🌎 5 Challenges of Building in Climate Tech
Founders Factory Startup Bulletin: Climate Edition
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Two weeks ago, the Earth’s climate crossed the long talked-about ‘two degrees Celsius’ threshold, with the average air temperature two degrees warmer than at pre-industrial levels.
Although this was only temporary, the message is stark—the Earth has never been hotter, and the climate crisis has never been more urgent.
The scale of the challenge ahead will cause the pessimists to despair; but for the optimists, we see the scale of the opportunity.
Over the past eight years, we’ve built and invested in dozens of businesses solving climate and sustainability challenges across multiple industries, from travel to finance to home and hygiene. More recently, we’ve launched our first dedicated climate programmes—working with prominent investors, local governments, non-profits, and innovation agencies to back the next generation of ambitious climate founders.
In this Climate Special Edition newsletter, we’re reflecting back on some of the lessons we’ve learned from operating in climate (and the challenges founders face), as well as some of the highlights from our climate portfolio in 2023. We’ll also look ahead to 2024 and ask our team, partners, and founders what they hope to see from the sector next year.
5 challenges of building in climate tech
By Jamie Rowles, climate investor at Founders Factory & Blue Action Accelerator
While climate change has been a known crisis for some years now, little headway has been made with regards to developing impactful, scalable solutions. This may be in large part to the complexity of the challenges founders face in climate tech, which include but aren’t limited to:
Hardware paradox. Climate change is a physical problem that requires physical solutions. But hardware is much harder to build, fund, and scale than software. Margins are smaller, with fewer repeat revenue opportunities, meaning it’s not as well suited to the VC funding model (hence historic investor reticence to back hardware solutions).
Technological risk. Developing novel climate technologies is far more R&D intensive and will have much longer timelines (potentially up to 10 years). Proving technologies can be hard, too, without access to real world testing.
Route from IP to commercialisation. Developing novel climate tech that compellingly solves problems is only half the battle: finding out how to build a business on the back of it is often the real challenge. Science-rooted entrepreneurs don’t always have the know-how or resources to commercialise new technologies.
Measuring impact. Unlike with purely commercial business models, climate tech founders have a much harder job on their hands to measure the real impact of their business. It can be time consuming, complex, and to make it even more complicated, many investors will have different ideas of what to measure.
Brand & storytelling. Climate tech founders can’t rely on good will for people to change their behaviour. They have a huge job to persuade people to not only disrupt their habits but potentially pay more. Similarly, persuading investors often requires translating complex IP into cohesive, marketable brands.
In our Thesis on Climate, we’ve laid out our climate investment platform, a holistic package of support that aims to help entrepreneurs overcome each of these challenges.
We’re partnering with world leading corporates to back the next generation of climate founders in our Venture Studio and Accelerator programmes. Learn more about opportunities for partnerships.
Our climate portfolio in 2023
We’ve invested in a vast range of climate tech and sustainability businesses across a range of industries over the past 8 years. Some of 2023’s highlights include:
Dronamics had a stellar year in their plan to launch a fleet of ultra-efficient, long distance cargo drones. In February, they announced a $40m pre-Series A funding round, before pulling off their first successful test flight in May. They capped this off by securing the first contract for postal cargo drone deliveries with Hellenic Post in Greece, as well as partnering with Aramex, one of the largest logistics companies globally, to start manufacturing up to 300 drones a year from 2025. We spoke to founders Svilen and Konstantin Rangelov earlier this year.
We announced the launch of G-Force Fund II, a new €20 million fund to invest in 35 climate tech startups over the next few years. Partners Louis Warner and Marian Gazdik share their highlights from Fund I and what they’ve learned along the way.
Matter, who are pioneering microplastics filtration technology for commercial use, announced their $10m Series A round. They plan on releasing a range of products, including Gulp, a washing machine filtration attachment.
Materials Nexus raised a £2m seed round, as they are looking to radically accelerate the R&D process behind the discovery of next gen materials through AI and quantum mechanics.
Again’s decentralised network of cleaning technology has built on momentum from last year. They’ve secured partnerships with Uber Eats, Abel & Cole, smol, Belu, and several other brands as their official cleaning partner for reusable packaging, as they ramp up towards expected capacity of cleaning 500,000 units a month.
Jeevan hit headlines this year for its breakthrough Direct Air Capture technology—DeCarbon HIX—which can capture carbon far more efficiently and affordably before releasing it into the ocean as baking soda (which helps reverse ocean acidification).
Byway have seen a surge in demand for flight free sustainable holidays. They’ve partnered with First Choice, one of the UK’s biggest travel agents, to power their flight free offering, while also adding dozens of destinations. All this is having a huge positive impact—saving their customers 170 tonnes of carbon in one year. On top of this, they raised over £600k in angel funding, helping them grow their team to 30+.
Furbnow started the year spinning out of our Venture Studio, and have kept up momentum ever since. The one-stop-shop for home retrofitting are live and serving customers across the UK, and have secured a partnership with Birmingham City Council to trial their platform in the Midlands. They were also accepted onto the Norrsken impact VC Accelerator programme.
What we’re hoping to see in Climate in 2024…
We asked our team, partners, and founders from our portfolio what they hope and expect from the climate sector in the coming year.
Cat Jones, CEO & founder of Byway: “"We’d like to see more regulations around air travel—including tax on jet fuel and introduction of frequent flyer levies, as well as more countries banning domestic flights (as France did recently where train routes already exist). We need regulators and governments to put in place measures and policies to accelerate the viability of rail alternatives to flights. We’d also like to see rail subsidies implemented and more government support for low-carbon alternatives and flight-free technology like ours."
Louis Warner, partner at G-Force: “Europe should learn from the Inflation Reduction Act’s PR and comms strategy. If you dig, you’ll find that the EU’s range of carrot and stick climate policies are more mature and in most cases ahead of the US’ IRA, but the key here is PR and comms. The EU policy makers and legislators need to speak as one voice and communicate more clearly and loudly with the climate sector.”
Olly Betts, fintech sector director at Founders Factory: “As the government rows back on climate commitments, financial services must play a critical role in the climate sector in 2024. I’m interested in ways to get more capital deployed to carbon reduction initiatives—see green lending (Corporate, SME), green mortgages, retrofit financing, and more. On top of this, a huge upgrade is required to the data infrastructure and tooling, to enable measurement of climate investments and technologies (moving beyond carbon counting) and to enable investors to really put money to work.”
Becky Lane, CEO & co-founder of Furbnow: “I’d like to see a clear plan and policy roadmap for home decarbonisation from all parties vying to become the next Government. This would go a long way to increase certainty in the supply chain wanting to invest and grow, and help convince investors looking to commit capital that the tailwinds are really coming.”
Olivia Brooks, investor at Founders Factory & Blue Action Accelerator: “In 2024, we’re seeing a broad spectrum of opportunities across the ocean sector. In particular, there’s a huge need for strengthening of monitoring, reporting, and verification (MRV) strategies in carbon removal. MRV is a crucial piece of the puzzle to build out ocean carbon credit markets to the status of terrestrial carbon credit markets, and can pave the way for innovative new capture technologies or ocean alkalinity enhancements.”
See you next month 👋
Interested in reading more of the same insights? Check out the Founders Factory blog, and previous newsletters.