Climate tech startups grab unique opening

At a farm in the central province of Khanh Hoa, solar panels and sand batteries are combined to store thermal energy for drying mangoes and herbs. By using photovoltaic panels and sand batteries instead of grid electricity, the farm can ensure a stable heat source unaffected by weather conditions and enable continuous drying capacity.

Na Nguyen, founder of Ecovi Farm, estimates that this carbon-neutral drying system helps her farm significantly reduce electricity costs of approximately $300-350 each and every month. Therefore, her farm can produce processed agricultural products at much more competitive prices while also contributing to sustainable development.

The thermal energy storage solution utilising sand battery technology was developed by the Vietnamese startup Alternō. This solution, tailored for agricultural applications across drying, warming, or heating needs, is a typical example of a climate tech startup in Vietnam.

Hai Ho, co-founder and chief commercial of Alternō, told VIR, “Alternō is committed to driving significant reductions in carbon emissions by focusing on sectors crucial for sustainable development–agriculture, industry, and residential heating. Our innovative thermal energy solutions, such as the Alternō Air and Alternō One systems, are designed to replace less efficient and more polluting traditional methods, offering both environmental and economic benefits.”

By enhancing the sustainability of essential processes through advanced technology, Alternō aims not only to lead the market in thermal energy storage, but also to set new standards in how businesses and homes manage and utilise energy in a climate-conscious era.

Thanks to the innovative solution, Alternō has successfully wrapped up over $1.5 million in an oversubscribed funding round co-led by leading impact VC funds The Radical Fund (Singapore) and Touchstone Partners (Vietnam) at the beginning of April.

Alternō is the latest climate tech startup receiving funding in the Vietnamese market. Previously, Touchstone Partners, a pioneering climate VC, invested in Selex Motors’ electric motorbike ecosystem in 2021, Forte Biotech in agritech in 2022, and digital energy-platform Stride in early 2023.

Another climate tech startup, electric vehicle (EV) group Dat Bike, has raised $16.5 million over three rounds from VC funds like Jungle Ventures, GSR Ventures, and Wavemaker Partners.

According to a report by Golden Gate Ventures and Venture East, climate tech encompasses a set of sectors that tackle the challenge of decarbonising the global economy, aiming to reach net-zero emissions.

The market size for climate technology in India and Southeast Asia in 2023 was $102 billion and is expected to grow to $350 billion by 2030, at a compound annual growth rate of around 20 per cent. Over $70 billion was invested in climate technology globally in 2022, with Southeast Asia and India accounting for approximately 7 per cent of it.

Meanwhile, data compiled by DealStreetAsia reveals that Vietnam accounts for 5.3 per cent of climate tech funding value in Southeast Asia since 2022, which places the country in the top three countries. Singapore ranks first at 80.4 per cent, followed by Indonesia at 13.1 per cent.

Vietnam’s climate tech startups are on the radar of VC funds thanks to their potential to contribute to advancing Vietnam’s net-zero roadmap.

Tu Ngo, general partner of Touchstone Partners, said, “When we started Touchstone in 2021 with the underpinning thesis of investing in big opportunities that impact Vietnamese people’s lives, climate was always an important landscape we operated in. We invested in climate solutions in Vietnam before attention came to this space, and hence have inadvertently become the most active VC in climate in Vietnam.”

“When we invest in climate tech startups, we look at how breakthrough and unique the technology will be in the market in the next 5-10 years. We ask the question: when this startup succeeds, in a world where Vietnam transitions towards net-zero goals, will they be one of the market leaders in a major climate vertical, namely energy, transportation, industrials, agriculture, and urban life?”

For instance, the fund believes that Selex will be a significant company given that more than 50 million motorbikes in Vietnam can transition into EVs in the next 10 years.

“We see the vision where all of these pieces are helping Vietnam get closer and closer to our net-zero goal. Ultimately, as climate change will disrupt a lot of our economy and our way of life, we take the long-term view and want to discover and nurture breakthrough firms that can take the chance and lead the green economy in the next 10 years,” Ngo said.

In the same vein, Vinnie Lauria, managing partner of Golden Gate Ventures, said, “Vietnam is going to shine against the backdrop of global economic challenges and will keep rising in the startup golden triangle of Vietnam, Singapore, and Indonesia. Climate technology will emerge as another big bet, with the climate discussion becoming much more ubiquitous and organisations facing greater environmental, social, and governance pressures.”

Following on from Vietnam’s net-zero commitments and national green growth strategy, climate tech startups offering innovative solutions to offset greenhouse emissions, ranging from EVs to battery tech and agritech, have enormous potential to thrive in Vietnam.

“Climate tech startups like EQUO are essential to helping drive innovation and solutions for Vietnam. We know that while consumer behaviour will ultimately drive change, the onus is on brands and businesses to provide these solutions for them,” said Marina Tran-Vu, founder and CEO of EQUO.

To foster a thriving climate tech ecosystem, she suggested that Vietnam could implement supportive policies that incentivise the adoption of sustainable tech.

“In addition, establishing grants is crucial for climate tech startups to innovate and scale their solutions. Finally, leading by example, the government could integrate these technologies into state-funded projects and promote their enhancing public awareness and trust in these innovations,” she added.

I remember landing in Hanoi for the first time in early 2010, impressed by endless streams of motorbikes. As a practitioner pursuing sustainable development, I thought about the emissions fuming out of the many vehicles. Over a decade passed, and when I landed again in Hanoi a few months ago, I still found myself surrounded by swarms of motorbikes. But things are about to change.

As the landmark COP28 kicks off this week, the spotlight is on the development of climate tech to bring the region closer to the 2015 Paris Agreement targets.