The Future of Sustainability: SFC Capital's Role in Early-Stage GreenTech Investment
The Seed Enterprise Investment Scheme (SEIS) has been a linchpin for early-stage investment in the UK, especially in sectors aspiring to make a transformative impact, like GreenTech. The UK’s swelling GreenTech scene, responsible for an impressive $2.6bn of funding last year, has grown into one that we are particularly interested in. At SFC, our portfolio reflects the current trends in GreenTech as it became the second biggest sector we invested in during the 2022/2023 tax year.
What is GreenTech?
The term ‘GreenTech’ often brings to mind solar panels and wind turbines, but it has become quite difficult to put your finger on what GreenTech is exactly. It has expanded over a variety of sectors like clean energy, sustainable transport, and agritech. The underlying commonality is that all of these sectors aim to mitigate climate change, its effects, and other environmental issues through innovative technology.
Key Trends in Early-Stage GreenTech Investing
Away From Naïve Sustainability
Over the years, the word 'sustainability' has changed its meaning. From merely aiming to reduce carbon footprints, the space is moving towards a more holistic view of sustainability.
This is desperately needed as sustainability is incredibly complex. As Sifted reports, this means that other sectors like biodiversity, plastics pollution, and resource use are now capturing investors' attention.
The Rise of Data-Driven Sustainability
Dealing with more complexity also means dealing with more data and in smarter ways. Data has been a game-changer in how companies, consumers, and policymakers address sustainability.
Investments are pouring into companies that leverage data to make our societies less carbon-intensive. Software for monitoring and improving energy efficiency, particularly in commercial buildings and industries, is becoming a focus area.
Emphasis on Circular Economy
One way of looking at sustainability with a more nuanced perspective is the concept of ‘Circular Economy’, focussing on the system as a whole, inflows and outflows, and how to increase its efficiency.
More and more businesses have this concept at their core. These businesses are pioneering next-generation recycling technologies and finding alternatives to non-recyclable materials, thus reducing both pollution and consumption of finite resources.
Transportation Transformation
Further rising are also electric vehicles (EVs) – and not only on the ground but also in the air with the rise of electric planes. On the ground, next to cars, a growing space are light electric vehicles like e-bikes and e-scooters.
These are destined to redefine the way we move as well as our urban landscapes, making them more sustainable and people-friendly.
Heat Conservation
A still overlooked area in GreenTech is heat conservation, which accounts for a big chunk of today's energy mix – even more than electricity. In this emerging space, companies are realising the big impact efficient use of heat could bring for our joint effort against climate change.
Our GreenTech Portfolio
At SFC Capital, we are proud of our GreenTech portfolio. Founded in 2012 with a mission to be the first backers of the UK's most inventive startups, we've grown into the country's most active seed investor. In 2022, Beauhurst cited SFC as the most proactive fund in the UK's CleanTech sector with 22 GreenTech investments. This makes GreenTech one of the main cornerstones of our portfolio. Notably, SFC has also won the 'EISA Impact Award' for the significant impact our SEIS and EIS funds are having on the business landscape in the UK.
Our investment strategy benefits from strong connections with the UK’s top universities, accelerators, and incubators. With the capacity for long-term investments, we can support ventures through the often lengthy R&D and commercialisation processes. This is crucial for science-led companies that require both time and money to bring their innovations to market.
One standout company is Petalite, a startup developing an Electric Vehicle (EV) charging technology. The company has launched the commercialisation of its innovative EV charger, which offers faster charging times and is far more reliable than current alternatives, a breakthrough that could pave the way for the mass adoption of EVs.
Another company is Halocycle, a startup tackling the plastic waste problem. SFC initially invested in 2022 and followed on in 2023. They are developing a technology to recycle the plastic Polyvinyl Chloride (PVC), which was previously thought to be only mechanically recyclable. With the investment, they are able to bring their technology from the lab onto the road.
A Great Opportunity for Investors
The GreenTech sector looks more and more like one of the outstanding sectors that promise a significant upside. So, if you're an investor with an eye on both financial gains and environmental impact, the GreenTech sector looks highly interesting. There is much space for diversification with a variety of sectors like Clean Energy, Sustainable Transportation, Sustainable Food, Clean Industry, Sustainable Consumer Goods, and Green FinTech.
This is exactly what SEIS was created for, offering up to 50% income tax relief and capital gains tax exemptions to entice investors to invest in the companies that are finding the answers to our questions of tomorrow. Larry Fink, CEO of Blackrock, said it best: "The next 1,000 billion-dollar startups will be in climate tech."
Conclusion
GreenTech is an industry full of promise and potential. As it gains momentum, so does the necessity for informed, passionate investment. We at SFC Capital are fully committed to fostering this new wave of sustainable innovation. If you’re a GreenTech startup looking for investment or an investor looking to invest in the technologies of tomorrow, we’d love to hear from you.
Sources
Lucy Wilson in Beauhurst (2022): Top Greentech Companies in the UK | 2022.
Capital at risk. For professional investors only.
Tax benefits are subject to individual circumstances. Subject to changes.
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