Climate Insider Brief:
- Corporate Venture Capital, exemplified by Founders Intelligence’s Sandra Steving Villegas, emerges as a critical funding source for climate tech startups, providing patient capital and strategic advantages with longer investment horizons.
- Successful climate tech ventures, guided by insights from entrepreneurs like Rachel Delacour of Sweep, emphasise the importance of aligning with corporate perspectives, wisely selecting partners, and navigating regulatory frameworks like the EU’s Corporate Sustainability Reporting Directive.
- Scaling climate technology, a challenge highlighted by Gilles Dreyfus, co-founder of agritech Jungle, necessitates collaboration between startups, corporate partners, and investors.
The need for climate technology is becoming increasingly high, but startups in this sector encounter challenges within the investment landscape. To fully realise the potential of climate tech, it is crucial to broaden the support base, going beyond conventional venture investments. This article examines how Corporate Venture Capital (CVC) and corporate partnerships contribute to scaling climate tech, with insights from industry experts.
Corporate Venture Capital emerges as a crucial player in funding ambitious and untested climate technologies, providing what experts term as “patient capital.” Unlike traditional venture capital, CVCs often operate with longer investment horizons and prioritise strategic returns over purely financial gains. This approach is especially vital for sectors like vertical farming, which require time-intensive understanding and creative funding solutions, according to Gilles Dreyfus, co-founder of agritech Jungle.
Sandra Steving Villegas, partner and head of sustainability practice at Founders Intelligence, highlights the unique advantages of CVCs, citing their ability to provide market access that traditional investors may not offer. This aligns with the extended time horizons required for innovations in the climate and sustainability space. However, it’s acknowledged that funding cycles can be uneven within CVCs.
While the benefits of corporate investment are apparent, choosing the right corporate partner is crucial for the success of climate tech ventures. Steving emphasises the need for climate tech companies to align their thinking with corporate perspectives and strategize on commercialization. Clarity around the commercial upside is essential for sustaining corporate partnerships, even if the benefits are projected far into the future.
Identifying red flags in potential commercial partners is also emphasised. Climate techs should seek evidence of successful scaling and actual commercial returns, moving beyond proof of concept. Steving advises startups to ensure that their potential partner CVC has strong links within the business, providing both capital and corporate access. Furthermore, a focus on industry alignment or a clear commitment to decarbonization is crucial for a fruitful partnership.
Regulatory frameworks, such as the EU’s Corporate Sustainability Reporting Directive (CSRD), are becoming pivotal in shaping corporate partnerships and fostering climate tech adoption. Steving notes that regulations are compelling companies to create real transparency in their value chain, extending beyond carbon footprints to encompass resources, biodiversity, and water.
The regulatory landscape, while imposing reporting burdens, acts as a catalyst for corporate leaders to invest in sustainability not just as an ethical necessity but as a strategic move to stay competitive. Entrepreneurs are encouraged to embrace these regulations, with Rachel Delacour, co-founder of carbon and ESG tracker Sweep, highlighting the responsibility of entrepreneurs to set up ethical foundations from the outset.
Together, a set of 12 climate technology categories has the potential to significantly decrease up to 90 percent of overall anthropogenic greenhouse gas (GHG) emissions when implemented on a large scale. These categories, interconnected through dependencies in foundational science and system-level scaling mechanisms, represent the key to large-scale emissions reduction.
The maturity levels of these categories vary, with some already commercially competitive while others require further innovation and cost reduction. The need for an annual growth of about 10 percent in climate tech investments, reaching approximately $2 trillion by 2030, is emphasised to achieve technical and commercial breakthroughs.
Challenges to scaling climate technologies are multifaceted and require a three-pronged approach:
- 1. Creating at-scale supply chains and support infrastructure.
- 2. Embracing effective capital reallocation and financing structures.
- 3. Addressing system-level bottlenecks to parallel scaling up.
Scaling climate technology is a multifaceted challenge that demands collaboration between startups, corporate partners, and investors. The role of Corporate Venture Capital is highlighted as a crucial element in providing patient capital and strategic support. Additionally, the need for aligning with corporate perspectives, selecting partners wisely, and navigating the regulatory landscape is crucial for climate tech success. The interdependence of various climate technology categories underscores the importance of addressing challenges collectively to achieve meaningful progress in the fight against climate change.
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