Hardware startups in Europe receive a smaller proportion of investment and face longer development cycles than their digital counterparts. However, data from the sector indicates that their returns are equal to or exceed those in the United States. In Chapter 62 of Toque de Ingenio, Oriol Pascual explains why the continent has lost industrial strength, what investors require of a physical product project, and how a hardware accelerator works to bring it from development to factory and to market.
Guest: Oriol Pascual, who appeared in the episode as CEO of S2xpeed. Interview published: September 23, 2025. Episode: 62. Duration: 1 h 23 min.
In this episode:
- Why does the industry support the middle class, and what happened to Europe when it outsourced manufacturing?
- What differentiates an industrial startup from a digital startup when presenting to investors?
- How to validate the problem and the market before investing in industrialization.
The conversation was recorded in Barcelona. Oriol lives in Finland and travelled there for the recording, as Edgar explains when presenting it. At the time of the interview, S2xpeed had 21 companies under its control and was preparing to launch its next program in October.
Europe has outsourced production and lost industrial strength.
Oriol began with a diagnosis: Europe was once a producer of innovation and a global manufacturer for decades, but with the rise of globalization, the focus shifted to generating intellectual property within Europe and manufacturing elsewhere. He explains that this strategy has backfired, creating a dependence on supply chains that are not controlled, as was evident during the pandemic.
This is further compounded by the lack of cohesion between the 27 states, which compete against each other rather than acting as a united bloc. According to Oriol, regaining lost ground against the United States and China will take decades.
“The middle class exists when there is industry.”
Oriol Pascual 07:48.
The sector, it is argued, is not just a contributor to the economy; it generates skilled employment, exports, and innovation, and functions as a key element of social cohesion. Countries that are highly competitive achieve at least 20% of their GDP from the industrial sector – as seen in South Korea and China. Catalonia reached 25% a decade ago, then fell to 16%, and was hovering around 18 or 19% at the time of the interview.
Three waves of entrepreneurship and an emerging industrial ecosystem.
To contextualize industrial startups, Oriol describes three waves. The first was the digital entrepreneurship wave, which emerged with the internet and is now a mature ecosystem. The second arrived with biotechnology and medical devices – highly regulated sectors with clearly defined milestones.
The third wave – which he refers to as “industrial tech” – consists of startups based on scientific, technical, and engineering foundations, focusing on areas like robotics, automation, clean technologies, and mobility. According to the data he has access to, private investment in these types of projects has increased tenfold in Europe over the last five years, but it still represents only 3% of the overall venture capital investment.
Oriol explains that money flows to where the rules of the game are known. In the digital sector and in the healthcare sector, investors know what milestones, timelines, and success rates to expect. For a robotics startup, that “rulebook” doesn’t yet exist, which is why there are very few specialized funds and only a couple of programs offering support across Europe.
Oriol considers the digital and health sectors as representing the two extremes, and he predicts that the industrial sector will fall in the middle once its roadmap is fully defined. It requires more investment and longer cycles than software, but it’s less regulated than a medical device.
What do investors expect from a physical product project?
Oriol explains that the companies he works with, which typically last for three or four years, seek private funding and consistently receive the same response: “Come back when you have a first series of industrialised products and initial sales.” The problem is that they need the money specifically to industrialise their production.
Edgar brings the i-mas perspective: startups only succeed in approximately 10-15% of the projects that have passed through the company, compared to established industries which launch new products. Oriol interprets this figure as an indicator of the maturity of the ecosystem, as ten years ago it would have been close to zero.
It also shares two key findings from a study on investment in deeptech, presented in Barcelona to 120 investors. The first is that European funds achieve returns comparable to those in the United States. The second is that deeptech projects based on hardware are more profitable than those based on software.
Validate the problem before industrializing the product.
Oriol has outlined the development of a physical product in three phases: initial research and development to confirm the technology’s feasibility, the creation of the company to industrialize and validate the market, and growth. He explains that the middle phase – the one where the market has been validated – is the one that receives the least support, with funding becoming readily available once the market has been validated.
