Sustainability has become one of the top business priorities in the past years, and 2024 is no exception. As companies adopt sustainable tech with increasing urgency, we’ll see the rise of more sustainable tech startups entering into the game. With more businesses adopting new technologies to reach sustainability goals, investors will also continue to accelerate the development of these new and exciting solutions.
However, according to Accenture, 40 per cent of CIOs cite a lack of solutions and standards as a critical obstacle in their sustainable tech strategy — a gap that startups are poised to fill. Businesses will increasingly tap into an ecosystem of startups to harness technology in completely new ways, solve crucial problems and deliver sustainable outcomes.
At The Mills Fabrica, we believe that sustainable tech startups play a critical role in protecting our planet. From creating dyes for clothes from DNA sequencing and nature’s own colours, using automated micro-factories to create carbon-conscious apparel, to deriving sugars from fibres of agricultural side streams, startups deliver groundbreaking solutions which, with the right investment, partnerships, and implementation, can be adopted en masse to drive change and social good across communities.
While there is much potential, there is a looming recession on the horizon, and securing investor backing becomes more crucial, yet more difficult. Sustainable tech startups will need to demonstrate they are ready for success, with a well-defined possibility for growth, financial resilience, and an innovative product and go-to-market strategy that is different from competitors.
When evaluating startup investment opportunities as an investor, here are some key factors to consider:
Identifying problem areas and making your impact tangible
Investors will inevitably prioritise how startups offer solutions to vital problems. Sustainability and planet-positive actions must be “baked” into a startup’s business strategy from the get-go, with ways to show that solutions are delivering tangible results.
Startups must not only be able to articulate their positive impact on the general environment, but also how they can help their customers and partners accelerate their sustainability goals. It is also important to utilise comprehensive and rigorous tools to define goals and report impact metrics.
The more we speak a ‘common language’ using such tools, the more effective and impactful our work can become. This also puts your goals in clear terms for investors worldwide. For example, startups can get started with the Stockholm Resilience Centre’s Planetary Boundaries Framework, which is a scientific approach that defines the safe operating space for humanity within Earth’s natural systems.
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It lists nine planetary boundaries that must not be crossed to avoid irreversible environmental changes, including climate change, human pollution, and freshwater availability, among others. A startup can make use of this framework and showcase how their solutions can create a holistic impact on the planet’s wellbeing.
Stand out from the competition
To stand out from the sheer volume of competition, resilience and creativity is key. Fundraising may be more competitive than ever, but startups can source for research and grant opportunities beyond VCs, like those provided by governments and corporations looking to drive technological disruption. Startups can also look out for project funding at various stages of their development, including during the infrastructure-building phase.
The Singapore government, for example, sets up multiple grants to start-ups, such as the Early Stage Venture Fund (EVSF), which provides financing to early-stage startups in Singapore to support their growth and help them scale up their business. Under the ESVF, The NRF invests US$10 million on a matching basis to seed corporate VC funds that invest under this initiative in Singapore-based early-stage high-tech companies.
Aside from capital, incubation programs by organisations dedicated to helping bring sustainable tech to the forefront, like The Mills Fabrica, could also provide extensive support from industry connection market exposure to potential clientele.
Taking advantage of various schemes and support from the private and public sectors, in addition to a solid fundraising strategy balancing all capital opportunities, will signal to investors that founders are savvy, well-connected, and have clear, attainable milestones along each step of the growth journey.
Local problem-solving with global scalability
Investors want to know how startups can grow so they can get returns on investment. A startup’s capabilities to address environmental challenges at a local level while having a clear plan to scale up regionally or globally will become a key consideration, especially for enterprises and investors. This indicates the potential for widespread impact and growth on the consumer level, enacting genuine difference for our planet.
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For example, Colorifix, a startup that pioneered the first entirely biological process of dyeing textiles, offers a unique solution to incumbent technologies that completely cuts out the use of harsh chemistry and leads to huge reductions in energy and water consumption. It brought bio-based dyes to mass consumers with popular brands like Pangaia and H&M.
Another startup, unspun, aims to reduce global carbon emissions by at least one per cent by using automated, localised, and on-demand manufacturing for jeans. With the textile and apparel industry contributing 8-10 per cent of global greenhouse gas emissions, every step counts.
Building the right bridges and educating the wider ecosystem
It should be a responsibility for all startups to prioritise educating different players in the ecosystem about sustainable innovations. Sustainability is a collective effort, and only by working cohesively with ecosystem players can we bring forth impactful changes in lifestyle habits for the betterment of our environment.
Startups need to look beyond their own four walls to solve problems in the wider world. Apart from honing their solutions, they need to understand what corporations and the wider industry, including regulators and funding firms, are looking for.
Active participation in industry conversations, awards, and events shape a well-rounded worldview that can help startups build not only credibility, but also strong value propositions and become agile, solution-oriented partners.
While developing a new solution from the ground up may be a daunting task, resilient entrepreneurs will be able to continue the pipeline of innovation and weather any economic condition. It’s by making genuinely measurable impacts, being self-sufficient and resourceful, and fostering ecosystem-wide connections and partnerships, a startup can innovate to bring a truly planet-positive product to the market.
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