Article Peer-Reviewed
Assessing Profitability and Environmental Impact of Cleantech Start-up Business Models: A Monte Carlo Simulation
University of Auckland Business School, Auckland 1010, New Zealand
*
For correspondence.
Received: 25 June 2023 Accepted: 29 January 2024 Published: 2 February 2024
This article is part of the Special Issue Capturing the Sustainable Impact of Early-Stage Business Models.
Abstract
The clean technology (cleantech) industry is an exponentially growing sector aimed at producing sustainable products of services that are good for the environment. While these start-ups are producing cutting-edge research with real-world implications, their path to financial and environmental success is tenuous and heavily dependent on their choice of business model. Due to high uncertainty in parameter values and variables pertinent to decision-making, stimulation analyses need to be performed to discuss such choices. We construct a Monte Carlo simulation to evaluate and compare the financial and environmental outcomes of two competing business models: a Business Owned and Operated (B.O.O.) model and a licensing model. The results showed that while a licensing model consistently delivered more environmental benefit, it was also 10% less profitable than a B.O.O. model at their expected values. The analysis identified three main decision points for cleantech start-ups with varying levels of compromise between financial and environmental outcomes. The simulation model is easily adjustable for future cleantech decision-makers, allowing them to choose the right business model and increase their chances of financial and environmental success.
Figures in this Article
Figure 1
Figure 2
Figure 3
Keywords
Copyright © 2024
Goyal and Mahmoudzadeh. This article is distributed under the terms of the Creative Commons Attribution License (CC BY 4.0), which permits unrestricted use and distribution provided that the original work is properly cited.
Funding
This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.
Cite this Article
Goyal, N., & Mahmoudzadeh, M. (2024). Assessing Profitability and Environmental Impact of Cleantech Start-up Business Models: A Monte Carlo Simulation. Highlights of Sustainability, 3(1), 46–60. https://doi.org/10.54175/hsustain3010004
References
1.
Cumming, D., Henriques, I., & Sadorsky, P. (2016). “Cleantech” venture capital around the world. International Review of Financial Analysis, 44, 86–97. https://doi.org/10.1016/j.irfa.2016.01.015
2.
Acemoglu, D., Aghion, P., Bursztyn, L., & Hemous, D. (2010). The Environment and Directed Technical Change (FEEM Working Paper No. 93.2010). FEEM. https://doi.org/10.2139/ssrn.1668575
3.
Wilder, C., & Pernick, R. (2014). The clean tech revolution: winning and profiting from clean energy. HarperCollins.
4.
Johnston, M. (2024). Top 4 Alternative Energy Companies for 2018. Investopedia. https://www.investopedia.com/investing/top-alternative-energy-companies (accessed 27 January 2024).
5.
Metz, B., Davidson, O., de Coninck, H., Loos, M., & Meyer, L. (2005). IPCC special report on carbon dioxide capture and storage. Intergovernmental Panel on Climate Change (IPCC).
6.
Bumpus, A., Tansey, J., Pérez Henríquez, B., & Okereke, C. (Eds.). (2014). Carbon Governance, Climate Change and Business Transformation (pp. 188–206). Routledge.
7.
Raychaudhuri, S. (7–10 December 2008). Introduction to Monte Carlo simulation. 2008 Winter Simulation Conference, Miami, FL, USA. https://doi.org/10.1109/wsc.2008.4736059
8.
Khindanova, I. (2013). A Monte Carlo Model of a Wind Power Generation Investment. The Journal of Applied Business and Economics, 15(1), 94–106.
9.
Hutsebaut, E., Ochelen, S., Cerulus, T., & Putzeijs, B. (2007). Milieubaten of milieuschadekosten - waarderingsstudies in Vlaanderen (in German). Departement Leefmilieu, Natuur en Energie: Brussel.
10.
Alphaspread. (2024). Discount Rate. https://www.alphaspread.com/security/nzx/nzl/discount-rate (accessed 21 January 2024).
11.
Festel, G., Wuermseher, M., & Cattaneo, G. (2013). Valuation of early stage high-tech start-up companies. International Journal of Business, 18(3), 216–231.
12.
Nazarkina, L. (16 June 2011). It’s not easy being green, or why sustainability entrepreneurs sell their businesses. oikos Young Scholars Entrepreneurship Academy 2011, Filzbach, Switzerland.
Metrics
Loading...
Journal Menu
Journal Contact
Highlights of Sustainability
Editorial Office
Highlights of Science
Avenida Madrid, 189-195, 3-3
08014 Barcelona, Spain
08014 Barcelona, Spain
Cathy Wang
Managing Editor
