Indian climate-tech startups break funding records in 2022: Avaana Capital

Indian climate-tech startups raised more funding in 2022 than in any previous year, according to research by Avaana Capital.

During a keynote session on Investing in a Net-Zero Future at YourStory's startup-tech summit TechSparks 2023 in Delhi, Anjali Bansal, the Founding Partner of Avaana Capital—a climate-focused fund, highlighted a significant milestone for Indian climate-tech startups.

According to Bansal, startups dedicated to combating climate change secured $2.2 billion in funding in 2022. This amount surpassed the cumulative funding raised in the preceding four years. Seed-stage startups contributed to ~65-75% of investments by volume.

The renewable energy sector witnessed investments totalling $14.5 billion in the fiscal year 2021-22. Notably, about 75% of this deal value came from acquisitions and bond purchases. Bansal emphasised that India has experienced substantial investments in sustainable mobility and the electric vehicle (EV) ecosystem.

"Energy has already arrived, companies are choosing solar energy and hybrid because it is cheaper than thermal, and that is the kind of transformation we have to undergo across various industries," Bansal said.

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Despite these positive strides, achieving a net-zero future for India remains a formidable challenge. Bansal emphasised that approximately $10 trillion in climate financing is required to reach net zero by 2070. The ambitious goal of attaining 405 gigawatts in renewable energy capacity by 2030 further underscores the need for substantial investment—estimated at more than $30-40 billion annually.

Bansal highlighted that the current installed capacity is largely utility-scale solar and there is huge potential for distributed rooftop solar.

In June 2022, Avaana Capital, an investment firm focusing on climate and sustainability, successfully secured a commitment of $70 million for the initial closure of its second fund.

Since its inception in 2018, Avaana has provided support to over 20 early-stage startups.

Avaana Capital adopts an investment strategy focused on market-ready solutions poised for commercialisation. The fund directs its investments towards major themes such as energy and resource management, mobility and supply chains, and sustainable agriculture and food systems.

"VC investing is of course solving for consumers, but really it is solving for large problems. Value gets created when there is a big problem but also a big market," Bansal noted.