24 ideas transforming climate startups in 24

Here are some of our favorite ideas that will shape climate startups in 2024.?

1. Forget acronyms. Do the work.?

ESG has been hijacked for capital formation and politics. DEI was used to advance different political agendas. But the issues remain, and so do the numerous opportunities for action, impact, and profit.?

“Forget the co-opted acronyms. DO. THE. WORK. “ - Albert Wenger (on X)

2. Cleantech 2.0 is upon us. And it doesn't matter at all.?

Here’s SEMAFOR on The grim outlook for climate tech . Sounds a lot like the Cleantech bust in 2008. The excitement about climate is real, but many of the businesses don’t have enough customers because they’ve overestimated the desire to pay green premiums.? Or they’re just too early.?

This isn’t very different from Crypto or Augmented Reality or food delivery services in 2000. But it will seem worse because there is much more at stake. And because there will be more negative press for the same reason there were so many fossil fuel lobbyists at COP - the age of fossil fuels is ending.?

Climate tech is simply tech disruption now - it’s better, faster, and cheaper and in many cases will be helped along by tech early adopters and climate early adopters as well as policy.?

3. New Signal. Who dis?

Over the last few years it wasn’t too unusual to meet VCs who claimed Harvard MBAs, when they just did the exec ed course. It’s not a small embellishment. Founders accepted liquidation preferences to allow them to announce unicorn status that would later come back to erase any common stock value. Many LPs believed they were getting great access to direct deals without making any investment in sourcing or value-add.?

Plenty of blame to go around. But that’s over. The market is correcting now and there is perhaps no stronger evidence than the contraction of fundraising for VCs as shown below by Business Insider. The benefit is less noise.???

4. Timing is still the hardest thing to judge

Here’s the AI movie poster. From 23 years ago.?

5. Robots Ramp Up

Robots have been quietly sneaking into the world. They look like cars or vacuum cleaners or coffee machines or vehicles. Or they’re simply out of sight, in the air, in sewers, at sea, in warehouses, in conflict zones, at construction sites or manufacturing plants.?

One clue to the coming surge is the growing number of firms solving specific automation challenges. It’s no surprise that LLMs get a lot of attention for helping humans, but they’re also teaching robotics. And then there are less obvious challenges, like automated charging.?

The most likely candidate to automate charging is wireless charging. And demand for wireless chargings is coming from consumer electronics, logistics, manufacturing, etc. Resonant Link is seeing demand accelerate as larger deployments reveal the downsides of plugin charging, especially where the goal is improved productivity from automation.??

A lot of processes are just getting started with large scale data acquisition to provide the first learning environments. Versatile helping customers to get to 100% utilization of cranes on construction sites. Behind that are the sensors and automation that will eventually unlock robotic cranes. Few outside the construction industry will even notice. Similarly, Pallon is automating complex inspection tasks for large infrastructure like the pipes that under almost every street in the world. And Bowery Farming probably has one of the largest datasets in farming as they instrument and automate all aspects of farming.?

6. 2024 is the year we get serious about pricing climate risk

“Inflation, higher reinsurance rates, and lawsuits are part of doing business for insurers. Climate change is a wild card. When insurers can’t quantify a risk, they charge more to cover it, or avoid it completely,” from: Buying Home and Auto Insurance Is Becoming Impossible .?

We have a lot of the climate consequences mapped out: translating from GHGs, to temperature, to increased flood and fire risks. However, it’s been much harder to take the final step and translate these consequences into economic risks, like potential revenue loss. That will change in 2024. One reason we know? One Concern is working with some of the most trusted financial and insurance brands in the world and they’ll start to share this analysis.? Here’s BCG, Swiss Re and One Concern on Climate Risk .?

7. Climate resilience and defense industries blur

We’re 10 years into resilience investing because when we set out, we looked at the C40 cities framework on climate, and while they focused on carbon, they also saw the coming threat to their citizens from increased physical risk events like floods, fires, and storms.?

Adapting to physical risk means we’ve invested in areas like risk and scenario modeling like One Concern and Mammoth. We’ve also invested in remote sensing and inspection like Pallon and Near Space Labs . And we’ve invested in supporting first responders with teams like HAAS Alert , pi-lit? and Mark43 .

