Germany's start-up scene is missing out on the green pioneer role

Florian Hildebrand hates detours. For his latest company, the tech founder simply wrote to several German universities and asked two questions: Are you working on a technology that is changing the world? And do you need an investor for that? Hildebrand found what he was looking for in Essen.

Scientist Peter Behr has been researching there for 15 years to filter CO₂ from the air and make it usable for industry. He believes he has found a particularly energy-saving and practical process. At least that's how Hildebrand reports about the emergence of the joint start-up Greenlyte last September.

"The topic captures the zeitgeist, the technology is very promising," says Hildebrand in his first interview about the start-up. "I hope that this story will also motivate other founders to produce even more ClimateTech in Germany."

In fact, there is a need to catch up – despite a whole series of successful German founders. Because the undisputed pioneering role in climate protection, which Germany would like to see itself in, it does not take on, at least in the start-up scene. This is shown by a previously unpublished study by Fox Corporate Finance (FCF). The Munich-based company financier has looked at start-ups that can make a contribution to climate protection - known in the scene as CleanTech or ClimateTech.

Accordingly, in the past five years, Germany has only ranked third behind Great Britain and France in terms of the number of venture capital financings in this area. When it comes to the total sum, even the poorly populated Sweden (EUR 6.4 billion) is ahead of Great Britain (EUR 4 billion) and Germany (EUR 2.8 billion).

Germany doesn't look bad in a comparison of numbers, says FCF expert Florian Theyermann - but: "We often think that Germany leads in green technology. But other countries achieve more in relation to their size.”

The example of Sweden shows how individual cases of success can attract large investments to a country. With the battery manufacturer Northvolt and the electric truck developers Einride and Volta Trucks, the Nordic country has three highly financed young companies, catapulting itself to the top of the FCF statistics.

The potential for such successes also exists in Germany. Because technologies for climate protection are becoming more attractive for investors and founders. Magnus Grimeland, head of the global start-up financier Antler, which supports 600 founders worldwide, is now also focusing on CleanTech.

A quarter of the 250 European companies in its portfolio deal with sustainability. This includes the Berlin start-up Neocarbon, which wants to filter CO₂ out of the atmosphere using existing cooling towers in industrial plants. Also in Berlin is Novo, which wants to advise homeowners on the climate-friendly conversion of their houses and offers financing for this.

"The issue is high on the agenda of every government and every corporation," says Grimeland, who supported the founder from the very beginning. At the same time, new technology can protect the climate and increase efficiency, for example by saving energy. "More and more people understand that ClimateTech needs a business model that is not based on pure altruism," says the Norwegian, who lives in Singapore. A lot of capital is therefore available from institutional investors - even in the current situation, in which it has become more difficult for eCommerce start-ups to find money.

In Europe and Germany, the Harvard graduate sees particularly great opportunities for start-ups in this area, after all the EU countries are investing a lot in climate protection. "Then the best companies should also be created here," he says. Grimeland hopes that European start-ups could become leaders in this “very large” global market in the next ten years.

Apparently Google recognizes this too. The US group will start a funding program for climate start-ups in Munich on Monday. 14 young companies from Europe and Israel receive start-up support in a ten-week program. Among them are three German foundations.

On Tuesday, the Hamburg home technology provider 1Komma5° announced a new round of financing of over 200 million euros. Former Tesla Germany boss Philipp Schröder offers private homeowners technology from solar roofs to heat pumps, including installation and energy contracts. Sales should increase to 200 million euros in 2023, Schröder told the “Handelsblatt”.

According to the FCF study, however, only two of the top ten European start-ups that have collected the most money come from Germany. On the one hand the solar service provider Enpal, which equips private houses. He has received 271 million euros in venture capital.

On the other hand Infarm, founded in Berlin. The company develops automated greenhouses for herbs and lettuce - for use directly in supermarkets, but also for larger systems. The technology still needs a lot of energy, but the founders hope that it will make a positive contribution to feeding the world in the long term. They have raised 518 million euros in venture capital so far. But the difficult economic situation also affects Infarm: At the end of last year, the company cut around half of its almost 1,000 jobs and withdrew from some foreign markets.

The energy storage developer Sonnen from Dresden, financed by Shell, and the Enpal competitor Zolar also attracted attention with larger rounds of financing.

However, the German climate founders are currently also reporting the bankruptcy of a highly traded start-up: the solar car developer Sonar is giving up – despite numerous pre-orders.

On the other hand, there are successful sales of start-ups, with which the venture capitalists secure their returns: In Germany last year, Samsung took over the Baden-Württemberg OLED developer Cynora, who is working on economical screens, for 283 million euros. A year earlier, Shell acquired the Cologne-based eco-electricity trader Next for EUR 150 million. However, there have been no major IPOs in this area in Germany so far, which have mainly taken place in Scandinavia and France.

FCF expert Theyermann sees a reason behind the relative weakness of the German climate start-up scene that speaks in favor of the location: the strong German large-scale industry develops its own solutions and thus attracts university graduates. In Great Britain, on the other hand, young engineers are more often left to their own devices and therefore more often found their own companies. That could be one reason why German start-ups in the climate sector are less talked about.

But the increased chances of success are now attracting more and more experienced founders from the German tech scene to switch to the climate field. Founding a company is not a new experience for Greenlyte boss Hildebrand either – otherwise he would not have thrown himself into the project head over heels. He had already co-founded the Frankfurt chemical certification platform Qualifyze.

The start-up capital for the latest project came from the partial sale of his first company – and his knowledge of what convinces start-up financiers. The ideas for Greenlyte envisage, for example, making the technology flexibly usable via containers and linkable via the cloud - two points that start-up financiers like to see.

At its core, however, it is about chemistry that binds captured CO₂ in a salt and is said to require less energy for this than other processes that are currently being developed around the world. The solidified CO₂ can be further processed, for example into fuel.

Greenlyte has already bought the patents for this from the University of Duisburg-Essen. Investors such as the Berlin early-stage financiers Earlybird and Green Generation Fund as well as the specialized Swiss investor Carbon Removal Partners are already on board. The co-founder of the German flagship climate protection start-up, Schröder von 1Komma5°, has also invested.

The eleven-strong Greenlyte team wants to use the money to set up a first pilot plant this year. The founders hope to be able to prove the favorable energy balance in order to start with a pilot industrial customer in the coming year - and then to be able to set up sales and production. It cannot be ruled out that Greenlyte will become a success case that will push Germany up the ClimaTech statistics in a few years.

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