ANALYSIS - GREEN INNOVATION GROUP A/S · Danish ecosystem for startups working with green energy...

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THE DANISH ECOSYSTEM FOR STARTUPS IN GREEN ENERGY AND ENVIRONMENTAL TECHNOLOGY

ANALYSIS

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ANALYSIS - THE DANISH ECOSYSTEM FOR STARTUPS IN GREEN ENERGY AND ENVIRONMENTAL TECHNOLOGY

Written by GREENTECH CHALLENGELayout by Lars Hartmann

Published February 2019

3Executive abstract

This report concludes that the Danish green startup ecosystem does not offer the best conditions or possibilities for the startups to create revenue, start collaborations with the state and with larger clients, or gain access to capital. The Danish startup ecosystem is loosing ground compared to the startup ecosystems of other countries included in this report.

The Danish startups fail to create revenue and raise capital on a level that can be described as satisfactory compared to the rest of the European countries. This report therefore concludes that focused action is needed in Denmark to make the ecosystem thrive and yield the best possible conditions for green startups. This analysis finds three obstacles standing in the way of Danish startup ecosystem rising to the top:

EXECUTIVE ABSTRACT

Obstacle #1: Challenges in finding

risk willing capital.

Obstacle #2: Lack of involvement from public utility

companies in the ecosystem.

Obstacle #3: Other surrounding countries

are moving fast with political action.

EXECUTIVE SUMMARY ............................................................................................................ 3CONTENT ................................................................................................................................ 51. INTRODUCTION ................................................................................................................... 71.1 STRUCTURE ........................................................................................................................................ 8

1.2 CLARIFICATION OF CONCEPTS ......................................................................................................... 81.2.1 STARTUP ...................................................................................................................................................................... 8

1.2.2 GREEN COMPANIES ................................................................................................................................................... 9

1.2.3 ECOSYSTEM................................................................................................................................................................. 9

1.3 METHOD ............................................................................................................................................. 9

2. GREEN STARTUP ECOSYSTEMS IN DENMARK AND OTHER COUNTRIES ................................ 112.1 DENMARK .........................................................................................................................................11

2.2 PORTUGAL ........................................................................................................................................12

2.3 SWEDEN ...........................................................................................................................................13

2.4 UNITED KINGDOM ............................................................................................................................14

2.5 NORWAY............................................................................................................................................15

2.6 GERMANY ........................................................................................................................................15

2.7 FRANCE ............................................................................................................................................16

2.8 FINLAND ...........................................................................................................................................17

3. ANALYSIS OF THE DANISH ECOSYSTEM FOR GREEN STARTUPS COMPARED TO OTHER EUROPEAN COUNTRIES ............................................................................................... 193.1 DANISH PREDOMINANCE OF IT STARTUPS ..................................................................................19

3.2 DANISH GREEN STARTUPS LAG BEHIND IN REVENUE ................................................................22

3.3 DANISH GREEN STARTUPS CANNOT RAISE THE NECESSARY CAPITAL .....................................24

4. ASSESSMENT: OBSTACLES FOR THE DANISH ECOSYSTEM ................................................. 29OBSTACLE #1: ACCESS TO CAPITAL ....................................................................................................29

OBSTACLE #2: POLITICAL INITIATIVES ................................................................................................30

OBSTACLE #3: FAILURE TO INCLUDE PUBLIC UTILITIES COMPANIES ..............................................30

5. CONCLUSION AND RECOMMENDATIONS ............................................................................ 336. CASE COLLECTION – SELECTED GREEN STARTUPS ............................................................. 37ENERGY PRODUCTION # 1 ....................................................................................................................38

ENERGY EFFICIENCY ..............................................................................................................................40

ENERGY PRODUCTION # 2 ....................................................................................................................42

AIR MANAGEMENT / SMART CITIES .....................................................................................................44

7. APPENDIX ......................................................................................................................... 477.1 OM GREENTECH CHALLENGE ........................................................................................................47

7.2 METHOD CONSIDERATIONS ............................................................................................................47

7.3 DANISH ENTREPRENEUR COMMUNITIES ....................................................................................48

CONTENT

6Content

01

7Content

INTRODUCTION

The corporate sphere in Demark is in a position of power today when it comes to green energy and environmental technology. However, research shows that Denmark is challenged by a relatively low output in innovation compared to other countries, which is caused, among other things by a lack of high impact entrepreneurs.

That is why the Ministry of Industry, Business and Financial Affairs have tasked GREENTECH CHAL-LENGE with analyzing the Danish ecosystem for startups working with green energy and environ-mental technology.

For many years Denmark have been viewed as lead-ing the pack when it comes to promoting sustain-able development, because corporates in Denmark have been in a position of power within the field of producing and developing green energy and envi-ronmental technology.

But if we compare the Danish green startup ecosys-tem with the European ecosystems we unfortunately see that we are falling behind countries like Finland, Germany, Sweden, France, Norway, Great Britain, and even Portugal. In order for Denmark not to fall farther behind in green commercialization, a deeper

understanding of the green startup ecosystem is needed.

The purpose of this analysis is to provide the government’s growth team for green energy and en-vironmental technology with knowledge about the Danish ecosystem for startups working with green energy and environmental technology. This knowl-edge comes in a comparative form with other Euro-pean ecosystems to ensure that the growth team has the prerequisite information to recommend better frameworks for Danish corporate life when it comes to utilizing the green change for growth and inno-vation.

How many startups and growth companies exist in the sector compared to other sectors and other countries?

Does Denmark have a good ecosystem for inno-vative startups working with green energy and environmental technology?

What does the innovation startup look like – what types of products, services, business models, etc. do startup companies work with?

8Content

INTRODUCTION

1.1 STRUCTURE

This analysis is divided into 5 chapters. The present introductory chapter covers concepts and methods. The second chapter covers the researched ecosys-

tems focusing on the initiatives abroad that Denmark should pay special attention to. The third chapter analyses and valorizes the Danish green startup ecosystem in relation to the corresponding ecosys-tems in other countries. The analysis is used for an overall estimation of obstacles in the Danish ecosystem. The report concludes with a series of rec-ommendations to the growth team, after which a perspective on a handful of chosen cases

that deserves special attention from the growth team is given.

1.2 CLARIFICATION OF CONCEPTS

It is first necessary to clarify the following concepts used in this report.

1.2.1 STARTUP

This report leans on the definition of startups given by Paul Graham1:

“A startup is a company designed to grow fast. Being newly founded does not make itself a com-pany and startup. Nor is it necessary for a startup to work on technology, or take venture funding, or have some sort of ‘exit.’ The only essential thing is growth. Everything else we associate with startups follows from growth.” 2

A company is therefore not necessarily defined as a startup just because it is new, small or has few employees, but is defined as a startup when the company has a considerable potential for growth. This report thus defines startups as young and fast growing companies that have not yet established themselves in the market. These companies have a constant need for reaching out to partners to sup-port their development and to ensure they establish themselves in the market.

1.2.2 GREEN COMPANIES

GREENTECH CHALLENGE defines a green com-pany as a company that has a positive influence on the world’s environment and/or climate every time they sell a product or service. Thus, the definition

1. Venture capitalist og co-founder of the world famous accelerator Y-Combinator.

2. Paul Graham (2012): http://www.paulgraham.com/growth.html

http://www.paulgraham.com/growth.html

9Content

INTRODUCTION

2000 MAPPED OUT

IN

PRESENT REPORT:

700 PROCESSED

513

includes a series of different industrial sectors – everything from energy, information technology, and resource management to food technology, and mobility.

1.2.3. ECOSYSTEM

The concept of ecosystem refers to a network of players that exists within and around a specific grouping of companies. Ecosystem in this report is used as a determining factor for having successful green startups, and the report evaluates the ecosys-tem based on its; access to entrepreneur networks, network generating events, and visibility for start-ups, access to legal and administrative guidance, and access to risk willing capital.

1.3 METHOD

The data used in this report is sourced from the databases of GREENTECH CHALLENGE that has unique information on startup companies working in the green field. Information that is not found in registers and that, today, is next to impossible to gather due to the fact that most startups are not listed on the stock exchange, the changing size of innovation, and to the startup company’s changing states and circumstances, that can quickly turn from explosive growth to sudden threat of bankruptcy, or the other way around.

GREENTECH CHALLENGE has more than 2000 green startups mapped out with deep data on more than 7000 European green startups. Since 2015 GREENTECH CHALLENGE has been working closely with more than 200 green startups and held activities in 8 European countries as well as in China. Andrea Licata, Ph.D. from International University Institute for European Studies, estimates that there are around 5000 green startups in Europe. Thus, the 2000 green startups already mapped out in Europe makes up around 40 % of all green startups in this estimate. The starting point for this report is 513 cases. Based on this data, GREENTECH CHALLENGE will analyze the Danish ecosystems for startups working with green energy and envi-ronmental technology compared to other European ecosystems. When measured against the estimated 5000 green startups in Europe, this set of data repre-sents just above 10 % of all green startups in Europe.

