Clean-focused technology companies across the country are having a moment. Public and private spending into space is up this year. And VC dollars into Cleantech grew 30% over the last two years despite overall VC funding dips, according to Crunchbase data.
The Southeast has long been a hub for Cleantech innovation, serving as the home to several eco-focused tech accelerators and venture-backed teams like electric bus company Proterra and recycling giant Rubicon. The region is also home to a growing number of Cleantech and climate-focused startups like cove.tool, EnviroSpark, Palmetto, EnvAns, Cloverly, Aquagenuity, NALA Membranes, and HData.
What’s behind the momentum? There are several optimistic signs about the future of the industry, said Bob Irvin, Executive Director of the clean energy-focused Joules Accelerator in Charlotte, North Carolina.
“There are significant headwinds for venture backed startups, but also good opportunities for companies and governments willing to take big bets on the energy transition. The United States has a long history of building big, ambitious projects and delivering world-changing results,” Irvin told Hypepotamus. “The road ahead demands terawatts of new generation deployment, an overhaul and modernization of the grid, the rapid development of new materials and technologies, and trillions invested in carbon neutral and carbon negative solutions. I remain confident that market forces and innovation will ensure we are up to the task.”
Henk Both at the investment firm Anzu Partners, added that the “decreasing costs of energy storage” is helping drive even more innovation and helping improve the “value per dollar” associated with Cleantech projects.
What Investors Want To See From Cleantech Founders
So what do investors want to see from Cleantech founders right now?
Nick Fragnito, Founding Partner at Shorewind Capital, said that he wants to see Cleantech founders show a “viable path to profitability.”
“For a lot of [companies], pilot projects are tremendously helpful for de-risking product market fit,” Fragnito told Hypepotamus. “It’s important for startups to know what KPIs those pilots are being measured against as well as what’s needed to convert the pilot to a longer term contract.”
Henk Both at Anzu Partners said he wants to see founders that can show “substantial and significant results” within their specific industry vertical.
“It’s more than just an intrinsic belief in a specific person’s charisma,” added Both. “[In venture capital], we are playing with live rounds. We’re not trying to fund people’s education, we don’t want to be their learning experience.”
Irvin at Joules Accelerator said he sees more opportunities coming up for founders working on reliable energy options (geothermal and nuclear), and those addressing labor shortage problems that are keeping the Cleantech world from growing.
He added there is still a lot of “low hanging fruit” for founders working in the energy efficiency space.
What’s Overhyped?
The startup world is prone to getting caught up in “hype cycles,” where inflated expectations and exaggerated promises impact technologies before they are ready to be out in the market. The Climate and Cleantech world is not immune from such cycles.
So what’s overhyped in the industry? We heard from multiple investors that fusion-related ideas are decades away from turning into viable energy startups. Irvin at Joules Accelerator and Both at Anzu Partners said hydrogen technology and hydrogen from electrolysis are also still nowhere near ready to be a viable business answer to our energy needs.
Irvin added that there is a lot of ‘hype’ around mobility startups and not enough focus around grid innovation to make those innovations run.
Other investors we talked to are keeping an eye on how generative AI will impact the industry moving forward.
While AI can help “reduce bottlenecks, congestion, and curtailment of renewables,” the technology still has a ways to go, added Fragnito at Shorewind Capital.
“Overhyped would be a strong word for this, but we’ve seen quite a few generative AI plus government contracting platforms being built, several even around climate specific verticals. While there is a huge need for assistance / efficiency and certainly a lot of capital that needs to make it to the right startups, it’s hard to see multiple winners in the space,” Fragnito said.
