VCs are investing in these hot areas of climate tech

agricultural technology


  • Tens of billions of dollars are being scrambled for startups trying to solve the climate crisis.

  • After the Inflation Reduction Law was passed last year, a new era begins.

  • Regenerative agriculture, energy analysis software, and commercial shipping are all ready for disruption.

Venture and private equity funds seeking the next big climate solution raised piles of cash last year, and now is the time to spend it.

According to an analysis by Climate Tech VC, approximately $64 billion flowed into these funds in the fiscal year ended November; This figure is more than double the previous year’s total. This means tens of billions of dollars are available for startups trying to solve the climate crisis.

Several venture capitalists told Insider that a new era has begun as the Inflation Reduction Act passed last year, which includes nearly $370 billion in federal subsidies over a decade aimed at expanding renewable energy and increasing production in the United States. Industries known as major polluters, such as agriculture, utilities and commercial shipping, are ripe for change, VCs said.

“The climate is like the internet that is going to turn every corner of the global economy upside down,” said Andrew Beebe, managing director of Obvious Ventures, which has more than $1 billion in assets under management. “It can be like a dirty little secret in Silicon Valley, where some of the best destinations for venture capital are where governments will make the quickest adjustments.”

Veery Maxwell, a partner at Galvanize Climate Solutions, a global climate-focused investment firm that refuses to manage its assets, said policymakers’ support could help offset rising interest rates that could make investors reluctant to support large industrial projects.

Maxwell added that cash flow is encouraging more entrepreneurs and ex-Big Tech employees to enter the field.

One of the headwinds is that enough startups don’t get past the venture stage and enter the public markets to raise capital, Maxwell said.

“We don’t have enough of these great success stories, both financially and in terms of impact,” he said. “There are a lot of categories of companies that no one has thought of starting yet. We need a lot more innovation, but I’m encouraged that the number has grown significantly over the last three or four years.”

Here are three sectors climate venture capitalists are betting on in 2023.

regenerative agriculture

The global food system accounts for one-third of greenhouse gas emissions, according to UN-funded research. Maxwell said that while practices that reduce emissions on farms are well known, such as planting cover crops that help soil store more carbon or use less fertilizer, there is no market that encourages this behavior, although some initiatives are trying to change that. .

Galvanize has spearheaded a Series B funding round for the Regrow Ag initiative, a technology platform that works with food companies and farmers to invest in applications to track and reduce greenhouse gas footprints.

Beebe told Insider he’s excited about innovations in reducing methane emissions from livestock. There are additives that can reduce the amount of methane that cows burp in the food they eat by up to 90%. Methane is a much more potent greenhouse gas than carbon dioxide, so significant reductions could be a climate win.

Energy analytics for companies and consumers

As more people buy electric cars and install solar panels, and utilities provide more renewable energy and battery storage online, tools are needed to manage how all these elements interact with the electric grid. Consumers want to know the best time to charge their car or use electricity at home to avoid high fees. Utilities need to make sure there is enough electricity to run around, especially as the seasons change and extreme weather events become more frequent.

Meanwhile, companies and cities electrifying their vehicle and bus fleets need tools to manage them in an energy-efficient way.

Shawn Cherian, partner at Energy Impact Partners, said these transitions create opportunities for companies with smart analytics software.

The company has spearheaded a Series C funding round for Grid X, a startup that helps utilities design energy rates and communicate to customers how their actions will affect their bills.

commercial shipping

The European Union is tightening emissions from diesel-powered cargo ships, enabling our collective consumerism. Shipping has been exempted from the EU’s carbon market, the bloc’s core climate policy, but this exemption expires in 2024.

Beebe said the industry isn’t investing much in research and development, which means there’s room for new entries that will help reduce the industry’s climate rebound through new battery technology, lower-carbon fuels or other solutions.

There were batteries that could power commercial ships, Beebe said, but today such batteries take up too much space to drive the economy on a voyage across the ocean. For now, battery-powered cargo ships are better suited for shorter voyages, such as cruises up and down the East Coast of the US.

One of the initiatives working to electrify these short journeys is Fleetzero, which has developed batteries in the form of shipping containers to make it easier for port cranes to replace them with freshly charged batteries, Beebe said.

Beebe said Obvious Ventures did not invest, in part because of concerns about long-distance travel. But Fleetzero completed a $15.5 million funding round last year.

Read the original article on Business Insider

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