Markets & Companies
The Evolution of the European Chemistry Start-up Scene
Accelerators are Becoming a Crucial Part of the Chemistry Innovation Landscape
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Accelerators are expected to play an increasingly important role to help start-ups in the chemical sector quickly find their product-market fit and to accelerate market entry. (© /Shutterstock) -
Marie Asano, High-Tech Gründerfonds -
Tobias Kirchhoff, BCNP Consultants -
Program facts and features of European accelerators for chemical start-ups. -
Comparison of incubators and accelerators. (© BCNP Consultants)
In various high-tech industries start-ups occupy an important place in the innovation ecosystem. Various statistics show that this holds increasingly true for the chemical sector. In particular, there are an increasing number of interdisciplinary chemistry start-ups, and especially accelerators play a central role in supporting the development of start-ups.
During the last 10 to 15 years, the start-up landscape in the chemical sector has been steadily evolving. Since 2007, the number of yearly established innovative chemical start-ups in Europe has doubled on average per year, totaling between 30 and 35 new companies incorporated per year. The leading seed investor in Germany, High-Tech Gründerfonds (HTGF), has also observed a steady increase over the years. In 2005, only 26 chemistry start-ups were recorded, whereas in 2018 this had increased to 60 start-ups active in the field of traditional chemistry. The percentage of chemistry start-ups observed per year — in comparison with the total observed HTGF deal flow — has remained mostly constant at an average of 3% (2005-2019). From 2017 to Q3 2019, the total share of chemistry and chemistry related start-ups increased up to a total of 4.8%. This indicates that the industrial sector make-up of the start-up market has not changed drastically, despite a steady increase in the total number of start-ups observed yearly. However, a slight increase could be observed in the total number of start-ups that are active in chemistry and chemistry-related fields due to the increasing number of interdisciplinary chemistry start-ups.
Is the Future Digital and Interdisciplinary? An interesting trend observed by HTGF from 2017 onwards is that the number of “traditional” chemistry start-ups (chemicals, processes and materials science) has decreased, despite the total number of chemistry and chemistry-related start-ups increasing in general. The number of start-ups active in the area of traditional chemistry decreased from 77 in 2017, to 60 in 2018, and finally to 40 up to Q3 in 2019. On the flip side, the percentage of interdisciplinary chemistry start-ups has steadily increased. Interdisciplinary start-ups are defined as start-ups active in the area of digital chemistry, agritech, biotech, 3D printing, recycling, quantum chemistry — among other adjacent sectors which offer new innovative solutions for the chemical industry. In 2017, only 8% of all chemistry start-ups were defined as interdisciplinary. By 2018 this has increased to 34%, and in 2019 over 40% of chemistry start-ups observed by HTGF were active in a field which is not traditional chemistry. During industry events, such as European Chemistry Partnering, an increasing proportion of companies among the start-ups are active in the digital area, offering solutions to optimize business models and processes in the chemical industry.
Speed up — with Accelerators Start-up accelerator programs are a vital part of the innovation ecosystem that support young companies by speeding up their business development and time-to-market with the help of industry specialists. When talking about accelerator programs in the context of start-ups, the word incubator is often utilized synonymously as the differentiation between the two is often blurred. To our understanding, accelerators are start-up programs that are characterized by intensive mentoring, training and workshops in specific topics with the aim to rapidly scale-up young businesses in a limited and defined time period. In most cases, the program duration only ranges up to a few weeks or months, and the possibility for entering such a program is offered several times a year. Having accelerators that are industry-specific is beneficial as they offer a substantial network of industry experts, investors and corporates. Over the last decades, many start-up accelerators were established all over the world. However, most of them were either focused on information and communications technology (ICT)-related topics or had no specific technological focus. Accelerators with a clear industrial focus in chemistry, or a program with a high ratio of participants with a focus on providing solutions for the chemical industry, were largely unknown until a few years ago. The vast majority of the 19 top chemistry and chemistry-related accelerators identified by BCNP Consultants and HTGF were established only within the last 4 years.
Chemistry Accelerators in Europe 70% of these 19 accelerator programs are located either in Germany or Austria. A possible reason for that is the strength of Germany’s chemical industry, which is the third largest in the world with an estimated €4.2 billion having been spent on innovation alone in 2017. Therefore, it is not surprising that the accelerators would benefit from being near the chemical industries that are potential clients and valuable proof-of-concept partners for many of the start-ups. In particular, Merck and BASF have either their own accelerator programs or are corporate sponsors of accelerators. Additionally, the 19 identified accelerators could be clustered into three groups. 30% of the programs were fully dedicated to chemistry-related topics, 40% had chemistry as one of several technological focuses, and 30% did not have a specific tech focus but were also open to chemistry-related start-ups. The most important topics were identified to be Energy and IT.