For further considerations on methods and reserva-tions see appendix.

10Content

02

11Green startup ecosystems in Denmark and other countries

GREEN STARTUP ECOSYSTEMS IN DENMARK AND OTHER COUNTRIES

An ecosystem is made up of different players, pro-grams, and initiatives (components), with the pur-pose of supporting the green startups to make them viable and competitive. This interrelation focuses with this chapter on chosen components from the ecosystems in Denmark and other countries, hope-fully inspiring new initiatives in Denmark, including the tax incentives SEIS from Great Britain, Station F from France and Websummit from Portugal. We are focusing on the initiatives that have created tangible change for the ecosystems in the respective coun-tries and/or have positioned the country in one or more global industries for startups. The initiatives described have been chosen with the input GTC has gathered from working with around 200 startups in the last two years.

2.1 DENMARK

The green startup ecosystem in Denmark consists of a long series of initiatives. Most of them are in one way or another financed either by the state, by philanthropy or by the EU. Entrepreneur and office communities such as BLOXHUB, university envi-ronments, venture capital funds, and other driving forces are all a part of making green startups viable and competitive.

VENTURE CAPITAL FUNDS, ACCELERATORS, AND DRIVING FORCES The innovation fund invests in startups, entre-preneurs, and projects with a high-risk profile to support and further the development of usable and viable solutions for the challenges within climate, food, environment and health in society.

ACCELERATORS AND DRIVING FORCESAccelerace focuses on later stage startups working with IT, food tech, and clean tech. Accelerace have been working with more than 265 startups and spin-offs, and created more than 1200 jobs. Their startups have received more than DKK 240 million in fund-ing and investments.

Gate 21 is a partnership between regions, municipal-ities, companies, and knowledge institutions within the greater Copenhagen area working with green change and growth. Gate 21 utilizes the demand of the regions and municipalities to, together with the knowledge institutions and companies, develop, demonstrate, and distribute new resource efficient solutions within climate and energy.

Next Step Challenge introduces startups to new markets and investment networks, entrepreneurs, established giants in Danish corporate life, mentors and experts.

The TechBBQ conference is the newest player in the field of larger Danish startups initiatives. The confer-ence has up to 6500 participants. Among those are entrepreneurs, investors, and corporates. During the last two years the sustainability part of TechBBQ has helped green startups develop networks and expo-sure. It is a big event and a big triumph for Denmark, but it pales compared to the initiatives in other countries.


2.2 PORTUGAL

These days Portugal is regarded as an advanta-geous place for startup companies, partly due to low wages and low housing prices, and partly due to an available and highly trained work force with good Eng-lish qualifications3. In a new estimation Lisbon in particular scores as number four on the 2017 list over the world’s best cities for startups only topped by Vancouver,

Berlin, and Manchester4. Since 2016 investment in startups has grown by 30% annually5. That goes for all startups – green and not green.

Even though Portugal is not yet at the same level as other European countries when it comes to the maturity of their green startup ecosystem, the devel-opment during these last couple of years has been extremely positive. From being a country with very few startups, startups are now a considerable driver for job creation6. Due to fact that the ecosystem is still young, most startups in Portugal are not yet in the heavy end revenue-wise. This however, may soon

not be the case; for example, investments in startups have six doubled in 2017 compared to 20167 and the amount of new companies grew by 11.45 % for Q1 and Q2 in 2018 compared to 20178.

WEBSUMMITThe largest startup and innovation conference in Eu-rope, Websummit, is held annually and attracts up to 70.000 participants from more than 170 different countries. The conference brings together partners and CEOs from tech companies (such as Facebook, etc.), fast growing startups, decision makers, and politicians to discuss “What’s Now & What’s Next?” Since 2016, Websummit has strengthened Portugal’s position in the field of entrepreneurship and innova-tion by stimulating interaction and collaboration between relevant players9. Websummit gives Portu-guese startups a visibility to investors and collabora-tors that Danish startups cannot match.

MATCHMAKING HELPS STARTUPS GET THEIR FIRST CUSTOMERSBeta-i plays an important role for green startups in Portugal. Apart from investing and offering office spaces (giving them a certain access to monitor the ecosystem) beta-i works as a matchmaker for large companies (Fx. Ikea, Airbus, Cisco, and Microsoft) and governmental organs (Turismo de Portugal) that all wants innovation. It helps green startups get-ting those critical first customers and landing deals.


3. Entrepreneur (2018): https://www.entrepreneur.com/article/307526

4. PeoplePerHour (2017): http://blog.peopleperhour.com/blogroll/peopleperhour-

reveals-their-startup-city-index/

5. Essential Business (2018): https://www.essential-business.pt/2018/06/08/startup

investment-in-portugal-grows-30-year-on-year/

6. European Startup Monitor (2018): https://europeanstartupmonitor.com/

fileadmin/esm_2016/country_reports/Portugal_CountryReport.pdf

7. Halbe&Koenraads (2018): https://www.halbekoenraads.com/wp-content/

uploads/2018/06/BOOKLET_PORTUGAL.small_.pdf)

8. Portugal Startups (2018): https://portugalstartups.com/2018/08/

companies-created-portugal/

9. Halbe&Koenraads (2018): https://www.halbekoenraads.com/wp-content/

uploads/2018/06/BOOKLET_PORTUGAL.small_.pdf

https://www.entrepreneur.com/article/307526

http://blog.peopleperhour.com/blogroll/peopleperhour-reveals-their-startup-city-index/

http://blog.peopleperhour.com/blogroll/peopleperhour-reveals-their-startup-city-index/

https://europeanstartupmonitor.com/fileadmin/esm_2016/country_reports/Portugal_CountryReport.pdf

https://europeanstartupmonitor.com/fileadmin/esm_2016/country_reports/Portugal_CountryReport.pdf

https://www.halbekoenraads.com/wp-content/uploads/2018/06/BOOKLET_PORTUGAL.small_.pdf


EDP Starter helps startups in the energy sector de-velop their ideas and business models within clean tech and innovation in the energy sector10 (EDP is one of the largest energy companies in Europe). The connection to public utility companies makes it eas-ier for green startups to start pilot projects and get customers in the energy sector. The EDP Starter has therefore included both financed pilots and a Pro-curement Speed Way as a part of their program for green startups, to make it easier for the startups to integrate their products into EDP. Furthermore they have attached experts in commercialization from the energy sector, and have in that way, as opposed to many others (especially semi state run) accelerators, a much more powerful focus on getting the innova-tion out of the lab and unto the market11.

THE EFFECT OF POLITICAL INITIATIVESThe Portuguese government passes more initiatives to further the startup ecosystems. In 2016 the gov-ernment established the program StartUP Voucher, which supplies more than 400 entrepreneurs with a 1-year fellowship to pursue their innovative projects and ideas12.The government has also passed a 20 % tax break on investments for up to EUR 5 million, which means that the taxation on investment in Por-tuguese startups can be as low as 7.5%13. The effect has been massive, investments in startups has grown by 30 % annually since 2016.

2.3 SWEDEN

CULTURE In Sweden it is easy for citizens to invest in both listed and unlisted small companies and startups. Especially the Swedish investment savings account, which has a low rate of taxation and an unlimited ceiling for account deposits, has given the Swedes lucrative investment options. Just scarce of 2 million Swedes has an investment savings account that they can use for investment as well as for saving14, which testifies to Sweden having a different culture of sav-ing and investing than Denmark.

THE STOCK MARKET The First North stock exchange creates a space for a number of small stock listings, which in 2015 resulted in 81 companies to go through an IPO. Thus, First North has created a space for an invest-ment culture for the smaller companies, which has also meant that more smaller Danish companies and startups are moving to the Swedish stock exchange15.

