The climate tech sector presents both a formidable challenge and a significant opportunity, according to Mohammed Shoeb Ali, Co-founder and Managing Partner of Transition VC, India's first energy transition venture capital fund. Ali, an experienced investment professional, emphasizes the importance of focusing on specific sectors to gain deep market insight, especially in a field as complex as climate tech. He estimates the energy transition domain could be a $200 billion opportunity by 2030, driven by India's knack for building solutions from fundamental technologies.

One of the primary hurdles facing climate tech startups in India, according to Ali, is the scarcity of research and development talent. This is partly attributed to the limited R&D budgets of Indian corporations and a perceived lack of innovation culture within the university system. The absence of adequate infrastructure and ecosystem support further compounds the problem. For instance, a hydrogen-focused startup developing storage cylinders may struggle to find the necessary testing facilities within India.

While early-stage funding is available through grants and investors like Transition VC, a significant gap exists in Series A to Series C funding. Securing $10 million to $20 million can be particularly challenging for climate tech startups in India. Despite these funding challenges, Ali underscores the importance of startups being physically close to the problems they aim to solve. He argues that developing solutions for markets like the US from India is difficult, requiring a deep understanding of local environments and market dynamics, unlike software products that can be built for global application.

Ali highlights industrial decarbonization as a massive opportunity for climate tech startups in India. Industries consume a substantial portion of the country's energy, resulting in significant carbon emissions that are difficult to abate. Sectors like steel and cement manufacturing, which rely on fossil fuels for high-temperature processes, face considerable challenges in reducing their carbon footprint.

Transition VC focuses on core technology investments, aiming to support 25 promising startups from its Rs 400 crore fund. Many Western startups possess groundbreaking technologies but struggle with scaling up due to high manufacturing costs related to land, labor, and regulations. Transition VC's objective is to find and nurture companies capable of replicating successful technologies, like Rondo Energy's thermal batteries, within the Indian context, adapting them to be economically viable.

The impact of global politics and policies also plays a crucial role. Ali notes the potential negative consequences of administrations that do not prioritize climate change, potentially hindering funding for green technologies and allowing other countries to dominate the clean tech sector.

Despite the challenges, the climate tech market presents exciting opportunities for developing sustainable business models. As demand for climate tech solutions grows, companies are exploring innovative ways to generate revenue while creating positive environmental and social impacts, such as providing energy-as-a-service. Innovation in technologies like carbon capture and storage (CCS), and sustainable agriculture are also driving the market.

Ali also praises companies like Ather Energy, calling them a "Tesla on two wheels" and lauding their engineering and product quality. Transition VC's portfolio includes companies like EMO Energy, which is developing advanced battery solutions to accelerate the adoption of electric vehicles in India. EMO Energy's battery packs can be charged quickly and are designed with safety in mind, utilizing liquid-cooled immersion technology to minimize the risk of fire.

Transition VC actively supports the growth of startups in the clean energy and decarbonization sectors, in part through strategic partnerships, such as with the Kerala Startup Mission (KSUM). Transition VC is also planning to launch a $150 million international fund in 2026 to write larger checks and follow-on investments.