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💸 "A New Era for Climate-Focused Venture Capital"

The Energy Gang

Photo by Amanda Jones / Unsplash

Hosts: Stephen Lacey & Katherine Hamilton
Guest: Emily Kirsch | Founder & CEO | Powerhouse
Category: 💸 Venture Capital

Podcast’s Essential Bites:

[3:46] SL: “The venture world and the world of Silicon Valley tech companies is certainly moving once again. And interestingly, even though things froze up last year for a while, there was a lot of movement in deal flow in climate tech venture capital. In fact, venture investments topped $17 billion in 2020, across more than 1000 deals. Five years ago, it had fallen to 5.2 billion, which was a 30% decrease from a previous peak in 2011.”

[8:56] KH: “I'm gonna reference a newsletter by Kimberly Zou and Sophie Purdom from […] And they say there are a few things in climate tech that have always been true. One is that climate is technology. It's across a lot of different sectors. It's measurable. So you can tell when you're making a difference. And the third thing is that it really encompasses the entire economy. […] And they say what's different this time then, earlier, when we were really focused on clean tech, which was much more about energy and efficiency, and less about just holistically society that now climate tech is broader. […] There's […] need for policy to really signal to investors where we need to go. There's also much more demand from public markets and institutional investors. […] So there's a lot more pull. And then all these corporate decarbonization commitments. The corporates are on board and have also changed the landscape of investment.”

[10:39] EK: “We are all as individuals starting to directly experience the impacts of the climate crisis. […] [Also] millennials and GenXers are putting the climate pressure on in a way that is new. […] What all these points are culminating in is the fact that according to the new Future of Climate Tech Report that was released just yesterday from our friends at Silicon Valley Bank, venture capital fundraising for climate tech focused funds in 2021 is on track to hit a record $21 billion. And similarly, capital flowing from venture capital funds to climate tech companies, is on track to reach 49 billion according to this new SVB report.”

[12:25] SL: “The thing that stands out for me is the cultural shift. And I think there's this moral component to generational perceptions and experiences with climate change. There is this shift in the broader tech sector, away from companies that are just telling you Instagram ads and taking your data, and a lot of skepticism about the first generation of social media companies and the ethical components of how those companies operate. […] And now that we're experiencing climate change every day, it is so obvious that it is getting more intense, seasonally, a lot of these investment firms are realizing that they have this moral component to their portfolios that they may not have felt a decade or 12 years ago.

[13:28] SL: “You have the experience of someone like Elon Musk, who could very well become the world's first trillionaire. […] In 2020, he became the world's richest person. And he did that by creating a form of a climate tech company, by leading with this vision of electric cars, and batteries, and solar. And Kara Swisher, in The New York Times, pointed that out at the beginning of 2020 saying, […] you better wake up to climate change because the money is being made here. So those factors seem incredibly important, underlying the deal flow that we're seeing.”

[16:06] EK: “According to a great report from PwC, from 2013 to 2019 […] we've seen the top three sectors in climate tech investment, […] first, mobility and transport. This was by far the largest with about 37 billion in investment or 63% of total climate tech investment. A lot of that was attributed to heavy investment in EVs in China, but also investment into micro mobilities. […] The second biggest area was food and ag and land use with about 8 billion or 14% of total investment out this included plant based meat and precision agriculture. […] And then third is energy, which accounts for about 5 billion of investment. This includes generation and storage and about 8% of total climate tech investment. It is worth noting that energy and power account for 73% of global emissions and so we would love to see that 8% increase significantly [to] give an opportunity to reduce emissions through innovation.”

[17:48] EK: “This year alone transportation and logistics are on track to receive about 20 billion in venture funding, while energy and power are capturing the majority of angel and seed stage investing […]. Some of the kind of hot clean tech themes in the past 12 months include circular economy and supply chain, climate FinTech, so risk analysis modeling, climate financing, using AI and geospatial analytics for carbon markets, green hydrogen and direct air capture. At Powerhouse Ventures a couple of the things that were most interested in are FinTech for quantifying climate risk, renewable energy and electric vehicle marketplaces and software and financial technology to enable the proliferation of electric vehicles and charging infrastructure.”

[48:28] EK: “A decade ago, a tech unicorn was a big deal. […] Unicorns were, for the most part, extremely well known and noteworthy. […] When the venture capitalists, Aileen Lee coined the term unicorn […] there were 39 unicorns in 2013. Today, depending on who's counting, there are upwards of 600-700 unicorns. And in 2020, a new startup became a unicorn every three business days on average. And so this is the same trend that we will see in climate tech. Many of the early unicorns are now the big names like Tesla and Nest. And by the end of this decade, a climate tech unicorn will no longer be remarkable. The opportunity is so massive to tackle the climate crisis that like in traditional tech people won't think twice when they see another climate tech unicorn and it'll probably just be thought of as a unicorn versus a climate tech unicorn at that point. As of today, there are 43 privately held venture backed climate tech startups with valuations in the excess of a billion dollars. These unicorns are concentrated in the mobility and transportation areas, and unsurprisingly represent firms founded relatively early in the climate tech space, though it does suggest that there is room for many additional climate tech unicorns to come.”

Rating: 💧💧💧💧

🎙️ Full Episode: Apple | Spotify
🕰️ 54 min | 🗓️ 07/21/2021
✅ Time saved: 52 min

Additional Links:
Future of Climate Tech Report (Silicon Valley Bank, 2021)