From Cleantech to Climate Tech #48

Reflections and aspirations for a new dawn of climate investing

Happy Monday!

In this week’s issue, we walk through some salient differences from Cleantech to Climate Tech and what we’re looking forward to. Tl;dr - a more connected, practical, and future forward transformation measured in tangible impact (not just SPACs).

We also break down the SCALE act, cover a bevy of deals in batteries, scooters, and waste management, and seven new ‘proofs’ from Albert Wenger of USV on climate and crypto.

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A Bipartisan Act to SCALE Carbon Capture

A map of US CO2 Pipelines for Enhanced Oil Recovery projects (Source: DOE)

A bipartisan group introduced the US’ first comprehensive CO2 infrastructure bill – the Storing CO2 And Lowering Emissions (SCALE) Act. While CO2 capture has long been hailed as the gateway to decarbonization, the CO2 midstream and downstream has long been overlooked. Just like the fossil fuels it seeks to offset, carbon capture will rely on a buildout of pipeline and storage infrastructure that provides the critical missing link for CO2 sequestration and utilization in end-use markets. The US currently has around 50 CO2 pipelines (primarily for enhanced oil recovery), but the existing network is vastly insufficient to transport the volume necessary for CCS at scale to achieve net zero.

Fortunately, investing in CCS seems to be one thing everyone can agree on. Supporters of the bill have cited recent analysis from Rhodium Group that shows that, over the next 15 years, carbon capture could create 100K+ jobs per year and offer a $200B+ investment opportunity. To develop CCS infrastructure while creating regional economic opportunities and jobs, the landmark bill would:

💨Establish the CO2 Infrastructure Finance and Innovation Act (CIFIA) program to (1) provide flexible, low-interest loans and grants for CO2 transport infrastructure projects and (2) facilitate private sector investment in infrastructure for reaching net-zero emissions

🔨Build upon the existing Department of Energy (DOE) CarbonSAFE program to provide cost sharing for deployment of commercial-scale saline geologic CO2 storage projects

🖊Authorize increased funding to EPA for permitting Class VI CO2 storage wells to ensure rigorous and efficient CO2 geologic storage site permitting

💰Provide grants to state and local governments for procuring CO2 utilization products to create demand for materials, fuels, and other products made from captured carbon


Deals of the Week (3/15-3/21)

♻️ Allonnia, a Boston, MA-based waste performance company, raised $20m in Series A extension funding from Evok Innovations.

⚡ Charge Amps, Sweden-based green-tech company and maker of EV charging solutions, raised $15m in funding from Swedbank Robur, Microcap and others.

🛴 Unagi Scooters, an Oakland, CA-based-based electric scooter manufacturer, raised $10.5m in Series A funding from The Ecosystem Integrity Fund, Menlo Ventures, Broadway Angels, and Gaingels.

☀️ Zolar, a Berlin-based residential solar startup, raised $12m in additional Series B funding from Energy Impact Partners.

☀️ Ubiquitous Energy, a Redwood City, CA-based maker of transparent solar energy technology, raised $8m from ENEOS Holdings.

🌎 Pixxel, an India-based earth-imaging technology startup, raised $7m in Seed funding from Omnivore VC, Techstars, Lightspeed Ventures, Blume, and others.

💧 ZwitterCo, a fouling-resistant membrane technologies provider, raised $6m in Seed funding from Mann+Hummel Corporate Ventures, R-Cubed Capital Partners, Burnt Island Ventures and others.

🏢 75F, a Minneapolis, MN-based building management system, raised an additional $5m in Series A funding from WIND Ventures.

⚡ Noon Energy, a Palo Alto, CA-based creator of a low cost, long-duration, energy-dense battery, raised $3m in Seed funding from Prime Impact Fund, At One Ventures, Collaborative Fund, and Xplorer Capital.

🌱 Nordetect, a Denmark-based agritech provider of portable water and soil testing solutions, raised $1.5m in Seed funding from Luminate NY, Rockstart, SOSV, PreSeed Ventures, and Vækstfonden.

Later-Stage Fundings / New Funds:

Generate Capital launched a credit arm to capitalize on increased clean energy firm demand for loans.

DBL Partners, a San Francisco-based venture firm focused on cleantech, sustainable products and services, and healthcare has raised $600m for its fourth fund.


From Cleantech to Climate Tech

In the early 2000s, concern around rising energy prices tied with rising emissions led to a wave of venture investors piling into cleantech almost overnight. The VC crusaders who rode the internet wave applied the same investment formula to what they saw as a disruptive market opportunity in clean energy. They poured billions into nascent clean technologies like thin-film solar, batteries, and biofuels, and waited for the sky-high returns that had been promised of the industry. Then unforeseen forces, such as advances in fracking and China’s manufacturing prowess, drove energy and solar PV prices way down, causing high-flying cleantech startups to topple one by one. The cleantech bubble burst, leaving venture capitalists with massive write-downs and scar tissue that hasn’t quite seemed to heal until now.

