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Will India’s Climate Tech Startups Make Their Mark In 2023?

Will India’s Climate Tech Startups Make Their Mark In 2023?

Climate change presents the world’s population with the greatest problem. But even in 2023, many people are still talking more about individual accountability than about taking collective action to combat climate change.

The use of technology, which has already fundamentally altered human behavior, may hold the key to finding the best course of action for both individuals and organizations. The climate tech startup ecosystem in India is active at this intersection.

While there is no doubt that this is a global problem, there are distinct regional differences in the remedies that must be taken into account. It’s also the reason why early-stage investors have become much more interested in Indian climate tech businesses over the past couple of years, but progress has been sluggish after that.

Climate tech has not had the same level of investment maturity or depth as other significant areas, despite companies’ efforts for innovation in this crucial area. Despite the evident potential these firms will uncover in the future, investors are still hesitant about how some climate tech business models will do in the long run.

However, there is a sense that the tide is going to turn. Some entrepreneurs predict that by 2023, climate technology will be present in all industries and sectors. Additionally, the speciality models in the industry will begin to get some momentum.

Electric car startups now dominate the climate tech startup scene in India, and while their expansion will be crucial for the wider push in other directions, it’s also time for investors and the government to focus on other sectors.

When Will VCs Start Taking Climate Tech Seriously?

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India needs to lay a lot of groundwork in many industries to achieve its climate change reversal goals. Perhaps investing in early-stage climate tech startups will initially alleviate some major problems, but these startups also need to expand more quickly.

Investors are waiting for India’s climate tech businesses to break the business model in order to take a bigger risk, and founders need investors to do this. The sector is mired in this loop of desires and requirements, despite the fact that both sides claim that climate technology is essential.

ClimAct is an accelerator program that has been created by early-stage venture capital firms Huddle and Merak Ventures with the goal of advancing climate technology. The initiative, which has received support from well-known investors like the agritech and biotech-focused Omnivore, Sequoia Money, Matrix Partners, and other household names, gives upfront pre-seed capital of $200K per applicant and a follow-on investment of up to $1.5 Mn.

Along with regulatory improvements to foster startups and innovation, VC investments in the climate tech industry are required to achieve India’s ambitious COP27 targets. Regarding EV, sustainable mobility, and solar power, India has witnessed a number of legislative reforms that have paid off in other industries. However, other regions require more attention.

All nations are equally at risk from the climate issue, but India is especially susceptible because it has more than 1.35 billion people living in it and ranks seventh on the global climate risk index. Even though 2070’s net-zero carbon emission goal is still many years away, the private sector and climate tech firms must provide the strongest push.

In order to meet the nation’s sustainability targets by 2030, the Indian climate tech sector will require a capital infusion of over $1 Tn, according to a Unitus and Climate India analysis.

The year 2021 was a turning point for climate tech investments in many aspects because it received more financing than the preceding three years put together. In comparison to other, more established industries, the climate tech startup ecosystem is still relatively young, with $2 Bn invested in the last eight years (2014-2022). But in terms of what is required, we are way outside the range.

The Diverse Climate Technology Landscape: Beyond EVs

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Of course, it’s challenging to determine which companies belong under the umbrella of climate tech. Even electric cars, with their ultimate goal, fit under this sector, in contrast to other, more recent topics of interest that, at first glance, do not appear to be related to climate technology.

However, agritech businesses, solar and renewable energy firms, alternative fuel and material firms, biotech and agrifood life sciences firms, sustainable consumer brands, and others are all included within the climate tech category. Recycling and trash management, alternative foods, carbon management, and other fields also offer promising prospects.

EVs are unquestionably the focus of this industry, and the majority of startups are also involved in the clean vehicle market. However, beyond 2023, other options besides electric vehicles will need to be considered. Since there is so much money going into the electric vehicle industry and there is a focus on sustainable mobility, this industry is sometimes compared to climate tech as a whole.

However, climate technology addresses more than only EVs. Even if India delivered 1 million electric vehicles for the first time in 2022, EVs still represent a very small portion of climate technology.

Climate technology, in its broadest sense, encompasses any methods developed to lessen or counteract the effects of climate change, whether through decreasing emissions of greenhouse gases or promoting more environmentally friendly behaviors on the part of businesses and individuals.

Climate change is expected to have an impact on habitats and ecosystems that are normally not discussed, such as sustainable agriculture and crops that are tolerant of extreme weather. Both the public and private sectors need to invest significantly in R&D in these two fields. While numerous agritech and biotech businesses, including LoopWorm, are working on using technology to address these issues, India lacks the R&D capabilities of the US and China.

Many would argue that climate technology is wide, whereas clean technology is more focused, yet the broad phrase also denotes the fact that climate change will affect every person on the planet, making it difficult to categorize.

Improving Climate Technology on a Global Scale in 2023

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Obviously, India cannot afford to wait in this particular field. Investors must make riskier bets today even though climate-focused technology takes longer to show itself in the market. After all, venture capital once served that purpose.

Startups in the climate technology sector confront dubious business prospects due to the current state of the economy and the fact that many corporations prioritize corporate sustainability over environmental sustainability. Definitely at the top of the list of requirements for entrepreneurs in this field is a fresh policy push.

Government initiatives to combat climate change include a total prohibition on single-use plastics, a requirement that states use renewable energy, a push for electric vehicles, and the National Hydrogen Mission.

In addition, India’s climate tech entrepreneurs are advocating for a carbon tax on businesses that would increase the relevance of carbon credit solutions. Still, others want a strong regulator to ensure that climate tech is adopted and has access to the government market. This will quicken the market entry of cleantech products, increasing their capacity for capital raising.

And as a result, switching to EVs or solar has become monetarily viable for both individuals and enterprises. Therefore, he continued, we now need to see a similar push from the government at the appropriate moment in these other sectors.

Edited by Prakriti Arora

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