Climate tech companies raised $1.23B in 2023, but several key sub-sectors went unnoticed
EV and renewable energy sector received the maximum funding in the first ten months of 2023, while sectors such as water and waste did not find too many takers, according to YourStory data.
- Ola Electric, Ather, Zypp Electric, BluSmart, and CleanMax Solar raised the maximum funding in 2023
- EV, renewable energy were investor favourites
- Over 50% of the deals between Jan-Oct 2023 were early-stage deals
- Bengaluru, Mumbai saw maximum number of climate tech startups
After several long years of winter, climate tech startups in India are finally starting to see some sunshine.
The year 2023 saw investors thaw from their cautious frost and pump money into particularly hot sectors such as e-mobility, renewable energy, and advanced technology.
The EV sector raised over half a billion dollars—$667.9 million to be precise—in the first 10 months of 2023, while the clean energy sector raised $390.3 million, led by a $360 million mega-deal bagged by CleanMax Solar, according to YourStory data.
EV was, of course, led by industry giants such as, , as well as EV-ancillary companies such as and .
But critical sectors that solve India’s most pressing problems remained relatively underfunded. Waste and effluent treatment, where India severely lags behind other countries, failed to turn trash into cash. Food and agriculture, as well as clean water, which 6% of the country’s population still does not have access to, also saw very little funding.
“EVs and renewable energy have already seen substantial growth being driven by government initiatives…they’re much more mature and thus attract a lot more investor confidence,” says Sandiip Bhammer, Managing Partner at, a VC firm that focuses on companies innovating in green industries.
Overall, the climate tech sector raised a total of $1.23 billion, across 55-odd funding deals.
Most of the climate-tech startups came from metro cities such as Mumbai, Bengaluru and Delhi, but lower-tier cities such as Bhubaneswar, Ahmedabad, Pune, Bathinda and Jaipur also saw interesting startups emerge.
Sectors such as waste, water, and adaptation have struggled to gain significant traction, because, for one, investors perceive them as inherently challenging to scale.
“The waste management sector in India certainly requires funds, but is completely dependent on government procurement and driven by individual municipalities so scalability is a concern,” says Heena Khushalani, partner, climate change and sustainability services at EY India.
These sectors are also R&D intensive and no one stakeholder is currently incentivised to invest, she adds.
Both Khushalani and Bhammer concede that for some of the up-and-coming climate tech sectors to become investable and sustainable from a business perspective, government intervention in the form of subsidies, incentives, priority sector lending, etc., is pertinent.
“Things can change for these sectors very fast if there’s increasing awareness and government support,” Bhammer adds.
The government has also started taking baby steps towards boosting these sectors. The Reserve Bank of India, in April this year, released a framework to mobilise capital for environmentally sustainable projects, enabling retail investors to invest in ‘green deposit’ schemes.
To combat greenwashing, the RBI has stipulated that funds generated from these green deposit schemes exclusively support ventures that advance energy efficiency, mitigate carbon emissions and greenhouse gases, encourage climate resilience and adaptation, and safeguard and enrich natural ecosystems and biodiversity.
Still, this is a small step in the direction, but not enough to increase funding in the sector, Khushalani adds.
Building climate resilience
Sectors that need growth fuel in India at present include agriculture, clean water, and plastic circularity or circular economy.
Food and agriculture raised a total of $58.9 million in the first ten months of 2023, withraising the most—$25 million in a Series B round, followed by which picked up a Series C round of $25 million.
“With changing weather patterns and the impact of global warming on soil quality, it is imperative that in countries like India—where the economy is heavily dependent on agriculture—the sector becomes resilient to climate change,” Khushalani says.
Another key focus has to be startups within the circular economy, specifically those that bolster recycling initiatives, promote the use of sustainable alternative materials, and solve the plastic problem.
“Plastic is a climate disaster catalyst and the main culprits are “fast” businesses such as fashion, e-commerce, FMCG…startups therefore are primed to capture this market because frugality is built into their DNA, and big corporations love cheap things,” says a Deloitte analyst.
However, the circular economy remains a neglected sector, primarily because of its long gestation periods and the lack of proven return on investment (ROI).
“Unlocking the potential of circular practices holds the key to sustainable development and demands a closer examination of its long-term benefits beyond conventional ROI metrics,” the Deloitte analyst adds.
Beyond small rounds
Of the 55 odd deals in the climate tech sector, at least 30 were early-stage deals--pre-seed, seed, and pre-Series A rounds.
Clean energy, water, waste, and food and agriculture were the sectors that witnessed the highest number of early-stage funding rounds.
“Since the amount of capital required upfront to invest in these businesses at an early stage is not too large, investors are more willing to effectively take on that risk, early on with small amounts of capital,” says Bhammer.
Climate change is also very contextual, and a one-size-fits-all approach can be quite impractical, which can limit a startup’s scope to expand internationally into newer markets.
“Investor interest at a massive scale will come only if some of these technologies have been proven successful across markets and also have a large addressable customer base,” notes EY’s Khushalani.
In terms of sectors poised to see increased funding, electrification, mobility, and energy will continue to demand investors’ attention and large cheques are likely coming their way.
2024 will especially also see increased financial support for EV-ancillary companies engaged in battery recycling, establishing charging infrastructures, innovating in battery chemistry innovations, and developing energy storage solutions.
Of course, it helps that the government is laser-focused on these sectors, and there’s bound to be a lot of money via subsidies and grants flowing in too, which will attract corporate and foreign investors, reasons Sheetal Bahl, Partner at Merak Ventures.
Edited by Megha Reddy