Mentoring, Support and Networking are Key Elements No two accelerators are the same. And yet, there are key elements in the programs that all, or almost all, accelerators offer. All programs organize mentoring by various industry specialists. This can be done as part of either a mentoring day or week by external experts. In the Merck Accelerator, mentoring is provided for the duration of the program on-site by internal experts across different specializations ranging from production to product management. Approximately 90% of the accelerator workshops address specific topics such as the business model. Another important feature is that almost all accelerators offer access to a relevant network, especially an industrial one. The access to feedback from relevant market participants is especially valuable for developing products and the technology further. In addition, a pitch day is often organized to complete the program, where all start-ups can showcase their business to the industry and investors. The duration of the programs varies greatly and can span from 2 to up to 70 weeks. Depending on the length of the individual program, program intakes for new applications can range from once per year up to 6 times per year. Some of the programs also offer grants and investments for start-ups. From the 19 identified programs, 10 offered an average sum of funding totaling approximately €100,000. The maximum observed funding available was up to €400,000.
Challenges of a Typical Chemistry Start-up According to a study by the Handelsblatt Research Institute, 42% of all start-ups fail due to the lack of a relevant market or product-market fit. This can be said to be especially true for chemistry start-ups, which often have a very strong “tech-push” led by a team with a strong technological background. In these cases, the danger is that the market assessment and customer outreach play a secondary role in comparison to improving the technology for the sake of scientific excellence. In the end, a clear market need, a product-market fit, scalability and market access are vital for success. As business models are usually B2B, sales cycles are long and the barrier to entry often depends on whether the new product is a “drop-in-solution”, able to be seamlessly integrated to already existing process/production streams. Products where existing processes need to be modified or disrupted, face an even greater barrier for acceptance. The adoption into mainstream production also depends on the ability to produce large quantities (usually in the hundreds of kilograms if not tons). Having early access to relevant customers and proof-of concept partners is fundamental to be successful in a market often dominated by a handful of medium and large players.
Chemistry Innovation Landscape It is too early to evaluate the influence of accelerators on the start-up scene. But with the increasing number of chemistry accelerator programs being observed to date, they are expected to play an increasingly important role to help start-ups quickly find their product-market fit and to accelerate market entry. The chemical market is both challenging and lucrative as well as eager for innovation. Since market-entry barriers are high, once you’re in it’s difficult to be displaced. However, cutting-edge interdisciplinarity, especially in topics such as digitalization and the circular bioeconomy, could bring completely different business models and market participants into a hitherto traditional industry. In today’s dynamic chemistry landscape there are ample opportunities that can be seized, especially regarding implementing solutions in order to come closer to achieving a truly circular economy. This is imperative if we are to fulfill our responsibility as an industry by adhering to the 17 UN Sustainable Development Goals. References to this article can be requested from the authors.
During the last 10 to 15 years, the start-up landscape in the chemical sector has been steadily evolving. Since 2007, the number of yearly established innovative chemical start-ups in Europe has doubled on average per year, totaling between 30 and 35 new companies incorporated per year. The leading seed investor in Germany, High-Tech Gründerfonds (HTGF), has also observed a steady increase over the years. In 2005, only 26 chemistry start-ups were recorded, whereas in 2018 this had increased to 60 start-ups active in the field of traditional chemistry. The percentage of chemistry start-ups observed per year — in comparison with the total observed HTGF deal flow — has remained mostly constant at an average of 3% (2005-2019). From 2017 to Q3 2019, the total share of chemistry and chemistry related start-ups increased up to a total of 4.8%. This indicates that the industrial sector make-up of the start-up market has not changed drastically, despite a steady increase in the total number of start-ups observed yearly. However, a slight increase could be observed in the total number of start-ups that are active in chemistry and chemistry-related fields due to the increasing number of interdisciplinary chemistry start-ups.
Is the Future Digital and Interdisciplinary? An interesting trend observed by HTGF from 2017 onwards is that the number of “traditional” chemistry start-ups (chemicals, processes and materials science) has decreased, despite the total number of chemistry and chemistry-related start-ups increasing in general. The number of start-ups active in the area of traditional chemistry decreased from 77 in 2017, to 60 in 2018, and finally to 40 up to Q3 in 2019. On the flip side, the percentage of interdisciplinary chemistry start-ups has steadily increased. Interdisciplinary start-ups are defined as start-ups active in the area of digital chemistry, agritech, biotech, 3D printing, recycling, quantum chemistry — among other adjacent sectors which offer new innovative solutions for the chemical industry. In 2017, only 8% of all chemistry start-ups were defined as interdisciplinary. By 2018 this has increased to 34%, and in 2019 over 40% of chemistry start-ups observed by HTGF were active in a field which is not traditional chemistry. During industry events, such as European Chemistry Partnering, an increasing proportion of companies among the start-ups are active in the digital area, offering solutions to optimize business models and processes in the chemical industry.
“Germany is the hotspot for the chemical industry in Europe.
ot surprisingly, accelerator programs gather here.”
