A Sudden Outbreak of Green Fever - The Khuram Dhanani Blog
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A Sudden Outbreak of Green Fever

Climate tech, a broad industry that encapsulates any technology that offers a solution to climate change, has gained overwhelming interest in the last year. The industry is generating such a buzz that the renewable energy space alone gained quadruple funding compared to 2020.  So what’s with the sudden outbreak of green fever?

Simply put, as investors and consumers become more interested in investing in or spending their hard-earned cash on more sustainability-focused companies, venture capitalists are becoming more interested in funding the startups that are giving these businesses the tools they need to help cut and maybe even eliminate their carbon footprint.  It’s not just VCs looking to give these startups a nudge, either. After the infrastructure bill that Biden signed last year, billions of dollars worth of United States taxpayer money will now be going to combating climate change which, for a brighter future, is not a bad place for tax dollars to go.

As a result, climate tech solutions that create emission management software are going to be reaping the rewards within the next year as more and more businesses sprint from solution to solution to ensure that they look as eco-friendly as possible. However, the path for this growing trend of climate tech startups does not remain completely clear. There are, of course, hiccups and obstacles that start-ups must maneuver through to gain funding.

The Road Ahead 

The funding for climate tech is not going to be a quick and easy solution. As the competition for climate change fighting technology ramps up, start-ups can expect much more scrutiny from investors and customers alike. Regardless of how much money is pooled into building solutions to clean up carbon emissions or building low-impact supply chains, startups are not going to be able to hide their own carbon footprint. As a result, these startups that claim to offer climate-reversing technology must answer for the energy required to run their tech and discover tactics to avoid becoming another hardware startup dud.

It’s also worth mentioning that the software start-ups VCs are expressing the most interest in are only projected to reduce carbon emissions by a mere 20% by 2050. This takes the spotlight away from solar power, green hydrogen production, and food waste solutions capable of reducing carbon emission by 80% within the same time frame. As a result, these solutions received only 25% of climate tech funding between 2013 and 2021. The problem stems from the fact that VCs are only interested in solutions that offer a quick win and most true green tech solutions are unable to offer that to them. 

A Shifting of Tides

The future for truly sustainable climate tech is not bleak, however. VCs all over the globe are more capable now than ever to take on risks after enjoying a record year for deals in 2021. These VCs now have the confidence they need to close deals with fusion-energy startups who are dead set on building miniature carbonless energy producing suns. This confidence was demonstrated in December when Norwegian start-up, Commonwealth Fusion Systems, raised a $1.8 billion Series B payout to continue working on its “SPARC” reactor.

As more VCs become more willing to take risks, impactful solutions such as solar, plant-based protein, and food waste technologies might finally have their time to shine. Solar energy, for instance, is in for a record 2022 year with 44 GW of solar predicted to come online in 2022, or double the amount of solar energy from 2021. So who are the biggest true green climate tech players to keep an eye on in 2022?

The Key Players

Northvolt

NorthVolt is based out of Sweden and is a manufacturer of clean lithium-ion batteries which they build out of dead and recycled batteries. NorthVolt was founded in 2016, has 1,400 employees, and has drummed up a staggering amount of attention over the years. This company has raised a total of $6 billion over the course of 9 funding rounds.

Proterra

With public transportation responsible for 29% of carbon emissions in the United States, focusing a good chunk of climate tech resources to transportation is key to cutting down carbon emissions. Proterra, a company based out of California, develops battery-powered buses that completely eliminate the need for fossil fuels. This company has been met with a respectable amount of support with around $1.2 billion in funding.

ZeroAvia

ZeroAvia, an electric aircraft developer, produces a zero-emission powertrain for aircraft to ditch dirty fuels and eliminate carbon emissions. This company was founded in 2017 and has earned an impressive $110 million in funding over the course of 7 rounds.

Carbon Engineering

Norwegian company Carbon Energy is working on technology called, “Direct Air Capture,” (DAC) that literally sucks carbon emission out of the atmosphere. This DAC technology is capable of removing close to a million tons of CO2 from the atmosphere each year. Carbon Engineering has achieved a funding amount of $110.4 million over the course of 8 rounds.

The Greatest Years

So what do we know about climate tech? It’s a rapidly growing industry that is benefiting from increased investor interest, and it has the potential to make huge strides in reducing greenhouse gas emissions. While there are some challenges posed by climate tech for investors (including the need for significant capital investments and longer time horizons), there are also many reasons why investing in more efficient climate tech solutions makes sense. Fortunately, it appears as though the greatest years for energy efficient tech lie ahead.

Khuram Dhanani
Khuram Dhanani
Khuram Dhanani
khuramdhanani@gmail.com