14 climate tech investors share their H1 2022 strategies

Almost the same size as Florida, global warming has made Antarctica’s Thwaites Glacier increasingly unstable. This month, researchers are attempting to reach the “Doomsday Glacier” for study, but icebergs are slowing their progress.

The climate emergency is becoming more apparent, and investors are taking notice. Last year, round sizes for climate tech startups quadrupled, with more than 600 investments totaling over $40 billion.

Nearly a third of these were pre-seed and seed, with 182 deals closing just in in Q4 2021. The start of 2022 shows no signs of slowing, with more startups jumping into the fray to tackle one of humanity’s biggest challenges.

To examine the market forces and psychology driving climate tech, we surveyed an international group of investors to learn about how they evaluate new opportunities and what they’re looking for from the entrepreneurs who approach them.

We spoke with:

Alex Bondar, partner, Acre Venture Partners
Carolin Funk, partner, Blue Bear Capital
Hannah Friedman, Associate, Closed Loop Partners
Joshua Posamentier, co-founder and managing partner, Congruent Ventures
Shayle Kann, partner, Energy Impact Partners
Heidi Lindvall, general partner, Pale Blue Dot
Robert Downey Jr., Jon Schulhof, Steve Levin, and Rachel Kropa from Footprint Coalition
Maryanna Saenko, co-founder and partner, Future Ventures
Valerie Shen, partner and COO, G2 Venture Partners
Thai Nguyen, partner, MCJ Collective
David Frykman, general partner, Norrsken VC

Alex Bondar, Acre Venture Partners

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We’re fundamentally very bullish on the space. I think this is something that is a present-day issue for us to solve. We’re food and agriculture investors, so we definitely have that kind of lens as we think about it. We’re constructive around things like voluntary carbon markets. We think those are standing up. You’re already seeing quite a bit of flow in there.

We have a different view wherein we see an inflection point around less of the corporate involvement and more on the consumer side. We’re investigating how the consumer engages with these markets to solve some of these issues rather than just relying on the Microsofts of the world to buy a bunch of carbon credits.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

If anything, I think all it does is validate the fact that it is a large opportunity. In some ways, it’s probably the largest opportunity in VC given its existential nature. I see it as a net positive that I don’t think there’s enough capital that we could put towards this to really find the underlying true issues here.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

Given where we have invested recently, we definitely saw health opportunities on the agtech side. One company is going after bettering soil health so that we can sequester more carbon through better ag practices. I think something similar can be done on the forestry side as well. As we think about carbon sinks, instead of going after these highly technical solutions, such as direct air capture, there are natural proven ways of doing it. So if we can accelerate that, I think that makes a lot of sense to me from a carbon removal standpoint.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

This is where we can integrate some of these carbon markets with the consumer. For example, what Moss is doing in terms of making these credits very easily available for just general applications, whether it’s loyalty programs or purchases that the consumers are making.

I think it makes it much more tangible in terms of engaging with some of these environmental solutions and digitizing those environmental assets. Those downstream applications are something new and there could be quite a willing audience to engage with than just simply relying on the corporate consumer.

A lot of this is bringing trust and credibility into the space. I think those tools allow for preventing things like double counting and tracking the provenance of these credits. That is where we see a lot of the benefits. It’s also a way to create a more frictionless pipeline between the projects themselves, and then some of these applications and things like instant offsets make a lot of sense, especially in some of these consumer applications.

Some solutions (e.g., electric scooters, replaceable battery technologies) generate a high volume of e-waste. How do you consider an investment’s overall environmental impact? How much do you consult with scientists or other climate experts before investing?

We definitely think through that when we do our diligence. It is an important component. You want to make sure that things you’re investing in are a net positive. There are always some indirect consequences at times, some of which you don’t realize until much later.

You have to be in business to make these investments. So there’s a component of making sure that you’re keeping your LPs happy and you’re providing the kinds of returns they’re seeking. That being said, I think a lot of this is also like a stage process. So some of the technologies that have been invested in could be foundational for other things that come in later.

Which metrics do you use to gauge the health or viability of your climate tech investments? Is there a metric that helps you be more comfortable when cutting a check?

We think we can make the types of returns that we’re seeking in venture-style investments. There have been a lot of catalysts and inflection points in the last few years, especially in fruit and ag. I’ve seen quite a bit of innovation just in the last five, six years since we started the fund. We

have an impact mission, but the underlying underwriting still has to reflect the types of returns we want to see in this space.

