Green Startups
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Green Startups Investors’ New Focus: Even though risky investments are declining in the current environment, green technology startups are beginning to attract capital.
Global multi-fund manager Mountain Partners estimates that fintech still attracts the most venture capital funding in Latin America, accounting for 43% of total investments. However, green startups focusing on reducing carbon footprints are gaining traction and capital.
A company dedicated to carbon capture and storage, using clean technologies in the industry, and promoting sustainable practices in production and consumption is attracting investors’ attention in the carbon tech sector.
According to Santiago Caniggia Bengolea, managing partner of Mountain Partners for Latin America, investors focus on these companies.
This is because existing technologies can only address 25% of the CO2 reduction needed to achieve the net zero reduction targets proposed in the Paris Agreement.”
A report published by Sling Hub, a data intelligence platform for Latin American startups, shows that clean technology accounted for 5% of capital investments in Latin America in May. Argentine firm Waterplan, which offers a platform for AI-driven water conservation, raised US$11 million to boost this percentage.
Earlier this year, Brazilian power company Copel said it intended to invest 150 million reais (US$31 million) in startups that provide solutions related to renewable energy, energy as a service, smart cities, and innovative internal processes.
Investors are also interested in renewable energy and electromobility, evident in the emergence of new green investment funds. It is estimated that over 1,200 such funds will be registered globally by the end of 2022, up from fewer than 100 at the end of 2021.
Partners at Mountain: Green Startups Investors New Focus
Mountain Partners launched Mountain Green Fund in 2021; a venture capital fund focused on investments that could reduce carbon footprints in Latin America and the United States. Investments in the region are expected to amount to US$100 million.
Caniggia states, “we have identified several promising startups that meet our investment criteria.”.
In addition to carbon abatement technology (carbon-tech), sustainable agriculture (ag-tech) and sustainable mining technology are the main verticals that the fund focuses on.
As of the end of the fundraising process for the Mountain Green Fund, US$30 million has been raised of the estimated US$100 million.
In a recent announcement, Mountain Partners Switzerland committed to investing 100% of the profits generated in its First Fund Portfolio in Chile. Companies including Polglota, Zapping, Capitalizarme, or Destácame have banded together to form the Mountain Green Fund in an effort to raise money more quickly.
Next year, Mountain Partners plans to invest in 10 green technology startups in Latin America and the United States.
By the end of this year, the company anticipates announcing its first investments in the green portfolio.
As well as the green fund, Mountain Partners is actively involved in two other funds in Latin America: Nazca VC México and EWA Fund.
Investing in green startups: 3 keys to attracting investors
1. Value-based vs. climate-based investing
Almost all green startups think of climate investors when scaling. These investors’ investments aim to generate a positive, measurable environmental impact. A prominent example of their funding was Global Thermostat, which promotes climate change mitigation.
By reading the fine print, you’ll quickly realize that putting all your eggs in the baskets of specialized investors might only sometimes be wise. Climate investors showed little interest during my journey, while conventional investors were more enthusiastic.
So? Due to pre-defined metrics and strict investment theses that only fit some companies. These investors meticulously measure carbon emissions, pollution, carbon reductions, and climate impact to seek energy and renewable resource solutions first.
Consequently, many startups with grant green visions, but little climate focus, may seem marginal. Investors in climate may also be less interested in consumer industries.
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2. Collect evidence that can be scaled with diligence
It is outside the interests of investors to keep a business afloat. They are interested in investing in your industry to grow their capital. Hence, you should gather enough evidence to demonstrate that you can survive without investment before approaching investors.
You have reached the point of being able to scale if this is the case. Investors will welcome you with open arms if you present them with a written business plan for achieving this growth within a short period.
3. Learn how to network in a hybrid world by exploring the art of valuable networking.
The key to connecting with investors has always been networking, but the pandemic has made it more difficult to build personal connections. Although the internet allows us to collect more contacts, these connections are often much looser than those made in person.
Therefore, you should adopt a strategic approach. The first step should be to establish an active LinkedIn community. In addition to expanding your network, you will receive advice on funding opportunities from other entrepreneurs and strengthen your messaging about your business’s purpose and goals.
Furthermore, since LinkedIn is a community network, I recommend you participate in conversations, exchange opinions, and start discussions about important topics (both entrepreneurial and “green” topics).
Several LinkedIn groups are devoted to green startups, innovation, and sustainability. Participating in these groups will provide you with new funding opportunities.
