In the past few years, climate-tech has experienced a major spike in attention from investors around the world, as the public narrative has gradually focused more and more on the impending climate crisis. As a result of that focus, an increasing number of entrepreneurs, engineers and innovators have entered the field of climate technology in order to combat climate change (and hopefully make a living doing so).
“In the last couple of years, about a quarter of US and European venture investments were climate-focused. There’s really a lot of money coming into the field, and there’s a much more solid approach to sustainability than the clean-tech wave in 2008,” said Dr. Astorre Modena, managing partner at Terra Venture Partners.
“In the last couple of years, about a quarter of US and European venture investments were climate-focused. There’s really a lot of money coming into the field, and there’s a much more solid approach to sustainability than the clean-tech wave in 2008,”Dr. Astorre Modena, managing partner at Terra Venture Partners
Modena holds a Ph.D. in physics from Imperial College UK and a Post-doc from Ecole Polytechnique FR, with more than 25 scientific published papers. In an interview with The Jerusalem Post, Modena drew upon his 15 years in the Venture Capital space in order to give his insights into five climate-tech sectors that deserve attention in the coming year.
One of the most frequently discussed climate-tech sectors as of late is food-tech, and more specifically the development of sustainable proteins (or “alternative proteins”), which aim to solve the enormous climate damage caused by cattle farming.
By producing alternative protein out of plants, cell cultures and even bugs, food-tech entrepreneurs hope to reduce the world’s dependence on cattle as a primary source of protein, thereby acting to reduce the staggering greenhouse gas emissions as well as the land and water usage that cattle farming necessitates.
Despite its common popularity, Modena isn’t yet convinced that alt-protein will have its big moment, as it certainly has some major competitors to square up against in order to claim significant market share.
“Alternative protein is a big trend that has been extremely hyped up in the last couple of years. We [at Terra] believe cultured meat and similar bio-technologies can have a big impact, but at the end of the day, because they have to compete with authentic steak and normal burgers, it's going to be very difficult for most of the companies to succeed,” he said. “It's probably going to happen, but there are going to be a lot of dead companies before there’s one that will really succeed.”
"Alternative protein is a big trend that has been extremely hyped up in the last couple of years. We [at Terra] believe cultured meat and similar bio-technologies can have a big impact, but at the end of the day, because they have to compete with authentic steak and normal burgers, it's going to be very difficult for most of the companies to succeed, It's probably going to happen, but there are going to be a lot of dead companies before there’s one that will really succeed."Dr. Astorre Modena, managing partner at Terra Venture Partners
Another very popular sector in the climate-tech field is Agricultural Technology, which is an umbrella for many sub-sectors of tech that aim to improve and optimize the sustainability and resource usage of agriculture.
“We're looking a lot at agri-tech companies. It's not an easy field, but Israel especially can play a significant role here, and we have a few companies in our portfolio that are succeeding like Fieldin and Arugga,” Modena said, noting that the sub-sector of carbon capture is likely to see more attention from new companies in the coming year (though those at Terra are more interested in carbon mitigation than capture).
“[Carbon capture] is a growing field right now, and it's not so easy to do it from Israel, because it’s very capital-intensive, but there's going to be quite a few companies in the field this year,” he said.
A major lynchpin in renewable energy’s success is the ability to sustainably store the energy it generates. To that end, many companies are operating in the climate-tech space, developing energy storage technologies based around water, heat and even rocks, in order to give all that sustainably-produced energy a place to hang out until it’s needed.
“We’re big believers in energy storage and electrification. It’s the number one challenge for the entire renewable energy field to really become the number one energy source,” Modena said. “For renewable energy to become not only the leader in new energy but also the leader in energy in general, you'll need to solve the storage issue.”
Modena pointed out that even the most sustainable technologies need to be manufactured, and unless the process of manufacturing is climate-conscious itself, the products it produces will have a big overhead to cover until they actually make a positive climate impact.
”One of the things that people aren’t aware of is that even when you want to build an electric car, for example, the carbon footprint of actually building the car is going to take you many years to actually recoup,” he explained.
One of Terra Venture Partners’ portfolio companies, Daika, aims to address this issue by turning recycled wood into a plastic alternative that can be used in any production facilities that use plastic as a manufacturing material. Another such company is UBQ Materials, an Israeli climate-tech start-up poster child whose proprietary product converts both unrecyclable and organic waste into a universal plastic alternative.
“A lot of countries are looking at manufacturing and seeing that, not only should the product itself [have a climate impact], but the actual production of the product needs to have a low carbon output, and that's where these new materials come in,” Modena said.
As a physicist, Modena worked in the fields of plasma and energy fusion in order to advance energy sustainability progress. His expertise in the area has led him to believe in the massive potential presented by nuclear fusion as a source of renewable energy, which he hailed as “The Holy Grail of solving all clean energy issues.”
However, he admitted that his advanced knowledge of the field has also led him to believe that any significant progress or impact in the nuclear fusion department is still pretty far down the road from now. “Many people are investing a lot of money in nuclear fusion, but as a venture investor, I’m not a big believer in it taking off soon, [due to the] time and capital it requires,” he admitted. “I’m sure it's going to take off eventually though, and there are a couple of companies in Israel working on it.”
Climate-tech’s market share is increasing despite economic constriction
Modena explained that, while overall tech investments have tightened in response to economic challenges since 2021’s record-setting high, climate-tech is still likely to take up a significant amount of market share in the new year.
“This year is going to be a challenging year for the whole venture industry, but you can see that while the overall amount of money invested has gone down significantly, climate-tech market share is increasing,” he said. “It's actually one of the only sectors that have not seen such a drastic reduction as some fields like FinTech, which has gone down something like 70-80%.”
There is more movement toward creating more sustainable companies and more impactful companies,” he said. “Serial entrepreneurs are saying ‘Okay, for the next company, for the next job, I want to do something meaningful.’”