Green Gold Rush: Cleantech Startups Attract Global VC Interest

In recent years, cleantech startups have emerged as the favorites of venture capitalists (VCs). The rising concerns surrounding climate change triggered a massive shift in investment patterns and pushed the clean technology sector into the limelight. This transformation is not confined to a specific geographic region; rather VCs across regions are increasingly supporting technologies and innovations that could contribute to a sustainable future. Is this a short-term trend or a new phenomenon?

Cleantech startups have garnered significant interest from VCs worldwide. This heightened attention is primarily driven by the growing global concern surrounding climate change and the increasingly ambitious push by governments for achieving net-zero emissions. This surge in interest on a global scale is palpable, as evidenced by the remarkable evolution of cleantech investment figures. In 2016, the total number of cleantech deals worldwide amounted to a modest 1,669, with a cumulative investment of USD 7,969 million. Fast forward to 2023, and we observe a remarkable increase with 1,986 deals worth a staggering USD 32,863 million, highlighting the growing commitment to sustainable and environmentally responsible technologies.

This surge extends beyond developed regions and has embraced developing areas. In 2023, Europe recorded an impressive 8,342 cleantech deals, while the US followed closely with 7,982 deals, positioning them as frontrunners. Moreover, Asia contributed significantly with 2,562 deals, and Africa showed a commitment to change, with 395 deals in the same year. These figures underscore the global readiness to transition toward a greener, more sustainable future and the willingness to invest in such initiatives across diverse regions.

Unicorns – Cleantech

The cleantech industry recorded the rise of numerous startups, with many of them attaining unicorn status in the past decade. Although most of these unicorns are based in the US, a substantial number also hail from China. Startups from Germany, Sweden, Israel, and UK are also present in this list. Some notable names are as follows:

1. Northvolt - The Swedish enterprise, Northvolt, operates in the clean energy sector, specializing in battery production. With a commitment to manufacturing using clean energy sources, Northvolt aims to deliver batteries with an 80% lower carbon footprint than those produced using coal energy. They are actively integrating these batteries into solutions that contribute to a more environmentally friendly and sustainable world.
2. Commonwealth Fusion Systems – A US-based Startup Commonwealth Fusion Systems (CFS)is also in the clean energy sector. It uses innovative high-temperature superconducting magnets created to construct smaller and more affordable tokamak fusion systems. CFS is in the process of creating the first of its kind net energy fusion machine, which marks a big step toward the world's first fusion power plant, known as ARC. Their goal is to provide clean and cost-competitive fusion energy to help combat climate change.
3. Meicai - Established in 2014 in China, Meicai primarily specializes in directly sourcing farmers' produce for restaurant owners. A smartphone app, by eliminating the middleman, Meicai aims to offer fresher, more cost-effective ingredients to restaurants and produce shops, while ensuring a large share of the proceeds reaches the farmers. In a nation where agriculture remains a significant source of employment, this mission is commendable.
4. Spiber – A Japanese startup, Spiber, has copyrighted a product called Brewed Protein materials. These are manufactured via fermentation that relies on sugars and microbes, as opposed to petrochemical or animal-derived sources. Spiber believes that these Brewed Protein materials have the potential to play a significant role in various industrial applications, making them a compelling contribution toward collective efforts to build a sustainable future.
5. Octopus Energy – Based in the UK, Octopus Energy provides energy, offering electricity and gas services to residential and business customers in the UK. They differentiate themselves by emphasizing clean and renewable energy sources, enabling customers to reduce their environmental impact. Octopus Energy also develops and promotes innovative energy-saving technologies and services, contributing to a sustainable and eco-friendly energy landscape.

The past two decades posted the rising importance of sustainability and clean energy. However, the current landscape, shaped by intricate geopolitical dynamics and rapid technological progress, introduced new facets to this journey. Cleantech evolved from a niche infrastructure fund to a sector where numerous investors are meticulously assessing the various themes and opportunities within their industry verticals. They seek to capitalize on the promising trends, tax incentives, and the positive momentum behind clean energy, as they navigate the path forward.