In 2024, sustainability (and cleantech and climatetech) startups hold unprecedented significance in leading innovation in the goal of net zero.
Their role is pivotal in accelerating the transition toward a sustainable future, addressing the urgent need to reduce carbon footprints, conserve resources, and foster eco-friendly practices.
The sector is broader than I can cover in a single stand-alone article, but here are some of the key trends (and startups) to watch in the following year:
Climatetech will maintain its dominance as a global innovation leader
According to Atomico, the carbon and energy sector, which encompasses 'climate tech', accounted for 27 percent of all capital invested in European tech in 2023, tripling its share of total investment since 2021. This made it the single largest sector by capital raised, overtaking both fintech and software.
Alston Zecha, Partner at Eight Roads Ventures, believes that Europe is likely to maintain its dominant position thanks to "high public awareness, the region's leading policy and regulatory frameworks and Europe's early lead in "green finance," e.g. the EIB's significant capital allocations to the sector in recent years."
"European climate tech seems set to continue growing its share of overall funding in 2024 and grow in absolute amounts invested too.
This will be driven by a healthier funding environment in 2024 than in 2023 overall, as well as more growth funding rounds in climate tech, specifically as European startups mature.
Though I'd caution that we're still likely to be off the all-time highs of the tech investing bubble of H2 2020 - H1 2022."
Philipp Emig, Investor at Picus Capital, expects "several early-to-mid-stage climate tech companies to develop into the (early) growth (financing) stages where they will find ample capital in dedicated funds waiting to be deployed."
Catriona Hyland, VC at A/O, asserts that while climate will continue to play a significant role in European tech in 2024, there will be a critical realignment of venture dollars across themes.
"Climate tech investment has been misaligned with greenhouse gas emissions.
For example, the built world accounts for 37 percent of global GHG emissions, yet climate solutions targeting this problem receive just 3 percent of annual VC dollars, making it significantly underinvested.
Comparatively, clean mobility and sustainable food account for 7 percent and 4 percent of venture dollars despite solving for a much smaller footprint (15 percent and 20 percent GHG emissions, respectively).
This year has shown early signs of change that will continue to play out in 2024 – for example, investment in clean mobility has dropped by 40 percent in 2023, while VC investment in building efficiency has grown by 73 percent."
She also contends that in 2024, Europe will see a more significant share of venture dollars globally.
While climate tech deal volumes have been equal across Europe and North America for some time, capital invested has always lagged in Europe. We are now reaching an inflection point.
Jamie Vollbracht, founding partner at Kiko Ventures, envisages that in 2024, climate tech will continue to receive the most substantial proportion of European capital investment, given its importance and relevance.
"We do, however, think that there could be moments when this investment rate could fluctuate, even if the long-term trend is upwards.
If, for example, Trump were to win a second term as President of the USA, there could be a short-term detrimental impact on climate tech investment."
Solar energy startups triumph
It's been a great year for solar startups. We've seen some impressive funding raised this year:
In June, 1Komma5 secured €215 million of equity and became a unicorn after a mere 23 months in operation.
In January, Berlin-based photovoltaic systems provider Enpal raised €215 million in a Series D funding round — less than one month after a hefty injection of €855 million in debt funding.
Enpal secured €356 million through a new type of solar bond in April, followed by a successful €430 million debt round in June.
The company has raised €2.3 billion in funding since its founding in 2017.
In December, Exeger signed a €35 million loan agreement from the European investment bank. The company has raised over €169 million, including €16.1 million Series B in March this year.
In November, Technique Solaire, a French solar energy distributor, secures €200 million in funding from Bpifrance and Groupe Crédit Agricole to expand operations and R&D efforts.
In January, Oslo-based solar firm, Otovo raised €120 million in debt and equity funding. Then, in November, they secured €40 million in funding to achieve profitability and establish a leading position in the European residential solar market.
I predict we'll see a flurry of activity in 2024, with companies getting closer to profitability.
The sector worker shortage demands startup solutions
Aging populations of blue-collar professionals mean that worker shortages plague many hands-on climate companies.
In 2024, tech startups will not only continue to implement automation and SaaS options to increase task and workplace efficiency but also expand their role in training and developing hands-on climate workers in roles like construction, solar panel installation, and heat pump installation.
Project A's Mila Cramer says:
"Germany lacks an estimated 60k workers to achieve the heat pump energy transition goals by 2030 alone; 50 percent of all blue-collar workers will retire in the next ten years.
