The heat pump market in Europe has taken off in recent years, with both new and established players entering the sector from various angles. Startups in Europe are working on everything from manufacturing and installation to streamlining behind-the-scenes processes and delivering integrated energy systems for customers.
That’s caught investors’ attention, whose hundreds of millions of euros worth of investment led to a surge in the European heat pump market between 2021 and 2022 — both in heat pump installations and VC investments.
But by 2023, that rapid growth had stalled, with shifts in policy, cheap gas, expensive bank loans, fluctuating energy prices, a sluggish economy and pushback against climate initiatives leading to declining sales in several countries.
The slowdown was particularly evident in air-source heat pumps, which are used for space heating, with sales of air-to-water units dropping by 12% and air-to-air units falling by 10%, according to Carbon Brief.
But for the EU to meet its carbon neutrality goal by 2050 something’s got to give. Heat pumps are seen as a key part of the bloc reaching that goal. There’s also money to be made by VCs who back the right horses — the market to replace more than 90m gas and oil heaters in Europe with cleaner alternatives could be as big as €150bn.
From 2027, the EU will also put a carbon price on the fuels used in buildings, road transport and other sectors and a dedicated share of that will go to a new financing instrument — a €68.7bn social climate fund — to support the roll-out of heat pumps across Europe.
With all that in mind, Sifted has mapped the startups behind Europe’s heat pump revolution. Below are the “new” manufacturers, the installers and the tool makers looking to make heat pumps the go-to for heating houses across Europe.
The heat pump producers
With large infrastructure projects eating into margins, opening factories to develop heat pumps, a technology already on the market, may sound risky. But here are the startups giving it a go.
Aira Home, Sweden
Founded: 2022
Investors: Altor, the Burda family, Collaborative Fund, Creades, Kinnevik, Lingotto, Nesta Impact Investments, Statkraft Ventures, and Temasek
Aira was launched in 2023 by Swedish financier Harald Mix’s company builder Vargas Holding. The company, a direct-to-consumer startup taking on the heat pump and domestic energy market, is headquartered in Sweden but is focusing on selling to the UK, German and Italian markets. The company has almost 1,200 employees and tells Sifted it has a recent annual sales run rate of €150m.
It opened a factory in Poland in April, with the capacity to produce 500k heat pumps annually. Aira also installs its heat pumps and the software it has developed to go with them. CEO Martin Lewerth tells Sifted that having started off selling third-party heat pumps, there was a worry about how the market would respond to Aira’s own product.
“Since then, 95% of the heat pumps we sell are our own”, he says.
Last summer, it raised a €200m debt facility from BNP Paribas to make it possible for customers in Germany not to pay an upfront cost for its heat pump but instead pay with monthly installments.
Qvantum, Sweden
Founded: 2021
Investors: Thomas von Koch (partner at EQT), IMAS Foundation, SEB Greentech, DIG Investment (connected to the H&M Persson family), NEA Partners and Climentum Capital.
Qvantum is developing its own heat pumps for apartment blocks, which have traditionally used gas boilers. It acquired a factory in Hungary in 2023 for a broader European rollout by the end of 2025. It is focusing on the Swedish market as a testbed.
Qvantum isn’t installing its heat pumps — and instead partners with heat pump installers — but provides the software specifically developed to optimise the energy system.
The company recently raised a €108m Series C, including €15m in debt.
Quatt, the Netherlands
Founded: 2021
Investors: Seaya, Blue Earth Capital and Impact Equity Fund
Dutch heat pump startup Quatt has developed a hybrid heat pump — the Quatt Hybrid — which is a modular heat pump system that lets homeowners start by integrating the product with existing gas boilers before gradually transitioning to an all-electric solution. It says its heat pump reduces gas consumption by up to 80% and will put heat pump doubters to rest.
The company has around 200 employees and has raised a total of €27m in equity. According to investors, Quatt has installed around 7.5k heat pumps across the Netherlands.
