Driving Sustainability Through Innovation in Indian Startup Ecosystem

The journey to net zero will require a strong focus on innovation and R&D. The next crucial aspect is developing new business models around these innovations.

December 24, 2024. By News Bureau

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Indian Startup Ecosystem

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India is the world's third-largest emitter of greenhouse gases, and climate change has induced uneven monsoons, increased flash floods, and heat waves. The World Health Organisation estimates that between 2030 and 2050, climate change can lead to approximately 2.5 Lakh additional deaths every year due to heat stress, malnutrition, malaria, and diarrhoea. Further, climate change can push 45 million Indians into poverty. In this light, India has promised to achieve net zero by 2070 to tackle the impending impact.

The journey to net zero will require a strong focus on innovation and R&D. The next crucial aspect is developing new business models around these innovations. These innovations will fall in the realm of creating the best technologies for allowing businesses to minimise carbon emissions. The focus should be on a broad canvas encompassing solar power, carbon capture/ neutrality, renewable resources, vehicle end-of-life solutions, e-mobility and business models in sustainable last-mile supply, interconnected intelligent logistics for sustainability, and storage technologies.

The scale of the climate problem and the vast array of the climate tech canvas presents a promising opportunity for India to venture into climate entrepreneurship. This new approach can bring a paradigm shift in our traditional methods of tackling climate change. Climate entrepreneurship, with its focus on innovative technologies that reduce GHG emissions through software, hardware, data analytics, and value chain optimization, offers a beacon of hope for a sustainable society and a direct impact on SDGs.

According to the Climate Policy Initiative, India will require USD 10.1 trillion to achieve the net zero target by 2070. However, from 2017 to 2021, climate technology startups in India received merely USD 1 billion in funding, a drop in the ocean considering the demand.

Table 1: Investment volumes in Climate tech, number of transactions and median deal size in the years 2020, 2021 and 2022:

Source- India Impact Investments Trends (Impact Investment Council)

Table 2: Investment in climate tech according to different sectors:

Source- India Impact Investments Trends (Impact Investment Council)

The above table highlights two aspects: a substantial increase in climate funding in the last few years. However, climate tech startups have received a mere 9% of the total budget, and only 17% can convert from seed-stage financing to Series A funding. It is far below the global average of 29%. The data underlines a need for the necessary support for the climate tech startups in India to survive and thrive. There is a need to focus on climate tech startups to unleash the potential of Indian climate tech startups to achieve net zero by 2070.

Two aspects are crucial for a startup to be successful. First, access to the risk capital to enable businesses to cross the Valley of Death. Second, the provision of alpha-level returns for early investors. In this light, two crucial levers identified by the Inter-Ministerial Committee on Low Carbon Technologies report, NITI Aayog, are pertinent—the creation of the National Decarbonisation Fund and R & D Collaborations. Creating a national-level fund will pave the way for the transition towards a low-carbon pathway. The report further emphasises the creation of a dedicated R&D fund supported by the government and the industry. The fund will help in two aspects: first, nurturing innovative technologies and improving the commercial viability of these technologies. It is a crucial recommendation, and implementing it will help address the funding scenario in the climate tech space.

Creation of a Conducive Ecosystem
Funding is crucial to ensuring innovative startups receive the necessary support. However, linkages with academia, access to the right mentors, industry connections, and government support are equally important. The Industrial players can act as facilitators and can create innovative approaches to develop engagement with emerging innovations. Academia can act as a catalyst to tap into novel markets and innovative climate technologies and support wild dreams. Academia can help emerging startups access labs, inaccessible equipment, and other product and prototype testing resources. The government can provide the necessary regulatory environment and policy stimulus. In a nutshell, it is the role of government, industry, and academia to create a conducive environment for startups to thrive. Such an ecosystem can ensure India's status as a global leader in green innovation.

There are thousands of talented youths with innovative ideas across the length and breadth of India. The need of the hour is to tap the talent as soon as possible and provide them with the necessary support! It will ensure India usher as the climate tech hub of the world.

- Akshay Joshi, Program Manager, NSRCEL