But if cleantech 1.0 was about energy and efficiencies, climate tech is about everything and evolution. The new dawn of climate tech is about acknowledging our planet’s hurtling trajectory towards an unlivable future, and rewiring the way we do things to get to any reasonable place. Amongst the euphoria of climate technology investment and the chase for the next Tesla, reality holds true that the dividends of innovation are measured in decades not SPACs. Here, we offer some reflections on how climate tech has evolved, where we are today, and some ways we may guide the future while heeding past missteps:

What has always been true?

  • Climate is tech - climate is not a siloed thesis or niche; software ate the world, data models will run it, and organizations will need resiliency in capital, talent and infrastructure.
  • Climate is measurable - values-based investing is now value-based investing. Climate change is tangible economically and locally, and companies will have to control for its impacts across their organizations, markets, and interdependencies.
  • Climate takes a village - the transformation of the entire economy takes all hands on deck of top talent from technology and research, policy and governance, to operations and investment in order to drive more durable transformation.

So, what’s different this time? How is Climate Tech different from Cleantech 1.0?

  • Climate Tech today is broader than Cleantech yesterday, and encapsulates decarbonization and adaptation of all sectors (buildings, mobility, ag, industrials, retail, etc.) vs. solely efficiency and use in the energy sector. Where CT1.0 approached climate investing looking for a silver bullet solution to our energy needs, climate tech approaches the problem with a million paper cuts across industries, asset classes, and functions.
  • Climate change is now tangible to the economy and our lives. The climate crisis is at our front door. Whether by flood, fire, or freeze, the effects of climate change are now personal and accelerating. The number of extreme weather disasters grew 5x over the last decade, costing the US alone over $890b.
  • Fundamental technology advances have driven down the cost of renewables, meaning lower capital intensity for climate tech. Solar costs have dropped 90% in the last decade, and solar and wind are now often the cheapest form of power with batteries tracing down the cost curve in hot pursuit. The dream of CT1.0 was cheap renewable energy, and these renewable technology advances are perhaps the biggest difference of the past decade, enabling the adoption of other climate tech built atop electrification as a path to decarbonization.
  • Rigorous (inter)national climate policy means that 70% of the global economy has now committed to net zero - most within the past 12 months. During CT1.0 any hope of global climate cooperation let alone the Paris Agreement was distant on the horizon, and the US was stuck in a series of gridlocked doldrums on climate policy. Now the Biden administration is stacked with staffers already taking swipes at the $1.7 trillion climate plan through departments as diverse as agriculture, treasury, and the interior.
  • Demand from public markets and institutional investors for ESG has handily doubled the past 5 years, with record inflows marking each quarter. The bigger-than-ever pool, plus the supply-demand imbalance between public ESG capital vs. private ESG companies and tools like SPACs to bridge the gap, are enabling climate tech business to make the leap over CT1.0’s Valleys of Death.
  • Corporate decarbonization commitments are an entirely new change lever of the past few months - let alone decade. Whether from investor pressure, consumer demand, supply chain necessity, or talent attraction and retention, the world’s biggest corporates are tripping over each other on the race to carbon neutral / negative, waving their pocketbooks at startups for green RFPs along the way. Mega tech cos like Google and Microsoft, which had massive electricity-fueled carbon footprints, are now legacy climate neutral orgs and actively derisking the frontier of climate tech as initial adopters of carbon negative technology purchases.

What are we excited about? What’s unique and positive about Climate Tech investing today?

  • Subsidy sober - climate tech businesses are learning to stand on their own with better performance and lower costs, without reliance on external factors such as rising oil prices, regulation, or subsidies to drive returns.
  • Talent to climate - across industries, functions and tenure. Climate is no longer the province of crunchy do-gooders. As people increasingly want to align their values with their work, more top tier technologists, investors and operators are devoting their energies to the climate ecosystem.
  • Custom structured funds - to fit climate tech long technology development timelines. Climate tech funds have much more patient capital, with LPs who know what they’ve signed up for (especially in moonshot funds like BEV). Deep technical diligence is also left to scientific and industry expertise, not just the software investors.
  • Syndication and collaboration - between a spectrum of investment funds. Companies and projects have better access to the right capital at the right time as climate tech funds across multi-stages (seed venture to mature project finance) and multi-strategies (corporate VC to generalist) proliferate. Financial and strategic value-add is generated through an investment ecosystem willing to work together - whether through sharing diligence, brokering pilots or following on across future rounds.
  • More pre-venture non-dilutive funding - “catalytic capital” crucially derisks technologies before mainstream VCs invest, via a plethora of opportunities for ecosystem support and non-dilutive funding like government-funded programs, accelerators and incubators, and philanthropies.

