Climate tech: enabling technologies and the Spanish startup scene

In this piece, we explore the enabling technologies that are helping to tackle the challenge presented by climate change, we dive into the corporate drive towards sustainability, and outline our take on the considerable potential of the Spanish climate tech ecosystem.

It’s going to be a difficult century… but we’ve got a fair chance

Bill Gates recently shared his 2023 outlook. He didn’t mince his words: ”Getting to zero emissions will be the hardest thing humans have ever done. We need to revolutionise the entire physical economy — how we make things, move around, produce electricity, grow food, and stay warm and cool — in less than three decades.”

But how? While innovations in deep tech (spearheaded by engineering and hardware solutions) will create some of the most impactful climate solutions, enabling technologies are also key in our efforts to tackle climate change. Developing and deploying cutting-edge technologies, such as Artificial Intelligence, offers us the potential to understand climate change's impacts better and develop targeted strategies that can mitigate its effects.

It is going to be a tough century, certainly, and it looks increasingly likely we'll struggle to keep temperatures within the UN's cited 1.5 degree target, but that doesn't mean that we should give up. Human ingenuity is its most impressive when times are most difficult, and we’re excited by the work already being done by founders to tackle these challenges.

How enabling technologies will help us tackle climate change

The United Nations has identified technologies such as 5G, IoT, AI, Machine Learning, Blockchain, Robotics and Cloud Computing as key enablers for achieving the Sustainable Development Goals (SDGs).

Let's explore how some of them can assist in addressing climate change:

  • Artificial intelligence and Machine Learning to analyse and make sense of the vast amounts of data being generated by monitoring and tracking technologies. Both technologies can both identify patterns and trends, predict future conditions, and optimise systems for more efficient and sustainable operation. Experts recently highlighted examples of how AI brings us closer to a Net Zero world at the Future Trends Forum organised by Fundación Innovación Bankinter. According to PwC, the utilisation of AI alone has the potential to boost the worldwide economy by $15.7 trillion by the year 2030.

  • Robotics and Automation: to augment and automate processes in areas such as renewable energy generation and storage, energy-efficient building design, and sustainable transportation.

  • IoT, 5G networks, and Cloud Computing to connect and communicate data between devices and systems, allowing for more efficient and effective monitoring and management of energy use, transportation, and other relevant areas.

  • Sensors, Drones, and Satellite Technology to gather data on environmental conditions, such as air and water quality, weather patterns, and the state of natural ecosystems. This data is then used to inform decision making and track progress in addressing climate change.

  • Blockchains and Smart Contracts may help to improve transparency, accountability, and traceability of emissions. They can be used to calculate, track, and report on reducing the carbon footprint across the entire value chain with instant authentication, real time data verification, and precise data records.

  • Quantum Computing offers simulation and optimisation capabilities beyond the reach of classical computers. Simulating molecules, for example, provides major potential for progress in chemistry, clean energy, batteries and carbon capture.

However, it is worth noting that various technologies can have relevant, damaging side effects too. For example, machine learning and AI can be powerful tools, but they also contribute to carbon emissions due to its need for large amounts of computing resources and electricity, presenting an ongoing challenge for the AI community.

Combining technologies for powerful solutions

When combined, cutting-edge technologies have the potential to unlock unprecedented levels of power and capability.

From our investment thesis perspective here at K Fund, that’s our sweet spot: we’re looking for businesses at the intersection of enabling technologies, applied across all fields in climate tech, and including but not limited to electromobility, carbon removal, smart grids and energy generation.

For example:

Smart Grids

Integrating IoT devices, such as sensors and meters, with traditional power grid infrastructure to enable real-time monitoring and management of energy consumption allows for more efficient uses of renewable energy sources. This is commonly seen across solar and wind, and can help drastically reduce emissions or energy wastage.

A relevant example is AutoGrid, which uses IoT and AI to optimise the management of energy consumption on the grid, increasing the integration of renewable energy sources. Within Spain we’ve noted Plexigrid, a data-driven platform for grid planners, operators, and flexibility managers or Adaion, a cloud based platform that digitalizes a grid by applying data, digital twin, and AI.

