Mapping the biodiversity startup ecosystem

The loss of biodiversity is a fundamental threat to our planet with immense economic consequences. Investors, governments, and corporations are waking up to this crisis. We are witnessing a rise of new technologies and innovations that help to accelerate the implementation of nature-based solutions at scale.

In Earth’s history, five mass extinction events, the so-called ‘Big Five’, took place. The most famous is the Cretaceous-Paleogene mass extinction that happened about 66 million years ago: an asteroid hit our planet. The aftermath drove Dinosaurs and many other species to extinction. An estimated 76% of species disappeared from this planet.

Why might this be relevant, even if you are not a raving fan of dinosaurs or a paleontologist? 

Because we might be heading into the sixth mass extinction event and imagining the outcome of the meteorite’s impact might help to get a glimpse of the scale we can expect. This time, it is not caused by naturally occurring geological processes or extra-terrestrial rocks impacting our planet. This time, humans are at the center of attention: we are responsible for it.

The planet supports the life of around 8.7 million different species, which interact to maintain and support the ecosystem which helps our planet and climate function. The loss of natural habitats and the loss of biodiversity are intrinsically linked. We cannot stress its importance enough as more than half of global GDP depends on nature.

The good news? We can change the course we are on.

What is biodiversity?

First things first, let’s get a few definitions clear:

Natural Capital can be defined as the world’s stocks of natural assets which include geology, soil, air, water and all living things. Biodiversity is the variety of living components that make up natural capital, it is thus the very fabric of “natural capital.”

There are 5 main drivers of biodiversity loss:

1. Habitat loss and degradation
2. Overexploitation of species
3. Invasive species
4. Pollution
5. Climate change

The conversion of natural habitats such as forests to agricultural land or human settlements is the №1 reason for the global biodiversity crisis.

The fundamental problem is that biodiversity is not priced in and therefore suffers the fate of a common good: unsustainable exploitation. But, it gets even worse: Currently, worldwide activities that degrade ecosystems are subsidized at an estimated USD 4–6 trillion per year.

Protecting biodiversity involves setting fair prices and providing sufficient compensation for the services nature provides us with, especially those in countries rich in natural resources, particularly in the Global South, which often includes indigenous peoples and local communities.

The rise of "nature tech"

The G7 committed to protect 30% of their land areas as part of the 30x30 initiative, the EU adopted a “Nature Restoration Law’’ with binding restoration targets that cover at least 20% of the EU’s land and sea areas by 2030, and, as part of the Finance for Biodiversity Pledge, asset managers managing 12 trillion in USD committed to nature restoration through their investments.

The economic opportunities of ecosystem restoration are compelling: A report by UNEP valued the business case for ecosystem restoration at 9 trillion USD. With corporates looking for ways to report on biodiversity and build more resilient supply chains, there is increasing interest in Natural Capital and exploring ways of monetising biodiversity through e.g. payment for ecosystem services (PES) schemes.

At the same time, we see an explosion in what we like to call “Nature Tech”. These are technologies that can accelerate the implementation of nature-based solutions at scale. This can range from drone technology for reforestation, MRV solutions like bioacoustics, e-DNA to mobile apps that can connect local communities to sources of information.

At its core, nature tech is about establishing the data necessary to define, measure and validate nature uplifts and cater towards arising business cases i.e. triggering financial flows. It plays a key role in building the natural capital ecosystem. The expanding flow of capital into nature tech startups suggests that investors recognise these trends and see the value they could create for business and the beneficial effect they could have on the climate.

PWC`s analysis of nature tech startups estimates that investment in the sector has grown to around US$2 billion in 2022, an average rate of growth of 52% per year since 2018.

Mapping the market

The new attention to biodiversity is sparking innovation across the whole value chain from implementing conservation projects, to valorising nature uplifts — at the core of it is data. We broke down the ecosystem for you below.

Airtable bonus: We all love startup maps, but let’s be real, they are not ideal to use. So, we’ve gone ahead and also created a list of the startups mapped above. Enjoy!

Project development & origination

The conservation efforts to protect biodiversity to a large extent is intertwined with carbon markets. We see lots of players emerging in the development of nature-based projects with either a biodiversity focus or strong biodiversity co-benefits. Prominent examples leveraging technology to develop projects that protect, restore and improve biodiversity include Zulu Ecosystems or Ponterra in the forest space or Klim and Agreena in the agriculture space.

