Local governments and sustainability professionals in Europe face interconnected environmental, social and economic issues, alongside the growing threat of climate disasters. These challenges require cities to look beyond standalone initiatives and develop innovative, holistic solutions that transcend traditional silos of municipal planning. In this article, we consider the role of startups in meeting sustainability goals and how programmes like the Clean Cities Spain ClimAccelerator empower climate entrepreneurs.
Startups are uniquely positioned
At the recent World Economic Forum meeting in Davos, Jennifer Schenker, editor-in-chief at The Innovator, set the stage for a panel discussion on scaling clean tech. In opening remarks, she said “the only way to avoid the worst impact of climate change is to reduce global greenhouse gas emissions from 51 billion tonnes per year, where they are now, to net zero by 2050. That means we need unprecedented technological innovation in almost every sector. About 35% of CO2 reductions depend on technologies in early stages requiring more R&D, while another 40% depend on not-yet-developed technologies.”
Startups play an essential role in pioneering unprecedented innovation and advancing not-yet-developed technologies. They are uniquely positioned to innovate in ways that corporations and public institutions often cannot. Through visionary thinking and unconventional solutions, startups are tackling some of the most pressing challenges facing cities today, from climate change to energy security.
Consider fusion energy. The availability of commercially viable fusion power has long been considered decades away. However, Tokamak Energy, a UK startup firm, is making progress toward the availability of fusion power through design of advanced fusion reactors. The firm’s goal is to develop a compact, fusion power plant for commercial applications, potentially within the next decade. Recent progress in fusion energy has profound implications for urban sustainability in Europe, offering clean energy and secure, scalable power.
Speaking at the Davos event, Ann Mettler, vice president at Breakthrough Energy, discussed the importance of looking at climate and energy issues from a different perspective. As she explained, it’s not only about climate challenges. It is also about competitiveness, resilience, and security. “It is not secure to rely on only one source of energy. Diversification and building up new sectors is going to be a huge priority.” She emphasised that the global trend toward clean energy is unstoppable.
Startup gaps in Europe
Despite world-class universities, entrepreneurial talent, and government funding programmes, the EU struggles to compete globally in creating and scaling innovative startups. Based on a Forbes article, “Europe’s underdeveloped venture capital ecosystem hampers the continent’s ability to finance and grow the next generation of tech giants.” Pitchbook data indicates a decline of 6.7% in European venture capital investments in 2024, with total deal value dropping more than 20%.
“From 2013 to 2023, EU venture capital funds raised about $130 billion compared to a staggering $924 billion raised by VC funds in the U.S.” This massive gap drives European entrepreneurs to look abroad for funding sources.
How do Europe’s startup challenges affect innovators with entrepreneurial aspirations? Europe is rich in startup and entrepreneurial potential, and a Eurobarometer survey revealed that 46% of young Europeans aged 15-30 would consider starting their own business. However, only a fraction take steps toward a career as an entrepreneur. The barriers constraining entrepreneurial activity include financial hurdles and uncertainties combined with insufficient knowledge and mentorship opportunities. For many young people in Europe, the security of a position in government or industry outweighs the attractiveness of life as a risk-taking entrepreneur.
Is the tide turning?
McKinsey reports signs of optimism in the European startup space. The continent is making strides in creating a more conducive environment for startups. Increased access to funding and an influx of capital helps support startup development. Another positive trend is high growth in unicorns, with more than €110 billion invested in startups. McKinsey says these are encouraging signs that “the tide is starting to turn in Europe’s favour.”
Although still lagging behind in venture capital investment, Europe’s startups are making progress, especially in pursuing research-intensive opportunities like deep tech—a transformative global sector where new technologies once considered exploratory or untested are now becoming widely adopted, according to McKinsey. With its depth of resources and talent in high-tech research, Europe has the potential to compete in deep tech fields such as AI, virtual reality, clean energy, quantum computing, biotech, robotics, and more. Companies in this sector focus on pioneering solutions for the world’s most complex challenges, including climate change and the clean energy transition.
