Nordic green tech reality check: Re-Match delisting highlights start-ups’ financing struggles

News Analysis 23 March

Nordic green tech reality check: Re-Match delisting highlights start-ups’ financing struggles

The delisting of Re-Match following Verdane’s EUR 32m takeover of the Danish astroturf recycler, one year and two months after its stock exchange debut, points to the market’s risk-averse sentiment towards green technology start-ups and the consequential growth funding gap in the sector.

When Re-Match listed on the Nasdaq First North Premier Growth Market in December 2021, it was the largest growth listing in Denmark ever, according to Dealogic data. And according to Re-Match CEO Nikolaj Magne-Larsen, the IPO was supposed to be a stepping stone on the path to a main market listing.

However, it was not possible for the company to raise the funds necessary to sustain its factory roll-out on the growth exchange, Magne-Larsen told Mergermarket

“To continue the roll-out as planned, the company would have had to raise the same amount as when it first listed, and that just was not going to happen on the Danish growth exchange,” he said.

One would think that every portfolio manager in the Nordics - a region that prides itself on its environmental values - would be exploring every possible way to turn their portfolios dark green. Yet, greentech CEOs often see reluctance from institutional investors.

Especially in Denmark it has been difficult for sustainable businesses that require significant capital in the early stages to scale and find the necessary funding despite proven roll-out strategies and institutional backing from the EU.

“There is no lack of capital in the region. Denmark and the Nordics in general have large institutional investors that are interested in the green transition. And they do get involved, but investment scope and mandate is not always compatible,” Navid Samandari, executive chairman and interim CEO of Seaborg, a Danish fourth-generation nuclear energy company, said. 

Despite the potential for outsized returns, investors struggle with longer investment horizons and higher risk profiles, Samandari said.

Seaborg - another example of how a Denmark-based greentech company can struggle to attract the financing necessary to develop a technology that could potentially revolutionise the energy sector - has been trying to raise EUR 100m since September 2022, but has found the market environment in Denmark challenging, Samandari said.

To date, the company has raised EUR 60m, primarily from ultra-high net worth individuals and family offices, he said. Given the funding gap in Denmark and in the Nordics that is very hard to bridge due to the risk profile of cleantech and deeptech start-ups in general, the change to institutional investors for funding has been difficult for the company, he said.

On the other hand, it sometimes also comes down to investors' inexperience of the sector. 

“Investors may want to finance projects like Seaborg, but without a stronger ecosystem and more experience with cleantech investment it takes a longer time", Samandari said, adding that, to some extent, it resembles the challenges faced in regular tech investing 20 years ago in the Nordics, when start-ups had to look to the US before the region had the strong angel- and venture-capital ecosystems it has today.

Samandari also points to the fact that the above is less of an issue in the US, where more investors are used to cleantech investments. Increasing support from the Inflation Reduction Act (IRA) and the Department of Energy granting substantial sums to similar businesses is catalytic in bridging the gap for cleantech startups, Samandari said.

“There is a much more straightforward path to financing in the US than in Denmark and in Europe. Our region simply does not match the level of grants, project financing, tax credits and other types of support available there,” he said. “The US is also further ahead in their knowledge and acceptance of nuclear as part of the energy transition than Europe, which only really started moving after the invasion of Ukraine.” 

Magne-Larsen agreed that the market for funding capital-intensive companies in the green technology space is subpar in Denmark, saying that despite Re-Match being a green investment case, founded in Denmark, it has been more attractive to look for funding outside of Denmark. “I think capital intensive technologies will really struggle in Denmark,” he said.

Another example of the greentech leak out of Denmark is material recovery and recycling company Combineering, which was considering an IPO but instead decided to sell to UK-based Reconomy Group for EUR 202m instead.

The current market volatility serves as yet another challenge for the green transition, as it will be even harder to convince sponsors to invest in typically capex-intensive green technologies, Magne-Larsen said.

Meanwhile, despite good intentions in the Nordics, one ultimately must look outside the region to find sources of substantial investment. In fact, Seaborg already has strong partnerships with several Korean corporates, and it is primarily looking outside the region in terms of finding substantial investment.

by Gustav Hoejmark-Jensen

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