📑Sopoong Briefs I Series 1. What have global climate tech accelerators invested in? [카테고리 설정이 아직되어 있지 않습니다.] As the first venture capital in South Korea to create a 10 billion won climate fund that focuses on investing in early-stage climate tech startups, Sopoong Ventures has been engaging in supporting the South Korean climate tech startup ecosystem alongside its investments. 'Sopoong Lab', which is the research lab of Sopoong Ventures, aims to contribute to the quantitative and qualitative growth of the climate tech startup ecosystem by sharing domestic and global climate tech trends and insights, as well as delivering Sopoong’s climate investment perspective and expertise to a wider audience.Climate tech accelerator bridges 'language of technology' and 'language of business'Due to its distinctive industrial and technological features, climate tech often requires large amounts of capital and a long time to commercialize. Uncertain political and regulatory environments make this even more challenging. The International Energy Agency (IEA) emphasizes that rapid uptake of currently commercialized technologies, as well as the commercialization and utilization of new technologies that have not yet entered the market, are key to carbon neutrality. However, there are many gateways for lab-scale technologies to find the right market fit.Therefore, the role of "Climate Tech Accelerators" that bridge the gap between people who speak the "language of technology" and the "language of business" is critical to achieve carbon neutrality through sustained growth of the climate tech industry. They provide investment and acceleration to early-stage climate tech entrepreneurs who have the technical expertise but are struggling to access the market, helping them to refine their technology and find market-ready business models. This group of portfolios which already have been vetted by the accelerators can also be a great deal-sourcing channel for follow-on investors.What have global climate tech accelerators been investing in, and what about South Korea’s climate tech investments trend?Y Combinator (YC) and SOSV are two of the leading global top-tier climate tech accelerators, ranked as the top 1 and 2 investors by number of climate tech investments. Where are they looking for opportunities and how are their climate tech portfolios doing? And what about South Korea’s climate tech investments trend?Comparing and analyzing 244 climate tech portfolios of YC and SOSV and 380 climate tech companies invested in Korea from '21 to '23, we analyze global trends and point out the direction in which the South Korean climate tech startup and investment ecosystem should move forward.How are global climate tech accelerators investing?Y Combinator (YC) and SOSV are considered as the leading "climate tech accelerators," ranking as the top 1 and 2 by number of climate tech investments. How are they investing?To explore this, we extracted companies that could be classified as climate tech from YC's Startup Directory (158) and SOSV's Climate Portfolio 100 (100) as of September 15, 2023, and excluded companies with incomplete information through Crunchbase, resulting in a final sample of 244 companies (146 from YC and 98 from SOSV). To compare with the domestic situation, we divided the technologies into the five climate tech sectors announced by the National Carbon Neutrality and Green Growth Council.Figure 1. the five climate tech sectors by 'Presidential Commission on carbon neutrality and green growth'.Top three areas in which climate technology company establishment and investment have increased rapidly over the past four years: alternative food, mobility, and AI∙data∙finance.Looking at YC and SOSV's climate tech portfolio (244 companies), we found that companies founded in the last four years (2020-2023) are more than half (49%, 119) of the total number of the companies founded in the last 20 years (2004-2023).This shows that recent climate tech company establishment and investment is more active than in the past. We also found that the technology sectors are becoming increasingly diverse: in addition to traditional clean energy and mobility, we are seeing investments in new technologies such as alternative food, AI, data and finance, new energy industries, process innovation, and carbon capture.Figure 2. Year of IncorporationFigure 3. Number of companies by climate tech sectorAlternative food: Diversifying food groups and collaborating with major companiesAs technology advances, alternative food products are diversifying and investments are expanding. The food crisis caused by climate change and population growth has sparked interest in sustainable food production, leading to Beyond Meat’s IPO and Impossible Foods becoming a unicorn in 2019.As the alternative food market grows, so do alternative food(related) technologies, such as cell-based cultured meat, 3D printing, and synthetic biology, and the scope of alternative foods, such as alternative seafood, plant-based dairy products, soy-based chocolate, spirits using molecular science, and natural colors using fungi. The U.S. FDA's approval of cultured meat for human consumption in 2022 has raised expectations for market expansion, and partnerships, strategic investments, and M&A between large companies and startups have helped to further expand the size of this market.On the other hand, price competitiveness is expected to be a major challenge for the market's sustained growth in the coming years, as the growth of alternative foods has slowed somewhat due to increased price sensitivity to groceries in the era of high inflation.'Finless Foods' that makes cell-cultured tuna(Src: Livekindly)'Endless West' uses molecular science to create sustainable spirits (Src: FoodBev Media)Mobility: XaaS(Anything as a service), various forms of green transportation emergeThe mobility sector, which accounts for about 50% of cumulative climate tech investments, has seen a shift in the nature of startups as technology has evolved. In the early days, there were many companies related to battery-related material/component technologies as energy sources changed from fossil fuels to electricity and hydrogen, while more recently, solutions that help infrastructure operate more efficiently (HaaS/SaaS/MaaS)[1] are gaining attention. In addition to automobiles, alternative transportation methods that utilize eco-friendly energy sources are also emerging. These include hydrogen-powered small airliners, wind-powered cargo ships, and seaplane electric airplanes.