How Australia is powering the next wave of climate tech innovation

Australia is uniquely positioned to lead the next wave of clean technology investment globally, according to the team behind climate tech venture capital manager Virescent Ventures (Virescent). Its Partners, Kristin Vaughan, Ben Gust and Blair Pritchard, launched the pioneering fund manager in 2022, after spinning out of the CEFC. They continue to manage the portfolio of climate tech investments they established at the CEFC, including the Clean Energy Innovation Fund (Fund I).

Now, as Virescent’s Fund II nears final close, Ben and Kristin discuss Australia’s place in climate tech investment, how they are part of a growing ecosystem, and why local innovation is taking off overseas.

Australia has some unique characteristics, and these create a dynamic which puts Australia at the forefront of the energy transition. The Australian market, in many ways, is like a bellwether for international markets – mapping out the direction that they're going to be travelling in.

Ben Gust

Managing Partner, Virescent Ventures

Closing the climate tech funding gap

Virescent was established to attract private backing for startups that deliver world-leading clean energy solutions.

“The fundamental reason for launching Virescent was that there was not enough private sector capital being invested into Australian climate technology businesses. And it’s still true that traditional venture capital is not heavily investing into climate technology in this market,” Gust says.

“We wanted to show that early-stage climate technology investing was an attractive asset class for the private sector. That led to the idea of building on our track record to establish the leading climate technology venture fund in Australia, with the ability to raise third party capital, and become a manager not just of CEFC capital, but also private sector capital.”

That goal has been achieved, with the team deploying almost $300 million across 37 climate tech businesses and seed funds on behalf of the CEFC, and Virescent’s second fund having raised over $155m to date. Virescent’s Fund II cornerstone investors - the CEFC, Westpac, QIC and Breakthrough Victoria - form part of approximately 70 investors, including family offices and high net-worth individuals.

Australia’s leadership role in climate tech

Most of the companies backed by Virescent have global aspirations, and Australia has become a hub for innovation in this sector.

“Australia has some unique characteristics, and these create a dynamic which puts Australia at the forefront of the energy transition. The Australian market, in many ways, is like a bellwether for international markets – mapping out the direction that they're going to be travelling in,” Gust says.

Virescent-backed Amber Electric is an example of a company solving a homegrown problem that’s now going global.

Amber’s behind-the-meter grid solution was developed for the Australian market’s high solar and battery uptake. Its cutting-edge platform seamlessly charges batteries when solar is abundant, or power prices are low, and exports energy when the grid is constrained, supporting both individual household budgets and overall grid stability.

Following its rapid expansion in Australia, Amber recently closed a $45 million Series D round led by UK-based ETF Partners, with local investors, including Virescent’s Fund II, also participating. The company is now partnering with one of the UK’s largest energy distributors E.ON Next and is planning operations in Germany.

“Many of the investments we have made in the second fund over the past 12 months are focused on that energy market transition,” Gust says, referring to the challenges of moving from a traditional fossil fuel energy system to a renewable, variable energy system.

“That trend then gets replicated in overseas markets, typically a few years behind. But if an Australian company can find solutions that are required for our market dynamic, it can then be rolled out into international markets.”

Global ambitions for homegrown innovation

Offshore markets play an important role for Virescent and the companies it invests in. “Companies raise capital offshore for a couple of reasons: to access deeper capital markets and to help them expand into those markets. Most Australian companies in this space need to grow offshore to generate the kinds of returns that will keep investors coming back,” Vaughan says.

“We’re seeing more European, Israeli and U.S. investors who know that Australia is really strong in energy transition, and so they’re actively looking at technology companies coming out of this market.”

“Our market dynamics put us ahead of much of the world, making Australia an ideal place to develop novel climate technologies for global rollout. It’s why the timing feels so compelling for the sector, and it’s reflected in the growth we’ve seen since the CEFC launched the Clean Energy Innovation Fund eight years ago,” Gust adds.

Virescent has invested in multiple companies that have developed international exposure. These include:

• Kwetta builds EV charging infrastructure which addresses grid constraints, resulting in faster and cheaper deployment for light vehicles, buses and trucks. Founded in NZ, it is now being deployed in Australia and has recently entered the European market.
• Relectrify has created a transformer-less battery technology that extends battery life and improves performance through cell-level control. It is currently preparing for market entry in Europe and the U.S and has attracted an international investor syndicate.
• MicroTau has developed sharkskin-inspired 'riblet' 3D printing that is applied to aircraft and marine vessels to reduce drag and as a result, reduce fuel costs and carbon emissions. It is now working with organisations including the U.S. Defence Force and international commercial airlines.

Market dynamics and the path ahead

Virescent believes the economics of renewables are now “unstoppable” and there has never been a better time for Australia’s climate tech sector to shine. “We have all the building blocks. The question is: where do we play most effectively?” Vaughan concludes.