Clean-tech start-ups are facing different challenges than other businesses. They are not only coming up with new, untested technologies but they are also entering an almost non-existent market they must help shape. An international research team, including Dr Michal Jirásek from ECON MUNI, is looking for ways to measure and strengthen the resilience of clean-tech start-ups.
Start-ups are one of the main drivers of innovation in any economy and can contribute to solving various society-related problems. However, there are some less discussed challenges that start-ups face – challenges that can’t be easily dealt with. In our research we want to help start-ups, investors, and innovation agencies overcome these challenges in a way that doesn’t restrict the start-up innovation drive.
It is true that the resilience of start-ups is a relatively new topic for us. But it fits very well with our research group's long-standing interest in corporate innovation and the ways in which businesses deal with a changing environment. And while we do not focus directly on start-up resilience, we have a number of publications across the research group that are related to this topic.
First of all, it is the high uncertainty in almost all areas of their operations. This covers funding, people and the product they come up with. On the other hand, the great advantage of start-ups is flexibility and speed: it is not uncommon for them to be able to react to the market in a short time and completely change the nature of their products. This is only possible thanks to the great commitment of the founders and other key people. Their ability to adapt to changes in the environment is therefore crucial. The problem arises when a start-up cannot or will not adapt – for example, when they lose a major customer. According to some surveys, around one third of start-ups have liquidity problems – that’s when resources can be depleted very quickly, and the start-up can disappear.
What I consider to be one of the most interesting paradoxes is that while they are trying, at least verbally, to change the world, they rarely count with the fact that the world can change even without their involvement. In my experience start-up founders simply assume it’s them who will bring the change, but don’t expect anything else in their environment to change in the meantime.
However, it’s not surprising. There is so much uncertainty around start-ups that certain things have to be overlooked for someone to start a start-up at all. It's the necessary mental compensation for the complexity of the world – as we know thanks to behavioural economics for example. But the compensation still needs to be balanced. Dreams of massive growth may be useful for convincing some naive investors, but they are dangerous for the practical life of start-ups that are often planning their long-term growth. Because of their limited resources, start-ups need to be prepared for different future variants that may not match their initial expectations.
Start-ups generally come up with products that may or may not succeed on the market. Their goal is to influence the market they enter. But a lot of things can go wrong – from internal to product development issues to failure with customers. Apart from the innovation itself, clean-tech start-ups also face the fact that they are often targeting a new market that does not exist yet.
One of the problems that clean-tech deals with is greenhouse gas emissions. Carbon dioxide is a well-known topic, and its production is increasingly being reduced. But other gases also contribute to the greenhouse effect: for example, methane, which is up to 80 times more dangerous than carbon dioxide. One of the important sources of methane is cattle.
To address methane emissions from cow manure, the start-up needs to develop an actual technology and deal with limited resources mentioned above. But even this is no guarantee of success, because the market it enters is largely non-existent. Methane emissions go almost unaddressed by farmers because it would be an extra cost for them. The start-up must, in addition to a new product, contribute to the creation of a new market or demand on the part of farmers. In this case, for example, through carbon offsets, proof of emission reductions that are procured by third parties such as large corporations seeking carbon neutrality. By purchasing them, they will at least partially pay for the purchase and operation of the technology by the farmers.
We have structured the content of the project application to make the collaboration as close as possible. With the exception of activities exclusively related to the Czech environment, such as interviews with the founders of Czech start-ups, representatives of both the Czech and German sides will be involved. This will create a lot of room for mutual exchange of experiences and opinions, which I believe will contribute positively to the quality of our outputs.
It is interesting that the grant call is structured differently on the Bavarian side than it is here. Doctoral students hired specifically for this project will play a significantly larger role on the German side. Such a thing would be practically impossible with the duration of the project in our conditions. However, this is an advantage for the research, because we will have a very diverse mix of researchers, ranging from beginners to experienced professors. As the Technical University of Munich is one of Europe's leading universities, we plan to continue and deepen our collaboration in the future.
The project titled "Resilience and impact of clean-tech start-ups in Bavaria & Czech Republic" identification code LUABA24105, was supported under the INTER-EXCELLENCE II program, subprogram INTER-ACTION.
Michal Jirásek is an assistant professor at the Department of Business Management. He focuses on strategic management topics, especially organisational adaptation, in connection with behavioural factors and disruptions in the business environment.
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