Green Unicorns

Photo: Companies known as 'green unicorns' are on the rise. Credits: Pexels 

On this day 52 years ago, 10% of the U.S. population took to the streets and demonstrated to demand climate action. Since then, Earth Day has been celebrated in more than 190 countries, with more than one billion people taking part in activities. Today, Earth Day is recognized as the largest civic event of the year. 

From the first environmental laws to today's current situation, a multitude of business opportunities linked to the ecological transition have arisen. The startups that have been able to capitalize on them and have achieved record funding are known as 'green unicorns'. 

Unicorn has been a polysemic word since 2013, when Aileen Lee, an American angel investor – a person who invests in early stage startups – wrote in TechCrunch about this term that has gained popularity in recent years. In addition to the mythological being that, as a matter of curiosity, is the national animal of Scotland, a rare category of startup is called a unicorn. A unicorn company is a startup valued at $1 billion – or more – with a potential to grow quickly without having gone public. 

As of March 2022, there were about 1066 unicorn companies worldwide, according to the list compiled by CB Insights on a monthly basis. If you cross-reference the names of these companies with those recognized by the intelligence platform Holon IQ as Global Climate Tech Unicorns, you get the figure: there are 31 green unicorns worldwide. This group of sustainable companies received the most funding in Europe, raising 24% of the money invested in unicorns, according to a report by the venture capital fund Atomico. Currently, three out of every 100 unicorns, globally, are green. However, some have predicted that the next 1,000 unicorns will be sustainable. 

The companies of the future will be sustainable. 

The founder and CEO of BlackRock, Larry Fink, predicted in January this year, in his traditional letter to CEOs around the world, a promising future for these companies. According to the chairman of the world's largest fund manager, the next 1,000 unicorns “will contribute to decarbonization and make the energy transition affordable for all consumers“. Fink not only highlighted the leading role of startups in the transition to a carbon-neutral economy, but he also pointed to the opportunity that exists for dominant, established companies with the advantage of capital, market knowledge and technical expertise. 

In this regard, the latest report of the United Nations Environment Program (UNEP) also recommends that private companies “implement certified and identifiable sustainable practices along the entire supply chain“. In terms of regulation, the UN encourages governments to account for natural capital in decision-making and to provide incentives for companies to do the same. 

Organizations such as the International Monetary Fund and the World Bank “have a critical role to play” in helping to ensure that capital is invested in green climate technology in developing countries, Fink said. 

A UK government report highlights that half of the country's most valuable tech startups were focused on the green economy. In 2021 these unicorns raised £2 billion (€2,391.8 billion) in investment, an increase of £300 million (€358.86 billion) over 2020. Data from the UK Digital Economy Council report also showed that investment increased by 127% from 2018. As of today, the domestic green tech sector exceeds £50 billion (€59.795 billion) for the first time. 

The British case is not an exception; 22.5% of sustainable startups, i.e. 7 of the 31 green unicorns in the world, are located in Europe. They all share some common characteristics: they work in the transport, energy, or agricultural sectors to reduce or mitigate CO2 emissions. We analyze them case by case. 

Bamboo brush to comb European unicorns 

The latest startup to be declared a unicorn in Europe is Volocopter, an electric urban aerial mobility company that made the list in March 2022. A month later, it has carried out the first air taxi in Paris. The German company plans to offer this service for passengers during the 2024 Olympic Games. 

The German company Tier Mobility, which offers electric scooters, also works in the transportation and mobility sector. Voi, a Swedish mobility company with a presence in Madrid, Rome, and other European cities, has the same philosophy of a smoke- and noise-free city. 

In Europe, three of the unicorns focused on green energy are making headway. Enpal, based in Berlin, aims to “build the continent's largest renewable community” by offering all-inclusive rental of the equipment needed to obtain solar energy at home: solar systems, storage units and wall boxes -home recharging points. 

Another company based in France, but with five million users worldwide, is Ovo Energy France, a provider of renewable energy from hydro, wind, and solar sources. 

The third case is Northvolt, the Swedish sustainable battery company founded by former Tesla executive Peter Carlsson. The company plans to start marketing electric vehicle and lithium-ion batteries this year that are much more environmentally friendly than traditional ones. Volskwagen, BMW or the founder of Spotify are some of its best-known investors. 

The Ÿnsect company founded in Paris by scientists and activists transforms insects into high-value ingredients for pets, fish, plants, and humans. They use a circular and innovative technology that poses a solution to the growing demand for food globally. 

Can unicorns save the world? 

Less than 3% of all unicorns worldwide are sustainable. The priority of such companies is to have exponential growth to achieve maximum economic value as soon as possible and therefore achieve exceptional unicorn status. 

Given their nature, there is a wariness about the good intentions of such companies. Since, by definition, the path to become a unicorn is not directly related to sustainability.  

However, more and more companies are aligning themselves with the UN's sustainable development goal of “inclusive and sustainable economic growth”. The pandemic marked a turning point: Spanish companies carried out 92% more social responsibility projects than in the previous year, even more reason to justify the direction taken by the business sector. Being aware of the environmental impact of the development of business activity is the first step in directing an organization towards sustainability. In this context of a green economy, there are also unicorns whose development potential has yet to be fully tapped.