Why do early-stage sustainable start-ups have such high growth potential?
With the launch of The OnePlanetCapital Sustainability EIS Fund, we are seeing the unprecedented ‘green industrial revolution’ really take shape. The media is obviously reporting the headline-grabbing news. For example, Bloomberg recently reported that in the last few weeks, two new Cleantech US funds had attracted 12 billion USD in private equity with investment inflows in 2021 far surpassing 2019 and 2020*.
At OnePlanetCapital we are seeing a massive increase in pipeline companies looking for capital. Whereas even 2 years ago this would mainly have been dominated by companies in the renewable space with technology around wind & solar and the asset management of these resources, now we see companies across every sector – energy, transport, electrification, battery storage, food technology and sustainable consumer businesses.
So what are the main driving forces behind growth in the climate change sector?
One of the main drivers is government regulation. For example, we literally only have 9 years left of petrol and diesel cars being sold in the UK. This in itself is monumental, but it is only the tip of the regulatory iceberg so to speak. We are likely to see new tax regimes, regulation on carbon markets, regulation on housing energy efficiency as well as a completely different energy system. Everything that can be electrified will be!
Corporates are starting to aggressively move towards net zero and beyond. Some of the more visionary corporates are seeing sustainability as a huge opportunity for customer growth. For example, Ikea is pivoting its business to be one of the early truly sustainable global companies. It is already selling renewable energy to customers in Scandinavia and is operating solar powered microgrids from its rooftops in markets like Australia.
Aside from the catalysts of regulation and corporate action on net zero objectives, consumer demand is also a big factor here. Recently, OnePlanetCapital’s own research saw 75% of retail investors ‘extremely concerned’ about Climate Change. This is clearly reflected on the crowdfunding platforms which are a good barometer of retail investor/consumer interest. Recent raises such as Clim8 (the sustainable investment platform) have shown the interest in sustainable investing – the business recently attracted 20,000 customers and went on to secure 10m GBP of VC funding.
This green economic transformation is really in its very early stages. COP26 in Glasgow promises to be a huge catalyst in terms of political regeneration and media coverage and will only serve to increase commercial activity in this sector.
For early-stage companies in this space, it is really a perfect storm of regulation, consumer demand and access to capital. The amount of institutional money for series A and beyond (reverting back to the Bloomberg point) means that high valuations and M&A are here to stay for early-stage companies in the climate sector with 2050 being the arbitrary date for so much implementation of regulation and emission targets.
If you would like more information on early stage sustainable investments please visit us at https://www.oneplanet.capital or send us an email at info@oneplanet.capital