Following the boom-and-bust “Cleantech 1.0” period, investing in sustainable companies was thought to be too risky. However, the looming threat of climate change has become increasingly clear and investors have become convinced that now is the time for the ClimateTech revolution. With a new group of entrepreneurs who’ve learned from the mistakes of the past and found ways to create ClimateTech ventures that are less capital intensive, money is flowing into climate solutions at an unprecedented rate.
While venture capital hit all kinds of new records last year (venture money hit a staggering new high of $330B, up from an already high $166B in 2020), ClimateTech stood out for its astounding growth even amid the bonanza. VC investments into ClimateTech more than doubled, increasing from $25B in 2020 to $54B in 2021. Why have these funds started investing into ClimateTech?
There are a lot of trends at play, and while one of them is concern for the environment, sustainability is not the only driver. New government mandates and increased funding availability for sustainability projects through bills like the Biden administration's infrastructure law from 2021 are important factors. ESG funds are also on the rise, with investors looking to do well by doing good seeing green in more ways than one in environmentally focused startups. In fact, ESG funds grew 53% in 2021. More than ever before, ClimateTech founders need to seize the moment and harness this market trend for a greener, cleaner tomorrow.
Here’s a few tips:
1. Have one pitch deck for ESG/climate focused investors and another for more typical funds
- One question ClimateTech founders often ask the PAX team is whether to focus their pitch more on the company’s impact or on the company’s business model. Before going into a pitch, make sure you research the person/fund you’ll be talking to and learn about their investment thesis, personal background, and portfolio companies. While you should always mention both impact and business model, emphasize one or the other more heavily depending on your audience.
2. Make sure to have a clear GTM strategy
- One aspect that too many ClimateTech, particularly deep tech founders neglect, is their GTM and sales strategy. Technology is important, but investors need to see you have more than just technical knowledge. Focus on sales and you’ll find that landing even one customer completely changes the way investors see you.
3. Join an accelerator
- Accelerators are a great way to receive investments and training and to be introduced to potential future investors. There are numerous accelerator programs so it is vital that you find one that is aligned with your company.
4. Look for non-dilutive funding
- There are a lot of government grants available to ClimateTech companies, at both the federal and state levels.
- Investors love seeing grant funding because (1) it shows that you are resourceful and (2) It won’t dilute their shares
5. Join groups of other entrepreneurs
- Talking with other entrepreneurs is a great way to ride the ClimateTech wave. Finding a group of diverse founders can help you gain insights into many different areas you might face. Not only can they help you, but by helping others out you could realize a way to fix your issues!
- My Climate Journey has a great slack channel for ClimateTech founders!
Pax Momentum has reserved 3 out of our 10 spots for ClimateTech companies. If you are a ClimateTech founder with some traction and are ready to scale up your sales efforts, look into applying to PAX’s program. Through PAX, you will be able to access and meet a wide network of investors, learn how to create a scalable sales process, and join a community of entrepreneurs who are facing similar issues as you.