Startups outside the West might be the key to helping the world adapt to a changing climate. But where do they get the funding to scale up?
If you’ve been watching COP28, as we have at The Climate, you may be somewhat concerned about the fate of the planet — or at least, our chances of success in hitting, by 2030, the science-backed targets of the Paris Agreement.
This is where the Earthshot Prize makes its entrance: a global climate competition that will fund 50 startups with 50 million dollars by the time the decade is out. Its goal is to repair and restore the climate before 2030 by funding solutions that have the potential to scale widely and make an outsized impact.
In 2023, it awarded Acción Andina, Boomitra, S4S Technologies, GRST, and WildAid Marine Program 1 million pounds apiece to continue their work in climate technology and science. It also funded reforestation projects, hydrogen technologies, carbon capture techniques, and coral reef regeneration from Rwanda to the Middle East.
In that regard, it’s unique. A majority of private climate funding typically goes to founders in Western Europe, the U.S. and Canada. Out of the total, only a tiny percentage reaches the regions marked in a category labelled “Rest of World”: Latin America, the Caribbean, Central Asia, Eastern Europe, the Middle East and Sub-Saharan Africa.
Between 2010 and 2022, for example, $28.6 billion in VC capital flowed into climate startups based in the U.S. alone, while “Rest of World” countries received fewer than $10 billion combined.
“If you’re not at least partially based out of a major hub,” Telstra Ventures climate tech partner and venture capitalist Albert Bielinko tells The Climate, “it’s going to be very difficult to raise capital”. Bielinko’s firm has funded SaaS startups like DocuSign and Box, but he recognises that startups struggle to raise funding outside of tech hubs like London, Berlin, and San Francisco.
‘So far, the prize has funded reforestation projects, hydrogen technologies, carbon capture techniques, and coral reef regeneration from Rwanda to the Middle East.’
By now, however, Earthshot has seen quite a few success stories from tiny startups.
In 2015, Dr. Sebastian Groh launched SOLshare, a rural energy and electrification startup, while attending Stanford’s Graduate School of Business. It’s late in the States when we call, but he’s based in Dhaka, Bangladesh, where he’s lived for close to a decade.
In a community kilometres away from Silicon Valley, Dr. Groh and his team pioneered one of the first peer-to-peer energy grids in the world — an innovation that wouldn’t have been possible without a deep knowledge of local customs, habits and systems of transport.
For example, he explains to The Climate that Tesla is one of the most visible electric vehicle companies in the world, yet it designs and manufactures vehicles that are made to carry one or two individuals — a reality far removed from the three-wheel tuk-tuks that dominate the streets of Dhaka.
It’s not that Western founders have anything against designing more inclusive systems. It’s just difficult when you live inside a system in which “every product is designed for one person,” to contemplate anything else.
Although SOLshare didn’t win the Earthshot, Sebastian had access to traditional funding. Since its inception, SOLshare has raised capital from EDP Ventures, Singapore-based firm SBK, Palo Alto’s innogy New Ventures LLC and IIX Impact Partners.
But for most startups, venture capital can be hard to come by. The overall VC market throughout 2023, aside from massive investments in generative AI, has stayed largely unsteady.
Whereas before, says Bielinko, startups may have been able to raise capital later down the road in future investment rounds, they now “need to be sustainable sooner.” After a year with a lot of high-profile failures, venture capitalists are wary — and, if they don’t know the market well enough to have a “good price read” on it, cautious.
This caution doesn’t mean funds are closed off to unique, underfunded or overlooked concepts.
After all, Bielinko is genuinely excited and invested in the success of his portfolio. He once founded a Sydney startup himself, and he’s aware that bringing something new into the world, especially now, is difficult. So he’s receptive, he says, when “a founder walks through [his] virtual door and has an idea that’s different”.
The paradox — and tightrope — that local and niche startups must walk is this: they must be highly specialised to understand and meet the needs of their local community, but to raise millions of dollars, especially at the level of the Earthshot Prize, they must be able to illustrate how their idea can scale across households, cities, countries and continents.
‘To raise millions of dollars, especially at the level of the Earthshot Prize, [startups] must be able to illustrate how their ideas can scale across households, cities, countries and continents.’
Is the problem a lack of local interest?
Not exactly. Another 2021 Earthshot Finalist, a data platform startup called Restor, connects local biodiversity projects with a network of global organisations, volunteers and funders. Its founder, Dr. Thomas Crowther, aims to scale Restor to support a million local climate projects by 2030 — the date by which Prince William hopes to achieve, or make major progress towards, all five of the UK’s climate earthshots.
In an email to The Climate, Crowther points to the variety of rewilding, ecotourism and agroforestry projects on the platform that take into account local and indigenous climate science. He doesn’t think there’s a lack of local interest. “[We’ve] had incredible engagement from hundreds of thousands of local communities,” he writes.
Hyperlocal solutions actually proliferate. In the Arctic, the World Wildlife Fund combines AI and indigenous knowledge. In the U.S., Virginia deploys hyperlocal data to launch greenification projects.
The Earthshot Prize alone has nominated 3,000 startups from 25 countries, awarded 45 founders finalist status and given away £15 million in prize funding. Peridotite mineralisation in Oman; microbial technology in the U.S.; fertilised deserts in China.
Even Google, as of September, started a climate change accelerator: “Google for Startups”.
These “bottom-up” climate movements pose a stark contrast to global projects like geoengineering, in which projects like spraying sulphates into the atmosphere would affect every country around the world to differing extents — helping some but hurting others.
(DALL.E 2 AI Generated/ The Climate)
Mexico has already banned geoengineering; expert coalitions have requested more comprehensive global restrictions, since this solution, promoted by “billionaires in the North”, would likely have a largely “uneven impact”.
What happens, though, is that “it can take a long time [for potential funders] to find these solutions,” says Crowther. The world of venture capital and funding is largely built on complex connections and partnerships; it thrives on networks. Deals, fair or not, are often made through recommendations and referrals, trusted friends and relationships built at elite business schools and through Western tech networks.
Thus, platforms like Earthshot exist. Prize competitions, though occasionally criticised for “greenwashing”, connect hundreds of local projects with a network of donors, investors and foundations, raising awareness for projects that might not otherwise get the necessary capital and support to scale up.
Over time, the Earthshot Prize has evolved. Its core selling point, however, remains the same. While the award ceremony may be glitzy, it provides rural, local and “Rest of World” entrepreneurs with a way to meet the one person who might make a difference to their startup.
This matters, Groh explains, because ideas to address and mitigate climate change come from everywhere, not just the “Silicon Valleys of the world”. If we keep funding the “usual suspects”, we might miss huge opportunities in markets outside the West. His guiding principle is that founders come up with the best solutions when they’re closest to the problem.
And “climate change”, he concludes, “is at its fiercest form in emerging markets”.