This cannot be like a philanthropic endeavor. I think this has to be a market-based solution. Given the size of the problem, some of these opportunities, you’re going to see these types of returns, especially in food and ag in our space. I don’t know if this is true for all industries, but I think creating more sustainable solutions is something that we see consumer demand for as well. The consumers are willing to pay a premium for that and there is economic incentive to do that.

Think about plant-based alternatives to meat. People are paying a premium for those products. At the end of the day, it’s less about thinking about these like upstream solutions and more about figuring out where the consumer demand is, and then what the consumer is willing to pay for.

We’re seeing opportunities in terms of the consumer becoming more knowledgeable, more aware, and demanding better products, whether it’s for the environment or for their health. I think this is really consistent with the investments that we’ve made as well.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

I think it varies. It depends on the type of solutions we’re looking at and where in the value chain you are. So when you’re dealing with something like a biotech-driven company, like a seed genetics company, for instance, of course, there’s a more scientific background there. But as you move downstream, a lot of those founders may not be purely scientists.

Carolin Funk, Blue Bear Capital

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

In 2022, we foresee continued interest and investments in the climate tech space. According to the IPCC there are only eight years — or 95 months — left to avoid the biggest crisis.

We are excited about solutions that help operationalize the energy transition and the climate tech industry. We focus on a lot of technologies that are ready to deploy but need higher levels of professionalization and removing bottlenecks — AI-powered, cloud-based, quickly scalable solutions can play that role.

Since we started investing in energy and climate in 2016, we’ve expanded from renewables (wind, solar), grid and EV infrastructure investments to energy storage, carbon markets and climate risk.

In H1 2022, our aperture is wide open on all things needed to “de-bottleneck” the energy transition — e.g. cybersecurity and the increasing risks for critical infrastructure. We see a major risk in deploying cloud-based technologies without having the necessary scrutiny on cybersecurity. This will be driven by regulatory measures, but at this point, reputational risk is probably the short-term accelerator.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

We focus on investing in software- and data-centric businesses in the climate tech space, and have seen the number of companies and deal flow increase over the last two years.

Commensurately, the talent interested in climate and impact has grown quickly and keeps pace. As sector specialists with a relative amount of experience across cycles, we’ve continued to focus on business fundamentals and identifiable technology drivers. These are the kinds of businesses that will endure regardless of market conditions.

Since we have a lot of deep sector expertise, we try to get faster in our decision-making and do a lot of the work upfront. We closed four deals in Q3 2021 — that wouldn’t have been possible without a deep understanding of the markets before even meeting the founders.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

We’re tracking developments in hydrogen, geothermal and mining for energy transition technologies closely. Baseload power, industrial emissions reduction and the identification, aggregation, and orchestration of the elements required to power the transition are all critical for driving change towards a more decarbonized, sustainable economy.

Climate change adaptation measures are a bit early in development, but I don’t think we have ways around them at this point. So, we are trying to keep following the research and developments closely.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

To be able to electrify (almost) everything, we need to upgrade our grid or find new ways to decentralize it, e.g. through microgrids. Some talk about mini- or nano-grids, but to me it’s all the same concept. We need to keep our regulators up to date on what’s possible in grid innovation — like using machine learning, AI, or geospatial data to make the grid and grid extensions more efficient. It’s a tough market for startups to be in, as it’s moving slowly, but there is true change happening.

Putting on a data lens with regards to electrification: I think the next important step is to get to 24/7 decarbonization of that electrification. Today, we don’t even have the ability to provide a view into the carbon footprint at grid node level in real time. Getting that data out to customers and decision-makers will be a catalyst for large- and small-scale consumer-driven change.

This is also a prerequisite for emission tracking and one pillar to make the carbon markets more meaningful.

Most efforts appear to be focusing on a combination of adaptation (e.g. green concrete, building sea walls) and mitigation (e.g., electrification, carbon capture). Where do you think the greatest short-term financial returns can be found, and why?

The much-used Marc Andreesen quote that software is eating the world is also true in climate tech — our take is that software and data will create outsized returns.

But short-term returns are just that: short term – and likely, illusory. Our conviction is based around operationalizing large data sets that can optimize scaled deployment of renewable resources and/or accelerate the identification of compounds and chemistries that contribute to a step-change in the way we consume or are able to abate our consumption.

After spending several years building batteries myself and experiencing how resource-intensive that is, this is dear to my heart. We assess the environmental impact before each investment. We carry out our own analysis and don’t outsource that work, because we want to understand the dependencies, drilling deeply into supply chains as well.

Of course, we consult with scientists and industry specialists, but we are doing the heavy lifting and model building ourselves.

