Biden's Infrastructure Plan: Opportunities for Startups

With President-elect Joe Biden preparing his transition team and outlining his initial goals for his administration, startups may anticipate progress on previously delayed infrastructure projects, potentially leading to substantial benefits for their operations.

The incoming Biden Administration considers infrastructure a key priority, as the former Vice President intends to fulfill his campaign pledge to “build back better.”

For many years, American infrastructure has deteriorated due to a lack of substantial federal investment; furthermore, much of the infrastructure slated for replacement will also incorporate updated technology, according to sources with knowledge of the Biden plan.

This suggests that technology firms specializing in advanced telecommunications and utility infrastructure, transportation, and housing and construction technologies focused on energy efficiency could experience increased funding over the coming four years.

“Investments in infrastructure and the development of a clean energy economy… don’t always involve large-scale wind or solar installations. They could encompass sophisticated metering systems… or innovative engine technologies,” explained Dan Goldman, a managing partner at Clean Energy Ventures. “We believe this presents a significant opportunity for job growth… not only re-employing individuals but also providing them with high-caliber positions.”

Goldman also noted a growing openness to supporting these infrastructure initiatives in a bipartisan manner within states like Massachusetts, Virginia, and Florida, all of which are actively expanding electric vehicle infrastructure and renewable energy projects.

Although the federal government will be the ultimate source of funding, startups can anticipate that the actual expenditures will be managed by city and state governments, which are typically better positioned to assess local requirements and allocate resources effectively.

Next-generation energy infrastructure

The increasing electrification of all sectors – a key element of any plan to achieve net-zero emissions – necessitates substantial improvements to current power systems. This encompasses advancements in areas such as power systems control technologies, distribution networks, and methods for storing energy for delivery to the electrical grid.

Abe Yokell, a co-founder and managing partner of Congruent Ventures, emphasized that “significant investment in infrastructure is crucial for success.”

He highlighted large-scale energy storage solutions as a potential answer, while also noting the importance of advanced management systems for utility companies.

These infrastructure developments are likely to prove beneficial for companies specializing in battery technology, such as Form Energy, which recently secured its first major agreement with Great River Energy. Companies like Antora and Malta, which focus on storing energy through thermal means, and Quidnet, which utilizes pumped hydroelectric storage by leveraging underground rock formations to create pressure for power generation, could also see positive impacts.

Furthermore, other companies involved in the development and installation of large-scale energy storage systems stand to gain, including Tesla, with its established battery installations, and Fluence, which provides management and operational services for large projects.

Gia Schneider, founder of Natel Energy, a startup focused on energy storage and generation through hydropower, believes her company’s technology could also be integrated into these evolving systems.

Schneider explained that her company addresses challenges across multiple areas, stating, “Climate change is fundamentally linked to changes in water resources.” She categorizes her company’s work into three areas: energy, environmental solutions, and sustainable land use.

Opportunities extend beyond energy storage as well. Technologies related to sensing, monitoring, and management all have a vital role, potentially leading to growth for innovative tech developers.

“Numerous startups are concentrating on energy efficiency, ranging from residential energy consumption to city-wide energy usage patterns,” stated Matt Mullrennan, chief executive officer of EnVest, an international climate tech startup showcase. “Improving energy efficiency relies heavily on data utilization, intelligent systems, and informed decision-making regarding energy use. A considerable amount of energy is currently lost through waste, a similar issue exists in the food and agriculture sectors.”

Water works

The sensing technologies utilized for monitoring energy consumption and reducing waste within the food and agricultural sectors find comparable applications in the realm of water management. This represents another field where Mullrennan identifies potential for new businesses and investment opportunities.

“Investments in this type of infrastructure are critically important. Water represents our most vital resource, and a substantial number of investors are currently focused on this area,” he explained. “Similar to energy, we experience considerable water wastage across various industries – particularly within the food and agriculture industries.”

Companies such as Banyan Water, Smart Energy Water, Emagin and FlowWorks have dedicated the past ten years to the creation of technologies and the development of markets centered around intelligent water management and efficient utilization. Furthermore, specialized firms are emerging to address specific water management challenges, exemplified by Opti, a startup located in Boston, whose stormwater management technology is currently deployed in Kansas City, Kansas.