All of these companies started selling to governments, insurance, and financial services. However, we expect to see more defense-focused teams cross over into climate resilience. It’s unlikely the revenues match defense opportunities, but we suspect employees would like to see their work used to expand impact.?

There will likely also be some difficult conversations trying to unpack impact as more people reckon with their theory of change related to ongoing and new conflicts, many of which will increasingly relate back to climate change.?

8. ARR isn’t the only kind of desirable revenue

Not so long ago, no matter what kind of business you were building, you needed to find a path to annual recurring revenue. Now the primacy of SaaS is ending . There are many reasons, but the most important result is that investing is increasingly open to a wider range of businesses that can build a lot of value for shareholders. In many cases VCs may not change, but tech founders will find other investors who want to back them.?

9. Non-dilutive capital matters more than ever

Far fewer equity sources and slower deployment pacing [likely 1/3 of VCs remain vs 2021 high by the end of 2024].

More equity investors will require a non-dilutive roadmap before funding, to ensure implementation.

Non-dilutive sourcing is still relatively immature…venture debt relies on VCs. Other credit providers often rely on sponsors, simple heuristics, or simple equipment which rarely get the whole job done in Climate Tech.

10. Better together

Bird’s delisting was a good reminder for all of us that the path from zero to $2.4b back to zero can take as little as 6 years. So it wasn’t a surprise to see Bird E-scooter competitors “merge to pave the way for a dominant force in European micro-mobility ”.??

A tougher fundraising environment means more teams will explore mergers and acquisitions. Lots of value has been created in categories like micromobility or building automation or the value stack for deploying solar from customer acquisition to financial operations.?

11. More Roles for Matt Damon

It’s fine to science the shit out of stuff, but more risk and complexity will mean it’s never been more important to recruit great talent.?

In Ford vs. Ferrari, Matt recruited Christian Bale to win the first Le Mans title for Ford. The Martian seemed like it might be a solo effort, but Matt had the help of a huge team on Earth. And then there was Matt seeking out MJ to transform Nike in Air. In Oppenheimer he recruited Oppenheimer. He’s somehow on great teams in Ocean’s and Invictus too.?

Look out for the best possible help. More inspiration from Matt’s filmography .?

12. Incumbents as competitors, not customers

The goal for most software firms is to enable a specific function or part of tech stack for existing business. There are opportunities to do this in climate, but very often there are also opportunities to completely rethink the entire businesses.?

Besides, a lot of incumbents are now caught trying to build new businesses, while also supporting existing cash-flowing core businesses. This might make them customers, but increasingly it seems like they’re likely to be partners or even acquirers. But the core building blocks, from batteries to customer acquisition, are completely new and now also supercharged by being able to build with AI vs. trying to integrate into an existing business.?

13. Climate enablers and accelerators will get more attention

Climate finance includes folks like Ezra Climate , Perl Street , Streamline Climate , Enduring Planet and Basis Climate to name just a few. Acceleration with finance is one of the things that the IRA does best because it encourages investors to own or fund assets, which means new customers don’t have to. It’s the BNPL of impact.?

Similarly, there are key enablers like wireless charging for charging automation that increase the advantages or electrification of all kinds of fleets. Or design and production tools that accelerate insights to avoid errors, reduce material use, or improve performance. Or marketplaces for everything from climate jobs (check out Climatebase ) to low-carbon feedstocks on Loamist . ?

14. 24/7 clean energy goes mainstream

Andrew Beebe explains how we’ll move to make renewables an “on-demand” or baseload option for when the sun doesn’t shine and the wind doesn’t blow.?

We can see this in the expected growth in 2024 sales across these types of companies in our portfolio. Storage is the best known approach to create baseload, the other is to maximize renewable energy use when it’s produced, often via Virtual Power Plants or load shifting.?

Plentify is optimizing use of solar in South Africa and will come to new markets in 2024. Swell Energy was recently featured in the New Yorker story about VPPs. Renewell Energy is converting obsolete, leaking oil and gas wells into gravity energy storage. Gradient , Flair and Kelvin are all enabling different strategies to decouple the main built environment loads from the grid, heating and cooling. For industrial and commercial markets, teams like Sapient Industries and GlacierGrid are shifting loads like EV charging, refrigeration, etc.??

