Report Reveals That Fragmented EU Rules Are Blocking European Startups Scaling

For Europe’s impact startups, it looks like there are bright days ahead.

Founders setting out to take on climate change, energy and healthcare are finding that investors are interested, deals are flowing and the future looks optimistic, according to Norrsken VC’s European Impact Report 2025.

The report, published by the Sweden-based venture capital firm, explores how founders and investors feel about ventures that are tackling societal and environmental issues.

The problem? There is one big thing preventing them from scaling: confusing red tape.

 

What Is An Impact Startup?

 

An impact startup is a company that isn’t just focused on profitability, but is also setting out to make a difference in the world.

Normally, these startups focus on big societal problems, such as:

• Decarbonisation
• Clean energy
• Reducing food waste
• Making healthcare more accessible
• Making education more accessible

Unlike regular startups, impact startups measure purpose as well as profits.

 

Confidence Across Europe’s Impact Founders Is Back

 

Earlier this year, many founders and investors were feeling cautious.

Markets were unstable, war still impacted Europe, and ever-changing policies created a sense of doubt.

But now, the tide seems to have turned. In fact, according to Norrsken VC’s European Impact Report, 6 in 10 people working in impact startups say they feel that the future looks good.

When it comes to investors, the sentiment is similar, especially amongst incubators and accelerators, with 9 in 10 seeing a bright future ahead.

Agate Freimane, General Partner, Norrsken VC, commented, “The mood around impact investing was cautious at the beginning of this year because of geopolitical tensions, market uncertainty, and shifting policies. Now, however, the picture looks very different: impact-optimism is back and is being driven by market fundamentals and accelerating technology.”

 

 

Investors Are Ready To Spend Big On Impact

 

The research, which surveyed 660 founders and investors, showed that investors are keen to get a piece of the action.

Over 75% of investors say that they will put more money into these companies over the next 5 years, with over 20% saying they will invest “significantly more”.

Tove Larsson, General Partner, Norrsken VC comments: “Investors are doubling down on impactful technologies, and for good reason. These companies are no longer just solving for climate change. They offer some of the strongest answers we have to the biggest challenges of our time: inflation, energy insecurity, fragile supply chains, and geopolitical instability.

“They’re on track to become the backbone of Europe’s next economy, and the investment case for them has never been stronger.”

 

Energy Tops The List Of Most Attractive Ventures

 

When asked about which areas excite them most, energy and electrification came up top for investors.

In Europe especially, the cost competitiveness of renewables, combined with lower energy security, means that its a sector that the region urgently needs new solutions in.

To put this into perspective, in the first two weeks after Russia invaded Ukraine, the prices of oil, coal and gas went up by around 40%, 130% and 180% according to the European Central Bank.

This was a huge problem, especially for countries like Italy, Germany and a lot of Eastern Europe who were highly dependent on Russian gas exports.

Additionally, as AI becomes more integrated into how we live and work, the higher electricity demand makes it hard to keep up with.

It’s no surprise then, that impact founders and investors are looking for energy sources that will provide a sense of stability to the region.

Fabian Erici, Principal, Norrksen VC, commented: “It’s no surprise that energy and electrification tops the list. This sector sparked the first cleantech wave, and today renewables like solar and wind are the cheapest sources of new power globally.”

Second and third on the list were industrial efficiency and healthcare, particularly exploring ways that make them more scalable.

 

Innovation Is There, But Red Tape Is Standing In The Way

 

Despite all the optimism around European innovation, the research also revealed that growth is being held back by fragmented regulations across Europe.

In fact, almost 1 in 2 founders said that the differences in regulations between EU countries has affected their company’s ability to scale across borders.

On paper, the European Union is meant to be a single market. That means, in theory, a founder in one country should find it easy to expand into another without having to jump through tons of hoops.

But in practice? Each EU country still sets a lot of its own rules. This makes the system a lot more difficult to navigate, especially for companies that want to expand quickly.

Agate Freimane said “With the optimism and willingness to invest in impactful solutions, Europe has a unique opportunity to lead this next wave of hyper-efficient innovation. But half of founders have their growth held back by regulatory differences across EU borders, despite the promise of a unified market. While capital is ready to flow, these barriers must be cleared to unlock Europe’s full potential.”

 

Is Europe Hindering The Growth Of Its Own Businesses?

 

Whilst the idea of 27 countries being part of a single market should make growth easier for founders, the truth is quite the opposite.

For impact startups in particular, these fragmented rules slow everything down.

So, the question stands: Will politicians across Europe work to clear the way for real growth, or will red tape continue to stand in the way?

Only time will tell…