Schneider noted that Natel concentrates on optimizing water usage and flow, concurrently working to revitalize hydroelectric facilities, rehabilitate aging dams, and safeguard and restore natural waterways. “The United States is home to approximately 90,000 dams, and a significant portion of this water infrastructure is aging and in need of modernization.

Startups are attracting considerable investment in the area of wastewater treatment for municipal, agricultural, and industrial purposes. Companies like Epic CleanTec are adapting the concepts of distributed energy production to waste management, developing treatment systems suitable for installation within buildings.

Technologies for large-scale industrial wastewater treatment have also attracted investor attention, with companies including Ostara, H20 Innovation and Cambrian Innovation securing substantial funding in 2019 for their respective innovations.

The Shift in Transportation Technology: Electrification and Future Innovations

Alongside necessary improvements to utility systems, transportation represents a significant focus within Biden’s infrastructure plan. Historically, funding was primarily allocated to long-standing projects like highway maintenance and road repairs.

However, the emergence of self-governing systems and the transition to electric vehicles – both crucial for the United States to remain competitive globally – are reshaping the importance of these investments. A Biden administration is expected to strongly favor electric vehicles, potentially through mandates for federal vehicle purchases or the implementation of stricter emissions regulations. Accompanying this shift is the essential need for expanded charging infrastructure to meet growing demand, as well as efforts to identify alternative sources for the raw materials required in battery production.

“Establishing a market for responsibly sourced nickel in anticipation of potential supply constraints presents a substantial opportunity,” Mullrennan observed. “Companies capable of sustainably extracting lithium and nickel are poised for success within the electric vehicle sector.”

He highlighted companies such as Camden Nickel and Lilac Solutions as emerging businesses likely to benefit from this increasing demand.

Mullrennan also believes that this year will see significant advancements in hydrogen fuel cell technologies.

“A considerable competition exists between batteries and hydrogen for long-distance transportation. Electric vehicles for personal use represent the most readily achievable goal,” he explained. “The greater challenge lies in powering trucking and scaling up to large trucks, massive freighters, and even entire cargo ships. The central question is whether these vehicles will operate on batteries or fuel?”

The creation of a viable hydrogen fuel industry could provide a pathway for the established oil and gas sector, leveraging their existing expertise and infrastructure to remain relevant in a future increasingly focused on electrification and moving away from traditional hydrocarbon fuels.

Green building boom

Several investors believe that an initiative focused on building upgrades and environmentally friendly construction could yield the greatest benefits of any potential stimulus package from the Biden administration.

Financing for companies developing technology for the construction industry has been increasing, and the anticipated infrastructure investments could further elevate demand, necessitating additional capital.

CB Insights data reveals that from 2015 through 2019, investors committed $5.1 billion to construction technology startups through a total of 571 transactions.

Image Credits: CB Insights

The number of global deals in this sector rose from 2015, reaching 130 deals in 2018. Funding experienced a significant increase in that year, largely due to Katerra, a company specializing in prefabricated construction and project management, securing approximately $1 billion in its Series D funding round. Although deal volume in the first half of 2020 was trending towards its lowest level since 2016, with a 19% decrease compared to the previous year, total funding reached $1.3 billion in 2020—a 56% year-over-year increase.

Goldman’s company is expected to contribute to this overall funding amount. “We examined numerous platforms designed to enhance building management, as well as innovative materials capable of substantially improving the performance of components like windows, drywall, and building exteriors,” he explained.  

Goldman is not the only one showing interest. Investors are increasingly focusing on reimagining buildings and the built environment as part of a broader re-evaluation of technologies related to climate change.

 

“Improving energy efficiency is particularly promising because it has the potential to generate a substantial number of jobs,” stated Mullrennan of EnVest. “For every dollar invested, energy efficiency initiatives create a high volume of employment opportunities, and these jobs are distributed more equitably throughout the United States. Small businesses that assist homes, commercial properties, and even cities and towns in becoming more energy efficient will benefit.”

Mullrennan, like other investors, highlighted the additional advantages of energy efficiency and weatherization. “Ideally, this will function as a financial benefit for individuals. Savings on energy costs can be redirected to other expenses,” he said.