The venture community has realized several things in recent years: Climate change isn’t going away, and there is a huge opportunity to invest in companies that promise to define entire segments of the future economy.
With a few hiccups along the way, venture dollars have begun to flow with increasing volume and regularity to climate tech startups over the last few years. That capital is adding up; since the start of 2021, climate tech startups have raised $88 billion, according to PitchBook data.
The sector’s potential is practically limitless: The problems presented by climate change will be with us for generations, meaning that solutions could build companies that last for decades, if not hundreds of years. The slight dip in funding that the climate sector saw last year isn’t indicative of lost investor interest nor are the slow-pacing Q1 figures; for many, not just those in climate tech, the market is slow.
But just like in other parts of the startup economy, those dollars are far from evenly distributed. Women founders have received just 6.9% of venture dollars in climate tech in Q1, according to Crunchbase, which is down from 8.9% in 2022.
It will take the perspectives and knowledge from all things and all people to tackle our changing planet. But while climate tech and its backers might be experiencing an awakening, founders who identify as women have yet to experience it.
Gender bias is still persistent
“The funding gap is astounding,” Emily McAteer, co-founder and CEO of Odyssey Energy Solutions, told TechCrunch+.
A key driver appears to be the discrepancy in round size between companies with male-only founders and those with mixed-gender or female-only founding teams.
Data visualization by Miranda Halpern, created with Flourish
“One trend I’ve noticed is that women-led companies raise less in those first two rounds — pre-seed and seed,” Lindsey Hoell, founder and CEO of Dispatch Goods. “While investors may be proud of a diverse portfolio in some cases, I’ve seen data to support that the round sizes are smaller for underrepresented founders. That sets those founders and companies up for a much more difficult journey.”
Abe Yokell, managing partner at Congruent Ventures, agrees. He told TechCrunch+ that his firm, which focuses on early-stage companies, has worked hard to create a portfolio that’s significantly more diverse than the norm. But, he added, “the pipeline slims down at each stage of funding.”
Getting firm data on the longevity of women-founded climate tech companies is hard. In fact, it’s unclear how many women founders there are in this space, which isn’t surprising to many founders with whom TechCrunch+ spoke.
It’s often a combination of self-doubt and sexism holding many women back. The space is growing, and understanding of its needs and economic potential is also increasing. What persists, however, is gender bias. Kruppa Raghuraman, whose climate company is still in stealth mode, said she was initially hesitant to consider her startup climate tech because it didn’t seem “complex enough,” and she didn’t really have a background in it.
We must “stop the gender bias of men having more knowledge in this area than women and encourage women-led climate tech VCs who want to represent the underrepresented,” Raghuraman told TechCrunch+. “We shouldn’t have to separate women versus men when trying to provide a platform for a massive issue like climate innovation.”
The power of diverse perspectives
Those who identify as women bring unique experiences, helping them pinpoint and mitigate facets of the climate problem that otherwise would be overlooked.
“While climate change impacts us all, it doesn’t impact us all equally. In fact, those most impacted by climate change — today and in the future — are often the least responsible for it,” said Mary Yap, co-founder and CEO of Lithos Carbon. “Climate tech companies have an opportunity — and arguably, a responsibility — to center climate justice in the solutions they are leading. This means increasing the representation, involvement and protection of those most vulnerable to the impacts of climate change.”
“Capital should flow to women in this sector because female leadership is good for the environment, and startups with women perform better financially,” Elizabeth Landau, the co-founder of the climate fintech platform GreenPortfolio, added. “Why aren’t male founders asked these questions, and why are women required to build awareness?”
Fixing the shortfall of women-founded climate tech startups won’t be easy. The venture capital community has known about its shortcomings for years, and there’s been little in the way of tangible progress. Already, some initiatives have taken place. For example, last year, Amazon announced it would invest $50 million from its Climate Pledge Fund into climate companies founded and led by women.
The founders TechCrunch+ spoke with offered a range of solutions. “I don’t think there are any silver bullets to change the situation overnight but I do think that the fundraising process is more suited to male traits — at least according to some of the research I’ve found,” McAteer said.
One approach, she said, might be to change the metrics on which investments are decided. The prototypical founder’s pitch focuses on selling a “grandiose vision,” she said. That stands in contrast with the way women tend to pitch, McAteer said, which focuses more on short- to medium-term goals that are realistically achievable. “I wonder if the changing investment climate toward more metric-driven analysis might help favor this type of fundraising style.”
Another solution would be to boost the number of women in positions that help make investment decisions. “More underrepresented managing partners will also help. Nearly every fund that has invested in Dispatch Goods has at least one female decision-maker,” Hoell said.
In a way, climate tech could become a test bed for the rest of the venture community. “Because climate tech is an emerging sector, investors have the opportunity to design investment strategies with equity as a focus from the very founding of their firms. That’s quite different from established firms who must redesign their strategies and their support systems to include more women and people of color,” said Shally Shanker, founder and managing partner at AiiM Partners.
Still, it can’t be done in a vacuum. “Effecting change will take a concerted effort across the venture ecosystem at all stages,” Yokell said.
“I strongly believe those numbers can change,” Shanker said. “Ten years ago, there weren’t a lot of firms focused on climate tech. In the past three years, we have seen an influx of capital coming into the climate space. The same investors have an opportunity to impact funding for women and people of color and to change the dialogue.”
“What gives me hope is that women like me, who have the passion, courage and support to innovate and hopes of putting something positive into the world, aren’t going to let biases stop us from doing so. This support comes from family, friends, community members and, most importantly, VCs who don’t let gender bias stop them from supporting us,” Raghuraman said.
This piece was updated to reflect Elizabeth Landau’s name and company.
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