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Assessing the RelAtionship between public policy & cleAntech gRowth among investors &
start-ups in Scandinavia
funded by
Assessing the RelAtionship between public policy & cleAntech gRowth among investors &
start-ups in Scandinavia
Wain Collen & Alexander Lidgren
02
05
10
20
22
04
executive summary
INTRODUCTION
results
bibliograhy &resources
annex 1Interviewees
06 | Public Policy and the Cleantech Sector09 | Objective and Methodology
main findings
contents
Cleantech Scandinavia
www.cleantechscandinavia.com
Magle Stora Kyrkogata 7223 50 LundSweden
funded by
02 03
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
As scAndinAviAn countries look to
develop the cleAntech sector into A
source of reliAble growth And globAl
competitive AdvAntAge, the role
of start-ups is considered crucial.
however, there Are significAnt bArriers
for the successful development of
start-ups, and consequently public
policy has an important role to play in
mArket development.
Different policies, such as chemical regulations or
feed-in tariffs for renewable energy can be pivotal
in triggering research and business development
for new commercial applications.
Additionally, public policy that does not provide
access to finance beyond R&D; for instance, for
technology demonstration and commercialization for
smaller companies risks reducing the impact of R&D
investments.
We conclude that public policy needs to
be simple, trAnspArent And predictAble
if it is to increAse investor confidence
in cleantech markets. Investors consider
certain types of policies as more “reliable” than
others; these are typically policies that are not easily
revised. Additionally, improved coordination between
diverse public funding bodies may help address the
challenges that start-ups face in moving beyond
R&D to commercialisation. Finally, our findings
suggest that the time and creative effort invested by
entrepreneurs to accessing the full potential of public
funding can pay off substantially in the medium term
This report assesses the relationship between public
policy and cleantech start-up growth in Scandinavia
from the point of view of both start-ups and investors.
This is undertaken by interviews with actors
developing cleantech solutions in Scandinavia and
investors allocating capital to cleantech solutions
in Scandinavia. Results show that public policy has
a positive influence on cleantech growth. Firstly,
environmental policy has been key in providing
incentives for entrepreneurs to begin researching and
developing new technologies. Secondly, policy in the
form of public funding can provide necessary support
to companies in early R&D and business development
processes.
executive summary
Another sphere of government
influence is public funding which
is often necessary in situations
where mArket Actors Are hesitAnt
to provide funding for high
risk-high reWard activities, such
as neW technology development.
hoWever, public policy can also
have unintended negative effects.
this is particularly the case With
unpredictAble legislAtion thAt
may reduce investment confidence
in the sector.
eFFectiVepublic policy = 1+2+3
simple
predictable
transparent
1
2
3
04 05
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
o The trend of stricter environmental policies in
Europe is a contributing factor for a majority of high
growth start-ups to start developing environmentally
beneficial technologies.
o Long term environmental policy trends do impact
on strategic business development, but less so in the
day-to-day operations.
o Most cleantech investors do take policy implications
into consideration when assessing cleantech business
options.
o However, a significant portion of investors prefer to
not consider environmental policy implications in their
investment decisions. This is due to a lack of reliability
in some environmental policies, specifically those
funded by government budgets. This in turn reduces
the potential for start-ups dependent on such policies
to access venture capital.
o To strengthen investor confidence, environmental
policy needs to be simple, transparent and predictable.
There is more faith from investors in legislation that
Cleantech is an area that Scandinavia has prided itself on being a market leader in. The region ranks high in various cleantech indexes (1) and there are suggestions to further develop the vision of Nordic countries as sustainability leaders and champions of green growth (2).
bans or taxes environmentally harmful substances,
or implements standards, and less confidence
in legislation that costs governments money –
particularly feed-in tariffs.
o Access to public funds provides significant benefits
for start-ups, particularly to undertake R&D, but
also to attract venture capital. Public investment
helps product development and increases investor
confidence by taking on some of the early investment
risk.
o Despite this, the main challenge for start-ups is to
source further finance for product demonstration and
large scale commercialisation.
o Addressing this challenge will require
i) coordinated funding policies on the national level to
ensure that all stages of the technology development
cycle are adequately funded, and
ii) creative and dedicated attention by entrepreneurs
to the full range of funding options available to them.
