This decade will be mission critical to the future of our planet. Humankind has ambitious goals to meet in order to stop climate change. We at Speedinvest and Creandum believe that technology will play a huge role and we see Europe paving the way for Climate Tech innovation.
To get a better understanding of the current state and trends in the sector, we decided to map out the Climate Tech landscape in Europe according to the eight categories defined by the European Green Deal.
We built a foundation using sources such as Crunchbase, Dealroom and our respective deal flows, and crowdsourced additional companies with your help. In the end, we created a list of more than 1,100 companies that are chasing substantial business opportunities in the sector. We then compared the list to our internal deal flow and other sources in the field to understand the current state of Climate Tech in Europe and how Europe’s startup scene is positioned to impact the fight against climate change in the coming years.
Questions we answer:
To get an overview of activity by location, we split the continent into four regions: Northern, Southern, Eastern and Western Europe.
Most Climate Tech startups on our list are located in Western Europe (54%), followed by Northern Europe (36%), Southern Europe (7%) and Eastern Europe (3%). When we look at specific countries, Germany is leading the way (24%), followed by the UK (15%) and France (9%).
When it comes to VC funding, Sweden ($3.7bn) and Germany ($3.4bn) are the countries where the Climate Tech ventures on our list have attracted the most funding between 2006-2021. But the number for Sweden is primarily a result of huge funding rounds for one company - Northvolt ($3.3bn). With this outlier removed, Germany leads, followed by France ($1.7bn) and the UK ($822m).
While many on our list operate across several of the eight pillars of the European Green Deal, Energy companies (suppliers of clean and secure energy) are in the lead, representing 26%. In second place, Smart Mobility with 18%, followed by Food (16%), Zero Pollution (12%) and Clean & Circular Economy (11%). The categories with the fewest companies, according to our list, are Sustainable Building (7%), Biodiversity and Sustainable Finance, each with 5%.
Energy has also attracted the most VC funding with $5bn, dominated by large players such as Northvolt. Energy is followed by Smart Mobility with $3.7bn in financing (Flixbus, BlaBlaCar, Volocopter, TIER, Lilium).
According to PwC, Climate Tech globally has experienced a rapid increase in investment over the past seven years (2013-2019), growing by more than 3750%, in line with the increasing number of startups in the space. Not surprisingly, the number of Climate Tech pitches received by Speedinvest (see below) has also increased significantly year-over-year for the last decade. Creandum has seen a very similar trend.
Over the past four quarters, Speedinvest's Climate Tech deal flow has been dominated by startups from the UK (17%), Germany (14%) and France (12%). Combined, the Nordics account for about 13%, in line with where our network is the strongest.
This deal flow trend is also unsurprising as, according to EU Startups, a majority of Europe’s top 15 startup hubs are located in the above countries (London, Berlin, Paris, etc.). Additionally, Dealroom and PwC have named Berlin one of the world’s largest Climate Tech hubs in terms of VC funding raised ($0.9b).
While more than 1,100 companies is a great start, it’s admittedly still a limited data set. Nevertheless, we believe it’s a valuable starting point to understand what’s going on in the European Climate Tech space, and where future opportunities lie.
In addition to the data, Speedinvest and Creandum compared notes on our respective deal flows and ongoing conversations with founders in the space. We were quick to align on five key areas of opportunity that we are observing and will continue to monitor closely over the coming years.
2020 was the starting point of many carbon software solutions. Typically, these companies measure, monitor and help reduce the CO2 footprint of companies and individuals. Some players in this field are CarbonChain, Earthly, Tomorrow and Speedinvest backed Planetly.
Recently, we’ve seen the emergence of more vertical players that focus on reducing emissions specifically in the procurement processes and across Scope 3 emissions. Some examples include Carbmee, Vaayu and Variable. Others like CarbonCloud, Minimum and Yook track emissions across the supply chain to help end consumers make more informed purchasing decisions.
Further down the value chain, offsetting is also playing an increasing role. Exciting models have evolved, such as those by Chooose, Lune and Patch, that develop APIs to enable merchants to build offsetting options into their check-outs. With this and the evolution of carbon credit markets, verifying offsets is also becoming increasingly important. Sylvera and Rize are now active in this area.