Monitoring and data collection

Collecting biodiversity data is non-trivial for several reasons. Biodiversity loss is a highly local problem, which makes e.g. hectare-to-hectare offset claims very problematic. Existing methods often depend on human counting or citizen science programmes like e.g. the Big Butterfly Count or the Cybertracker to track Rhinos. A range of new technologies is emerging to offer more accurate, multi-dimensional and cost-effective measurement of local biodiversity hotspots. The Rainforest Xprize is playing an important role in catalysing innovation to bring down the costs of collecting and analysing data:

Data collection: New nature tech solutions can scalably collect real-time information in remote areas to establish baselines and monitor ecosystems continuously. This either happens on the ground (drones, sensors, robots) with the help of companies like Agrisound and Deep Forestry or via satellite-imagery as in the case of Gentian.

Data analysis: Monitoring requires specific, localised and multi-dimensional data (imagery, acoustics, Lidar, etc.). Satellite-based monitoring, e.g. SPARC, may map species movements while eDNA can help to scalably detect a larger number of species with little effort (e.g. Nature Metrics or Simplex DNA). While it is still higher on the cost curve and relies on existing databases and specialist equipment, analysing genetic material is emerging to be a game-changer.

Data aggregation: The aggregation of different data sources is a fundamental challenge solved by tech-agnostic data platforms like Pivotal or Cecil. They can then link these measured biodiversity gains to a variety of financial mechanisms — such as sustainability-linked bonds and biodiversity credits — enabling money to flow to those projects and activities that create the most positive change.

Standards & intermediaries

Biodiversity still lacks formal and widely adopted standards and frameworks, critical to bringing integrity into the value chain. But the puzzle pieces are beginning to come together. As the biodiversity market will be able to build on the experiences of the carbon market, the development might happen faster. We see standards emerging to lay out the rule book for biodiversity credits (e.g. TNFD, Plan Vivo, VERRA) and rating agencies like BeZero putting increased emphasis on biodiversity.

End-Use/applications

Biodiversity data will become useful for a range of different use cases. Particularly industries with large agricultural supply chains like food & ag or substantial land use like construction will be in need of data. Eventually, there will be consolidation but currently, we see a few emerging ways of rewarding biodiversity efforts:

Compliance uses: Close to 90% of biodiversity uplift projects are compliance with Environmental Impact Assessments (EIA) as part of construction projects being the clearest use cases.
Carbon Markets: A large share of projects in the voluntary carbon market are intrinsically linked to biodiversity dimensions. Companies like GoodCarbon offer biodiversity as a ‘co-benefit’ which results in credits trading at a price premium.

Biodiversity and nature markets: Recently, various actors have been working on establishing parallel credit schemes for biodiversity and natural capital and we see companies like Single.Earth emerging. For nature credit markets to make a meaningful contribution, they must deliver on their core purpose in terms of scale, price and impact; yet there are still concerns around definitions, metrics and additionally.

Nature-related disclosure: Biodiversity is a fundamental business risk. Driven by regulatory changes like the EU’s Corporate Sustainability Reporting Directive, there is a rising interest of financial institutions and companies to understand their impact on biodiversity and report it. Companies like Nala.Earth or Refinq look to solve this.

In-Value Chain Action: Companies with strong exposure to nature like the food or energy industry have committed to nature-positive pledges. With the help of startups like Carble or Epoch, they can improve biodiversity along their own supply chains in the name of resilience and mitigating climate risks.

Risk detection: Based on sensors or satellites, companies like Orora Tech or Dryad detect wildfires to mitigate risks to biodiversity.

The lines between these fields are blurry and companies like The Landbanking Group, a company we have invested in, are building tech solutions that span across different use cases. They allow landowners to quantify ecosystem services and corporations & financial institutions to invest in conservation and restoration equivalents as a capital asset that they can put on their balance sheets.

Our take

The nature tech ecosystem is emerging fast. New technological developments and innovation is driving down the cost and improving the integrity and quality of biodiversity measurement. At the same time corporates face increasing pressure to understand and report on the double materiality of biodiversity, i.e., how they impact biodiversity and what risks biodiversity loss poses to their business model. The surge in new data sources will allow corporates to move beyond generic datasets (e.g. IBAT and ENCORE) and save costs and time. While the market is still very early and the magnitude of the demand is uncertain, we see that the need for integrity offers great opportunities for startups building the data infrastructure of nature markets.

We should be cautious however to avoid pitfalls. While the market needs technology, it’s not built by technology, but rather by policy and stakeholder pressure. The cautiousness extends to biodiversity offsets: Ecosystem composition is highly location-dependent and compensation is never “like-for-like”. Founders should rather innovate around business cases that help companies actively understand and directly manage their dependency and impact on nature. It is estimated that 84% of species are yet to be discovered — there is still a lot of work to be done and, after all, we don’t want to end up like dinosaurs.

This article is also published on the author's blog. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.