The most common mistake he sees is highly technical teams putting all their emphasis on technology and assuming the product will sell itself. He describes a University of Helsinki start-up developing an AI genetic analysis platform: its minimum viable product was 70% complete, but the team had not spoken to the laboratory technicians who would use it.
“Technology accounts for 10% of the project”.
Oriol Pascual 39:17.
Distinguish between two tools. Customer development involves conducting structured interviews with 30 or 40 people to understand their problem and how they currently address it. Market validation, on the other hand, requires someone to actually pay – and to demonstrate levels: offering the result as a bespoke service, presenting a prototype, or selling a mass-produced product.
Edgar adds examples from the podcast: entrepreneurs who sold 3D-printed items before investing in molds, or who created a website to see if anyone would buy. This kind of prototypes allows you to address the business question before committing to the costs of industrialization.
Assuming years of R&D and funding them realistically.
According to Oriol, many projects fail to realize that they won’t be able to generate revenue by selling their product for several years. For a company with a lifespan of three to four years, he estimates that the next five years will be focused on developing their initial product line. The key question is how a company whose primary activity is R&D can be financed.
Her recommendation is to combine different funding sources – non-repayable funding, European projects, and services based on its own technology – which can also be used to validate it. She adds that people will sleep better the sooner they accept that revenue won’t arrive next year.
Edgar points out the lack of realism in the deadlines: projects arrive in September and are intended to be sold at Christmas, when it typically takes a single mold two or three months to produce. Oriol attributes this to the immaturity of the ecosystem – there’s a lack of forums where those who have gone through the process can share how they did it.
How hardware accelerators work: the S2xpeed program
S2xpeed was founded in Barcelona in April 2022 as a private company focused on supporting European hardware-based industrial startups. Oriol describes it as an accelerator with a two-year program: the initial four months are intensive, partly in Barcelona, and afterwards, the support is quarterly.
The program is structured around four key areas. The first focuses on the production process – encompassing documentation, certification strategy, and supplier sourcing, including contract manufacturers and engineering firms. The second area is market validation within a B2B context, leveraging a network of over 90 innovation managers from major industrial companies. The third area concerns team and operations, and the fourth focuses on growth, including internationalization and funding.
As examples, Oriol cites a Norwegian startup specializing in autonomous cleaning robots for ports, which had signed contracts with two Spanish ports, and a British company with a pediatric diagnostic device that secured nine letters of interest from hospitals for clinical trials.
The entry criteria are clear: validated technology with a functional prototype, not just a rendering; original inventiveness, even if it’s not patented; a team of at least two or three people fully dedicated; and a B2B business model with a physical device.
The business model involves taking stakes: support is valued in monetary terms and converted into shares in the startup. At the time of the interview, they were managing 21 stakes, less than 30% of which were Spanish, and they aimed to double or triple the valuation within a three to five-year timeframe. Oriol explains that some funds are starting to condition their investment on the startup participating in the program.
What can another development team learn?
The conversation with Oriol offers four useful ideas for anyone looking to launch a physical product:
- Demonstrate mastery of the problem. Before developing anything, it’s important to understand how people are currently addressing the issue and what strategies they’ve put in place.
- Validate with the minimum. A service, a handmade unit, or an advance payment can confirm that someone is paying before investing in molds.
- Plan for long-term research and development. The company will rely on a mix of funding sources before it can rely on sales, and the plan must reflect that.
- Demonstrating the functional prototype. Investors and support programs are requesting stable technology and dedicated equipment, not renders.
At the time of the interview, S2xpeed was continuously analyzing opportunities and launching two programs per year – in March and in October. The next edition was scheduled for October 2025.
This episode doesn’t describe a specific development, but rather the context in which European manufacturers operate. If you work in an industrial startup, in Toque de Ingenio You will find more conversations with those who have already walked that path, and we are interested in following your journey.
To continue reading: How Rieju continues to manufacture 20,000 motorcycles per year in Figueres..
Source of article: Interview with Edgar Guerrero on Toque de Ingenio with Oriol Pascual. The excerpts cited link to the minute of the conversation. The recommendations for other projects are a summarised editorial from i-mas.