The VC industry is sometimes accused of being on a timeline that’s too short to be an effective change-maker for climate change. How does your investment thesis reflect that?

Blue Bear’s investment thesis prioritizes speed to deployment, identifiable ROI, and practical, advantageous customer development mechanisms. Our model is contingent on acknowledging the speed with which the energy transition is occurring, and our LPs have found alignment with our approach.

Trillions of dollars will be spent to scale renewable energy, modernize infrastructure, and secure sustainable supply chains. Research from McKinsey and Deloitte shows that this spending will be frontloaded over the next five to eight years to meet climate goals.

Which metrics do you use to gauge the health or viability of climate tech startups? Is there a metric that helps you be more comfortable when cutting a check?

We look for companies that already have a product and revenue, so that during our diligence we can introduce them to new customers from our network to understand the traction. Our focus is in B2B and understanding the buyers’ needs and decision-making are soft factors, but very important for us.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

Definitely not. We invest in entrepreneurs that have a deep understanding of the industry, but that can be from the technology, business or even compliance angle. For example, one founder was an environmental consultant, and she is now building a platform that is automating the hands-on consulting work she used to carry out.

One development we have been observing is the collaboration between founders from large tech companies, who have a lot of experience in scaling businesses, and climate tech industry experts who have deep networks and market understanding

Hannah Friedman, Closed Loop Partners

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We invest in the transition to a circular economy and support scaling innovations that advance a more sustainable and profitable economic model. The circular economy is a renewable system by design, one that eliminates the concept of waste and circulates materials at their highest value and best use for as long as possible, while more equitably redistributing the benefits of the system.

Even just two years ago, we often had to define the circular economy in conversation. Now, after a global pandemic that could have easily derailed sustainability efforts, COVID-19 has instead accelerated acknowledgment of the need for greater resource efficiency, resilient supply chains and climate stability — terms core to a well-functioning circular economy.

We are encouraged by the critical link drawn between transitioning to a circular economy and addressing the climate crisis. Within this intersection, Closed Loop Partners invests across a range of sectors, including plastics and packaging, food and agriculture, fashion, and supply chain, logistics and technology. We are increasingly seeing circular economy innovations in electronics and battery recycling, carbon utilization, water and the built environment too.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

As we continue to deploy out of our second fund, we are excited about enabling more regenerative agriculture, upcycling agricultural waste; resale and rental of fashion; onsite and distributed processing of waste and manufacturing of new products; and carbon utilization of late — but we are constantly eyes-open about the next big problem to solve.

Large food and beverage corporations who rely on agriculture commodities and supply chains are increasingly doubling down on existing or creating new regenerative agriculture strategies. Regenerative agriculture is core to maintaining healthy soils which have potential to be a large carbon sink. Closed Loop Ventures Group invests in enabling technologies for regenerative agriculture, like Buenos Aires-based UCROP.IT, and in new products capable of upcycling agricultural residues, like St. Louis-based Rebundle.

“Recommerce” is moving from buzzword to mainstream operational strategies in the apparel space, and we are eager to see more solutions that enable fashion rental and resale, like Thrilling and For Days.

Another area where we’ve seen emerging technologies is in the carbon-to-value space (also referred to as carbon utilization).

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

Certainly, growing electrification, improvements to energy efficiency, increasing grid resiliency and an expansion of underlying renewable energy are critical drivers of emissions mitigation. Incorporating circular principles to the production, distribution, and end-of-life management of the physical assets of the transportation and energy sectors is also important for emissions impact.

We see tremendous opportunities across mitigation, adaptation, and resiliency measures to invest in today. Below are a few highlights of sectors within this framework that we think are highly investable in the near term.

Mitigation: Reducing GHG emissions

Replacing fossil-fuel-based feedstocks with recoverable, waste-based or regenerative-based sources.
Implementing operational improvements to reduce energy consumption and material loss in industrial and commercial production lines.
Enabling regenerative farming practices both on land and at sea to create viable business models and to enhance natural carbon sinks.

Adaptation: Preparing for more frequent and extreme climate events

Incentivizing green infrastructure by improving groundwater retention and developing more weather-tolerant plantings. We recently invested in Thrive Lot, which tackles this problem in the landscaping industry.
Creating visibility through traceability and transparency tools in the supply chain that allow for more resilient and adaptive supply chains.
Generating insurance-related products that allow adaptations to be reimbursed or rewarded by the broader insurance and reinsurance industry.

