As an investor, you should be wondering about the potential profitability of climate tech startups in emerging markets.
Companies like Moni, Metafuels, Stream, Procens, Clem’, T40, Baubap, Refillable, Taqt, Soft Seaweed, Solaris Offgrid, Blissway, Kibus, Climatize Earth, Antigaspi (Willy), Debito, FreshBox Kenya, AgrowAnalytics, Airmyne, LivnSense, Ponera Group, XRGlobal, Charzer, and Fae Bikes constitute the core of my current portfolio (including investments made in 2023), and some of them are at the forefront of climate tech, a rapidly growing sector.
Why Invest in Climate Tech in Emerging Markets?
- Significant Growth Potential: Emerging markets are experiencing rapid economic growth, creating a strong demand for innovative climate tech solutions.
- Scalability: With fewer regulatory hurdles and often less competition, climate tech startups in emerging markets can scale more quickly.
- Cost-Effective: Climate tech solutions can be more cost-effective in emerging markets due to lower labor and resource costs.
Key Areas and Opportunities
- Renewable Energy: Companies like Solaris Offgrid/Eternum Energy are driving the adoption of renewable energy sources in emerging markets. Climatize is democratizing investment in renewable projects in the USA.
- Energy Efficiency: Startups like LivnSense which offers AI based platform with digital twins for GHG measurement, analysis and real time decision.
- Sustainable Agriculture: AgrowAnalytics is leveraging technology to enhance (smart) irrigation, improve crop yields and reduce environmental impact in the agriculture sector. Softseaweed supports seaweed farmers in developing their business sustainably and profitably, and Procens produces 100% natural insects’ protein flour and oil, through a circular economy model.
- Waste Avoidance/Management: Startups like Ponera Group with recyclable IoT pallets, FreshBox Kenya which builds locally solar powered cooling boxes, and Refillable which creates smart packaging and refill systems to eradicate waste at source for brands and consumers, are providing solutions to address the waste management challenges in emerging markets.
Trending?: Investor Sentiment and Funding
Climate tech investment in emerging markets has shown mixed trends in 2023. While global climate tech investment was down 40% from the previous year, some regions have seen increased activity. The Middle East nearly tripled its global climate tech investment to $5 billion in 2023, though less than 2% of this went to local innovators in the region.
New climate-focused funds like Alterra are being established to support climate tech startups. Additionally, young angel investors in the UAE are increasingly favoring the Africa, Middle East, and North Africa (MENA) regions for climate tech investments. However, the overall trends in emerging markets remain mixed, with some regions seeing declines in climate tech funding while others attract new sources of capital.
Conclusions
The climate tech sector in emerging markets represents a unique opportunity for investors to make a positive impact while potentially generating strong returns. By supporting innovative startups that are developing locally relevant solutions, investors can contribute to a more sustainable future while diversifying their portfolios and tapping into high-growth markets.
As the demand for climate solutions continues to rise, the climate tech sector in emerging markets is poised for significant growth and impact. However, the path forward is not without challenges. Investors must navigate complex regulatory environments, infrastructure gaps, and other market barriers. Nonetheless, the potential rewards, both financial and societal, make this a compelling investment opportunity for those willing to take on the risks and work to overcome the obstacles.
Please do not hesitate to contact me if you are interested in learning more about any of these startups or in sharing deal flow (my views on this).
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