This Berlin ClimateTech is Helping Companies Become Clean
Updated: May 16, 2022
Hi! We’re Varun and Max, MBA students at the London Business School looking to share our two cents on cutting edge early-stage companies that intrigue us. Welcome to our third blog post, where we’ll cover the full spectrum of why we think these companies are poised to create value in the future. In this particular blog, we’ll provide an educational overview on Climatiq. This is not your typical Startup top 50 or 30 under 30 list. Give us a ten minute read and we’re sure you won’t be disappointed!
Climate change, specifically global warming, is likely the biggest challenge that humanity has ever faced in its history. In order to limit global warming to 1.5°C, PwC's most recent climate report states that the global economy has to accelerate its current rate of decarbonization by 8x. At COP26, it was revealed that the world is heading for 2.4C of warming, far above the 1.5C limit set by nations with severe repercussions on our planet.
Regulation has already been picking up in the G7 countries and across Europe, for example through the EU Emissions Trading System (EU ETS) incorporated in 2005. A more recent piece of regulation is the EU Green Deal that mandates member states to a 55% cut in Co2 emissions by 2030.
With a price tag being slapped on Co2 emissions, companies are incentivized to work on their carbon footprint in order to optimise their cost structure. This changing landscape has paved the way for ClimateTech startups to tackle decarbonization at scale.
What is Climatiq?
Climatiq lays the foundation for organisations that want to understand their emissions in detail. Launched in early 2021, Climatiq is building a database for all emission producing activities ranging from an employee commuting to work to an employee drinking a cappuccino in the office building. The database democratises access to emissions data by allowing organisations to connect through an API and pull detailed information about single steps in their value chain. By building the first API solution for carbon tracking, Climatiq is tackling the big initial problem companies are facing when they want to reduce their carbon footprint: Measurement. Climatiq provides measurement of every activity that happens throughout the company’s value chain in order to truly understand the carbon footprint of the organisation.
How does Climatiq work?
At its core, Climatiq hosts a database that contains research data about the emissions factors of certain activities as well as the emissions of specific resources. In the future, additional sources of data, such as customer feedback, might be implemented. The comprehensive database contains all types of data points, such as raw materials or different kinds of vehicles and engines, alongside a method to quantify the resultant emission. For example, generating an emissions factor for “driving a heavy diesel truck”. The input parameter is the distance and Climatiq’s API then tells you how many emissions were generated with that trip.
The final product that we imagine (don’t forget, they are still building) is a tool that helps you model the value chain or a subset of it. The product’s output can be accessed in a programmatic way via the API and feed a company’s own analytics system, or alternatively through visualisations that are included in the expanded product stack: In a nutshell it is an analytics product that helps you to understand how your value chain influences your carbon footprint.
How do they go to market?
Currently, the company is in the late stages of building its emissions database and beta testing its platform with select customers. The development focus has shifted to adding an abstraction layer to the API with the goal to automate emissions calculations as much as possible with minimal inputs. Ultimately simple value chains, such as loading and transporting goods from A to B, will be available without the need to manually add all activities that are part of the process.
The go-to-market strategy of Climatiq relies heavily on the kind of data they can secure for their database. With new data into the system, additional industries can get more value from the tool. Conversely, a feedback loop to Climatiq should be established to leverage the first-hand information of users about emissions of specific data points. The path to building a network with relevant industry players could accelerate the process of:
1) Establishing a wide variety of emission producing activities for that industry
2) Verifying emission factors (i.e. pollutants released) that exist for those activities in that particular industry
The recently introduced pricing tier includes a corporate and a commercial model, with the latter focussed on third party providers that want to integrate Climatiq’s platform into their product palette and need unlimited access. The corporate tier on the other side limits the usage to 50k API calls per month. Custom plans are also available.
What’s unique about the product?
In the broader ClimateTech space Climatiq stands out because it offers a product that allows for fully automated emissions tracking on a new level of granularity. A majority of companies, such as Planetly andNormative are more focused on carbon offsetting than understanding their clients’ emissions on a deeper level. Their solutions also rely on constant manual input. Bad tongues might speak of greenwashing in that context, and it is factual that those companies are not solving the inherent issue at hand: reducing emissions.
Taking a step further, Climatiq is not reducing emissions either but it gives its customers a way to understand where their emissions originate from and thereby helps them to understand where improvements are going to be most effective and practical. Over time Climatiq is in the position to collect even more intelligence and fine tune the information they are building their product on.
