The energy transition: a startup goldmine

The energy transition represents a massive shift away from fossil fuels toward renewable sources like wind and solar, creating enormous opportunities for startups. But it’s not just about generating clean energy – founders can solve the next big challenge: how to ensure that green energy is efficiently delivered and used in homes, businesses, and communities. With the UK having moved from coal dominance to renewable energy in just a few years, founders are now racing to develop solutions for energy storage, smarter grids, and demand management.

Harnessing consumer behaviour and tech innovation

The key to unlocking this shift lies in consumer behaviour and technological innovation. Startups can lead by creating intelligent systems that help consumers and businesses manage energy usage more effectively – whether through smart tariffs, advanced storage systems, or better integration of clean technologies like solar, heat pumps, and electric vehicles. By developing tools that optimise how energy is stored used and experienced, founders can position themselves at the forefront of this global movement.

For founders, the real excitement comes from the surge of investment into this space. Until recently, capital primarily focused on energy generation, but we’re now seeing a rapid increase in funding for areas like storage, smart grids, and electrified infrastructure. With nearly $1 trillion flowing into non-generation technologies in 2023 alone, the opportunity for startups is enormous – especially for those solving the crucial issues of balancing energy demand  to make energy clean, reliable, and affordable.

Decarbonising transport, industry, and buildings

Sectors like transport, industry, and buildings are still heavily reliant on fossil fuels, representing untapped areas for startups to disrupt. What’s more, all these sectors are facing regulatory, investor and consumer urgency for action. Electrifying transport fleets, greening buildings, and finding alternatives to carbon-intensive industrial processes are all ripe for innovation. The founders who crack these challenges will be key to reducing emissions and accelerating the global energy transition, creating the future infrastructure of the long term zero carbon economy.

With electricity demand set to double by 2050, startups will play a critical role in scaling solutions to manage this surge. From AI-powered grids to efficient storage systems, founders who solve the energy usage problem will unlock vast potential in a market that’s growing faster than ever. Investors are pouring billions into companies that are driving this change, and here at Blackfinch we’ve been busy working out how best to back these visionary startups.

Backing the winners

The Energy Transition is not without its challenges – as the innovation moves beyond grid scale energy infrastructure towards consumers and the built environment, the greater the level of complexity around issues like land availability, property ownership, consumer purchasing behaviours and complex energy flows.

At Blackfinch Ventures, our investments of nearly £100 million into startups along with our team's experience as founders and entrepreneurs, allow us to recognise the immense potential for innovation in the energy transition. Our energy team owns and manages over 120MW of renewable assets and our property team have invested over £450 million into the built environment across commercial and residential. This breadth of knowledge, experience and contacts gives us unique insight into the challenges in these sectors and is precisely why we recently launched our Energy Transitions EIS Portfolios product.

Identifying early-stage potential

Over the past four months, we’ve been actively exploring opportunities in the space. We’ve evaluated more than 1,000 potential investments, filtering down to 500 in scope, holding meetings with around 200, and bringing 40 to our investment committees. This thorough process has revealed an incredible depth of innovation, particularly in deeptech and science, where patent-led breakthroughs are driving advancements in generation, storage, distribution, and digital solutions for energy management.

The energy transition is highly competitive, with the most progressed deals often pursued by multiple investors. However, we’ve identified promising founders who, despite being early in their journey, have achieved significant milestones and show strong potential for future growth. These are often under-the-radar opportunities where we believe our support can unlock the next phase of development.

Strategic interest and market gaps

We’ve also seen significant strategic investment from global leaders seeking to move away from fossil fuels. However, at the early stage, there’s often a funding gap, as many startups are pre-revenue and considered too small for large investment firms or corporate strategics. Despite this, their potential for impact and scale is enormous. This creates a unique opportunity for Seed stage firms like Blackfinch to capitalise on startups with technological innovations that are positioning themselves for long-term growth and success. And just like our existing portfolios we plan to support them right through that journey, placing them firmly on the radar for future high-value strategic exits.

Breakthroughs across the energy ecosystem

In the energy transition space, we’ve identified groundbreaking innovations across key areas like generation, storage, distribution and digital solutions. One standout company is developing a novel hydrogen electrolyser capable of producing high-pressure hydrogen without the need for energy-intensive compression systems. This is critical for industries like ammonia and metal processing that need hydrogen for high-temperature processes.

Another company is focused on wind propulsion technologies, particularly for large maritime vessels. Their solution involves retrofitting ships with systems that drastically reduce fuel consumption, offering a cleaner alternative for the shipping industry, which is a significant contributor to carbon emissions.

Optimising energy storage and driving power source flexibility

In storage, we’ve found and tested solutions designed to optimise energy retention, especially for industrial-scale processes. One innovation involves heat pump technologies for buildings that capture and store waste heat for reuse. This kind of energy efficiency can transform both residential and commercial buildings, reducing reliance on traditional fossil fuels such as gas and oil boilers.

We’ve also spoken to companies focused on decarbonising combined heat and power (CHP) systems. One such system offers fuel flexibility, switching between low-carbon and zero-carbon fuels like bioethanol and hydrogen. These systems are highly efficient, capturing waste heat to power industrial and residential operations more effectively.

Empowering digital energy solutions

In the digital realm, a company we brought forward is revolutionising energy management for households. Their smart software allows consumers to generate, store, and manage their own energy usage, offering greater independence from the grid. And on the industrial and business side we’ve seen platforms designed to monitor and manage consumption in real time to identify inefficiencies and optimise consumption patterns to achieve cleaner and lower cost energy.

In both homes and businesses, this data-driven approach helps reduce energy costs while improving sustainability efforts. By managing peak demands and adjusting consumption behaviours, these platforms are driving more efficient energy use across commercial and industrial settings, supporting the broader energy transition.

What this means for founders

For founders navigating the energy transition, now is the time to assess whether their businesses align with the needs of this growing space. If success has been elusive, consider a pivot to focus on areas where emissions reduction is critical – in areas such as transport, industry, and buildings.

Careful research in to the sectors where the most impact is needed can reveal new growth opportunities. Aligning your company with the energy transition not only positions you as part of a global movement but also makes raising capital easier, as investors are eager to support innovative solutions in this area.

At Blackfinch Ventures, we are always happy to review your deck to explore whether we could work together adding capital and expertise to your journey.

The future is bright for energy Transition Startups

The energy transition presents a unique opportunity for founders to innovate, solve pressing global challenges and tap into a rapidly growing market. Whether developing cutting-edge energy storage, driving efficiency in transportation or creating digital solutions, startups can thrive by aligning with the areas where change is needed most. With significant investment interest and a supportive ecosystem, now is the time to take bold steps and position your startup at the forefront of a transformative movement, unlocking both impact and growth.

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