Green Unicorn Will Become The Norm
In 2013, VC investor Aillen Lee created the term “unicorn” which is now defined as the privately-controlled companies valued at $1 billion or more. This monetary value does not actually exist, it is a projection, based on the company’s ability to disrupt entire sectors in the future. As we discussed the trend in the Green-Growth, we will cover one type of unicorns that are becoming mainstream, and which are known as green unicorns. These types of companies are focused in a few sectors including renewable energy, agribusiness, mobility and the circular economy. One of the cross-cutting drivers of these Green Unicorns is that they try to promote one of the 17 sustainable-development objectives of the United Nations.
Last year Larry Fink, president of investment company BlackRock, remarked, “It is my belief that the next 1,000 unicorns won’t be a search engine, won’t be a media company, they’ll be businesses developing green hydrogen, green agriculture, green steel and green cement. Investments in low carbon projects in emerging markets will need to be more than a trillion dollars a year, more than six times the current rate of investments of about $150 billion a year”.
There are currently 43 private, $1b+ climate tech companies in the unicorn club. Of the 1,000 Unicorns today, the 43 in climate tech make up 4.3% of the overall herd (the fintech’s share of ~20% or internet software’s ~18% piece of the pie). But zoom in on last year and you can see the rate of climate unicorn births have dramatically increased. 29 climate tech achieved unicorn status in 2021, making up 60%+ of all-time climate unicorns and ~6% of overall new unicorns that year. Big climate tech valuations were so hot in 2021 that they even outpaced the general market, with a 625% growth rate of newly minted climate tech unicorns compared to the industry benchmark growth of 287%. What is also reinforcing our believe that Green Unicorn will create massive value, is that these type of start up are reaching unicorn status much faster that the startup in other sectors. The Green startup have taken an average of 4 years to reach Unicorn status, as opposed to the 7 years for startup in other sectors.
Climate tech unicorns are concentrated in the highest emitting sectors and geographies.
Similar to the distribution of climate tech venture capital in 2021, more than 80% of climate unicorns fall into the three major categories of energy (35%), agribusiness (33%), and mobility (16%). Climate unicorns are also homegrown in geographies which take up the largest slices of the emissions pie, with 95% of unicorns coming from the US (60%), Europe (21%), and China (14%).
While these trends are very promising, the market is still dealing with the unproved economical profitability of green-tech startups. Furthermore, we continue to see a lack of skilled investors and entrepreneur that understand the Green-Growth agenda and the risk and opportunity associated with it.