10-Day Countdown to Unshackle EU Cleantech: #Scaleups

Day 5:?The countdown continues! For those catching up, each day until the European Council on 9-10 February, I’ll be sharing one actionable?#idea ?a day that can help accelerate the?#energytransition ?and make Europe a global leader in?#cleantech ?#innovation ?and?#deployment .?

Scaleups: Europe’s Achilles’ Heel

Today’s topic is an old hobby horse of mine: #scaleups . I’m old enough to remember that there was once a time when #startups were in short supply in Europe. That’s fortunately no longer the case. What’s been neglected, however, are scale-ups: the promising mid-sized companies that are still young, on a promising trajectory but not yet big and powerful like many of the competitors they’re trying to take on. It’s a perennial sore spot in Europe where the last sizable multinational that was created was … hang on to your seats! … SAP in the year 1971.

I can’t recall how often I heard policymakers vow that their country was going to create ‘the next Google’. Well, it never happened. And in cleantech it may be even more challenging given that digital companies are born global but cleantech by definition is born very local. Take H2 Green Steel , Europe’s only greenfield green steel plant which will be based in Boden, Northern Sweden. The #greensteel will be derived from #greenhydrogen , so the operation will need abundant and affordable renewable energy – available galore in that geography because of wind and hydro power. Even though construction hasn’t even begun, 60% of the future supply has already been sold, clearly demonstrating that there is indeed sizeable demand for decarbonized steel. It’s an inspiring success story – but it’s far from certain that H2Green Steel will ever be more than a demonstration site we're really proud to showcase, rather than a formidable competitor to the current incumbents. And even if this one company succeeds, will that be enough to lead to the decarbonization of a notoriously hard-to-abate sector?

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Why is scaling up so difficult?

Growing a big corporation from scratch is exceedingly difficult in Europe. The reasons are manifold: from the absence of a unified, liquid capital market, to continued fragmentation of the single market which forces companies to grow one country at a time – with all the regulatory, linguistic and legal hurdles that entails. In a world where ‘time to market’ and ‘internationalization from day 1’ are decisive factors in raising capital, Europe is often simply too complex to maneuver. It’s not a coincidence (or secret) that many European entrepreneurs have chosen to start their venture on the other side of the Atlantic where it tends to be easier to find investors and where on balance, the market is more unified. Also, over there, an entrepreneurial failure is a badge of honor rather than life-long stain. ?

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Why is it so difficult for public policy to identify and support scale-ups? ?

During my time in #publicpolicy , it used to often annoy me that so little effort was made to a) identify Europe’s scaleups, b) understand their needs and stumbling blocks, and c) be more interventionist to help them succeed against global competitors. We live in a day and age where size matters – in fact, it matters a lot. While the US grew massive digital companies, we assured ourselves that only they could do it – until China followed the same path with Alibaba, Tencent, ByteDance, Didi, JD.com, to name just a few. If we now follow that same trajectory in cleantech we will have missed another massive opportunity as the world stands on the cusp of an all-encompassing #energytransition . But sadly, we may be well on our path. According to Cleantech for Europe , €10.6 billion was invested in EU cleantech last year – the second-most ever. That’s the good news. The bad news is that while early-stage investment soared, scale-up financing in cleantech plummeted, with growth equity falling 35 percent year-on-year.

The result? Name one sizeable, financially healthy and solid clean tech company in Europe that is less than 50 years old. They are perhaps not abundant elsewhere either, but it’s noteworthy, for instance that NextEra – a US renewable company – was founded in 1986 and is now among the biggest energy companies across the Atlantic and was for a brief moment, in October 2020, more valuable than ExxonMobil. Personally, I never understood why so much is done for startups which for the most part have unproven business models and where it's clear that so many are destined to fail while almost nothing is done for scaleups, companies that have raised the first tens of millions of Euros, that have a promising business model, and that have lined up first offtakers. These handful of companies should definitely be a top policy priority. Partly to give this important group a voice, Cleantech for Europe founded the Scaleup Coalition . It includes companies in the cleantech space that have raised more than EUR 50 million. Starting out with 8 companies, it has now grown to 11. What would it take to pay some attention to 11 (!) companies and figure out if and how we can help them to become not only European but global champions?

Why are scaleups important?

-?????????All economies need an element of creative destruction. Geographies that can only sustain the old without being able to grow the new are unlikely to be dynamic market places. Japan is a case in point here. ??

-?????????Scaleups are more likely to be charting the technology frontier than their more sizable competitors which often suffer from innovator’s dilemma.

-?????????The more we can help our scaleups break new ground in emerging technologies, the more not only one company but all of Europe will benefit from first-mover advantage. The spillover effects of individual companies succeeding are significant. Think of how the success of BioNTech put an entire country – Germany – in pole position to lead in the race for new pharmaceuticals and biotech leadership, not to mention that #Europe at large scored a huge goal. Of the two mRNA vaccines, one was developed in Europe (BioNTech), the other by a US company led by a European CEO, Frenchman Stéphane Bancel.

-?????????This is a little known fact but young companies create the most jobs, according to the OECD. Even if more sizable incumbents have more jobs in total, they are less likely to create new jobs. And that matters. In the job creation space, young beats old.

So yes, scaleups are my old hobby horse. And they will be my future hobby horse. I find them inspiring beyond belief. An eclectic mix between a charismatic, driven founder, a mind-blowingly novel business model, a breakthrough technology, not to mention big drama over money, growth and governance. I swear, no soap opera can beat that.

That's a wrap for Day 5 of?#unshackle ?#eu ?#cleantech

#greendealindustrialplan ?#netzeroindustryact