Climate ventures need a wider ecosystem of support if they are to succeed, with less focus on the unicorns and more focus on the bigger forest, argues Ben Honan, investment lead at Climate KIC.
The venture capital unicorn model doesn’t work when it comes to climate action. Chasing billion-dollar valuations and rapid exits from silver bullet technology solutions overlooks something critical – if the market isn’t ready for it, innovation falls flat on its face.
A unicorn can only thrive if there is a forest is there to feed it. Climate ventures need a wider network of supporters and an ecosystem of enabling conditions to succeed. Effective climate action demands interconnected solutions that work together toward a new market structure.
As the climate crisis intensifies around the world, the impact investing ecosystem must evolve beyond hunting for the next climate tech superstar toward funding approaches that are interconnected and adaptive.
The limits of venture-by-venture thinking
Traditional climate finance has borrowed heavily from the venture capital playbook, evaluating single businesses on individual metrics such as revenue growth, patents filed, CO2 avoided and jobs created. But these measures don’t add up to the systemic transformation needed to address climate change at scale.
Early-stage financing rewards speed over collaboration, commercial returns over community resilience, and competition over co-operation. The result? Too many promising solutions remain isolated. They struggle to penetrate the market and have very limiting impact.
Let’s take the example of the circular economy, where innovations consistently face adoption barriers because the supporting ecosystems such as policy frameworks and community partnerships remain fragmented. This means that even a startup with a great technology will struggle to scale because waste collection systems, regulatory structures, and consumer behaviour haven’t evolved in parallel.
The case for systemic entrepreneurship
Systemic entrepreneurship doesn’t replace venture building. But it transforms the context around it. Instead of backing individual companies, funders support networks of entrepreneurs. Rather than celebrating solo “heroes,” they nurture collective capacity building. Instead of optimising for short-term outputs, they invest in relationships and infrastructure that endure.
We’re seeing evidence of this working around the world and across sectors. In East Africa, portfolio approaches to informal waste management have created interconnected solutions where plastic waste recyclers, clean fuel producers, and housing material innovators share supply chains, knowledge, and worker networks.
Similar patterns emerge in urban mobility, where shared e-mobility platforms succeed only when integrated with public transit optimisation and policy experimentation. The ventures that thrive are therefore not necessarily the most technically sophisticated, but those embedded within broader systems transformation efforts.
What this means for impact investors
For development finance institutions, mission-driven foundations, and impact funds, this shift demands new evaluation frameworks and investment approaches. Portfolio construction becomes less about risk diversification across uncorrelated assets and more about building synergistic networks where ventures strengthen each other.
This requires funding what traditional VC often dismisses as “soft” outcomes: trust-building between entrepreneurs and communities, knowledge sharing across ventures, and capacity development within local ecosystems. Investing in the forest around the unicorn is what creates the conditions for sustained impact at scale.
For development finance institutions, mission-driven foundations, and impact funds, this shift demands new evaluation frameworks and investment approaches.
Blended finance structures become particularly relevant here, combining patient capital with technical assistance and ecosystem development support. Rather than expecting single ventures to shoulder the full burden of market creation, investors can fund the connective tissue (incubators, policy advocacy, community engagement) that enables their ventures to succeed collectively.
The market development imperative
The transition from unicorn hunting to ecosystem building also reflects a growing recognition that climate solutions require market development, not just technological innovation. Most climate challenges involve market failures where prices don’t reflect costs, communities lack agency in solution design, or regulatory frameworks lag behind technological possibilities.
Traditional venture funding assumes functioning markets where superior products naturally gain adoption. Climate solutions often require reshaping the markets themselves, developing new supply chains, shifting consumer behaviour, and aligning policy frameworks. This market development work demands longer time horizons, patient capital, and tolerance for uncertainty that venture capital unicorn theory typically avoids.
Shaping tomorrow together
Impact investors who embrace systemic approaches today will shape tomorrow’s climate solutions landscape. Those who cling to traditional venture models risk watching promising innovations fail not because the technology isn’t good, but for lack of a supportive context.
The shift requires courage from asset owners, fund managers, and development finance institutions to measure success differently and treat relationship building as a legitimate return on investment. It means backing the unsexy work of ecosystem development alongside the glamorous technologies that capture headlines.
To be clear, this isn’t about choosing between innovation and systems change. It’s about recognising that lasting climate impact requires both, working in concert. The entrepreneurs developing breakthrough technologies need the ecosystem builders to create conditions for adoption. The communities facing climate impacts need both local solutions and global capital flows that support their agency and resilience.
The impact investing community has the opportunity, and responsibility, to lead this transition. Those who act now will define how capital flows toward climate solutions for the next decade.
Ben Honan is investment lead at Climate KIC
