Que: How does Ostara Advisors assess risk in EV battery and BMS startups and what are the top three factors investors consider when funding electric 2W or 3W startups in India?

Ans: Ostara Advisors evaluates EV Battery and Battery Management System (BMS) startups across three key dimensions:
1. Technical Viability & Differentiation – For EV battery startups, a strong focus is placed on the depth and nature of technology differentiation and adaptability for Indian markets (thermal management, safety, energy density), etc. Innovation is paramount.

In the case of BMS, the evaluation extends to how data is collected, processed, and leveraged to generate value for drivers. A key question is the direct correlation between collected data and tangible benefits for users—whether in performance optimisation, predictive maintenance, or enhanced safety features.

2. Supply Chain Resilience & Unit Economics – Startups are assessed on their efforts toward localisation of critical components and supply chain diversification to mitigate risks associated with global disruptions. We also look for how the startup is driving higher gross margins through an effective supply chain for key components.

3. Market Traction – Being B2B products, customer adoption rates serve as a strong indicator of product-market fit. The assessment considers the company’s traction, growth in deployments, and types of customers with order book details, providing insight into its ability to scale effectively.

By analysing these factors, Ostara Advisors identifies startups with robust technology, sustainable supply chains, and strong market potential in the evolving EV ecosystem.

Top 3 Factors for investors to consider investing in electric 2W or 3W startups

Growing Market:
India’s EV sector continues to surge, attracting foreign investors. In 2024, the market grew 30 percent, with total EV sales increasing from 1.39 million to 1.80 million units, fueled by technological advancements, affordability, and regulatory support.

● E-2Ws led the segment, growing 37 percent to 1.07 million units, driven by affordability and increasing adoption in urban and semi-urban areas.

● E-3Ws saw a 21 percent rise, reaching 0.63 million units, largely due to soaring demand for L3 and L5 passenger mobility E-3W and steady growth in goods-focused E-3Ws, supported by e-commerce expansion.

Competitive Differentiation:
With incumbent players aggressively entering the EV market, investors prioritise startups with strong competitive differentiation. Key factors include technological innovation, advanced battery management systems (BMS), unique powertrain efficiency, and distinctive go-to-market (GTM) strategies that set them apart from the competition.

Distribution Capabilities:
As competition intensifies, the strength of a startup’s distribution network becomes critical. Investors assess how startups engage with dealers, expand their dealer network, and optimise last-mile availability to drive adoption. Strategic partnerships with established networks enhance accessibility and brand visibility, positioning startups for sustained growth.

Que: What are the key drivers behind the growing investor interest in carbon credit trading platforms?

Ans: Investor interest in carbon credit trading platforms is growing rapidly, driven by strong market expansion, rising carbon prices, and attractive financial returns. In 2023, global carbon permit trading reached a record EUR 881 billion, with 12.5 billion metric tons of permits exchanged. The EU Emissions Trading System (EU ETS) dominated this market, accounting for 87 percent (EUR 770 billion) of the total value.

Despite economic challenges, the Global voluntary carbon market is projected to grow from USD 3 billion in 2024 to as much as USD 10–40 billion by 2030.

Investors are increasingly drawn to carbon credits due to their strong risk-adjusted returns (16.6 percent), which outperformed traditional assets like gold (2.56 percent) and natural gas (5.48 percent) between Jan 2011 to May 2022, even though they come with higher volatility.

These trends highlight the economic potential of carbon trading platforms and their critical role in driving global decarbonisation efforts.

Que: What frameworks or certifications are international investors demanding from Indian cleantech firms, and what are the biggest regulatory hurdles for startups working at the intersection of energy and mobility?

Ans: Frameworks or certifications
International investors increasingly seek robust standards and frameworks to assess the credibility and impact of Indian cleantech startups. ISO certifications are frequently required to ensure compliance with global environmental and operational standards.

Beyond certifications, impact or climate investors emphasise climate impact-driven business models, expecting startups to outline measurable carbon reduction strategies. Financial projections are now paired with impact tracking frameworks, where investors assess a startup’s ability to achieve quantifiable environmental goals—such as emissions reductions. These metrics are continuously monitored to ensure alignment with sustainability targets.

Startups operating at the intersection of energy and mobility in India have faced regulatory hurdles, primarily stemming from policy uncertainty (including frequent changes in EV incentives, net metering policies, and open access regulations), adequate energy availability, permits for power distribution, and infrastructure bottlenecks.

Having said that, the Indian administration is looking at ways to simplify complex licensing requirements, engage with regulatory bodies for policy stability, and leverage global partnerships to align with best practices in clean energy and mobility integration.

Que: How is Ostara helping investors differentiate between hype and true innovation in the EV space, and how do you assess the return on investment (ROI) in smart grid infrastructure for clean mobility?

