Climate Tech 2024: Balancing Innovation And Revenue

Author: Egor Savvin

As the world attempts to adapt to the harsh realities of climate change, including natural disasters and unprecedented heatwaves, the climate technology sector has an important role to play.

Total venture capital funding decreased by 35% in 2022 compared to 2021. However, this was not the case in clean technology, which still saw almost 30% growth in venture capital funding. venture capital over the past two years, according to Crunchbase.

With this in mind, how can we prepare for venture capitalists in 2024?

#1: Build partnerships with governments and CVCs

Companies have now adopted a climate technology strategy that goes beyond environmental, social and governance frameworks, meaning green technology startups often attract corporate venture capital early in their development. This not only makes money, but also provides access to a vast R&D infrastructure that is very expensive to develop and allows climate technology startups to accelerate the development and scaling of their products.

Public support also plays a key role, such as the Deflation Act ($369 billion) in the United States and the industrial Green Deal plan in the European Union (€300 billion via the RePower EU plan). Government support means the success of climate tech startups is critical to the country's overall goals.

#2: Profitability comes before growth

Technologies such as solar panels and wind turbines have become cheaper, and green energy closely rivals fossil fuels in terms of profitability.

Specifically, between 2012 and 2022, the costs of solar and batteries fell by 80%, and wind, both onshore (57%) and offshore, fell by 73%. Experts estimate that these investment costs will decrease by up to 50% by 2050.

Another example is hydrogen fuel cell trucks. They have significant advantages over battery-electric trucks, especially in the heavy-duty sector. While a fuel cell truck can be charged with 500 kWh of usable energy in 20 minutes, a battery electric truck takes 90 to 120 minutes.

#3: Take a portfolio approach and diversify

Climate technology encompasses many things. These include transport (with a focus on batteries and charging infrastructure), energy (with a focus on renewable energy sources, energy storage, hydrogen and nuclear energy), agronomy (alternative proteins, circular economy technologies and productivity improvement) and waste recycling technologies. (like recycling and waste management), CCU (Carbon Capture Disposal) and more.

All disruptive ideas.

This means I can diversify into climate technology as a venture capitalist. Unlike many other sectors where this is not the case, this approach protects investors from diversified sector risks.

#4: Choose products with long-term potential

For me, this is the best risk reduction strategy and why I value the long-term potential of climate technologies so much.

Climate technology initiatives, if successful, will change the world. They will change how we produce energy, how we move from one place to another, what we eat, how we travel, what we wear and much more.

There is a lot happening in the industry because there is an urgent need to protect our planet. This means that, unlike other industries, we do not need to actively market our air conditioning technology products.

The problem they solve is so important that they market themselves. Therefore, once the technology is proven and patented, it is expected to be very profitable. As investors, we must do everything we can to get our climate technology portfolio companies there.

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Egor Savvin is a partner at Alfin Ventures and an investment specialist with over 10 years of experience in private equity and venture capital. He has extensive experience in various sectors including fintech, artificial intelligence, Web3 and climate technologies.

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