Monitoring and planning

Satellite data combined with scientific modelling can allow the accurate measurement, prediction, and reduction of environmental impacts such as carbon emissions, deforestation, water use, or associated biodiversity loss.

Orbital Insight uses satellite imagery and AI to monitor changes in land use, such as deforestation, and track progress on conservation efforts. Landgriffon is a Spanish company that empowers companies to measure and manage large-scale agricultural supply chains such as cotton, beef, palm oil, rice, and soy to transform agricultural supply chain impacts and help meet their sustainability targets. In planning, RatedPower helps to design and optimise solar power plants (recently acquired by Enverus).

Simulation and optimization

We recently conducted a deep dive into Quantum Computing, and learned how Quantum computers can outperform classical ones in simulations and optimisations. Examples include simulating chemical systems involved in carbon capture or optimising renewable energy systems. Additionally, AI and Machine Learning can be used in conjunction with quantum computing to analyse data, identify patterns, and develop predictive models, improving their accuracy and efficiency.

An excellent way to keep up to date with the latest discoveries is through Q4Climate, an initiative that brings together the research communities at the intersection of quantum and climate science, involving academia, government, and industry, to identify how or where emerging quantum technologies may be applied to reduce the pace and impact of climate change.

Multiverse has great examples of quantum-powered methods applied in energy and chemistry, working with top Spanish utilities companies.

Carbon offsets transparency

Several startups have developed carbon offset solutions using blockchain technology, such as Nori, JustCarbon, or Likvidi. The voluntary carbon market has traditionally faced problems with  trust, and blockchains and smart contracts could improve trustworthiness making the process of dealing in carbon credits more transparent by providing a clear record of transactions.

ClimateTrade and MossEarth are noteworthy examples in Spain and Latin America, respectively.

Predictive Maintenance

Combining AI and IoT technology to monitor the performance of factories, large-scale installations, or buildings, identifying potential issues before they occur, helping improve the efficiency and lifespan of the facility, and thus reducing the costs and environmental impact.

Strong examples here are Augury (which combines advanced sensors with powerful AI capabilities and collaboration tools to help teams understand when machines are at risk), or Spanish startup Fracttal, an IoT and Big Data all-in-one asset maintenance management solution allowing any enterprise management system to make their operations more efficient, safe and sustainable.

Unlocking the Potential

These are just a few examples of the many possibilities out there. With such a wide range of combinations, the potential for new and exciting ways to use these technologies is almost limitless.

Large Language Models (LLMs) and Climate Change

2023 is already the year of Generative AI. The potential of LLMs to assist in climate tech is yet to be fully explored. Last November Climate Policy Radar teamed up with OpenAI for their first hackathon dedicated to Climate Change. Several teams designed AI solutions for climate policy ranging from analysis tools to enhancing document accessibility. The 2023 edition dates will be announced soon and probably way more projects will present their ideas.

A unique moment for climate tech entrepreneurs

The current moment presents a prime opportunity for starting a climate technology company - it's never been a better time. Entrepreneurs and investors are experiencing an alignment of favourable conditions providing an unprecedented environment to impact climate change significantly.

Diving deeper:

Advances in technology 

Technologies in climate tech are becoming more sophisticated, available, and in some cases, more affordable due to scientific and engineering advances. Plus, the influx of venture capital into climate tech has allowed for more significant investment in research and development of new technologies. Alongside this, learning curves are driving a move towards extremely cheap clean energy.

Climate awareness

Individuals worldwide are becoming increasingly aware of climate change and its effects. UNICEF found that 73% of citizens are concerned about it while young people are more motivated to act. The pandemic also has heightened environmental awareness. Also, less than half of people report being satisfied with their country's efforts to preserve the environment.

At K, back in the day, we learnt a lot about that awareness through our investment in Lucera, a pioneer in the renewable energy utilities sector in Spain acquired by Masmovil in 2021.

Regulatory pressure

Governments are rapidly developing tougher new policies related to climate. 