What are we worried about? What gives us pause?

  • Outmoded investment logic - niche prescriptions of “only software investing” in climate tech, when often it’s a mixed solution - and one that has more hardware, service and ecosystem requirements than traditional SaaS investments.
  • Discounting the success of Cleantech 1.0 - without it, climate tech in its current form wouldn’t exist and cost-competitive renewables would still be a fantasy. An index of CT1.0 through today would be net positive, and disregarding the lessons and contributions of the past discounts the potential of today.
  • Beware the elevator effect - riding the same playbook from last decade won’t get you to the same destination. Every EV OEM is not going to be the next Tesla, and we’re more bullish on emerging supply chain innovation, low cost carbon capture, and regenerative ag plays than just looking for the next new electric wheels.
  • Be wary of the (SPAC) bubble - valuations are really high across the board, and the Robinhood / Tesla effect is driving up a higher imbalance. There are ~40 climate tech SPAC mergers announced with more than 1/3rd of the targets pre-revenue. With more SPACs fishing for targets than IPO-ready climate tech companies, there’ll likely be a rebalancing and flight to quality when the tide comes in.

In the News

Volkswagen threw a Power Day celebration of the car maker’s pathway towards EVs batteries, unveiling an ambitious plan to build six gigafactories (240 GWh production capacity/ year) in Europe by 2030. VW’s emphasis on two-way charging stood out, particularly as Elon downplayed it at Tesla’s own Battery Day bash.

Deb Haaland officially became the first Native American to serve in any US cabinet position. Her department oversees the country’s 500m acres of federal lands, coastlines, and wellbeing of 1.9m Native people - alongside land use for energy infrastructure, giving her the ability to stifle or boost transmission, renewables, and fossil fuel policies.

Microsoft is digging a 550-foot deep hole as tall as the Washington Monument below their new building. The goal? Harness enough thermal energy from the ground-source pumps to heat and cool the entire building.

Bottom trawling produces 1 gigatonne of carbon per year, meaning that if trawling for fish were a country it’d be the world’s 6th most polluting economy.

How does natural gas fit into a lower carbon future? Scientific-American discusses strategies to decarbonize the natural gas system: (1) replace gas with biomethane, (2) replace gas with hydrogen, (3) transport hydrogen in other chemical forms, and (4) extract carbon at consumer locations.


Pop-up

USV’s Albert Wenger drops seven “proofs” on supporting both climate and crypto.

Northwestern University and ClimateWorks released a 100+ page report on several pathways to decarbonize concrete.

If you’re looking to buy an e-bike for the impending warm weather (and back to office commute), you might want to hold out for the $1,500 e-bike tax credit bill just submitted.

One man’s harrowing journey to electrify his home in NY shows that getting our buildings off fossil fuels still has a long way to go.

Apes together strong. In just a week, WallStreetBets frequenters have taken $383K of their hard-earned profits to the Dian Fossey Gorilla Fund.

Need an activity for your next virtual happy hour? Check out X’s new game, “Moon Shot” (of course). Choose your cards and be challenged to think about problems in novel ways.

Opportunities & Events:

🗓️ Techstars Sustainability Summit: Entrepreneurs, investors, and industry leaders in climate and sustainability, join Techstars on April 15th for a global summit on entrepreneurial solutions to the climate challenge.

🗓️ 2021 MIT Sustainability Summit: Join the Summit on April 16th as the "For Good Measure" theme explores questions and needs for measuring impact on both people and the planet.

💡 Google For Startups Accelerator: Apply by April 1st to join this 10-week program that brings the best of Google to startups using AI and ML to combat climate change.

💡 OPEN 2021: Concept papers due April 6th for funding from the DOE for “ideas that involve technology which is so high-risk that it can’t get support, but so potentially high-impact that it should.”

💡 New York Climate Progress: Cleantech startups with a presence in New York should apply by April 14th for an investment up to $500k from NYSERDA.

💡 Elemental Excelerator: Elemental is launching applications for its 10th cohort looking for passionate, diverse teams committed to solving climate change. Apply by April 16th.

💡 2021 Cleantech Open: Apply by April 18th to the world’s largest cleantech accelerator spanning over 10 years.


Jobs

Senior Policy Advisor @Carbon180

Analyst @Precursor Ventures

Growth Equity Associate @Emerson Collective

Growth and Operations @Ambrook

Portfolio Impact Principal @Primary Venture Partners

Finance Ops Intern @Google X

Head of Data Science @Equilibrium Energy

Impact Measurement Intern @Planet Labs

Director of Powertrain Development; Hydrogen Systems @Universal Hydrogen


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

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