Resiliency: Strengthening current ecosystems and enabling rapid recovery from climate events

Utilizing recoverable materials in consumer products and the built environment
Scaling water purification technologies
Expanding onsite and distributed waste processing and utilization
Expanding onsite and distributed food production

E-waste is a great example of a negative externality incurred on our pathway to maintain temperature increases below 1.5-degrees Celsius. Another example is found in carbon removal technologies––namely direct air capture (DAC)––which often have high regeneration energy requirements, hence less net negative carbon drawdown depending on where the grid’s energy comes from.

We anticipate many more trade-offs as our globalized systems recalibrate to achieve not only climate-related goals, but also broader sustainability goals — inclusive of biodiversity, water and social metrics. It is critical to consider these trade-offs.

In our impact management process, which spans everything from initial company screening, due diligence, portfolio management and exit outcomes, we prioritize managing to net impact. This means that we validate the impact statements provided by founders through our own research and expert networks, and run thorough analysis to develop net impact based on the best available information at the time.

We also work to consistently update our impact management as new information becomes available. As the impact space rapidly changes, we continue to align with best practices and evolve our systems to be at the forefront of impact management and measurement.

The VC industry is sometimes accused of being on a timeline that’s too short to be an effective change-maker for climate change. How does your investment thesis reflect that?

We think this is a fair criticism of the industry, and are excited by the funds that are offering 15 year-plus time horizons to scale, are designed to support the entire lifespan of a startup, or have a blended capital stack to support companies at different stages of growth. Climate solutions will require a diversity of financing mechanisms to meet the diversity of technology risk, commercialization timelines, maturing talent capabilities, capital intensities, and new market build-out across sectors.

Closed Loop Partners has a slightly different approach that deploys a myriad of investment strategies across the capital stack, comprising venture capital (seed and pre-seed), growth equity (Series A+), private equity and catalytic capital, as well as an innovation center focused on building the circular economy.

Our platform represents the spectrum of stages of investments and differentiated investment mandates that enable multiple stakeholders to achieve their stated financial and impact goals. Entrepreneurs and investors focused on building the circular economy each have unique capital needs and/or capital objectives, and we align incentives across our funds and team in order to achieve collective objectives.

Which metrics do you use to gauge the health or viability of climate tech investments? Is there a metric that helps you be more comfortable cutting a check?

For Closed Loop Partners’ Ventures Group, we hold climate tech startups to the same success standards as regular startups. Key progress indicators (KPIs) may differ across industries or the nature of innovation (hardware vs. software) between fundraising rounds, but we fundamentally evaluate the strength of every startup along the three axes of product, market, and team.

We look for products close to commercialization or market readiness with proven technology and defensible intellectual property or competitive advantage. We seek products or services that solve critical problems for customers or inefficiencies in supply chains. We seek innovations that are a “need-to-have,” not just a “nice-to-have.”

We look for large, growing markets that can support the company’s revenue growth with relatively low market penetration. We like when startups have customers who have demonstrated their willingness to pay and utilize business models that achieve customer “stickiness.” Lastly, we admire teams built from a deep bench of industry experts who have established a strong reputation as leaders in their space, and have aligned values.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

Absolutely not. The transition to a just climate future will take a village. We need everyone contributing their most pertinent, unique skills.

The transition to a circular economy will require entrepreneurs across AI and machine learning, infrastructure and project build-out, material science, robotics, agriculture, marketing, digital and IoT technologies, and consumer products and education, among other areas.

Yes, we seek entrepreneurs who are experts and can educate us about the problems occurring in their field or industry. But, when we invest, we seek founders who strike the perfect balance between hungry and humble.

Joshua Posamentier, Congruent Ventures

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We are constantly developing the thesis — one or two a quarter, and then we hold them. Opportunistically, we’re first, we’re usually the first money, and precede Series A. Even if we develop a thesis and start looking for stuff, that doesn’t mean anything’s gonna actually show up.

Some of the areas we’re focused on right now are boring, basic, hard-to-decarbonize industries like industrial heat, high-grade and low-grade steel production, hydrogen, industrial hydrogen.

So we’ve done a little bit of early detection, and we’d like to find more in mitigation. On the other side of that coin are also interesting uses of biomass and CO2. We continue to look in the carbon accounting space as well.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

I would say it’s pushed us to be more on an overall fund thesis. So our fund thesis is, typically first money in, typically lead, and usually early, so pre-seed and Series A. It’s obviously getting increasingly hard for us to wrap our heads around Series A pricing and dollar amounts.

