Green start-up finance – where do particular challenges lie?

The purpose of this paper is to shed some new light on the entrepreneurial finance of green start-ups, for which there has been little quantitative empirical evidence thus far. It explores what challenges green start-ups might experience when it comes to financial access.

The paper includes a survey of start-ups in Finland, Germany and Sweden and the separate evaluation of the “greenness” of participating companies’ product/service portfolios based on Eurostat’s Environmental Goods and Service Sector classification. A logistic regression is carried out for different company phases for two measures of challenges (“difficulty accessing finance” and “rejection by investor/funder”).

Green start-ups as an overall group cannot be said to have more challenges in access to finance. Particularly, a lack in business education and a high level of innovativeness, however, seem to be lead to more challenges for green start-ups in accessing finance compared to other start-ups.

Further research might seek to identify which exact characteristics of innovative green start-ups lead to challenges in financial access, i.e. is it individual factors such as high risk levels, high investment sums, long development periods or a low return prospect – or is it rather a combination? It might, furthermore, be rewarding to investigate whether “interventions” of business-related training might reduce challenges.

Suggestions are made for improved policy support to sustainable entrepreneurship in the case of green start-ups.

This research paper provides quantitative empirical analysis in a new research area, which has previously been predominantly theory based with some anecdotal observations as well as some early qualitative research.