There was no old boys network to break into in the growth stage of climate tech investing when the women at Blume Equity set out to raise their first fund. Back in 2020, there were few funds of any sort dedicated to helping critical climate solutions reach commercial scale.
“There was a really robust climate venture ecosystem in Europe. And very traditional pools of capital for profitable companies at the later stage,” says Blume’s Clare Murray, who launched the Amsterdam- and London-based climate investment firm with partners Eleanor Blagbrough and Michelle Capiod. “But the growth stage was this missing middle. We saw it as a huge opportunity.”
Blume is among the new crop of fund managers that are stepping up to address the shortage of growth capital for companies that have proven out their technologies and may even have found their first customers, but are struggling to scale up their production – and climate impact.
Many of those fund managers are women. And even as “emerging managers” raising their first or second funds, they are aiming big in order to be able to write checks of the size companies need for deployment and commercialization, which is orders of magnitude larger than what’s required for R&D or prototyping or early market testing.
Blume is nearing a final close of $200 million for its first fund. Avaana Capital, an early growth-stage climate investor that focuses on India, is close to closing its $120 million second fund. Ankur Capital, also in Mumbai, is dedicating 70% of its planned $150 million third fund to climate tech and sustainable agtech.
In the US, Trellis Climate, a Prime Coalition fund, launched in April to invest in growth-stage climate tech ventures that need funding for their first commercial plants. AiiM, which supports climate tech commercialization, targeting $200 million for its second fund. Elemental Impact is channeling $100 million in US federal funding from the Greenhouse Gas Reduction Fund, or GGRF, to deploy climate tech in underserved communities.
Why not aim high to prove the thesis? As Murray says, “It’s just as hard to raise $20 million as it is to raise $200 million.”
Investing in women
These fund managers are not claiming to have identified capital gaps or promising climate solutions because they are women. But they also are not not saying that. Women still represent a small minority of climate fund managers and entrepreneurs.
“There isn’t a pipeline problem, there’s a nurturing problem,” observes AiiM’s Shally Shanker.
Half of the companies in AiiM’s portfolio are women-led companies or companies where they’ve been able to significantly influence the gender balance post-investment.
In India, Avaana has seen an uptick of female founders in its pipeline, in part, the team thinks, because they’re a women-led fund. Blume Equity, while it doesn’t target a specific number of women-led companies, requires portfolio companies to track gender metrics and looks for opportunities for improvement.
“The challenge we take on is how do we bring more women into the climate tech field?” Shanker says.
Growth gap
Blume Equity’s founders saw an investment edge in betting on Europe’s growing ecosystem. Most other climate tech investors had gravitated toward North American companies, both in the boom times of 2020 to 2022, and the far less frothy 2023 and 2024.
Murray, a former investment professional with LeapFrog Investments and BlackRock, joined forces with Blagbrough (ex-McKinsey) and Michelle Capiod (ex-partner at private equity firm Mid Europa Partners) with an eye to raising $200 million to invest in 12 to 15 companies.
It has built a pipeline of more than 600 companies, of which nearly 400 are “interesting” and relevant, Blume says. “When you’re looking to make three to four investments a year, that’s a good ratio!”
A good portion of its funnel comes from Europe’s robust ecosystem of early-stage climate venture funds, which includes Berlin-based PlanetA, Amsterdam-based SET Ventures, Stockholm-based Norrsken VC, and Holsholm, Denmark-based Kompas. Blume is also finding companies that have successfully bootstrapped their way to growth, like Latvia-based Aerones, which makes robotics for wind turbine inspection and repair.
Such companies “are not on growth-stage investors’ radar because there hasn’t been much information about them,” notes Murray.
The Blume team also invests considerable time in cultivating relationships with companies it sees as promising, but which are still too early-stage.
“We are focused on building a pipeline for the long-term and long-term relationships. Even if something doesn’t fit now, if we’ve had a good conversation, we stay in touch. Maybe that company matures to the stage where it makes sense for us. And because we’ve already gone out of our way to help them, they’re more amenable to working with us,” says Murray.
Blume has also committed to its impact mission, including by linking a portion of its carried interest to its impact achievements.
Such strategies have helped Blume near its fundraising goal, despite an especially difficult fundraising environment for emerging managers. Its first fund is backed by the European Investment Bank, Swedish pension fund AP4, the Visa Foundation, Impact Engine, Wire Group, British Patient Capital and Queensland Investment Corporation.
