There are two main categories of impact startups, those solving social challenges, such as poverty and famine, and those solving environmental challenges, such as climate warming and decarbonisation.
Investment in these impact startups, the vast majority situated in Stockholm, grew from €1.3bn (14 billion Swedish kronor) in 2020 to €3.6bn (39 billion Swedish kronor) in 2021.
For the first time ever, Sweden surpassed the UK and Germany, becoming the top European ecosystem by venture capital money invested in impact startups.
This huge increase illustrates how impact investing has evolved from a niche investment strategy into something closer to the mainstream.
Participants in impact investing (also known as ESG investing, with ESG standing for environmental, social, and governance) are increasingly considering these non-financial, social or environmental factors as part of their analysis process to identify material risks and growth opportunities.
Why has Stockholm been at the epicentre of this deluge of impact investment?
In a recent report on Stockholm as an impact hub, Anna König Jerlmyr, the Mayor of Stockholm said, “In Stockholm, we take pride in the fact that sustainability has become an inherent part of our culture. This is evident in how we act as a city, setting ambitious environmental goals and initiatives to encourage the development of more sustainable solutions and technologies. And also in how we live our lives, in balance between work and life, city and nature.”
David Liu, general manager of Norrsken House Stockholm, a non-profit foundation dedicated to helping impact entrepreneurs and startups, agrees that Stockholm has a unique set of characteristics that makes it a magnet for impact startups.
“I’ve been living in Stockholm for the past 11 years and I’ve also travelled around the world extensively,” he says. “For me, Stockholm is one of the few places in the world that combines a modern lifestyle with a real closeness and awareness of nature. It makes Stockholm residents really aware of the importance of protecting the natural environment. This is obvious in many areas of Stockholm life, with recycling efforts, electric vehicles and bikes, the prevalence of vegetarianism and so on.”
David, originally from Taiwan, also thinks there are more fundamental reasons for Stockholm’s pre-eminence as an impact startup hub, characteristics that are hardwired into the Swedish capital’s very DNA.
“There are also many other common values in Sweden that we probably take for granted, such as the pursuit of equality, diversity, social justice, and more, which aren’t seen as so important in many other parts of the world.
These are very important, too. And then of course, there are organisations like Norrsken that fund, invest in, and support initiatives committed to positive impact.”
There is certainly truth in the idea that Stockholm and Sweden have the mindset and startup structure that encourages creative thinking – Sweden regularly ranks in the top three on the Global Innovation Index and, in 2021, Stockholm was found to be the most innovative city in Europe.
While many other cities struggled following the outbreak of the COVID-19 pandemic, Stockholm’s ecosystem actually improved in 2020, despite the challenging circumstances.
Stockholm offers many advantages that startups, scale-ups and investors may be hard-pressed to find anywhere else in the world. It’s among the reasons more Stockholm founders are compelled to remain in the city to establish their subsequent ventures compared to founders in other European cities.
Why has this happened? Why has Stockholm in particular been at the vanguard of the search for socially important and sustainable solutions, services and products?
According to Anna, it’s because people in Stockholm are increasingly driven by purpose. “As a global citizen, you want to accomplish something good and leave things better than when you started. Stockholm is a great place to do just that – to find meaning and co-create a better future.”
A natural consequence of this passion for sustainable, socially positive startups is the upcoming Impact Week event in Stockholm, from September 6–14, which aims to bring together the world’s most impactful and influential startups, talent, investors, business leaders and policymakers, to shine a light on the global problems that need attention, and come together around solutions to address them.
David from Norrsken agrees that the cultural and business environment in Stockholm is especially conducive to nurturing impact startups. But he also believes that larger companies understand that they need to be involved in the impact habitat, and must focus part of their innovation efforts on the small companies in the impact arena.
“A lot of people and a lot of companies in Stockholm already pay attention to the impact they create on society,” says David. “There is a great deal of focus on impact. But innovation takes a lot of time and effort, especially for larger companies. I think that’s why we’re seeing so many great examples of how large enterprises are collaborating with startups, to find new and out-of-the-box solutions to large challenges. We see this happen regularly within the Norrsken ecosystem, where small and fast-moving impact startups can influence big enterprises to help them drive positive impact.”
Stockholm is clearly a world-leading impact hub now. But what of the future? Where will Stockholm be in five or ten years’ time?
David thinks that we won’t even be talking about ‘impact investment’ in ten years, simply because it’ll be a core tenet of every business in Stockholm.
“No matter if you’re making cars, running a restaurant, building houses, designing clothes, or operating power plants, people will be ensuring their business positively impacts the planet and the people around them. That will be our definition of success.”
Anna has a very clear vision of where she sees Stockholm as an impact hub in the future.
“Our vision for Stockholm is to become a prominent hub for the impact investment and startup community with the purpose to inspire other cities and governments. Through Stockholm’s creativity, spirit of innovation and public support, we aim to bridge the gap between today and a sustainable future. It’s time for Stockholm to become even more of a breeding ground for innovative startups that positively impact the lives of more than one billion people.”
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