In 2024, early-stage venture capital firm Green Frontier Capital launched a Rs 1,500-crore (~$178 million) fund to back startups developing solutions in the area of sustainability. Today, as it marks the first close of its maiden India fund, the firm has cut down the total fund size to $75 million–$100 million. It has already raised 20-25% of the fund.
Managing Partner Sandiip Bhammer tells YourStory that the decision to downsize had nothing to do with the demand for the fund but it was due to the limited number of high-quality investment opportunities in India and the overall macroeconomic conditions.
“The pipeline in India just isn’t deep enough right now to deploy capital at that scale (Rs 1,500 crore) responsibly. We’d rather raise a smaller fund and generate strong returns than chase every company that comes along and end up delivering subpar performance,” he says.
His comments come on the heels of a rather slow year for climate-tech funding. Last year, climate-tech companies managed to raise just $2.1 billion, the lowest since 2022, according to data from market intelligence firm Tracxn. Only 158 environmental-tech firms got funded, marking a seven-year low, The CapTable had reported. However, regulatory policies and a global push for sustainability were expected to spearhead a rise in investments in the sector this year.
But Bhammer says this is yet to happen. The sector is still reeling from strong headwinds in the global market. Besides, the spotlight on AI is taking some sheen off climate-tech, which was considered hot some time ago.
Added to this is the ground reality: climate-tech companies have long gestation periods and require patient investments, and the returns are volatile compared to other sectors.
Having said that, despite the cooldown in the climate-tech space, Green Frontier is excited about areas such as waste management, sustainable consumer brands, and asset-light software/platform businesses that help climate-focused companies scale.
“With interest cooling and valuations correcting, we think this is a great time to double down on the climate thesis… with a longer-term view,” says Bhammer.
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Founded in 2020, US-based Green Frontier Capital is an early-stage VC firm focused on Indian climate-tech, with offices in New York and Mumbai.
The firm has backed a range of companies including battery swapping operator Battery Smart (it exited the company in 2024), EV-financing firm Revfin, and EV manufacturing company Euler Motors. It has also invested in agri-tech startups KisanKonnect and Nutrifresh, biodegradable footwear brand Chupps, and organic beauty brand RAS Luxury Oils.
Demonstrating a track record of exits is important for the VC firm as evidence of growth and capital returns. Bhammer says the firm is eyeing exits in an agri-tech startup and an EV manufacturing company.
In an interview with YourStory, Bhammer details the VC firm’s investment strategy in India and the macroeconomic conditions that are derailing climate-tech investments in the country.
Edited excerpts:
YourStory [YS]: How do you assess the current state of the climate-tech ecosystem in India, and how do you see it evolving?
Sandiip Bhammer [SB]: In all honesty, climate-tech has taken a bit of a backseat lately because AI is extremely hot right now, and investors are chasing quick gains and exits there.
At the same time, there are a couple of headwinds. Oil prices are rising, which should make renewables more attractive, but instead investors are piling into oil-related companies because that’s where the near-term returns are.
The other challenge is that climate businesses typically have long gestation periods—they may take eight to ten years to pay off. In a market where investors are looking for quicker returns and stronger policy support, it makes it harder to attract capital.
That said, many of the climate-tech companies are still performing well. With interest cooling and valuations correcting, we actually think this is a great time to double down on the climate thesis—provided you have investors willing to take a longer-term view.
YS: Within the broader climate-tech space, which sub-sectors are seeing the most momentum today? Which of these align with Green Frontier’s investment focus?
SB: One thing that makes India unique is that climate challenges vary city by city. In Delhi, for instance, the big issue is air quality. In Bangalore, it is water availability. In Mumbai, waste management is a major concern. The good news is that this creates a wide range of opportunities beyond traditional climate sectors like renewables.
We’re particularly interested in consumer-focused sustainable lifestyle businesses because India is such a large consumer market and these businesses don’t necessarily rely on heavy regulation.
For example, we’ve invested in Chupps, which makes biodegradable flip-flops and sliders. Instead of sitting in landfills for 400 years like rubber footwear, these break down in about 18 months.
Another company we’ve backed is RAS Luxury Oils, which makes organic beauty products with no microplastics and recyclable packaging, while sourcing from women farmers.
