Supportive policies and a growing consumer cohort is attracting risk capital investors to back startups in India’s climate tech space, especially in the early stages.
Investors like Blume Ventures, enterprise software and fintech-focused Leo Capital, and new firms like Synapses have been raising climate bets over the last 12-15 months.
In March, early-stage venture firm Leo Capital, which has backed startups such as IndiaGold and LambdaTest, made its first climate-tech investment, leading a $3-million round in carbon emission management startup Sprih.
Last month, IIT alumni and veteran investors Ruchira Shukla and Karthik Chandrasekar launched Synapses, a venture capital firm that aims to invest in climate tech and health tech startups. Synapses is looking to raise $125 million for its maiden fund.
Global early-stage firm RTP Global, which closed a new $1-billion fund last year, has stepped up on investment in climate tech startups, having backed three startups last year. In February, it led a $8.7 million funding round in Varaha, which helps offset greenhouse gas emissions.
According to Venture Intelligence data, startups in the climate tech space raised nearly $157 million in 2023 across 52 deals. In the January-April period of 2024, startups in this space raised $45 million through 12 transactions.
Early-stage investor Blume Ventures has two deals in the pipeline in the climate tech space for this year, and is looking to back 10-15 startups over the next three to four years.
“Investors follow growth in the (customer) market,” said Arpit Agarwal, partner at Blume Ventures. “We know that businesses and consumers are making the change from carbon emitting technology to carbon neutral technology….The reason why VCs are investing is because there is a sense that tomorrow there will be a much larger demand for carbon mitigation technologies.”
Global investors, too, are increasingly looking at climate tech as an emerging option.
According to a Bloomberg report last week, Eversource Capital, which closed India’s largest climate impact fund in 2022, is planning to raise at least $1 billion for a new fund to back companies in the water, food, agri-chain and recycling sub-segments of the broader climate theme.
ET had reported in November that former KKR India CEO and veteran investor Sanjay Nayar has teamed up with Peak Ventures – an early-stage firm focused on cleantech areas such as new energy, food systems, clean water and climate – to foray into this space.
“Maturing technologies, deepening research and development capabilities, and a stated push from the government toward a green energy transition are some tailwinds that have converged to provide further impetus to investments in climate tech,” said Manish Advani, vice president at Elevation Capital, which has backed climate tech startups like SolarSquare and SenseHawk.
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According to Ravi Srivastava, partner at Leo Capital, climate-related opportunities primarily involved hardware solutions earlier, but now software-related opportunities are emerging in the sector.
“As a trigger, and specifically from a venture investor’s lens, because we are also fiduciaries of our limited partners (LPs) capital and we are looking for returns, the regulatory intervention that is happening globally, not just in India or the US, is significant,” Srivastava told ET.
He underscored that the Business Responsibility and Sustainability Reporting (BRSR), mandated by markets regulator Sebi for the top 1,000 companies, gives climate tech startups a huge opportunity.
This shift is driving the growth in demand for climate tech solutions and attracting significant investments to the sector, as both companies and investors aim to align with these new standards and capitalise on the opportunities they provide.
“There are some emerging players, but there’s actually no incumbent that has totally captured the market. So there is a tremendous opportunity there from a pure financial standpoint, that these have to be addressed,” Srivastava said.
Blume’s Agarwal said the firm is scouting for startups in the green hydrogen, battery chemistry, sustainable packaging and circular economy spaces.
Meanwhile, venture debt firm Stride Ventures has announced the final close of its third fund at $165 million. The fund said it will primarily focus on consumer, financial services and clean tech sectors.
“The interest that we really have is more on sustainable mobility. It dominates all other sectors, which you can see in terms of funding…This is a sector that’s achieved the technological maturity threshold where products are proven and revenue lines are stable,” a senior executive at Stride Ventures said.
“There’s been a widespread stakeholder consumer buying in this sector, which is what’s driving that interest in that investment as well, not to mention the policy tailwinds that we’ve seen,” the executive said.
