There has never been a better time to be a climate-tech startup in Southeast Asia.
Funding for climate tech in the region now makes up 7.8% of all venture-capital (VC) investments, up from 0.6% five years ago, according to DealSteetAsia’s climate-tech funding report report DealStreetAsia The State of Climate Tech in SEA 2022 Read more . And there seems to be a consensus that climate tech cannot be built using traditional venture-capital models alone.
Last October marked a turning point for Waste4Change—an Indonesian waste-management enterprise. It raised a US$5 million US$5 million AC Ventures Waste4Change bags US$5M co-led by AC Ventures to shrink Indonesia’s landfills Read more Series A round, which was its first VC investment after sustaining solely on corporate-client income for eight years.
The sudden change in the company’s fortunes can be attributed in some part to its joining Ecoxyztem—a venture-building programme for climate-tech startups in Indonesia. This infusion of funds came with the leeway for the firm to expand. From processing 100 tonnes of waste daily, to processing 2,000 tonnes per day over the next five years. To achieve that scale, it’s hiring for 18 full-time positions in the country.
And Waste4Change is not the only one. Local investment firms are showing a growing interest, with prominent VCs in the region—who once rode the wave of consumer-internet and fintech verticals—making their first early-stage climate-tech bets.
For instance, Temasek, the Singaporean state-backed fund, committed S$5 billion (~US$3.6 billion) towards investing in decarbonisation solutions through its new platform, GenZero, in June last year.
Last August, East Ventures invested in micro-farming startup GREENS, which claims to reduce water usage by 90% to grow crops, and AC Ventures co-led the October round in Waste4Change.
But even as this sounds like good news for the sector—and the region, in general—there’s a hitch: a lack of local scalable startups in this space. Currently, Southeast Asia’s largest share of climate-tech funding is restricted to renewable-energy solutions and e-mobility, leaving many opportunities untouched, said Jonathan Davy, Ecoxyztem’s co-founder and chief executive.
Ecoxyztem is one of the few programmes in Southeast Asia that aims to jump-start a more diverse set of climate-tech startups in multiple sub-sectors until they become mature enough to absorb venture capital.
Meanwhile, some VC firms are going a step further by building climate-tech startups from scratch with their own venture-building process.
Wavemaker Impact (WMI) is a spin-out of the Singapore-based VC firm Wavemaker. WMI’s philosophy is to identify climate-tech opportunities in Southeast Asia, work with experienced founders to build business models around them, put a team in place to execute the idea, and infuse the startup with initial capital to get it off the ground.