Climate tech start-ups need more targeted support in early stages – report

The next German government should provide more financial support for the founding and scaling of climate tech start-ups, argues the German Energy Agency (dena) on the basis of a new report by the Tech for Net Zero Alliance. Dena says that, especially in the early stages, many climate tech start-ups lack capital for investment-intensive innovations, such as hardware-based climate technologies in sectors such as energy generation, industrial production or mobility. The report presents three main recommendations for policy makers: First, the high equipment and material costs of hardware start-ups should be publicly funded in the future through so-called matching grants in order to stimulate more private investment in climate tech start-ups. Second, the allocation of public venture capital should also be extended to early-stage financing. Third, CO2 neutrality should be established as a technical requirement in public tenders in order to accelerate the market ramp-up and scaling of climate tech solutions.

"Technical innovations are an important building block in achieving climate neutrality,” said dena head Andreas Kuhlmann. “Complementary financing via matching grants has proven itself as an instrument: private investments are doubled by public subsidies. For hardware start-ups, this minimises the technical risk, while private investors continue to bear the market and implementation risk."

In Germany, many start-ups take advantage of the energy transition by bringing novel business ideas to market and snatching market share from incumbents in sectors such as renewables, heating or mobility. The green start-up scene is so lively the country has been dubbed a "Green Energy Valley".