🌎 Climate capital stack evolves #123

Grant advances, debt capital, and tax-deductible CDR purchases fund founder options

Happy Monday!

In this week’s issue, we highlight the ever evolving climate capital stack – necessity breeds innovation, and given the unique capital and technology risks of climate, the range of non-dilutive funding available speaks to the unique moment of climate tech investment today. As the IRA deploys, we expect to see more para-governmental funding options emerge leveraging tax credits, cost shares, and unique convertible mechanics to spur more activity in specific sectors.

In this week’s deals, EU companies loom large with a Sweden-based green steel producer raising $256m, a UK-based low-carbon rocket launcher raising $46m, and another UK-based sustainable animal fat manufacturer raising $22m. In funds, lots of specialization with Lowercarbon’s new $250m fusion fund, and Propeller’s $100m ocean fund in partnership with Woods Hole.

In the news, the DOE funds a carbon infrastructure agency with $2.1B and awards $2.8B to expand domestic manufacturing of batteries, and Xi Jinping’s inaugural speech heralds China’s climate pledge over the next 5 years.

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Capital innovation beyond venture

This newsletter’s beat is quite literally on the label. Yet, climate tech venture does not stand alone in driving forward decarbonized innovation - nor could it. To cross multiple technical valleys of death, particularly in hard tech, innovators need not only more capital, but more types of financing. Looking outside of venture towards the full stack of climate tech financing options is critical to hitting individual and collective escape velocity.

It’s a common misconception that the non-dilutive mechanism of the climate capital stack is exclusive to early stages of company formation. “Non-dilutive” oft gets sloppily lumped synonymously with “philanthropic” (of which actual climate philanthropy has historically been meagerly underallocated to, but that’s a separate story).

In the past week alone, three new non-dilutive climate capitalization mechanism announcements caught our eye - bridging supply pushes and demand pulls, as well as spanning the R&D to Deployment continuum.

Source: CTVC

Climate Grant Advance: To bridge the time gap between grant awards and disbursement, investment firm Enduring Planet will front up to $500k of reimbursable award expenses in a few weeks - instead of the typical 6-9 months that it takes for state and federal grant funding to hit startups’ bank accounts. Advanced disbursement accelerates grant liquidity - and therefore impact.

Tax-deductible CDR purchases: Terraset launched as the “anti-GHG 501(c)(3)” to pool tax-deductible donations from individuals, foundations, family offices, and DAFs to fund high-quality carbon removal purchases. Individuals have been mechanistically prevented from purchasing from CDR companies - this pooled approach could unlock pent-up demand, and drive down the cost of carbon removal projects.

Source: BNEF

DOE Carbon Transport and Battery Manufacturing: Under the Carbon Dioxide Transportation Infrastructure Finance and Innovation Act (CIFIA), the LPO is partnering with the Office of Fossil Energy and Carbon Management to provide $2.1B in debt capital for large-scale carbon transport projects - including pipelines, rail, shipping, and other transport methods. In the same week, the DOE announced $2.8B for 20 battery companies across the battery manufacturing chain, from lithium extraction and processing, manufacturing components, to recycling materials. Federal dollars will be matched by recipients to leverage a total of more than $9B to compete in the global battery race. (For more on how to access the DOE’s deep pockets, check out our Founder’s guide to the DOE.)

These three sources of non-dilutive capital act as levers to accelerate climate tech by:

  • Speeding up early-stage R&D by bridging grant disbursement times
  • Signaling demand for technologies to drive down the cost curve
  • Scaling later-stage projects by providing growth funding

These are just the tip of the melting iceberg. We are likely to see more innovative structures and pools of capital as the opportunity set and need for scale in climate grows.


Deals of the Week (10/17-10/23)

🔋  Hithium, a China-based lithium-ion battery manufacturer, raised $278m in Series B funding from ABC International, CCB Capital, Chengtun Mining Group, Dayone Capital, Fenghe Capital, and Matrix Partners China.