The heat pump installers
Although some startups are opening up factories to manufacture their own heat pumps, the biggest manufacturers in this space are companies like Germany’s Valliant, Sweden’s Nibe, Japan’s Daikin and Germany’s Bosch. These manufacturers are the companies that the heat pump installers are partnering with.
Enpal, Germany
Founded: 2017
Investors: HV Capital, SoftBank, Vision Fund, The Westly Group and The Rise Fund (TPG).
With 4,000-5,000 employees, German energy scaleup Enpal has made a name for itself as one of the largest solar panel installers in Europe in recent years. Following years of growth in PV, the company added heat pumps to its offering two years ago. It also offers an EV charging system and AI-based energy trading system (a virtual powerplant). Enpal doesn’t manufacture its own heat pumps but instead installs heat pumps from Bosch.
“It was always clear to us that the solar installations won’t be on that high level they used to be during the energy crisis, so we diversified into heat pumps in anticipation of that market development,” says Enpal’s chief evangelist Wolfgang Gründinger.
By leveraging its existing customer base for solar panels and partnerships with local installers, it has in the last 18 months installed 5,000 heat pumps — which has given it the leading spot for heat pump installations in Germany.
It has secured €5bn in financing commitments from private investors such as BlackRock, ING, Infranity and Pricoa Private Capital and banks such as Citi, Bank of America, Barclays and Credit Agricole. The financing means it can offer customers a payment plan so they don’t need to pay up front. The company has also raised more than €500m in equity.
Gründinger says that because Enpal hires and trains its own installers, it hasn’t had to rely on existing heat pump installers like some of its competitors.
“There’s not so many heat pump installers that you can buy because they are so tiny it doesn’t really make sense. That we can build things organically is also an advantage for us,” he says, pointing to Enpal’s integrated ecosystem with solar, EV charging system, heat pumps and AI-based energy trading system – a virtual powerplant.
1Komma5°, Germany
Founded: 2021
Investors: US pension fund CalSTRS and G2 Venture Partners, with the participation of 2150, Norrsken VC, Hamilton Lane, B2venture and others.
The German company 1Komma5° also offers customers various solutions, such as solar panels, heat pumps, an EV charging system and an energy storage system (a virtual powerplant) – similar to what Enpal is offering. But instead of growing by hiring installers, 1Komma5° has grown by acquiring solar and heat pump installers across its markets in Germany, Sweden, Finland, Denmark, Netherlands, Spain and Australia.
“If you look across those markets and the different types of product configurations, the biggest growth comes from the combination of solar with a heat pump,” cofounder and CPO Jannik Schall says.
The company raised €150m in a pre-IPO financing round in December of last year. Although the round was called a “pre-IPO” round, Schall tells Sifted there is no hurry to IPO and it likely won’t until 2026.
Schall says that because 1Komma5° is profitable at group level for 2024, the company doesn’t need to raise more capital to operate. The equity raised will instead be invested in the further development of its energy management platform “Heartbeat AI”, a platform through which it buys energy when it is cheap and sells energy back to the grid when it’s more expensive. The company says it will invest €100m in its virtual power plant over the next three years. The company has around 2,500 employees.
Hometree, UK
Founded: 2016
Investors: DN Capital, LocalGlobe, Literacy Capital, Oxford Capital, 2150 and others
UK-based home maintenance startup Hometree entered the heat pump business last year through the acquisition of IMS Heat Pumps. The company, with 250 employees, has a “buy and build” strategy — acquiring residential heat pump installers across the UK. So far, the company has bought four installer companies, with plans to expand further in the near future.
It has a debt facility for M&A from BlackRock and £300m in asset-backed debt facilities from Barclays and CPPIB to fund customers’ solar, battery and heat pump assets. In total, it has raised £85m in equity.
Its business model involves leasing a system to a customer, who pays the company back over up to 25 years.
Similar to how Enpal is targeting its PV customers for heat pumps, Hometree is targeting its 100k home emergency insurance and boiler customers with heat pumps, Simon Phelan, its founder and CEO says. Using its existing customer base enables Hometree to transition its existing customer base to heat pumps as their gas boilers reach the end of their lifecycle.
