Lessons learned on navigating the Cleantech Venture Capital Landscape

What does it take to make it as a European cleantech VC in the global cleantech competition era?  Investing in cleantech is both a challenge and a reward. At Cleantech for Europe, we are lucky to convene a cohort of Europe’s foremost cleantech investors. Their tireless work to fund the clean technologies that will take Europe to net zero emissions is an undertaking that takes both grit and experience to succeed at.

In a candid dialogue with Martin Kröner, Partner at Munich Venture Partners (MVP) and the Green European Tech Fund (GET Fund), we have gleaned six key lessons from his seventeen years of experience in the European cleantech ecosystem.

In 2007, following a successful career in a global leader in plant engineering, Martin took a plunge and set up a bioenergy start-up. In 2011, he transitioned into venture capital investing, focusing on advancing the deployment of sustainable technologies.

Through his entrepreneurial and venture capital journey, Martin drew six (definitely non-comprehensive) lessons:


  1. Impact and return go hand in hand.
  2. Hardware start-ups have the potential to hyperscale.
  3. Holistic impact assessment is essential for meaningful measurement.
  4. Building trust is key to successful partnerships.
  5. Are valuations overvalued?
  6. Diligence and persistence are indispensable for success.

1. Impact and return go hand in hand:

Impact investing is frequently associated with low returns or non-profit endeavors. However, framing the question as “How much return must be sacrificed to achieve impact goals?” is misleading.

Impact, regardless of the key performance indicators (KPIs) employed, constitutes a key non-financial metric that should be evaluated independently of financial returns. An impact venture capital investor must therefore achieve both, typical venture capital returns and high impact targets. It’s not an ‘either-or’ and should instead become the “new normal of investing". Finding investment opportunities with strong business models is essential here: only quickly scalable business models offer both high impact and high return potential.

Case studies of this include companies like sonnen (residential battery storage), Luxexcel (3D printing of optical components), and GreenCom Networks (energy management software.

2. Hardware start-ups have the potential to hyperscale:

It is a myth that hardware start-ups, especially in the cleantech space, cannot scale quickly or that financing these start-ups is too capital intensive. This analysis is based on the poor results of the venture capital investments of the "1st cleantech wave" which occurred between 2005-2010, when many investments were made in project-based business models, e.g. waste-to-energy plants, algae farms, biogas plants, biofuels, etc. Such projects take years to develop, involve an array of stakeholders and require long lead times for permitting, construction and commissioning. Only after several plants are in operation can the value of the start-up increase significantly and meet the expectations of a venture capital investment.

Crucially, however, this often takes 5-10 years, sometimes even longer. This is far longer than the normal cycle that venture funds envision when investing and expecting a profit. Additionally, launching these projects in the first place, with first-of-a-kind plants and factories, require a large amount of working capital to pre-finance projects, and often come with the provision of various guarantees.

In the "2nd cleantech wave" from 2010, our team implemented the learnings, and therefore invested more heavily in product-based business models, as opposed to the aforementioned project-based ones. Such operations have the advantage of being standardized. That significantly reduces the complexity and time required to scale the venture.

These business propositions become even more exciting when a digital component is added to the business model, utilizing IoT capabilities, connecting the products virtually, and thereby enabling new revenue streams through hybrid hardware-software business models. In the best-case scenario, this results in an as-a-service solution for which the customer does not purchase the product as such, but rather subscribes to a recurringly paid-for continuous solution. This achieves shorter sales cycles, access to traditional debt financing, and longer-term customer relations – all of which are key ingredients for rapid scaleup with low equity requirements.

Good examples for the implementation of such business models are our portfolio companies sonnen and relayr.

3. Holistic impact assessment is essential for meaningful measurement:

Carbon footprint reduction is one of the most common and important key performance indicators (KPIs) to assess the impact of cleantech startups and their technologies on decarbonization and on climate. Often, though, it ends up the only KPI tracked by financial investors. Even though the carbon footprint is a meaningful and very important parameter, reducing impact measurement to on one single variable risks being too short-sighted.

