Are We Building The Wrong Adaptation Tech?

Start-up founders criticizing adaptation technology? It’s not something one expects to hear at a climate tech conference. And yet, a number of speakers at the Adapt Unbound summit in New York last week had some choice words for where the market appears to be headed.

“The advanced software-based products I think absolutely do not help the person on the ground most often,” said Jack Wilson, Co-Founder of Eztia Materials, a company engineering wearable cooling materials to address rising heat risks. “There is a push for getting more and more data — especially on end-users — seeing when they’re getting heat stress, where it’s hotter than one area or another, and that’s just not helpful. Having been a customer of one of those products, getting an alert that says it’s extremely hot out when I’m outside, is extremely frustrating.”

Wilson wasn’t alone. “I think if you really want to solve [for] the farmer, they probably don’t need more decision data,” said Eric Bellefroid, Founder and CEO at Brekland, a start-up developing frost risk solutions for farmers. “They sort of see this stuff happening. They kind of know it better. They need a tool to solve it.”

For some in the room, these comments would have made for uncomfortable listening. Adapt Unbound was packed with climate intelligence start-ups — including ISeeChange, Weathervane, RCOAST, and Fathom — whose business models revolve around the very software tools being criticized. Moreover, their views ran counter to the current tide of investor sentiment. Right now, the climate intelligence sector is one of the hottest verticals in the emerging climate adaptation technology (CAT) space. Consultancy BCG projects it will expand 15% annually over the next five years.

But their statements highlight an ongoing tension in the adaptation space. While adapting to the physical realities of climate change demands physical solutions, early-stage investors in the US and other developed countries are more likely to be wooed by digital technology providers, who can offer the scale and investment multiples they crave.

This tension played out on the conference stage. Erik Weber, Vice President of Product and Operations at ISeeChange, spoke up for the importance of software. “The technology that we have at our disposal today is a huge difference driver. The ability for us to use machine learning, computer vision, and AI to process information at scale — that just didn’t exist even five years ago,” he said. ISeeChange offers a platform for sharing info on climate and weather impacts in real time and turning it into useful data for cities, engineers, and utilities.

In his telling, climate intelligence isn’t divorced from real-world adaptation. Instead, it unlocks savings and enables a more efficient allocation of scarce resources in the climate fight. “This has been a huge opportunity for us and for our customers … to make better decisions to allocate limited money in the most impactful ways,” he said. This is particularly important when it comes to local government clients, who are straining to climate-proof public assets and protect communities with miserly budgets.  

Weber wasn’t the only one making this efficiency case. “Some of these early warning systems are very valuable,” said Katie MacDonald, Director of Ventures at RWDI and Co-Founder of Tailwind Climate, an adaptation venture fund. “There is just not high-quality data in a lot of cities because they cannot afford it. That’s a huge, huge gap that I think we can address with technology.” But MacDonald also said she and Tailwind were “very bullish” on adaptation hardware devices as well.

Others argued that in some sectors further advancements in data and analytics are still needed to lay the groundwork for effective physical adaptation solutions. Water infrastructure is one example. Tom Ferguson, Managing Partner at Burnt Island Ventures, said at the conference that although the underlying tech stack for water risk and quality management “had really come on in leaps and bounds,” it is still “crap relative to most other sectors.” For example, Bluefield Research recently calculated that almost 20% of all treated drinking water in the US is lost before it reaches customers or is improperly billed. Poor data and tech is one of the culprits.

Still, the few in-depth analyses of the CAT space out there do suggest that innovation —and financing — are disproportionately skewed towards the software and climate intelligence segments. Tailwind Climate’s deep dive, published last year, claims around 44% of venture funding for adaptation is going toward digital solutions and AI, with another 27% flowing into earth observation and sensors. In contrast, only 16% is going directly to physical risk reduction products and services, like Eztia’s wearables. 

Recent high-profile raises attest to this trend. Last week, Spain’s Xoople — a geospatial intelligence company — emerged from stealth with US$129mn in total funding. Climate X, a climate risk intelligence company targeting the financial sector, raised US$18mn in 2024. While there are counterexamples in the physical space, like “living seawalls” builders Kind Designs and water infrastructure specialists Aqua Membranes, it appears to some participants that the largest, splashiest investments are made in the software space. Speaking last year, Emilie Mazzacurati, Tailwind Climate’s other Co-Founder, argued that the venture capital market is simply better suited to software. “It’s just easier to make money on software than on hard tech,” she said.

Another funder, John Robinson of Mazarine Climate, believes the ability of adaptation software to “democratize” climate risk intelligence is what makes it so useful — and therefore potentially lucrative. “High-resolution, real-time tools are increasingly accessible, not just to institutions, but to communities and individuals. When the proverbial ‘little guy’ can see the latest forecasts for temperature, precipitation, or wind, they can start making informed preparations. Not everyone will have the resources for full protection, but now, more than ever, they have a real chance to act and to adapt,” he told Climate Proof.

Still, one founder in the buzzy geospatial space is conscious that climate intelligence companies have to do more to prove their worth the money, and link their solutions to the real world as much as possible. “The thing that I’ve been saying to all of our customers is: climate risk data is necessary, but not sufficient,” Josh Gilbert, CEO at Sust Global, told Climate Proof. “None of these folks are like: ‘Oooo I’ve got my [climate risk] exposure score.’”  What clients are really looking for, he explains, are intelligence solutions that do more than spit out a number. They have to offer ways to drive adaptive actions, too.

Some heavyweight analysis suggests physical solutions start-ups may soon have their own moment in the spotlight. In its analysis of the private equity opportunity in adaptation, BCG claimed that many of the most promising investments today are physical in nature, from climate-resilient building materials to human-engineered flood defenses. The consultancy estimates the market for these two sectors will grow at an annual rate of 6-8% and 7-10% over the next five years, respectively.

Another promising indicator is growing corporate revenues from adaptation. The London Stock Exchange Group estimates that the green buildings and water infrastructure sectors generated US$424bn and US$94bn, respectively, from adaptation-related products and services last year. Companies highlighted in their recent report include Japan’s Raito Kogyo, which generates revenues from slope construction and soil restoration, and Clean Harbors, which specializes in debris removal and disposal in the wake of extreme weather and seismic events.

Established “meatspace” companies — those with real-world operations rather than digital products — are emerging as ideal clients for CAT start-ups of the “hardtech” persuasion. They could even become acquirers down the line. This prospect gives early-stage investors a stronger reason to back these ventures, since it offers them a clearer path to exit.

Indeed, speaking after the Adapt Unbound conference, Wilson at Eztia said he was optimistic the swing towards CAT hardtech was already in motion. “In conversations with investors … the desire to get tangible solutions is really coming around, at least for the people we’ve talked to.”

“The need is there, and the desire is there.”

Thanks for reading!

Louie Woodall
Editor