No money, no product: why green start-ups have a hard time – digital


They are called Kaneo, Cirplus or Thermondo and their names indicate that they are young, innovative and growth-oriented companies – start-ups. But these three don’t just want to earn money with new technologies, products or services. You also want to create added ecological value, such as reducing greenhouse gas emissions. The three named are so-called green start-ups. Kaneo is a green IT service provider, Cirplus is a global marketplace for plastic waste and Thermondo sells and installs digital and environmentally friendly heating systems. According to calculations by the German start-up association, there are around 3,000 of these companies in this country. The association has a total of 9,000 to 10,000 active start-ups in Germany, so a good third of them are considered green.

Environmentally-minded companies face different challenges than ordinary start-ups. In a study, the Federal Association of German Start-ups, together with the Borderstep Institute, tried to identify these additional problems, which was financially supported by the German Federal Environment Foundation.

Even if there are more and more green startups, they have more difficulties in raising capital than their traditional counterparts. For example, 42 percent of green start-ups would like venture capital financing, but only 16 percent state that they have received one so far, and 21 percent of the non-green ones. So it is hardly surprising that the green start-ups also tend to prefer crowdfunding (16 to seven percent).

For David Hanf, who is responsible for finances at Thermondo, the difficulties in raising money have to do with the fact that the development cycles of green start-ups are longer than usual and that a technically mature and salable product is therefore often not immediately available. Many of the start-ups arise in the university environment, the founders are mostly exclusively scientists. “There is often a lack of entrepreneurs and investors do not know whether the end customer will buy the product. That is simply a higher risk,” says Hanf. It is true that there are green start-ups in Lilium and Volocopter, which develop electric air taxis, which attract many investors and thus also collect a lot of money. But about that, the others who make a less prominent product shouldn’t be forgotten. State subsidies could therefore be an alternative.

The fact that the path for the start-ups does not always go smoothly can also be clearly seen in Thermondo – even if the company has a specific product with environmentally friendly heating today. But that was not always the case: The company originally started ten years ago as the portal. Consumers could use the website to find out how they can reduce their heating costs. Then came the idea that people who are interested in economical and climate-friendly heating could be referred to local craftsmen and they would pay a fee for it. That didn’t work, and neither did the idea of ​​hiring heating engineers as subcontractors. That is why Thermondo, which was majority acquired by a Canadian investor in 2020, is now itself a heating construction company with 300 employees. “We now see ourselves as a medium-sized company,” says Hanf. “We have career opportunities and you can also do an apprenticeship with us.”

Most start-ups in Germany are far from that size. In 2020, a start-up had an average of 14.3 employees and 2.4 founders. One of them is Nele Kammlott from Kaneo, a green IT service provider from Lüneburg. One of the findings of the study is that green start-ups have a higher proportion of female founders compared to non-green start-ups (19 to 14 percent). However, she considers it a cliché that women want to protect the environment more than men. “The companies that are starting up are putting more emphasis on ecological goals in their agenda and there are simply more women who now dare to start up.

Nele Kammlott founded her company seven years ago because she found that there were no IT service providers who consistently thought digitization and sustainability together. “Companies often don’t need as many resources as they think,” says Kammlott. “Many servers in Germany are bored”. Most IT systems are oversized, and if you program more leanly, you can save up to 50 percent of the energy required. And that has a direct impact on CO2 emissions.

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