So we’re looking at areas like waste management, sustainable consumer brands, and asset-light software or platform businesses that help climate-focused companies scale. In India, there’s no shortage of opportunities in these spaces.
YS: Electric vehicles have received a large share of investments so far. Do you see their dominance continuing? Or could other subsectors start attracting more capital as the policy and regulatory landscape evolves?
SB: Sentiment around EVs has changed a bit for a few reasons. We’ve seen some high-profile setbacks—companies like BlueSmart shutting shop, Log9 Materials facing challenges, and some EV companies not performing particularly well after going public. That has definitely cooled investor interest.
Having said that, the economics of EVs are still extremely compelling. On an operating cost basis, running an electric vehicle—whether it’s a two-wheeler, three-wheeler or even a car—can be up to 95% cheaper compared to a traditional ICE vehicle.
So the question is: does the entire thesis fall apart because a few companies struggled? Not really. If anything, with valuations coming down, it may actually be a good time to double down on strong EV companies that have real moats and scalability.
It’s also true that the sector isn’t getting the same level of subsidies and tax breaks it once did, with policy attention shifting more toward renewables. Even so, we still see EVs as one of the key pillars of climate-tech investing.
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YS: What timeline are you targeting for the final close of your fund?
SB: We have about 12 months to close the fund, and we’ve already completed the first close. Our target is around $75 million–$100 million. The reason it’s not larger isn’t a lack of demand—capital isn’t really the issue for us. The challenge is actually the availability of high-quality opportunities.
When you raise a fund, the size has to match the quality and depth of the investment pipeline—and right now, we’re simply not seeing enough companies to justify a much larger fund.
YS: How much is the first close expected to be?
SB: The first close will be probably 20-25% of the size of the fund.
YS: What does the LP (limited partner) base look like for the fund?
SB: We have very few foreign investors for this fund, which is quite interesting because our earlier fund saw only foreign investors participating. So, these are the family offices and institutional investors based out of India.
YS: Will you reserve a portion of the fund for follow-on rounds?
SB: Typically, about 30% of the fund goes into first cheques—investments in companies between Series C and Series A. We generally don’t enter a company for the first time beyond Series A. In total, we expect to back around 25 companies.
The remaining 70% of the capital is reserved for follow-on investments. It’s essentially a classic power law approach—you write smaller cheques across a larger number of companies early on, identify the winners, and then double down on them in subsequent rounds.
YS: What is your average cheque size?
SB: Our average cheque size depends on the stage of the company raising capital. For a Series A company, we typically invest around $2 million. For pre-Series A, it is usually $1 million to $1.5 million. For companies earlier than that, it’s generally between $500,000 and $1 million.
YS: What is your exit strategy?
SB: If you look at the VC industry in India, the real question is: how many funds have actually delivered meaningful exits? I don’t think the track record is particularly strong. Broadly speaking, I don’t see many funds that have fully returned capital to investors over the last decade.
Exit strategies that rely heavily on IPOs haven’t worked very well. In my view, trade sales are the more realistic path. Large companies often prefer to acquire startups that have already innovated rather than build those capabilities internally—it saves them time and uncertainty.
So our focus is on exiting either by selling to growth-stage investors at Series C or D, or through strategic acquisitions by larger companies. IPOs can work if you come in at a very late stage, but if you’re investing at Series A or earlier, waiting for an IPO can take 10–12 years. Most investors simply aren’t willing to lock up capital for that long without clear visibility.
YS: Is the firm eyeing any exits from the current portfolio?
SB: We’re actually looking at a couple of exits right now, though I can’t go into too much detail. We’ve already exited Battery Smart. In hindsight, we could probably have done even better because the company has scaled significantly since then. We exited at about 14–15x, but if we had held on, it might have been closer to 30x today.
That said, demonstrating exits was important for us. One of the biggest challenges for VCs in India has been proving that they can actually return capital; so we felt it was necessary to show that track record even if it meant exiting a bit early.
Right now, we have two more companies in our earlier portfolio that could potentially see strategic buyouts from large corporations. One is in the energy business, and the other is in the EV manufacturing space.
Edited by Swetha Kannan
Original Article
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