Two-thirds of chemical startups lack funding

Long investment phases, high costs for equipment and limited exit options: Chemical start-ups are often unattractive to investors. A ZEW study finds that the federal government's start-up strategy must change this.

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 sector receives only 0.2 percent of all venture capital invested in Germany. By contrast, most of the money ends up with startups in the IT and biotechnology sectors.

The author of the study, ZEW scientist Christian Rammer, identified the special nature 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 industries," he says. There are also limited exit options, he adds. Companies are already operating in the target markets, he says, which means there are only limited growth prospects. According to Rammer, the German Federal Ministry of Economics and Climate Protection needs to keep in mind that chemical startups have a more challenging starting situation than other young companies when it comes to government venture capital financing instruments.

The funding gap for chemical startups also hinders the development of climate-friendly solutions. One-third of chemical startups have a green business model, and half offer individual sustainable products and services.