In Europe, the EU's Non-Financial Reporting Directive (NFRD) requires entities to provide regular updates regarding their ESG practices across multiple domains, while the EU Taxonomy will require over 50,000 firms to report independently verified ESG indicators. US issuers may also be subject to the new EU rules. In the US, companies must measure and publish their Scope 1 and Scope 2 carbon emissions beginning in 2024 under new ESG regulations. The SEC has also announced new ESG disclosure requirements.

This increase in regulation is creating plentiful opportunities for startups especially in B2B SaaS. There's still a long way to go, as only 10% of companies measured their emissions comprehensively in 2022

There are incumbents like Salesforce with Net Zero Cloud and well-backed startups such as Watershed, Plan A, or Persefoni, whose latest $101M series B round seems to be the largest investment round in any climate tech SaaS company.

We have already invested in Bcome, a Spanish sustainability platform that empowers textile and apparel businesses to build responsible supply chains, guarantee transparency and bring it to the final customer.

Also within Spain there is Trebellar, an integration platform that digests and unifies workplace and workforce data into actionable insights, or Dcycle, which helps companies measure and control their sustainability.

Since our initial investment in Factorial, we have seen the impact of digitalisation on SMBs and how they can benefit from using great software that, years ago, was only in the hands of large companies.

The same dynamics could manifest here as SMBs will have to make a considerable effort to comply with the new regulations and pay more attention to their effect on the environment. It remains to be seen if there will be one "winner takes all" player or if there will be a champion for each vertical or sector. Only time will tell.

Corporate demand

Corporations increasingly ask for more sustainable solutions in response to investors and employees pressure, consumer demand, and regulatory requirements. Companies are responding to the demand for sustainability by taking steps to become more sustainable, with some studies revealing that more than a third of global consumers are willing to pay more for sustainability.

Funding growth

In 2022, 25% of all venture capital funding went to climate tech, and there is nearly $300 billion in dry powder waiting to be deployed in this industry for 2023. However, given recent slowdowns in the market, there is less pressure to deploy it quickly, although this is being countered by increasingly competitive deals in the climate space.

It’s worth noting that, according to Bloomberg, a substantial portion of that money comes from Corporate Venture arms, demonstrating the corporate hunger for climate tech. Corporate venture investors doubled their spending on climate tech in 2021, investing $23.2 billion according to Pitchbook, suggesting similar figures for 2022 (as yet unpublished). 

Increasing talent density

Highly-skilled employees are leaving big tech companies to pursue opportunities in climate tech, driven by a sense of urgency, purpose, and impact. Also, Gen Z workers are avoiding employers with a negative environmental impact, and new websites like Work on Climate or communities such as ClimateEU are helping those transitioning to climate-focused roles.

Climate tech startups are also benefiting from the big tech lay-offs that have significantly increased since the autumn. .

Climate tech in Spain

At K Fund, we’ve spent the last six months getting our heads around Spain’s thriving climate tech ecosystem, mapping over 150 companies in the space, and speaking to at least a third of these in the hunt for the finest entrepreneurs solving the biggest problems.

We’ve been consistently amazed by the quality of founders, the variety of approaches to problems, and the talent flowing into these businesses - reflecting all the macro trends seen above.

Find below our initial mapping of the climate tech sector in Spain, limited for now to 150 companies, and based on the categorisation of the European Green Deal. We limited our scope as we couldn’t hope to be totally comprehensive with a first iteration, and we’ve no doubt missed many great companies. Please let us know by email any companies we might have missed to (max@kfund.vc / nacho@kfund.vc), and we’ll update the map on an ongoing basis.

Some trends we’ve observed:

1. Energy dominates

We have categorised Spain’s startup landscape across eight core areas. Spain’s climate ecosystem leans heavily towards the category “a clean and efficient energy transition”, driven in large part by the prevalence of solar startups in the country, but supported by a long tail across wind, hydrogen, and new battery/storage technologies.

As noted in a recent piece on our blog, Spain has a wide and growing ecosystem of solar startups, working across B2B and B2C, alongside novel hardware, financing and credits. We believe the most promising of these are working cross-stack, covering installation, operations and management, and providing ongoing analytics for both businesses and end consumers.