In General Sweden has an active stock culture, where investors are taxed comparatively low rates. Taxation on return of shares is at about 30 %, which incentivizes investments in high-risk companies16. If you, like most business angels, use a holding company the tax rate drops (placing it at the level of the corporate tax at 22 %)17. Moreover, Sweden


10. EDP Starter: https://www.edpstarter.com/openinnovation

11. Forbes (2018): https://www.edpstarter.com/tools

12. Entrepreneur (2018): https://www.forbes.com/sites/heatherfarbrough/

2018/02/28/all-roads-lead-to-lisbon-why-startups-are-booming-in-the-

portuguese-capital/#7539b7fb77ea

13. Entrepreneur (2018): https://www.entrepreneur.com/article/307526

14. DR (2017): https://www.dr.dk/nyheder/indland/faktatjek-holder-brian-

mikkelsens-svenske-aktieeventyr

15. FinanceWatch (2016): https://finanswatch.dk/Finansnyt/article8561663.ece

16. DR (2016): https://www.dr.dk/nyheder/penge/flere-penge-paa-boersendanske-

virksomheder-rykker-til-sverige

17. Deloitte (2016): https://www2.deloitte.com/content/dam/Deloitte/cn/

Documents/international-business-support/deloitte-cn-ibs-sweden-tax-

invest-en-2016.pdf

https://www.edpstarter.com/openinnovation

https://www.edpstarter.com/tools

https://www.forbes.com/sites/heatherfarmbrough/2018/02/28/all-roads-lead-to-lisbon-why-startups-are-booming-in-the-portuguese-capital/#7539b7fb77ea



https://www.entrepreneur.com/article/307526

https://www.dr.dk/nyheder/indland/faktatjek-holder-brian-mikkelsens-svenske-aktieeventyr

https://www.dr.dk/nyheder/indland/faktatjek-holder-brian-mikkelsens-svenske-aktieeventyr

https://finanswatch.dk/Finansnyt/article8561663.ece

https://www2.deloitte.com/content/dam/Deloitte/cn/Documents/international-business-support/deloitte-cn-ibs-sweden-tax-invest-en-2016.pdf


has made it more attractive to move your pension savings into index funds (that invest in growth companies too) and directly into smaller companies. The result is that Sweden has the largest number of startup unicorns per capita in the world, outside of Silicon Valley18.

ACCELERATORS AND DRIVING FORCES E.ON:agile is an accelerator that helps startups mak-ing their innovation energy solutions into successful business models by drawing on knowledge and experience from the energy sector19. As seen in Por-tugal with EDP Starter it’s a good launch pad for the startups to land their first customers. The interesting thing here, seen from a Danish perspective, is that E.ON:agile are scouting startups from Denmark and are successful in bringing them across the border to work from the Swedish accelerator.

2.4 UNITED KINGDOM

POLITICAL ACTION The Government passed the program Seed Enter-prise Investment Scheme (SEIS) in 2012 as a supple-ment to the existing program Enterprise Investment Scheme (EIS), which gives investors up to 30 % of their investments back in tax breaks to promote investing20. SEIS is more comprehensive than EIS, since the program promotes risk willing investments through 4 economic incentives:

1. Tax breaks on income tax corresponding to 50 % of the invested amount.

2. Tax break on capital gains for private investors with a share of up to 30 % in startups (the share is set at 30 % to encourage external investments).

3. Any profit from investments made within SEIS is tax-free.

4. Profit from other investments made outside SEIS is also exempted from task, insofar as the profit is reinvested within SEIS.


18. Nordic Business Insider (2017): https://nordic.businessinsider.com/the-swedish-

tech-scene-had-a-golden-year-in-2017--/

19. E.ON :agile: https://eon-agile.com/about

20. Seedrs: https://www.seedrs.com/learn/guides/uk-tax-relief-eis-seis

280

240

200

160

120

80

40

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Den

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Finl

and

Nor

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Icel

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DIAGRAM #2: ROUNDS OF FUNDING

Q1-2 2016

Q3-4 2016

Q1-2 2017

https://nordic.businessinsider.com/the-swedish-tech-scene-had-a-golden-year-in-2017--/

https://eon-agile.com/about

https://www.seedrs.com/learn/guides/uk-tax-relief-eis-seis


SEIS has made it possible for more than 1000 UK startups to get the necessary capital from investors for them to succeed21.

2.5 NORWAY

OSLO INNOVATION WEEKThe focus here is on how entrepreneurship, tech-nology, and innovation are driving the sustainable development. Drawing its inspiration from the UN’s Global Goals, this conference brings together 10.000 experts, entrepreneurs, investors, and startups to discuss the global challenges and business oppor-tunities22. The event offers visibility to Norwegian Startups. So far, the event has not realized its full po-tential in the same way as Slush in Finland, TechB-BQ in Denmark or Websummit in Portugal has.

NORDIC IMPACT This is a newer initiative that supports, builds, and invests in companies and funds that have a positive and meaningful influence on society and in the world at large. Nordic Impact mobilizes the corpo-rate sphere and capital to further global solutions and joins them with economic gains. Nordic Impact finances, among other things, the accelerator Kata-pult that invests in startups that promote a positive development through technology. They are primar-ily financed by Nordic Impact but also have private partnerships with PwC and Danske Bank, among others. The presence of Nordic Impact has given Norwegian startups a clear shot at getting capital, sparring, and international partnerships.


2.6 GERMANY

PRIVATE AND STATE ACCELERATORS Climate KIC is the EU’s accelerator program for climate related innovation. They support entrepre-neurs, companies, students, and scientists and help them get their clean tech innovation, products, and solutions out on the market. Climate KIC facilitates Green Garage, which is Germany’s first incubator for climate innovation that primarily supports and de-velops solutions for climate change. From 2010-2013 23 new companies working with climate innovation arose with the help of Green Garage23. Green Garage was effective in giving help to green startups, and Bank, Fichter & Klofsten (2017) points to the decid-ing factors as being that Green Garage had access to Climate KIC’s green startup data, combined with the level of talent and the risk willing capital of Berlin24.

Like in Sweden E.ON:agile is also active in Germany. The collaboration med EON makes it easier for the German startups to get that first important sale and test customers.

POLITICAL ACTION In order for them to raise the amount of risk willing capital for startups Germany has started an invest-ment project they call INVEST. Invest gives business angels a 20 % tax break on investments in a startup (min. 10.000€ and up to 500.000€) and up to 80 % of your combined investments within INVEST gets a tax discount on 25 %25.

21. Forbes (2013): https://www.forbes.com/sites/davidprosser/2013/11/08/tax-breaks-for-investors-in-start-ups-pay-off-for-britain/#59fa2ed54a03

22. Oslo Innovation Week: https://oiw.no/faq-about

23. Green Garage: https://www.climate-kic.org/news/green-garage-germanys-first-climate-innovation-start-up-incubator-opens-doors/

24. Bank, Fichter og Klofsten (2017): https://www.researchgate.net/publication/316370272_Sustainability-profiled_incubators_and_securing_the_inflow_of_tenants_-_The_

case_of_Green_Garage_Berlin

25. BMWi (2018): https://www.bmwi.de/Redaktion/DE/Dossier/invest.html

https://www.forbes.com/sites/davidprosser/2013/11/08/tax-breaks-for-investors-in-start-ups-pay-off-for-britain/#59fa2ed54a03

https://oiw.no/faq-about

https://www.climate-kic.org/news/green-garage-germanys-first-climate-innovation-start-up-incubator-opens-doors/

https://www.researchgate.net/publication/316370272_Sustainability-profiled_incubators_and_securing_the_inflow_of_tenants_-_The_case_of_Green_Garage_Berlin

https://www.researchgate.net/publication/316370272_Sustainability-profiled_incubators_and_securing_the_inflow_of_tenants_-_The_case_of_Green_Garage_Berlin

https://www.bmwi.de/Redaktion/DE/Dossier/invest.html


ups in France, and facilitates collaborations between startups and public institutions. Station F has been successful in matching startups and corporates lead-ing to great common value. Among the founding members were Facebook and Microsoft, and start-ups in the incubator were previously purchased by other tech giants, such as SAP. There are 32 venture capital firms in the incubator, which makes it easier for startups to profile themselves and to identify and access high risk capital. The combination of visibility and the hallmark of Station F have made it easier for startups to enter into larger deals29.

SCALING POLITICAL INITIATIVESIn 2013, the Government launched the La French Tech initiative30 to promote the French startup eco-system at an international level. In 2015 the Government upgraded La French Tech through three new initiatives. The first initiative was to establish French Tech Hubs in several major cities31. The purpose was to promote the French ecosystem in these cities, and to support French startups that want to establish themselves abroad, and to make France more attractive for local entrepreneurs and investors. The second initiative was the French Tech International Attractiveness Platform, which sup-ports entrepreneurial ideas from the private sector to promote French expertise within innovation. The third initiative was French Tech Ticket, which is a welcome package for foreign entrepreneurs. With this initiative they get a French residence permit, an incubator site and subsidies to establish their business. The effect has been an increased visibility for French green startups aimed at both investors and talent.


26. BusinessFrance (2018): https://www.businessfrance.fr/en/

discover-France-news-france-a-hotbed-for-startups

27. European Union SME Performance Review (2017): https://ec.europa.eu/docs

room/documents/26563/attachments/1/translations/en/renditions/native

28. Station F: https://stationf.co/campus/

29. Station F in Forbes: https://www.forbes.com/sites/kittyknowles/2018/05/02/

station-f-is-the-worlds-biggest-startup-incubator-could-it-also-become-the-

best/#20d8e25b62d0

30. Government France: https://www.gouvernement.fr/en/la-french-tech

31. New York, Israel, Tokyo, San Francisco and Moscow in 2015. Abidjan, Cape

Town, London, Barcelona, Hong Kong and Montreal in 2016.

