Bioeconomy startups have the potential to solve the major challenges of our time, but their operations require a lot of funding.
What does it look like now, Youssef Zad, the chief economist of the Finnish startup community?
The nine-year growth period in terms of financing ended in the peak year of 2022. Since then, the rapid rise in interest rates in particular has meant that money has a price again after a long time. As a result, investments that were previously considered profitable are no longer so. Access to financing has weakened. Early-stage seed financing is available, but the situation deteriorates as we go further. And even though domestic financing is available more than ever before, I still see that Finnish funds will not be able to make up for large financing rounds when foreign investors, at least temporarily, reduce their investments.
How does your membership view the challenges of growth?
According to startups, access to finance is currently the single biggest obstacle to growth. According to our most recent startup barometer, from the last quarter of 2023, it worries 45 percent of respondents. Confidence in the financial situation of the environment and one's own company has also weakened slightly. Another major concern is the scarcity or outright lack of a skilled workforce. Around 34 percent of respondents considered it the most significant challenge for their business.
What is the situation especially for startups linked to the bioeconomy?
Startups related to the bioeconomy and circular economy have a lot to offer now and in the near future. Investors also understand their value, as the companies have clear solutions to the big questions of our time. From climate and environmental solutions to new bio-based materials.
What is challenging, however, is that operating in the bio and circular economy often requires quite large financial investments, right from the beginning of the business journey.
It is one thing to get funding for, for example, an IT company that mainly relies on laptops for production, than for a company that needs industrial-scale processes for its operations. The same applies to startups operating in the process industry other than those linked to the bioeconomy and forest industry. As I mentioned earlier, early-stage funding is still quite available. However, follow-on funding rounds often involve at least tens of millions. The journey from the laboratory through pilot and demo plants to industrial scale is long and expensive and still proves to be a valley of death for many startups.
Youssef Zad
chief economist
Finnish startup community