In developing new technology solutions, start-ups
have a significant role to play. Smaller companies are
known to foster innovation and be flexible in adapting
to change. And more specifically in the debate
surrounding economic growth: fast growing start-ups
are a major source of growth and job creation (3). These
characteristics make them an important stakeholder
in developing clean technology as a source of reliable
economic growth for Scandinavian countries.
However, the cleantech market is a challenging one for
start-ups to succeed in. Firstly, the cost of developing
new technology tends to be expensive, and the sector
is characterised by a “long time to market” - increasing
costs further - with markets often being conservative
and resistant to adopting new technologies (4).
Consequently, development of the cleantech sector
is often characterised by dependence on government
policies that promote the inclusion of societal costs
of environmental degradation, and policies that
support the development of innovative technologies
that address environmental problems. Nevertheless,
influencing market behaviour in a “beneficial” manner
for society and remaining competitive has proved
challenging for governments, particularly on the
international arena. To address such obstacles public
policy needs to continuously evolve if Scandinavian
countries are to optimise clean technology as a source
of global competitive advantage and economic
growth.
o
mainfindings
1.introduction
Public Policy and the Cleantech Sector
Objective&methodology
public policy needs to continuously evolve if scandinavian countries are to optimise clean technology as a source of global competitive advantage and economic growth.
lack of reliability in some environmental policies,
specifically those funded by government budgets reduces the potential for start-ups
dependent on such policies to access venture capital.
06 07
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
public policy and the cleantech sector
It can be argued that one important difference between
cleantech and other areas of economic growth –
such as ICT and biotech – is the importance of policy
drivers (5, 6). Various types of environmental polices
(See table 1) are often important drivers for cleantech
research, testing and the commercialisation of
cleantech technologies. Policy support is therefore an
important factor to foster technical change to cleaner
technology (7). This is hardly controversial, though the
issue of how government interventions should be best
designed and applied is still under debate (8).
These include government support for R&D through
grants, subsidies, & tax breaks, government support
for incubators, pilot testing, demonstration projects,
and different types of networking and clustering
projects. In addition to these, some government
support measures are of more importance later in
the technology development chain, when SMEs
have a commercial product ready for the market.
These include education packages for SMEs related
to marketing and sales competence, contract
negotiations, and business model development. There
is also a lot of public interest in supporting cluster-
related activities; for instance, how cleantech SMEs
can team up with competitors in order to win large
contracts. Such activities are considered beneficial to
develop and market more system oriented solutions
that require contributions from several firms (8).
Given the high costs of developing new technology -
access to relatively large amounts of capital is pivotal
for entrepreneurs to succeed in this sector. However,
in the early stages of technology development, most
venture capitalists are not that interested in investing
since they perceive the risk of an untested technology
to be too high. Given these circumstances, all
Scandinavian countries – as well as other governments
around the world - have created publicly funded bodies
to provide sources of funding for entrepreneurs in the
initial phases of product and business development.
Despite all Scandinavian countries providing such
funding options, the mandates of these bodies can
vary greatly, and thus the type of financial support
provided varies also. The majority of these funding
mechanisms are focused on very early stage R&D.
Much fewer of these public finance options have clear
mandates to fund SMEs beyond laboratory R&D,
specifically to develop prototypes and for large scale
commercialisation. This presents a challenge for start-
ups since the jump from laboratory testing to market
commercialisation is well recognised as an area that
lacks financial support in the technology development
process. This funding gap is called the “valley of
death”, specifically due to the lack of investors,
public or private, willing to invest the large amounts
of capital required to move a technology beyond the
laboratory and onto the market (4). Figure 1, by STDC,
demonstrates well the funding gap start-ups face
during this stage.
Bans (products and materials),
licenses, requirements on EHS
information, mandatory recycling
and recovery quotas, material
and quality requirements, emission
levels, chemicals regulation
(bans, handling etc.)