[1] HaaS : Hardware-as-a-Service / SaaS : Software-as-a-Service / MaaS : Mobility-as-a-Service'GoCarma' offers carpooling/car sharing toll discount solution'Regent' develops electric seagliders to transport people 'Voltic' replaces fuel with solar panels to reduce GHG emissions and costsAI, data, and finance: carbon emission measurement and monitoring solutions, and productivity enhancement solutions utilizing ICT technologies.Rising carbon trading barriers and climate disclosure mandates are increasing the need to measure and monitor carbon emissions across a company's value chain. This has led to a rise in the number of companies providing services such as emissions tracking and monitoring solutions for supply chains, emissions estimation solutions by linking consumer data with climate data, and emissions project planning and trading services. The carbon accounting market is forecast to grow at a CAGR of 22% to reach a market of $64.39 billion by 2030, and this is expected to accelerate as more countries and companies join the ranks of the net-zero movement. The link to finance is also impressive. Platforms that automate feasibility assessments for renewable energy investments, real-time climate asset trading platforms, and climate risk insurance products have received an investment, and more are expected to be established as green finance and AI technologies advance.Others: Process innovation to help reduce carbon footprint, new energy industry to help grid parity, various CCUS technologies, etc.Companies are increasingly innovating their manufacturing process to reduce CO2 emission across traditional industrial value chains, including manufacturing. Whether it's developing greener raw materials and products to replace traditional petrochemicals, 3D printing hardware and material solutions for making parts and apparel, solutions that reduce data center cooling costs by 96% and carbon emissions by 40%, or underwater robots that collect battery metals from the ocean floor without harming the environment, solutions are being developed to help transform processes.New forms of energy solutions are also gaining the spotlight. Various service models are emerging that combine hardware and software in the supply, storage, trading, and consumption of energy, such as API solutions to digitize scattered power sources and renewable energy asset management and transaction optimization services. The use of robotics in the energy industry is also on the rise, with autonomous snow removal and lawn mowing robots, wind turbine blade maintenance robots, and solar construction robots to maximize solar productivity attracting investment.Investments in carbon capture technology companies that require relatively large amounts of capital or are in the early stages of technology development also continue. The U.S. and Europe are actively fostering the industry with tax credits and increased R&D investment for CCUS and DAC-related projects, which has led to a steady increase in the number of related company establishments. New ways of capturing and utilizing carbon are emerging, including carbon mineralization companies that convert carbon into building materials, companies that capture carbon emissions from tailpipes of freight trucks, and companies that develop modular direct air capture technologies that do not require large infrastructure.'Impossible Metals' builds underwater robots for sustainable mining 'Zeitview' offers drone-enabled renewable energy infra monitoring solution'Noya' uses industrial cooling towers to design a cheaper DAC processAre climate tech accelerators really making outcomes?43% or more of Series A stages for early-stage (PreSeed-Seed) companiesLooking at the previous investment stage of the YC and SOSV climate tech portfolios, we found that 43% (106 / 244) are at Series A stage or higher [2]. Considering that companies founded relatively recently (2020-2023) account for half of the portfolio (49%), it's clear that companies have grown in a short period of time.[2] Series A (41 startups), Series B (19 startups), Series C (6 startups), Series D (3 startups), Series E (3 startups), Venture round -Series unknown (32 startups), Corporate Round (2 startups)Figure 5. Last investment stageOf the total climate portfolio, 45% are lead investments and 92% are PreSeed-Seed investments.Lead investors are typically responsible for a significant portion of the total amount invested in a given investment round, setting the terms of the investment, and guiding follow-on investments. The role of the early lead investor is even more important in the climate tech industry, where it requires a lot of follow-on capital and the market entry takes a long time.. We found that nearly half (45%, 109/244) of the institutions are lead investors, and for lead investors, a focus on early-stage investments (92%, 100/109) can (1) identify promising companies, (2) attract follow-on investments, and (3) lead to strategic investments (SI). Here's a closer look at the results.