There are also a number of interesting project-financing plays connected to the energy sector, allowing individuals to invest in renewable projects through crowdfunding (Crowmie, Fundeen), or institutional investors to finance utility scale developments (Alter-5). Given the rapidly growing nature of this market, alongside the poor quality of institutional offerings, we expect to see more players in this space, especially on the B2B side. 

2. The ESG reporting market remains wide open

As noted above, emissions and impact tracking technology have had a bumper few years across Europe. The first wave, including the likes of Plan A and Persefoni, have raised near-mega rounds, and although we predict this to be a market with multiple winners and we’re closely following the trajectory of Spanish players here (including our own BCome), the questions of generalist vs. specialist and local vs. international remain as yet unanswered.

We are interested in speaking to founders building businesses in this area  with a clearly defined customer base and strong fundamentals, that have been grown not just through sales and brand, but also through a tech-driven edge. The first wave of companies have generated large investments with excellent public profiles, but we believe the value here lies in leveraging data to develop relevant actionable insights for a specific sector or segment, above and beyond green-washing metrics.

3. Strong tech development in satellite imagery and data visualisation

We’ve been impressed by the quality and variety of Spanish businesses using satellite imagery to assess risks. Mitiga Solutions has demonstrated impressive traction building risk and hazard prediction tools utilising physical models (vs. probability models focused on past events), while Lobelia Earth focuses on the generation of precise and observational datasets from geophysical features.

Much like ESG reporting, we believe the winners here will be those who capture large but clearly defined markets - financial services, insurance, property -, built on proprietary algorithms that produce clear predictions from numerous data sources, to cut through what is currently a very noisy sector. 

4. Logistics will play an important role in the green transition

Spain is a nation with a high concentration in logistics providers amongst legacy players, which alongside growing e-commerce penetration presents a considerable opportunity for new entrants. We believe more efficient delivery, returns and exchanges will play a major role in the green transition - as vehicles transition to clean energy sources (such as Basquevolt’s novel semisolid battery technology), last-mile and long-distance routes continue to be optimised and waste can be reduced across all areas.

Our portfolio organisation IF Lastmile is working to streamline the returns and exchange process, improving savings for retailers, reducing inefficiencies in routing and improving traceability. Spanish competitors Dawa and Rever are also working in the reverse logistics space, while Trucksters’ novel relay model is targeting similar goals for pan-European long-haul freight.

5. Enabling technologies are well distributed 

Based on conversations with founders and publicly available information, we’ve observed that the use of AI dominates across the mapped companies, with over 35% of companies claiming some use of Machine Learning or Artificial Intelligence in their propositions.

Beyond this, IoT is strongly represented in almost 20% of companies - unsurprising given the presence of sensor or hardware-based businesses across climate tech areas such as Clever Solar Devices in the B2B solar space, Wallbox in B2C EV charging, Zeleros building Spain’s first hyperloop, Worldsensing in infrastructure monitoring, or Candam in reverse logistics. 

And notably, there are a number of businesses using distributed ledgers such as BeChained, a business building digital twins for business consumers to reduce wasted energy consumption and sell carbon credits, or the aforementioned Climate Trade using blockchain technology for carbon credits trading.

6. Government initiatives in Spain

And lastly, we’re proud to observe that Spain has the potential to take a leading role in the green transition, setting ambitious goals to reduce GHG emissions and investing in climate finance commitments

The country is introducing a new regulatory framework to reduce carbon emissions, devoting 40% of its total allocation to climate objectives, and banning new coal, gas, and oil exploration and production permits. 

Additionally, Spain has recently approved the act to promote the startup ecosystem and is launching a new digital nomad visa.

Get in touch

We have huge respect for founders building climate tech businesses, due not only to the difficulty of building any company, but also for the social good provided by novel solutions, and we’re excited to learn more about all of the areas discussed above.

Here at K Fund, we are a group of experienced investors, operators, and innovators that leverage our diverse knowledge to support our portfolio and add value beyond capital alone. 

We are a multi-stage fund that can write tickets from €100k to €10M in entrepreneurs with the capacity to create differentiated technology-based products and services.

If you're building a climate tech company, we would love to have a conversation with you to discuss how we can help

Let's work together to create a brighter, more sustainable future.