Deposit-refund systems, taxes
and charges, liability rules, feed-in
tariffs, removal of subsidies to fossil
fuels, white certificate schemes,
green certificate schemes, various
tax credits, CO2 trading
Requirement on EHS information,
emission registers, material and
quality information and mandatory
labels, information about chemical
content for professional and
private users, energy labelling,
marketing regulations
Responsible Care and similar
industries initiatives, application
of product and process standards,
product panels, environmental
management systems (e.g. ISO
14001), functionality panels,
various agreements between
government and industry
Green public procurement,
technology procurement, public
procurement for innovation,
& public financing for, R&D,
innovation and environmentally
beneficial market solutions
Eco-labelling ISO type I, EPDs,
green claims, energy labelling,
organic labelling of food,
certification schemes of
e.g. hotels, consumer advice,
consumer campaigns, education
ADMINISTRATIVE
MANDATORYINSTRUMENTS
VOLUNTARYINSTRUMENTS
ECONOMIC
INFORMATIVE
table 1: examples of different policy instruments. adapted from: mont, o. and dalhammar, c.(9)
APART FROM POLICy INSTRuMENTS THAT
PROVIDE INCENTIVES TO INFLuENCE MARkET
DEMAND AND SuPPLy, OTHER TyPES OF PuBLIC
SuPPORT TOOLS AND ACTIVITIES ARE ALSO
INFLuENTIAL FOR THE DEVELOPMENT OF
CLeAnTeCh (5, 10).
08 09
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
fundamentalresearch
appliedresearch
Technology development &demonstration
product commercialization
& market development
market entry & market volume
GOVERNMENTS industryangel investors
venture capital banks
FUNDING INTENSITY
industry
Figure 1: Funding intensity for new technology in Canada. Adapted from SDTC (11)
Thus, we can see that governments can provide
support for cleantech SMEs through a variety of
policies that can have varying impact on startup
growth and investor confidence.
Objective
This report investigates the role of policies in driving
new cleantech solutions in smaller companies; how
it affects both cleantech start-ups and their potential
investors. It also looks into how government funding of
cleantech start-ups can interact with and complement
private funding. The research is undertaken in a
Scandinavian context and as perceived by :
1 individuals running start-ups and 2 cleantech investment managers.
The purpose is to provide fresh insights, and identify
question-marks for policy-makers on the impact of
public policy as perceived by those closest to the
ground in the cleantech market.
Method
We address this by undertaking semi-structured
interviews with:* 20 start-ups in the Scandinavian cleantech sector * 10 investors strategically allocating funds in
Scandinavian cleantech market. * 1 other relevant institutional actor
Interviewees where selected out of the two groups of 25
Nordic Cleantech Open (www.nordiccleantechopen.
com) finalists in 2011 and 2012. These companies were
selected from among 82 applicants in the first year,
and 97 in year two. The 25 companies were selected
by a jury of 60 industrials, investors and cleantech
experts. They represent the current upper echelon of
the start-up landscape in cleantech in the Nordics.
Investor interviewees where hand-picked on the
criteria that that they
A. actively invest, B. represent a variety of Nordic countries, as well as
some non-nordic investors who actively invest in the
Nordics, and C. represent the different stages of Cleantech
investments (from seed to commercialisation to
expansion).
objective &methodology
10 11
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
Below, the results of our investigation are summarized.
3.1 Is environmental policy creating
an incentive for entrepreneurs
to research and develop new
technologies?
In our sample of 20 companies, 12 (60%) of those
interviewed cited some form of environmental
policy as a driver for the initial founding of the
company. Of these, the most commonly cited
policy drivers were the more long-term Eu 20-20-
20 goals1 , or the 2020 requirements on energy use
in buildings set in Eu law 2 , and other regulations to
curb climate change in general. To a lesser degree,
more specific legislation was cited, like solar feed-
in tariffs, the phase-out of incandescent light-
bulbs, the ban of toxins in REACH3, and recycling
standards, as those set in the 2006 (Eu) Battery
Directive4. This suggests that the trend of stricter
environmental policies to reduce pollution, increase
efficiencies, and promote renewable energy is
a contributing factor for a significant number of
entrepreneurs in starting a company that has a
solution to environmental problems. It also suggests
that long term environmentally related goals can
have a significant effect on start-up activity in the
Cleantech sector.