Ans: Differentiating between Hype and True Innovation:

At Ostara, we prioritise strong technological differentiation, partnering only with companies that demonstrate a clear edge in innovation. Our approach involves investing effort to develop a good technical understanding, where we engage in multiple product demos to gain a comprehensive understanding of the technology. Beyond just assessing innovation, we analyse how superior technology translates into superior proven financial outcomes, integrating these insights into our financial models.

To help investors appreciate a startup’s unique value proposition, we conduct rigorous competitive analysis, benchmarking against both Indian and global peers. As a thought leader in the Indian climate tech market, Ostara’s insights are highly regarded by investors, reinforcing our role in identifying and supporting the most promising climate-tech startups.

Smart grid infrastructure for clean mobility refers to the integration of advanced digital technologies into the electrical grid to support the efficient charging of electric vehicles (EVs) while maximising the use of renewable energy sources. We are currently advising a startup in this space, where the technology solution involves helping Utilities optimise energy supply in response to demand from EV charging stations.

Some of the ways in which Smart Grid Infrastructure for Clean Mobility can deliver higher ROI for the Utility:

1. Tempering EV charging demand in response to supply and times of the day can help in optimising further investment in electricity distribution hardware like transformers and sub-stations
2. Vehicle-to-Grid (V2G): EVs can feed excess energy back into the grid, enhancing grid stability.
3. Such technology can help in integrating renewable energy sources into the main grid, enhancing energy supply and bringing in cheaper sources of energy.
4. Predictive Maintenance of the Grid: AI-driven analytics prevent failures, lower repair costs, and extend asset lifespan.

Que: What are the biggest bottlenecks to scaling clean mobility solutions in India’s automotive ecosystem and how is Ostara contributing to ecosystem building beyond just capital matchmaking?

Ans: ● Limited Patient Capital: EV startups face steep CapEx requirements to scale. Investors hesitate due to longer return cycles, restricting funding for R&D and commercialisation. Given that most innovations in this space are related to hardware development, there is a need for patient risk capital to be deployed, which can extract returns from a 8-10 year gestation period, rather than short-term investing. Such sources are few and Ostara has invested much time and effort in liaising with global investors to access this much-needed capital.

As per a McKinsey report, The climate tech sectors require significantly larger later-stage VC ticket sizes than other high-tech sectors, with transport leading at USD 59M. Carbon management (USD 41M) and industrials (USD 31M) also demand high capital, reflecting the cost-intensive nature of decarbonisation. In contrast, non-climate sectors like fintech and quantum computing require much smaller investments, averaging around USD 4M – USD 5M.

● Import Dependency: Chinese companies control half of global lithium production and over 70 percent of Li-ion battery manufacturing (Benchmark Mineral Intelligence 2020), leading to high costs and supply risks during geopolitical crises.

● Fragmented Manufacturing: Small-scale suppliers struggle to meet demand, requiring a shift to large-scale, integrated production.

A 2022 report by Unitus and Climate India estimates that India's climate tech sector will require over USD 1 trillion in investments by 2030 to achieve its sustainability goals. At Ostara, we believe that capital is the cornerstone of ecosystem building, and our mission is to bridge the funding gap for climate startups in India.

As global investors increasingly turn their attention to India's climate tech landscape, Indian startups need significant funding to scale. Ostara was founded with a vision to connect high-potential Indian climate ventures with international capital, facilitating cross-border investments and unlocking new growth opportunities.

Beyond funding, we actively shape and educate the market by engaging with global investors and helping bring first-time foreign capital into India through our deals.

Our thought leadership extends to industry conferences, where we have served as speakers and panelists at events like Future Mobility Asia, UN’s Asia Climate Accelerator, TiE Global Summit etc, sharing insights on India’s climate startup ecosystem. We contribute frequently to news pieces and columns in climate-tech to increase awareness.

Additionally, we publish a monthly newsletter and weekly updates to foster knowledge-sharing and contribute to the growth of India's climate tech ecosystem.

Que: Which verticals within climate tech (beyond EVs) do you see as investment hotspots over the next 5 years?

Ans: Key Climate Tech Trends

1. Integrating Renewable Energy
● Load Shifting: Optimises energy sources based on cost and grid demand (e.g., Renew Home, Reel, Stem, Numocity)
● Battery Storage: Stores renewable energy for later use (e.g., Antora Energy, Form Energy).

2. Decarbonising Industry & Construction
● Green Hydrogen: Uses renewable energy to produce hydrogen (e.g., Electric Hydrogen, Verdagy).
● Green Cement: Captures and repurposes CO₂ emissions from cement production (e.g., Fortera).

3. Emissions Tracking & Minimisation
● Circular Economy: Reduces waste via recycling innovations (e.g., batteries, Enerkem for biofuels).

4. Carbon Capture & Removal
● Carbon Capture: Extracts CO₂ from air and water (e.g., Heirloom, Captura).
● Carbon Utilisation: Embeds captured CO₂ into products like concrete (e.g., CarbonCure) or fuel (e.g., Air Company).