Henrik Båge: "It's not the technology that fails - it's the system"

Henrik Båge, co-founder and former CEO of Phoenix Biopower

This is part of Sweden Startup Nation's interview series with startup founders and investors and other actors from the ecosystem, which aims to highlight systemic failures and give voice to startup actors' experiences as a knowledge base for future decisions.

Henrik Båge is co-founder and former CEO of Phoenix Biopower, a Swedish climate tech company that developed a technology to double the energy efficiency of electricity production from biomass with lower operating costs and zero carbon emissions. After almost a decade of development, and SEK 150 million in residual capital from 2,400 shareholders, the company went bankrupt in early 2025.

The technology held. But the system did not. Sweden Startup Nation meets Henrik to get his take on the ecosystem that surrounds Swedish startups.

"Sweden has capital - but not the right skills"

In the early years, the capital raising process was smooth, but as the world situation changed, so did the risk appetite. After Russia's invasion of Ukraine in 2022 and a trend in the EU questioning biomass as a renewable energy source, everything changed, exposing a bigger problem:

- Sweden has a lot of venture capital, but it is mismanaged. Most investors come from IT and software. They don't know how to build hardware and deeptech doesn't work with the same logic.

For Henrik, the problem is structural. Virtually all venture capital funds in Sweden are structured according to the Silicon Valley model: 10-year funds that require quick exits.

- But building a metal climate solution into a global energy system takes time. You cannot demand an exit after three to six years. It's a different reality.

He calls for more long-term evergreen funds, greater public investment and a new understanding of capital flows in technologies that can actually change the world.

Behind the numbers lies a distorted reality

On paper, Sweden looks strong in sustainable investment - but the picture is misleading, says Henrik.

- Look behind the numbers. The majority of investments go to a few large companies, like Northvolt or Stegra. This distorts the picture. It looks like the ecosystem is flowing with money, but most of it is going to companies that are already scaleups. That's not where the shortage is. To understand the reality of Swedish startups, especially in deeptech and climate innovation, the numbers need to be cleaned up, segmented and interpreted with care. Otherwise, we risk making decisions on a glossy picture. We must stop being blinded by nice rankings. If we want new world-leading companies, we must understand what it actually takes to build them.

A system that works against sustainability

Henrik lists system error after system error. Grants that require unreasonable reporting. EU rules that prevent sufficient co-funding. Innovation calls that are narrow, rigged or lack flexibility.

- We had almost two full-time positions just to handle applications. And when the company went bankrupt, there was no way to protect the public investment already made.

He calls for a national crisis mechanism, a kind of pause mode where the state can protect IP and investments until conditions improve.

- It is unreasonable that the whole effort just goes up in smoke. We need to have a strategy on how to save technologies we have already chosen to believe in.

At the same time, he points out that there are bright spots.

"The Swedish Energy Agency has been accessible and quick to deal with before and during projects," he says. The Swedish Tax Agency also gets credit: "We haven't had much contact, but the researcher deduction, 10% lower employer's contribution, has helped us a bit."

Sweden needs a headquarters strategy

Sweden is at risk of losing its leadership as a home for prominent companies, says Henrik Båge. He calls for a long-term strategy to retain and attract headquarters.

- Look at the Stockholm Stock Exchange. How many companies founded after the Second World War still have their headquarters in Sweden? Of the big companies, it's basically only H&M. In mergers, the head offices almost invariably end up outside Sweden," he says.

This development is due to a combination of factors - high tax burden, housing shortage, deficiencies in the education system and a geographical location that makes Sweden less central from a European perspective.

- Sweden is on the outskirts of Europe and we have to deal with that if we want to be an attractive country for headquarters. Why does Spotify have its legal seat in Luxembourg? Why is ABB's headquarters in Switzerland, AstraZeneca's in the UK? And why are so many venture capital funds based in Luxembourg? They are effectively run out of Sweden," he says.

This is not an individual problem, but a systemic failure, says Henrik.

- It's not just about taxes. It's about the whole picture - education, infrastructure, regulation. We are too visionless. If we are to attract the business elite, we must deliver quality at every stage.

Skills shortages, culture clashes - and spiraling costs

At its peak, Phoenix Biopower had 17 employees from 9 countries. The skills were not available in Sweden - and hiring from abroad was both costly and complicated.

- A person with a Swedish education, family and home could still be expelled from the country if the residence permit expired. You can't build a company on that.

He describes a system that makes it easier to be an employee than an entrepreneur. With LAS rules that make it difficult to adapt quickly, employee stock options that are taxed as salary and banks that make it difficult to be a customer.

What would have made a difference?

- We raised SEK 150 million, but over six years. If we had raised the same amount in three years, we would have gone further.

Henrik says that climate tech and large-scale deep tech require big money early on. Scaling up test facilities and going from prototype to market requires hundreds of millions, before a single penny in revenue comes in.

- In technology sectors where it costs 200 million to reach TRL 6, the technology will never be developed if the programs only provide small sums. This is not reasonable.

Advice to founders - and to governments

To other founders, he gives straightforward advice:

- Apply for money when you have it. Not when you run out. Keep an eye on your cash flow. And dare to cut what doesn't work - fast.

And to the decision-makers:

- Make it cheaper and easier to build companies. Simplify the rules. Cut taxes on hiring. And stop thinking you are maximizing jobs by maximizing tax revenues.

A national player who dares to speak out

Henrik sees Sweden Startup Nation as an important voice in an otherwise fragmented ecosystem.

- We need someone who dares to point out the flaws in the system. Someone who collects data, raises voices and can show in figures what is not working.

He believes in the role of SSNs as a link between ecosystem reality and policy perception.

- It is only when you see the whole picture that you can drive real change.