Climate Tech SaaS: What Are VCs Currently Investing In?
Three key insights and six investing themes
I often talk about how the SaaS landscape is now divided between markets that are in the replacement phase, in which you can build mostly incremental SaaS, and markets that are in the equipment phase, where there are opportunities to build radical SaaS. Climate Tech definitely falls into the latter category, as many problems related to climate change are still unaddressed but are becoming pressing issues for an increasing number of businesses.
With this in mind, I was interested in seeing what types of Climate Tech SaaS VCs are currently investing in. To explore this, I analyzed 44 Climate Tech SaaS pre-seed, seed, and series A rounds that have taken place in Europe over the past six months. By Climate Tech SaaS, I mean startups that sell climate-related software to business customers. These can be pure software products or include a hardware component.
I did not include deep tech companies such as those working on battery technology, food alternatives (e.g., meat, fish substitutes), nuclear fusion power, green materials (e.g., green cement), direct air capture tech, or energy storage tech. While many of these startups are B2B, they do not fall into the software category.
Learning #1: VCs are Investing in Six Major Climate Tech SaaS Themes
The first aspect that stood out is the handful of recurring themes:
Impact Accounting & Compliance: Many Climate Tech SaaS companies that have raised money in the past six months help businesses measure their climate impact (whether greenhouse gas emissions, societal impact, or both) to comply with regulations. As regulations around climate issues become stricter, it's logical to see startups tackling measurement and compliance first. It’s a must-have for an increasing number of companies.
Climate Related Data Providers: Startups collecting and/or aggregating climate-related data (carbon, methane, forest, wind, ocean etc. related data) to sell to businesses were another common investment theme. Customers of such software range from insurance companies to specialized companies like forestry firms or wind farm project developers.
Energy Consumption Optimization: Another recurring theme is software platforms that help businesses reduce their energy consumption. Energy savings can be achieved in buildings (electricity or gas), fleets of vehicles (from ships to cars), or manufacturing machinery. Several of these startups also provide hardware components that need to be installed in order to collect real-time data, which their software then uses to offer energy-saving recommendations.
EV Infrastructure: It was interesting to see several startups providing software or data to support EV infrastructure. This ranges from back-office software for EV chargers to data providers that help charge point operators find new locations for charging stations or software to help companies manage their EV fleets. There’s a whole ecosystem of SaaS developing around EV infrastructure.
Vertical SaaS for Climate-Related Businesses: I saw several vertical software products targeting climate-related businesses. Examples include software that helps solar panel installers digitize their operations or ERP systems for carbon project developers. It’s essentially the VSaaS playbook applied to businesses in the climate change space.
Carbon Credit Startups: A couple of startups are operating in the carbon credit space, such as carbon offset marketplaces or carbon credit verifiers.
Learning #2: 80% of Climate Tech SaaS Are Vertical Startups
Out of the 44 startups in my sample, 32 are vertical SaaS, meaning they target a specific industry.
Examples of industry-focused climate SaaS include a compliance tool for metals and mining businesses, software for charging station operators or wind farm developers, and flood intelligence software.
Examples of horizontal climate tech software include all-in-one ESG platforms, an employee sustainability training platform, or ESG data management software for sustainability teams.
Learning #3: 55% of Climate Tech SaaS Are AI-First Startups
By AI-First, I mean software products that would not function without AI; AI is core to their operation, not just a feature.
I was surprised to see that the majority of these climate tech SaaS are AI-First.
This shows how AI is becoming like "the cloud" – a “table stake” technology rather than a differentiator.