VC trends in maritime technology, Anjali Bakhru, Co-founder, pH3 Capital Ventures

VC trends in maritime technology, Anjali Bakhru, Co-founder, pH3 Capital Ventures

As the blue green economy continues to work towards its 2050 Net Zero commitments, we’re seeing it emerge as home to a growing number of technologies and innovation. Currently contributing £116bn+ to the UK economy within a $3tn global industry, there’s a clear opportunity for new thinking and strategies to help this sector expand as we unlock change-making technologies for our oceans, ports, and inland waterways.

And, while venture capital interest in maritime technology has seen considerable growth in recent years as the sector seeks to leverage innovation, there’s a clear requirement for more. It’s only with this investment in the UK ports and maritime sector, that we’ll be able to meet decarbonisation targets and modernise sustainably. In this article Anjali Bakhru, co-founder of Beyond Blue Accelerator, looks at the key issues shaping VC behaviours in this emerging sector.

Government commitment to supporting R&D

To date, the UK government has actively supported green initiatives in the sector directing investment towards R&D. 2022 saw UK SHORE (Shipping Office for Reducing Emissions) make £206m available to support the development of clean and smart maritime technologies. This built on previous funding of £23m made available to develop clean, smart maritime technologies in maritime.

The venture capital community has however, been a relatively slow adopter of the sector. Maritime currently attracts just 0.3% of total VC investment, although its share of global GDP is approx. 0.9%. It’s fair to say that this is a disproportionately low amount of VC money in the sector, relative to its size and importance to global trade flows, UK economic prosperity and global security. 

As a sector, the call to action is clear: we need to collaborate to make sure maritime technology stays firmly visible on the investor map, ensuring we’re seen as an attractive destination for tech investment.

Creating commercialisation opportunities for startups

A key barrier to investment in maritime has been the ability of startups to commercialise their R&D. In many ways, the lack of VC investment perpetuates the cycle. A key aim of the Beyond Blue Accelerator is to break this cycle. By creating a sustainable ecosystem – complete with networks, investment, mentoring and training – startups will have the resources they need to develop, test and market their R&D, unlock change-making and circular technologies, innovate green infrastructure solutions as well as develop new green materials. We believe this will be a real catalyst for more investor interest and support.

Climate tech gaining ground

We’re reassured to see that our climate tech colleagues are gaining ground: TechNation’s 2022 report showed that 2021 was a record year for climate tech investment, with over $111bn raised by startups and scaleups globally. To contextualise this, climate tech represented 15.3% of all investment into tech startups and scaleups in 2021 ($111bn of $726.4bn raised in total). 2022 figures are equally buoyant with Net Zero reporting nearly 20% annual growth in climate tech investment. Of this, $8bn was raised by UK companies (double the previous year’s level), and just over $43bn by US based companies.

What’s also exciting is that the global climate tech ecosystem is maturing: 53% of total investment in 2021 comprised deals of over $250mn, compared to just 10.5% in 2017.The recent high levels of climate tech investment are, in part, being driven by large rounds ($185mn +) into later stage companies. Broader economic factors are challenging this trend although climate tech is still expected to prove resilient. This shows the opportunity for maritime technology as an emerging sector, and we hope to see the benefit of the ripple effect spilling into our sector.

Closing the funding gap

We know the potential of this innovative sector. As the first maritime tech unicorn, Flexport has shown us just what’s possible. How to build the next one? 

Startups across all sectors are challenged with the reality of reduced funding in line with the current economic climate. In essence, the most attractive companies to VC funding in 2023 will be those that fit more risk mitigating requirements: indispensable goods or services, capital efficient and resilient business models, and skin in the sustainability or clean energy game, together with an exit strategy timed to coincide with improved market conditions further down the line.

Maritime innovation could look particularly attractive through this lens with key features being it is indispensable, its ability to scale and, perhaps most of all, its strong emphasis on sustainability. At pH3 Capital Ventures, we believe some of the areas which are contenders for rapid scaling and growth include advanced robotics, marine renewable energy and storage solutions (outside of offshore wind), green vessels (for all sizes and categories including leisure boats and retrofitting), advanced materials (such as  new composites, blue biotechnology applications linked to the refinery of macro-algae and microalgae, and circular economy solutions. 

Which is why we will raise seed funding for the top performing ventures in our Beyond Blue Accelerator and select the best performers from the first three cohorts to fund at Series A.

Our priority is to grow the innovation ecosystem for the UK maritime industry to catalyse investment for a new generation of blue green entrepreneurs. We’ve seen that the missing enabler for driving growth of the blue bio-economy is the availability of scale-up capital from early stage investors who understand the rapidly changing market context for maritime. With Beyond Blue, our aim is to close this gap.

To apply to Beyond Blue Accelerator, please go to https://ph3.co.uk/beyond-blue-accelerator/.