Getting Net Zero Off the Ground
Building the road to net zero is one of the greatest entrepreneurial challenges of our generation — one that involves building new technology and infrastructure that both fits into, and transforms, the world we live in.
Our society isn’t going to stop driving cars or taking planes, and if we’re going to reduce emissions and reach net zero, we need to support our brightest technical minds and business leaders who are building the solutions to take us through that transition. One of those people is Sofia Graflund, who we’re thrilled to welcome to EQT Ventures as Executive in Residence on our DeepTech and Climate Team.
Sofia brings with her over a decade of legal and operational experience from some of Europe’s leading climate tech scaleups — having worked at Northvolt where she helped create a new financing model for giga-scale factories, driving the green transition. Most recently, she served as COO at Heart Aerospace, helping shape the future of electric aviation.
Developing the facilities to roll out cutting-edge batteries for electric vehicles, or a whole new class of sustainable aircraft, represents a different kind of challenge to the deeptech ideas that VCs have traditionally backed. Rather than relying on algorithms and cloud computing providers, Sofia has learnt from experience that climate technologies require novel hardware, physical infrastructure and new financing routes to get off the ground.
As EQT Ventures commits to backing founders taking on these challenges, having her on board makes us better placed than ever to support companies building a greener future.
Deep tech in climate is different
Sofia spent more than two years in senior roles at Heart Aerospace, first as General Counsel and Sustainability Lead, and later as COO. Since 2018, the Gothenburg-based company has been developing electric aircraft designed for short haul, regional travel and in 2019 EQT Ventures co-led a seed investment into the company.
Today, its 30-seater ES-30 is one of the largest and most ambitious green aircraft being built in the world — a formidable task for a startup with no pre-existing manufacturing facility.
“Looking at a deep tech company like Heart Aerospace, building a whole new electric hybrid aircraft from scratch, there is a lot of development needed to get to production,” Sofia explains.
In 2022 the company announced that it would build new production and test flight facilities in Sweden then, this year, opened a new R&D facility in Los Angeles, after it became clear that its first hangar outside Gothenburg wouldn’t be able to house the ES-30’s full development.
The challenge of investment
Building these kinds of facilities can cost anywhere between $30–55m, just to get a company to the point that it can move into the production phase. That kind of capital outlay — years before a startup has a working product to sell — presents a new type of funding need, as many growth-stage VC investors have become used to expecting reliable revenue by that phase of a company’s financing journey.
“Long-term financing after early-stage is still the biggest hurdle. VC’s are prepared to take technical risk while growth funds and debt providers are less willing to do so,” Sofia explains, adding that governments need to make bold bets on these technologies that could reshape society for the better.
“There is a need to bridge the gap between VC’s and infrastructure and growth funds for hardware climate tech companies, as their road to profitability in comparison with software companies is longer. We need to bridge that gap with more governmental funding, which doesn’t necessarily mean grants only.”
Beyond public money, companies like Heart Aerospace have had to think creatively about how to secure the capital they need, and one strategy they’re using is to win the support of industry players who can later become their customers.
Working with strategic partners
In 2021, the startup closed a $35M Series A round led by United Airlines Ventures and commercial aviation company Mesa Air Group Inc, with the two companies placing an order for 200 aircraft, with an option to buy 100 more.
Two years previously, Volkswagen invested substantially into Northvolt and has backed the company in four subsequent rounds as the German carmaker seeks to shore up its battery supply chain.
As Sofia points out, big industry players “need these innovations to reach their sustainability goals,” but startups also need to learn how to work with industry early, rather than just relying on VCs who often expect exits within a 10-year period.
“The scaling journey will most likely be more expensive and difficult than what you thought from the beginning and then you need partners — not investors only looking for an exit — at your side,” she says.
Working with those partners means that startups have to ensure they’re building something the industry actually needs and can work with, a process that Sofia explains requires ongoing dialogue with partners and potential customers.
“Calibration and potential pivots of the initial strategy in the beginning is not a failure,” she says.
That kind of agile product mindset needs to be combined with strong financial and operational discipline — meaning that deep tech climate startups need to build a team with diverse skills who are all pulling in the same direction.
“These companies need to be visionary, but always keep their eyes on next quarter’s objectives and deliverables, and to build a strong team that challenges each other in a healthy manner, while sharing the same vision,” Sofia says.
Building a whole new ecosystem
Startups like Heart Aerospace could soon see us taking zero-emission short-haul flights, removing around a quarter of the aviation industry’s annual CO₂ emissions.
Making bold new ideas like this a reality will require collaboration from VCs, industry and governments, as the tech sector learns to support a more complex company journey than it’s become used to, in an investment era dominated by software.
“The green transition will not happen by itself, it requires a whole new ecosystem to be built around it,” Sofia says. “The competence and the know-how to get to the finish line is there, but if countries and the aviation industry, in this case, are serious about their net-zero goals, we all need to make this happen together.”