The current competitive landscape features players on both ends of the spectrum: carbon offsetting and carbon accounting (although similarities may exist). The recent surge of investments in the space has created some big companies and even some successful exits; Planetly for example was acquired last year by OneTrust as an addition to their ESG product. Nonetheless the space is still nascent and companies are trying to figure out how to measure, understand and offset their emissions. This is especially important, considering that ESG disclosure is about to become an accounting standard in the big markets.
Climatiq’s product has the potential to become the baseline platform for startups on both ends of the current spectrum, powering their analytics to gather in-depth insights on emissions. Their API does not only have the potential to feed emissions data into existing accounting software but also provide offsetting solutions with more accurate information.
Who are the visionaries behind Climatiq?
Isis T. Baulig (CTO), Philipp von Bieberstein (COO*), Hessam Lavi (CEO)
(Co-founders from left to right)
Image Source: Sifted
The Climatiq story is heralded by a complementary founding team of three which was put together by Hessam Lavi.
Hessam Lavi is a serial entrepreneur who built and scaled Jobspotting, the Berlin based discovery engine for job matching. He sold Jobspotting to US based SmartRecruiters in 2017 for an undisclosed amount. Hessam holds a Masters in Computer Science from Lund University, Sweden.
Philipp von Bieberstein is a business development & partnerships expert with wide-ranging experience in big tech firms like Google and startups across US, India, Ireland and the UK. Philipp holds an MBA from Cambridge University, UK.
Isis T. Baulig is a product engineer who has held senior software engineering roles at Jobspotting as well as SmartRecruiters, signalling his previous professional relations with Hessam’s entrepreneurial ventures. Isis holds a software engineering degree from Spain.
*Philipp’s official title is not disclosed but we believe it will be related to Scale up / Business Development based on his past experience.
Alongside the founding team, the company is also supported by Cherry Ventures who led a €1.7m seed on a ~€5.4m pre-money in September 2021 with notable angel investors. Matteo Vallone from Cherry Ventures sits on the board of Climatiq.
What’s the market opportunity here?
The market size for ClimateTech is difficult to determine, as this sector potentially affects all industries and activities that consume energy in some way. Thus, Climatiq has the potential to disrupt the market for accounting and offsetting in industries that heavily rely on the use of fossil fuels. 50% of global emissions come from transportation and energy production. Of the remaining, 50% comes from industrial production of goods (see EPA). Broadly speaking, this provides us with three key sector themes that help determine the scale, opportunities and challenges for ClimateTech companies across the globe:
Fossil energy production
While fossil energy production and the transportation sector are self-addressing market opportunities, according to some estimates, roughly 29% of global greenhouse emissions are from direct industrial sources. This provides us with an initial indication of the size of the market that horizontal ClimateTech companies such as Climatiq can challenge: With 36.7B tonnes CO2 being emitted globally in 2019 (using pre-pandemic numbers, to avoid lockdown distortions) and an average CO2 price of 56€ last year (EU ETS price) we see a €596M market that can be disrupted and that just considers industrial emissions. We are specifically focussing on this subsegment because manufacturing is most likely to be targeted first by regulators.
Where do we see Climatiq go from here?
Due to the further advancement of global warming, ClimateTech remains one of the most interesting spaces in the broader startup environment. Unfortunately governments have shown a very laissez-faire approach towards the issue in the past decade, which is why we expect regulation to become a lot tighter, especially when global warming will become more of a tangible problem for nation states. This regulation will drive growth in the sector and early movers such as Climatiq will profit from a head-start.
Since policies are difficult to predict we see a bright future for Climatiq: the product they are building is versatile and and is being marketed in a way that it satisfies different customer groups. Nonetheless, Carbon Accounting as a subsector of ClimateTech is still a fluid space with few companies being built. While we have full trust in Climatiq and its team, it is possible that valuations and multiples will fluctuate. These industry developments could impact Climatiq, but will not prevent them from building an amazing product and we believe they are set up for success.
To our audience, you’ve now made it to the end, and we must thank you dearly. If you liked this analysis, or are a Climatiq API user or have feedback for us, please reach out and subscribe to our blog to stay up to date!
Note: The views and opinions expressed in this article are solely of the contributing writers and in no way reflect the official views of Climatiq or the London Business School.