EBAN

Why Business Angels hold the key to European competitiveness and resilience

EBAN Team

Why Business Angels hold the key to European competitiveness and resilience

by Laurits Bach Sørensen, senior partner and co-founder at Nordic Alpha Partners, Europe’s leading greentech growth fund, & Jesper Jarlbæk, President of the European Business Angel Network (EBAN)

Europe stands at a decisive point in its industrial and energy transformation. The continent continues to produce world-class innovations in materials, energy, automation, and circular technologies, however far too few of these hardtech breakthroughs ever scale into globally competitive industrial champions.

Deeptech is entirely different from software and pharmaceuticals, and the companies in the hardware technology space need to be diligently scaled if they are to survive the valleys of death. The founder teams typically consist of a team of brilliant engineers, who need various operational guidance and a wide variety of support functions and capabilities to transform an idea into a profitable company.

One of the most pressing challenges is that the European venture capital model is less effective when it comes to managing the complexity and capex intensity of transformative hardtech, or deal with disruptive hypertransformation. The problem is not a lack of new inventions; it is a lack of operational capabilities and realisation that hardware-based transformative assets will not survive premature scaling on their route to market commercialisation.

Our proposal: Give experienced business angels a structural platform with access to the financial firepower and support capacities of European VC and PE.

If business angels were invited into or had access to more structured platforms and could use the same structures and financial engineering capacities that are usually reserved for growth equity firms, they could have a profound impact on the harder to grow technologies that fall outside the normal VC-model scope.

In fact, by combining the reach, structure and investment power of growth equity with the agility, network, and operational experience of business angels, we can target the critical growth phase (when advanced technologies transition from technological stability to product-market fit and early commercial scaling) and create immense value.

The traditional business angel in Europe

Typically, business angels have one of two backgrounds; type one is a successful entrepreneur that has taken a good idea and translated it into a commercially viable business, which has been exited to a strategic or financial acquirer (or sometimes via an IPO). The second type is successful business executives with comprehensive knowledge of best practices in leading multinational corporations.

In both instances, the business angels have relevant, first-hand operational experience, and a capacity as well as an appetite to engage in early-stage start-ups that appear to be higher risk. Business angels often form consortiums (to spread the risk) and provide the start-up with a lead angel that can channel all the relevant industry and necessary market knowledge from the angel consortium.

Building a company or developing a technology from a very early stage always involves timely identification of the barriers to growth and addressing them before the start-up hits a glass ceiling. As companies scale, several business functions evolve from being just a portion of some individual’s job description, to being fully fledged departments led by professional managers. Business angels have been through this development before and knows how to manage both cultural and organizational transformations. 

Finally, the classic business angel understands the importance of diligent cash management and securing a profitable and de-risked offering. They also understand that premature scaling, especially when dealing with capex intense assets, is the fastest route to the valley of death. Also, when they engage operationally, the business angel won’t perceive the investment through a lens of: “1 out of X”. Instead, they are substantially more committed to the success and return of their direct investment activities.  

Traditional VCs in Europe

The rationale of venture capital has been to take calculated risks on new and promising technology. They’ve traditionally done this by raising many but relatively small funds, typically from 25-100 million EUR. The funds then deploy the capital across a large spread of different, early-stage companies with the best roadmap and potential market fit.

The business model has been predicated on the fact that it can mitigate risk through diversity, with many VC investors utilizing a ten to one or even twenty to one approach, meaning that for every ten or twenty equity investments, one will drive sufficient returns to make up for the others, with money left over.

This model has worked well since it was professionalised in the 1970s and continues to work well within several different sectors, such as software and pharma, two areas where Europe continues to successfully commercialise a high number of new innovations.  

How the current VC model is putting EU at risk of falling behind

With its many facets and completely new geopolitical reality, the classic VC model struggles to drive commercialisation of the next generation of technology assets in Europe, and this has created two major problems for our region:

1) The EU’s commercialisation rate is lower than other countries:

According to the EIB, VC investments in the US are 6–8x higher than in the EU. In the European Commission’s own Competitiveness Report from 2024 it stated that cleantech innovation in the EU “does not translate into a production advantage.”

In fact, the EU accounts for only 5% of global venture capital raised, compared to ~52% in the US and ~40% in China, a powerful indicator of the weaker commercialisation rate. 