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In this piece, we explore the enabling technologies that are helping to tackle the challenge presented by climate change, we dive into the corporate drive towards sustainability, and outline our take on the considerable potential of the Spanish climate tech ecosystem.

It’s going to be a difficult century… but we’ve got a fair chance

Bill Gates recently shared his 2023 outlook. He didn’t mince his words: ”Getting to zero emissions will be the hardest thing humans have ever done. We need to revolutionise the entire physical economy — how we make things, move around, produce electricity, grow food, and stay warm and cool — in less than three decades.”

But how? While innovations in deep tech (spearheaded by engineering and hardware solutions) will create some of the most impactful climate solutions, enabling technologies are also key in our efforts to tackle climate change. Developing and deploying cutting-edge technologies, such as Artificial Intelligence, offers us the potential to understand climate change's impacts better and develop targeted strategies that can mitigate its effects.

It is going to be a tough century, certainly, and it looks increasingly likely we'll struggle to keep temperatures within the UN's cited 1.5 degree target, but that doesn't mean that we should give up. Human ingenuity is its most impressive when times are most difficult, and we’re excited by the work already being done by founders to tackle these challenges.

How enabling technologies will help us tackle climate change

The United Nations has identified technologies such as 5G, IoT, AI, Machine Learning, Blockchain, Robotics and Cloud Computing as key enablers for achieving the Sustainable Development Goals (SDGs).

Let's explore how some of them can assist in addressing climate change:

  • Artificial intelligence and Machine Learning to analyse and make sense of the vast amounts of data being generated by monitoring and tracking technologies. Both technologies can both identify patterns and trends, predict future conditions, and optimise systems for more efficient and sustainable operation. Experts recently highlighted examples of how AI brings us closer to a Net Zero world at the Future Trends Forum organised by Fundación Innovación Bankinter. According to PwC, the utilisation of AI alone has the potential to boost the worldwide economy by $15.7 trillion by the year 2030.

  • Robotics and Automation: to augment and automate processes in areas such as renewable energy generation and storage, energy-efficient building design, and sustainable transportation.

  • IoT, 5G networks, and Cloud Computing to connect and communicate data between devices and systems, allowing for more efficient and effective monitoring and management of energy use, transportation, and other relevant areas.

  • Sensors, Drones, and Satellite Technology to gather data on environmental conditions, such as air and water quality, weather patterns, and the state of natural ecosystems. This data is then used to inform decision making and track progress in addressing climate change.

  • Blockchains and Smart Contracts may help to improve transparency, accountability, and traceability of emissions. They can be used to calculate, track, and report on reducing the carbon footprint across the entire value chain with instant authentication, real time data verification, and precise data records.

  • Quantum Computing offers simulation and optimisation capabilities beyond the reach of classical computers. Simulating molecules, for example, provides major potential for progress in chemistry, clean energy, batteries and carbon capture.

However, it is worth noting that various technologies can have relevant, damaging side effects too. For example, machine learning and AI can be powerful tools, but they also contribute to carbon emissions due to its need for large amounts of computing resources and electricity, presenting an ongoing challenge for the AI community.

Combining technologies for powerful solutions

When combined, cutting-edge technologies have the potential to unlock unprecedented levels of power and capability.

From our investment thesis perspective here at K Fund, that’s our sweet spot: we’re looking for businesses at the intersection of enabling technologies, applied across all fields in climate tech, and including but not limited to electromobility, carbon removal, smart grids and energy generation.

For example:

Smart Grids

Integrating IoT devices, such as sensors and meters, with traditional power grid infrastructure to enable real-time monitoring and management of energy consumption allows for more efficient uses of renewable energy sources. This is commonly seen across solar and wind, and can help drastically reduce emissions or energy wastage.

A relevant example is AutoGrid, which uses IoT and AI to optimise the management of energy consumption on the grid, increasing the integration of renewable energy sources. Within Spain we’ve noted Plexigrid, a data-driven platform for grid planners, operators, and flexibility managers or Adaion, a cloud based platform that digitalizes a grid by applying data, digital twin, and AI.

