How Climate Tech Has Matured Significantly Since The Cleantech 1.0 Boom
It was around a decade ago that the Clean Tech 1.0 boom crashed. Several industry darlings dropped one after another in quick succession after taking millions of dollars in loan from the U.S. government. The same pattern repeated in Germany too. There are multiple reasons why so many businesses went kaput. Some were in the right place at the wrong time, or rather, had the right tech at the wrong time. Others depended on venture capital, which ideally seeks returns on a charted timeline that’s ruthlessly brief for deep tech companies. A few others were undercut by bigger competitors. And many others collapsed under the pressure of general market forces that took the world by storm during the Great Recession. Regardless of the reason, the grand bust spooked venture capitalists, who shied away from the sector for years despite seeing promise for enormous longterm gains.
However, in the last few years, venture capital has roared back, pumping in tens of billions of dollars in start-ups that aim to solve environmental issues. What changed? For starters, the name. Clean tech is passé. Climate tech is the new thing! The skeptics might ridicule the change as marketing fluff incepted to mask the dark of the past. One may say they’re not entirely wrong. Post the last boom-bust era, the clean tech reputation was damaged. Founders, regardless of all their talk of failing quick and learning from failures quicker, ideally don’t like to be associated with that kind of defeat, even by syntactic association. Yet if you investigate a little deeper, it’d be apparent that climate tech is much more than just repackaged clean tech.
While Clean Tech 1.0 mostly focused on clean energy, which at the time, was not scalable owing to economic and technical constraints
It’s both an organic progression and a revised bottom-up think of founding and investing in climate friendly startups. Climate tech allows founders and investors to collaborate to introduce promising technologies and conversations to market in a manner that will ensure significant profits while also tackling climate change in a purposeful way. Investing in climate tech doesn’t refer to investing in non-profit ventures or plain investing in enterprises that produce environmentally conscious deliverables. It means investing in any business that consciously removes or reduces greenhouse gas emissions.
The reason why Climate Tech is unlikely to fail like Clean Tech 1.0 is that it makes economic sense. Climate change can result in natural calamities which are unfavourable to businesses and governments alike. As such, investing in climate tech can help reverse the effects of climate change and help the world be better prepared. India could, in fact, gain $11 trillion in economic value merely by slowing down rising global temperatures and passing on the climate solutions to the rest of the world. According to credible reports, currently, India ranks 7th on the global climate change crisis index and is set to lose 35 trillion $ in the next five years if climate change issues are not tackled. This is a blockade to an economy that is bound to grow to 5 trillion $ in the next few years.
Furthermore, with support from governments and conglomerates in the form of announcing ambitious net zero targets, the practicality and applications of Climate Tech increase multi fold. Also, as consumers become increasingly conscious of the implications of climate change, they make smarter choices. Nearly one-third of consumers across the globe are inclined to invest in sustainable products. Another important point to note is that Clean Tech 1.0 had one major inherent defect. It was not cost-aggressive with the fossil fuel industry. Today, solar and wind energy are not only cost-competitive but, in some cases, cost-effective as well, largely owing to the technical developments in the last decade. Clean technologies have become more inexpensive. The average price of energy utilities is on the decline. For instance, the cost of solar panels has declined by 71% in the last ten years.
While Clean Tech 1.0 mostly focused on clean energy, which at the time, was not scalable owing to economic and technical constraints. On the contrary, climate tech today concentrates on a wide range of issues from electric mobility to carbon offsetting and desolation and has several applications and far higher demand.Climate Tech aims to concentrate not merely on decarbonising energy but also on reducing carbon dioxide emissions in mobility, agriculture, construction industries, and practically everything else in the world that is carbon intensive. There are several ways in which investors can avoid repeating previous mistakes.
They can opt to invest at later stages, at a time when the technological risk has been mitigated concentrate on digital and software avenues that don’t necessitate the buildout of huge factories or plants; embrace an investment model that doesn’t heavily depend on returns as rapidly; and scout for technologies that slot into, and not compete against, existing means of manufacturing products. The unanimity around clean energy as one of the primary opportunities in the short term will determine where investments will be going on, and consequently, the movement of skilled workers. The green economy is fast becoming omnipresent and plans to polarise its decarbonisation mind-set across different sectors in the global industry. There’s sufficient room for talent, and the surge in demand doesn’t show any signs of slowing down. Be it in business or research, business leaders are all vying for a slice of the Clean tech 2.0 pie.