As most organisations still struggle with their carbon emissions, we are convinced the market is still largely untapped. A key focus, we think, will be on enabling companies and end consumers to eliminate as many emissions as possible and only offset what really can’t be avoided.
Under new EU rules, Environmental, Social and Governance (ESG) tracking has gone from a nice-to-have to a universal compliance requirement. Soon, governments, asset managers, investors and customers will expect - and require - companies to regularly report these metrics the same way they report financial data. This creates ample room for tools that make the tracking and reporting process less painful and time consuming.
Some companies to watch in this field include Atlas Metrics, Nossa Data, Sustiportal and Worldfavor. They assist companies with internal reporting. On the other side, Clarity.ai, Net Purpose and Util harness public data to rate public companies on their sustainability performance for asset managers and sustainable investment products.
We think priority should be on working towards standardized and reliable reporting metrics for companies. This will help stakeholders make meaningful comparisons between the impact of different organisations and demand better of decision-makers around the world.
Recycling and waste management
Building a Clean & Circular Economy, which naturally includes recycling, is a core focus area of the European Green Deal with 11% of companies in our list tackling this area. It’s a gigantic industry. UBS estimates the market size to be $2 trillion. But it still remains a black box for so many of us.
How can we ensure as much material as possible is reused? Think of large companies or the supermarket around the corner; what happens to their waste? As pressure to achieve higher recycling rates mounts from regulators and consumers, these are questions more and more companies will need to address. This comes with the added benefit of quality waste opening up new revenue streams.
The food, meat in particular, we produce and consume has an incredible impact on our environment. 19% of global CO2 emissions are driven by agriculture. In our list, 16% of companies tackle different parts of the food industry. This includes everything from farming to the type of food that lands on our plates.
This is aligned with what we see in our deal flow. For example, Creandum is a proud backer of Stockeld Dreamery, creating the world’s most ambitious (vegan) cheese. Many more companies offer more sustainable (often plant based) alternatives, including Better Fish (sea food alternatives), Vly Foods (pea protein based milk) and Gourmey (developing ethical Foie Gras).
The list of examples spans even wider with companies enabling farmers to trade crops (eg Agrando), software bringing transparency into the livestock supply chain (e.g. Breedr) and converting food waste into animal feed (e.g. Better Origin). For retailers, Hier enables merchants to source local produce and IntFarm allows them to grow salad indoors.
For us, the list of opportunities “From Farm to Fork” really still feels endless.
Electric vehicles and EV ecosystem
While total sales of vehicles decreased by 15% in 2020, the sales of electric vehicles (EVs) increased by 33%. This is driven by consumer demand, a greater variety of choices, and government incentives.
By 2025, studies expect that more than 40 million EVs will be sold, implying 85% annual growth over the next five years. This means EVs are here to stay and, with that, the need for new infrastructure and adjacent solutions is emerging. This is also confirmed by what we see in our data. 18% of companies on our list are in Smart Mobility. Of those, about 42% of those tackle EVs and charging infrastructure.
Speedinvest and Creandum are proud backers of battery analytics company Twaice, but the list of players is growing at a steady rate. Check out e.g. Aviloo, CaCharge, EcoG, ev.energy and Meshcrafts.
Climate Tech, as seen above, is a broad sector that covers everything from capital intensive infrastructure investments to NGOs. But the fact that Speedinvest and Creandum are early stage VCs, focusing on pre-seed to Series A, does help define what catches our eye. Specifically, we’re looking for founders who:
In the year ahead, we expect to see even more companies in the eight pillars of the European Green Deal emerge and grow. If you are looking for more inspiration, check out the Annex to the European Green Deal. It is a great overview of areas that need to be tackled, and might help spark ideas of where you can get started.
We want to grow our list well beyond 1,100 companies. We know you’re out there! So we’ll keep our Climate Tech list open to submissions and update regularly. We also invite you to play with the data in our list and share your findings and stay in touch.
Many thanks to Pal Habsburg-Lothringen for his support on the project.
Speedinvest is a leading pan-European, early-stage venture capital firm. Our portfolio includes Wefox, Bitpanda, TIER Mobility, GoStudent, Curve, CoachHub, Schüttflix, TourRadar, Adverity, and Twaice. Sign up for our newsletters to get our exclusive content delivered straight to your inbox.