Two-thirds of chemical startups lack funding

Long investment phases, high investment costs and limited exit options: Chemical start-ups are often unattractive to investors. The German government's start-up strategy must change this, according to a ZEW study.

According to a study by the Leibniz Centre for European Economic Research (ZEW), around two thirds of chemical start-ups lack funding. According to the study, the chemical industry only receives 0.2 percent of all venture capital invested in Germany. In contrast, most of the money ends up with start-ups in the IT and biotechnology sectors.

The author of the study, ZEW researcher Christian Rammer, has identified the special characteristics of the industry as the reason for this. "Chemical start-ups have long investment phases of five to ten years, and the investment funds of often more than one million euros per start-up are also higher than in other sectors," he says. There are also only limited exit options. Companies are already active in the target markets, which means that there are only limited growth prospects. According to Rammer, the Federal Ministry for Economic Affairs and Climate Protection must take into account the fact that chemical start-ups have a more challenging starting position than other young companies when it comes to state venture capital financing instruments.

The funding gap for chemical start-ups is also hindering the development of climate-friendly solutions. A third of chemical start-ups have an ecological business model, while half offer individual sustainable products and services.