The four megatrends growth investor Lightrock is looking to invest in: 'Extremely interesting'

In the race to scale climate tech, a persistent challenge looms over Europe’s innovation ecosystem: the "missing middle."

While early-stage venture capital is abundant and well-networked across the continent, growth-stage funding – the critical bridge between startup and scaleup – remains underpowered.

London-based growth investor Lightrock is leading the charge to change that.

With an €860m climate impact fund and more than €5.5b in total assets under management, Lightrock is one of Europe’s biggest backers of growth-stage startups.

For Lightrock CEO Pål Erik Sjåtil, that’s both a strategic edge and a systemic downside.

"Europe needs a more vibrant capital market for late-stage investing," Sjåtil tells Impact Loop in an interview at Lightrock’s offices near Piccadilly Circus in central London. "One of the benefits for us is that it’s a less competitive space, but we’d actually welcome more competition because it would benefit the market and contribute to solving the issues we’re focused on as investors."

Europe needs to take bigger risks

One long-standing challenge for European impact investors is that companies who grow big enough to need late-stage funding often have to rely on US funds to scale up – sometimes resulting in pressure to relocate to the States. The latest example of that is Heart Aerospace announcing its move from Sweden to the US last week.

But in a time of increasing macroeconomic uncertainty, Sjåtil thinks this could be an opportunity for Europe to step up and become more ambitious.

However, that requires a change in mindset.

"The key difference between the US and Europe is that US investors are more willing to double down on companies that show the most promise," Sjåtil notes. "Europe excels at supporting startups in their early stages, but when it comes to providing substantial follow-on funding, there’s a reluctance to concentrate capital on just a few top performers. Doing so goes against the more cautious European mindset, making it harder to take the bigger risks required as companies scale and the financial stakes increase."

Lightrock is very comfortable with taking those bigger risks, and has already backed a number of successful scaleups. Its portfolio includes the likes of German green hydrogen company Sunfire, Octopus Energy in the UK and Aerones, a Latvian provider of robotic wind turbine care services.

Lifting European ambitions

So how can Europe become better at nurturing startups, and keeping hold of the companies who prove successful?

Again, for Sjåtil it starts with changing attitudes. He says "it's not an easy cycle to break out of" and that we are doing what we can, but ultimately, "Europe needs to produce some major success stories – companies on the scale of Spotify – and create an environment where such achievements are possible,".

"It’s crucial that we actively champion these companies and help raise their profiles. The pivotal moment comes when founders begin to achieve real breakthroughs and the investor landscape shifts. We’re committed to advocating for Europe, but to do so effectively, we need compelling examples to point to."

Those arguments are becoming easier to make, in part because of the volatility and uncertainty gripping the markets in the wake of Donald Trump’s on-again-off-again tariffs.

Sjåtil has been beating the drum for higher European ambitions ever since 2018, when he became head of McKinsey’s Europe operations, and has noticed a recent shift in sentiment.

"I had a presentation back then about how we needed to lift our ambitions, which I travelled around to give to any CEO in Europe that would listen to me,” Sjåtil says. “Fast forward to today and I am glad that Europe finally seems to take this issue more seriously."

Like all investors, Lightrock is still assessing the impact of Trump’s trade tariffs. But Sjåtil singled out market volatility as his biggest concern.

"From a day to day perspective, this volatility is very difficult for investors. And the fear is that some funding markets could potentially freeze if this continues. It doesn’t affect our portfolio in the short term, but a general increase in the cost of funding obviously isn’t good."

From a European point of view, though, there could also be some benefits.

"This situation might serve to mobilise Europe into action, which could be a real silver lining. Ideally, it could kick off a renewed sense of purpose and momentum for the European ecosystem."

Adding value

Being a late-stage investor doesn’t only mean writing bigger checks than early-stage VCs. Sjåtil, a father of three, likens the difference between investing in a startup and a scaleup to the difference between raising a young child and a teenager.

"To use a simple analogy, think of teenagers: too much oversight can be counterproductive, but leaving them entirely unsupervised isn’t beneficial either," he explains. "The way investors add value changes significantly between the early and growth stages – what works at one stage doesn’t necessarily work at another."

Lightrock’s approach to adding value includes helping founders put together a more professional senior management team, improve decision making, provide access to industry giants who can become important customers or suppliers, and offer support around future financing.

"We typically help a lot when they do further fundraising because if we come in on a Series B or C round, then there tends to be one or two more fundraising rounds before they become cash flow positive or consider an IPO," Sjåtil says. "That can also include helping them access other climate funds or setting up smart debt vehicles."

Spun out of LGT Group

Lightrock was spun out of LGT Group, the private banking and asset management owned by the Princely family of Liechtenstein, as a more impact-focused investment platform. LGT remains a leading partner and Liechtenstein’s Prince Maximilian serves as the chairman of Lightrock.

The company also has a global growth and a small-cap fund as well as regional strategies focusing on India, Africa and Latin America.

The goal is to "empower purpose-driven companies to achieve their full potential while maximising their positive impact on the world," Sjåtil says.

With a team of around 140 people, Sjåtil says Lightrock stays on top of the investment landscape by doing up to 20 “deep dives” into different fundamental trends to identify possible companies to back. So far, the portfolio consists of about 90 positions in the private market and 64 in the listed market.

Four megatrends

So what are some of the "megatrends" that Lightrock is looking to invest in next? Sjåtil quickly identifies four: the energy usage of data centres, the maritime industry, decarbonising heavy industries like concrete and construction, and solutions to help the European power grid deal with the green transition.

"The transformation happening around electricity and energy markets and the intersection between that and what's happening in AI and data is extremely interesting," he says.

"Maritime is also interesting from a sustainability perspective because the whole industry is going through a transformation trying to become more sustainable and cost efficient. And as part of what's happening in geopolitics, maritime is also becoming more and more strategically important."

The good news for startups, though, is that the list of exciting trends only keeps growing.

"If anything, I’d say there are more and more interesting trends now compared to four or five years ago,” Sjåtil says. “When we have the debate about which deep dives to do, we feel like there are more and more areas to go deeper on."