🏭 H2 Green Steel, a Sweden-based green steel producer, raised $70m to close their $260m Series B round from Hitachi Energy, Kobe Steel, and Kinnevik, AMF, GIC, Schaeffler, and Altor.

🛵 Ather Energy, a India-based electric scooter manufacturer, raised $50m in Series E funding from Herald Ventures and Caladium Investments.

✈️ LanzaJet, a Illinois City, IL-based company producing sustainable aviation fuel, raised $50m in grant funding from Breakthrough Energy Ventures.

🚀 Orbex Space, a UK-based company developing low-carbon launch vehicles for rockets, raised $45.7m in Series C funding from Scottish National Investment Bank, BGF, Heartcore Capital, High-Tech Gründerfonds, Octopus Ventures, Jacobs, the Danish Green Future Fund, Vaekstfonden, and Verge Ventures.

​​☀️ Cherry Street Energy, an Atlanta, GA-based company providing solar energy solutions, raised $40m in funding from EBSCO Industries.

🥩 Nourish Ingredients, an Australia-based company utilizing synthetic biology to produce animal-free fats, raised $28.6m in Series A funding from Horizon Ventures, Main Sequence Ventures, and Hostplus.

🥩 Hoxton Farms, a England-based company producing sustainable animal fat from stem cells, raised $22.4m in Series A funding from from Collaborative Fund, Fine Structure Ventures,  Systemiq Capital, AgFunder, MCJ Collective, Founders Fund, BACKED VC, Presight Capital, CPT Capital, and Sustainable Food Ventures.

☀️ Nitricity, a Stanford, CA-based company using solar and wind energy to sustainably produce fertilizers, raised $20.9m in Series A funding from Khosla Ventures, Fine Structure Venture, My Climate Journey Collective, Lowercarbon Capital, and Energy Impact Partners.

🌍 Tradim, a France-based company providing waste collection and management software, raised $19.7m in funding from Turenne Capital and Capital Croissance.

⛏️ Sensat, a UK-based data visualization company optimizing infrastructure development, raised $18.9m in Series B funding from National Grid Partners.

♻️ Makersite, a Germany-based company providing data management software for sustainable product development, raised $17.9m in Series A funding from Hitachi Ventures, Translink Capital, KOMPAS, and Planet A.

💨 Levidian, an England-based company decarbonizing methane by cracking it into graphene and hydrogen, raised $13.6m from Baker Hughes.

☀️ Ecoligo, a Germany-based impact investing platform supporting solar projects, raised $9.9m in Series A funding from FRV-X.

⚡ WegaTech, a Germany-based sustainable energy solutions company specializing in photovoltaic systems, raised $9.9m in funding from Goathear Group.

🚌 Freebee, a Miami, FL-based electric ride-hailing company, raised $8m in Series A funding from BP Ventures and Tensile Investments.

🌾 Lithos Carbon, a Seattle, WA-based carbon removal company sprinkling basalt dust onto farmland, raised $6.3m in Seed funding from Union Square Ventures, Greylock Partners, Bain Capital Ventures, Carbon Removal Partners, Carbon Drawdown Initiative, Fall Line Capital, and Cavallo Ventures.

🏭 Synonym Biotechnologies, a New York, NY-based financing platform building bio-manufacturing facilities, raised $6.3m in Pre-Seed funding from Thia Ventures, Giant Ventures, Blue Horizon Corporation, and Andreessen Horowitz.

✈️ Nova Pangaea Technologies, a UK-based company converting biomass into aviation fuel and various biochemicals, raised $6m from Par Equity, NPIF, and Mercia Asset Management.

♻️ Umincorp, a Netherlands-based sustainable plastic recycling company, raised $4.93m in funding from Nationaal Groenfonds.

☀️ Solarize, a Germany-based company developing solar energy distribution software, raised $4.2m in Seed funding from Point Nine and Picus Capital.

