Championing Diversity and Innovation Through Climate Techs
This new era of climate tech investment and innovation is seeing more effort than ever before put into scaling technology to combat the issues causing and posed by climate change.
As seen across other industries, a push needs to be made to ensure more diversity — based on sex, race or academic background, to name a few — among founders of these pioneering businesses as they set out to make meaningful change.
Ensuring this rapidly evolving sector is developing cutting-edge technologies and inclusive solutions for all with diversity at its heart is Sustainable Ventures. Investment team Lead Stuart Ferguson advocates the importance of diversity in driving innovation has become increasingly evident.
A believer that diverse teams bring a variety of perspectives and ideas, leading to more creative and effective solutions, Sustainable Ventures invests 12 times more in female-founded startups than industry average.
Sustainable Ventures is at the epicentre of the climate tech revolution and the largest hub of its type in Europe, with more than 500 businesses to scale up from startup to success thanks to its support. Success stories Sustainable Ventures has had a hand in helping expand include 2022 Earthshot Prize winner Notpla, AirEx and Depop.
Investing in female-founded climate techs
Sustainable Ventures has committed 23% of its investment to entirely female-founded startups compared to the 1.8% average across the venture capital industry.
These figures come as Sustainable Ventures celebrates its milestone 50th investment, which it says underpins how its holistic support model drives the success of the portfolio.
“Climate tech’s a really exciting space to be in at the minute, not just because of the technologies coming through but thanks to the brilliant founder teams,” Stuart told Energy Digital. “It’s ultimately those guys who are driving success.
“We support people in a number of different ways, working with around 700 startups. It’s great to see the gender split of the founders there is roughly 50/50.”
With plenty of initiatives supporting diverse founders, Sustainable Ventures has made great progress in the six years it’s been investing in finding brilliant female-founded teams to invest into.
“When we first started, we were choosing from 100 different climate tech opportunities,” he continued. “We’re now choosing from about 1,500. It’s pretty clear to see that a huge amount of time and money has been invested in supporting people from diverse backgrounds to come through and become entrepreneurs.”
Benefits of female-founded climate techs
Sustainable Ventures supports diverse founders as it believes the founding team is the key success factor in any startup as they provide diverse viewpoints as well as reflect customer bases and, ultimately, their long-term employee base.
“That’s not going to happen if it’s a team of white men from the same university course, which we still unfortunately still see too often,” Stuart said. “It is really critical that we can have that diverse viewpoint across the team, which also does translate into better returns and better performance.”
Boston Consulting Group (BCG) research shows that female-led teams deliver around double the return of its entirely male-founded counterparts, displaying an added financial benefit to diversity in the climate tech space.
Despite this, the amount of money in the venture capital (VC) world going into female founders has plateaued in the last decade, with the climate tech sector coming in just above that average.
“Climate tech is slightly better, around double, but even that’s depressing as it comes in at around 6% to 7%,” Stuart explained. This is partly driven by the top end of the funnel with more mature companies raising hundreds of millions where there’s not a huge amount of diversity.
“This reflects some of the work that’s been done to encourage diverse founders but also encourage diverse decision makers within VC.”
Improvements happening but a long way still to go
Stuart continued: “It is still hard for female founders to get funded, harder for them than all-male teams. That’s still the main challenge, but it's improving.”
This, Stuart hopes, will be combated by the increase of initiatives at university and school level to get diverse founders into STEM subjects. Stuart believes that a growth in STEM subjects is what’s needed to subsequently grow the capability of deliverable technologies needed to meet net zero.
“The key thing is being open and accepting that the space is by no means perfect,” Stuart added. “This is a hugely collaborative market, we don't invest on our own. We invest alongside other investors so we need everyone working together to increase the flow of capital into climate tech and diverse founders.
“If we can talk and be open about some of the challenges diverse founders are facing, we can get startups working together more effectively.”
Ensuring climate techs are armed with resilience, effective fundraising approaches and a clear vision are some of the ways Stuart and Sustainable Ventures see climate techs, particularly the female-founded variety, securing long-term success. These characteristics, combined with a supportive ecosystem and strategic guidance, help startups navigate their journeys toward growth.
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