AI is sucking up VC funding, claim green startups

Reuters/Fahad Shadeed

• AI getting bulk of investment
• Investors looking for quick returns
• Startups told to integrate AI

Green startups in the region have appealed for VCs to invest more in clean tech and renewable energy hardware, rather than just looking for quick returns in artificial intelligence projects.

The venture capital market across the Middle East and North Africa raised $1.3 billion from January to September 2024, with Saudi Arabia securing 39 percent of this total funding.

But sustainability-focused startups argue that most of the venture capital is going to AI businesses.

“A lot of VC money is going into AI and ecommerce – it’s a worldwide phenomenon, looking for quick and big money,” says Michael Salvador, co-founder of solar energy company Mirai Solar, a spin-off from the King Abdullah University of Science and Technology. 

“We’d like to see more venture capital into hardware, but VCs don’t like that because it’s capital intensive,” Salvador says. 

“We’re hoping there will be at least some sense of need for clean tech investments. It’s popping up as a trend in the US and Europe, and it’s needed – you can’t mitigate CO2 by designing software.” 

Mirai Solar’s shading screens, which convert blocked sunlight into solar energy, won a $30,000 prize from Pepsico’s regional green accelerator last month. 

“A normal solar panel is large and bulky and they’re getting bigger,” Salvador says. “We set out to do something that can’t be done by a solar panel. If you want a shading canopy with conventional panels, you need a large steel structure.” 

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Dubai-based wastewater startup Mruna also benefitted from the Pepsico accelerator in 2024.

Its co-founder Ziad Hussami says it has received a few small grants, but the accelerator helped with introductions to Saudi regulators and state companies, including the petrochemicals giant Sabic.

“I’m cautious because I know things are going to take a lot more money, a lot more time to get off the ground until we find the right partner and go for it. We’re a small business, we can’t take chances,” says Hussami. 

Innovators in electricity-based aviation have also faced funding problems because investors are cautious about the large capital requirements of an as-yet untested technology. The German developer Lilium announced its insolvency last week over that very issue.

But Silvina Moschini, CEO of Unicorns Inc in California, which connects investors with high-growth companies looking to hit the $1 billion “unicorn” valuation, says green startups need to think more about how they integrate AI and how they market themselves.  

“If you have a company that is developing green technology and you know the market is investing in AI, how are you going to leverage AI in your narrative?” she said at last month’s Future Investment Initiative forum in Riyadh. 

“You can use AI to optimise your supply chain, to make business decisions, to run your communications department.

“Climate energies and clean technology are very important. It’s about how you navigate the system, because the money is available.”