Is Climate-tech dead?

In one of my recent calls with a prospective co-investor/friend; he kicked things off with a question that seems to be on everyone’s mind - Did you participate in the ongoing debate if climate tech is dead?

I mean this is/was the hot subject the entire last year. This was when everybody suddenly turned into a climate tech expert and talked about Battery technologies and Electronic aviation vehicles wrt Northvolt and Lilium .

My take on this subject is simple. While there’s been a lot of hype (and scrutiny) surrounding these companies, I see them as symbols of European innovation. Sure, not all companies succeed. But what they achieved is bigger than individual success—they’ve inspired a new wave of entrepreneurs who will carry the torch forward. And that, to me, is the true mark of progress.

Alright back to the question: “Is climate tech dead?”

My short answer? Yes, it is.

Now bear with me. Hear me out -

1. Every sector experiences a hype cycle and its inevitable correction (cue - Gartner hype cycle).

This isn’t unusual—it's part of the natural evolution of innovation cycles. Innovation doesn’t grow in a straight line. Climate tech is no exception; we are currently in its hype correction phase.

Would this correction actually affect climate tech investors?

No, it won't. Most seasoned investors evolve alongside the labels. Yesterday’s “climate tech” might be today’s “bio-economy” or “planetary technologies", or another buzzword. The core technologies and opportunities remain. History has shown us this evolution time and again:

• In the 1960s, Molecular Biology became Genetic Engineering, then Biotech, and later Synthetic Biology. Each term had its own hype cycle, yet they all revolved around similar foundational innovations.
• The evolution of terms can also be seen with Deep Tech, Hard Tech, Deep Science Tech, Emerging Technologies, and so on.

2. Hype correction = The Weeding out phase

This phase, often dubbed the “death valley” of innovation, is when survival is determined. Some teams and technologies thrive, while others fail.

The arguments can vary from "Disruptive innovations like DAC are hard to survive" to "Incremental innovations like using biobased feedstocks do not yield good IRRs".

I would personally argue that the "trough of disillusionment" is the most important phase of any cycle. It presents the moment of truth and transition. Radical innovations that survive this become safer investments as they transition into their incremental innovation phase. This is why the weeding-out phase might be the best time to invest.

However, it is the radical innovations at the start of their innovation cycle (Innovation trigger, refer to the first graph) that have the potential to generate exorbitant IRRs.

What does this mean for Climate tech/Planetary technologies/Bioeconomy etc etc.

It means that this might be the best time to get into the game.

Case study - The Dot-Com bubble

The dot-com crash of 2000 is a perfect analogy. It was a crash of its own kind - U.S. VC investments plummeted so harshly that it did not return to the same heights till 2017. Was it the first crash of its kind? Of-course not. Other crashes (related to or leading to internet) were home computers market crash in 1980s, and transistor electronics in 1950s.

Fun fact - The 1956 Nobel prize in Physics was awarded for research on semiconductors and their discovery of the transistor effect" and last year's (2024) Nobel prizes both in Physics and Chemistry were awarded for discoveries that supporting or developing AI.

See any connection yet - Radio discovery supported the discovery of transistors which in turn supported home computers which in turn boosted internet and IT - and what's AI - the current next frontier. Semiconductors to Internet to AI!!!

Indeed each crash opened a doorway for a new bigger revolution.

My Thesis: Process innovation & Drop-In solutions

I strongly advocate for Process innovation and Drop-In solutions—approaches that either replace a product or integrate seamlessly into existing infrastructure without the need for significant changes. These solutions drive meaningful progress, even as sector labels evolve over time.

The beauty of drop-in solutions lies in their inherent security: there’s already a demand and an established market. You don’t need to create a new market from scratch. Instead, you fit right into the existing ecosystem, playing by the rules—or at least making it seem that way—while subtly bending them, just a little more with each iteration. This quiet yet impactful disruption is what makes drop-in solutions so powerful.

Here are some standout ventures exemplifying this philosophy:

1. Genomines Engineering plants to produce metals essential for batteries, bypassing conventional mining.
2. Bioeutectics Pioneering the use of bio-based eutectic systems for green solvents, enabling sustainable and efficient industrial processes.
3. Yangi? Innovating dry molding of paper pulp and thereby eliminating the need to resolubilize the pulp - hence reducing the carbon footprint and the energy needs of the existing process.
4. HEJMAS Agrifibre Technologies Creating high-performance materials/paper pulp from agricultural fibers, offering sustainable alternatives for industries like construction and packaging.
5. i-Foria Italia Developing groundbreaking solutions in waste reduction (diaper/adsorbent material recycling) through process-driven innovations.
6. Cellulotech Advancing cellulose-based molecular grafting technologies to replace plastics and other non-renewable materials in packaging and beyond.

So, what's your take?

Cheers,