Adam Zobler, General Partner at Foundamental notes that his firm focuses on teams who fix the rapid thermal renovation and upgrading of the European building stock. This includes labour:
"Whether it is making existing labour supply more fungible and efficient, or, upskilling domestic labour supply in innovative ways, the primary driver to accelerate the upgrade of the building stock is to address the need for workers."
Berlin is home to three stand-out companies. The afore mentioned Enpal opened an academy in 2021 that enables up to 120 new solar technicians and electricians to be qualified monthly.
montamo is training people from migrant backgrounds in English and other languages to make a career change to become skilled construction workers in the energy sector.
Varm has created a digital solution that enables homeowners to get a quote, access grants, and have building cavity walls and roof insulation insulation installed by trained VARM insulation installers.
interest in low-carbon heating to propel residential heat pumps
Low-emission heat pumps are regarded as a critical weapon in the fight against climate change. Still, the industry has had to overcome technical challenges and develop the best payment plans to entice customers.
Heat pump soft costs (design, installation, permitting, marketing) represent the bulk of the cost to the homeowner. Catriona Hyland shared:
"Until now, high hardware cost relative to incumbent solutions has meant heat pump installers have seen little commercial traction. In certain markets, government incentives and rebates are now changing the economics for homeowners. Tech will help digitise the end-to-end customer experience, improve the quality of installations, and remove supply frictions for installers."
Digital tech aids grid decentralisation
Philipp Emig sees smart grids to be a peak trend in 2024, noting:
"The orchestration of an energy system that looks fundamentally different than before will be critical.
We are convinced that digital solutions and, not alone but as a "special ingredient", also generative AI in climate will contribute immensely to making the grid more efficient and building solutions that enable grid-friendly use.
Beyond using the grid, AI and data-driven solutions can drive further areas - such as utility grid infrastructure planning, resilience, interconnection, cybersecurity and autonomous operations.
Dr Moritz Belling at Earlybird Venture Capital also sees one of the transitions from a centralised electricity grid centred around large power plants to a decentralised grid with many smaller yet connected production, storage, and consumption energy assets as a key trend for 2024.
In response, energy production patterns will no longer follow market demand but, e.g., sunshine and wind.
"To supply energy even during peak demand hours, we need to enable grid flexibility either by providing energy from storage systems or by smartly managing demand.
Here, we need new software solutions to manage asset connectivity, distribute flexibility incentives to potential contributors, and enable incumbents to offer this in a seamless UI / UX to scale the aggregation of small-scale assets."
Companies to watch
Swiss startup DePoly converts PET plastics and polyester textiles back into virgin-grade raw materials without any additional heat or pressure. These components are then sold back to the industry to make new virgin-quality plastic items, creating a sustainable circular plastic economy.
Caeli Energie (France)
Caeli Energie develops and manufactures next-generation air conditioners with excellent energy efficiency and a minimal carbon impact.
Heat waves driven by climate change have increased the demand for air conditioning, but traditional systems using polluting refrigerants and consuming substantial energy worsen the problem. This creates a harmful cycle.
In response, Caeli Énergie has developed a patented technology in collaboration with CNRS, creating a French-made air conditioner that operates without refrigerants, external heat rejection, or cold blocks.
It boasts five times the energy efficiency of conventional air conditioners, offering a sustainable cooling solution.
Kausal helps cities turn their climate goals into action through a digital platform that enables smarter collaboration around key data.
Kausal is in the process of developing a software-as-a-service tailored for cities. Its platform aims to assist cities in establishing transparent climate targets, constructing actionable climate plans, and effectively monitoring progress.
ONiO, based in Oslo, has developed microcontrollers that consume so little power that they can harvest all they need from their environment, running indefinitely without any batteries to change or charge.
These aren't Xbox or mobile phone CPUs but rather the chips that control sensors, TV remotes, and wireless keyboards. Combined with motion, weak indoor light, or background RF radiation they may eradicate the need for small batteries.
Lun ( Denmark)
Lun is helping homes decarbonise fast with a focus on a digital platform for electric heat pump installers.
50 percent of heat pump installers' time is spent on admin tasks that software can help fix: on-site visits, writing quotes, writing invoices, chasing customers to convert and chasing them to pay, and procurement – and collate the various data points required to spec the heat pump, some from open sources and some from the building owner directly.
Marvel Fusion (Germany)
Marvel Fusion is developing a disruptive nuclear fusion concept that holds the promise to produce carbon-free, truly clean energy at scale from abundant fuels.
Lead image: Freepik.