I would say we’ve really focused more on getting in at the earliest possible stage in often overlooked areas. So we haven’t done much. For example, our food and ag vertical is numerically underrepresented.

In terms of investments, dollars are actually pretty evenly spread out. It’s been difficult because it’s one of those incredibly frothy sectors where even at the first money, the valuations are just nonsensical. Which, for a fund like ours, just makes no sense.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

I think transmission in advanced distribution is probably the next big thing. There are lots of things that we don’t need to electrify obviously — heavy industry, transportation and built environments.

What is interesting is just bringing power into those environments. The city of San Francisco, for example, two-thirds of its energy comes from natural gas. If you want to electrify that, you obviously need to update the transmission capacity because the city is otherwise isolated. That’s a huge challenge. In some ways, it’s less about the technology and more about the challenges of transmission and distribution.

Grid orchestration has to happen in a much more sophisticated way at the edge. We’ve made one bet in that space. We made two bets in transmission — one focused on undergrounding, making it easier to bury lines, and one on basically making it easier to run lines above ground and with real power over distributions to scale infrastructure.

So two very different approaches to fixing that same issue. But on the grid orchestration side, that’s a huge, huge problem. Most energy management systems are 30- to 40-year-old entitlement software. It’s possible that it’s not hard to change stuff. So this might be a rip-and-replace opportunity.

Mitigation is probably the right answer right now. We’ll see how that goes over time. So many companies and technologies are actually dual-use. They both have both a mitigation and an adaptation aspect. Our company in the early wildfire detection space is absolutely both.

If you look across our portfolio, and how I think about it, most of those are truly mitigations. We’re going to switch to plant-based meat, we’re going to make more alternative energy, but at the same time, better grid orchestration means you can island parts of the grid and avoid PSPs when wildfires are threatening transmission lines.

It’s a blurry line, but most of the opportunities we see are still mitigation-centric.

E-scooters and micromobility is not a place we’ve actually managed to invest yet. The fact that it used to be a 700-day lifetime for those scooters, that was definitely a knock on that business model that we really didn’t like.

There are a few companies in our portfolio that are actually manufacturing, and are very conscientious of the full footprint of what they’re doing. So we’ve got a plant-based meat company, which is very cognizant of where their upstream pea stock comes from, and they’ve implemented all this water recycling. They’re very low water footprint, compared to most other processes. So that’s something we take into account.

But by and large, we haven’t really had a lot of exposure to that question. Most of the stuff in our portfolio doesn’t generate a lot of waste. Most of it is very durable. We do have a recycling company for helping others.

Which metrics do you use to gauge the health or viability of climate tech investments? Is there a metric that helps you be more comfortable cutting a check?

We are focused on market-grade returns with our fund. So we look at viability, probably even more conservatively than a firm investing in social media where you’re valuing dollars per user, or dollars per click. These are really fundamentals. We’re looking at real businesses here, so we’re not going to invest in anything that doesn’t have a fairly clear business model, or at least a choice of business models and a path to exit that doesn’t require an indefinite generous government subsidy.

We’re looking for real returns. One of the big faux pas of Cleantech 1.0 was, there were a lot of interesting technologies that got funded, but you just didn’t know if it was going to work. The same technology is playing in the commodities market, so you built a full-scale plant. By that point, you’ve deployed $150 million, and you still didn’t know if it works. That’s not a fit for us. We don’t consider that an appropriate use of risk capital, at least not ours.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

Not all of our founders have technical backgrounds. I see more that do than do not, often because it’s something that came out of their research or their work.

We’ve had pretty good experiences with founders from a science background, but it’s not required. In fact, in several of our companies, it’s an entrepreneur with a different technical background that has nothing to do with the space, or someone that comes at it from a purely market perspective. In those cases, I’m going to go hunt down the technology set, I’m going to partner with that group, that person, to solve this problem, which is clearly a market problem. So those are just as exciting as the ones founded by the hardcore tech founders. Both work great.

Shayle Kann, Energy Impact Partners

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

The fundamental thesis that we’re operating under is two-fold. The first is that there is a massive wave of innovation in the market, ranging from new technologies, services and business models, all oriented around ways to decarbonize the various sectors of the economy that need to be decarbonized.

The second is that there will be an acceleration of market adoption of these solutions, driven by the fact that there is a growing recognition of the need to achieve net-zero greenhouse gas emissions by mid-century or earlier, and that there is a long path to that goal.