Frank Funke, managing director, 5-HT Digital Hub
Speed up — with Accelerators Start-up accelerator programs are a vital part of the innovation ecosystem that support young companies by speeding up their business development and time-to-market with the help of industry specialists. When talking about accelerator programs in the context of start-ups, the word incubator is often utilized synonymously as the differentiation between the two is often blurred. To our understanding, accelerators are start-up programs that are characterized by intensive mentoring, training and workshops in specific topics with the aim to rapidly scale-up young businesses in a limited and defined time period. In most cases, the program duration only ranges up to a few weeks or months, and the possibility for entering such a program is offered several times a year. Having accelerators that are industry-specific is beneficial as they offer a substantial network of industry experts, investors and corporates. Over the last decades, many start-up accelerators were established all over the world. However, most of them were either focused on information and communications technology (ICT)-related topics or had no specific technological focus. Accelerators with a clear industrial focus in chemistry, or a program with a high ratio of participants with a focus on providing solutions for the chemical industry, were largely unknown until a few years ago. The vast majority of the 19 top chemistry and chemistry-related accelerators identified by BCNP Consultants and HTGF were established only within the last 4 years.
Chemistry Accelerators in Europe 70% of these 19 accelerator programs are located either in Germany or Austria. A possible reason for that is the strength of Germany’s chemical industry, which is the third largest in the world with an estimated €4.2 billion having been spent on innovation alone in 2017. Therefore, it is not surprising that the accelerators would benefit from being near the chemical industries that are potential clients and valuable proof-of-concept partners for many of the start-ups. In particular, Merck and BASF have either their own accelerator programs or are corporate sponsors of accelerators. Additionally, the 19 identified accelerators could be clustered into three groups. 30% of the programs were fully dedicated to chemistry-related topics, 40% had chemistry as one of several technological focuses, and 30% did not have a specific tech focus but were also open to chemistry-related start-ups. The most important topics were identified to be Energy and IT.
Mentoring, Support and Networking are Key Elements No two accelerators are the same. And yet, there are key elements in the programs that all, or almost all, accelerators offer. All programs organize mentoring by various industry specialists. This can be done as part of either a mentoring day or week by external experts. In the Merck Accelerator, mentoring is provided for the duration of the program on-site by internal experts across different specializations ranging from production to product management. Approximately 90% of the accelerator workshops address specific topics such as the business model. Another important feature is that almost all accelerators offer access to a relevant network, especially an industrial one. The access to feedback from relevant market participants is especially valuable for developing products and the technology further. In addition, a pitch day is often organized to complete the program, where all start-ups can showcase their business to the industry and investors. The duration of the programs varies greatly and can span from 2 to up to 70 weeks. Depending on the length of the individual program, program intakes for new applications can range from once per year up to 6 times per year. Some of the programs also offer grants and investments for start-ups. From the 19 identified programs, 10 offered an average sum of funding totaling approximately €100,000. The maximum observed funding available was up to €400,000.
„Accelerators in chemical industry are supporting close relationships at eye level,
where corporates contribute experience or market access and start-ups
add creativeness and acceleration by passion.“
Thomas Renner, Vice President Consortium Corporate R&D, Wacker Chemie
Challenges of a Typical Chemistry Start-up According to a study by the Handelsblatt Research Institute, 42% of all start-ups fail due to the lack of a relevant market or product-market fit. This can be said to be especially true for chemistry start-ups, which often have a very strong “tech-push” led by a team with a strong technological background. In these cases, the danger is that the market assessment and customer outreach play a secondary role in comparison to improving the technology for the sake of scientific excellence. In the end, a clear market need, a product-market fit, scalability and market access are vital for success. As business models are usually B2B, sales cycles are long and the barrier to entry often depends on whether the new product is a “drop-in-solution”, able to be seamlessly integrated to already existing process/production streams. Products where existing processes need to be modified or disrupted, face an even greater barrier for acceptance. The adoption into mainstream production also depends on the ability to produce large quantities (usually in the hundreds of kilograms if not tons). Having early access to relevant customers and proof-of concept partners is fundamental to be successful in a market often dominated by a handful of medium and large players.
Chemistry Innovation Landscape It is too early to evaluate the influence of accelerators on the start-up scene. But with the increasing number of chemistry accelerator programs being observed to date, they are expected to play an increasingly important role to help start-ups quickly find their product-market fit and to accelerate market entry. The chemical market is both challenging and lucrative as well as eager for innovation. Since market-entry barriers are high, once you’re in it’s difficult to be displaced. However, cutting-edge interdisciplinarity, especially in topics such as digitalization and the circular bioeconomy, could bring completely different business models and market participants into a hitherto traditional industry. In today’s dynamic chemistry landscape there are ample opportunities that can be seized, especially regarding implementing solutions in order to come closer to achieving a truly circular economy. This is imperative if we are to fulfill our responsibility as an industry by adhering to the 17 UN Sustainable Development Goals. References to this article can be requested from the authors.
