Early-Stage Funding for Sustainable and Green Energy Startups

Eco-entrepreneurs looking for early-stage funding for sustainable and green energy startups can now find a wide range of sources. Global warming and carbon emissions are rising at alarming rates. Efforts need to ramp up to achieve the UN’s 2030 net-zero sustainability targets.

With these objectives in mind, investors are diverting funds toward sourcing industry-disruptive ideas from entrepreneurs. Statistics indicate that Assets under Management in the Wealth Management market are estimated to reach US$128.90tn in 2024.

However, only a small fraction of this amount has been supporting green energy startups, which are poised for change. Eco-preneurs can not only grow their green startups and protect the planet but can also boost economic development.

Consumers are also increasingly supporting brands that include sustainable practices in their mission statements. If you’re innovating technology that can achieve these goals, you’ll reach out to venture capital funds investing in portfolio companies.

Research investors that support startups working toward SDG areas like the oceans and conservation and restoration of the planet. Other issues include cleaning up plastic waste, access to clean water, reversing global warming, and promoting health and education.

Startups working toward boosting a circular economy are also of particular interest to investors. So, explore the World Economic Forum’s open innovation platform, Uplink, that launched to target VCs and investment funds.

Investment in the Clean Energy Sector is Ramping Up

In the coming years, investors intend to ramp up capital funding to companies that are working to address ESG issues. Clean and sustainable energy solutions to fight climate change are on top of their list of priorities. More so, since the market is expected to grow from $11.2B in 2020 to $36.6B by 2025.

Statistics over the last few years from 2019 through 2022 indicate that VC has grown around six times from $1.9B to $12.3B. This growth is surprising considering rising interest rates and lower liquidity in the market. Further, VC funding across the board for all sectors dropped by 53%.

In 2023, worldwide investors extended support worth approximately $13.9B to companies committed to sustainable efforts. Early-stage funding for sustainable and green energy startups has received valuable support also from legislation designed to act as catalysts.

Some of the main measures include the European Union’s Net Zero Industry Act and the US Inflation Reduction Act (IRA). These regulations will work to eliminate the red tape around approval processes and raise subsidies for clean energy solutions. At the same time, they will also attract investment.

Before we talk about what investors look for when assessing viable business concepts, here’s another aspect to consider. Check out this video where I explain what startup investors look for in entrepreneurs before investing. You’ll understand that more than the concept, investors back the face behind the brand name.

What are Investors Looking For?

When researching potential capital sources, you’ll focus on understanding what investors are looking for. Read up on their mission statements for information about the segments they back. For instance, VCs bridge the gap that exists for early-stage climate tech startups. Some of their targets are:

• Startups that are developing innovative solutions that have the potential to deliver significant impact on the climate. Particularly for critical environmental issues like air pollution, ocean acidification, and biodiversity loss.
• New ventures focused on green energy but also creating jobs and driving economic growth.
• Companies developing alternative fuel production like hydrogen or hydrogen-generated power. Hydrogen-powered products and services can also expect backing.
• Enterprises ideating solutions for generating solar and wind energy and new renewable tech. Any innovations that improve plant management processes and optimize energy generation also have support.
• Tech startups that can improve existing clean energy solutions.
• Enterprises that develop battery and energy storage solutions complete with analytics and optimization.
• New ventures developing technology to measure and lower greenhouse gas emissions. If you provide carbon accounting platform services and solutions for analyzing emissions, you can get funding.
• Startups building innovative hardware for microgrids and power grids.
• Any software solutions and platforms that enable companies to manage and operate their grid systems efficiently and with minimum risk.
• Enterprises working on nuclear fusion technology to transform it from the research level to commercial use.
• Startups innovating tools and equipment to improve efficiency in energy usage.
• Electric vehicle (EV) charging infrastructures for private and corporate consumers are eliciting interest from investors providing early-stage funding for sustainable and green startups.
• Enterprises dedicated to innovative solutions for carbon capture and its storage and utilization.

What Investors Offer Besides Capital

Aside from capital, venture capitalists and other investors offer several other benefits designed to ensure success for the startup. You can expect direction with developing a detailed strategy to market your products and services, complete with advertising resources.

Eco-entrepreneurs can also get access to their extensive network of climate tech ecosystems. This network is not just about capital, but also technical know-how, expertise, and mentoring, along with strategic partnerships.

The opportunities to work with pre-vetted and credentialed partners are another edge that can provide valuable support to founders. Assistance with understanding and complying with updated regulations on climate change is also a benefit.

Keep in mind that in fundraising, storytelling is everything. In this regard, for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

Why Investors Prefer to Back Startups in the Clean Energy Vertical

Smaller and larger corporations in the clean energy space are scrambling to meet net-zero goals. As a result, they must speed up innovation and find solutions to their established business models. Rising interest rates have led to higher energy prices across North America and Europe. The Ukraine war has also contributed to the chaos.

Investors are backing smaller startups in a big way for several reasons:

• Large companies face agility limitations because of their size and level of establishment. Integrating innovation abilities is much more challenging than a small startup.
• Companies that have been operating for decades find it harder to pivot the company culture and transition to greener practices.
• Smaller startups are more adept at attracting top-notch talent that can develop disruptive ideas, particularly in the digital segment.

