As a result of the scope of sustainability and the sudden increase in interested parties, clarity around “what is energy tech” or “what is climate tech” is harder to come by.
There’s no one “right” definition and everyone will have different criteria for how they interpret the opportunity set.
To clarify our approach, we are publishing how we view the varying sub-sectors of energy tech. There are two important caveats to note:
1. We acknowledge the role the hard sciences will play in the energy transition but have avoided investing in them to date. Something we hope changes as Intelis evolves.
2. Some of these subsets overlap. It’s possible to see startups that hit on all three of these themes at once.
Definition: technology that makes the global energy value chain more efficient, resilient and sustainable
Examples: remote asset monitoring, cybersecurity, automation, reliability
Key Points:
* Long sales cycles, 9-18 months to established players in the ecosystem
* Predominantly existing tech applied to new business applications from the energy industry
* Similar to enterprise SaaS, usually involves lengthy pilots that expand over time or services agreements that convert to recurring revenues
* Deployment of hardware can require multiple financial tools including debt and/or project finance in addition to regulatory hurdles
* Direct impact on sustainability is the lowest, but indirect impacts are fundamental in advancing climate goals
Definition: technology that empowers consumers or businesses to reduce their carbon and environmental footprint
Examples: energy efficiency for buildings, waste recycling, new uses for wastewater, solar
Key Points:
* Includes adjacent industries water, waste, and agriculture
* Sustainability as a consumer preference
* Sales cycles and business models vary depending on customer type and industry
* Behavioral changes from entrenched processes
* Largest impact on emissions and environment
Definition: technology that allows consumers or businesses to adapt to new externalities as a result of climate change
Examples: carbon accounting, geospatial data for construction and insurance
Key Points:
* Protect or restore the capital and assets impaired, damaged, or endangered by climate change to accommodate further economic growth.
* Large impact on the built world and financial infrastructure around it
* Newest vertical of the three, still in its infancy
* Impact on sustainability is direct and/or indirect depending on the application
Climate, sustainability, and energy tech are all rapidly evolving and there’s no one right answer.
I’m providing ours as an example of one lens that is possible for a venture firm focused on the early stage, but it will look much different for those in project finance or debt instruments.
The one thing we can all agree on is that the opportunity for technology in and around the energy ecosystem is generationally huge.
