Scaling Green Innovation: Why market shaping matters

The green transition requires more than breakthrough technologies. It also requires the conditions that allow those technologies to scale. By reducing uncertainty and creating investable markets, market shaping helps bridge the gap between research, industrial deployment and long-term societal impact.

The green transition is driving a new wave of innovation across Europe. Startups are developing breakthrough technologies in clean energy, sustainable materials, food systems and industrial processes that have the potential to transform entire sectors.

Yet technological innovation alone rarely creates systemic change. Many promising solutions struggle not because the technology fails, but because the conditions for commercial deployment do not yet exist.

For research organisations, companies and policymakers alike, the challenge is increasingly shifting from technology development towards market creation.

Not all startups scale in the same way

Many of Finland’s best-known startup success stories have emerged from the digital economy. Companies such as Aiven, RELEX, AlphaSense, Oura and Swappie have built globally competitive businesses based on software, data and digital platforms. Their business models align well with the traditional venture capital model: rapid growth, global scalability and the potential for unicorn valuations. This is the startup world celebrated on the Slush stage—and for good reason.

Industrial green transition startups follow a very different path. Companies such as Solar Foods, Onego Bio, Steady Energy, Spinnova and KÄÄPÄ Biotech are developing new production processes, sustainable materials and energy technologies rather than digital platforms or software.

Many of these companies are able to attract early-stage private investment, often from specialised climate tech funds, corporate venture capital investors and strategic industrial partners, typically alongside public funding instruments that help reduce technological risk.

Their biggest challenge emerges when technologies move from successful pilots to industrial deployment. Building a First-of-a-Kind (FOAK) commercial facility may require investments of hundreds of millions of euros, fundamentally changing the financing landscape.

The financing gap at the FOAK stage

Traditional venture capital typically does not finance projects of this scale and risk profile. At the same time, bank financing usually becomes available only after the technology has been proven in industrial operation and can demonstrate predictable cash flows. This creates a financing gap precisely at the stage where commercial deployment should begin.

The challenge is not only technological but also market-related. Investors need confidence that customers will adopt the new solution, that regulation provides long-term certainty and that demand will emerge. Without these conditions, even technically successful innovations may struggle to secure financing for their first commercial-scale facility.

Why market shaping matters

This is where market shaping becomes essential.

Popularised by economists such as Mariana Mazzucato, the concept of market shaping emphasises that governments can create demand and reduce uncertainty for transformative innovation. Rather than simply correcting market failures, public policy can help establish entirely new markets.

In practice, this includes instruments such as public procurement, long-term offtake agreements, technical standards, guarantees and carbon pricing that create the conditions for emerging technologies to scale.

Several countries have successfully applied these approaches. Norway accelerated electric vehicle adoption through coordinated taxation and infrastructure policies. Denmark built a globally competitive wind industry through long-term public support and industrial policy. Germany’s H2Global mechanism reduces demand risk for green hydrogen through long-term purchasing contracts that provide greater certainty for both producers and investors.

These examples illustrate an important principle: markets for transformative technologies often do not emerge spontaneously. They are created through coordinated action between industry, finance and the public sector.

Market shaping also unlocks private investment

Market shaping is often discussed as a way to create demand. Equally important is its role in enabling investment.

For industrial technologies, uncertainty about future markets directly affects financing decisions. If there is no credible expectation of customers, stable regulation or long-term demand, investors and banks will remain cautious regardless of the quality of the technology itself.

By reducing these uncertainties, market shaping strengthens the investment case for industrial innovation. It lowers perceived risk, improves bankability and enables larger pools of private capital to participate in commercial deployment.

In other words, market shaping creates not only future markets but also investable opportunities.

Europe’s competitiveness depends on industrial deployment

This perspective is increasingly reflected in European competitiveness policy.

Mario Draghi’s report on the future of European competitiveness argues that Europe requires substantial additional annual investment in energy systems, industrial infrastructure and clean technologies to maintain its competitiveness while delivering the green transition.

The challenge is therefore not simply generating more research or more startups. Europe also needs effective pathways that allow innovations to move from laboratories and pilot projects into industrial production and commercial markets.

Without successful deployment, even world-class technologies cannot generate lasting economic or societal impact.

Innovation ecosystems connect technology, finance and markets

Accelerating the green transition requires collaboration across the entire innovation ecosystem.

Researchers develop new solutions. companies turn them into business. Investors provide growth capital. Public institutions help create predictable market conditions. Each actor addresses a different part of the innovation journey.

Innovation ecosystems play a critical role in connecting these capabilities. They create spaces where industry, research organisations, investors and public actors can jointly identify barriers, develop solutions and accelerate the commercial deployment of new technologies.

At CLIC Innovation, this means facilitating collaboration that goes beyond technology development. Through innovation ecosystems, collaborative projects and strategic programmes, CLIC helps bring together the actors needed to reduce uncertainty, strengthen market readiness and accelerate the path from research to industrial deployment.

Ultimately, the success of the green transition will depend not only on inventing better technologies but also on creating the conditions that allow them to scale.

By creating credible future markets, market shaping also helps unlock the private capital needed to scale industrial innovation.

Further reading

Mario Draghi (2024). The Future of European Competitiveness. European Commission.
A strategic roadmap highlighting the need for large-scale investment in clean technologies, industrial capacity and innovation to strengthen Europe’s long-term competitiveness.

Mariana Mazzucato (2013). The Entrepreneurial State. Debunking Public vs. Private Sector Myths. Anthem Press.
Explores how governments can actively shape markets and reduce uncertainty to enable innovation and accelerate societal transitions.

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