2) Industrialisation technology and “first-of-a-kind”(FOAK) industrial technologies are underfunded:

A fragmented EU capital market and the small size of the majority of VC funds in Europe do not provide the necessary scale-up capital for capital-intensive technologies. This was documented by the Delors Centre in 2024 in a report that confirmed that EU’s VC sector is smaller, with fewer funds, and that institutional investors rarely allocate to VC, creating a structural mismatch for industrial tech scale-ups.

New industrial technologies in particular require a blended capital stack (equity + debt/quasi-equity + grants), not pure VC. This issue has previously been raised directly by the EIB cleantech team. What happens is that FOAK (First of a Kind) technologies fall into a “no man’s land” as they are often too large for VC and too risky for traditional project finance. Lastly, it has been highlighted several times that European VC has a strong bias towards software, and InvestEurope estimates that “information and communication technology” received ~46% of venture investment, with biotech & healthcare receiving 27%.

But Europe and its member states won’t be able to defend itself from geopolitical warfare (as we have recently seen with China using access to lithium and rare earths as political mechanism) nor can Europe sustain growth on new software or obesity drugs alone. As a region, we need optimised heavy industries that can sustain themselves, an independent and efficient energy production capacity and a defense industry that can source and scale innovations locally.

Naturally, this requires that the financial ecosystem finds a way of investing into asset-heavy hardware technologies (You can find more information on what factors hardware companies have to navigate in this article on Hypertransformation).

How they have changed the VC model in China

China, one of the fastest growing economies in the world, have seemingly solved the issue of deploying the right amount of capital at the right time and in the right format, and according to Stanford’s Center on China’s Economy and Institutions they have done it through re-thinking and establishing thousands of government-backed niche VC funds.

These funds are dispersed across industries and regions, targeting critical technology niches. At the same time, these funds are deeply integrated into existing corporate environments, and with full overview of upcoming policy and regulatory changes, due to the long-term public planning structure. From 2013 to 2018, the number of government-backed VC funds surged, with an average of 238 funds created annually. Government-sponsored funds now account for +30% of all private equity and venture capital funds raised in China and together they can allocate almost 1 trillion USD to innovation within critical industries and technologies.

At the same time, the Chinese central bank recently extended its offering of a favourable interest rate for all initiatives with a “green” profile, currently at around 1.75% vs. the normal, nominal interest rate of around +4%. The country’s long-term strategy also enables it to implement policies that can quickly cater to new value chains and industries. As a result, China and Chinese firms now lead in 57 out of 64 critical technologies globally. In 2007, China led in just three of 64 technologies, according to the Australian Strategic Policy Institute.

Now, the European VC model cannot adjust to a similar degree, and neither should it, but it cements the argument from earlier, that we need to foster a new and deeper relationship between those with operational capabilities and those with capital.

A low, early-stage commercialisation ratio paralyses the critical interconnectivity in the financial ecosystem

Currently, the low success ratio of ensuring a profitable commercialisation of Europe’s strong industrial innovation, means that the later stage and much larger capital deployment players and growth supporters cannot get involved. They simply have very different requirements in terms of risk/revenue/profit & loss, and also very different investment horizons and return commitments.

The conventional growth equity and buyout investors are simply not able to take the risk nor spend the time to lift new technologies up to a state of profitable industrial grade performance. In effect, this means that despite interest and capacity to invest in the scale up phase, they will not engage as the private equity model is not tuned to drive return unless the companies they invest into have reached a sufficient level of financial maturity. 

The unfortunate effect of this “gap of engagement” in the financial eco-system is clearly visible in the declining number of IPOs. It also has a critical effect on large scale infrastructure capital players, when technologies don’t reach critical mass. In essence, they either are or will be starved of new assets to invest into. 

On the sidelines of an interconnected financial ecosystem in Europe, we have the 15 trillion USD capacity of the European pension funds. They however struggle to see the argument for making returns in a financial value chain with such a strong disconnect between innovation and large, established industrial players. 

Ultimately, all of this negatively affects Europe’s ability to convert its strong innovation into GDP growth, as new companies that can contribute to overall growth are not reaching sufficient scale.

Recent examples of larger projects with huge commercialisation difficulties include:

Solar manufacturing (Germany, Spain, Italy): Europe once had a thriving solar PV industry (Q-Cells, SolarWorld, Solaria). Most collapsed or were acquired after Chinese firms, backed by coordinated state policy and patient capital, scaled faster. Today, Europe imports the vast majority of its solar hardware, despite being an early innovator.

