By Cristian Pinto Marinho, September 26th, 2023

It’s been a long time coming, but finally, I managed to put pen to paper (sort of) and follow up on my last piece about the European construction tech industry. This time, the focus will be on how software (and hardware) can empower the talent necessary to rebuild our continent in a green way. This will be the first article of a series of articles on European startups working on decarbonizing our economy in the coming decade.

First things first: a warm welcome to everyone

For those who don’t know me, I’m Cristian Pinto, an investor at Daphni, a Paris-based early-stage VC investing in tech for good startups (from pre-seed to Series A) with European DNA and strong international ambitions. To help me co-write this article, I invited Eduardo Fuentes, Head of Research at Distrito, one of the best tech market intelligence firms in Latam.

I would also like to thank interviewees Beatrix von Schröder, impact investor at AENU, Richard Ng, co-founder and CTO of Greenworkx, a climate EdTech startup tackling the green skills emergency and building the net-zero workforce, and Konstantinos Matsoukas, partner at PT1 and lead investor in Greenworkx (green-collar) and Kollabo (blue-collar).

Besides the two of them, I also spoke extensively with Elio Pinto, a skilled construction worker and founder of a construction subcontractor firm in Portugal that employs five people. Elio is also my former boss, back in my construction worker days. He taught me everything I know about the craft and almost convinced me to stay as an entrepreneur in the space and not go into tech.

The (not so new) Problem: The EU aims to be climate-neutral by 2050, and we might be understaffed

I assume that after this historically warm summer and the heat waves around the continent in the middle of September, I really don’t need to do too much convincing about how the climate crisis is here. If we don’t make huge strides in decarbonizing our economy quickly, things will only get worse.

In September 2023, a team of scientists quantified, for the first time, all nine processes that regulate the stability and resilience of the Earth system, and spoiler alert! It’s not looking good for us. We have crossed 6 of those boundaries by a wide margin and are well underway in the process of crossing the remaining three, basically making our planet “unlivable.”

In addition to these, there is also important regulatory tailwinds coming from the EU commission, as under the European Climate Law, the EU committed to reduce its net greenhouse gas emissions by at least 55% by 2030 (The ‘Fit for 55’ package) plus the enormous +€1 Trillion green bill meant for powering the infrastructure change required to achieve the net zero target by 2050.

Where do we start, then?

Another spoiler alert: The energy sector 😱

According to the Climate Watch by the World Resources Institute, the Energy sector contributed, directly or indirectly, to 73.2% of all Global greenhouse gas emissions.

Supported by huge and continuous amounts of VC capital + EU-level bills, the energy sector is primed to decarbonize first, with net-zero emissions possible by the mid-2040s. As we rush our transition our energetic matrix toward a carbon neutral system, a rapid scaling of renewables production, solar panel installation, and storage capacity will be required.

Plus, By 2040, half the existing building stock will have to be renovated to low-carbon standards (GIEC). Geez, the heat pump industry alone is set to grow with a CAGR of over 18% between 2023 and 2032, reaching a whooping total market value of US$ 78 billion (GMI).

BUT…

According to McKinsey’s analysis, in Europe, the transition towards net-zero emissions is anticipated to generate approximately 11 million new jobs while phasing out 6 million positions, ultimately leading to a net job increase of 5 million. Only within the construction sector, the EU would require 1.1 million skilled workers to retrofit homes with improved insulation and install eco-friendly heating and cooling systems.

The demand is about to explode, but the supply is shrinking = The math doesn’t math

If we don’t have the people we need to deploy this infrastructure and reach net zero, there are real material consequences for people across the world. So that was the first big, big wake-up call that it was a big moral imperative for me! — Richard Ng (Greenworkx)

As we can see in the graph below, the number of blue-collar workers in Europe has been declining in recent years. In 2000, there were 86 million blue-collar workers. By 2022, that number had fallen to 73 million.

Analyzing the percentage of blue-collar workers in Europe by age group, we note that the group below 25 years has been decreasing in recent years. In 2000, 12% of European blue-collar workers were under 25 years old. In 2022, that number fell to 7%. These data suggest to us that the population of blue-collar workers in Europe is aging and young people are less and less interested in these types of roles.

We as a company have to decline new projects on a weekly basis because we simply cannot find any workers available, and it’s the same across Portugal. All the best workers leave to France, Switzerland or Luxembourg to make more money and we are left with no seasoned professionals to train the few newcomers. I’m nearing my mid-40s and only one person in our team is under 35. — Elio Pinto (Construction Professional)

 

To attract talent in younger generations, as well as to shift traditional blue-collar workers over the age of 45 to green jobs, will be a huge challenge and one that is very important to overcome to achieve our goals.

The way the industry talks about the roles is not very effective at getting people in, where the job ads are actually really full of jargon. When you talk to people and you can just say things like, “Hey, this is a job where you’re going to help people by making their homes greener, so they waste less energy, and by the way it’s in really high demand.” This is quite a simple proposition, actually, but it’s not the way the industry talks about itself. — Richard Ng (Greenworkx)

 

🗺 ️Who are the ones working on it? Startup Mapping

To contrast with the overall negative tone from the first part of this article, we have good news! There are some incredible teams that are working at this exact moment on solving the skilled green-collar and blue-collar labor shortage.

Obs: We use the term green-collar for skilled workers in crafts associated with green infrastructure tasks such as energy assessment, heat pump/PV panel installation, integrated energy systems installations, and retrofitting.

We split the mapping into two different angles: Positioning (A) and Approach (B).

