Funding a Better Future: How to Invest in Startups Fighting Climate Change

Entrepreneurship and innovation are needed to significantly reduce air pollution and minimize the impact of the climate crisis. Startups around the world are working on creative and ambitious solutions to the great challenges facing humanity. But how do venture capital funds make the right investments in environmental technology? How do they balance economic benefits with environmental impact? , Anil Achuta, Managing Director of TDK Ventures, a global VC fund focused on sustainability and social value, and Scientific Director of Extancia Capital, a VC fund working in the climate space. Iris Ten Hav, Principal, and Yarden Yitzhaki, Vice President of Engineering and Operations, Doral Group, shared insights on how to invest in a better future for the planet.

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From left: Yarden Yitzhaki, Iris Ten Hav, Anil Achuta

(Credit: Mika Lebaton)

“Without technological advances, the world will not be able to reach its net-zero goal.”

“We believe that technology and policy are the two main pillars for addressing climate change,” says Achuta. “Advanced technologies that support carbon emission reductions in energy production, storage, heavy industry, transportation, construction, agriculture and chemistry are at the forefront of the battle to solve the climate crisis.”

“As a chemist working for a climate change technology venture capital fund, I see first-hand the transformative impact of technology. Without it, says Ten Have,” from the air (DAC), we will not be able to reach our net-zero targets. “

“The role of existing and future technologies in addressing the climate crisis is critical,” Itsuhaki added.

How do you make decisions about investments in the environmental technology field?

“As a fund with deep technical expertise, we look at potential investments such as atmospheric carbon reduction potential, energy consumption, expansion capacity, market demand, technology maturity and commercial viability. We use quantitative metrics to evaluate,” explains Ten Have. How we ensure that our investments are well-suited to our mission of reducing greenhouse gas emissions while considering the long-term sustainable growth of our startups.

“We use three main criteria: high financial return, strategic value and positive impact on society. In terms of financial return, we aim to return capital on all our investments. We are aiming for a “Win-Win” partnership when it comes to strategic value. From a social perspective, we strive to act in accordance with the United Nations Sustainable Development Goals (SDGs). “

Yitzhaki said that Doral Tech will continue to develop technical and engineering capabilities for the next phase of the company’s development based on market research and technical research through the company’s engineering and technology departments and senior academics and experts in related industries. He said he is testing the feasibility. “The core criteria are the vision and quality of the team, the investors, the potential to solve the climate and energy crises, technical and engineering feasibility, development time, economic viability and potential markets, Strategic value, market size, timing and potential economic returns from the investment.”

How do you navigate between economic benefits and positive environmental impacts?

“As a VC fund, we need to identify opportunities for economic return,” says Ten Hav. Resolutely avoiding dependence, we are looking for environmentally friendly alternatives: “We will compete on the price of fossil fuels without relying on subsidies. We support startups that have the potential to make a big impact on climate change.”

“Fortunately, the market is very active, so we are looking at the best possible economic benefits while at the same time carefully considering the technologies that we believe will be the best and most efficient. We can do that,” says Itsuhaki. There is usually a match between high-quality, promising technology and the expected financial return from it. Positive environmental impact has high economic value, and trying to add value to it is part of our expertise. “

“We are always looking for companies that offer us the best unit economics without subsidies, which helps us make economically viable investment decisions. We want a parameter-only venture capital fund to lead B and C,” says Achuta. If we don’t, our businesses will not have the full impact on the climate. “

Against the backdrop of the global economic situation, VC funds are cautious, but investment is still brisk.

“The ongoing crisis has created uncertainty and aversion to potential risks among investors, leading to cautious decision-making,” Ten Have said. Investments in technology continue to thrive: according to Bloomberg, the world is currently investing about $1.1 trillion in combating climate change.”

Referring to the situation on the ground, Yitzhaki said, “Israel has many graduates from academies and the military industry who are part of a new wave of entrepreneurs who are moving from various high-tech fields to climate and energy entrepreneurship. We have talented people,” he said.

“Israeli start-ups are characterized by tenacity, exceptional performance, and a determination to face their most pressing challenges head-on,” the ten said. Israeli entrepreneurs typically break boundaries and fearless. , have a peculiar mentality that favors action over perfect execution. You can learn from it and adapt your strategy to reality, and your performance will improve.”

Achuta agrees. Israeli startups have a high risk/reward ratio and excel when it comes to innovation. I personally enjoy the boldness and level of ambition of Israeli startup ideas. This is why companies such as H2Pro, Helios and others were born in Israel. “

According to Achuta, the most developed and exciting areas in the field of climate technology are “the electrification of buildings and homes, transport, aviation, green chemicals and reducing the carbon footprint of the circular economy”. Most of these areas are expected to benefit from the support of venture capital funds, he said. “Additionally, there are areas where we feel the need for increased government support, such as nuclear fusion, grid modernization, mining, and self-driving public transport.”

Yitzhaki points out the importance of carbon capture, particularly the production of green hydrogen and green molecules in general, energy storage, recycling solutions, energy storage and reuse of produced products.

“It is possible and prudent to install solar systems wherever possible, including dual use of land – on top of existing buildings, reservoirs, plantations and crops, where precision agriculture can be maintained. We can produce energy at the same time,” says Itsuhaki. . “Draltech, the company’s innovation and investment arm, collaborates on the research and development of translucent solar panels that allow selective transmission of light rays while at the same time improving the energy efficiency of the panels. We also work with academic institutions, for example, as part of our collaboration with Bar-Ilan University, we have identified sodium ion technology as a potentially disruptive technology in the energy storage industry. Through joint research and development, we believe this technology has real potential.”

“Investment from VCs can be a decisive factor in closing the gap in the early stages.”

Regarding the importance and role of VC in the environmental technology industry, Ten Have said, “Startups in this field have innovative ideas, but they have no source of income and are struggling to get loans from banks. This is where venture capital funding becomes important.” Closing the gap and providing early stage investment is essential. Unlike grants, which often prioritize academic milestones, VC funding focuses on commercial milestones that drive technology deployment and scale-up. Venture capital adds significant value by supporting both developments. An attractive product and a viable and sustainable business model.

Areas that are highly dependent on investors are generally those that rely heavily on research and development (R&D), breakthrough innovation, and long-term expansion, Ten Have said. “Early-stage technologies, such as long-distance energy storage and carbon capture and utilization, often require significant R&D efforts and breakthrough innovations to mature. Scaling a technology to commercial levels requires a complex navigation between engineering challenges and manufacturing aspects.” They play a key role in providing the funding, industry expertise and strategic training needed to bring solutions to market. “

Itsuhaki said corporate investment funds like Draltech see great value in accompanying startups. “Our role is to support the entrepreneurial journey, embrace ventures and technology, support growth, benefit as a customer, and provide multifaceted support in financial, strategic, regulatory, engineering and professional. To successfully raise a large follow-on round, especially when there is an “appetite” among early-stage investors on the one hand and a particularly large capital requirement on the other, companies must It needs to demonstrate commercial, engineering and scientific traction. Defined as a company that is not yet profitable. “

Finally, Mr. Itsuhaki said: “Several years ago, Doral adopted the motto ‘Energy for Innovation’. The engineering department now supports dozens of projects around the world and is at the forefront of global energy and climate technology. It’s placing us here, it’s a real win-win.”

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