For as long as we have been advising technology companies, one theme that crops up consistently is that of efficiency – whether it is resource efficiency, process efficiency, energy efficiency – be it hardware, software, workflows or a combination of all three – the notion of doing things better, faster, cheaper, using less of one thing or more of another has occupied a significant proportion of our collective professional careers.
Then again, we should not be surprised because where there are inefficiencies or new technology to exploit, there is opportunity, which is the very lifeblood of venture investing.
The number of new Climate Tech focused funds launched in the last 18 months is testament to both the challenge and opportunity seen by investors as the world increasingly wakes up to the need for immediate climate action.
The Built Environment – The Challenge
Buildings are the single biggest users of energy worldwide – alone accounting for some 40% of all Green House Gas emissions (GHGs). Revolutionizing the built environment therefore offers a significant challenge area and opportunity for today’s climate tech entrepreneurs.
Two thirds of GHG emissions in the built environment are ‘operational’, coming from the energy used to heat, cool and light buildings with the remainder captured in the fabric of the buildings themselves.
Energy efficiency has moved beyond the ‘behavioral nudge’ that was the hallmark of many of the early energy management platforms and energy monitors. An ex-client and expert in the energy efficiency space has long-since argued that corporates don’t want to pay consultants to produce pretty graphs and energy reports telling them how they ‘might’ save money on their energy bills. What they want from energy data platforms are clear and actionable insights into energy usage (and ideally automated responses) to demonstrate a clear ROI.
Deeptech Solutions and the Built Environment
Some of the easy wins may have already been made – Building Energy Management Systems (BEMS) systems and vendors abound, lighting has long-since shifted to LED and new shared-savings business models are now commonplace.
AI and sensors are now being deployed to interpret, monitor and optimize building usage and environmental factors and web-based platforms allow energy managers to control the real-time management and optimization of buildings across large estates.
Further innovation in sub-systems and materials present significant opportunities can have a huge impact on the built environment without the need for significant upheaval in the existing infrastructure.
Nanotech companies such as HT Material Science, who we have advised on their Series A fundraising recently, for instance have developed a nano-heat transfer fluid that can be quickly retrofitted to closed-loop heating and cooling systems to deliver immediate energy savings of up to 30% from the pumps and chillers running the system. Same system, but a step change in operational efficiency.
This ability to heat things up or cool things down more quickly offers significant savings in process cooling to manufacturers everywhere as well potentially supercharging the efficiency of data centre cooling systems without need to adapt the existing infrastructure.
The truth is that there is no magic bullet for optimizing the built environment – it will require innovation in both how we interact with, occupy and manage buildings and there are opportunities everywhere and where there is opportunity, then investment money will continue to flow.
The biggest challenges in decarbonizing the built environment will require multiple solutions throughout the supply chain – from infrastructure to sub systems to software to AI and IOT solutions to new materials. The proliferation of new venture funds in the UK and Europe and the increased activity in corporate venturing is testament to the opportunity that exists.
HMT has significant experience of working with energy efficiency and climate tech companies over several economic cycles. Investment appetite has proven to be robust and in the last year alone, HMT advised on 42 transactions across the venture capital and private equity markets.
If you want to discuss your energy business, then our team would love to talk you through your funding options from debt and equity to venture debt.