Over the last few months, we have partnered with urban health foundation Guy’s and St Thomas’ Charity, who recently launched their programme on the health effects of air pollution. The Charity have a track record in using finance to achieve positive societal outcomes, particularly around long-term systemic health issues such as this one, that require a whole variety of approaches and engagement from different stakeholders.As Europe’s leading early-stage tech for good VC, we are interested to understand how venture capital can be best leveraged to support impactful innovation in the clean air space. Given the inflection point the investment landscape is at right now in light of COVID-19, as well as the correlation with air quality and overall management of health, could we collectively identify barriers to investing in startups tackling air pollution and anticipate some key challenges and opportunities that will exist in a post COVID-19 society? Foundations and investors alike come across hundreds of businesses, how might macro trends affect their ability to grow and scale?We have been talking to quite a few entrepreneurs and investors in this space. Our work with the Charity has highlighted a range of areas where entrepreneurs are racing ahead of national governments, creating solutions in areas such as transport and engaging citizens in actions they can take to protect their health. It has also shown how the current context of COVID-19 has driven increased demand for related technology and air purification.To bring all this to life, on June 9th we brought the said entrepreneurs and investors for a virtual event to discuss how tech for good and early-stage investment can help tackle air pollution. Below you will find highlights from our first session where we talked about some near-term scenarios for the future of anti-air pollution investment.Under Chatham House Rule, we were joined by a group of highly-engaged investors from Europe and North America, all interested in anti-air pollution startups, working across different stages and verticals such as mobility and transportation, smart cities, internet of things and hardware, enterprise and software as a service, consumer goods and e-commerce. We imagined four futures, from 2020-2025, each one projecting; contrasting changes to air pollution regulation and contrasting developments of the global economy.Ultimately, the aim of this work is to point to a range of potential ways in which Guy’s and St Thomas’ Charity and like-minded organisations could intervene, for example, by providing patient capital for new technologies and business models or supporting the piloting of such solutions where they work in South London, and beyond.Anti-air pollution as a service
- Anti-air pollution is a value-add for both direct customers and businesses in a number of different industries: real estate, enterprise solutions, travel and logistics, to name a few.
- Regardless of industry, the consensus is there is board-level pressure to be at least carbon neutral and this is unlikely to go away. COVID-19 restrictions lifting is likely to further sustainability concerns as most countries vigorously ‘restart’.
- Businesses’ ability to invest in measures to lower their own contribution to air pollution is unsurprisingly directly related to the economic trend. If the correlation and causation between poor air quality, poor health and poor productivity is better measured and communicated, this might go higher in their agendas.
Awareness and appetite for self-protection and cleaner consumption
- In light of COVID-19, consumer awareness for their environment, air quality and appetite for tech for good and self-protection is growing, regardless of regulation. Could we be looking at a scenario where we are checking air pollution levels like we do with the weather, embedded in various systems?
- Hardware innovation could see a boost through government grants around R&D and potentially accelerated commoditisation of sophisticated sensors and other internet of things devices.
- There is a risk that the higher demand for hardware might exacerbate income equalities within a society where personal/household devices become quasi-luxury items available only to a small part of the population.
Regulation as an innovation enabler
- When we talk about regulation, it is important to distinguish between local level and national level. There is an opportunity for local authorities should they want to become innovation hubs around air quality - the better the regulation the higher chance for innovation to flourish and develop responsibly.
- Equally, there is an opportunity for startups focusing on hyperlocal, real-time data, particularly as people’s movement patterns change to adopt social distancing measures.
Investing in tech for good
- In terms of investment, it is necessary to recognise tackling air pollution as a multi-layered opportunity and think about infrastructure investments in adjacent industries like health and construction. Poor regulation would probably result in lower valuations as startups struggle to gain more traction while better regulations might suggest more attractive exits. Regardless, there is benefit to having a long-term, patient capital view with a focus on intersecting verticals rather than purely air quality itself.
- If the economic outlook ahead is bleak, would governments ease up their procurement processes to become a stable customer for more SMEs? Worthwhile to note that the BGV portfolio companies that are servicing the public sector proved more resilient so far during this crisis. Would the governments give more subsidies for fuelling growth? Or even set up more mechanisms for becoming LPs in venture capital funds?
While there are not easy, straightforward answers to complex and cross-cutting questions, it was great to kickstart this conversation with fellow investors. It is encouraging to see the massive investment opportunity in tackling global challenges being more widely recognised. The biggest issues we all face, like climate crisis, rapid urbanisation, quality education and the aging population, are all areas of human need coupled with large, high growth commercial markets and relatively low exploitation of digital technology.There is much still to be done to build meaningful solutions, and we will be following up in the coming weeks with our notes from sessions two and three where we talked to entrepreneurs building the products for a more breathable tomorrow.For a deep dive into the subject, take a look at Guy’s and St Thomas’ Charity air pollution programme hub. Over the coming weeks and months they will start to refine their focus areas and approach to supporting ventures working closely with us, led by Kate Langford and Matt Towner who kindly contributed to these blog series. We intend to speak to a wide range of stakeholders in relation to this work from entrepreneurs, investors, and local authorities, to others involved in supporting innovation in this space. Please reach out if you have ideas for how best we can support the health of individuals by tackling air pollution.