On May 6, Bengaluru-based electric mobility company Ather Energy made its stock market debut, listing its shares at a 1.57% premium on the Bombay Stock Exchange (BSE). The shares opened at Rs 326.05, compared to the IPO issue price of Rs 321. On the National Stock Exchange (NSE), meanwhile, the stock opened at Rs 328.

From a plucky IIT-Madras-incubated startup pioneering the development and manufacturing of electric scooters, it has become a publicly listed company. Ather Energy not only serves as an inspiration for the countless innovators in India’s burgeoning climate tech space, but also exemplifies the importance of long-term funding and support for startups that have an important role to play in ensuring an equitable energy transition for this country.

In his statement on X, Swapnil Jain, co-founder of Ather Energy, thanked amongst others, “those early investors who thought beyond short-term gains.” But it remains the exception rather than the rule for climate tech startups seeking consistent long-term funding.

A December 2024 report by the Observer Research Foundation (ORF) stated that of over 2,600 registered climate tech startups in the past decade, only about 800 are active. Of these 800 startups, only 25% have secured funding, mainly in the seed stage, with only 2.5% reaching growth-stage capital, mostly in electric mobility.

But why is it important for India to fund climate tech startups? Speaking to The Better India, Gopalika Arora, an Associate Fellow at the Centre for Economy and Growth at ORF, notes that climate tech plays a critical role in India’s bid to transition away from fossil fuels.

“Climate tech plays a very critical role, not just in reducing emissions, but also in reshaping how these energy systems work. We are seeing a surge in climate tech startups and the growing ecosystem around them, which is very encouraging. This has the potential to foster innovation, promote market competition, and create jobs while addressing deeper societal challenges. In a developing economy like ours, this makes the energy transition not just greener but also more inclusive and people-positive,” she adds.

Mismatch in investor expectations and startup needs

Given these circumstances, it begs the question of why climate tech startups aren’t receiving adequate and long-term funding. For starters, climate tech startups are tough businesses to build. They are very capital-intensive, and they also take time to show results. Most of them engage in serious investment in research and development and hardware just to get out of the laboratory and into the real world, whether it’s electric vehicles or batteries.

Gopalika argues that these solutions demand heavy upfront spending, and in recent years, early-stage funding, especially at the seed and pre-Series A levels, has become more accessible thanks to a group of early investors who are willing to take a bet.

“The real crunch hits when these companies try to scale. So, raising money on Series A is still a steep climb, and without that capital, many promising ventures struggle to grow or prove their commercial worth. The problem is that big investors want safe bets and proven tech like solar or wind. But startups engaged in next-gen climate technologies like green steel often struggle to attract investment due to these high risks and long gestation periods.

Unlike software or any other asset-light businesses, these climate tech ventures require substantial capital at very early stages in their life cycle and need more time to break even and scale up. This is one part of the challenge,” she notes.

Speaking to The Better India, Gautam Das, the CEO of Oorjan Cleantech, a Mumbai-based renewable energy startup working on solar solutions, talked about the challenges his venture experienced in the early stages while seeking funding.

“Initially, we approached a few VCs, held some healthy discussions, but everybody was just in a hurry to make money, except for one. By mid-2018, we also leaned into our network of family and friends for early-stage funding and raised about Rs 3-4 crore (less than $500,000). We have not raised any funding after the initial seed round, but we have gone on to cross Rs 120 crore in revenue and achieved a very healthy $1.5 million EBITDA. I understand that you may not last without money, you may not scale up without money, but we had a different belief that we will work on impact. But what you see today is a lack of patient capital, which will align with a startup’s goal of impact and purpose,” says Gautam.

© The Better India