Climate tech in India
More so than Europe and North America, India’s burgeoning climate tech ecosystem still has a major capital gap for early stage R&D funding.
“We could do with a lot more funding at that stage,” observes Rema Subramanian of Ankur Capital. It largely falls on private investors and fund managers to provide funding that government agencies and public bodies, like the US’s National Science Foundation, provide elsewhere.
The impact investment firm isn’t 100% focused on climate tech, though startups in the sector, along with agtech ventures, account for most of its investment activity. It’s eying about 25 investments with its third fund.
As with its two prior funds, Ankur’s third fund is focused on early stage companies, but the most promising companies will be eligible for follow-on investments of up to $10 million.
“The second gap is at that later stage, as companies start maturing,” Subramanian says. Growth-stage climate capital exceeds “what the Indian ecosystem can do” at this point. “There’s a lot of international capital that’s expected to fill that gap,” she adds.
Like Ankur, Avaana saving a good share of its capital for follow-on rounds, in light of the capital-intensive nature of many climate technologies. Avaana emerged in 2018 as one of the first fully climate-dedicated fund managers in India.
“There are a lot of generalist funds in the market, there are a lot of impact funds, there are a lot of incubators and accelerators, but we didn’t see anyone who was 100% dedicated to the climate tech ecosystem,” says Avaana’s Swapna Gupta.
Its goal: to help put India on the global map for climate tech innovation.
“There is no reason that 20% to 30% of climate solutions should not come from India, because we are reeling from climate problems,” Gupta says.
The firm was started by ex-TPG Growth partner Anjali Bansal. Gupta joined in 2022 as a partner from Qualcomm Ventures’ India team. Avaana, which is now nearing a final close, is aiming to make about a dozen early-stage investments with its second fund. It’s halfway there, having backed companies like Aerem, which connects small businesses to solar installers and financing, and Kazam, an electric vehicle charging software developer.
First of a kind
In the US, one of the most glaring capital gaps is for growth capital to help companies build their first production plants, expand their physical footprint in new markets, and test out new business lines and models.
Companies needing such “first of a kind,” or FOAK, funding often don’t fit venture capital requirements and are seen as too risky for commercial infrastructure and debt investors.
“What we’re focused on is that moment when startups have some technology proof, when they have demonstrated that the technology is workable, and it’s time to actually start selling it to commercial markets,” said Lara Pierpoint of Prime Coalition’s new Trellis Climate fund.
The nuclear engineer did a stint at the Department of Energy supporting innovative research breakthroughs. Trellis’ first investments will support project developments for Ample Carbon, which repurposes retired coal plants for bioenergy, and Ebb Carbon, a marine carbon dioxide removal company.
Trellis targets projects in the $10 million to $100 million range – well below the threshold of prominent FOAK backers like the US Department of Energy’s Loan Program Office.
“This first-of-a-kind funding gap is a big one, and now is the time to solve it,” Pierpoint told ImpactAlpha in April.
Honolulu-based Elemental Impact (formerly Elemental Excelerator) last week announced it will manage $100 million as a sub-awardee to the Coalition for Green Capital, a network of green banks that received a total of $5 billion under the Greenhouse Gas Reduction Fund to accelerate the rollout of green technology across the US. Elemental, led by Dawn Lippert, has long focused on ensuring that promising climate tech deployments benefit underinvested communities in the US.
“We’re laser-focused on the scale gap,” Elemental’s Avra van der Zee told ImpactAlpha.
Off-take contracts
California-based AiiM has found a sweet spot in companies that are early in their growth phase but can demonstrate commercial interest.
“That’s where nobody is writing checks,” says Shanker. “Investors all want to see $50 million in revenues first.” (Shanker declined to comment on fundraising for AiiM’s second fund.)
About 80% of the 17 companies AiiM has backed since launching its first, $71 million fund in 2020 have signed commercial contracts in place.
AiiM has already notched four exits, including Ecologic Brands, a woman-led sustainable packaging company, which was bought by manufacturing company Jabil in 2021. In January, AiiM’s portfolio company SupplyShift, a software developer focused on supply chain sustainability, was acquired by ESG-focused software company Sphera.
“We come in after companies have de-risked the technology,” says Shanker. “We are not taking moonshot risk. We are taking commercialization risk.”
Correction: An earlier version of this article suggested that AiiM invests in pre-revenue companies. AiiM invests in post-revenue companies.
