Storytelling, Plan-B Ready: Top Fundraising Tips From Climate Tech Founders
As India moves towards transitioning to a net-zero economy, the climate tech startup space is seen heating up.
The craft of good storytelling is crucial while raising funds, according to founders from the climate tech startup ecosystem that collectively raised over $50 million, while a back-up plan is essential too, as the timeline for fundraising is very uncertain.
At a session hosted by the Climate Collective named 'Essentials of Fundraising for Early-Stage Climate Tech Startups', EVage Ventures' Co-founder Pulkit Srivastava, Recykal's Co-founder Abhishek Deshpande, and LogisticsNow's Founder Raj Saxena guided new founders on how to get funds to invest in their climate-change-oriented stories.
As India moves towards transitioning to a net-zero economy and achieving its climate targets, the climate tech startup space is seen heating up.
As per Bengaluru-based NGO Climate Dot Foundation, climate tech investments came in at around $20 billion (Rs 1.58 lakh crore) in 2021, a fourfold jump from 2020.
“The funding, however, has largely been limited to two sectors, renewable energy and electric vehicles, suggesting the policy priorities of the country and reflecting market adoption,” it said.
However, most of this funding has gone into established business models for renewable energy and not necessarily into funding innovative ideas for startups.
The investment scenario and markets have matured in 2022, according to Deshpande, who started B2B waste management firm Recykal in 2015. “This year is the perfect time for climate tech startups to raise capital," he said. "Funds are looking to invest and storytelling is the key.”
He added that the market is more mature now, compared to when Recykal started seeking investors 4-5 years ago. However, he added that climate tech as a domain has limited understanding.
Deshpande, who raised $22 million from Morgan Stanley, Circulate Capital, and the family office of Murugappa for Recykal, said he spent a lot of time on investor education, and even though the market is in a better place now, everyone "needs to be patient as they pitch their startups."
It's very important to identify the right partner, he said. "Check if they have invested in similar companies, this will make investor conversations much easier."
Srivastava concurred with Deshpande on the point of storytelling. "I learnt the craft of telling people what is required," he said. "In my journey of being an entrepreneur for the last 8-10 years, I have gotten better at understanding what the other person wants to hear and matching what I want to say to what they want to hear, and I got better at this with all my experiences with fundraising."
He told entrepreneurs that money couldn't be raised based on presentations. "Raise money from your friends and family till you have your product in place."
Further, he said raising money should be looked at as a loan. "Don’t think that you don’t have to give it back, the more you raise the more you have to multiply it and give it back. But, be confident because you’re making money for your investors, have that mindset during investor meetings."
Saxena, who has raised funds from Shell and Flipkart, said diligence is extremely detailed when you’re raising institutional capital and one must be ready with all sorts of details. "With Flipkart, even our intern agreements had to be shared. That’s the level of diligence that happens."
Deshpande said such due diligence by startups can also take anywhere between 3-9 months. "So always have backup plans as fundraising timelines are very uncertain. Have a well-planned and well calculated fundraising strategy. Don’t do a last minute fundraise as there could be mistakes."