Business India ×
 Climate Change

Finance
Published on: Feb. 14, 2020, 8:10 p.m.
We need more conversations followed by more capital
  • Clean energy is a priority

By Sishir Garemella. The author is Founder & CEO, Sunvest Capital

They looked like floating metallic sheets of different colours, in a sea of muddy water, but they were the tops of the submerged cars. Kolhapur has seen massive floods, so has Bihar. 

The houseboats in God’s own country have been replaced by inflatable rescue boats. Not too far, in Bengaluru and in Chennai, people are praying for rain and groundwater levels to rise. In a few months, there will be the winter smog and we will start discussing air quality again. The climate situation is alarming and we cannot wait any longer.

Over the years, cleantech investment has been seen as impact-driven, with traditional metrics being supported by climate metrics. However with technology evolution, falling prices and availability of data, cleantech presents a pure economic value proposition to consumers and entrepreneurs like never before. Investors like to bet on entrepreneurs solving big problems with a large addressable market – the present climate situation in India presents a significant investable opportunity – albeit an overlooked one.

The opportunity areas:

Thus far, most of the clean energy investment in India has been in large utility-scale renewable energy projects. End consumer models present a strong value proposition for investing however there are very few early-stage venture capital firms looking at this space. It may also be that many entrepreneurs have used the “green”/“sustainability” narrative for easier fundraising rather than presenting the actual unit economics to the investors. In his book, Creating Climate Wealth, Jigar Shah mentions that getting Goldman Sachs to agree, gave SunEdison instant credibility because it was “the hardest money out there”.

Within India, Central and state governments are now focussing on clean energy, energy efficiency and mobility as a priority. There is a 100 GW commercial opportunity only in the renewable energy space. One reason why cleantech has not attracted early-stage capital is because of the regulatory complexity in the domain; however end-consumer business models mitigate that risk. Opportunity areas are in distributed renewable energy, storage technology, data analytics, electric mobility, mobility infrastructure and domain-specific lending.

What can entrepreneurs do:

Win local. Given the size of the market opportunity, there is enough business in your neighbourhood itself. Staying close to the customer helps in acquisition and delivery. The regulatory complexity in the Indian framework makes it difficult for smaller companies to operate across multiple geographies without margin erosion. Repeating the same task in a certain jurisdiction over and over again will allow for acceptance with the authorities and expertise within the firm.

Hope makes the world go round – Cleantech entrepreneurs must position their product or service as a growth driver rather than a cost-saving solution. The same Rs4,000 you save for a homeowner or a Rs40,000 you save for an SME when positioned as money earned rather than money saved, creates a significant mind shift in acceptance. Consumer awareness is still the primary challenge in this market and the more people that talk about your product, service, brand – the more you and your sector will grow.

Creating the ecosystem:

Silicon Valley is a fascinating place for it is a true start-up ecosystem. A successful ecosystem is a combination of a strong set of entrepreneurs, quality educational and research institutions, the will of the leadership and investor capital. While there are a handful of successful cleantech start-ups in most major cities, we have not been able to create a strong ecosystem where all four pillars work together to make investments a reality. We need more conversations followed by more capital. I would urge investors, next time you meet a cleantech entrepreneur, please give them a patient hearing. This is no longer about building the future, it is economically viable today and Mother Nature is screaming for help. 

(Views expressed are personal).


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