Thinking beyond Technology Readiness Levels and revenue

One part of the equation around the lack of commercialisation is that many early-stage players think that it is enough for a technology to be functional for it to convert a market. 

Only later do they realise that technologies that are seemingly great on paper and are at TRL 9 level, are very far from being industrial grade.

Northvolt is a good example of a TRL9 technology that came shooting out of the gates with both VC and industrial backing, but without any existing value chain or supporting ecosystem, referred to as TRL10. And many early-stage investors also underestimate the importance of ensuring capital efficiency and functioning value chains in their scaling strategy and instead overly focus on creating or generating revenue, regardless of cost.

However, when dealing with industrial technology in fast-growing sectors with high demands for new offerings, locking your company into contracts that forces you to suddenly build stock and deliver hundreds or thousands of units or solutions without sufficient margin, more revenue can become far more dangerous than less revenue. We refer to this as “premature scaling”.

Political stability also plays a role in the TRL10/industrial value chain discussions, something that China has solved for in a very efficient way, as mentioned, through long-term roadmaps and accelerated market demand into a much less fragmented market with more transparent legislation. This enables them to fund assets for longer, deploy more operational support functions and secure industrial grade quality/readiness before considering an exit.

As said, we can’t replicate that model in Europe, but what we can do is give the thousands of expert business angels access to new tools and more powerful structures such as new vehicles and dedicated financing.

Equipping business angels with the firepower of private equity

While business angels are skilled in the operational reality on the asset level and the complexity of scaling a founder-led business, they are often small “one-person” entities without vast access to financial engineering infrastructures, value creation support services, specialist technology advisors or the many support functions that are core to the private equity and venture capital toolkit.

This is also the reason why we won’t fix the problems just by putting more money into the hands of the business angels. Instead, we need a more structured approach to upskilling business angels, bringing them closer to the growth equity community or create a vehicle that resembles the VC/PE format but with more operational knowhow.

If we can create a stronger platform for cross-collaboration between these two early-stage players, with new models that can deal with the complexities of hypertransformation – then we can increase the capital efficiency across the growth cycle and ultimately end up with more quality technology assets, for the conventional growth and private equity investors to scale up, in a shorter amount of time.

A new form of such collaboration between growth equity (VC, PE, INFRA) and experienced and operationally engaged business angels armed with an operational value-creation toolkit tailored to scaling industrial technology could be in the shape of a new and integrated early-stage investment entity. 

A vehicle that could merge the reach, structure and financial firepower of professional growth equity, with the agility and operational experience of business angels. By equipping business angels with professional tools, shared value creation services, talent infrastructure, and co-investment capital, they could facilitate a more de-risked and faster journey from early stage to industrial maturity. In essence, such a structure would provide business angels with the power of private equity: full access to vetted deal flow, value-creation services, venture capital levels of syndication capital, and multiple exit or liquidity routes – from early secondaries to full-scale international expansion.

Some core elements that would differentiate such a vehicle from both traditional business angel syndicates and conventional venture capital models include:

  1. Addressing the hard-tech scale-up challenge by mastering hypertransformation.
    Industrial and hardware-based technologies rarely fail because of the product – they fail because of the overwhelming complexity that emerges when trying to scale technology, operations and capital in uncertain regulatory regimes across multiple geographies and value chains. This phase demands a level of governance, speed, and integration that most early-stage companies – and their investors – are unprepared for. There are several ways to teach skills necessary to navigate this. One is by building and incorporating bespoke executive programmes. One such programme that NAP has already built is the “Global Re-Industrialisation Programme” in partnership with the Danish Technical University (DTU).
  2. Giving access to systematic value creation powered by proven toolkits.
    Nordic Alpha Partners has already prepared to release its full value creation and management toolkit in book form. Covering the creation, de-risking and management of hypergrowth at the earliest stages while bringing institutional-grade structure, strategy, and data discipline to young industrial technology companies.
  3. Offering flexible and secure liquidity models, meaning predictable return pathways for investors.
    Such a platform could introduce a new level of liquidity visibility and structural flexibility to the business angels as it would set up structural partnerships with conventional VC and growth funds. Funds that are looking for de-risked assets and are eager to buy secondaries to secure them. At the same time, each company’s journey would be fully mapped from the outset, defining the expected strategic trajectory and the liquidity (exit) options available at key milestones. This ensures investors are never locked into a binary exit scenario but instead benefit from multiple, pre-engineered outcomes—including full exits to later-stage investors, partial exits to realise early returns, or continued ownership and co-investment alongside a growth fund. By combining disciplined planning with optionality, a platform like this could provide a predictable, de-risked liquidity profile. Something that is very uncommon in early-stage investing otherwise, allowing angels to balance short-term return potential with long-term value participation.