A majority of the companies interviewed –
75% - cite environmental legislation that, to some
degree or other, benefits the market for their
product (See table 2). Of these, eight companies
cited environmental legislation that we categorise
as indirect; that is to say, legislation that does not
significantly reduce costs, or increase revenues in
the short term, or significantly drive short-term
demand. Examples are the Eu 20-20-20 energy
goals, or the Eu 2020 building performance goals.
The other seven companies influenced by
environmental policy refer to legislation that we
categorise as having a direct impact on company
performance. These included the REACH Regulation
which bans certain harmful toxins, the phasing out
of incandescent light bulbs, standards on emissions
and truck idling, as well as solar feed-in tariffs.
Five companies (25%) feel that environmental
policy does not really impact on their business.
believe that some form of environmental policy is as a driver for the initial founding of the company.
cite that environmental legislation benefits the market for their product.
feel that
environmental policy does
not really impact on their
business.
Is environmental policy benefitting your company?
Yes, Directly
Yes, Indirectly
No, Not ReallY
60%companies
75%companies
25%companies
35%
40%
25%
1 The so-called 20-20-20 package in the Eu includes the targets that by 2020, 20 % of Eu energy use should come from renewable energy
sources, 20 % energy efficiency improvements should have been reached, and GHG emissions in Eu should have been cut by 20 %.2 DIRECTIVE 2010/31/Eu OF THE EuROPEAN PARLIAMENT AND OF THE COuNCIL of 19 May 2010
On the energy performance of buildings. The directive requires, among other things, nearly-zero standards for new and retrofitted buildings
by 2020 (2018 in the case of Public buildings), and also has rules on the application of a cost-optimal methodology for setting minimum
requirements for both the envelope and the technical systems of buildings.3 REACH is short for the Eu regime for chemical control, as set out in Regulation (EC) No 1907/2006 of the European Parliament and of the
Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a
European Chemicals Agency. The aim of REACH is to improve the protection of human health and the environment through improved and
earlier identification of the intrinsic properties of chemical substances. under REACH, bans and other use restrictions on chemicals are set.4 DIRECTIVE 2006/66/EC OF THE EuROPEAN PARLIAMENT AND OF THE COuNCIL of 6 September 2006 on batteries and accumulators and
waste batteries and accumulators.
results
12 13
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
A significant number of investors interviewed –
4 out of 10 – state that environmental legislation is
not a consideration in their investment decisions,
and that cleantech is assessed on the same principles
as any other business would be. For example, one
investor at sarsia seed [14] argues that
they prefer to focus on products that
generAte vAlue in And of themselves,
rather than satisfy the next generation
of legislAtion. Another interviewee
at cleantech invest [15] argues that
environmentAl legislAtion’s biggest
influence on investment decisions
can actually be a negative one: this is
especially the case if policies are seen
as unpredictable. This highlights a consensus
in opinion among investors that if a technology
is dependent on certain types of legislation,
especially if it is complicated and unpredictable,
this increases risk for investors. There is a specific
lack of confidence expressed by investors regarding
programmes that cost the government money –
for instance, feed-in tariffs and subsidies. These
programmes can end up costing governments
more money than initially budgeted, causing
backtrack on the policy decision. Furthermore, due
to the political cycle, programmes approved by one
party in power may be overturned by a succeeding
party. Examples that were cited by interviewees
To summarise, we see that environmental
policies can and have been an important driver for
cleantech growth. Consequently, many investors
take policy issues into consideration for allocation of
investment capital. Nevertheless, due to some cases
of environmental policy being unpredictable, there
is a larger than expected portion of investors who
prefer to avoid policy considerations and focus on
cleantech as any other business case. Additionally,
programmes that cost the government money are
currently viewed as less reliable due to possible
adjustments in the future.
