Climate tech attracts growing numbers of Israeli entrepreneurs

In the past year, the climate-tech industry in Israel has burgeoned, both in the number of companies founded in this field and in the finance they have raised. According to a report published last week by PLANETech, an organization that brings together climate-tech companies in Israel, whereas in 2019 only 10% of the startups founded in Israel contributed to dealing with the climate crisis, last year the proportion was 14%, approximately one in every seven companies.

Traditionally, investment in Israeli climate-tech startups has been lower than elsewhere in the world. According to the PLANETech report, last year, some $2.5 billion, 10% of the investment in Israeli ventures, went to companies making a contribution to dealing with climate change. This compares with 13% in the EU, and 14% globally. The figure improved, however, in the first half of this year, when 15% of the amount invested in Israeli startups flowed to companies making a climate contribution.

PLANETech counts 694 Israeli startups that help in adaptation to climate change, or in reducing greenhouse gas emissions (mitigation). The companies come from a wide range of fields, such as improving transport (for example Via and Optibus), making production more efficient (Augury), reducing food loss and waste (for example, Wasteless, which has a solution for automatically reducing the price of food items as their sell-by dates approach), and the hot field of carbon capture (for example, RepAir, which has an electrochemical device for separating carbon dioxide from the air).

“Some of the companies were originally founded with the aim of combatting climate change, while in other cases this was not the main reason for founding them,” says PLANETech director Uriel Klar, “but we went over them company by company, learned about their technologies, and put into the report only those whose core activity contributes to reduction of emissions in a direct and measurable way.”

Ready to compromise on pay

Klar says that the flourishing of climate tech is also manifest in the type of entrepreneur who comes to it, who is no longer in the classic “tree hugger” category. “We’re in touch with dozens of entrepreneurs who want to found climate-tech startups, and some of them come from prestigious army units such as 8200, Talpiot, and 81. These are entrepreneurs who at one time would have founded cybersecurity companies or would have gone to other classic technology fields, and are now coming to climate tech, because they want to devote their time and energy to something that will do good in the world. I also meet many engineers and programmers who want to work specifically in climate tech, and are even prepared to compromise on pay.”

Several venture capital funds specializing in climate-related fields are active in Israel, such as Jonathan Benartzi’s Firstime Ventures, and Capital Nature. Microsoft recently announced that its Climate Innovation Fund (CIF) would open its first representative office outside the US – in Israel.

In Klar’s view, however, the real challenge is to persuade non-specialist Israeli funds to invest in climate technologies. “Most of the money is not at funds that specialize in climate, and so our main focus is on working with funds that invest in software. Some of these investors are already interested , and Gigi Levy-Weiss’s NFX has announced that it will start investing in this field, but in my opinion the real change will happen only when the investors behind the funds start to ask them about climate, and why they haven’t got climate companies in their portfolios As far as I’m concerned, if funds that invest in cybersecurity and software will invest in two or three climate companies a year, that will be much more important than another specialist fund in the field.”

Itamar Weizman, partner and head of climate investments at Firstime Ventures, has been dealing with climate tech for over a decade. Firstime is at the advanced stages of closing its third fund, amounting to $100 million, 70% of which will be invested in climate tech and 30% in healthcare. The firm’s portfolio includes Beehero, which has developed a smart beehive for saving the bee population, and First Airborne, a developer of control services for wind turbines using drones. “I’m convinced that the climate fund will be our best for returns, simply because the climate crisis is humanity’s greatest challenge and generates crazy opportunities. My estimate is that by the end of the decade more than half the money invested by venture capital funds will go to climate technology,” Weizman says.

“Awareness of the issue in Israel lags behind the US and Europe, because the media have started focusing on it only recently. Today, I receive more approaches from entrepreneurs than in the past, but Israeli entrepreneurs often prefer to go into fintech, gaming, or cybersecurity, rather than life-saving fields. If they think about it seriously, they’ll see clearly that the opportunities in fields like food and energy are greater than in gaming and cyber,” he adds.

Erel Margalit, chairperson of venture capital firm JVC and a senior figure in venture capital investment in Israel, came to climate tech through meetings with city and state leaders around the world. “From these conversations we realized how much climate technology is seen as a strategic matter, just as cybersecurity is seen,” he says.

Last week, Margalit inaugurated an international climate-tech center in New York that is the first of its kind, in cooperation with the local municipality and car maker Mini, of the BMW group. He says that the emphasis at the center is on integrating climate tech with more traditional technological fields such as cyber and fintech.

“We see much in parallel between climate tech and cyber,” he says. “Companies that deal with protecting municipal water systems from hackers can also protect them from contamination. Climate tech is an additional dimension of all existing fields of technology.”

Published by Globes, Israel business news – en.globes.co.il – on September 21, 2022.

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