Monitoring and planning

Satellite data combined with scientific modelling can allow the accurate measurement, prediction, and reduction of environmental impacts such as carbon emissions, deforestation, water use, or associated biodiversity loss.

Orbital Insight uses satellite imagery and AI to monitor changes in land use, such as deforestation, and track progress on conservation efforts. Landgriffon is a Spanish company that empowers companies to measure and manage large-scale agricultural supply chains such as cotton, beef, palm oil, rice, and soy to transform agricultural supply chain impacts and help meet their sustainability targets. In planning, RatedPower helps to design and optimise solar power plants (recently acquired by Enverus).

Simulation and optimization

We recently conducted a deep dive into Quantum Computing, and learned how Quantum computers can outperform classical ones in simulations and optimisations. Examples include simulating chemical systems involved in carbon capture or optimising renewable energy systems. Additionally, AI and Machine Learning can be used in conjunction with quantum computing to analyse data, identify patterns, and develop predictive models, improving their accuracy and efficiency.

An excellent way to keep up to date with the latest discoveries is through Q4Climate, an initiative that brings together the research communities at the intersection of quantum and climate science, involving academia, government, and industry, to identify how or where emerging quantum technologies may be applied to reduce the pace and impact of climate change.

Multiverse has great examples of quantum-powered methods applied in energy and chemistry, working with top Spanish utilities companies.

Carbon offsets transparency

Several startups have developed carbon offset solutions using blockchain technology, such as Nori, JustCarbon, or Likvidi. The voluntary carbon market has traditionally faced problems with  trust, and blockchains and smart contracts could improve trustworthiness making the process of dealing in carbon credits more transparent by providing a clear record of transactions.

ClimateTrade and MossEarth are noteworthy examples in Spain and Latin America, respectively.

Predictive Maintenance

Combining AI and IoT technology to monitor the performance of factories, large-scale installations, or buildings, identifying potential issues before they occur, helping improve the efficiency and lifespan of the facility, and thus reducing the costs and environmental impact.

Strong examples here are Augury (which combines advanced sensors with powerful AI capabilities and collaboration tools to help teams understand when machines are at risk), or Spanish startup Fracttal, an IoT and Big Data all-in-one asset maintenance management solution allowing any enterprise management system to make their operations more efficient, safe and sustainable.

Unlocking the Potential

These are just a few examples of the many possibilities out there. With such a wide range of combinations, the potential for new and exciting ways to use these technologies is almost limitless.

Large Language Models (LLMs) and Climate Change

2023 is already the year of Generative AI. The potential of LLMs to assist in climate tech is yet to be fully explored. Last November Climate Policy Radar teamed up with OpenAI for their first hackathon dedicated to Climate Change. Several teams designed AI solutions for climate policy ranging from analysis tools to enhancing document accessibility. The 2023 edition dates will be announced soon and probably way more projects will present their ideas.

A unique moment for climate tech entrepreneurs

The current moment presents a prime opportunity for starting a climate technology company - it's never been a better time. Entrepreneurs and investors are experiencing an alignment of favourable conditions providing an unprecedented environment to impact climate change significantly.

Diving deeper:

Advances in technology 

Technologies in climate tech are becoming more sophisticated, available, and in some cases, more affordable due to scientific and engineering advances. Plus, the influx of venture capital into climate tech has allowed for more significant investment in research and development of new technologies. Alongside this, learning curves are driving a move towards extremely cheap clean energy.

Climate awareness

Individuals worldwide are becoming increasingly aware of climate change and its effects. UNICEF found that 73% of citizens are concerned about it while young people are more motivated to act. The pandemic also has heightened environmental awareness. Also, less than half of people report being satisfied with their country's efforts to preserve the environment.

At K, back in the day, we learnt a lot about that awareness through our investment in Lucera, a pioneer in the renewable energy utilities sector in Spain acquired by Masmovil in 2021.

Regulatory pressure

Governments are rapidly developing tougher new policies related to climate. 