Moreover, Germany has, in collaboration with the EU, started a state Fund of Funds that invests 2.7 billion EUR in especially German venture capital funds. That way an arm’s length distance is upheld and private expertise given room when it comes to startup investments. The fund focuses on commer-cialization and growth for innovative companies. 270 million EUR from the fund is used supporting a European Angel Fund, which is meant to support private investors, who invest in innovative compa-nies. Besides, Germany has, together with the EU, started a combined debt and share based mezzanine fund of 500 million EUR, which ensures fast grow-ing startups finance possibilities. This makes it easier to plan your finances, and thereby helps younger startups convince investors.

2.7 FRANCE

According to Eurostat, France is currently one of the best countries in Europe to set up business and has overtaken Denmark (now # 4) as the # 2 place. Paris alone is hometown for more than 3000 startups26 27.

ENTREPRENEUR COMMUNITIES AS INTERNA-TIONAL PRESTIGE PROJECTStation F gathers a whole ecosystem for startups under one roof, and gives the many startups access to various programs, office facilities and networks, as well as advice from experts in the fields of tax, research, visas and intellectual property rights28. Station F is the world’s largest incubator and hous-es more than 1000 startups in their approximately 34000 m2. With so many startups under one roof, Station F is one of the best agents to monitor start-

https://www.businessfrance.fr/en/discover-France-news-france-a-hotbed-for-startups


https://ec.europa.eu/docsroom/documents/26563/attachments/1/translations/en/renditions/native

https://stationf.co/campus/

https://www.forbes.com/sites/kittyknowles/2018/05/02/station-f-is-the-worlds-biggest-startup-incubator-could-it-also-become-the-best/#20d8e25b62d0

https://www.gouvernement.fr/en/la-french-tech


HISTORICAL HOSPITAL TRANSFORMED TO HOT STARTUP HUB Maria 01 is a public startup hub for tech entrepreneurs and in-vestors, who help each other to succeed in a competitive startup environment. Maria 01 is lo-cated in the historical hospital in Helsinki, which underlines the public authorities’ trust and support for Finnish startups35. Maria 01’s location and insights into startups opens doors for Finnish green startups.

THE COLDEST TECH CONFERENCE IN THE WORLD Apart from Web Summit in Portugal, SLUSH is on of the largest and most important conferences for startups and innovation focusing on sustainability. Since 2008, SLUSH has gone from being a confer-ence with 300 participants to being a leading global startup conference. As a conference, SLUSH cre-ates visibility, generates data on local startups and facilitates connections with potential collaborators and venture capital. Year after year, SLUSH is getting better at creating awareness for green startups. In 2017, Al Gore was, for example, one of the most important keynote speakers, which helped the green startups throughout the conference.


2.8 FINLAND

VENTURE CAPITAL FUNDS FOR A CIRCULAR ECONOMYThe Innovation Fund for Circu-lar Economy, SITRA, is inde-pendent, and since 2017 it has supported the sustainable devel-opment in Finland by, among other things, hosting entrepre-neurial workshops, generating insights based on knowledge and practice and investing in venture capital funds that can then turn around and invest in startups32. At the end of 2017, SITRA had a capital of DKK 6.3 billion33. In comparison Den-mark’s Green Investment Fund is set up with an equity of up to DKK 200 million and a lending limit of up to DKK 5 billion guaranteed by the government for co-financing projects in energy saving, sustainable energy and resource efficiency34. Currently, Denmark’s Green Investment Fund has equity of only DKK 80 million and a lending limit of DKK 2 billion. As a result, the Finnish startups have a comparatively high level of innovation and good capital rounds (especially seen in the light of Finland’s size). In addition, SITRA generates a surplus of approximately EUR 30 mil-lion annually, which is then responsibly reinvested.

32. SITRA (2017): https://media.sitra.fi/2017/04/26085134/2017-04-19-Sitra-

Toimintakertomus2016-ENG-final-web.pdf

33. SITRA (2017): https://media.sitra.fi/2018/03/09133759/sitra-

toimintakertomus-ja-tilinpaatos-2017.pdf

34. Danmarks Grønne Investeringsfond (2018): http://gronfond.dk/om-fonden

35. Maria01 : https://maria.io/about-2/

https://media.sitra.fi/2017/04/26085134/2017-04-19-Sitra-Toimintakertomus2016-ENG-final-web.pdf

https://media.sitra.fi/2018/03/09133759/sitra-toimintakertomus-ja-tilinpaatos-2017.pdf

http://gronfond.dk/om-fonden

https://gronfond.dk/om-fonden/

https://maria.io/about-2/


03

19Analysis of the Danish ecosystem for green startups compared to other European countries

ANALYSIS OF THE DANISH ECOSYSTEM FOR GREEN STARTUPS COMPARED TO OTHER EUROPEAN COUNTRIES

In this section the Danish ecosystem for green start-ups is analyzed and compared to other European ecosystems. The section clarifies where the Dan-ish system stands out and where there is room for improvement. Especially when it comes to further strengthening the efforts for green startups with a digital element as part of their product / service, we see great potential.

3.1 DANISH PREDOMINANCE OF IT-STARTUPS

The green startups from this analysis are distributed among different European countries as illustrated in figure 1. The diagram is not a representative picture of the green startups in Europe, but illustrates how the 513 cases included in this report are distributed geographically. As it can be seen, most of the 513

DIAGRAM #1 GEOGRAPHICAL DISTRIBUTION OF STARTUPS INCLUDED IN THE ANALYSIS.

Germany 14,7 %

Sweden5,7 %

United Kingdom14,5 %

Portugal10,4 %

Denmark26,4%

Finland12,3%

France 8,5%

Norway7,4%


green startups come from Denmark, Germany, the UK and Finland.

This survey shows that more than 30 % of the green startups in Denmark work within information tech-nology, while only about 20 % of green startups from the other countries work in the field of information technology. Denmark therefore has a comparative

advantage in this industry, since information tech-nology is often able to scale faster, because the cost of development, production and distribution costs associated with growth are not as high compared to hardware startups.

The many lines in Figure 3 visualize the researched green startups’ monthly turnover by the thickness of


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DIAGRAM #2: DENMARK VS. OTHER COUNTRIES

PERC

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INDUSTRIAL SECTOR

DenmarkOther countries


the lines as seen in relation to countries and indus-try.

Danish green IT startups account for about half of the revenue of the total number of Danish green startups included in this analysis. Note that the vis-ualization does not include the relationship between the number of cases examined by country, but the total turnover for each country in relation to indus-tries. Denmark’s lines would therefore be significant-ly thinner if the visualization also took into account the weighted averages. It makes sense to have figure 2 in mind when looking at these conditions. The UK accounts for only 14.5% of the cases investigated, but accounts for about 33% of total turnover. Denmark accounts for 26.4% of the cases examined, but these cases together account for only about 8% of the total turnover among the cases combined. The green UK

startups that generate turnover have placed them-selves heavily in areas like Smart Cities and Energy Efficiency.

It is worth remembering, that there might be local cultural reasons for a startup, working with Smart Cities, that might make them choose to use the more descriptive label “Smart Cities” for their product rather than IT. If this is the case, Denmark is signif-icantly weaker in the area of IT. Nevertheless, green startups working with IT seem to be an area where Denmark can take a leading position through easier access to growth capital via incentives for investors, increased monitoring of the ecosystem and access to smaller public tenders for the younger green IT companies: See Conclusion and Recommendations for elaboration.


INFORMATION TECHNOLOGY

SMART CITIES/ EDUCATION

ENERGY EFFICIENCY

GREEN MANUFACTURING

WASTE MANAGEMENT

ENERGY PRODUCTIONFOOD/ AGRICULTURE

MOBILITY/ TRANSPORTATIONAIR MANAGEMENT

SUBSTAINABLE HOUSINGENERGY PRODUCTION

FINANCIAL FINTECHECO TOURISM

UNITED KINGDOM

GERMANY

FRANCE

DENMARK

FINLAND

PORTUGAL

NORWAYSWEDEN

DIAGRAM #3: STARTUPS VS. REVENUE


3.2 DANISH GREEN STARTUPS LAG BEHIND IN REVENUE36

This section examines how much money green start-ups are turning over. The analysis looks at how much money the startups have turned over in the month prior to for them giving their answer, and what their lifetime revenue is. Lifetime revenue clarifies how much money a startup has turned over in its entire lifetime. It is a good proxy for how close the startup is to the market. Low revenue indicates a short life-time and/or a product that has required a long time to develop. After the analysis the report puts forward minor recommendations where they are relevant.

3.2.1 AVERAGE MONTHLY REVENUEThe UK’s green startups perform significantly better than startups from the other countries in terms of monthly revenue37, as they in average are turning over just under DKK 300,000 a month. Startups from Germany, Finland, Norway and France on average turn over around DKK 150,000. Denmark’s

green startups in average generate revenue of just over DKK 100,000 a month. This puts Denmark at the bottom - only followed by Sweden, which, on average, generates revenue of around 96,000 DKK per month.

