4 min read

7 Reasons to Invest in Climate Tech Startups

7 Reasons to Invest in Climate Tech Startups

Many people invest in stocks and shares but there are very few angel investors out there. I was pretty surprised when I discovered these figures:

Investors seem to grapple with the high uncertainty and illiquidity of the private markets, but there are many advantages to investing in startups.

Let me share 7 reasons why I believe you should consider investing in climate tech startups:

1. Maximise your returns

Venture Capital returns are higher.

Investing in early-stage startups can offer an average annual return of 15% to 30%. A few startups will return much more, but many will return zero. Diversification is key – 10 investments minimum!

In comparison, the average annualised return of the S&P 500 since its inception is around 10%. Pretty good, but who wouldn't spice this up a little?

🚀 Venture Capital Returns (Cambridge Associates)

Pick any sector of the economy. If it faces high barriers to entry and transaction friction, there are likely to be market inefficiencies, and assets will not be optimally priced. This logically leads to outstanding returns (aka alpha).

This is certainly the case for investing in startups!

2. Drive climate impact

Shaping the world begins with how we allocate capital.

When you invest in ETFs or funds, you relinquish control over where your money goes. While this strategy is perfectly suitable for the largest part of your savings, consider allocating a portion of your portfolio to investments that align with your values and passions.

Vote with your money – make an impact on the issues you care about.

I decided to take greater control and now dedicate some of my savings to solving the climate crisis.

3. Leverage your superpower

Most founders expect much more than money from angel investors.

Add purpose behind your investments and back fearless founders from day 1. Angel investing offers a unique opportunity to put your soft skills, expertise and network at the service of a greater cause.

This highly personal approach to investing is also incredibly rewarding.

4. Diversify your portfolio

Don't put all your eggs in one basket.

Few investors explore the private markets. Yet, investing in startups introduces you to a new asset class and diversification opportunity for your portfolio.

I love how the VC fund Loyal measures its performance against other asset classes!

5. Step into climate action

We are the first generation striving for sustainability, join the action!

Angel investing is about sharing the vision of intrepid founders who dare to dream big and push technological frontiers. Come get the thrill of potentially striking gold too, but don't fly too close to the sun, little angel, or you'll get burnt!

In climate tech in particular, startups really have the power to transform industries and you too can help them shape a new, sustainable world.

6. Learn about new industries

Doing your due diligence forces you to learn a lot about climate innovations.

I would have never read so much and written in my newsletter about nuclear fusion, carbon removals or photocatalysis if it wasn't for angel investing.

Picking the best startups helps you stay up to date with the latest trends and opportunities in climate tech.

7. Meet fantastic people

For most angels, it's also about the journey and the people.

Climate tech entrepreneurship and angel investing is a tight-knit community. Whether in your town or online, you'll meet fascinating individuals who live and breathe climate innovation day in, day out.

To start with, a good practice is to join a local angel club or syndicate.

To conclude, barriers are lower than ever to get into climate startup investing, but you must first understand the risks. I'm happy to share with you how I took my first steps, just message me and ask any questions you have.

Thank you for reading!
Colin Rebel
LinkedIn / Twitter