As President-elect Joe Biden readies his transition team and sets the agenda for his first 100 days in office, startups can expect to see some movement on long-stalled infrastructure initiatives that could mean big boosts to their business.
Infrastructure is high on the list of priorities of the incoming Biden Administration as the former vice president hopes to make good on his campaign promise to “build back better.”
American infrastructure has been crumbling for decades without significant investment from the federal government, and much of what will be replaced will also be upgraded with new technology, according to people familiar with the Biden plan.
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That means tech companies focused on next-generation telecommunications and utility infrastructure, transportation, housing and construction tech around energy efficiency could see new dollars pour in over the next four years.
“Infrastructure and build out of the clean energy economy … doesn’t necessarily mean large wind or large solar projects. It could mean advanced metering … it can be new engine technologies,” said Dan Goldman, a managing partner at Clean Energy Ventures. “We think that that can be a huge opportunity for job creation … not only putting people back to work but putting people back to work in high quality jobs.”
And there’s a willingness to encourage these infrastructure projects in less partisan ways in states like Massachusetts, Virginia and Florida, which are actively building out electric vehicle infrastructure and renewable energy projects, Goldman said.
While the federal government will ultimately be distributing the cash, startups can expect to see the spending actually come from municipalities and state governments, which often have a better understanding of local needs and where the money should go.
Next-generation energy infrastructure
The electrification of everything — a component of any zero-carbon movement — requires significant upgrades to existing power infrastructure. That means everything from systems management technologies to distribution facilities to ways to store power that can be moved on to the grid.
“Without that infrastructure investment it gets quite challenging,” said Abe Yokell, a co-founder and managing partner of Congruent Ventures.
He pointed to large-scale energy storage technologies as one solution, but management systems for utilities will be another area of interest.
Those infrastructure initiatives will likely mean good things for battery companies like Form Energy, which signed its first major contract with Great River Energy earlier this year; or Antora and Malta, which store energy as heat; or Quidnet, which has a pumped hydroelectric play for large-scale energy storage by pumping water into the gaps between rocks underground that creates pressure and can force water back up through a generator.
Other large-scale energy storage companies working on developing and installing batteries could benefit as well. That means good things for Tesla, which has a few major battery installs under its belt, and Fluence, which manages and operates big install projects.
Natel Energy, another startup working on energy storage (and generation) using hydropower, could also find its technology in the mix, according to company founder, Gia Schneider.
Schneider sees three potential pitches for her company’s technologies. “Climate change is water change,” she said. “We have a bucket in energy, a bucket of stuff in environmental and a bucket of stuff in working lands.”
There’re opportunities beyond energy storage as well. Sensors, monitoring and management technologies all have a role to play, and here, too, startup tech developers may see a boost.
“There’s a lot of startups on the energy efficiency side all the way from how you’re using energy in your home to how an entire city is using energy and where and when,” said Matt Mullrennan, chief executive officer of the international climate tech startup demo day, EnVest. “Energy efficiency comes down to use of data, and the intelligence side and decision-making on when and how to use energy is going to be really big. We produce a lot of energy that’s completely wasted. It’s the same in food and agriculture.”
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Water works
Those sensing technologies that work for energy use and waste in food and agriculture also have corollaries in the world of water. It’s another area where Mullrennan sees opportunities for startups and investors.
“Those types of infrastructure spending are really important. Water is the most important resource that we have and a lot of investors are interested in the space,” he said. “With water, there are some of the same issues we have with energy. We waste a lot of water in different sectors — especially in food and ag.”
Water sensing technologies like Banyan Water, Smart Energy Water, Emagin and FlowWorks, have spent the last decade developing technologies and building markets for intelligent water management and use. There are even companies developing specific applications for more niche water management situations like Opti, a Boston-based startup, that has a technology for stormwater management that’s already being used in Kansas City, Kansas.