So that is pulling in demand for all sorts of new solutions from corporates, consumers, investors, advocates — all the stakeholders in the game. Those two things make us bullish on the trajectory for climate tech.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

Energy is the biggest one. Energy alone represents over 70% of global greenhouse gas emissions, ultimately, and so it’s a big area of focus for us.

So things like electrification across sectors, like education and mobility, electrification of heating, industrial processes — all of those fall within the realm of energy and our mechanisms to decarbonize.

So your pathway to decarbonizing at the high level is to decarbonize electricity, electrify as many things as you can, and then solve for all the remaining areas that can’t be electrified or for which energy is not the primary source of emissions. I would say those are, and probably always will be, big areas of focus for us.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

The next big hurdle that comes directly from electrification is grid flexibility and dealing with intermittency. It’s great to electrify everything but at the same time, we must decarbonize the grid.

The primary tools at our disposal to decarbonize the grid, which we are scaling up now and need to scale up even faster, are intermittent renewables — wind and solar and lithium ion batteries — and that’ll get you fairly far down the path toward decarbonizing. But you start to run into lots of challenges the further you get along that path driven by the intermittency of renewables.

The next big challenges are going to be navigating an electricity grid that needs to be simultaneously decarbonizing while doubling because of electrification. That lends itself to a host of solutions, such as long-duration energy storage technologies, potentially hydrogen, carbon capture and sequestration.

There are a variety of things that fall from the demand flexibility and demand response — all these things are born out of the fact that we’re going to be packing more demand onto the electric grid while simultaneously trying to transform.

I think my heuristic for the split between mitigation adaptation is that as of today, we should probably be dedicating about 80% of our time and attention and resources to mitigation, and maybe 20% to adaptation. As time passes, that ratio may shift, and how well we do on mitigation will impact how much we need to dedicate to adaptation.

As it stands today, we should be dedicating most of our effort, dollars and entrepreneurial talents to stopping the worst effects of climate change over adapting to what we already have caused.

I think it’s important to have a holistic view on the environmental impact, and particularly the climate impact of anything. You want to be looking not just at the point solution that it is solving, but the entire supply chain that comes with it.

We take a fairly robust approach to that. We have an entire ESG measurement process that we do. It’s important to think about the full lifecycle impact of any new technology.

We have internal science expertise, we hired a team that focuses on technical diligence for us and has a great deal of internal expertise. Our CTO is Michael Weber, who’s the former CTO at Engie and is a professor at the University of Texas, Austin. We have internal technical expertise. In addition to that, for anything that has significant technology risk, we also leverage external expertise to make sure that we are getting the best information on that technology, where the pitfalls might be, where the opportunities lie, and so on.

Heidi Lindvall, Pale Blue Dot

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We invest in climate tech companies that reduce or reverse the impact of the climate crisis and help us prepare for a new world. We see ourselves more as a generic VC fund with a climate focus rather than a cleantech fund, so we invest mainly in scalable software companies. While not our core focus, we are open to looking at hardware and some higher CAPEX solutions with a high climate impact, especially where we see that regulation changes are accelerating the speed to market in these areas.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

We have seen some increased competition and have felt the pressure to act faster in a few circumstances. However, generally, the competition has been positive and we welcome more investors in this space. All companies will need to build their products in more climate-friendly ways, so we need all investors to consider the climate in their investment decisions.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

We come across a range of technologies in climate tech that are equally exciting. Seeing machine learning and AI used to optimize current industries or the whole web3 space and how that can improve climate impact is exciting to follow.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

We still have a long way to go on electrification, so I think we will continue on this path and optimize our infrastructure to adapt to this new reality.

The VC industry is sometimes accused of being on a timeline that’s too short to be an effective change-maker for climate change. How does your investment thesis reflect that?

As we focus on climate tech, mainly software and highly scalable businesses versus clean tech, we haven’t seen a concern here and don’t anticipate slower returns at this time. The climate tech space is being accelerated through regulation out of necessity, as the problems we invest in are crucial to be solved within a VC timeframe. This is definitely still a concern for some new technologies and higher CAPEX solutions, but I believe that even this space is being so heavily accelerated that we will see some VC returns within a shorter timeframe than before.

Which metrics do you use to gauge the health or viability of climate tech startups? Is there a metric that helps you be more comfortable cutting a check?

We make a distinction between cleantech, which has historically mainly been renewable energies and materials, and climate tech, which is a lot wider and can be any climate-positive tech company. While cleantech startups have previously failed to actualize return to investors, software-driven companies have always been more successful, even in this space.

