The Sustainable Global Economy

By White Star Capital’s Early Growth Team

As outlined in our recent post, our Early Growth Fund team has been hard at work on four reports that go into detail on the macro themes that we believe will drive tech innovation in the coming years:

• the impact of widespread demographic shifts;
• the digitisation of all industries and enterprises;
• the creation of new digital infrastructures to handle the transfer and security of zettabytes of data,
• and finally, the demand for climate technology, new circular business models, and green innovation — which we have collectively labelled as the Sustainable Global Economy.

Our themes of focus have evolved since our first fund in 2014 in response to rapid technological adoption and the changing world around us, but the criteria we apply to each investment have remained consistent across our three Early Growth Funds to date.

Over the next few months, our team will be publishing four reports that go into detail on each of these macro themes.

We’re delighted to share the first report which covers the Sustainable Global Economy. You can find a summary of our thinking, along with a condensed version of the report, included below.

What is the Sustainable Global Economy?

The global climate crisis and the urgent need for a green transition are fuelling what is being described as the new industrial revolution and the growth of what we call the Sustainable Global Economy.

As a firm, White Star Capital has already backed early movers in this space in Fund II & III, with portfolio companies such as TIER, Novisto, 900.care, and SWING. We believe we should continue to be involved in this revolution, not only because it is necessary for the good of our planet, but also because from a purely financial perspective it will undoubtedly see the rise of the unicorns of the future.

This report sheds light on where and how we, as VC generalists, can invest while continuing to apply the investment criteria we have used throughout three consecutive funds. It includes details of the WSC VC Investability Index that we applied to identify areas that White Star Capital would look to focus on.

In summary, our core areas of interest within the Sustainable Global Economy for Fund IV include:

• Green Fintech: payments, lending & green investing, insurance & risk management
• Circular Economy: sharing economy, product lifecycle management
• Carbon Management, Trading & Capture: carbon trading & carbon markets, carbon accounting & ESG reporting
• Electric Infrastructure: smart grid technology
• Construction: smart buildings and automation
• AgriTech & FoodTech: picks & shovels, precision agriculture
• Packaging & New Materials: packaging software & infrastructure

Why now?

Regulatory pressure, combined with consumer demand for sustainable and clean alternatives, is pushing stakeholders to rethink the way they do business while encouraging entrepreneurs to build the innovative solutions required.

Governments around the world are pushing for major change, with the US allocating more than $370bn to climate as part of their Inflation Reduction Act while the EU passed a ‘Green Deal’ which could see them dedicate more than €1tn in public and private funds to mitigating climate change. Similar pieces of legislation are being passed around the world, from Brazil’s National Plan to Japan’s GX Basic Plan, and the Chinese Five-Year Plan.

We expect these measures will open up many opportunities for new software applications and technological solutions.

Key findings

• There’s an $18 trillion investment gap in capital required to deliver the net-zero energy transition
• Last year, climate tech attracted $97.3 billion in new funding
• The Inflation Reduction Act (IRA) has already allocated $370 billion in funding for the mitigation of climate change
• Estimates predict the value of the Sustainable Global Economy will rise to between $9 trillion — $12 trillion by 2030

It is worth noting that ‘climate tech’ has had a chequered past due to the significant capital requirements, long development timelines, and unclear exit opportunities of cleantech companies. However, we believe that the conditions are now right for a new sustainable global economy funded by VC. The market and macro conditions today are ripe for outsized climate investing returns and impact — we’re excited about the potential and opportunity to partner with ambitious founders building in this space.

We hope you enjoy reading this report, please feel free to share widely.

If you have any questions, or are an entrepreneur creating something in a sector covered by our research, please reach out to our team. They’ll be happy to hear from you!