Larger and better-established corporations also prefer to invest in or partner with startups because:

• Partnering with an upcoming startup developing cutting-edge technology diversifies risks and allows corporations to expand into business models and markets.
• Expanding existing product portfolios to offer more products and services is more easily done in new enterprises.
• As energy transition continues to take over the business landscape, bigger companies can stay relevant and competitive with strategic alliances. To integrate new value and differentiate themselves in the rapidly evolving sphere, they can build in-house R&D sections. Or invest in and partner with new startups. That’s where you come in as an eco-entrepreneur.

New ventures also benefit from access to larger pools of capital and resources that larger companies can provide. Not to overlook the brand name backing and availability of a dedicated customer base, the legacy player can provide.

How Founders Can Get Early-Stage Funding for Sustainable and Green Energy Startups

Assimilate into and Grow a Network of Founders in Your Space

Getting backing for your fledgling enterprise from investors requires a well-designed and executed game plan. The first step in the right direction is to integrate with a network of other founders and contacts in your segment.

Connect with non-competing entrepreneurs in your space and look for openings and opportunities you can tap into. Also, look for introductions to venture capitalists and angel investors, and tips on applying to accelerator and incubator programs. Particularly those that offer early-stage funding for sustainable and green energy startups.

Check around for networking events and coworking spaces dedicated to eco-preneurs like yourself. Being active on professional social media sites is a great idea to promote your credentials. And gain visibility for the business concepts you’re developing.

Make it a point to connect with startup owners and the big names in the green energy space. Interact with them for valuable advice and pointers on building a successful company. Though, you might want to start off by engaging with the content they post before emailing them directly.

Research Accelerator and Incubator Programs Focused on Clean Energy

Search for reputable accelerator and incubator programs that particularly back founders with ideas that can transform the industry. Getting accepted into these programs is challenging and approval rates are low. But if you get approved, that’s validation that your concept has what it takes.

Once in, you can expect an array of resources to convert the idea into a working product prototype with the potential to sell. Several resources are made available to aspiring founders such as capital, working spaces and labs, and equipment and tools.

Eco-entrepreneurs also get mentoring and access to an extensive network of investors who might be interested in funding their companies. At the end of the program, you’ll present a pitch to accredited investors and acquire the seed capital needed. This money will help get the startup off the ground.

Even if your ideas are not exactly about clean energy, you’ll get the program administrators interested in related concepts. For instance, sustainable and organic food, green clothing processes, and other low-impact products.

Check the accelerator or incubator’s official website for the portfolio of successful companies they have backed in the past. You’ll get an overview of the products and concepts they support. Here’s a quick overview of accelerator programs supporting green energy startups.

• Apple-backed Energy for Livelihoods Accelerator
• Better Ventures
• Echoing Green
• Fashion for Good
• Food Future Co
• GoodCompany Ventures
• Rutgers EcoComplex
• Sustaintech Accelerator
• Praxis

If you would prefer to apply to an incubator program, here are some of your options:

• Accelerating Asia
• Clean Energy International Incubation Centre
• DLabs
• IIT Mandi Catalyst
• imec
• Mohammed Bin Rashid Innovation Fund
• Team Europe
• The Koffman’s Clean Energy Incubator Program
• Upward
• Yunus Social Business

Government Grants and Funding and Small Business Loans

The federal, state, and city municipal bodies have grants and funding opportunities focused on R&D efforts by startups. For instance, founders exploring solutions to environmental damage can apply to the federal Environmental Protection Agency for grants.

Small startups serving customers via eCommerce platforms or local stores offering zero-waste groceries are great candidates for small business loans. This funding option is ideal for entrepreneurs looking to launch a company quickly and efficiently.

If you think the company is likely to start generating profits in a short time, consider applying for a small business administration loan. Also, check with local credit unions or try crowdfunding platforms to appeal to small investors.

Sources of Early-Stage Funding for Sustainable and Green Energy Startups

Check out this starter list of venture capital and other funds that you can reach out to for backing. These organizations offer early-stage funding for sustainable and green energy startups.

• Aera VC – This is a Singapore-based fund that invests in innovations that drive radical shifts for reversing climate change. It also backs ventures in the health tech, space, and circular economy segments.
• Chi Impact Capital – This organization runs the Burning Issues Impact Fund (‘BIIF’), which is dedicated to green innovation and climate tech. It also supports ventures working on plastic waste management, nature conservation, and the circular economy.
• Contrarian Ventures – This fund primarily supports climate tech founders based in Europe and Israel, offering expertise, funding, and networking opportunities.
• Draper Richards Kaplan Foundation – This fund is committed to bridging the capital cap for entrepreneurs building startups in the high impact and SDG sectors.
• Link Capital – This fund supports early-stage companies developing mobility, software and technology for transitioning to greener energy sources.
• Water Equity – This fund offers capital to new ventures in upcoming markets with a special focus on clean water and sanitation solutions. Particularly to underprivileged and low-income communities.
• Katapult Ocean – This fund is concerned with negating the damage done to the oceans. It also supports blue tech companies working to resolve biodiversity and climate change challenges. If your startup is developing solutions for providing sustainable food and clean water, apply to this organization for support.

The Takeaway

As an ecopreneur developing solutions to bring a positive impact on the planet, this is the opportune time to build a new company. You’ll easily access early-stage funding for sustainable and green energy startups.

The industry is poised for a big leap and is expected to grow exponentially in the coming few years. Not only are investors dedicated to supporting upcoming startups in this sphere, but you’ll also find a customer base easily.

More and more consumers are expressing awareness of the issues concerning the planet. They are willing to support brands and companies that operate with concern for the environment and offer sustainable products. Go ahead and start your new venture confidently and watch it scale profitably.

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