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.
Sources: The India Climate Finance Report
Harmony Ventures
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.