A) Positioning 🎯

 

In terms of different positioning in the value chain, these are the 4 core verticals and our takeaways for each of them:

• Blue-Collar Jobs: Startups that are working on solving the general challenges associated with skilled blue-collar shortage but are not specifically tailored for green infrastructure roles. They are still extremely valuable for both the functioning of our society and for reaching net zero as in the coming years, the distance between a roofer and a PV installer, an electrician and an energy renovation professional, a Refrigeration expert and a heat pump installer will slowly fade away.
• Green-Collar Jobs: These startups focus on the most highly requested skills directly associated with the energy transition. They are in the eye of the storm, navigating uncertainties about which approach will work the best while seeing demand grow at an alarming pace.
• Streamlined Operations: These startups believe that the best way to reach net zero is to do the “dirty work” of infrastructure implementation themselves while building an efficient and software-powered process to go further with fewer workers. They are crucial for us reaching our targets, but as they grow (i.e. Enpal), they will either become clients of the previous two groups of firms or they will try to build training and upskilling centers themselves.
• Automation/ Robotics: The other face of fighting a systemic labor shortage is finding solutions to improve efficiency while naturally reducing the need for onsite human labor for repetitive tasks. Robotics and site automation are great approaches to achieving this mission. Although the adoption of some of these technologies is moving slowly, we are seeing more and more evolution, giving us the hope that in some years, we will be able to see them being deployed at scale around the built environment.
• Incumbents: Players that are in the industry for 10+ years, not necessarily focused on blue or green-collar jobs, but that are a relevant source of job matching in these industries still.

B) Approach 🧐

 

There are different ways of approaching the challenge of filling up the existing and soon the be vacant roles in the traditional and green infrastructure industries with software or a mix of software and in-person training. Here are the 4 approaches we believe are necessary:

• Increase of Supply: If we are already suffering to fill all the blue-collar job listings as we are, there is not a single scenario where we can fill +10M green infrastructure roles in the future without going through a drastic increase in workforce supply. We need to make green-collar jobs more attractive and attract demographic groups that are not looking at these roles at the moment. It is not an easy task, and there will not be a single winner, but whoever cracks this puzzle will make a lot of money while generating incredible amounts of societal impact.
• Upskilling: Besides widening the top of the funnel, we need to be able to efficiently and scalably train and specialize skilled workers who want to change their craft towards one of the green-collar roles that are being created.
• Matching (Marketplaces): These startups are working on scaling the matching between workers and the right opportunities for them. This is the easiest to scale and to solve with software alone, but without having the right pool of talent available, the impact of matching without increasing supply and upskilling is limited.

If we look at PowerUs or other US comps, they have successfully raised large sums of money because they have created sustainable marketplaces. This makes them highly fundable. Marketplaces are only as good as they are in bringing supply and demand together. In a world with limited supply, the most important factor for a marketplace is its ability to access unique supply streams.

Keeping an eye on CAC (per acquisition channel) and marketplace liquidity is key. Nevertheless, companies like Smalt and Greenworkx that aim to overcome bottlenecks by filling (widening the top of the funnel) them are important to overcome the labor shortage. — Konstantinos Matsoukas (PT1)

• Immigrant Integration: This is one of the most delicate subjects in the EU in the past years, but we can’t ignore reality for too long. In an aging continent with the need to rebuild its infrastructure, utilizing and facilitating skilled-labor immigration + facilitating the regularization of readily available labor that is going through sometimes inhuman labor conditions (trust me, I saw this daily) is a must. It’s a tricky space to operate in, but if we are serious about reaching net zero, we need to build in this space.

Our team is fully composed by immigrants at the moment, all 6 of us were born away from Portugal. As things stand, unless we have more young people coming into the industry, the only way to keep rebuilding the country will be through immigrant workforce that are well integrated. But the thing is, a good skilled blue-collar worker over here is so hard to find that you can easily earn more than Engineers with master degrees that normally are giving us the instructions. — Elio Pinto (Construction Professional)

 

💪🏼 Come build!

Much of Net Zero will come from changing energy consumption, agricultural methods, lifestyle, etc. The new markets, resulting from the new environmental policies and new ways of life, will be huge and this transition demands more than just software and hardware. It demands a huge number of well-trained people.

I don’t think software alone will solve this issue. I do think software can play a good role, but I am more interested in looking at solutions that also have an in-person component (for training and upskilling), and figuring out how to do that most efficiently. — Beatrix von Schröder, AENU

To achieve a successful transition in the energy matrix, we need to reorganize the workforce. First, we need to train people who work in traditional blue-collar jobs about new technologies (solar panels, heat pump, retrofit, etc.), inserting them into new green-collar jobs. In addition, it will be necessary to rejuvenate the workforce, as today, fewer and fewer young people are working in this industry.

Some companies are already operating in this market. Greenworkx is an example of a startup that is working on training people in the face of the need for a green economy. Another great example is PowerUs (with a focus on blue-collar), a German company that announced earlier this week the raising of 24 million euros in a Series B round from the likes of Eurazeo, General Catalyst, Headline, and HV Capital. According to the company, the investment is an important step in its mission to train electricians and installation mechanics, making skilled blue-collar work attractive and aligned with new job requirements in the green industry.

This piece has as its main objectives to highlight the incredible founders working on solving the green skills crisis + fighting the blue-collar labor shortage and, even more importantly, to incentivize people who are passionate about fighting climate change to consider building new companies in this space.

We need you. Now!

Thank you for sticking around through this read. We would love to hear your feedback on how we can improve this material to reach more people like you: Passionate about tech and about creating a greener future for our planet.

If you are a founder building in this space and we did not map your startup, don’t hesitate to contact me, and if you are fundraising at the moment, feel free to apply here.