In Europe, the EU's Non-Financial Reporting Directive (NFRD) requires entities to provide regular updates regarding their ESG practices across multiple domains, while the EU Taxonomy will require over 50,000 firms to report independently verified ESG indicators. US issuers may also be subject to the new EU rules. In the US, companies must measure and publish their Scope 1 and Scope 2 carbon emissions beginning in 2024 under new ESG regulations. The SEC has also announced new ESG disclosure requirements.

This increase in regulation is creating plentiful opportunities for startups especially in B2B SaaS. There's still a long way to go, as only 10% of companies measured their emissions comprehensively in 2022

There are incumbents like Salesforce with Net Zero Cloud and well-backed startups such as Watershed, Plan A, or Persefoni, whose latest $101M series B round seems to be the largest investment round in any climate tech SaaS company.

We have already invested in Bcome, a Spanish sustainability platform that empowers textile and apparel businesses to build responsible supply chains, guarantee transparency and bring it to the final customer.

Also within Spain there is Trebellar, an integration platform that digests and unifies workplace and workforce data into actionable insights, or Dcycle, which helps companies measure and control their sustainability.

Since our initial investment in Factorial, we have seen the impact of digitalisation on SMBs and how they can benefit from using great software that, years ago, was only in the hands of large companies.

The same dynamics could manifest here as SMBs will have to make a considerable effort to comply with the new regulations and pay more attention to their effect on the environment. It remains to be seen if there will be one "winner takes all" player or if there will be a champion for each vertical or sector. Only time will tell.

Corporate demand

Corporations increasingly ask for more sustainable solutions in response to investors and employees pressure, consumer demand, and regulatory requirements. Companies are responding to the demand for sustainability by taking steps to become more sustainable, with some studies revealing that more than a third of global consumers are willing to pay more for sustainability.

Funding growth

In 2022, 25% of all venture capital funding went to climate tech, and there is nearly $300 billion in dry powder waiting to be deployed in this industry for 2023. However, given recent slowdowns in the market, there is less pressure to deploy it quickly, although this is being countered by increasingly competitive deals in the climate space.

It’s worth noting that, according to Bloomberg, a substantial portion of that money comes from Corporate Venture arms, demonstrating the corporate hunger for climate tech. Corporate venture investors doubled their spending on climate tech in 2021, investing $23.2 billion according to Pitchbook, suggesting similar figures for 2022 (as yet unpublished). 

Increasing talent density

Highly-skilled employees are leaving big tech companies to pursue opportunities in climate tech, driven by a sense of urgency, purpose, and impact. Also, Gen Z workers are avoiding employers with a negative environmental impact, and new websites like Work on Climate or communities such as ClimateEU are helping those transitioning to climate-focused roles.

Climate tech startups are also benefiting from the big tech lay-offs that have significantly increased since the autumn. .

Climate tech in Spain

At K Fund, we’ve spent the last six months getting our heads around Spain’s thriving climate tech ecosystem, mapping over 150 companies in the space, and speaking to at least a third of these in the hunt for the finest entrepreneurs solving the biggest problems.

We’ve been consistently amazed by the quality of founders, the variety of approaches to problems, and the talent flowing into these businesses - reflecting all the macro trends seen above.

Find below our initial mapping of the climate tech sector in Spain, limited for now to 150 companies, and based on the categorisation of the European Green Deal. We limited our scope as we couldn’t hope to be totally comprehensive with a first iteration, and we’ve no doubt missed many great companies. Please let us know by email any companies we might have missed to (max@kfund.vc / nacho@kfund.vc), and we’ll update the map on an ongoing basis.

Some trends we’ve observed:

1. Energy dominates

We have categorised Spain’s startup landscape across eight core areas. Spain’s climate ecosystem leans heavily towards the category “a clean and efficient energy transition”, driven in large part by the prevalence of solar startups in the country, but supported by a long tail across wind, hydrogen, and new battery/storage technologies.

As noted in a recent piece on our blog, Spain has a wide and growing ecosystem of solar startups, working across B2B and B2C, alongside novel hardware, financing and credits. We believe the most promising of these are working cross-stack, covering installation, operations and management, and providing ongoing analytics for both businesses and end consumers.

