Depleting natural resources is too high a price to pay in the name of development. Electric energy is a great solution but it may not work unless VCs focus on resolving these four challenges.
Learning how to keep the lights on was a technological development that revolutionized the power industry and ushered in a new age of social progress. Thomas Edison probably didn't account for how much carbon footprint his lightbulb was going to generate, but two centuries later - we're starting to see the scope of it.
Many industries across tech, agriculture, and power are drafting long-term strategies to combat environmental problems caused due to rapid development, urbanization, and depleting natural resources. The cost to the world in the name of progress is too high a price to pay.
In the past two years, the world has seen a pandemic, forest fires, thunderstorms, and tsunamis - all due to climate change. The United Nations Panel on Climate Change in its report found that the climate change crisis has been steadily getting worse -- recycling and reusing is not going to cut it.
Countries across the globe have pledged a lot of money and made commitments to ensure they achieve net-zero emissions. India has set a target to drop carbon emissions to net zero by 2070. The fight against climate change can only progress if industries worldwide make a drastic change to their processes - switching to clean technology.
Understanding clean technology
Clean technology, colloquially known as clean tech, is the umbrella term that encompasses environment-friendly solutions and strategies that aim to mitigate the climate change crisis. This involves shifting models that focus on long-term energy development rather than short-term profit payoffs. This is where clean tech startups can really do their bit.
One of the biggest focuses in clean tech has been on air pollution. The quality of air we breathe has been declining every year, with data reporting 2021 being the worst year for clean air. Lack of good, clean air has been responsible for the growing number of respiratory issues. While there are a lot of Indian entrepreneurs looking to build sustainable clean tech solutions, the general consensus is that most venture capital firms are still hesitant to bet on them.
The Challenges of Clean-tech:
A cleaner and sustainable energy system with net-zero emissions will require a wide range of technologies, some of which are still at an early stage of development. Clean tech companies tend to leverage the power of innovation in order to profitably solve the world's energy problems.
There's a lot of scope for innovation in this space, but many clean tech startups tend to be small to medium sized businesses. A few reasons why venture capital firms could still be leery towards investing in clean tech are:
General lack of knowledge: Industry specific knowledge is key towards building a value proposition that entices firms to invest big capital. Since clean tech is still a developing industry, there are many factors to consider when it comes to making future plans for scaling.
Lack of positive exposure: Clean-tech solutions are rarely cut and dry. They are often niche and don't receive mainstream media attention. Even within the industry itself, there's a lack of positive exposure amongst leaders - especially since it's a competitive landscape.
No proper mitigation plans: Like we mentioned before, it's a competitive landscape and there's a lot of factors in play that can lead to failure. Investors want to know what the plans are in case the solution doesn't pan out in the intended way. Most entrepreneurs fall short of substantiating their intellectual property as well - so if there's a lack of pragmatism in case of uncertainty, capital firms will be hesitant to invest.
Narrow Appeal: There are several investors who haven't had the most success investing in purely clean tech solutions. Many entrepreneurs constrict their solutions to one label, which is a losing practice. Fortunately, since it's an evolving space, there are additional labels that a firm can attach to such as big data, AI, machine learning, etc.
The bottom-line is that India is still seeing a lot of growth when it comes to the clean tech space. Indian entrepreneurs and venture capital firms are looking to invest big in tech solutions that can help sustain the demands of the climate change crisis.
Majority of Successful technology concepts eventually pass through four stages: prototype, demonstration, early adoption and maturity. The success will not be that easy or straightforward. It depends upon technological innovation, and this takes time.
Clean tech startups are more open to "developing innovation" and public intervention - two ideas that can really build investor confidence, build scalable business models, and have a real-world positive impact.
Gaurav Aggarwal is Managing Partner at SeedVC.