This is a significant finding, because if environmental
legislation to influence market demand and supply is
not giving investors the confidence to allocate funds
in companies that benefit from such schemes, then
this reduces the effectiveness of said legislation.
Of the 10 investors interviewed – 6
explicitly take environmental policy into
consideration when making investment
decisions. These investors justify this
approach by citing cases where policy
can create a market - as in the case for
legislation on managing ballast water
[12-14], or the most notable regional
example perhaps being wind energy in
Denmark, which was driven by strong
policy interventions. As a Director of
Climate Change Capital Private Equity
Fund states, the clear impact of public
policy to boost wind energy in Denmark
was best demonstrated when benefits
were removed for wind, and this resulted
in an almost complete halt in wind
development- locally at least (12).
include: norway removing subsidies for cleantech
partnerships with India (due to concern over loss
of technology to foreign countries)(16); the Finnish
government setting up a fund for Combined
Heat and Power (CHP) production, but the new
government is planning to change it (17); Spain
removing their solar subsidy – and to add insult to
injury actually making them retroactive – requiring
those who had benefitted to pay back (12-14); and
uncertainty over solar subsidies in several countries (12,14,15). These factors understandably have
investors sceptical of the long-term stability for such
mechanisms. Companies that might be dependent
on such benefits for growth will therefore struggle
to convince investors.
3.2How is public policy influencing
the allocation of capital by
investors in cleantech?
explicitly take environmental policy into consideration when making investment decisions.
6/10investors
14 15
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
for solar energy in Germany. However, newer
technologies, such as solar heating, still do not
have the full backing of government and are more
susceptible to unpredictable influence by isolated
policy-making (18). One investor argued that
legislation that can actually generate income for
governments, such as taxes, or policies that are
not adjusted due to changes in political power or
budgetary reasons, such as standards are viewed
with more confidence than feed-in tariffs [15].
Once standards are put into place, for instance
Eu standards included in REACH, investors
perceive that it is less likely that these will then be
reversed. A partner at WHEB Partners, stated it
clearly: “A ban – now, that you can build a market
on.” A ban being a very clear example of easily
understandable and predictable environmental
legislation (19). These answers suggest that it
may not only be a case of “which” legislative
tools are better for clean-tech (subsidies vs. taxes
for instance), but it is also the “how” policies are
derived that is important (ensuring long term
security through agreements across political
party boundaries, long-term finance, etc.).
Although there is scepticism over the
role of policy in market development,
most investors concede that policy does
have a role to play in clean-tech growth,
given that it is such a young industry
and would struggle to compete with
established fossil fuel industries. So until
it can be competitive, what should the
role of policy be according to investors?
there is broAd Agreement
Amongst the investors
interviewed thAt in order to
be effective; legislAtion needs
to be simple, predictAble And
transparent.
For instance, a key to the success of
wind in Denmark was that the tariffs
introduced were long-term, between 10
and 20 years, and thus predictable. The
wind industry was driven by such broad
support that it was not so susceptible
to political whimsy. It is a similar case
A clear majority of companies
interviewed - 18 - have received some
form of public financial support. All
of them state this financial support
as extremely beneficial for initial
business development given the lack
of venture capital available in the
early development stages. In Finland,
getting funding from TeKeS is almost a
prerequisite for attracting private equity,
according to the CeO and co-founder of
netcycler(20). The reasoning being that
you need to have at least passed the
threshold of public funding agencies in
order to be eligible for venture funding.
3.3 How can public policy
lower risk for investors?
3.4 What is the role of publicly
funded grants and loans
for start-ups in the
cleantech sector?
have received some form of public financial support, which was extremely beneficial for initial business development given the lack of venture capital available in the early development stages.
