Green Startups Rising But Finance A Concern: MUFG Report

Climate Startups Struggle for Funding, MUFG Report

Funding continues to be a challenge for more than 800 climate tech startups in India, of which many have, till now, reached the growth stage. According to a report by IIMA Ventures and MUFG Bank, it is only 2.5% that get the prized Series A+ rounds. The report was launched at the Climate Action Summit, talking about the challenges as well as opportunities in India’s climate tech ecosystem.

Most startups in the portfolio focus on emission-reducing solutions for climate problems, with more than 80% on mitigation. Resilience building compared to climate impacts is hardly visible. Transport and Mobility constitutes a dominant sector in the space, with nearly 85% of the total funding received mainly due to electric mobility. Other sectors like industrial decarbonization, waste management, and alternative fuels appear less funded than their promise.

Growth-stage funding is the most problematic. Compared to this, early-stage funding is relatively robust: some two-thirds of startups achieve seed capital. Yet less than 3% of startups reach Series B or beyond. This funding gap severely limits the scaling potential and corresponding impact of startups.

Decarbonization technologies, waste-to-value solutions, and alternative fuels like biofuels and hydrogen are the identified growing areas by the report. All these fields open new opportunities for innovation and investment as India works on the climate goals.

India is highly vulnerable to climate change. With this kind of risk and opportunities for startups, the report also touches upon the developmental trend of government policies that support sustainability and stronger financial and policy support, so that more and more startups emerge and grow.

The summit hosted investors, entrepreneurs, and sustainability leaders who discussed how more financial support will be needed in climate tech. MUFG’s Takuya Senoo also mentioned that climate finance would be essential for India to realize its net zero ambitions while scaling up climate-tech startups. Going forward, IIMA Ventures in partnership with MUFG Bank would focus on supporting the sector through the development of initiatives which offer financial and other forms of support to start-ups working on solutions for climate mitigation and resilience.