Europe’s deep tech industry is experiencing notable growth in both innovation and investor interest. McKinsey reports that Europe’s global share of deep tech investment nearly doubled from 2019 to 2023, rising from 10% to 19%. Within Europe, “this trend is even more pronounced, with deep tech accounting for roughly 44% of total tech investments as of 2023″—underscoring the sector’s increasing prominence.
Stakeholder programmes empower startups in sustainability
Supporting entrepreneurs is crucial for building an ecosystem where European startups can thrive. Governments, universities, incubators and accelerators are key players in this ecosystem.
- Government programmes: Local and national governments provide policy incentives, funding support, and regulatory measures to foster startup ecosystems. Tax breaks for clean tech ventures, funding for research and development, and regulations that encourage sustainability innovations help startups grow.
- University programmes: European universities support startups by offering access to research, expertise, and talent. Universities also help bridge the gap between academic research and applications in smart cities and target markets. A close collaboration between cities and univercsities -what we call “univercities”- can have very positive impacts.
- Incubators and accelerators: To provide essential support for startups in the sustainability space, incubators, accelerators and innovation hubs in European cities offer mentorship, networking, partnership opportunities, knowledge sharing, and access to impact investors— enabling startups to scale their solutions and drive meaningful change.
- EU programmes such as Horizon Europe and initiatives like EIT Climate-KIC facilitate access to funding and knowledge that enable innovations to flourish. EIT Urban Mobility, Europe’s largest innovation community for urban mobility, is committed to decarbonising the mobility sector and accelerating the transition to sustainable transport.
Funded under the umbrella of Horizon Europe, the INNOVATE-EU project is designed to strengthen and connect local innovation ecosystems across Germany, Latvia, Lithuania, Romania, and Spain. By providing deep tech startups with essential knowledge and tools, the project aims to help these companies scale their business models and successfully bring products to market. INNOVATE-EU focuses on bridging the innovation gap between leading and emerging regions and building a collaborative and supportive community for deep tech entrepreneurs.
Smart cities embrace innovation
Cities like Berlin, Copenhagen and Madrid harness the power of entrepreneurship to create more sustainable and resilient urban solutions.
Berlin: The German capital is a prime example of a city which fosters partnerships between startups, universities, and public and private sectors. Through initiatives like the Berlin Partner for Business and Technology and incubators such as the Social Impact Lab, the city helps entrepreneurs to connect with resources to scale their innovations.
Copenhagen: Denmark’s vibrant capital has long been a leader in urban sustainability, with a goal of becoming the world’s first carbon-neutral capital by 2025. To achieve this ambitious goal, Copenhagen supports climate entrepreneurs in developing smart technologies in energy efficiency, waste management, and sustainable transportation. Innovation hubs like DISIE (the Danish Institute for Sustainable Innovation and Entrepreneurship), BLOXHUB, and Matrikel1 offer access to professional networks and facilities, tailored partnership programmes, and startup events.
Madrid: In this dynamic Spanish city, startups create solutions to improve urban living. With abundant sunshine, the city intends to accomplish a clean energy transition through adoption of solar power and support for innovation in solar technologies. Madrid benefits from clusters and hubs in the energy sector and a local university network that facilitates entrepreneurial activities. The Carlos III University of Madrid and the Polytechnic University of Madrid (UPM) are “among the most renowned educational institutions in the field of renewable energies.” UPM offers the highly regarded Clean Cities Spain ClimAccelerator, supported by EIT Climate-KIC.
Clean Cities Spain ClimAccelerator
In 2024, the ClimAccelerator programme worked with startups from Spain, France, Italy, Lithuania and the UK. These startups received specialised training in sustainability and impact skills, enabling valuable networking with investors and mentors and visibility at leading events such as the Valencia Digital Summit and Smart City Expo World Congress.
Elisa Navarro Carrillo and Ana Horta Bellido, accelerator lead managers at UPM, said “this is one of the longest-running acceleration programmes in the urban climate framework, supporting nearly 100 start-ups from 18 countries since 2020. The programme is built year-by-year based on the cohort of startups that make it up. We consider their maturity, technological development, investment requirements, and climate aspects, among others.” In 2025, the ClimAccelerator programme is looking for startups with capabilities to address climate challenges, work in multi-stakeholder ecosystems, and contribute to systemic urban change.
Photo by Lil Mayer via Unsplash
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