However, as mentioned above, it is also necessary to look at the green startups ‘lifetime turnover, as diagram #4 potentially only illustrates a snapshot of the green startups’ average turnover in Denmark and the other European countries.

3.2.2 AVERAGE LIFETIME REVENUEThe UK’s green startups continue to perform sig-nificantly better than the other countries, and have an average lifetime revenue of more than DKK 5.7 million. The fact that the green startups from the UK are performing significantly better than the other countries may be due to the fact that some of the startup-friendly political initiatives, such as the financial incentive structure (SEIS), have made it advantageous for investors to invest in startups with


300.000

200.000

100.000

0

DIAGRAM #4: AVERAGE MONTHLY REVENUE

DAN

SIH

KRO

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DenmarkGermanyFinlandNorwayUnited KingdomFranceSwedenPortugal

COUNTRY36. Startups that have not given

positive revenue numbers have been weeded out in this chapter. 37. Startups that have not given positive numbers have been weeded out.


high risk factors. This has enabled the UK startups to upscale production and marketing to a greater ex-tent, which is likely to have a positive impact on the revenue of the green startups in the UK. In addition, the UK has a good home market and easy access to the huge US market.

The Norwegian startups have, on average, the second highest lifetime turnover of the analyzed countries at around DKK 3.3 million. This is, however, only just under 50 % of the British startups’ lifetime turnover. Denmark is again at the bottom of this parameter with an average lifetime turnover of around DKK 1.3 million. Only followed by Portugal, which is at the bottom with an average lifetime revenue of barely DKK 990,000.

Figures 4 and 5 thus show that Danish green startups do not perform remarkably well in terms of turno-ver: neither the monthly revenue or lifetime reve-nue, compared to the other countries. It is clear that green startups in the other countries, except Sweden

and Portugal, are generating turnover considerably easier. Portugal’s small turnovers should, however, be seen in the light of the fact that the country only recently (and largely coinciding with the public sponsorship of the Web Summit) has begun to at-tract startups in large numbers. Therefore, there are far more startups in early stages in Portugal, who do not yet have big turnovers.

“The reason why green startups are experiencing adversity is partly because their green competitive advantage is not really taken into account [by customers] when they are compared to convention-al solutions. The green components of a product/solution are only seen as add-ons without extra payment.”

So says partner in Energy & Cleantech, Bjarne Hen-ning Jensen. Bjarne Henning Jensen points out that society is still lacking new parameters for valuing and rewarding green companies that are different than traditional economic parameters, so that the


COUNTRY

600.000

400.000

200.000

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DIAGRAM #5: AVERAGE LIFETIME REVENUE

DAN

SIH

KRO

NER



green initiatives can compete on these new and different parameters. This can for example be done politically through trade or fiscal initiatives like e.g. the market for CO2 quotas. In addition to Bjarne’s comment, this report points out that an easier access to the public market for green startups would be an effective booster for growth in Danish green start-ups, which will have a positive effect on the turnover and access to capital.

3.3 DANISH GREEN STARTUPS CANNOT RAISE THE NECESSARY CAPITAL

In it’s very early stages, every startup needs a capital

injection to, for example, develop a prototype, or to ensure liquidity if the industry is characterized by long sales cycles. In the early phase, it is often diffi-cult to get a loan approved or to attract the necessary investment. This section analyzes the green Danish startups’ traction in raising capital compared to the other European countries. “Capital” means both venture capital, high-risk loans, scholarships and fund assets.

Diagram 6 shows the analyzed startup’s average cap-ital requirement as the minimum amount they must raise in order to develop and grow. Denmark places itself in the bottom of diagram 6, as Danish startups


UNITED KINGDOM SWEDEN GERMANY FINLAND

8.923.447 9.126.251

16742.708

8.161.381

10.538.521

4.537.693

12.596.147

NORWAY FRANCE DENMARK PORTUGAL

7.154.935

8.747.055

4.889.021

5.431.500

1.520.819

7.076.453

1.679.607

6.835.211

VISUALIZATION DIVIDED INTO COUNTRIES OF THE RELATIONSHIP BETWEEN THE AMOUNTS OF CAPITAL THE LOCAL GREEN STARTUPS WANTS TO RAISE

COMPARED TO HOW MUCH THEY HAVE ACTUALLY RAISED.

20.730.991


have an average capital requirement of DKK 7 mil-lion. The low figure does not appear to be explained by the fact that Danish green startups do not need to raise as much capital, due to them being signifi-cantly better at doing business compared to the green startups from the other countries. Because, as seen in diagram 4 and 5, Danish green startups do not have unique sales figures. Diagram 6 could instead indicate that ambitions are low among Danish green startups when it comes to how much external capital they can raise, and how much they want to grow.

One explanation is that startups (particularly hardware startups) are experiencing difficulties in raising the capital needed to develop, produce and distribute hardware products. It is the experience of GREENTECH CHALLENGE, based on our work in 9 different European countries, that many venture capital funds typically do not invest in hardware, but channels their investments towards software. At the same time, it is difficult for startups to raise “soft

money,” as these funds are typically paid in arrears; which is a requirement that can be difficult to live up to in the startup phase, if a startup have both wage and production costs. CEO of Dacofi (a Danish green startup with a new energy efficient method of filtering liquids), Adam Hillestrøm, describes how there is a:

“... [N]eed for funds that can finance the early de-velopment of hardware startups. For example, it is difficult to apply for capital from the Danish Inno-vation Fund, since the fund requires startups to pay out wages (and only get them paid in arrears later [red]). That means that it requires private venture capital to apply for capital from public funds. It’s a problem”.

It is interesting to see how Sweden ranges in the top of figure 6 even though the green Swedish startups had relatively low turnovers. That tells us that the Swedish startups have greater ambition, before they


25.000.000

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COUNTRY

DIAGRAM #6: WANTED CAPITAL


actually achieve revenue. Figure 7 also shows that, despite their relatively low lifetime turnover, Swedish startups historically raise more money than startups from the other analyzed European countries - only British green startups raise more money than the Swedish.

France ranks roughly in the middle in relation to turnovers, but is lowest in figure 6. This gives us a signal that the French startups have a perceived smaller capital requirement than the others, which might indicate that the French green startups are skilled in achieving organic growth through sales and partnerships instead of relying on external capital injections; or that the required startup capital is covered by public funds. One of the most obvious reasons, is that several political initiatives have been implemented to promote the French ecosystem for startups, and to ensure that French startups stand

out from the crowd. Another reason is that there is a widespread recognition and respect for startups among French people, which potentially makes it easier to sell and enter into partnerships with larger companies. For example, in 2017 34 % of the French population wanted to start their own startup, while 75 % of the French population believed that entre-preneurs and startups are transforming the country and shaping future developments38. In comparison, only 3.3 % of Danes want to start their own busi-ness, with an EU average of 12.1 %, which makes Denmark among the least enthusiastic populations when it comes to wanting to start their own business although 83 % of Danes believe that startups play an important role for Danish society39.

The report’s 513 green startups have so far raised a large amount of capital through public and private investments and funds. The Swedish and British


10.000.000

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DIAGRAM #7: RAISED CAPITAL

38. BusinessFrance (2018): https://www.businessfrance.fr/en/discover-France-news-france-a-hotbed-for-startups

39. “Hvorfor vil danskerne ikke være iværksættere?” Af Dansk Erhverv: https://www.danskerhverv.dk/siteassets/mediafolder/downloads/analysenotater-2018/

analysenotat---hvorfor-vil-danskerne-ikke-vare-ivarksattere.pdf

COUNTRY


https://www.danskerhverv.dk/siteassets/mediafolder/downloads/analysenotater-2018/analysenotat---hvorfor-vil-danskerne-ikke-vare-ivarksattere.pdf


green startups undeniably raise the most money - respectively DKK 9.1 and DKK 8.9 million.

The Danish green startups have on average raised about DKK 1.5 million and do the worst in this area. The fact that Danish startups are lagging behind here is also confirmed in an analysis by Nordic Web40, which shows that more than twice as many investments are made in Sweden than in Denmark, measured by the number of investments in startups. It indicates that there is a general challenge for Dan-ish startups when it comes to raising capital. Den-mark is close to its neighbor countries like Norway and Finland in Nordic Web’s analysis in number of investments, but is lagging far behind the two coun-tries in the analysis of this report. Writer and owner of Nordic Web, Neil Murray, believes that:

“... one of the biggest challenges in Denmark is the lack of early-stage investors who are able look far ahead. Green tech startups typically tackle big problems or obstacles, so it may take some time before you see progress and traction. So, if you want to raise money, it is vital to bring investors on board who can be patient and support the visions in the long run, instead of investors who are destroying the [long-term version] by focusing on short time reimbursements.”

