European VC Hunts For The Startups That Can Change One Billion Lives

Norrsken VC is nothing if not ambitious. As Agate Freimane explains, as general partner, the goal of the Stockholm-based venture capital fund is to find and invest in European startups that have the potential to rise to a level where they can positively impact the lives of at least one billion people.

Meaning it’s an arbitrary number – which is a tall order – but as a stated aspiration it serves a purpose. Norrsken is an early stage influencer investor. The stated mission to benefit not just hundreds or thousands of people but billions is meant to underscore that the fund is looking for “unicorns.” Or, in other words, companies that can make a serious difference to the problems facing the planet.

But what does that mean in practice? As the world struggles to find solutions to problems such as climate change, food shortages, pollution and social inequality, it often appears that the vast majority of startups working in the “impact” space can offer potentially beneficial but ultimately limited solutions to global issues.

So when I spoke to Agate Freimane, I was eager to get her to know how entrepreneurs make a real difference and the role that investors can play.

foundations of influence

Norrsken VC originated from the Norrsken Foundation, an organization founded by Niklas Adalberth, an entrepreneur perhaps best known for being the founder of financial technology company Klarna. Keeping in mind that entrepreneurs represent the world’s greatest assets in terms of solving big and intractable problems, he created a support platform, which today operates accelerators and has co-working spaces in Stockholm and Kigali, Rwanda’s largest cities.

As a venture capital arm, Norrsken VC has, to date, made 31 investments in impact businesses. “The companies in which we invest must align with at least one of the United Nations’ 17 Sustainable Investment Goals,” Freeman says.

As Freimane emphasizes, the focus is entirely on commercial companies. “Originally we looked at both non-profit companies and for-profit companies,” she says. “But we realized that the biggest opportunity was to invest in a business that combines profit and impact.”

Hardware operator

The companies Norskin funded may indicate a renewed desire on the part of venture capitalists to look beyond software and invest money in projects that include hardware and infrastructure development.

For example, naming electricity as a major topic, Freimane cites two companies in Norrsken’s portfolio that demonstrate their willingness to embrace capital-intensive research and development. Northvolt is a battery developer that is building a Gigafactory powered entirely by green energy. Heart Aerospace is developing electric powered aircraft.

I suggest this could be risky. Tracking a decade or so ago, many venture capitalists — particularly in the Bay Area — have burned their fingers investing in hardware-led Greentech ventures. In contrast to software development, the market timelines were long and the stakes high. As a result, hardware and infrastructure investments have fallen out of fashion, but Freimane notes that something has changed.

“Hardware is trending now,” she says, not least because there is more money available in Europe. “There is more capital around and capital has to find a home.”

Added to this is the widespread realization that the planet’s problems cannot be solved with software alone or with relatively small, topical solutions.

But investing in companies that are engaged in long-term, capital-intensive R&D requires that venture capital focus on businesses that have the potential to provide the kind of returns that justify the investment. The ability to measure is critical. Hence, Norskin aspires to find the effect of tomorrow’s rhino. So how is this potential determined?

Find the difference

“Sizing comes down to the difference,” Freimane says. “If you have the right people on board, you can find the capital.”

As an early stage investor, Norrsken looks forward to later rounds, when larger amounts are needed. She sees the team’s assessment as the key to deciding whether future funding rounds will be successful. “The question I ask is whether this team will be able to raise several billion dollars in investment,” she says.

Freimane acknowledges that there will be failures and that’s a good thing. “Entrepreneurs are allowed to fail. We accept that,” she says. “However, with every funding milestone a business goes through, the risks decrease.”

It can be argued that the renewed desire to invest in the big projects that Freimane discovered was partly due to the success of the likes of Elon Musk who redefined both the automotive and aerospace industry. Equally, although the landscape is changing. In a post-COP26 environment, national regulations and international agreements will require sustainability to be at the center of the economic development agenda. So, whether you’re talking about capital-intensive green steel or more modest investments in, say, programs designed to improve supply chains, companies that offer viable and scalable solutions will be increasingly attractive to investors.

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