Examining the patient capital problem for green technology start-up and scale-up businesses

This study, using an innovative longitudinal quantitative methodology, investigated the equity funding gap for start-up and scale-up stage green technology (“Greentech”) companies. It reports the role innovation and technology plays to address environmental challenges. Evaluation of the last decades’ equity funding environment using Beauhurst data for UK Greentech companies suggests that funding in relative and total terms has increased. The findings suggest there is an increased pipeline of viable Greentech companies and that their financial access has broadened with the enhanced funding from venture capital, business angel and crowdfunding investors. However, despite improvements in the supply side, challenges remain for hardware-based Greentech companies to access larger scale funding, especially at the scaling-up stage and across all funding rounds in the UK. Analysis of PitchBook data shows that compared with the US and other major European markets, UK investors are more risk averse, and consequently reluctant to provide sufficient scale-up funding, giving rise to a structural investment funding gap that tends to undermine UK Greentech development. Public sector finance institutions perform an important role to close the Greentech investment gap, leveraging private finance through targeted support for Greentech companies at all stages of their development.