There are also a number of interesting project-financing plays connected to the energy sector, allowing individuals to invest in renewable projects through crowdfunding (Crowmie, Fundeen), or institutional investors to finance utility scale developments (Alter-5). Given the rapidly growing nature of this market, alongside the poor quality of institutional offerings, we expect to see more players in this space, especially on the B2B side. 

2. The ESG reporting market remains wide open

As noted above, emissions and impact tracking technology have had a bumper few years across Europe. The first wave, including the likes of Plan A and Persefoni, have raised near-mega rounds, and although we predict this to be a market with multiple winners and we’re closely following the trajectory of Spanish players here (including our own BCome), the questions of generalist vs. specialist and local vs. international remain as yet unanswered.

We are interested in speaking to founders building businesses in this area  with a clearly defined customer base and strong fundamentals, that have been grown not just through sales and brand, but also through a tech-driven edge. The first wave of companies have generated large investments with excellent public profiles, but we believe the value here lies in leveraging data to develop relevant actionable insights for a specific sector or segment, above and beyond green-washing metrics.

3. Strong tech development in satellite imagery and data visualisation

We’ve been impressed by the quality and variety of Spanish businesses using satellite imagery to assess risks. Mitiga Solutions has demonstrated impressive traction building risk and hazard prediction tools utilising physical models (vs. probability models focused on past events), while Lobelia Earth focuses on the generation of precise and observational datasets from geophysical features.

Much like ESG reporting, we believe the winners here will be those who capture large but clearly defined markets - financial services, insurance, property -, built on proprietary algorithms that produce clear predictions from numerous data sources, to cut through what is currently a very noisy sector. 

4. Logistics will play an important role in the green transition

Spain is a nation with a high concentration in logistics providers amongst legacy players, which alongside growing e-commerce penetration presents a considerable opportunity for new entrants. We believe more efficient delivery, returns and exchanges will play a major role in the green transition - as vehicles transition to clean energy sources (such as Basquevolt’s novel semisolid battery technology), last-mile and long-distance routes continue to be optimised and waste can be reduced across all areas.

Our portfolio organisation IF Lastmile is working to streamline the returns and exchange process, improving savings for retailers, reducing inefficiencies in routing and improving traceability. Spanish competitors Dawa and Rever are also working in the reverse logistics space, while Trucksters’ novel relay model is targeting similar goals for pan-European long-haul freight.

5. Enabling technologies are well distributed 

Based on conversations with founders and publicly available information, we’ve observed that the use of AI dominates across the mapped companies, with over 35% of companies claiming some use of Machine Learning or Artificial Intelligence in their propositions.

Beyond this, IoT is strongly represented in almost 20% of companies - unsurprising given the presence of sensor or hardware-based businesses across climate tech areas such as Clever Solar Devices in the B2B solar space, Wallbox in B2C EV charging, Zeleros building Spain’s first hyperloop, Worldsensing in infrastructure monitoring, or Candam in reverse logistics. 

And notably, there are a number of businesses using distributed ledgers such as BeChained, a business building digital twins for business consumers to reduce wasted energy consumption and sell carbon credits, or the aforementioned Climate Trade using blockchain technology for carbon credits trading.

6. Government initiatives in Spain

And lastly, we’re proud to observe that Spain has the potential to take a leading role in the green transition, setting ambitious goals to reduce GHG emissions and investing in climate finance commitments

The country is introducing a new regulatory framework to reduce carbon emissions, devoting 40% of its total allocation to climate objectives, and banning new coal, gas, and oil exploration and production permits. 

Additionally, Spain has recently approved the act to promote the startup ecosystem and is launching a new digital nomad visa.

Get in touch

We have huge respect for founders building climate tech businesses, due not only to the difficulty of building any company, but also for the social good provided by novel solutions, and we’re excited to learn more about all of the areas discussed above.

Here at K Fund, we are a group of experienced investors, operators, and innovators that leverage our diverse knowledge to support our portfolio and add value beyond capital alone. 

We are a multi-stage fund that can write tickets from €100k to €10M in entrepreneurs with the capacity to create differentiated technology-based products and services.

If you're building a climate tech company, we would love to have a conversation with you to discuss how we can help

Let's work together to create a brighter, more sustainable future.