①Discovering, investing in, and Accelerating companies: 74% invested within one year of establishment, many attracted government R&D fundsOf the 109 companies, 74% received investment within one year of establishment. (80/109, 52 in the year of establishment and 28 in the following year) This shows that the accelerator is successfully attracting follow-on investment by discovering, investing in, and fostering promising companies with potential.On the other hand, 23% (25/109) of the companies received grants before and after the accelerator's investment, which shows that it is necessary to use a complex financial strategy utilizing not only investment but also policy subsidies and low-interest loans for technology development and demonstration of climate technology.Figure 5. Time between founding year and lead investment yearFigure 8. Whether to receive grants②Follow-on investment connection perspective: 75% success in attracting follow-on investment, 77% attracting follow-on investment within 1 year, 70% follow-on investment from lead investment companyAmong lead investment companies, 75% (82/109) succeeded in attracting follow-on investment, of which 77% (63/82) succeeded in attracting follow-on investment within one year after investing in YC and SOSV, 70% (57/82) showed that YC and SOSV reinvested (follow-on). The fact that the majority of the portfolio quickly attracted follow-up investments from new and existing investors after investment indicates that the company has been successfully performing its role as an accelerator by discovering and investing in high-quality companies and accelerating their growth.Figure 7. Whether to raise a follow-on investmentFigure 8. Time to raise follow-on investmentFigure 9. Whether the lead investor did follow-on investment.③Strategic investment (SI) perspective:Strategic investment participation 36%, 10 large corporations in south korea participatingAmong the lead investment companies, 36% (39/109) received strategic investment (SI) from large corporations. Strategic investors included global conglomerates (Toyota Ventures, Volvo Earth Ventures, H&M Group Ventures, Shell Ventures, 3M Ventures, etc.) and domestic conglomerates (GS Futures, Hanwha Solutions, LG Technology Ventures, etc.), and included alternative food, process innovation, and smart food. There was a lot of strategic investment in companies in the sector.Figure 10. Number of strategic investments by sectorStrategic investments were deeply related to the company's industrial area.For example, DJI, the world's largest drone manufacturer, has invested in Wyvern, which monitors land changes in high resolution and provides images. Shell, a global oil company, has invested in Statiq, which has built India's largest EV battery charging network. Global apparel retailer H&M has invested in Keel Labs, which makes seaweed-based fibers. Global automaker BMW has invested in Prometheus, which produces carbon-neutral gasoline.10 South Korean large corporations were also participating in strategic investments Hyundai Motor Group has invested in AmpUp, which provides electric vehicle charging solutions. SK Group has invested in MycoWorks, which develops eco-friendly materials, and Perfect Day, which develops alternative proteins. Hanwha Solutions has invested in Catalog which isa data storage platform, and Coulomb AI which is a battery analysis solution for electric vehicles. It has also invested in Novoloop, which converts plastic waste into high-performance chemicals and materials.'H&M' and 'Keel Labs' collaborate to introduce kelp yarn clothing at Paris Fashion Week 2023'SK', 'Daily Dairy', and 'Perfect Day' establish joint venture to preempt 'alternative dairy protein' businessGlobal top-tier climate tech accelerators are successfully performing their role as early investors.The passage of the ‘Inflation Reduction Act (IRA)’ in the United States and the enactment of the ‘Net Zero Industry Act (NZIA)’ in Europe have fostered the growth of the climate tech industry by stipulating the development of green industries and the provision of incentives for them. In addition, the carbon neutrality and RE100 declarations of major big tech companies such as Apple, Google, and Amazon are attracting the participation of many companies, and private investment in carbon reduction and adaptation technologies is also expanding.However, in order to achieve the goal of carbon neutrality, the climate tech industry needs to grow and expand faster and on a larger scale than the current level. In this process, the importance of accelerators to discover innovative technologies and early-stage companies with high growth potential and accelerate their growth is increasing.As a result of looking at the investment trends and performance of two global top-tier climate tech accelerators, they are quickly discovering and investing in promising companies in various new technology fields and actively supporting companies to get on a stable track by letting them attract follow-up investments within a short period of time. In addition, it seems that they accelerate the spread of climate technology by actively attracting strategic investments from large corporations.Meanwhile, what about the South Korean climate tech market? In the next series, we will look at the South Korean climate tech industry and investment status, and the role of accelerators within it.[Series 2] Go to the next page - What about South Korea’s climate tech investment trends? What are the challenges ahead?
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