We need to stop talking about climate as a vertical itself and consider that it is more horizontal, as every industry will need to decarbonize and adapt to a new world where all of our tech solutions are climate positive. If we consider this, then there is no surprise that climate tech is so fast-growing, and that our future unicorns will be green. We strongly believe that this is the most important and most profitable space to be investing in at this moment for any VC.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

Only some of our portfolio founders have a science background, and for most companies, this isn’t required. Technology is a great tool to build some of these solutions, but anyone with any background can contribute in different ways, and you can build great circular business models or software solutions with domain expertise that doesn’t need to be scientific.

Robert Downey, Jr., Jon Schulhof, Steve Levin, and Rachel Kropa, Footprint Coalition

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

A year ago, we were entering this space and on a bit of a listening tour, but as our knowledge of the market has expanded and our team has grown, we’ve become confident in an approach that focuses on addressing consumers’ needs.

That focus makes it easier for us to tell stories to our audience, which is kind of the secret sauce of our whole enterprise. That means focusing on companies that reduce the carbon footprint of the food we eat, the clothes we wear, how we travel, and the homes we live in.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

This excitement over these opportunities has led us to double down on the flywheel. What we saw as an idea of what our focus could be has now become a necessity. We’re tying in investments with what we’re doing in the media space and bringing the community in, so there will be an informational and educational aspect to our work. It’s a merger between having these conversations, talking about what excites us, and backing these businesses.

We’re using our media work to inform our investing and to show our audience the companies that are really making a difference in the effort to mitigate climate change and helping people adapt to it.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

Right now we’re focused on technologies that can transform how people move and what they eat. Reducing emissions in mobility and shifting folks’ diets are two of the easiest ways to have a huge impact on keeping the world within that 1.5 degree Celsius warming limit.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

For us, the next big trend in the electrification of mobility is going to be in the aftermarket. Our research shows us this is a really interesting sector, and we’re already early in on it through one of our undisclosed investments. It’s not just aftermarket conversion but also the supply chain, where we can recycle things so we’re not wasting what’s left behind.

Beyond electrification, we’re looking at the ability to manipulate both biology and chemistry in ways we could have never imagined. There are now entirely new methods of production that address the brute-force chemical approaches that mankind has had forever. We’re replacing the fossil fuel and chemicals industry at the foundation of the economy with biochemicals and moving from the industrial age to the bio-industrial age.

For us, leveraging artificial intelligence and applying software to energy efficiency and greening the financial services sector have the potential to show the fastest near-term results, because that’s what we’re seeing in our portfolio.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

Great entrepreneurs can come from anywhere, and we encourage everyone who has an idea that can help mitigate climate change to start building their business now. In highly technical areas, you need a team with expertise, but that doesn’t have to be the founder. You need an entrepreneur with a clear vision, a “never say die” attitude, and an ability to inspire people with their vision for a better future.

Maryanna Saenko, Future Ventures

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We’ve always had the sentiment that we want to invest in technologies that make the world a better place. Fundamentally, that thesis hasn’t changed at all since the inception of the fund.

I think the culture is shifting, but not fast enough, and maybe technology can bridge the gap. So we’ve really focused on it at the end of last year, and coming into this year, on more direct first-order-effect climate companies.

We moved away from looking at solutions, like crumbling concrete across the surface of the ocean, which seems like an interesting solution space to look into. We focused more directly on areas where we think more specific approaches are appropriate. Within that, I would say the focus right now is to look at what are the largest climate change generating industries and what are the technological solutions that are addressing them.

Our focus is to continue looking at the markets that are the largest polluters, and asking, where are the most meaningful, technologically viable solutions going to be impactful? I think that’s going to be in the built world and construction, and continuing to look at agriculture. And then trying to figure out how to bring more fidelity to the carbon markets broadly.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

I think the only thing that’s changed for me is that we’ve become very focused on understanding how your actual impact model and therefore economic model functions. What are the baseline assumptions about the market today? How do you assume whether the carbon credit market or other associated markets will move in the future? Addressing these kinds of first- and second-order effects and companies, and questioning if you are making reasonable assumptions or ostentatious assumptions? How do we all collectively think about this?

What I’ve seen is just a lot more pitch decks come across from people being really excited. When you poke at those impact models a little bit it’s not as stable as you’d like them to be.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

It’s about having some sense of where you’re looking versus wanting to have an open mind and not being too prescriptive about what the solutions are. To the beginner’s mind, all possible abilities are possible. With that caveat, I would say there are sectors that we’re very curious about that we’re particularly open to hearing of, and others we’re maybe squinting and asking if we really believe that. For example, we’re very curious about biologically-mediated solutions and climate. I think it’s a space that’s been underserved.

