{"id":653874,"date":"2025-02-17T23:15:18","date_gmt":"2025-02-17T20:15:18","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/"},"modified":"2025-02-17T23:15:18","modified_gmt":"2025-02-17T20:15:18","slug":"how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/","title":{"rendered":"#How VCs are killing climate tech \u2014 and how they can save it"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a367f95b73cf\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a367f95b73cf\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/#The_great_expectations_mismatch\" >The great expectations mismatch<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/#Rethinking_the_climate_tech_model\" >Rethinking the climate tech model<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/#1_Rethink_traditional_funding_mechanisms\" >1. Rethink traditional funding mechanisms<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/buradabiliyorum.com\/en\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/#2_Provide_actionable_help_to_accelerate_the_road_to_scaling\" >2. Provide actionable help to accelerate the road to scaling<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/buradabiliyorum.com\/en\/how-vcs-are-killing-climate-tech-and-how-they-can-save-it-2\/#3_Adjust_metrics_and_expectations\" >3. Adjust metrics and expectations<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<div id=\"article-main-content\">\n<p><span style=\"font-weight: 400;\">Sustainability tech has been all the buzz in the last few years. Investors are hunting promising ESG businesses, governments are pushing ambitious legislation, and companies are getting on board to adopt new solutions. Sustainability funding is projected to reach unprecedented levels, with BCG Henderson Institute <\/span><a rel=\"nofollow\" target=\"_blank\" href=\"https:\/\/web-assets.bcg.com\/img-src\/BCG-The-Economic-Case-for-Combating-Climate-Change-Oct-2018_tcm9-203550.pdf\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\">estimating<\/span><\/a><span style=\"font-weight: 400;\"> accumulated global investment to achieve net zero to hit $75 trillion by 2050.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">And yet, behind the curtain, the picture isn\u2019t quite as rosy. According to <\/span><a rel=\"nofollow\" target=\"_blank\" href=\"https:\/\/www.statista.com\/statistics\/1399134\/quarterly-climate-technology-venture-funding-worldwide\/?__sso_cookie_checker=failed\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\">Statista<\/span><\/a><span style=\"font-weight: 400;\">, VC investment in sustainability and climate tech has been steadily declining since 2021. While AI startups often manage to secure funding rounds within mere weeks, sustainability-focused companies can spend years in fundraising limbo. <\/span><span style=\"font-weight: 400;\">As a partner at VC consulting agency <\/span><a rel=\"nofollow\" target=\"_blank\" href=\"https:\/\/waveup.com\/\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\">Waveup<\/span><\/a><span style=\"font-weight: 400;\">, I\u2019ve seen dozens of exceptional startups forced to bootstrap despite having validated <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> and clear market potential \u2014 from sustainable agriculture solutions to carbon capture technologies.<\/span><\/p>\n<p>Something just doesn\u2019t add up in venture capital. Why aren\u2019t investors backing the innovations needed to create a more sustainable future? The core issue lies in how they evaluate investment opportunities.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_great_expectations_mismatch\"><\/span><b\/>The great expectations mismatch<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">When looking at sustainability tech companies, most VCs expect rapid adoption, hockey-stick growth, and massive total addressable markets (TAMs) (understandably so, as otherwise, the VC formula might simply not work). They apply the same metrics and expectations used for SaaS and AI startups, and while some sustainability companies might fit this mould, many simply are too early in market adoption to demonstrate these characteristics.<\/span><\/p>\n<div class=\"inarticle-wrapper latest channel-cta hs-embed-tnw\">\n<div id=\"hs-embed-tnw\" class=\"channel-cta-wrapper\">\n<div class=\"channel-cta-img\"><img decoding=\"async\" class=\"js-lazy\" src=\"https:\/\/s3.eu-west-1.amazonaws.com\/tnw.events\/hardfork-2018\/uploads\/visuals\/tnw-newsletter.png\"\/><\/div>\n<p><img decoding=\"async\" src=\"https:\/\/s3.eu-west-1.amazonaws.com\/tnw.events\/hardfork-2018\/uploads\/visuals\/tnw-newsletter.png\"\/><\/p>\n<div class=\"channel-cta-input\">\n<p class=\"channel-cta-title\">The \ud83d\udc9c of EU tech<\/p>\n<p class=\"channel-cta-tagline\">The latest rumblings from the EU tech scene, a story from our wise ol&#8217; founder Boris, and some questionable AI art. It&#8217;s free, every week, in your inbox. Sign up now!<\/p>\n<\/div>\n<\/div>\n<\/div>\n<p><span style=\"font-weight: 400;\">Consider one of the clients we worked with developing revolutionary ocean-cleaning technology. The team managed to build a product with a clear and proven ability to drastically lower ocean pollution by reducing the amount of microplastics that enter the water. Despite recognition from the UN and an excellent client roster, the company has struggled with financing for years. For VCs, an absence of rapid growth overshadowed patented tech, past environmental impact, and excellent business economics. While recognising impressive results, most investors couldn\u2019t get comfortable with the adoption timeline and speed of growth as, for many corporate clients, sustainability investments remain a \u201cnice-to-have\u201d category rather than a \u201cmust-have.\u201d\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">It doesn\u2019t help that many sustainability solutions require buy-in from multiple stakeholders within organisations, leading to longer and more unpredictable sales cycles. Worse, many companies also need significant upfront investment in physical assets or infrastructure, unlike purely software-based startups. The result? Gloomy statistics: while traditional tech companies typically take three years from Series A to Series B, sustainability technologies need an average of seven-plus years to achieve scale.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The bottom line: impact investments aren\u2019t yet firmly matching traditional VC returns. While there\u2019s been a concerted push since 2015 to argue that impact returns are approaching venture returns, the data often tells a different story \u2013 and this performance gap creates a fundamental tension with the VC model. Venture funds operate under strict constraints: they have fiduciary duties to their limited partners, closed-end fund structures, and defined timelines for delivering returns. A fund\u2019s ability to raise Fund II or III depends entirely on the performance of its previous investments. In this context, backing \u201cgood investments\u201d that haven\u2019t proven viable enough becomes paradoxically risky \u2014 even for an industry built on taking risks.