Overall, there are numerous ways for new structures to support early-stage industrial investing, but merging the strengths of entrepreneurial agility, institutional structure, and financial professionalism is in our view a unique combination to better activate the full financial ecosystem.

Providing investors with exposure to a de-risked, systematically managed early-stage portfolios, and leveraging Europe’s strong angel community, strong VC community, and the other parts of the financial ecosystem, we could vastly improve the success rate of European greentech and industrial innovators.

An obvious partner for such a concept is the upcoming “European Scale-Up Fund”, a partnership between the EIF and the private investment community. It creates a strong player in the ecosystem that can provide great support avenues for founders and promising technologies along the way. 

However, without a pipeline of high quality and de-risked assets, there is a risk that a fund like the Scale-Up Fund will have to lean into Venture Capital risk rather than scaleup growth equity.

Business angels are they key to activating the broader ecosystem and increase the quality and commercialisation of early-stage technology.

Summing up:

About EBAN Europe

The European Business Angel Network (EBAN) is Europe’s largest trade body for angel investing, founded in 1999 and based in Brussels. The EBAN community includes over 10,000 individual angel investors and more than 45000 investors across multiple networks and sub associations.

The network spans more than 50 countries, and figures from 2023 puts capital deployed at around EUR 1.2 billion across 4,789 angel-involved funding rounds. 

In 2023, the three largest countries in terms of angel investment commitments were the UK (EUR 307.4m), Germany (EUR 198.5m) and France (EUR 142.5m).

EBAN estimates that angel investments account for roughly 50% of European early-stage investments in 2023, with the rest stemming from direct VC (40%) and a small proportion coming from equity crowdfunding (friends, family and fanatics) (10%).

In recent years, there has been strong growth of angel investment in energy sector startups across both 2022 and 2023, which now account for 10% of total investments in the early-stage investment ecosystem, with deeptech accounting for 6%

About Nordic Alpha Partners

Founded in 2017 and now with ~400mEUR in assets under management, Nordic Alpha Partners is a European resilience and green technology fund with a unique model, deeply focused on active ownership and operational value creation.

The fund works in close cooperation with the business angel community in what the fund calls a nesting fund structure, where business angels are provided with deal flow that contains asset opportunities that are too early for NAP to invest in. When BA’s mature them to a state of de-risked commercialisation, then the NAP flagship fund can invest and lead the globalisation. 

In general, NAP is deeply engaged in creating an interconnected and coherent financial value chain for resilience and complex industrial technologies in Europe. We do this via deep cooperation with both the academic and innovation environment, doing research and established bespoke educational programmes like DTU GRIP, the BA community via its nesting fund activities, partnerships with more than 50 VC funds as well as large scale green industrial infrastructure capital players (Copenhagen Infrastructure Partners owns part of the NAP management company). 

The firm was built on the thesis that a new and operational value creation toolkit could support complex deeptech and industrial decarbonisation technology companies through the challenging scaling phase. The result has been above-normal return opportunities in sectors where conventional private equity models are ineffective.

To date, the firm has raised over 1bn EUR directly and indirectly for companies at the forefront of the green transition.

With CAGR of 65% and annual related and equivalent emissions reductions across the portfolio in excess of 850.000 tons CO2e, the model continues to drive growth and value in areas otherwise avoided by private equity.

To do this, more than 50% of all team capacities and 60% of the partner group are fully dedicated to operational value creation through the deployment of the fund’s own value creation toolkit.

The Nordic Alpha “playbook” is being published in early 2026, so that the financial ecosystem can adopt or take the most useful methods from NAP’s systematic approach and decades of experience on how to diligently scale complex industrial technology. The assumption is that uniform language and methods can enable large scale activation of the market capital and illustrate how hardtech and industrial investments can deliver above normal returns. 

For further insights on complexity of “Hypertransformation” and the challenges in Europe, please see the following publications: European Business Review 1, European Business Review 2, EnergyWatch, NewWave Podcast.

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