15. Habits > Inspiration

“First forget inspiration. Habit is more dependable. Habit will sustain you whether you're inspired or not. Habit will help you finish and polish your stories. Inspiration won't. Habit is persistence in practice.”

― Octavia Butler, Bloodchild and Other Stories

This is true every year, but it seems especially relevant as we shift from hero fundraising to disciplined execution and efficient growth.?

16. Climate copywriters unite

“There will be a semi-serious national debate over renaming the heat pump to increase consumer adoption.” —Lauren Salz, co-founder and CEO, Sealed in Predictions from top investors on climate, politics, and health for 2024 ??

Incumbents have done a stellar job with language which is easy to understand, like:

Natural Gas

Range Anxiety

Green Premiums

Regulatory Burden

Firm Power

These show up in most of the objections founders hear. Masterful copywriting.?

Meanwhile, in climate we’re using language like:

VCMs

VPPs

DERs

BEVs

GHGs

Blech. Lots of great ideas are being held back because we don’t invest the time in more thoughtful words and communication. Fortunately more folks are paying attention.?

17. Climatetech becomes a generalist investment thesis

In many cases, climate is envisioned as an industry to make other things sustainable. But climate products and services are just things people want across almost the entire economy, that are also good for the planet.?

For one sign of this change, look at the investors, focused on climate. Here’s NFX list of the top pre-seed climate focused investors , most of the top 20 are not just climate investors. There are mostly generalists and deep tech investors.?

18. China +1

Before Covid, China was a default supplier or manufacturer for many. In the US and EU there are now political considerations such as potential tariffs. There have always been lingering concerns about IP, but now there is also the lingering sting from unreliable supply chains during Covid.?

Most teams still source from China, but it’s no longer exclusive. Most are also onshoring or working in new geographies like India, South Korea, Japan, and Germany.?

From Bloomberg. ?

Trump-era tariffs, and then COVID, and now misalignment on major foreign policy with the US and increasingly EU, seem likely to continue the trend.?

19. More industrial, food, and land use (please)

For decarbonization, industrial, food, and land use remain the biggest opportunities for impact and probably also for financial return via Sightline Climate (CTVC) .

20. Winning Customers in Climate will remain Hard (and takes longer than you think)

Initial small wins are usually possible because firms are curious and many want to do the right thing. But most customers can’t afford to pay a premium or add new costs if they are uncertain about the impact on their businesses.?

Faster, better, and cheaper remains the best predictor of success. And then there is usually quite a bit to figure out after product-market fit.?

21. Climate founders must understand “The merchandising cycle”

Good founders get to product-market fit, but great founders figure out how to remove themselves from the sales and marketing process to really unlock growth.?

“Ask the salesperson, “Why isn’t this selling?” – answer, “Not enough leads.” Tell the BDR team, “Hire 5 more reps” – “The message isn’t landing, bodies won’t help”. Ok, “Marketing, what’s the message? Is that wrong or does the product need work?”

“Take rocks out of the river until you get your first 4 or 5 sales where the CEO isn’t involved. That is the tell-tale sign that your Cycle is working. Then put your foot on the gas.”

Great thread on with pointers to more from Sequoia’s Doug Leone .?

22. Policy tailwinds will accelerate

New policy alongside continued impact of existing policy will continue its acceleration. Product-market fit still matters, so does the merchandising cycle. However, policy is increasingly helping to move things along too, and in some new and unusual ways: such as Gradient’s receipt of Defense Production act dollars to produce heat pumps in the US .??

23. History doesn’t repeat, but it seems to rhyme with the Roaring Twenties right now.?

New industrialism. New media. Don’t give me your tired and poor. Resurgence of nationalism. It’s not your college history book. City vs. Urban (or town vs country).?

Heading into 2024, it’s worth a refresher on The Roaring Twenties .??

24. 2024 will be even warmer

And also the coldest year for many decades to come. The increased frequency of these highly-deviated, anomaly events necessitates our continued attention and investment in the realm of “climate”.??

Source: The Economist .

It’s one pf the certainties for 2024.?Let’s do the work.