Climate change has been an issue of growing concern all over the world for the last couple of decades. Industrial activity alone contributes about 75% of global carbon emissions, is one of the fastest growing, and is also one of the most difficult to control. Today, governments are more committed than ever to mitigating the effects of Climate Change, resulting in several sustainability initiatives including the European Green Deal, Paris Agreement, and Sustainable Development Goals, each with elaborate targets and action plans. However, these goals cannot be achieved without a revolution in industrial, corporate and consumer activities.
Enter Climate Tech startups. The CleanTech boom and bust of the early 2000s left quite a sour taste in investors’ mouths, but that sector is making a major comeback in the form of Climate Tech. The sector is already growing exponentially. In 2020 alone, VC investment in the sector topped $17 billion. With at least 1,100 startups in Europe and 400 + investors globally, the prospects of the Climate Tech sector translates into an enormous opportunity for startups and investors - even in its nascent stages.
At Speedinvest, we’ve had our eye on the Climate Tech sector for a while. Earlier this year, we partnered with Creandum for a report on Europe’s leadership in Climate Tech. We have also recently invested in a number of Climate Tech startups such as one • fıve, Greyparrot and Resourcify, and are raising a new opportunity fund in order to increase our investments in the sector. If you’re already operating in Climate Tech or thinking about it, reach out to us!
To dive deeper, we recently hosted our first Climate Tech Industrial Tech Talk to share insights on investors’ expectations of startups in the sector, as well as best practices for building a scalable Climate Tech startup. Andreas Schwarzenbrunner - a Partner from the Speedinvest Industrial Tech team - was joined by a panel of experts in the industry, namely:
What criteria do investors use when evaluating Climate Tech startups? Which Climate Tech sectors show the greatest potential? How do you successfully secure funding to build and scale your Climate Tech startup? These questions and more were discussed during the virtual event. Our panelists presented some diverse - and in some cases controversial - viewpoints about the sector. However, there are a few things we all agree on:
Investors are looking for sustainable and scalable solutions. To be successful in securing funding, you must convince investors that your solution and vision will remain relevant in the near and distant future. Your answer to the question, “Will this still be possible and relevant in 2050?” should be “Yes!” Secondly, your solution should be scalable across geographies. While it is great to have a solution that works in a specific city or country, real impact is made with globally scalable solutions.
Don’t fall into the free money trap. It may be tempting to think that grants will suffice to sustain your vision, but they won’t. Governments only fund ideas as long as they make economic sense. Your solution must not just be interesting, it must be something that customers are willing to pay for in the long term. (But, of course, take the free money!)
Before approaching VCs, build your “network of believers”. The investor landscape is changing. Although investors are still pretty risk-averse, there is a growing number of impact investors who are more willing to invest in non-traditional VC cases. Starting with smaller tickets from these investors will eventually make the search for VC funding easier, especially for startups with little or no commercial traction.
Carefully consider the make-up of your cap table. Your startup needs the right constellation to render the support you need to access the next level. Given the complexity of Climate Tech, it pays to have a good mix of experts on your cap table.
Do you have an exciting Climate Tech idea or startup? Let’s talk!
Enjoy this recap video with highlights from the panel, or watch the entire discussion here.