Closing the climate funding gap: 3 tips to boost your climate VC chances

goodcarbon is a climate-tech startup built on the belief that one solution for the climate crisis lies in nature itself. We are reinventing the way in which high-quality, nature-based solutions get funding. We developed a platform that connects projects, investors and companies in order to accelerate investment into nature-based climate solutions and the purchase of related carbon credits. 

We do this by providing fast access to capital for project developers; by giving investors access to an attractive, ESG-conforming impact investing pipeline; and by giving corporates access to trustworthy carbon credit streams from high-quality projects. The key is providing transparency, quality and accountability to the carbon credit system, which has become oversaturated with low-quality, greenwashed carbon credits that don’t make a real difference. 

We raised €5M in pre-seed funding led by Planet A, a leading impact and climate VC fund, with 468 Capital and Greenfield One also participating in the round. From our experience raising funds in a difficult market environment, we gained valuable insights for other founders looking to raise funding for their own startups that are led by a clear climate agenda. We wanted to share our advice with other founders currently looking for funding, 

What is the climate funding gap? 

The appetite for climate tech certainly is strong, even despite the global funding slowdown. 2022 was a record year for climate tech startups, with investment levels reaching USD 13.2 billion. But this falls far short of what is needed to reach net zero by 2050. Only 16% of climate finance needs are currently being met - in order to meet EU and global climate targets by 2030, climate tech funding needs to increase by at least 590% to USD 2.35 trillion annually. 

So how can you boost your chances to get investment by climate VC funds?

1. Be aware of the difference between climate investors and regular VC funds 

• Investors deploying capital into climate tech startups need a solid understanding of the underlying climate science of a proposed target. 
• New, science-based early-stage technologies and innovations take a lot longer to prove their effectiveness. In the EU, government grants can be a useful option for funding ongoing R&D costs, especially in hardware and in climate tech startups focused on the built environment. 
• Our lead investor Planet A has an in-house science team that calculates life cycle assessments to quantify the impact of a startup. Their scientists hold the power to veto investments if there is no significant positive and quantifiable impact. As goodcarbon is an "enabling technology“, Planet A did not calculate an LCA but instead did a scientific deep dive into the significance of our potential impact. 
• Be prepared and able to provide the in-depth information that your climate VC investor provides according to their investment thesis.

2. Think about productisation, not only technology 

• In climate tech, you often start with a team of scientists working on a single solution, but need to transition this into a great commercial business. 
• It’s about so much more than just finding the right technology to start with: you must be able to showcase the commercial potential of your technology in a way that addresses the key challenges of the market and is positioned in a way that satisfies your core customers’ needs.
• At goodcarbon, our lead investor Planet A was convinced by our “Nature Analytics”, a tool that we have developed to assess and transparently communicate the impact, risk and integrity of Nature-based Solution projects and the underlying carbon credits. We thereby enable companies to make investment decisions based on comprehensive due diligence results instead of high-level claims, thereby reducing their exposure to greenwashing allegations.

3. Build early corporate strategic partnerships 

• Like any other investor, climate VCs are attracted by the stamp of approval and scalability promises that high-quality partnerships provide. If you are able to close a corporate partnership early on, you will be able to develop your product alongside a real-life partner and ensure that features and use cases are realistic, tweaking and adjusting as you go along. 
• Our partnership with Oceans2050, a leading advocate for ocean restoration, was a strong factor that convinced Planet A to invest in us. Ocean2050 focuses on five natural ocean-based sinks: mangrove forests, wild ocean forests, wetlands, and coral reefs as well as Regenerative Ocean Farming (algae, seagrass, etc.). Our long-standing partnership with Oceans2050 means that we have the right strategic partners on our side to better make use of the incredible potential of the ocean in mitigating climate change, and thereby accelerate investments in ocean-based climate solutions. 

Bonus: 4. Ensure that there is mutual value-add 

• By choosing investors that are backed by strategic LPs, you will gain further opportunities to scale your business and acquire new customers. 
• Additionally, an investor with an in-house science team will add as an extension to your own science team, often widening the scope or providing additional new insights. 

Where to find leading climate tech investors? 

As with all investors, it’s all about network, network, network. The very best way to meet potential new investors is to be introduced and recommended directly by others. It can also be useful to join networking meet-ups and attend some of the many climate tech events that take place around the world. Check out events such as New York Climate Week, the Greentech Festival in Berlin, NOAH Conference in Zurich, or VivaTech in Paris. 

You can also use LinkedIn to find investors in your specific space and see if you have any connections that can introduce you to the right investors. Some will regularly publish lists of the top climate tech investors as LinkedIn articles, or publish them on Medium or Substack. 

Databases such as Net Zero Insights give a good overview of the overall market and competitive landscape, as well as data-driven insights (add more, if applicable).

Furthermore, keep in mind the difference between European and US-based investors, and between software and hardware climate tech. For deep tech innovations and hardware especially, the way you interact with potential investors will be vastly different from a software business. 

In Europe, R&D grants and government funding are more readily available for the very early development stage of your climate tech business (especially if it is hardware-related), but in the US, you might still be able to access early-stage venture funding in areas where European investors have become more cautious. 

One thing is clear: on both sides of the pond, investors, as well as large corporates and strategic partners are on the search for smart new solutions to combat the climate crisis. Whether you’re only just starting out, or have a functioning product ready to scale, there really is no better time than now to get started - and the future of our planet depends on it. 

Sources

https://tech.eu/2023/06/01/funding-gap-threatens-europe-s-pioneering-role-in-climate-tech-start ups/ 

https://worldfund.docsend.com/view/7qkhj4tw72wxtnkh 

Founder Forum ClimateTech report 2023: https://ff.co/climate-tech-2023/ https://www.startup-energy-transition.com/tips-start-ups-funding/ 

https://planet-a.medium.com/how-nature-can-help-get-us-back-on-track-9dd7663dbb01