Germany, which placed in the middle of previous parameters, performs significantly better in raising

capital. Danielle Keizer from Wilo’s accelerator Win-cubator explains that the German government wants to improve the ecosystem and support German start-ups, which has led the German government to have its own venture capital fund, Coparion41. The Gov-ernment has supported Coparion with around DKK 1.7 billion, and the private equity fund only invests in German startups. With Coparion, Danielle Keizer explains, the German government has the opportu-nity to increase the amount of high-risk investments in German startups, but at the same time cannot dictate the grounds and premises for the funding.

So far, it is valid to conclude that the Danish green startups lag behind the other European green start-ups when it comes to opportunities for, or ability to raise capital.


40. Nordic Web: https://thenordicweb.com/the-h1-2018-q1-and-q2-nordic-funding-analysis/

41. bmwi.de: https://www.bmwi.de/Redaktion/DE/Artikel/Mittelstand/innovationsfinanzierung-coparion.html

https://thenordicweb.com/the-h1-2018-q1-and-q2-nordic-funding-analysis/

https://www.bmwi.de/Redaktion/DE/Artikel/Mittelstand/innovationsfinanzierung-coparion.html


v

04

29Assessment: Obstacles for the Danish ecosystem

ASSESSMENT: OBSTACLES FOR THE DANISH ECOSYSTEM

OBSTACLE #1: ACCESS TO CAPITAL

There seems to be a significant financial obstacle for the Danish green startups. The analysis shows, among other things, that the Danish startups are not able to raise as much money as startups from the other countries, which indicates that it can be diffi-cult for green startups in Denmark to access venture capital. This is a major problem, as it impedes the further development of startups and slows down Danish innovation and commercialization in the green area. A specific barrier is that it is often diffi-cult for green hardware startups to attract venture capital, because these investors typically invest in

software companies. Other countries, like Finland, have, as we have seen with SITRA, established other options for hardware-heavy startups to raise money. At the same time, it is also difficult for Danish green startups to get financial support, or “soft money,” from funds such as the Innovation Fund, as these are typically reimbursed42. If Danish authorities and various startup initiatives are going to help green startups successfully and effectively, it will require better monitoring of the ecosystem for green start-ups. Better monitoring will make it easier to engage in the ecosystem more effectively with the necessary business support, loans, and high-risk investments, when it is needed.

If the Danish business community is to be a leader in green energy and environmental technology, it is crucial for Denmark to support and protect the ecosystem for green startups, so that Denmark becomes an international platform for innovation and entrepreneurship.

42. For reference, see earlier quote from Adam Hillestrøm, chapter 3.3


OBSTACLE #2: POLITICAL INITIATIVES

Several governments from the other European countries have implemented policies to support and promote the green startup environment. Sweden has set a low limit on the IPO, the UK has introduced noticeable tax cuts on venture capital investments,

France is carrying out extensive programs to boost their ecosystem, and Portugal has brought the Web Summit to Lis-bon and gives out fellow-ships to entrepreneurs to boost innovation.

The governments of these respective countries’ have thus had a huge, innova-tive, and positive impact on their ecosystems for

green startups. There are no corresponding polit-ical initiatives in Denmark to target and promote the ecosystem for Danish green startups, which has made it difficult for Danish green startups to out-perform other European green startups on several parameters (please see the comparative analysis above). The Danish ecosystem is for example not providing much help for high-risk investments in small businesses, which must be seen as a disadvan-tage for Danish startups, especially since Denmark is surrounded by other countries that do.

In addition, it is difficult for small companies to gen-erate the necessary revenue to hire employees at the Danish market wage. In Portugal, where the wage level is considerably lower, they have made it easier for small businesses to hire qualified labor.

Denmark’s best counterpart to the other European countries’ political initiatives is the Innovation Fund. Last year, the Innovation Fund had a budget of DKK 1.2 billion43, which may seem like a lot. However, half a billion was set aside for research and the mon-ey was in general distributed to all types of startups, not just the green ones. In comparison, SITRA in Finland is exclusively aimed at circular economy and has over DKK 6.3 billion to invest. It has made the green Finnish startups considerably stronger than the Danish just like it has secured economic growth, money in the treasury, and given Finland a leading position in the EU. This leading position was recent-ly expanded when Helsinki hosted the UN Knowl-edge Center for Circular Economy.

The Innovation Fund is steered by the incoming ap-plications and not by the fund’s reaction to data and trends in society. To ensure that the DKK 1.2 billion is invested with the greatest possible effect, it could be valuable to circumvent the fund’s two annual admissions of applications and instead give support where and when it’s needed. In addition, marketing budgets, promotional efforts, etc., could be based on better data.

OBSTACLE #3: FAILURE TO INCLUDE PUBLIC UTILITY COMPANIESThis report shows that incubators and accelerators, particularly from public utility companies, play an important role in a number of European ecosystems. In addition to offering venture capital, their strength is that they open the doors to the commercialization of products and services from green startups.


43. Innovationsfonden (2018): https://innovationsfonden.dk/sites/default/files/2018-08/arsrapport-2017.pdf

https://innovationsfonden.dk/sites/default/files/2018-08/arsrapport-2017.pdf


E.ON Agile plays a big part in the German and Swedish ecosystem, and in both cases the E.ON Agile attracts Danish startups to their programs. Since 2013 the program has accelerated 133 start-ups in Europe, of which only 4 have accelerated in Denmark44. In Portugal, EDP Starter is one of the most well established actors for both Portuguese and Spanish green startups. Public utility companies do not seem to be playing the same role in Denmark, which is a weakness in the Danish ecosystem. Previ-ously, Denmark had SE’s Next Step Challenge, which was a key driver that connected startups with utility companies. However, Next Step Challenge has shift-ed focus from startups to scaleups (companies that are significantly further ahead in their development). The shift was made to identify a growing need for extended council and deliberation among companies that are too mature for already existing incubators and accelerators. Søren Røn, program director in Next Step Challenge elaborates:

“Risk willing capital is difficult to access in Den-mark. Large companies, for example, experience a gap before the cases have consolidated into the market and become attractive acquisitions. In Denmark, we have a strong position in green tech-nology, especially because we are good at working together in organizations, we do not have strong hi-erarchical structures, and we have a long tradition of knowledge sharing. Many good research results could easily get off the ground, but we are not as good at making spin outs from the universities as we could be. ”

- Søren Røn, Program Director, Next Step Challenge.

For a green startup in the energy sector it is advan-tageous to lean on the public utility companies as an incubator or accelerator, because these companies

can draw on knowledge, experience and expertise from the energy sector to strengthen the develop-ment of the products as well as the business. Often, the green startup will also be able to use the utility company as their first pilot customer. In addition, many green startups are characterized by having better engineers than business developers, and in this way they can benefit hugely from the help from utility companies.

The collaboration with a utility company can save the green startups many valuable resources by giving them better insight into the value chains they are a part of. Thus, they can more quickly identify the decision makers that are relevant to their technology. Last but not least, it is very cumbersome to become a supplier to the public sector, especially for smaller companies without much traction - more on this issue in the next section on public micro tenders.


44. eon.dk/acceleratecph: https://www.eon.dk/acceleratecph

https://www.eon.dk/acceleratecph


05

33Conclusions and recommendations

CONCLUSIONS AND RECOMMENDATIONS

This report shows that Denmark’s ecosystem does not provide the same favorable conditions for green startups compared to other European countries. Specifically, the green startups in the Danish eco-system fail to generate as much money as startups from the other countries. Neither are Danish green startups strong when it comes to monthly turnover and lifetime turnover.

The report points out that Danish green startups are not able to raise as much capital compared to the other countries’ green startups, which is why it can be harder for the Danish startups to increase their turnover, since they do not have liquidity to invest in their own growth. The challenges in finding capital appears to be one of the biggest problems in the Danish ecosystem, as the Danish green startups neither want nor are they able to raise more capital than startups from the other countries. In this con-text, it is necessary to take into account the investors’ possible alternative costs by investing in startups. In Denmark, we have very favorable terms for investing in property but almost no benefit from investing in small businesses, which is detrimental to the access to capital for startups.

One of the reasons for this problem may be that it is very difficult for green startups to get support in the early phase, because public funds, for example, require wage payments.

The CEO of Dacofi, Adam Hillestrom, describes how this can create a chicken-egg situation, where a start-up cannot pay wages due to lack of funds and cannot

get the public funds because they do not pay wages.Another more general challenge when it comes to raising enough capital lies primarily with the green hardware startups, who find it difficult to attract venture capital investments, as venture capital funds typically focus their investments on software start-ups. This is especially true in an ecosystem where the biggest success stories and inspirations have been from digital startups.

This report shows that Denmark’s ecosystem for green startups does not provide the best condi-tions for startups compared to the other countries. Therefore it can be advantageous to look to countries such as the UK, France, Sweden and Portugal, who, in their own ways, have boosted and promoted the ecosystems. This has resulted in better perform-ing green startups on parameters such as revenue and capital. A common denominator is that these countries’ governments have been heavily invested in their startup ecosystems, and have implement-ed various interesting initiatives in order to attract startups and venture capital investors.

