In the last video of my series about impact entrepreneurship, I will finally cover the elephant in the room: climate change startups.
Again I’m not an expert about it so what follows is mostly a “big picture” summary of what I read as well as what I see on the market.
I personally categorize the startups in the climate change space into two big buckets:
- First, startups dealing with carbon emission
- And Secondly, startups offering climate change resilience
“Carbon emission” startups
By carbon emission startups I mean the startups that tackle the major cause behind climate change, CO2 emissions, from the angle of:
- Measuring carbon emission
- But also Reducing it
- Or Capturing it
- And finally Offseting it
You’ve probably guessed, but in this category I include all the startups whose core value proposition is to measure your carbon footprint so that you can ultimately act on it. The current narrative in that space is that before we can really reduce carbon emissions we need to measure it. This is why a myriad of founders are rushing to offer carbon footprint calculators whether it’s for consumers or businesses.
This is probably the most crowded category of all. You can find literally tens of startups that will offer to estimate your personal carbon footprint based on your consumption habits by fetching data from your banking app or from your mobile phone GPS for example. Same on the B2B side with an increasing number of startups from generalist to specialized, that help businesses measure their carbon emission. As an example of a verticalized approached, you can check Tanso which focuses mainly on industrial manufacturers.
I personally believe that we see so many projects created the “measure” space because it’s one of the low hanging fruit ideas that most people can relate to. I also think that it attracts the most VC money at the moment because the products in that space are mostly pure software and they dont require as much capital or industrial knowledge as the startups in our next category “reduce”.
Startups in this category help mostly businesses to reduce their current carbon emission. It can be done by creating less polluting types of materials such Heimdal which is working on a greener concrete, or by optimizing logistic chains like Sourceful which focuses on the sourcing part, or by reducing energy consumption or waste production. As you can see there’s a myriad of ways to reduce carbon emissions, but what characterized most of the startups in that space is that they require industry specific expertise and often more upfront capital in order to build their product, especially for the ones with a hardware component.
These factors combined with the fact that the business potential of most of these companies is not proven yet, explain why you have less founders in that space but also less vc money. Which is a pity.
Moving to the capture category, you’ll find all the startups whose aim is not to reduce carbon emissions but to directly take out of the air. Again you have a myriad of approaches from very industrial Direct Capture companies such as climeworks that builds factories that suck up carbon directly from the air, to afforestation companies that do that by planting trees. What characterized most startups in that space is that they often require huge amounts of capital and have most of the time business models incompatible with a typical VC timeframe. There are probably few VC compatible companies in that space, but it can change once a real carbon market emerges.
The last types of startups that I see regularly are carbon offset startups which are basically buying carbon capture from the companies in our capture bucket to sell it to companies that want to reduce their carbon footprint through an offsetting mechanism. It’s probably the space I found the least interesting as it doesn’t really move the needle long term and is often used for greenwashing purposes.
Climate change resilience startups
If we hear a lot about startups in the carbon emission space, I think that there’s a less covered part of the spectrum which are the startups helping us build resilience in a world increasingly impacted by extreme weather events whether it’s tropical storms, floods, forest fires or rising water level.
To illustrate concretely what companies do in that space, we can take the example of Firemaps which is a B2B marketplace that connects homeowners with local professionals who build defenses to protect houses from wildfire. Or Forruner which offers a easy-to-use flood risk mitigation tools for local governments.
From a pure VC model perspective I think that climate change resilience startups are super interesting because not only are they useful for people, but they also tackle a market that will generate hundreds of billions of dollars of costs. Just to give you an example, we recently had devastating floods in Germany and its global cost is estimated at more than 10b of euros.
So it’s definitely not a space that should be overlooked, quite the opposite.