Norrsken VC isn’t afraid to take risks. According to Agate Freimane of Common Accomplice, the Stockholm-based venture capital fund’s mission is to find and invest in European firms that have the potential to develop to a point where they can positively impact the lives of at least one billion people.
Norrsken invests in early-stage influencers. The fund’s stated objective is to understand the lives of not just a few dozen or hundreds of people, but billions are designed to underline that it is on the lookout for “influence unicorns.” Or, to put it another way, businesses that have the potential to make a significant difference in the world’s concerns. In some ways, it’s an arbitrary number – and a large order – but as a stated goal, it does something.
But what does this mean in terms of what comes next? As the world struggles to find solutions to issues like climate change, food shortages, air pollution, and social inequality, it appears that the vast majority of startups working in the “influence” area can provide potentially helpful options but ultimately limited in the face of global issues.
So when I met with Agate Freiman, I was curious to hear her take on how businesses can establish a genuine difference and what role traders may play.
The Foundations of an Impression
Norrsken VC arose from the Norrsken Foundation, founded by Niklas Adalberth, an entrepreneur best known for being a founding father of the fintech business Klarna. He founded a support platform, which now conducts accelerators and includes co-working places in Stockholm and Kigali, Rwanda’s main city. He believed that entrepreneurs represented the world’s greatest asset by solving massive and intractable problems.
Norrsken VC, the company’s venture capital arm, has made 31 investments in impact startups thus far. “The enterprises we invest in should at the very least meet one of the UN’s 17 sustainable finance objectives,” Freiman adds.
The key emphasis, as Freimane emphasizes, is on companies that can be completely industrial. “At first, we looked at each non-profit and for-profit organization,” she explains. “However, we realized that investing in firms with a combination of revenue and impact was the best option.”
The Hardware Problem
Norrsken’s investments may signal a growing readiness on the part of venture capitalists to go beyond software and invest in projects that include the development of “hardware” and “infrastructure.”
For instance, citing electrification as a significant issue, Freiman offers two Norrsken portfolio companies that demonstrate a readiness to invest in capital-intensive R&D. Northvolt is a battery company building a gigafactory that will run entirely on renewable energy. Heart Aerospace is working on an electric-powered aircraft project.
This, I believe, might be hazardous. Many venture capitalists – particularly in the Bay Area – were burnt by investing in hardware-driven Greentech projects back a decade or two. Compared to software development, the timescales to the market were long, and the risks were high. As a result, hardware and infrastructure expenditures have fallen out of favor, although Freimane indicates that one thing has changed.
“Hardware is hot right now,” she adds, citing the increased availability of capital in Europe as one reason. “There’s a lot of additional cash floating about, and capital needs a place to call home.”
In addition, there is a growing recognition that the world’s problems cannot be tackled only by software or comparably small-scale spot solutions.
On the other hand, investing in long-term, capital-intensive R&D, on the other hand, necessitates VCs focusing their attention on businesses that have the potential to provide the kind of returns that would justify the investment. The ability to scale is crucial. As a result, Norrsken’s desire to find tomorrow’s influence unicorns. So, how can you detect that potential?
Identifying The Groups
“Scaling is done at the group level,” Freeman explains. “You’ll locate the capital once you’ve got the right people on board.”
Norrsken, as an early-stage investor, is looking forward to following rounds, when greater amounts will be required. She believes that assessing the staff is critical to determining whether or not subsequent fundraising rounds will be successful. “The question I pose is whether or not this is a group capable of raising tens of billions of dollars in investment,” she adds.
Freeman admits that mistakes might happen, and that’s OK. “Entrepreneurs are permitted to fail. “We’ll make do with it,” she adds. “However, the risks lessen with each financial milestone that a company achieves.”
According to Freeman, the revived need for food for financing in huge projects is largely due to people like Elon Musk, who has transformed both the automobile and space sectors. Similarly, even though the landscape is changing. Sustainability would have to be front and center of the financial growth plan in the post-COP26 environment, both in terms of national legislation and international accords. Traders are becoming more interested in companies that give viable and scalable choices, whether it’s capital-intensive green metal or more modest investments in, for example, software programs geared to optimize supply networks.