Enabling climate-focused startups | Interview with Dinesh Pai from Rainmatter

Backed by Zerodha, Rainmatter is a leading investment platform for start-ups in Fintech, Climate, Health, and Storytelling. This interaction with Dinesh Pai, Head at Rainmatter Investments, delves into how the investment thesis and approach for climate-focused startups differ from investments in other businesses.

Can you please tell us about Rainmatter?

Rainmatter began in 2016 as an initiative to support the capital markets ecosystem. It started off as an initiative where Fintech startups could build on top of the APIs offered by Zerodha. Early investments like Smallcase, Sensibull, Streak, helped provide tools for retail investors to save and invest better. These tools back then were mostly available for sophisticated investors. Apart from these tools, the focus was also to enable startups in ancillary sectors of fintech – such as Digio (fintech infra startup) and Ditto (insurance advisory).

Over time, Rainmatter expanded from fintech into climate, health, and storytelling.

We also have the Rainmatter Foundation, which supports nonprofit organizations.

Our learnings from this work inform our startup investments. “Rainmatter started as a seed and early-stage startup investor, being one of the first to adopt a patient capital approach to startup funding. And our focus has always been to back great teams and solutions being built in India.”

What does your current portfolio look like?

So far, we have invested around INR 500 crores and backed nearly 90 startups – 34 in Fintech, 21 in Health, 25 in Climate, 3 in storytelling, and 7 in other sectors. In terms of capital (500cr) distribution across sectors – Fintech takes up about 45%, Climate about 20%, and health is at 25%, the other startups making up the rest of the 10%.

Within climate, what are your focus areas?

When we started investing in climate, we identified key areas such as agriculture, water management, waste management, energy transition, materials, and education and awareness. While we focus on these areas, we are open to any solutions that might address climate problems. Our approach prioritizes decentralized solutions, the impact on livelihoods, job creation, and local value creation over urban-centric growth.

Unlike conventional VCs that focus on top-line and bottom-line growth, we aim to invest in sectors that truly need support. If a sector already receives significant attention and funding, we tend to stay away, believing our funds can be better utilized in underfunded areas. This way, we add more value where it’s needed the most.

Some of the climate start-ups in our Portfolio:

Apart from financial backing, what other support can startups expect from you?

“Beyond financial investments, we provide several key benefits. We focus on offering patient capital, which means we are in it for the long haul without the exit mandates typical of regular VC funds. This allows founders to build their companies at the right pace, especially in sectors like climate and health, where growth takes longer.”

In addition to patient capital, we are exploring ways to enable low-cost debt for our companies through credit guarantee schemes from Startup India and the government. We also facilitate networking through our collaborations and partnerships, particularly with the Rainmatter Foundation.

We support market connections and ideation, staying in touch with founders and assisting them whenever needed. Our value comes from being available, supportive, and helping founders build sustainable businesses.

The VC fund structure in India has specificities, with regulators allowing AIFs (Alternative Investment Funds) as pooling vehicles that have an end-of-life term. Investors in AIFs aim for exits within 7 to 10 years, but we do not have these constraints, allowing us a long-term perspective. Corporate VCs or those investing off balance sheets can also afford this longer term view.

There is growing recognition that building sustainable businesses and going public within 7 to 10 years is challenging, especially in the climate and health sectors. More investors are becoming open to patience.

Given the current landscape, we are among the few who prioritize patience and have a structured approach aligned with that mindset.

How do you see the people angle in solving climate issues as a business?

Climate is a complex problem that requires startups to understand the issue and their customers deeply. Many climate solutions fail because they are based on hypotheses without grasping ground realities. The best climate startups spend significant time understanding the problem’s complexity, necessary collaborations, and ecosystem support.

We prioritize teams that truly comprehend the problem and are passionate about addressing it. Successful startups have founders closely connected to the issue, committed to building sustainable, long-term solutions, and focused on R&D.

The general learning for us has been that one of the best ways to invest in climate is to support and back passionate teams doing great work and let them figure it out. We believe this approach will mean we build an ecosystem of experts in various climate sectors, eventually brewing potential for ideation and collaboration.

What kind of impact does Rainmatter aspire to have on climate space? Can you quantify the impact you envision, say, 5-10 years down the line?

Our goal is to build a robust ecosystem to support climate startups. While our impact may not be immediately quantifiable, our efforts through the foundation and investments aim to create an environment where new ideas can thrive. That’s the impact we hope to see from our efforts, time, and energy.

Beyond supporting our immediate portfolio companies, we aim to help startups we are not directly investing in.

This broader support network will only be possible if our portfolio companies and the foundation come together to create an ecosystem where new ideas in climate can be easily validated, verified, and supported from ideation to proof of concept to MVP and beyond.

We are not the largest climate fund, but we are focused on building collaborations and networks and enabling more people to see the business opportunities in solving climate issues.