The situation is a lot better today than 10 years ago or so, largely thanks to ÖBB Nightjet. But yep, it's not only state railway companies anymore, as can be seen on the map
Night trains are not like normal trains. They carry far fewer passengers per car. That doesn't make them as bad as flying on pure CO2 emissions, but night trains are not as efficient as "trains" generally. They are more comparable to luxury busses. But ... if the other option is an electric car, or even an electric aircraft, then even an electric night trains will likely no longer win on CO2 emissions.
The comparison is more complicated though isn’t it? It isn’t a comparison with a plane, it’s a variable comparison with a plane, a taxi, and a hotel etc.
Flying has around 10x the co2eq emissions of trains (300g/km, including infrastructure, occupancy). Cars are still pretty bad, but also don’t compete well for 1000km trips in Europe. It’s basically only aviation at those distances.
Electric airplanes that can do 1000km trips don’t exist. They may exist one day in significant quantities… but perhaps only after we’ve used up all our carbon budget on the path to a 2-3C increase.
It also helps if you're generally going city center to city center and aren't lugging large suitcases around. (Which you might think would be a better fit for trains but really aren't for the most part.)
It’s difficult to just do a startup on general in this space (it’s sustainable mobility, but involves hardware, an old industry, old tech).
The state railways can afford rolling stock, but it’s extensive and takes a long time. They are not too innovative either, so may not solve the economics issues with new approaches, because they are too conservative.
As to finance, it does suck that we throw billions at economically, socially, and/or globally destructive, unprofitable startups and yet something that is a net good for society and environment can't get that funding. I guess that's where government steps in or private/public partnerships.
Good luck though!
Since Europe has a liberalized market in the rail sector, some startups are trying to fill the gap.
European sleeper operates a night train on the route Brussel-Amsterdam-Berlin-Prague, using old rented rolling stock.
I’m involved with Luna Rail (in Berlin), which is trying a more technical approach around rolling stock design to improve unit economics to make Night trains profitable.
There’s also a startup in the US, dreamstar, whose primary effort appears to be about getting track rights for now (something that’s not such a big concern in Europe - here the barrier is rolling stock).