Implications of COVID-19 On Energy Start-Ups

Amid the developments of the outbreak of COVID-19, businesses and start-ups around the globe are bracing themselves for times of uncertainty, but also exploring opportunities that these times may hold for innovation in the energy sector. However, a successful recovery of the innovation and start-up sector will not take place without continued public and private support. In order to identify the areas of support that start-ups need,  the Start Up Energy Transition (SET) team reached out to its SET100 alumni network with a survey in mid-March. From the roughly 300 international #SET100 start-ups, 83 anonymous responses were received.

You can find the full report of the survey in English here and in German here.

The results of the survey indicate that most start-ups in the energy sector are facing negative implications due to the ramifications of COVID-19, but that many also see opportunities. The majority of the survey respondents, belonging to the seed and A-round stage, identified sales, investment, internal productivity and networking opportunities as the areas affected the most and negatively impacting on their business. More than half of the start-ups responded that they were able to sustain the current restrictions between 2-6 months before downsizing. While some start-ups noted no change to the investment ecosystem, many noted the reduction of investment opportunities or the size of available funds. Specific to the energy sector, some start-ups pointed to a reduction of R&D and investment to this sector. However, some also noted that it was too soon to tell whether the energy ecosystem has been particularly affected.

At the same time, half of the start-ups responded that the crisis could create opportunities for their business. The majority of these 42 respondents noted that the switch to digitalisation, the increase of consumer desire for more secure control over their energy sources and potential fiscal stimulus into clean energy could all yield benefits for them. However, it is important to stress that these start-ups also called for increased state support in terms of various funding mechanisms, direct transfer schemes and signalling to investors via a continued support for energy start-ups.

Although the pandemic has come as an unexpected setback and has left businesses around the world in a now more than month long limbo, there have already been promising advances aimed at a strong post pandemic recovery. One such initiative has been the Green Recovery Alliance, which was launched in European Parliament on April 14, 2020. The informal alliance was launched following calls from 12 EU ministers who signed an appeal for a green recovery from the COVID-19 pandemic. Read more about the Green Recovery Alliance here.

However, there is a large opportunity to do more, and policymakers and investors alike should not turn their backs on innovation in the climate and energy sector during and post-pandemic. Based on the responses of the start-ups, important measures to support can include: Provision of grants or low/no-interest loans that are state-backed; Offer direct transfer schemes to support start-ups in covering their ongoing costs;  substituting reduced private investment via public investment and procurement wherever possible; initiation of more online matchmaking platforms to link start-ups with investors; and finally, signalling: demonstration of energy start-up support by state actors to encourage private investment.

Please find the full report of the survey in English here and in German here.

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