Apr 24, 2023

Why greener startups are grabbing investor attention

Did you know that the number of emerging technology companies tackling the climate crisis has quadrupled in the last 10 years? Now more than ever, sustainability and a commitment to greener operations, products and services is becoming big business.

Part of the reason is the global need to find more sustainable ways of doing things. Under the European climate law, EU countries must cut greenhouse gas emissions by at least 55% by 2030, with the goal of making the EU climate neutral by 2050. This means there is a window of opportunity for startups to deliver products and services that help address the sustainability challenges that people and companies are facing.

In this blog, we’ll highlight some of those challenges, explore some of the biggest areas of potential from a startup and investment perspective, and look at some of the new startups that are already showing the way forward.

Business challenges to address

Perhaps one of the most difficult challenges that needs addressing – both by individual citizens and by companies – is balancing greater sustainability with financial viability. For businesses, that means protecting their revenue generation and profitability, and for individuals it means being able to pay their bills and stay out of debt. This balance is particularly important at the moment, where the cost of living crisis is putting increasing pressure on finances.

At the same time, many businesses are struggling to monitor or control their energy use, and assess whether or not to invest in clean energy solutions. Indeed, only 36% of businesses say they have the right tools in place to quantify their sustainability performance.

Furthermore, companies that can’t demonstrate good adherence to social and environmental standards are finding themselves on the back foot for two reasons. The first is that they are losing work because they fail to meet the demands of supply chain partners. The second is that their public and employee perceptions of businesses that aren’t sustainability-focused – or are judged to be short on actions to back up their words – can become very negative very quickly.

The biggest areas of interest

So where are the areas of innovation that are gaining the most traction among the public, business customers, and investors? Four in particular stand out:

Hybrid and electric transport: in the last ten years, there has been more than $400billion in investment into more eco-friendly means of transportation. Companies receiving this investment have generally been those looking at electric transportation options, connected mobility, and autonomous driving technologies.

Renewable energy: the high energy costs at present are only accelerating demand for renewable energy production, from solar panels and kinetic energy adapters to wind-based generation. New startups are gaining investment all the time on the basis of plans to make sustainable energy realistic and practical for all.

Waste management and recycling: the amount of waste generated in day-to-day life, and the proportion of it that is recycled, has major climate and sustainability implications. While a small number of big businesses dominate the waste-related market, there are opportunities for startups targeting niche areas and delivering better service.

Carbon capture, storage and tracking: efforts to lower the levels of CO2 in the atmosphere are gaining interest from VC investors, helping increase the global capacity of planned CCS projects by 50% in just nine months during 2021.

Climate startups driving innovation in 2023

Over the last few years, many investors have therefore put an increased focus on investing in startups that have solutions to sustainability challenges at their core. Examples of successful investments include:

Patch: a business creating API-based solution that simplifies the means of estimating carbon footprints, and that connects businesses to climate action projects all over the world

KoBold Metals: an artificial intelligence specialist that is helping businesses like electric vehicle makers find more sustainable and cost-effective ways to extract vital metals for components

Ztractor: we’re proud to support the creator of the world’s first autonomous electric-powered tractor, helping farmers operate improve efficiency, productivity and safety while also reducing the emissions generated by agriculture

At InfinityVC, we pride ourselves on investing in startups that value sustainability just as much as growth. Read some of our stories of green success here.