Lightspeed Venture Partners is aiming to allocate more capital to startups offering solutions for climate change.
“We believe that the focus of climate tech has opened trillions of dollars of opportunities globally, so we’ll be focusing more on this,” said Harsha Kumar, a partner at Lightspeed.
“As investors, we look for tailwinds and areas where there’s the biggest boom in the market — climate tech is clearly one of them. Climate change is a topic that’s relevant at a global level and [solutions to this are] being pushed aggressively by governments worldwide.”
Electric mobility is one of the biggest areas to invest in because close to 50% of spending in climate tech has been in this sector, she added. “Another area that we’re looking at is SaaS solutions, whether it is with regard to carbon accounting or offsetting. Technologies for decarbonisation are also interesting as there will be heavy R&D in this area,” said Kumar.
Both India and Southeast Asia are poised for innovation in the EV and other climate tech space. Kumar believes there will be more breakthroughs coming from these regions in the future.
“Given the nature of these markets, where the focus on economics is higher, you’ll see more cost-effective solutions coming up. In India, whether it has been hardware solutions, or battery packs, or battery networks, I think we’ll see interesting solutions emerge here,” she said.
And due to the predominantly agrarian nature of the economy in these regions, there are great opportunities for carbon offsetting as well, she added.
When it comes to climate tech or green tech funding, enterprise solutions will likely see more investments, she continued.
Lightspeed has made investments in a space tech startup called Pixxel which builds nano-satellites to provide up-to-date information relevant to climate monitoring. In August, Lightspeed led a $13 million Series A funding round in the Indian electric vehicle charging startup Exponent Energy, marking the VC firm’s first investment in the EV industry.
“Exponent Energy builds a fast charging network for commercial vehicles. The proposition is relevant for markets like India and other emerging markets where pricing matters a lot. You could reduce the size of the battery and have it run for longer distances which improves productivity which is critical in commercial vehicles,” Kumar explained.
Climate-focused funds
More venture capital firms are now tapping into climate tech, which is one of the components of ESG (environment, social, and governance) principles. Some of them even established climate tech-focused funds.
For instance, Wavemaker Partners launched its climate tech venture builder Wavemaker Impact last year. It recently hit the first close of its debut fund at $13 million and plans to close the fund at $25 million by early next year. Singapore-based Circulate Capital closed its second fund Circulate Capital Ocean Fund I-B (CCOF I-B) in July, bringing the vehicle’s total commitments to $53 million.
In July, Lightspeed raised $500 million in early-stage funds for India and SE Asia. From this fund, the firm invests typically from seed to Series A, between $1 million and $14 million. The climate tech investments for India and SE Asia are coming from this fund.
In total, the firm has amassed over $7 billion across four funds.
Although Lightspeed does not have plans to launch an ESG-focused fund in the immediate future, it will be doubling down investments in this particular area, according to Kumar.
“Venture capital is now waking up to the opportunity in this segment. If we compare climate tech funding this year to previous years, we’ll see that it’s trending positively. There’s also a lot of pressure for companies to be carbon-neutral. And given how strong the pool, the segment will remain attractive in the years to come irrespective of the macroeconomic situation,” said Kumar.
Lightspeed has invested in over 500 companies globally. This includes prominent names like the Indian e-commerce giant Udaan and edtech company BYJU’s, SE Asia-based superapp Grab and logistics startup Shipper, American buy now, pay later provider Affirm, and social media firm Snap.
