Building a climate tech company comes with a distinct set of challenges, particularly in obtaining funding and clients. This is largely because customers and investors often perceive that the societal benefits come at the expense of quick revenue generation.
As a result, the Australian government has established various programs, including grants, investment, and procurement, to support this sector, as it contributes to economic and environmental goals. Climate tech startups can consider these forms of government aid in their broader funding strategy.
While venture capital, angel investors, and accelerators play an important role in financing startups, climate technology often needs higher seed capital, longer development timelines, and has more market uncertainty. This is particularly true for hardware based climate solutions which need substantial funding to develop, test, and validate their product before scaling.
In this context, government programs can provide tangible benefits and complement traditional capital sources for different stages of startup growth. It also brings additional benefits.
Government grants are typically non-dilutive, so startups don’t have to sacrifice a portion of their equity or ownership in exchange for funding.
Startup projects that are the first of their kind which require a lot of upfront capital are great candidates for early stage government funding. They will be able to run tests and validate their products before scaling up, reducing risk.
Receiving a government grant signals to private and commercial investors that a company is credible, because it has already been vetted by a reputable organisation. In that way, such grants are catalysts allowing for future startup growth as a launchpad for fresh ideas.
Here are some key government funding pathways for startups:
ARENA - Federal - Grants:
The Australian Renewable Energy Agency is trying to support the country’s transition to net zero emissions by speeding up innovation. Their grants prioritize development in solar power, renewable electricity, hydrogen, mining and metals, and transportation.
All of ARENA’s current available funding opportunities can be found here: Funding Opportunities - Australian Renewable Energy Agency
AEA - Federal - Grants:
Australia’s Economic Accelerator aims to turn top-notch research conducted at Australian universities into commercially viable businesses. While this avenue is not 100% sustainability focused, they note that renewables and low emission tech as well as agriculture, forestry, and fisheries are high priority research areas.
AEA provides grants for startups with a proof-of-concept or proof-of-scale. More information can be found here: Grants - Australia's Economic Accelerator
CEFC - Federal - Investment:
The Clean Energy Finance Corporation is a corporate Australian Commonwealth and invests in technologies that support carbon sequestration, energy decarbonisation, and efficient material use. They back a wide range of technologies and climate related funds. Unlike grants, they expect returns on their investment. CEFC investment could be useful for sustainable startups that are on the rise and trying to deploy or scale further, helping them turn into successful revenue-generating projects
For more information refer here: Clean Energy Finance Corporation
State programs:
Many Australian state governments also fund projects related to companies focused on sustainability. These are just two examples out of a broader range of local government funding options available.
- New South Wales: NSW Climate and Energy Action works to reduce energy impact and emissions in the state, and one way they do that is through supporting sustainable businesses. They provide funding for projects like low emission manufacturing and carbon abatement for farmland. Learn more: Programs, grants and schemes | NSW Climate and Energy Action
- Victoria: Sustainability Victoria focuses on circular economy, recycling, waste reduction, and efficient energy to help its state’s environment. It has funds that finance innovative circular economy opportunities, with one previous fund specifically focusing on getting climate tech products commercialised. More information can be found at: Grants and funding | Sustainability Victoria
Startups can utilise the government not just as a funder, but as a customer. Government funds can be used for mutually beneficial contracts with climate tech companies, where the government organisation is receiving a product or service and the company gains a customer and payment. The government is a purchaser of renewable energy, transport, and infrastructure, and a contract with them will be a positive signal to future investors. Due to their maturity and reliability, later stage startups may be better positioned for this type of partnership.
These types of support exist for the climate tech sector because the Australian government wants to further its policy priorities. Its lofty goals to reduce emissions by 62-70% in the next 10 years will require the adoption of climate innovations. Strengthening this growing industry poses economic benefits through job creation, revenue generation, and improved global competitiveness.
Procuring government funding comes with its challenges. Funding applications can be very complex with very specific requirements. These processes can be very long with multiple rounds of selection delaying timelines. Additionally, getting government grants can be very competitive, with multiple relevant startups vying for the same funding. Despite all of this, many companies still succeed.
Successful projects do their research and target the right programs early. Many of the aforementioned organisations have grants that are already closed for applications, so knowing timelines and applying early is key. Building relationships with these agencies through smaller projects or other connections can improve visibility. The end goal should not be just to secure the finding, but use it strategically. Pilots should be designed with scale in mind, so that the government funding is a catalyst for future growth.
Overall, when used strategically, government funding is a powerful tool for climate tech startups. It can unlock capital, accelerate product development, and propel a company to make large scale impacts. Federal and local grants, government owned investment funds, and government contracts can provide startups of various stages the opportunity they need. Climate innovation has great potential in Australia, and government funding can help turn that potential into real solutions.
Key Takeaways and Strategies:
- Use research focused government grants to:
- Reduce risk for early stage development
- Prove the technology works in real conditions, not just theoretically
- Developing companies can use:
- AEA to support commercialisation
- CEFC to fund deployment and scaling
- Use government contracts to:
- Work on public sector projects and generate revenue
- Strengthen your position with future partners and investors
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