A ground-up study, which puts a spotlight on the investment activity in the Indian climate-tech sector over the past five years, has found that 120 climate-tech startups raised $1.2 billion during the period.
There was a sustained growth in both volume and value of equity deals in the sector between 2016 (18 deals worth $102 million) and 2019 (58 deals worth $506 million), before a dip in 2020, owing to the pandemic.
"This shows that a new wave of climate-tech is blooming in India. A total of 120 climate-tech start-ups raised this funding over 200 rounds from 272 unique investors over the past five years," said a report titled 'Early-stage Climate-tech Startups in India: Investment Landscape Report 2021', prepared by the Impact Investors Council (IIC), Climate Collective and Arete Advisors.
Apart from the finance, the second finding of the report is that the sustainable mobility leads the action, followed by energy.
Climate-tech is a broad term comprising several sub-segments, of which sustainable mobility (including Electric Vehicle manufacturing, clean logistics and novel components) has seen the highest investment activity (84 deals, $705 million).
It is followed by energy (including clean energy generation from new feedstocks, energy access, energy storage and energy optimisation products) that saw 44 deals amounting to $301 million.
"Both these sub-segments, i.e., mobility and energy are ahead on the maturity curve, and the benefit from favourable regulatory environment and easy-to-capture impact metrics. Climate-smart agriculture, waste management and circular economy, and environment and natural resources - are the other subsegments gradually beginning to gain traction in terms of new innovative business models as well as investments," the report said.
Third take away of the report is that a host of enablers lend climate-tech in India the potential for disruptive growth.
"Even as the number of start-ups working on novel technologies (be it green hydrogen generation, alternative proteins, or carbon capture to name a few) grows, the enabling ecosystem in India including incubators and accelerators, policy advocacy groups, and think tanks is also expanding," the report found.
It warned that the sector is presently at a nascent stage and needs mainstreaming.
The sector accounted for only 9 per cent of the investment flows to total impact investing flows (which also include financial inclusion, healthcare, agriculture, education etc.).
Most deals were 'early-stage' and of smaller ticket sizes - 68 per cent received seed stage funding, and 83 per cent of the transactions were $5 million or lower in size.
"An overwhelming proportion of investors and entrepreneurs called out the 'the lack of patient capital' as one of the biggest weak links in the present ecosystem," the report said and further stated, multiple structural interventions could help transition this sector from a niche narrow asset class to a more mainstream element.
Other findings of the report spoke about sector-focused ecosystem support, availability of patient capital, proactive government policy and greater capacity-building for the climate-tech start-ups.
The Impact Investors Council (IIC) is a leading national body to strengthen Impact Investing in India with a mission to encourage private capital to bridge the social investment gap in India in sectors such as financial inclusion, clean energy, education, climate-tech, and healthcare.
Climate Collective is a non-profit focused on empowering entrepreneurs throughout the Global South by building and strengthening local climate start-up ecosystems in bridging the gap between the development and private sectors.
Similarly Arete Advisors LLP, established in 2013, is a boutique consulting firm, founded out of a passion to contribute to India's economic landscape by delivering high quality advice and implementation support to clients.