A solid business model, the key to attracting venture capital to cleantech

Risk investment experts Santiago Muguruza from BBVA, Carlos Fisch from Seaya Andromeda, and Jaime Zunzunegui from Nazca reflected on the challenges, opportunities, and considerations that companies and funds must take into account when managing financing for innovation in clean technologies during the latest BBVA Open Talks.

The boom in clean technologies is a macro trend that will deeply transform economies, generating a growing need for investment and innovation, key elements for advancing global decarbonization goals. The increasing urgency of this endeavor, combined with factors such as technological development, increased profitability of clean energies, or ecosystem growth, has led cleantech entrepreneurship to climb positions in the ranking of sectors that attract the most capital.

In 2023, startups in the climate tech field, focused on combating climate change, attracted 27% of venture capital in Europe, according to the “State of European Tech 23” report. “This figure basically tripled that of two years earlier,” explains Santiago Muguruza, Head of Venture Capital Investments at BBVA. “It’s a topic that is growing very rapidly and is becoming increasingly relevant as it addresses the challenges of global warming.”

Worldwide, investments in this sector accounted for more than 10% of the total in 2023, compared to 7% in 2018, according to PwC’s “State of Climate Tech 2023” report. In Latin America, cleantech was the tenth vertical that attracted the most funding throughout 2023, according to LAVCA data, accounting for 2.7% of total investment.  Meanwhile, in Spain, climate tech was the vertical that attracted the most funding in 2023, with €404 million, as extracted from the “The Spanish Tech Ecosystem” report for 2024 prepared by Dealroom in collaboration with BBVA Spark.

The latest BBVA Spark Open Talks, moderated by Muguruza, has given voice to the world of investment to learn about the perspectives of venture capital in Europe and Latin America regarding cleantech startups. In this roundtable held on May 23, Carlos Fisch, partner at Seaya Andromeda, and Jaime Zunzunegui, partner at Nazca, addressed the challenges that capital-intensive business models face in obtaining funding, investment opportunities for VCs, and advice that will allow entrepreneurs seeking funding to obtain the financial support they need to drive their projects forward.

The perspective of venture capital investment

Despite the global and widespread decline in venture capital globally in 2023 (almost 40%, according to Crunchbase data), innovation in clean technologies offers glimmers of hope, experts indicate. “Climate tech” is proving to be a more resilient asset,” explains Fisch, partner at Seaya Andromeda. This fund focused on the cleantech sector with a pan-European approach, launched by Seaya in 2022, invests tickets ranging from €7 to €30 million in the verticals of energy, decarbonization, circular economy, and food value chain; and has already reached its target size of €300 million. “Generalist VC has had a big adjustment in 2023, while climate has held up more,” emphasizes Fisch. “There is more funding, there are dedicated vehicles [for investment], and there is also a macro trend independent of the rise or fall of interest rates.” 

“Climate tech is proving to be a more resilient asset”

Regarding the actors in this investment ecosystem, Fisch points out that there are different types of investors: specialized, with expertise in a specific market, and generalists, who identify the trend and want to join it. This is the case, for example, with Nazca: this investment fund focused on Spanish-speaking countries in Latin America and Spain has a generalist nature, but the cleantech field is gaining relevance in its portfolio, says Jaime Zunzunegui. 


The expert sees the slowdown in risk financing in 2023 as something positive: “It was an overvalued market, and it’s an adjustment that has led to business models that don’t need so much capital.” In that context, companies dedicated to green energies represent an opportunity for the investment world, as exemplified by the case of Bia — a digital provider of energy services that is part of its portfolio: “It’s a profitable company (something uncommon in the early stages) but it has to overcome certain guarantees to be the supplier [of energy], and until a financier like BBVA who knows that risk arrives, they have to obtain equity,” explains Zunzunegui.

Although, he warns, Bia (whose business model is based on software) is an ‘asset light’, requiring less investment. According to Zunzunegui, the challenge lies in those companies that are more ‘asset heavy’ and in “finding those business models for venture capital […] in the creativity of both the entrepreneur and the fund on how to originate them.”

"The challenge is the creativity of the entrepreneur and the fund to originate business models suitable for venture capital"

Cleantech trends for investors

The interest of venture capital in clean technologies, according to experts, is supported by the advantages they demonstrate for investors. This is what Carlos Fisch of Seaya Andromeda defines as a “green bonus”: “Companies that do things well, and above all know how to communicate it, generate a financial ‘green premium’. A bank will offer better terms to finance green companies — we are seeing this with securitizations of green bonds — or even when going public there will be a premium for that green part. We believe it is a lever for creating value and return for our investors.”

Zunzunegui of Nazca agrees: the adoption of ESG policy has paid off for them, and that is why they want to incorporate impact principles for their next fund. “We believe that this is something where we must definitely be present; one, because we are the last generation that can help these trends; two, because we like it; and three, because there is opportunity.” Their investment in sustainable innovation, he explains, will focus on decarbonization through seven verticals (with applications ranging from energy storage to electric mobility or carbon capture). “We estimate that around $250 billion in investments are needed annually in Hispanic America [to achieve decarbonization].”

Meanwhile, among the areas under the broad umbrella of climate tech with promising prospects from an investment perspective, Fisch mentions “the decentralization of energy — we are moving towards ‘prosumer’ business models where people produce and consume, both at the residential, commercial, and industrial levels, and we see many technologies that help overcome the challenges [for their implementation] at the hardware, software, and grid levels—; companies that are enablers of the circular economy and help create circular business models of subscription, repurchase, trading, renting…; and finally, in terms of agro and food chain, precision agriculture issues that help major food producers make better decisions to use less water, fewer fertilizers, and improve crop yields.”


Advice for entrepreneurs from VC experts

For Carlos Fisch of Seaya Andromeda, knowing how to approach the right partner is key to accessing the funding that each company needs depending on its nature and stage: “It is very important for an entrepreneur to understand what type of capital they are attracting. They can attract anything from purely philanthropic capital to purely financial capital, which does not take into account ESG.” Between one extreme and the other, responsible investments seek to reconcile the positive impact of the solution with the return on investment: “There are ‘asset light’ software companies that are attractive both for generalists and for climate investors,” explains Fisch, but others “have hardware, have CAPEX, and need a more specialized investor with a different appetite for risk and return,” warns Fisch.

Regarding what they value most as investors in a startup, Fisch is clear. “The team is important, although there must be a trend, traction, and a business model that makes sense.” “In the capitalist economies we live in, either a financial model is sustainable and profitable, or there will be no impact on a large scale,” he adds.

For his part, Zunzunegui subscribes to this recommendation for entrepreneurs in the sector: “Look for a business model that is profitable in a reasonable timeframe. The world changed in 2022, there are no longer piles of money, and the time one has to prove it has been greatly reduced; but, unfortunately or fortunately, there are still many problems that we have to solve.” 

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