The Climatech Gold Rush at the ARPA-E Energy Summit: There’s Never Been a Better Time to Start a Climatech Company
DENVER— At the ARPA-E Energy Innovation Summit 2022, “The Climatech Gold Rush” panel engaged leaders in the investor ecosystem in a lively conversation about the latest climatech investing trends in a rapidly changing landscape. Moderator Dr. James Zahler (ARPA-E) was joined by Clay Dumas (Lowercarbon Capital), Dr. Dan Matross (CREO Syndicate), and Dr. Johanna Wolfson (Azolla Ventures).
What These Investors are Looking For
Azolla Ventures, a new fund out of Prime Coalition, focuses on aggregating “catalytic” capital to support early-stage, high-risk investments that can make an enormous difference in climate. The prior fund, Prime Impact Fund, supported 16 companies with huge potential. Azolla Ventures is looking for companies with the potential to have gigaton-scale impact by 2050, funding them at the seed and pre-seed stages.
CREO Syndicate is a non-profit that works with family offices that are interested specifically in investing in climate solutions in energy, mobility, food and ag and water. The goal is to catalyze a trillion dollars of capital by 2025. CREO started as a way for family offices to trade information and deals. That has evolved into three initiatives: convening to discuss trends; research to make investors more informed; and deal flow at all stages, from early-stage to M&A and buyout.
As the firm’s research expert, Matross notes that there is more climatech expertise among investors and more capital being deployed than most people realize. For instance, at the Seed and Series A levels, there are 500 investors with experience in climatech. Investors in all stages have deployed $30-40 billion annually in the space over the last few years. Valuations are going up, with the typical early-stage climatech valuation hovering around $10-20 million, an increase of 60 to 80% in the last three years. And, there are now more than 40 climatech companies valued at $1 billion or more that reached unicorn status in a median time of just six years.
Dumas introduced Lower Carbon Capital, a firm investing in early-stage technology companies that can help bring down atmospheric CO2. The firm is focused on three categories: hard-to-decarbonize sectors; companies removing carbon from the atmosphere and putting it back in the ground or creating something useful from it; and technologies that will buy time for people and ecosystems that are getting hit hardest and first. Lower Carbon grew out of Lowercase Capital but shifted its entire focus into bringing down CO2 levels due to declining costs for energy, breakthroughs and electrochemistry advances in synthetic biology, and acceleration of everything due to machine learning and AI.
When to Engage
Zahler asked the panelists what they are looking for from entrepreneurs and when entrepreneurs should approach them. Lowercarbon wants to invest in companies of all kinds at the earliest stages that are addressing gigaton-scale problems and are capable of reaching scale and having a material impact. Matross noted that family offices tend to invest more in larger funds and, in some instances, Series A or B rounds. Wolfson noted that Azolla engages so early with entrepreneurs that they even help with applying for grants, but she emphasized that it is beneficial to seek grants and investment capital in parallel. Her message: it is never too early to begin building relationships with venture capitalists.
Now is the Time
All the panelists noted that there are more potential options than ever for entrepreneurs or potential entrepreneurs in the climatech space. Dumas’ advice, “Even today, with everything that's happening in global markets, there is a superabundance of really good climate capital, so spend time getting to know investors and figuring out who's going to earn your trust, who's going to hustle for you and roll up their sleeves…and help you get really down to product decisions.”
Added Matross, “What investors are really investing in isn’t technology, it is the entrepreneur’s talent and ability to solve problems.”
Capital is flowing in like never before, spurred by the urgency of the climate challenge. Dumas summed it up: “There has never been a better time to start a company that can have a massive impact…The actions of just a small number of people, dozens of people, can have a dramatic impact on the trajectory of the CO2 curve. The only way to figure it out is to start a company or to join that company. So please go do that.”