Vamo, Germany
Founded: 2022
Investors: Realyze Ventures, Neosfer, Extantia Capital and Green European Tech Fund.
Cologne-based Vamo has developed a software platform which optimises the customer journey from initial inquiry to installation. This system manages supply chains and automates administrative tasks, with a promise of installations to be done within 30 days.
It has also created a network of interconnected heat pumps that adapts to energy demands, optimising consumption and reducing the need for costly grid upgrades. Similarly to Aira, Hometree and Enpal, it offers flexible purchase options, including financing.
The company has raised €10m in total and has 45 employees, according to Dealroom.
Drem, Sweden
Founded: 2022
Investors: ByFounders, Peak, Redstone and Futurum.
Drem describes itself as a tech-enabled installer. It works with both in-house installers and third-party partners, managing everything from marketing and sales to installation and streamlining the process for customers and partners. The startup has 45 employees and has so far installed 670 heat pumps in Sweden and France. It’s raised a total of €5.5m.
The matchmakers
Woltair, Czechia
Founded: 2018
Investors: ArcTern Ventures, Westly Group, Fifthwall, Inven Capital, Kaya VC and Movens Capital
Prague-based Woltair offers a platform that connects installation and maintenance businesses with consumers who want to install sustainable energy solutions, such as a heat pump or a solar panel. It has 200 employees.
The company helps consumers choose the right system for their house and find the team to install it. It also solves other issues on the supply chain, such as engineers having issues sourcing parts and dealing with customer admin.
Woltair offers a tool that analyses the size and profile of a consumer’s home and recommends the best technological solution, together with details of achievable savings and available government subsidies. After determining the right product, the platform connects the buyer with a technician, handling the order process and tracking the installation online.
In 2022, the company completed a total of 1,900 installations of heat pumps and solar panels. As of June last year, the company expanded into Germany and Italy.
Woltair has raised €42m in total. In 2023, it recorded €46.1m in revenues, according to information submitted to Sifted.
The fintechs
With the average cost of a heat pump falling between €10k-15k, it is a large investment for many houseowners. Many scaleups in the heat pump business offer financing but there are some startups which have made that their entire thing.
Cloover
Founded: 2022
Investors: Lowercarbon Capital, Index Ventures, 9900 Capital, QED Investors, Broadhaven Ventures and Centrotec Sustainable
Berlin-based climate fintech startup Cloover has developed a platform that enables vendors of renewable energy technologies to offer their services through flexible subscription models. Its platform integrates software, financing and energy solutions.
In May 2024, Cloover raised €105m in seed funding, combining debt and equity to enhance its software for installers and improve its sales, payments, and financing services.
The heat pump tool makers
It may sound niche, but as we’ve seen within grid tech, there is a need for companies in every corner. The heat pump business is no different. The tool makers are the ones who are making the work of existing heat pump installers a lot less cumbersome. And with a scalable business model, plenty of investors are looking at this space.
Lun, Denmark
Founded: 2022
Investors: Partech, Norrsken VC, Foundamental, Lowercarbon Capital and MCJ Collective
Lun has developed a 3D-tool to streamline the heat pump installation process for installers across Europe. Its software is said to automate data-heavy, repetitive and time-consuming tasks for installers, manage and aid in converting leads and cost estimations and make installations more efficient by offering tradespeople its tech stack.
In 2023 it raised €10.3m.
Autarc, Germany
Founded: 2022
Investors: Y Combinator, better venture
Berlin-based Autarc has developed a platform that streamlines the planning and installation process, reducing project times by up to 50%. The software integrates various functionalities, including system design, offer creation, financing options, subsidies and mandatory reports.
The startup participated in Y Combinator as part of the winter 2023 batch. As of 2024, Autarc has more than 380 customers in Germany and has achieved seven-digit annual recurring revenue (ARR). The company has 15 employees and has raised $9m in total.
Read the orginal article: https://sifted.eu/articles/the-startups-behind-the-heat-pump-revolution/
