Sustainability Overview
By Alex Candow
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Sustainability Overview
Defining Sustainability
Last week, Devin provided an overview of the insurtech space, one of the three industry focuses—alongside edtech and sustainability—that help form our investment thesis at Hillside Ventures. When forming this thesis, we identified spaces that will likely require innovation for years to come. We were also sure to choose areas we believed would be relevant to the students who are the future of this fund. With that in mind, it was clear sustainability was one of these areas.
While defining the verticals of insurtech and edtech was relatively straightforward, creating a single definition for a broad and growing space like sustainability proved challenging. Although, we found that this was not a challenge unique to our team. Defining sustainability in a business context has presented challenges of its own due to the complexity of this concept and the ever-evolving needs of businesses. Understanding this, our team sought to create a definition that would be most relevant to the fund and nature of our investments. Hillside Ventures defines sustainability startups as “companies that address environmental, social, and economic crises by providing sustainable solutions and/or mitigating factors that inhibit sustainability.”
With this working definition established, we began diving deeper into this space. As we worked on sizing and mapping segments of this market, we found that grouping companies into three main categories would allow us to better understand where sustainability-focused startups fall into the larger ecosystem. These categories include hardware, software, and consumer packaged goods (CPG). Framing our research this way has helped Hillside identify emerging leaders in each of these categories, as well as startups utilizing a mix of these solutions to address wide-scale problems.
Why Sustainability?
Sustainability is not just a focus for Hillside, but UConn as a whole. So, as a university-based fund, aligning our interests makes sense. In the same way, our proximity to Hartford helped us choose insurtech and our inherent connection to education led us to edtech, UConn’s commitment to sustainability helped make a winning case for its inclusion in Hillside’s thesis. In this semester alone, UConn is creating opportunities including a free pop-up class to educate students on the climate crisis, an innovation competition known as HackUConn with the theme of environmental sustainability, and countless other initiatives to help bring student awareness and solutions to this growing issue. At Hillside, we are looking for companies that share our vision of a brighter future, and sustainability provides a space for just that.
The growing need for companies to create sustainable solutions is also intriguing. The primary driver for this demand is the climate crisis. As we become increasingly aware of the changing climate, we must also take a look at the costs associated with these changes. The Natural Resources Defense Council (NRDC) estimates that four global warming impacts alone—hurricane damage, real estate losses, energy costs, and water costs—will come with a price tag of nearly $1.9T annually by 2100. This figure is equivalent to 1.8% of U.S. GDP. Fortunately, people are working to produce solutions to these wide-scale problems. One of the areas that intrigues us the most is climate technology, also known as climate tech. PwC has identified over 1,200 climate tech startups working on a wide range of technologies. All of them share a common goal of reducing carbon emissions. As these technologies emerge, venture capital is crucial in bridging the funding gap between nascent solutions and products that can aid in today’s fight against climate change. At Hillside, we are excited to contribute to the growth of companies tackling some of the world’s most pressing challenges, and we know we are in good company. PwC reported that $60B in venture capital was invested in climate tech between 2013 and 2019 with a compound annual growth rate, or CAGR, of 84%. In 2019 alone, $16B of venture capital was invested in 590 climate tech deals.
Trends We’re Watching
Supply Chain Analytics
B2B Carbon Offsetting
Sustainable Banking & Investing
Carbon Footprint Tracking
Sustainable Packaging
To Conclude…
The growing landscape of sustainability-focused companies is exciting and one that has provided abundant opportunities to learn and invest. Whether you are a founder, investor, or industry expert, we are always looking to have conversations with those in the sustainability space. Feel free to email me at alexander.candow@uconn.edu or connect with me on LinkedIn.
By Alex Candow, Analyst at Hillside Ventures