India’s venture capital ecosystem appears to have a distinctive thesis – consumer, software-as-a-service (SaaS), and fintech – are thriving sectors. Climate-tech and AI, however, promising as they may seem, compel a more cautious approach – these are nascent sectors – a ‘whisper in the wind’ of the larger VC landscape – and call for a more substantive track record of startup success and investor exits.
India’s Climate Capital Ecosystem
Source: Climate Tech VC
As the United Nations points out, we need to limit warming to 1.5°C relative to pre-industrial levels to meet the goals set in the Paris Agreement. At the COP26 Glasgow summit in 2021, Prime Minister Narendra Modi set India’s pledge: to reach net-zero by 2070. This is clearly a challenging prospect – we need to invest $1TN by 2030 for industries to adapt to climate norms, as per an RBI report. The opportunity to invest in solving for climate – for economic return, social impact, or both – cannot be understated. Of the several tools at our disposal, CTVC highlights venture capital as a critical one, especially for early and growth-stage companies. With most government support aimed to large renewable energy & infrastructure projects, and few Indian VC/PE funds with a specific climate-themed thesis, there is substantial scope for family offices & angel investors to contribute to India’s climate capital ecosystem. Early-stage climate investing is clearly the existing trend in India, comprising the largest proportion of climate deals since 2016 – see below:
Climate and the Built Environment
The built environment – including buildings, architecture, and urban planning – is a substantial emitter of carbon emissions, accounting for roughly 22% of India’s total. With estimates suggesting 75% of India’s infrastructure is yet to be built by 2030, decarbonizing India’s built environment seems critical. Funding interest is largely focused elsewhere: ~10% of funding is directed to the built environment, disproportionately lower than its influence on India’s emissions, hindering the country’s ability to meet its net-zero pledge.
Early-stage investing in the heavily regulated built environment sector can fill this critical gap, noting that certain sub-sectors – such as construction processes and demolition & construction (D&C) waste – have attracted less funding interest. With effective public-private cooperation, an active funding ecosystem, and long-term horizons, investors & entrepreneurs can act together to create opportunities that the country needs.
This is the thesis for Harmony Ventures, the venture capital arm of Harmony Lifestyles Group. The investment office provides equity capital to early-stage sustainability-themed startups based in India, across pre-seed to Series A. We invest in passionate entrepreneurs with bold ideas across four sectors:(i) Clean tech, (ii) Climate tech, (iii) Electric Vehicles (EVs), (iv) ESG-aligned sectors (with a focus on Proptech), working to drive their growth into profitable businesses that will endure in the long-term. More details on our process, mechanisms, and portfolio, as well as our co-investment network and knowledge partners, here.