5.1 RECOMMENDATIONS

The findings of this report indicate that there is room for improvement for the Danish ecosystem for green startups, so that Denmark can become an international platform for sustainable and green innovation, future thinking and entrepreneurship. Based on these findings the report put forward the following recommendations:


PUBLIC MICRO TENDERSThe national and local governments are the biggest customers in the green area, because it demands green solutions for e.g. buildings, infrastructure, en-ergy supply, and smart cities. However, it is difficult for Danish green startups to win the public tenders, although they can provide solutions that are based on the latest technology and possess knowledge about future green technology. This is due to the fact that the public authorities place high demands on supply security, which is an obstacle for startups and new, undocumented technology. Hence micro ten-ders appear to be an attractive solution in Denmark, if a way to limit the costs associated with it can be found. The European Commission has previously pointed out, through the report “EVALUATION OF SMES ‘ACCESS TO PUBLIC PROCUREMENT MARKETS IN THE EU”, that there is a discrepancy between the number of SMEs, their turnovers and the number of tenders they have won. In Europe, SMEs make up 99.8% of all firms, accounting for 56% of the value added, but only win between 29% and 43% of public tenders.

The easiest way to increase SMEs’ share of tenders is, according to the report, to increase the amount of data on startups / SMEs available to public authori-ties and to reduce transaction costs associated with bidding on a public tender: this is done, in particu-lar, by making the tender easier to understand, as small businesses rarely have the legal muscle power to handle elaborate legal documents45.

Micro tenders are intended to function below the thresholds of the EU. The tenders can thus be direct-ed more specifically towards green startups. How-ever, the tenders would be open to all EU Member States.

The advantage of micro tenders is that the national and local governments first and foremost get cheap and almost risk-free access to future green technol-ogy. They subsequently have the opportunity to look

for new technological solutions in future tenders and in this way get the best green solutions for the Danish society. Secondly, the government can get feedback from - and knowledge about - green start-ups that potentially can win future public tenders, which can reduce the transaction cost of tenders from a public governance perspective. Thirdly, it is an excellent opportunity for the governments to support green startups by purchasing their products / solutions, as the green startups in this way generate revenue and get market validation, which ideally will make them more attractive to investors and employ-ees. And fourth, Danish green startups will have the opportunity to adapt their products to public demands and to be “front runners” in green energy and environmental technology on the international market.

BETTER CONDITIONS FOR INVESTMENT Access to capital is vital for green startups, but the report states that it is difficult for Danish green startups to attract the necessary venture capital in-vestments. One way to increase the access to venture capital for green startups is to introduce a Danish equivalent to the UK program SEIS, where investors, among other things, are rewarded with tax cuts for their high risk investments. Another way to increase access to venture capital is to look at the German government’s own venture capital fund46 that carries out high-risk investments in German startups.

Coparion invests within the same financial frame-work as VF Ventures, DKK 3.5 - 22.5 million. Be-sides size, the big difference between the two funds is that Coparion invests up to DKK 75 million in each case. Thus, there is another possibility for continuous supply of venture capital for each case, compared to the mandate of VF Ventures (a deeper analysis of the difference between VF Ventures and fx. Coparion is beyond the scope of this analysis).

Recently, a new Investor Deduction Law (L 101) has been adopted in Denmark to strengthen entrepre-


45. EU Commission (2014): http://ec.europa.eu/DocsRoom/documents/2153/attachments/1/translations/en/renditions/pdf

http://ec.europa.eu/DocsRoom/documents/2153/attachments/1/translations/en/renditions/pdf


neurship and to provide SMEs with easier access to venture capital. As of January 1, 2019, it is possible to get tax deductions for investments in small or medi-um-sized companies with company statute that are in a startup or growth phase46. This law is inspired by SEIS from the UK and is a step in the right direction, as it gives private Danes an increased opportunity to start investing in startup companies. However, the law does not go far enough to boost the Danish ecosystem for green startups sufficiently, as there are conditions that are not taken into account. An inves-tor is, for example, not entitled to get a tax deduction if he or she invests through holding companies. But experienced investors often prefer to invest through holding companies, because in that way a gain can be reinvested without being taxed. These experi-enced investors do not benefit much from the new law, and new investors are indirectly encouraged to invest in a way where it is not profitable to reinvest the money because the investor tax deduction is not applied to holding companies (the gain from an investment is taxed before it can be invested again). The objective of increasing the risk capital is thus partially sabotaged due to the requirement that it must be a private person who invests before the deduction applies. Another challenge is that there are many criteria that must be met in order to get the investor tax deduction. Therefore, there can be a number of doubts related to the investments. For example, the company that is invested in must be in a startup or growth phase, which is something that can only be decided in a few cases. This means that the companies need a large, and often cost-intensive, consulting to be able to determine at all whether they meet the conditions.47

INCREASED MONITORING OF THE ECOSYS-TEM FOR GREEN DANISH STARTUPS An increased monitoring of the green startup ecosystem in Denmark could provide the already existing programs for subsidies, the public sector in general, and the utility companies a better founda-

tion for making decisions. This monitoring, based on a monthly data collection, could lead to the use of machine learning and predictive analytics, which could diagnose specific cases that lack increased sup-port. Moreover, the increased data could provide de-cision makers with strategic knowledge about which green technologies or sectors, Denmark successfully can invest in and hence attain a leading international position.

Such monitoring could, for example, target green digital companies and be integrated into the already existing Digital Hub Denmark. By monitoring and selecting specific green subsectors, Denmark increases its chances to win big. As seen in Global Startup Ecosystem Report, this approach is clearly the best for smaller ecosystems:

“The key takeaway from this new era of tech is that ecosystem builders need to not only look at tech as a whole, but pay attention to and invest in specif-ic Startup Sub-Sectors. This is especially true for smaller ecosystems. It’s impossible for an emerging ecosystem to be competitive across all tech sectors, but it is eminently feasible for a smaller ecosystem to become a hub of excellence for one or more Start- up Sub-Sector.”48

The decision on which subsector Denmark should focus on within green technologies should be taken on the basis of thorough data and on a comparison of the Danish green startups strengths with those of our neighboring countries.

Denmark seems to be a strong actor in the indus-try of information and energy technology. But as the report shows, Danish green startups are losing ground to startups from those countries where there is a greater focus on creating the right conditions for green startups.


46. PWC https://www.pwc.dk/en/articles/2018 /11/ tax deduction-by-invest-

ment-investment-investments-and_investorfradragfonds.html?fbclid=IwAR1oVyB-

8CvWEWN6y9WH4hIhwYVoPXFDkLjqHBEd5MrJHhDQQ8mFuHYKsbS4

47. Fx Coparion: https://coparion.vc/en

48. Global Startup Ecosystem Report 2018

https://www.pwc.dk/en/articles/2018 /11/ tax deduction-by-investment-investment-investments-and_investorfradragfonds.html?fbclid=IwAR1oVyB8CvWEWN6y9WH4hIhwYVoPXFDkLjqHBEd5MrJHhDQQ8mFuHYKsbS4

https://coparion.vc/en

https://startupgenome.com/reports/2018/GSER-2018-v1.1.pdf#page=12


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37Collection of cases – selected green startups

COLLECTION OF CASES – SELECTED GREEN STARTUPS

A number of Danish innovative startups working with green energy and environmental technology have performed noticeably well in the Danish market, so this report will provide detailed insights into these start-ups and foreign counterparts. The selected cases have performed well and serve as inspiration - we can learn from them and use them to upgrade those initiatives that have helped the selected cases to grow and develop.

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ENERGY PRODUCTION # 1

KiteX (Denmark)KiteX is developing drone wind turbines to shape a future, wherein sustainable energy is the most cost efficient solution. KiteX has experienced great success in raising money at an early stage.

Kitemill (Norway) Kitemill is developing new technology for airborne wind energy. Kitemill has raised twice the amount of capital as KiteX in Den-mark and have found customers through their investor.

BlueBenu (Denmark) BlueBenu is developing a new technology for treating mixed plastic waste, making decentralized implementations and dif-ferent solutions for waste handling possible.


COLLECTION OF CASES – SELECTED GREEN STARTUPS Foto: KiteX

Ecomation Oy (Finland) Ecomation Oy designs and delivers machines and systems for the reuse processes of plastic and rubber, bio waste, electronic waste, as well as for energy waste on an industrial scale.

The Danish startups KiteX and BlueBenu has raised capital equivalent to more than double that of the average in Denmark, which bears witness to the fact that the two startups have developed products, that have attracted customers. Even though the two startups, working with energy production, has raised more capital than the average, they have had

little or no revenue, which is a testimony to the fact, that startups in Denmark are struggling getting their first customer/paid pilot projects. In spite of the good performance of Kite X and BlueBenu, the Norwegian and Finnish equivalents are doing better on every parameter and have, for example, raised around twice as much money.