🔋 Cylib, a Germany-based lithium-ion battery recycling company raised $3.5m in Seed funding from Speedinvest, and Vsquared Ventures.

🌏 Turnkey Group, a Singapore-based platform providing ESG software and analytics, raised $2.8m in funding from Maven Capital Partners.

🏠 Ventive, a UK-based company developing efficient heat pumps for homes, raised $2.8m in Grant funding from the UK Department for Business, Energy, and Industrial Strategy.

🌩️ Jua, the Switzerland-based weather modeling AI company, raised $2.5m in Pre-Seed funding from Promus Ventures and Session.vc.

🍀 Beleaf, an Indonesia-based smart farming company raised $2m in Seed funding from Alpha JWC Ventures, BRI Ventures, and Arise.

👚 Spinnova, a Finland-based textile manufacturer using sustainable dying methods, raised $1.6m in Grant funding from Business Finland.

🍄 MycoWorks, a Emeryville, CA-based company developing fungi-based biomaterials, raised funding from General Motors Ventures.

🐝 Peelo, a Slovakia-based company developing beeswax wraps as plastic wrap alternatives, raised an undisclosed amount of Pre-Seed funding from Rockstart and CB Investment Management.

🥩 MyoWorks, a India-based cultivated meat startup, raised funding from Ankur Capital.

Exits & New Funds:

Archaea Energy, a Houston, TX-based renewable biogas provider, was acquired for $4.1B by BP.

Lowercarbon Capital raised $250m for its fusion fund, Lowercarbon Q>1 to advance the most promising fusion companies including tokamaks, stellarators, lasers, sheared flow z-pinch, and even some “batshit insane orbitraps”.

Propeller, co-founded by former Hubspot CEO Brian Halligan, raised $100m for its first seed fund, focused on investing in the ocean climate industry.

Electric Last Mile Solutions, a Troy, MI-based manufacturer of electric fleet vehicles was acquired for $240m by Mullen Automotive, a Brea, CA-based car manufacturer.


In the News

The DOE awarded $2.8B to 20 companies to expand domestic manufacturing of batteries for electric vehicles (EVs) and the electrical grid with the intent of growing commercial-scale lithium, graphite, etc. facilities in 12 states. Check out our recent mining feature for more.

The DOE also allocated $2.1B to create the Carbon Dioxide Transportation Infrastructure Finance and Innovation (CIFIA) program, to fund CO2 transport infrastructure including pipelines, rail transport, ships and barges, and ground shipping.

Exporting sunshine. Australia will build the world's longest subsea high voltage cable to carry solar electricity to Singapore and eventually Indonesia. The 4,500-km Australia-Asia Power Link is expected to be fully operational by 2029. Australia will also attempt to break records with the world’s biggest contracted battery to help shut down its largest coal plant in 2025. Newcomer energy storage developer Akaysha Energy won the contract from investment giant BlackRock.

Xi Jinping called out China’s climate pledge during his inaugural speech, stating it’ll be a priority in their next 5 year plan. Be sure to read our latest feature on climate tech with Chinese characteristics.

Global CO2 emissions from fossil fuels are projected to rise just under 1% this year, well under 2021's 6% growth, according to the IEA as global record deployment of renewables and EVs pay off.

Germany extended its last 3 nuclear power plants beyond the end of this year, in a continued effort to deal with Europe’s energy crisis.

The African Development Bank is setting up a $1.5 billion green finance facility for funding clean energy projects and infrastructure to defend against floods, storms, and rising seas exacerbated by global warming.

20 red state Republican attorney generals launched an investigation into the 6 big US banks participating in GFANZ, the UN-convened Net-Zero Banking Alliance. The coalition claims that banks’ ESG commitments violate their states' consumer protection and fair-trade laws, and spit some heated language: “We are leading a coalition investigating banks for ceding authority to the U.N., which will only result in the killing of American companies that don’t subscribe to the woke, climate agenda. These banks are accountable to American laws - we don’t let international bodies set the standards for our businesses.”

