How Sustainable Is Germany's Startup Scene, Anyway?

Germany has a good reputation when it comes to environmental sustainability — it was the first country in the world to make manufacturers responsible for the disposal of their packaging materials and last autumn Chancellor Angela Merkel’s government passed a 54 billion euro “Klimapaket,” a package of measures to ensure the country meets its target of reducing carbon emissions by 55% by 2030. But does this attitude translate to the startup scene or do tight budgets play their part? We took a deep dive into Germany’s green startup sector to find out what the challenges ahead are and to evaluate how the scene is doing so far.

In order to do so we used statistics from the last available Green Startup Monitor – published last year but covering 2018 – as a jumping-off point.

26% of German startups can be considered green 

instagrid co-founders Dr. Sebastian Berning and Dr. Andreas Sedlmayr

We reached out to the Green Startup Monitor to find out what criteria this statistic was based on and were told this was the percentage of startups who self-defined as green. Since interviewees got to qualify what green meant to them, this number isn’t as impressive as expected — surely many startup CEOs and much of senior management would be too biased to be truly able to be objective.

However, Dr. Andreas Sedlmayr believes the scene is deeply supportive of green businesses. Sedlmayr is the co-founder and CEO of instagrid, a portable energy startup which has been nominated as a finalist for the Start Up Energy Transition Award 2020. He believes the ecosystem in the battery sector, especially at a European level, promotes exchange and cooperation. One example of this, he says, is InnoEnergy, a platform designed especially for young companies that want to push the energy revolution forward through sustainable technology. “Through this innovation driver, they receive support and attention.”

Managing Director Fabian Mischler of Wind Mobility

Managing Director Fabian Mischler of the Berlin-based e-scooter startup Wind Mobility also argues that things are getting better and better in the sector: “We’re seeing start-ups across Germany making every effort to become more sustainable, from providing employees with beverages in the office to dissuade them from buying bottled water and using takeaway coffee cups, to using recyclable stationery.”

The percentage of female green founders is slightly higher than that of non-green startup founders (yet at 18% still low)

When we asked Anna Alex from Planetly what could be done to encourage more women to start sustainability initiatives, she recommended we shouldn’t differentiate between industries — this isn’t an eco-startup problem, but a business problem in general. “The statistics show that we have too few female founders in general and the reasons apply for any industry or sector. How to change that? We need more female role models. We need more women who are successfully pursuing a career as a founder – in tech or any other field – and they need to share their experiences, the ups and downs of being an entrepreneur.”

Green startups are more likely to encounter challenges with attracting financing than non-green startups

Planetly co-founder Anna Alex

The problem? According to Dr Sedlmayr’s co-founder, Dr. Sebastian Berning, investors may suspect green entrepreneurs of being more skilled at being idealists and world savers than competent business wo/men.

Conversely, Anna Alex believes that there’s a historical reason for the challenge for eco-friendly startups in securing investment now. She referred to the first green startup wave at the beginning of the 2000s when “many investors invested in that space and most of them never got the expected returns, with the exception of the green tech software deals that overall brought a return of around 3.8 percent on the invested amount.” She believes that the tech investors who got burned then steered clear of the sector afterwards.

But there’s hope. Dr Berning notes that the decisive factor for such entrepreneurs “is to be able to demonstrate a profitable business model despite the green central idea.” For example, while starting his own business, he was careful to emphasize “the increase in efficiency through our innovative mobile battery system rather than the green idea.” Wind Mobility agree, arguing that unfortunately sustainability credentials are “still less important than profitability, and an entrepreneur’s ability to understand trends and what consumers want. In this way, investment has not quite kept up with the pace of the industry.”

tado°co-founder Christian Deilmann

Christian Deilmann, the co-founder and CPO of smart thermostat company tado° believes that in the long term, it will be sustainable businesses which secure the most investment, since he thinks that eventually our societies and their respective regulations will effectively tax institutions which destroy the planet. “By that time, sustainable companies will significantly benefit. It is hard to bet on this fact alone though, so startups fundamentally need to have a positive business case with or without the green element.”

Anna believes change is already underfoot, seeing “a stronger movement of investors towards green tech startups in the future. A very practical example is Leaders for Climate Action, a movement of over 200 tech CEOs. Their goal is to implement change on a personal and company level, as well as to call on political decision-makers to set a clear course for effective climate action in Germany.” She also notes there is an additional group of 20 investors who specifically require effective implementation of climate change initiatives from their portfolio companies. 

Of course startups aren’t perfect when it comes to sustainability. But there’s certainly achievements to celebrate. As the founder of the Borderstep Institute (the organisation behind the Green Startup Monitor) Prof. Dr. Klaus Fichter observed in a 2019 interview, the focus on hardware innovation amongst startups means that instead of creating “yet another app”, Germany-based startups are puzzling over technical solutions like new PV or storage technologies. He also highlighted the fact that there are now support mechanisms in place like large incubators that focus on energy transition startups: “You can find that in very few other countries — perhaps to some extent in Scandinavia, if at all.” Here’s hoping Germany’s startups can finish what they’ve started and to a greener future.

hubraum recently announced their 5G Sustainability Tech Award. Unfortunately, the award ceremony had to be cancelled due to the COVID-19 outbreak and is currently being rescheduled. In the meantime, our commitment to green tech continues online. Follow us on LinkedIn, Twitter or Facebook to learn more about the innovators driving sustainable telecommunication.

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