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Rethinking_the_climate_tech_model\"><\/span>Rethinking the climate tech model<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Financing the next generation of <span style=\"color: #111111;\">climate tech<\/span>\u00a0might require new solutions from everyone. The question is, are investors truly willing to find new models?<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With many VCs (without calling out names), we\u2019re seeing a troubling trend: rather than looking for new ways to adapt investment frameworks and funding mechanisms or dedicating more time to sourcing high-potential nascent climate tech startups, they hire consultants to reposition their existing portfolio companies as \u201cESG-friendly.\u201d Essentially, this involves finding an ESG angle in otherwise traditional software companies to report to LPs strides made in financing sustainable tech solutions. Needless to say, this approach does little to drive meaningful environmental and social change.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">What\u2019s the alternative? We have a few ideas.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"1_Rethink_traditional_funding_mechanisms\"><\/span>1. Rethink traditional funding mechanisms<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">VC investors need to work with other ecosystem players to offset financing risks while balancing risks and returns. Today, leading impact investors are working to combine traditional VC money with impact-first capital and structuring investments with different return tranches for various investors. Some use catalytic capital to de-risk early-stage investments or create revenue-based financing options for steady-growth sustainability companies. Others develop outcome-based funding models tied to impact metrics.<\/span><span style=\"font-weight: 400;\"><br \/><\/span><span style=\"font-weight: 400;\"><br \/><\/span><span style=\"font-weight: 400;\">For companies struggling with VCs altogether, evergreen funds<\/span> <span style=\"font-weight: 400;\">that don\u2019t have fixed lifecycles and allow for extended holding periods can better match sustainability tech\u2019s development timelines. Corporate venture capital and large corporations facing pressures to transition to net zero can also become viable backers by providing both capital and pilot opportunities for sustainability startups.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"2_Provide_actionable_help_to_accelerate_the_road_to_scaling\"><\/span>2. Provide actionable help to accelerate the road to scaling<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">Monthly advice in board meetings will be valuable, but the true contribution lies in hands-on help driving adoption. The best impact investors put their time where their money is by partnering with corporate venture arms to secure pilot opportunities and market validation for their portfolio companies, collaborating with government agencies on grants and subsidies, and working with industry consortiums to accelerate adoption.<\/span><\/p>\n<h4><span class=\"ez-toc-section\" id=\"3_Adjust_metrics_and_expectations\"><\/span>3. Adjust metrics and expectations<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400;\">Investors need to consider new frameworks for evaluating sustainability investments. Traditional SaaS metrics could be replaced with impact-adjusted indicators that consider both financial and sustainability outcomes or allow for longer return lifecycles that align with the sector\u2019s development timeline and adoption curves.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Important to note: this isn\u2019t about lowering standards; it\u2019s about adapting them to match the unique characteristics of sustainability technologies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For VCs, the question shouldn\u2019t be whether to invest in sustainability tech but how to adapt their approach to these critical innovations. Without this shift in perspective, we risk missing out on the next wave of transformative technologies that could help address our most pressing environmental and social challenges. After all, the biggest risk might not be backing sustainability tech too early \u2014 but too late.<\/span><\/p>\n<div id=\"article-main-content\" class=\"c-richText c-richText--large\">\n<p><i><span>Tech investing is a key theme of this summer\u2019s <\/span><\/i><i><span>TNW Conference<\/span><\/i><i><span>. The event takes place on June 19 and 20 and tickets are <\/span><\/i><i><span>now on sale<\/span><\/i><i><span>. Use the code TNWXMEDIA2025 for an exclusive subscriber discount.<\/span><\/i><\/p>\n<\/div><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMN63nwsw68G3Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more like this article, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/category\/technology\/\" target=\"_blank\" >Technology category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/thenextweb.com\/news\/how-vcs-are-killing-climate-tech\" target=\"_blank\" >Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Sustainability tech has been all the buzz in the last few years. Investors are hunting promising ESG businesses, governments are pushing ambitious legislation, and companies are getting on board to adopt new solutions. Sustainability funding is projected to reach unprecedented levels, with BCG Henderson Institute estimating accumulated global investment to achieve net zero to hit&#8230;<\/p>\n","protected":false},"author":1,"featured_media":653875,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/img-cdn.tnwcdn.com\/image\/tnw-blurple?filter_last=1&fit=1280%2C640&url=https%3A%2F%2Fcdn0.tnwcdn.com%2Fwp-content%2Fblogs.dir%2F1%2Ffiles%2F2025%2F02%2FUntitled-design-3.jpg&signature=b5d96b0b4e0119e438de49a0015fbc04","fifu_image_alt":"","footnotes":""},"categories":[18],"tags":[],"class_list":["post-653874","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/653874","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=653874"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/653874\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/653875"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=653874"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=653874"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=653874"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}