Venture-Capital Record Makes Sweden New Impact Hub in Europe

(Bloomberg) -- Venture capitalists looking for sustainable startups are plowing more money than ever into Sweden, turning the birth country of climate activist Greta Thunberg into Europe’s biggest magnet for impact investors.

Sweden this year attracted a record $4.5 billion in cash targeting ventures that seek to address at least one of the 17 Sustainable Development Goals, according to data compiled by Dealroom.co. Among the biggest funding rounds were those for battery-maker Northvolt AB and health-care app Kry International AB. 

Tove Larsson, general partner at Stockholm-based Norrsken VC, says she’s gearing up for more deals. “Given the enormous traction in this market we’re likely to go out with fundraising soon,” she said in an interview. Her fund currently has 120 million euros ($135 million) of assets, making it one of the largest of its kind in the Nordic region. 

Larsson says the development shows how impact investing, whereby money is channeled into ventures targeting change such as decarbonization, has evolved from a niche strategy into something closer to the mainstream. That’s as environmental, social and governance strategies proliferate, with ESG assets expected to exceed $50 trillion by 2025.

“Only five years ago the term ‘impact’ was misunderstood and didn’t resonate with $1 billion valuations at all,” Larsson said. “That has all changed now.”

Sweden was already a hub for startups and has produced some of the world’s best-known companies including music streamer Spotify Technology SA, Minecraft maker Mojang AB and payments firm Klarna Bank AB.

Larsson says she now feels a “sense of urgency” among Swedes to channel more financial resources into fighting climate change. “The Greta-effect is also a factor,” she said.

Eric Archambeau, who founded Brussels-based VC firm Astanor Ventures, has been investing in Swedish tech startups for 13 years. He started with Spotify and more recently was involved in the financing for Stockeld Dreamery, a vegan cheese producer in Stockholm.  

Aside from a public policy framework that encourages entrepreneurship, Archambeau says Sweden benefits from “a quickly maturing tech ecosystem,” where billionaire founders from the first wave of successes are now reinvesting back into the system.

“Oftentimes that investment is increasingly impact-driven,” Archambeau said.

Examples of that kind of reinvestment include the Norrsken Foundation, which was started by Klarna co-founder Niklas Adalberth. The buy-now-pay-later app he helped create is now valued at about $45.6 billion.  

Investors are still more comfortable putting their money into regular tech startups than into those committed to doing good, according to the State of European Tech report.

Larsson says her goal now is to “provide institutional investors with evidence that impact can create great financial returns.”

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