Over the next 30 years, every business, within every industry, will need to transition to Net Zero carbon emissions. Best estimates put the level of investment needed to achieve this at $5-7 trillion. This astonishing target will simply not happen without entrepreneurs – and the investors who back them – mobilising technology in new and innovative ways.
The VC community is waking up to this huge opportunity. In 2019, Climate tech was the fastest growing investment sector in venture capital, outpacing the rate of average growth by 5x and three times faster than AI. In 2020, $16.3bn was invested into climate tech. Back in 2013, that figure was at $418m – a 40 fold increase in seven years.
As policymakers, industry leaders and businesses wake up to the challenges of decarbonising, new markets will be created with huge business opportunities in the future. Along with this comes a challenge for Climate tech startups looking for funding: with few easy Climate tech comparables to draw on in the market, monetisation strategies are not always developed, or they can be contingent on regulatory change to drive demand. Secondly, many Climate tech businesses have spun out of intensive R&D in scientific and academic contexts that are less exposed to the venture capital ecosystem making it even more challenging to source funding.
The Growth funding gap
Many businesses within the category of Climate tech fall into the realm of deep tech. This means that the chasm of capital-intensive, pre-revenue timespans, typical of all early stage deep tech companies, has to be crossed. (We’ve been voicing this issue elsewhere recently.) For Climate tech startups, obtaining seed and early stage funding faces similar challenges as for founders in emerging technology sectors, but to get growth investors to look at them seriously at later stages is even more difficult. This isn’t helped by the fact that many of the markets Climate tech entrepreneurs are operating in are very new, so there’s the added requirement for investors to get up the curve in a completely new segment. The fund raising process is hard enough without it having to be an educative one too.
This is why we’ve organised our Climate Tech Office Hours event which aims to bring together Climate tech founders and investors. In collaboration with the Greentech Alliance, we’ve gathered investors from seed/early stage right through to much later stage growth, to help bridge the funding gap just mentioned. We’ve included generalist as well as specialist funds to allow them to look at the space more closely.
We believe it’s important to emphasise that while this event will give founders the opportunity to pitch to investors if they wish, it is more than just a pitching event. Many of the interactions may of course lead to deal sourcing, but it’s also about promoting increased collaboration and learning: founders will get to talk to investors they may meet further down the road, and hear from them in a mentorship capacity about how startups should be preparing themselves for later stage fund raising. Investors too, whether generalist or specialist, will come away knowing more about the innovations and green shoot markets emerging in the climate tech space.
We received over 130 sign ups from founders, and while there is only room for 25 (this time), the range of operations among them speaks to the vibrancy of the sector: from carbon removal technologies and robotics for the farming industry through to fashion recycling software and carbon footprint labelling for food.
Therefore our intention is not only that individuals come away with personal connections and knowledge, but that the sector network as a whole takes a significant step forward.
This event further demonstrates Octopus’ commitment to becoming a leading Climate tech investor. Earlier this year Octopus Group received B Corp certification. This requires a company to meet the highest standards of social and environmental consideration, transparency and accountability, to balance profit and the impact they have. And our sister company, Octopus Energy, which was founded five years ago to drive the green energy revolution faster and cheaper than anyone imagined, is already one of Europe’s largest green generation operators.
Climate tech’s reach
In order to reach Net Zero we need innovation and new technology in all sectors in which we invest – deep tech, fintech, B2B software, health and consumer – so we are hugely excited to be hosting 25 of the most dynamic Climate tech founders, as well as many of the leading Climate investors in Europe for this event.