Meanwhile in regulatory land, the International Sustainability Standards Board (ISSB) confirmed requirements for Scope 3 GHG emissions disclosures, all but ensuring that global securities regulators will bake in Scope 3 disclosures - even as the US SEC waffles on paring back its proposed rule.


Pop-up

Climate tech company, Minerva Lithium emerged victorious from Disrupt SF - an event notorious for being a weather vane of Silicon Valley’s technology interests.

VCs poured >$1b into DAC this year with capacity expected to rise sixfold by 2030. As BNEF’s Julia Atwood pointed out, that’s “44% higher than what we expected last year. And it’s before you take #IRA into account.”

Nothing screams spooky season like a Q3 retro. 4 of the top 10 Q3 equity deals were in climate.

GatesNotes’ reported that VCs have poured $70b into 1,300+ clean-energy start-ups since 2020. Those numbers sound familiar. Thanks for the CTVC data shoutout, Bill!

Just in time for COP27, the makers of Pandemic launched Daybreak, a climate-themed cooperative board game. You have all the tools to solve the climate crisis, but will you?

Impressive “investigative” Twitter reporting deduces the reason for the disappearance of billions of snow crabs.

In what’s certain to be a turning tide from mitigation towards adaptation, Breakthrough Energy Ventures will be explicitly investing in climate adaptation, with Asia-based Temasek as the anchor investor.

Private Equity is “brown-spinning” coal companies, or selling off hazardous assets to run away from clean up costs. With taxpayers paying for the runoff, literally.

We need more backbone in this world. A new report shows the world's vertebrate population dropped 69% from 1970 to 2018.

This land is dry land, from California to New York Island. 80% of the US is now abnormally dry, with the West in its longest dry spell in 1,200 years.

A well-deserved profile on Jigar Shah who has always been one of “the most important players in the energy transition.” His LPO budget has ballooned 10x.


Opportunities & Events:

💡 Activate Fellowship: Activate is seeking fellows for their Carbon Management Imperative — an opportunity to take your carbon removal technology to the next level. Apply by Oct 31st to the two-year Activate Fellowship, which provides early-stage hard-tech science entrepreneurs with funding, technical support, networking, and community.

🗓️  TDK Ventures Energy Week: Register for this free online forum (Oct 31-Nov 2) packed with over 30 of the world’s top minds in fields of cleantech on next-gen batteries, green chemicals, EV, charging, and supply chain, across academia, industry, startups, and VCs.

🗓️ ClimateTech Founders Summit: Register for this free virtual event from Nov 1-2 to discuss the role of technology & startups in solving the climate crisis. Speakers include our very own Sophie Purdom, Lowercarbon’s Clay Dumas, Plan A’s Lubomila Jordanova, and Climework’s Julie Gosalvez.

🗓️ Greentown Labs Climatetech Summit 2022: Register for this two day event taking place in Houston, Somerville, and online from Nov 2-3 alongside Greentown Labs’ 200+ startups.

💡 BNEF Pioneers Program: Hydrogen, metals, and sustainable ag startups should apply by Nov 11 for this awards program. Winners are inducted into the Pioneers alumni class, included in BNEF public research and summits, and given one year access to BNEF web products.


Jobs

Communications & Operations Manager @Lowercarbon Capital

Senior Analyst, Market Fundamentals @Form Energy

Senior Analyst @Kettle

Intern - Co-op, Spring/Summer 2023 @Commonwealth Fusion Systems

Director of Research @Vesta

Customer Success Intern @Voltus

Co-Head of Climate Hub Team @Bank of England

Enterprise Account Executive @Waterplan


Feel free to 📩 send us new ideas, recent fundings, events & opportunities, or general curiosities. Have a great week ahead!

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