Chemistry & Life Sciences

Start-ups Accelerate Innovation

An Overview of the European Chemical Start-up Scene

29.11.2018 - Virtually all areas of our lives would be inconceivable without products that come directly or indirectly in contact with chemical production: It affects the modern office environment, our private lives and thus our well-being and life fulfilment including health, leisure and personal protection.

According to James Clark, professor at the University of York speaking at the Green & Sustainable Chemistry Congress, around 97 percent of the products around us derive from chemical production or contain at least one chemical process step in their manufacture.

Sustainable Development Goals as Innovation Driver

To create more sustainable products and services as well as to establish a circular economy we need innovative solutions. The UN has defined 17 Sustainable Development Goals (SDG). The associated goals will need new chemical solutions to become reality. For example, the goals related to affordable and clean Energy or responsible production and consumption. The road leads to higher efficiency, increased sustainability and more environmentally friendly products with more efficient production methods. The associated goals can only be achieved in an interchange across regional, cultural, systemic and cross-disciplinary boundaries in shared cooperation.

Market Push Drives Innovation

Chemistry has to be innovative to meet the ambitious goals of its customers. Ikea, one of the world’s leading furniture retailers from Sweden, has an on-going project to eliminate virgin fossil-based raw materials in its plastic products. The goal is to use only plastic products from renewables or recycled materials by 2030. The same goes for Lego, a big Danish toy manufacturer, which has started to use sugar cane for its world-famous bricks. Both examples show that chemistry has to continuously innovate. The value chains in chemical production will change dramatically over the next decades.

All About Start-ups

Nowadays talking about innovation means talking about start-ups. This applies generally, but now also in chemistry. Start-ups are flexible, can act faster and - this is maybe the most important aspect – they can think out of the box on a daily basis. They can develop visionary projects, away from the constraints of stock market prices. Markus Steilemann, CEO at Covestro, also knows: "We need start-ups. No company today has the potential to solve everything alone."

Many large Chemical companies also run so-called corporate venture units to finance start-ups. Nevertheless, a vibrant and broad venture capital scene is yet to develop. The business models of chemical start-ups do not always fit into the portfolio thinking of investors. One reason might be a service-based business model which limits the investor’s opportunities to sell its shares. Another reason might be the high capital expenditures for plants. For sure not every Start-up will make it at the end, there will be an economically driven attrition rate. However, to deliver the best chances vibrant marketplaces are needed where the community can learn together and build up trust, to increase the probability of meeting the right people with the right problem at the right point of time. Meeting points can be events of Suschem, the European Technology Platform for Sustainable Chemistry, and of International Sustainable Chemistry Collaborative Center (ISC3), an international institution that promotes and develops sustainable chemistry solutions worldwide, or of course, the European Chemistry Partnering.

High Founding Figures since 2007

The increasing significance of start-ups for the chemical industry is also reflected in the trend towards higher Start-up figures. Since 2013 BCNP Consultants has continuously researched the situation of innovative chemical start-ups and start-ups that influence the chemical value chain in Europe. Influencing the chemical value chain is not just about classical chemistry, but it is also about an enzyme producer helping to avoid heating and refluxing or a digital Start-up helping to extract the better processing parameters out of the data available. Statistics show that since 1990 there were two growth steps. The first step was starting in 1997 when the yearly number of foundations raised from single-digit to double-digit numbers. Beginning with 2007 the yearly number of foundations increased again from around 15 to over twenty to thirty foundations a year. In the last years the statistic shows a decrease in the number of foundations. At least for the years 2017 and 2018 this will probably change because of companies that are still under radar or not founded yet (n.f.y.).

New Materials as Main Application

Thematically, chemical start-ups concentrate in particular on three fields of application. Most chemistry start-ups develop new or nanomaterials. This group accounts for almost a third (32%) of the start-ups. About a quarter (26%) of the start-ups produce fine and specialty chemicals. Following in third place are start-ups developing new technologies and hardware (21%). About a tenth of all start-ups focus on research R&D and services. Niche applications for chemical start-ups include analytics (4%) and catalysis and enzymes (4%). A relatively new field for chemistry start-ups relates to digitization issues. Meanwhile, these application accounts for 3% of foundations. The trend is clearly rising.

Big Economies are Ahead – Still?

The study on which the data is based initially focused on Germany. Therefore, most of the companies included in the database of Europe’s Compass to innovative chemical companies are German based. Since initiation the expansion of the database is an accompanying project. More and more non-German based start-ups have been added. But the research is certainly not exhausted. Non-existent English-language homepages complicate the assessment even if foreign companies fit the innovation criteria. Therefore, the number of start-ups outside Germany is not that high yet.

Excluding Germany, especially Great Britain and France have start-ups along the chemical value chain. In addition to the hub of London and the elite universities of Oxford and Cambridge, Great Britain scores with Scottish companies. Relatively smaller countries are in the following places: Netherlands and Switzerland. While Switzerland has generally presented itself as a strong research nation, the Netherlands focusses its innovation on the bio-economy. The Universities of Delft and Groningen are two universities with high spin-off numbers resulting in chemical incubators such as the Brightlands Innovation Factory which help to make start-ups successful in the long term.

Promotion is an International Question

The promotion of sustainable and green chemistry is becoming a top priority. While general Start-up promotion usually takes place at the country level, in the chemical industry where global value chains are crucial, international promotion instruments are developing.

SusChem was launched in 2004 as a European Commission supported initiative to revitalize and inspire European chemistry and industrial biotechnology research, development and innovation in a sustainable way. The European Investment Bank (EIB) is going to launch a European investment fund for the bio-based and circular economy, especially for investments in demonstration and industrial plants. The EIB will make up to €250 million available to chemical and biotech start-ups to scale up their technologies. At the same time, start-ups worldwide can benefit from the services of the ISC3 in Bonn and their international network with and for start-ups developing business models in the field of sustainable chemistry. In addition, international events such as the European Chemistry Partnering, the unique speed dating for the chemical industry, which brings together chemical start-ups with industry representatives and investors, are establishing themselves.

Problem: Price Competitiveness and Capital

Many good ideas find their way from the research institutes into start-ups. But the big breakthrough is missing. Price competitiveness with fossil-based products is mostly challenging. Large-scale plants, which generate economies of scale and therefore would increase price competitiveness, are expensive. The EIB fund already goes in the right direction as a catalyst for more private investment in large-scale plants. More initiatives like this are needed…

European Chemistry Partnering (ECP)

The ECP is Europe’s leading industry speed dating for the chemical industry and its diverse user industries. The event brings together chemical start-ups and SMEs with industry representatives and investors as well as other stakeholders. The 3rd European Chemistry Partnering will take place in Frankfurt on 26 February 2019. The organizers expect more than 1,000 participants from more than 30 countries all over the world.



BCNP Consultants GmbH