18/20companies
16 17
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
gap concerns. This appears to follow the Swedish
strategy of supporting technology demonstration
projects with large industrial partners. One
entrepreneur familiar with the process of accessing
public funds informed that smaller companies
in Sweden are allowed a maximum of 200, 000
Euros in public funding (21). This study does not
investigate the motivations underlying the reasons
for this policy, but we highlight that this may
influence the allocation of capital by investors in
Swedish start-ups. For instance, Peter Vriesman,
partner at breadfruit capital investment firm,
states that if his organization has a choice between
a Swedish start-up and a Finnish start-up, they will
invest first in the Finnish start-up since there is
much more public finance available in Finland for
demonstration and commercialization and much
better communication between funding bodies (22).
Denmark on the other hand, aims to address the
“valley of death” by explicitly coordinating funding
between different public funding bodies. The goals
is to ensure that new technology has the necessary
financial support from initial research through
demonstration to market introduction (23). Figure
2 demonstrates that Denmark, principally through
the EDDP, has targeted the demonstration stage as
a major receiver of public finances, with fewer limits
for finance for smaller companies. This approach
In terms of funding strategies to
address the “valley of death”, national
policy approaches differ quite widely
between countries in Scandinavia.
For our purposes, we will look at
the Swedish and Danish cases as
examples.
Sweden has identified the challenge
of translating public research
investments into profitable
innovations and commercial products,
and recognises that “an important
step in the development from
concept to commercial product is the
demonstration of technology and
manufacturing”(4). Consequently,
in 2010 the Swedish government
earmarked SeK 8 billion to be used over
a three-year period for demonstration
and commercialization. Interestingly,
after receiving 39 applications for
demonstration funds, funds of over
1 billion SeK were awarded to only 6
companies: chemrec Ab; göteborg
energi Ab; södra cell Ab; seabased
industry ab; volvo personvagnar ab.
Most of these beneficiaries are all very
well established industrial companies
and do not suffer greatly from funding
attempts to harmonise efforts between finance
bodies to ensure that no stage in the development
chain of energy technologies is left unfunded, or
disproportionately overfunded.
3.5 Different national
policy approaches to
addressing funding gaps
in the demonstration and
commercialization stages.
This shows that policy strategy
in terms of how public funds are
allocated can have a significant
impact on the access to funds
that start-ups have to bring new
technologies to market.
appliedresearch
dscr
ForskEL
ForskVEElforsk
EDDP
Green labs DK
Danish National Advanced
Technology Foundation
EU: FP7-Energy
Fornyelsesfonden
The Danish Council for Technology
and Innovation
basicresearch development demonstration market intro
Figure 2: Energy research programmes (2011) in the Organizational strategies for accessing public funds in Denmark. Adapted from (23)
18 19
Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
vasasensor is a Swedish company founded in
2004 that has developed a wireless sensor system
to reduce costs in paper production. The company
manager argues that spending time on developing
relationships with public finance bodies pays off
over time. She says that “the entrepreneur needs
to re-define financing rules by working closely with
public funders on applications, and seeing how
you can make the funding work for you” (25). This
has admittedly taken time - up to 9 months of
negotiating and working with the Swedish energy
Agency -, but thus far, one-third of all Vasasensor’s
capital backing has come from the Swedish Energy
Agency and Vinnova, including sufficient finance
for building a prototype. All in all around 1 million
Euros has been sourced from public funding, and
this despite Vasasensor not being a large Swedish
industrial company.
danish power systems has benefitted from the
broad range of public funds in Denmark and has
been granted over 3 million euros – divided over
several years. This gives the company capital to
undertake product development for the next two
years at current activity levels. These are grants that
do not require the owners to give away influence
to external investors. The company Business
Development Manager does however agree that
accessing public funds can be complicated mainly
due to the diverse set of government funding bodies
To conclude, access to public
funds is an important element
for most start-ups;
particularly so in the early
R&D stages, and securing public
funds can help to attract
venture capital later on.
With such policy variations, and
with many start-ups struggling to
move beyond the R&D phase, do
entrepreneurs have alternatives to take
better advantage of the public funding
opportunities available?
One the one hand, some start-ups see
applying for large public funds as overly
complicated and time consuming.
