Venture capital, innovation and business success in cleantech startups

Startups play a pivotal role in driving innovation and can significantly contribute to the transition toward an environmentally sustainable economy. This paper presents new evidence on the creation, performance, and innovation activity of green startups—those offering goods and services relevant to the green transition—over the period 2010–2022. While the share of green startups has grown modestly overall, venture capital investment in green startups increased considerably in recent years, peaking at around EUR 74 billion globally in 2021. The econometric analysis shows that green startups are more likely to secure VC, receive grants, and innovate than non-green startups. They nonetheless take longer to secure VC and are less likely to do so at the seed stage. Grants attract private investment, especially for green firms, and clean tech patenting is associated with improved funding outcomes. Green startups are less likely to go public and tend to take longer to exit, suggesting scale-up challenges that may warrant targeted policy support.