Despite still being “a very young ecosystem,” the Indian climate tech sector has seen “remarkable” growth in the past few years. That’s according to Chetan Krishna, head of research and diligence at Third Derivative, RMI’s climate tech accelerator, which just announced support for a cohort of nine climate tech startups, five of which are based in India.
“A decade ago, there were a couple hundred climate tech startups in India. Today, there are about 3,000,” Krishna told Latitude Media. In 2024, he added, $1.5 billion — roughly 10% of all Indian venture capital investments — went into the sector.
That’s not much compared to the $24 billion that went into climate tech startups in the U.S. in the same period, but it’s still a sign of promising growth. And it appears to be slowly stirring the interest of some climate-focused venture capital investors in North America and Europe looking for opportunities beyond their usual geographies.
U.S.-based Lowercarbon Capital, for instance, has two Indian startups in its portfolio: River, which develops electric two-wheelers, and rooftop solar developer SolarSquare. SE Ventures, Schneider Electric’s venture capital arm, recently expanded its investment horizon to include India, leveraging “a partner on the ground helping [it] identify opportunities first and best,” said Carlos Kokron, one of the company’s general partners. And about 15% of Third Derivatives’ portfolio companies are based in India, which is the accelerator’s largest geography after North America and Europe.
It’s still too early to say whether these moves mark the start of a lasting trend, but they already invite a closer look at what makes India attractive to Western VCs — and how deep the country’s climate tech potential truly runs.
Fast growth
The size of India’s economy is one immediate selling point for investors, explained Jai Shekhar, senior analyst at Peak Sustainability Ventures, a Mumbai-based early-stage climate VC firm.
“If you are willing to risk capital on the fact that the Indian economy is going to grow at a very substantial pace over the next 10 years, then the sector is attractive,” he said. And India is growing fast — it’s considered the fastest growing economy, and the fourth largest, in the world; it just surpassed Japan in size.
That growth has itself created an urgent need for scaling up the climate sector. Sandiip Bhammer, founder and managing partner of Green Frontier Capital, one of the first Indian early-stage VC funds dedicated to climate, pointed out that as India’s economy grows, so will its greenhouse gas emissions.
“There is no other country in the world where the demand for climate technology to address the environment is going to be extremely high, while also delivering potential for high returns,” Bhammer said. “That’s the reason why people are gravitating towards India.”
There’s also the potential for American VCs to “find very well-priced startup deals in India,” Krishna added, “because the supply of capital in India is not very large yet and the prices of companies in India tend to be a little lower.”
Plus, compared to China, the other comparable market outside of North America and Europe, the Indian market is relatively accessible. “Entering China as a VC is difficult. The economy is structured differently, norms are different, and languages are different,” Krishna said. “But in India, you can operate in English, and the overall structure of the economy is very similar to the U.S. or EU.”
A country for scaling
For Rajesh Swaminathan, partner at Khosla Ventures, where he manages many of the firm’s climate tech investments, the conversation around Indian climate tech changes depending on the sector.
U.S. climate tech investors backing technologies such as nuclear and geothermal, for instance, are better off keeping their capital and innovation in the country. The “U.S. needs a strong competitive advantage,” he said. But for expensive technologies, like green hydrogen and sustainable aviation fuel, that need to prove that they can be scaled economically, India provides a great platform.
“There’s an advantage in building first-of-a-kind plants, especially for…expensive technologies, in countries like India, because it just reduces the cost and the risk potential,” he said. China is not as advantageous, he added because the technology gets copied pretty quickly.
In other sectors, like solar and batteries, India can provide the advantage of scale, if not necessarily of technical innovation. When it comes to batteries, for example, Swaminathan has found that many Indian companies are focusing on importing core technologies from abroad and scaling them up, rather than developing them themselves. Participating in this scaling through joint ventures and partnerships can provide interesting opportunities for Western investors.
“We see more market expansion and relatively less hardcore, fundamental technical innovation,” Swaminathan said. For now, he added, “I think the innovation would still come from pockets in the U.S., and maybe Europe, and a lot of the expansion will happen in India.”