And Natel works to manage water use and flow, all while repowering hydro facilities and rejuvenate old dams and protect and restore waterways, Schneider said. “There are 90,000 existing dams in the U.S. Some of this water infrastructure is pretty old and outdated.”
Wastewater treatment for urban, agricultural and industrial applications are another area where startups are raising significant capital. Companies like Epic CleanTec are applying the same principles of decentralized energy generation and applying them to waste management, building treatment technologies that can be installed into buildings.
Larger industrial wastewater treatment technologies have also garnered investor interest, with companies like Ostara, H20 Innovation and Cambrian Innovation raising significant funding rounds from investors in 2019 for their tech.
Transportation tech moves to electrification and beyond
If utility upgrades are one area that looms large in Biden’s infrastructure plan, transportation is another. For years the only infrastructure initiatives that could get money were the ones that have been around for decades in the form of highway upkeeps and roadwork.
With the advent of autonomous technologies and vehicle electrification — two initiatives that the U.S. has to support to maintain its global competitiveness — that kind of spending takes on new significance. Electric vehicles will definitely gain under a Biden administration. Either through purchasing requirements for new vehicles in the federal fleet or the creation of new emissions standards, electrification is coming. What also needs to happen is the development of new charging infrastructure to support the increasing demand — and the search for alternative sources for materials needed to manufacture the batteries at the heart of electrification.
“Creating a market for sustainable nickel in the event of a shortage is a huge opportunity,” said Mullrennan. “The people who can sustainably mine lithium and nickel are going to be doing quite well in the EV space.”
He pointed to companies like Camden Nickel and Lilac Solutions as two startups that could benefit from the rising demand.
And Mullrennan thinks that this is the year when technologies around hydrogen fuel cells take off.
“There’s a big battle going on between batteries and hydrogen on the long haul side for transportation. To be honest EVs in passenger vehicles is low-hanging fruit,” he said. “The harder nut to crack is trucking and scaling to the large scale trucks, the larger freighters and fueling an entire cargo ship. The question is what are these things going to run on? Is it going to be batteries or is it going to be a fuel?”
The development of a functioning hydrogen fuel industry would be a lifeline for the traditional oil and gas industry, which has the expertise and the infrastructure to make it, and has little hopes for long-term relevance in a future free from hydrocarbons that’s focused on electrification.
Green building boom
Of all of the stimulus deals that a Biden administration could push through, the one with the best returns might be around building retrofits and green buildings, according to several investors.
There’s been a boom in financing for construction-related tech companies and the expected infrastructure push could see demand surge even higher, bringing more need for new capital.
From 2015 to 2019, investors poured $5.1 billion into construction tech startups across 571 deals, according to data from CB Insights.
Global deal activity in the space grew from 2015 to hit 130 deals in 2018. Funding notably spiked that year when prefabricated construction and project management startup Katerra raised nearly $1 billion in its Series D round. While deal activity in the first half of 2020 was on pace to be the lowest in terms of volume since 2016 (clocking in with a 19% year-over-year decline), funding was up to $1.3 billion in 2020. That’s a 56% jump in financing year on year.
Goldman’s firm will likely contribute to some of that total. “We looked at a lot of platforms for improving building management along with materials that can fundamentally change the efficiency of windows or drywall or building envelopes,” he said.
Goldman isn’t alone. Reimagining buildings and the built environment is one of several areas that have been a focus for investors that are taking another look at climate-related technologies.
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“Energy efficiency is exciting because it might be the biggest job creator,” said EnVest’s Mullrennan. “Per dollar spent, energy efficiency creates some of the highest number of jobs. and it’s distributed more evenly across the U.S. as well. Small businesses that can help homes and commercial entities all the way up to cities and towns become more energy efficient.”
Like other investors, Mullrennan noted that energy efficiency and weatherization have add on benefits as well. “Hopefully this is like a tax cut for people. when they save money on energy they can use it for something else,” he said.
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