Drone Systems (Denmark)Drone Systems specializes in thermal drone inspection. The primary service of their machine learning software is thermal mapping of the pipeline district heating supply net.

Prodrone Aps (Portugal)Prodrone is developing technology that can revise the way in-spections of large energy infrastructure is done.

Fibersail (Portugal) Fibersail software is monitoring and analyzing wind turbine wings with regards to shape, state and behavior, so you avoid mistakes and high maintenance costs on the wind turbines.

ENERGY EFFICIENCY



Foto: Fibersail

The Danish startup DroneSystems works with en-ergy efficiency and is another startup that is doing well on different parameters. Even though they have raised less capital than the Danish average, their monthly revenue is far higher than the average, which could mean that it is easier for green software startups to generate revenue without large influxes

of capital. If you do not look at Portuguese Fibersail then DroneInspektion Aps is doing comparatively better on most parameters than their Portuguese counterparts. With their high monthly revenue DroneInspektion Aps are likely to maintain a high and organic growth, which considerably lessens the need to raise capital.



ENERGY PRODUCTION # 2

Heliac (Denmark)Heliac produces polymerfoil based sun magnifiers for installa-tions in a usable scale. They have had a pilot project with EON.

Dall Energy (Denmark)Dall Energy develops and delivers new and improved energy technologies for especially thermal processes.



Foto: Heliac

Heliac is a good example on the value of collaborat-ing with an established player in the same field. EON meeting with Heliac led to a whole series of good

results: Heliac became more focused on their added value, and since Heliac and EON have made a 2,4 megawatt power plant together.



AIR MANAGEMENT / SMART CITIES

Polisensio (Denmark)Through the latest developments in sensing technology and IoT Polisensi is creating a hyper localized map over air pollu-tion of cities.

Green City Solution (Germany)Green City Solution has developed CityTree. The special moss culture is removing pollution from city streets, where the air is bad and pollution is heavy.

Pavegen Smart cities (Great Britain)Pavegen manufactures an interactive floor technology that converts the kinetic energy of footsteps to off-grid electricity.



Foto: Green City Solution

In the sectors of Air Management and Smart Cities two startups from Germany and United Kingdomhas done exceptionally well on all parameters. They are sectors wherein not many Danish green startups are working, but something could indicate that solutions in these sectors can generate high revenues as well as investments. One of the Danish startups working with this is Polisensio that works with localizing air pollution but they are obviously running into obsta-cles raising capital and generating revenue. Judging from the numbers from the German and British startups it looks like there is a market for Air Man-

agement and Smart Cities, and if Denmark was to increase the initiatives within these sectors it would be highly likely to pay off in the end. It is especially critical for Smart City startups to get their first pilot project with the local authorities – and for the local authorities to be on top of which of the developing new technologies are addressing the challenges in the city. It was a big helping hand for Green City Solu-tions to participate in Climate KIC, who because of their monitoring of the German green startups could vouch for Green City Solutions as being among the best in their field.


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7.1 ABOUT GREENTECH CHALLENGE

GREENTECH CHALLENGE is behind this report and has many years experience helping green start-ups develop, and connecting them with counseling and growth capital. GREENTECH CHALLENGE has a professional network, including a long list of players in green innovation, and the core strengths of GREENTECH CHALLENGE is mapping, screen-ing and analysis of green entrepreneurs and innova-tors across Europe.

7.2 CONSIDERATIONS ON METHOD

GREENTECH CHALLENGE is behind this report and has many years experience helping green start-ups develop, and connecting them with counseling and growth capital. GREENTECH CHALLENGE has a professional network, including a long list of players in green innovation, and the core strengths of GREENTECH CHALLENGE is mapping, screen-ing and analysis of green entrepreneurs and innova-tors across Europe.

GEOGRAPHIC DISTORTION GREENTECH CHALLENGE is a Danish com-pany, who since 2015 has worked with and meas-ured green startups ind Denmark. Since 2017 GREENTECH CHALLENGE has expanded and is now working in several other European countries. Which means that the data set in this report con-tains more cases from Denmark than from the other countries. This is not problematic for the conclu-sions drawn in this report, seeing as the numbers we

are working with are seen in relation to number of companies per country. There is, however, a larger consideration, seeing as the analysis’ data for Danish green startups are more exhaustive compared to those of the other countries. In the other countries, where GREENTECH CHALLENGE does not have an equally exhaustive knowledge of the green start-ups, GREENTECH CHALLENGE typically meets the companies later in their life cycle and therefore in a more mature situation. This means that there is a very real risk for a distortion in the data set seeing as the Danish ecosystem in this report contains startups on an earlier stage in their life cycle than the startups in the other countries.

MEASUREMENT VALIDITY GREENTECH CHALLENGE’s database over green startups is based on the companies’ own data report-ing. More precisely, the companies themselves fill out the answers to a series of questions, when they apply to be a part of GREENTECH CHALLENGE. This means that each of the companies can have a divergent understanding of what the questions mean, and moreover answer the questions differ-ently. This diverging understanding of the questions can have a negative influence on the validity on these measurements. GREENTECH CHALLENGE does not assess this as a problem for the conclusions drawn in this report, because the questions are structured in a simple language and does not require complex interpretation. Moreover, we have weeded out case units that, based on a professional assess-ment, have not answered the question satisfactorily.

APPENDIX


Moreover, the 513 case units are measured on the primary industry sector, which they themselves have given. Though, some startups may work within one industry sector, but also have something to offer in other industrial sectors.

Derudover måles de 513 caseenheder på den primære industrisektor, som de har opgivet. Dog kan der være startups, der arbejder i én industrisektor, som også er målrettet nogle af de andre industrielle sektorer.

7.3 DANISH ENTREPRENEUR COMMUNITIES

BLOXHUB is for people working with sustainable urbanization and supports solutions and collabo-rations in global urbanization and climate change.

BLOXHUB was founded by Realdania, The City of Copenhagen and The Ministry of Industry, Business and Financial Affairs in 2016, and is a not-for-profit member organization for compa-nies, research institutes, organizations and munic-ipalities. By connecting 230 companies in a Smart City vertical structure BLOXHUB makes it easier for Smart City players to

quickly connect with relevant stakeholders and part-ners. BLOXHUB is also an active member of a series of international networks, which widens the reach of the stakeholders members of BLOXHUB can expect to be meeting.

Symbion is a shared office space in Copenhagen owned by Copenhagen University, Copenhagen Business School and the Symbion Foundation, as well as by a series of private shareholders. Symbi-on provides a flexible offer for entrepreneurs and people who are self-employed. Symbion offers a lot professional sparring and expert counseling, which especially helps the companies in their early growth stages. Moreover, the collaboration with Copenha-gen University and CBS also means that Symbion can facilitate important sparring on the more techni-cal aspects of a new technology.

DTU Smart Campus offers campus facilities and data to the disposal of students and scientists, so they can test their new technologies that are used to develop the Smart Cities of the future. Moreover, DTU has also created DTU SKYLAB to promote in-novation and entrepreneurship among the students. It includes everything from small student projects, cases and startups. DTU SKYLAB offers free access to courses, equipment, design labs, wet labs and food labs, as well as professional counseling. DANISH TECH CHALLENGE (DTC) by DTU is an intensive growth program for hardware startups in Denmark. Every year they chose 20 startups to participate in a 4-month program.

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Copenhagen School of Entrepreneurship (CSE) by CBS is a platform where students, scientists and companies can cultivate entrepreneurship. CSE helps students develop their ideas for sustainable compa-nies through incubators and growth programs.

KPH Projekthus is a community for innovative startups, most of the members of KPH Projekthus work within at least one of the UN’s Global Goals. KPH Projekthus supports entrepreneurs, who creates solutions for the society of the future, with a net-work, sparring and development plans.

Energy Hub Nordhavn is a shared space with office facilities and a showroom for sustainable city development and energy solutions. Energy Hub helps smaller and larger companies alike with getting nearer to each other, professionally, and accessing new technologies, markets and networks.

Rainmaking Loft is a shared office space founded by on the leading players in Europe in en-trepreneurship. Rainmaking Loft supports tech startups by giving them an inspiring work environ-ment at an affordable price.

Founders House offers a commu-nity where startup founders can develop their companies faster by engaging with and learning from each other.

Greencubator is a not for profit shared office space for the entrepreneurs of the future. Here members get access to work space, a strong network and the possibility of participating in events.

Nordic Entrepreneurship Hubs (NEH) is a collab-oration between Lund University, DTU, Cph-Bus-siness and KEA, and offers network, facilities and resources. NEH support students with entrepreneur-ship ideas and strengthens the students entrepreneur companies to ensure that they grow and contributes to job creation on the long run.

Ignite is offered by KEA and is the NEH’s startup program for stu-dents, who wants to develop their startup ideas, train entrepreneur mindset and become a part of the entrepreneur community. Ignite offers free counseling, know-how, resources and workshops.

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