Sustainable Start-Ups – A Responsible Investment Avenue
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In 2021, PEs/VCs invested around $50 billion in sustainability-focused start-ups
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With recent investments in Climate Change Fund and sustainability start-ups, the trend is expected to continue in 2022
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From making an electric aircraft to producing microbes-based fertilizer, these unicorns are trying to alleviate adverse effects on the environment through product innovation
Sustainable Start-Ups – A Responsible Investment Avenue
On January 31, 2022, Breakthrough Energy Catalyst, a climate change investment fund launched by Bill Gates, secured $100 million from HSBC. Investments in technologies that focus on climate change and a sustainable future are gaining popularity. In a recent “Letter to CEOs,” Larry Fink, the chairman and CEO of Blackrock stated that “the next 1,000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators”.
According to GlobalData, venture capitalists (VCs) and private equity (PE) companies pumped in around $50 billion in 2021 for sustainable initiatives. Many sustainability-focused start-ups reached a valuation above $1 billion with such a considerable fund inflow and became ‘Unicorns.’ The most recent transaction took place –on January 25, 2022, in which Sylvera, a start-up that rates carbon offset, received $32.6 million in VC funding.
Sustainable Unicorns
At GlobalData, we track around 10,000 companies that have the potential to become the next unicorns. The following are some of the sustainable start-ups from our tracker that turned into unicorns in 2021:
Beta Technologies – Making Electric Aircraft
Beta Technologies is a company in one of the niche sectors – electric vertical take-off and landing (eVTOL), or the electric aircraft industry. While companies such as Joby Aviation and Archer Aviation are working on air-taxi, Beta is working on creating an air fleet for commercial operations such as defense, medical, and cargo logistics. The company has already secured partnerships with UPS and United Therapeutics. In a funding round led by Fidelity Management, Beta Technologies received $368 million in funding in May 2021. This funding round valued the company at $1.4 billion.
Perfect Day – Producing Animal-Free Milk
Perfect Day dairy products are identical to traditional milk but are produced from microorganisms. Conventional dairy farms are considered a significant source of greenhouse gas (GHG) emissions, and Perfect Day claims it can reduce these emissions by up to 97%. The company has delivered products through many retailers like Kroger and Lowes Foods. In September 2021, Perfect Day received an investment of $350 million to boost its efforts in animal-free dairy products. This funding valued Perfect Day at $1.5 billion, making it one of the biggest unicorns in the food industry.
Aurora Solar – Developing Software for Solar Energy
Aurora is a software company that developed a solution to estimate the cost of installing solar panels. Various features of this solution are helpful for both customers and the installing company. As the future of solar energy itself is considered brighter, Aurora was an excellent opportunity for investors. Valued at $2 billion, Aurora Solar raised $250 million in May 2021. The funding that made Aurora Solar a unicorn was led by Coature, along with ICONIQ Capital and other participants.
Pivot Bio – Creating Living Fertilizers
Pivot Bio creates fertilizers that do not cause soil pollution. The company infuses modified microorganisms into the soil, where they produce nitrogen. Synthetic fertilizers that are conventionally used cause GHG emissions, and this innovation provides a greener alternative. Pivot Bio secured $430 million in Round D funding in July 2021. DCVC and Temasek led this investment. With this investment, Pivot Bio reached a valuation of $2 billion. The company tripled its revenue in 2021, and the product has acquired more than 1 million acres of farmland.
Redwood Materials – Recycling Waste Batteries
While battery technology companies are trying to innovate battery materials, Redwood is on the other end recycling battery materials. From the scrap batteries, Redwood extracts cobalt, nickel, and lithium. These materials are resupplied to battery manufacturers. This can be circular economy realized in the battery value chain. Redwood’s partnership with companies such as Panasonic and Ford is expected to boost its growth. Led by moguls such as T. Rowe Price, Goldman Sachs Asset Management, Baillie Gifford, Redwood Materials raised $700 million in 2021, raising its valuation to $3.7 billion.
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