Several interviewees stated that
applying for public funds could be
extremely bureaucratic and, in some
cases not worth the trouble (24). Others
stated that just getting to understand
the requirements for funding was
complicated, and given the diverse public
funding bodies, each with their own
requirements, this made applications
and compliance more confusing.
Considering that start-ups often have
limited manpower, it is understandable
that they may be more focused on day-
to-day management than with dealing
with bureaucratic regulations.
However, our study suggests that
developing a focused and creative
strategy for accessing public funds can be
a way for start-ups to overcome “valley
of death” issues proactively. We present
three cases to exemplify that funding
the “valley of death” may be as much up
to creative business management as to
national policy.
and their diverse requirements. he suggests that
a higher degree of alignment may support start-
ups in the fund raising process.
reformtech, a Swedish company, offers solutions
in the fields of environmental catalysis, fuel
reforming and industrial production. The company
CeO and founder shows that sometimes you have
to find creative ways to get the funds you need
in Sweden. Recognising that the Swedish limit of
200,000 Euro for product demonstration would
not be sufficient for the company’s purposes, they
decided to partner with Scania. According to the
CEO, if a smaller company wants any chance of
qualifying for “the big money” necessary to build
a demonstration prototype, then a viable option
is to partner with a large industrial company (21).
Consequently, in liaison with a large industrial
partner, Reformtech has been able to source an
additional 1.5 million euro for demonstration and
commercialisation.
Our research thus suggests that accessing capital
to overcome funding gaps is not exclusively
dependent on national policy parameters, but
also on the approach taken by entrepreneurs
to targeting public funds. Aggressively and
creatively targeting public finance and allocating
the necessary time and manpower may be worth
the effort.
Despite this, there are some characteristics that
may hinder growth in start-ups. In some cases,
public spending on clean technology does not
adequately address the challenges that smaller
companies face when looking to demonstrate
and commercialise products. Making finance
available to both large and smaller companies
and coordinating efforts between finance bodies
to ensure that the complete development cycle
is financed may be strategies that can help
start-ups grow. Secondly, many entrepreneurs
focused on early business development may lack
the resources or the time to work through and
comply with public finance criteria. Given the
large sums of money available, this suggests that
improved coordination between financiers and
start-ups may be needed to optimise these funds.
There could be opportunities for a coordinating
service to add value between start-ups and public
financiers. This could be a public function itself,
or could present new business opportunities
for a private actor with skills in cross-sectoral
management.
3.6 Entrepreneurial approaches
to accessing public finance
“Public money is the cheapest money you can get - if you put the effort into getting it.” argues Danish Power Systems’ Business
Development Manager.
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Assessing the RelAtionship between public policy And cleAntech gRowth in Start-upS in Scandinavia
annex 1 interviewees
Innowind Investment Kjetil egeland
EnevoJohan Engstrom
justcommonsenseJonas Carlsson
akkuser Tommi Karjalainen
Ensol Phil Denby
remake Hilmir Ingi Jónsson
aerogelSusanne hedblom
MHG systemsSepo Huurinainen
NetcyclerJuha koponen
Applied Nano Surfaces Mattias Karls
Climate Change Capital Thomas Skovbjerg
Cleantech Invest Timo Linnainmaa
Sarsia Seed Jon Berg
Environmental Technologies Fund Per ericsson
Industrifonden Stefan Jakelius
Finnish Industry Investment Juha Letola Investinor helle Moen
Sitra Sami Tuhkanen
Breadfruit Capital Peter Vriesman
3M New Ventures young-Jin Choi
BT WoodJuha Etsakari
Ecospark hans Lindberg
Cellfab Kiano Mottaghian
norsetek Vidar holmoy
Centriclean systemsDaniel Johansson
Danish Power systems Kim Albertsen
Black Silicon Solar hjalmar nilsonne
Vasasensor Sofia kocher Reformtech Daniel hagstrom
ZemissionAnders Vestin
20 START-UPS 10 investors
Nordic Council of Ministers/Nordic Innovation Hans Fridberg (Other)
publiccleAn-techpolicy & gRowth
www.cleantechscandinavia.com
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