A singular measure for sustainability can become the main control parameter for portfolio management, which brings with it the risk of undesirable portfolio concentration and increased portfolio risk, i.e. investing in project-type business models, which are hard to scale and inherently provide limited impact although they have theoretically high impact potential. In my experience, sustainable products and solutions combined with a rapidly scalable business model achieve the greatest possible positive and material impact on the environment.

At the GET Fund, we use the Triple Top Line approach, which we have adapted to the business model development of start-ups, so that we can take a holistic approach which aggregates economic growth, environmental impact, and social equity. This also allows us to map the impact of all material and relevant aspects of our businesses, such as resource efficiency, biodiversity, and various social aspects. Depending on the business model, the reduction of carbon emissions and/or a life cycle assessment are part of the performance indicators included within the Triple Top Line.

To sum it up: Environment is more than climate, and climate is more than Carbon footprint – and truly high impact potential requires a quickly scalable business model.  

Case studies Triple Top Line: https://getfund.eu/insights/introducing-triple-top-line/; https://mcdonough.com/writings/design-triple-top-line/

4. Building trust is key to successful partnerships:

Value can only be created quickly and sustainably if all stakeholders work together in a spirit of trust. There are examples of promising cleantech start-ups that ended up failing because founders, shareholders or advisory boards no longer pulled together, instead mistrusting each other. On the other hand, I have personally seen cases in which seemingly impossible odds were overcome because everyone involved knew how to collaborate.

The key to this trust-building is continuous effort – and the understanding that it can be destroyed by one negative action. A basis of trust can only be created with sufficient expertise, consistent action and, and above all, stakeholders being aligned and rallying behind the same goals. The good news is: this perfectly describes the cleantech community. Thus, the space is full of people to trust, alongside whom you can build profitable impact.

On that note, I want to credit and thank our co-investors and start-ups for their trustful cooperation over the past years. Amongst others, I want to name (and I apologize for the incomplete list!): SET Ventures, PMV, e-capital, Inven Capital, Matterwave, ETF, Capricorn, Capnamic, Innovation Industries, Electrochaea, asgoodasnew, sonnen, Luxexcel, relayr, cobi.bike


5. Are valuations overvalued?

Of course, as an investor, I am anything but neutral when it comes to start-up valuations, as they are always too high for our initial investment and then are always too low in subsequent rounds and on exit. Nevertheless, start-ups should be aware that inflated valuations can be a major burden. Exaggerated evaluations mean that new investors come in with sky-high expectations, leaving little room for delays or missed targets. A valuation that is too high can render follow-up financing extremely difficult, which in turn risks triggering a downward spiral: no further financing can force cost-cutting measures in the company, with growth targets adjusted downwards as a result.

At the end of the spiral, it is not uncommon for the company valuation to be significantly reduced or for follow-up financing to fail outright - a disappointment for everyone involved. Realistic company valuations usually pay off positively in the long term. To quote a colleague: “That company must first grow into its valuation.”

6. Diligence and persistence are indispensable for success:

A key success factor of a cleantech venture capital investor is quite simply hard work. All start-ups go through difficult phases, must deal with growth delays, and may all struggle to find follow-up financing - there are new challenges every day. For investors, the core of the work actually starts after the initial investment, e.g. when they have to support companies with follow-up fundraising efforts – and certainly also with exit negotiations.

In my experience, most cleantech founders and investors are purpose-driven and follow their vision of scaling sustainable solutions. This intrinsic motivation helps them persevere in critical situations and overcome challenges. All the start-ups I have been privileged enough to accompany to an exit had critical phases, which were overcome thanks to the perseverance of the founders, management teams, and shareholders.


Martin Kröner is Partner at Munich Venture Partners and in charge of the new Green European Tech Fund (GET Fund), one of the leading Cleantech Venture Capital funds in Europe.

Martin was co-founder and CEO of agnion, a supplier of distributed energy plants. Prior to agnion, he worked at Linde Engineering. Martin holds a M.Sc. in mechanical engineering and a Ph.D. in combustion engineering from the Technical University in Munich. He is responsible for MVP’s investments sonnen, Luxexcel, COBI, GreenCom Networks, Electrochaea, and Kebony.


This interview is part of our ongoing series Voices of Innovation, where we convene cleantech investors to discuss challenges, opportunities, and trends of the cleantech transition in Europe.

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