I’m probably the wrong person to ask that. Saying we don’t focus on short-term financial return may sound odd — we have a 15-year fund cycle. We are fortunate enough to have a supportive base that is excited about that aspect. I think that this is an imperative for anyone who wants to do meaningful deep tech investing, which is if you want to start from the seed stage and move forward.

There’s a different story that you can start with later-stage technologies. I think Paul Hawken makes a fantastic point in Project Drawdown. I am very much a believer that the two-pronged approach is meaningful. We need to make fundamental shifts today, but to do venture scale returns, you need to invest early in technologies, and to do that you need to have a longer time frame.

We think deeply about the whole lifecycle of a product or technology and the approach. One thing we’re cautious of is, we don’t hang our hats on very specific impact calculation models. Because this is a wildly complicated space, I think it’s valuable to try to understand what the impact is and to try to calculate it. But I also think it can be a little bit of a fool’s errand when you’re talking about something as broad as e-waste, for example.

We consult with scientists and technologists and think about the externalities. The problem is, if you listen too much to that stuff, one will always say this is a terrible idea. The answer is, we don’t have perfect solutions today. We just have to move forward.

Which metrics do you use to gauge the health or viability of climate tech startups? Is there a metric that helps you be more comfortable cutting a check?

When we think about investing in the space as a venture fund, we look for a fundamental shift in technology that changes the landscape of how it can be brought to market. So for example, we’re investors in Commonwealth Fusion Systems, the advancements in the high-temperature superconducting tape leading to the much stronger and more efficient magnet as the basis for tokamaks really shifts the economics on tokamak fusion. That made it from our perspective, a viable, if not absolutely necessary and imperative, investment to make in the space.

I would say the metric we look at is, is there a reason? This doesn’t exist today, and is it a field where a large government can come in and subsidize the entire market into existence, in which case it probably needs to exist, but maybe isn’t a great venture investment.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

We were probably a little bit more tech-heavy than your average fund, just by the very nature of the fact that we are looking for breakthrough technology companies. I think the point is that when you’re anchoring on a fundamental shift in the underlying science, there needs to be some senior executive, technical talent in the company. For us, that’s most often the scientific CEO.

But it’s not true across the board, and we have seen plenty of successful companies with a dynamic duo, and we like that, particularly where there is a strong technical founder and strong business-minded founder. I think that regardless of whether you come from a deep technical background, there needs to be a deep understanding in the entrepreneurial executive team.

One thing you don’t have tolerance for is hearing a pitch from a non-technical founder that when we ask technical questions, they don’t have the answer. And they say, “Oh, let me bring in my technical team.” If I can ask such a difficult technical question in a first meeting with a founder, then my general sense is that the founder probably needs to have a deeper level of understanding of their own technology.

Valerie Shen, G2 Venture Partners

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

We believe electric vehicles are just the beginning, a “gateway drug” towards consumers and enterprises electrifying every part of their lives and businesses. Buildings are a major next step, with appliances and temperature control becoming electrified. We also believe electric vehicle charging infrastructure is a near-term opportunity, as existing infrastructure is clearly insufficient to support a future where the majority of vehicles are electric.

Some of the greatest short-term returns can be found via efficiency improvements – using technology to reduce wasted time or resources, and do more with less. For example, improving supply chains so food does not spoil during transport and trucks are not driving around half-empty, optimizing building energy-use, and streamlining manufacturing processes to avoid rework or wasted parts.

The VC industry is sometimes accused of being on a timeline that’s too short to be an effective change-maker for climate change. How does your investment thesis reflect that?

We expect to deliver competitive financial returns to our LPs, which includes delivering those returns in a timely manner. We believe there are many investments that can move the needle on climate change and are compatible with these financial goals, although we do acknowledge the timeline may make investing in a subset of technologies difficult (e.g. nuclear fusion).

Thai Nguyen, MCJ

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

Our philosophy is that climate change is fundamentally a global systems problem (and opportunity), intersecting widely across industries and sectors. In the first half of 2022, we expect to continue to invest in a diverse range of opportunities whether in carbon dioxide removal, mitigation, resilience, and adaptation, or ones we view as being foundational for the transition to a more just and sustainable carbon-neutral future.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

While we have seen an increase in investor interest in climate tech, we view it, largely, as offering more opportunities for collaboration than competition. The climate venture community is close-knit and the general attitude has been to support one another in rallying behind founders working on the most critical climate problems.

That said, it has underscored the importance of honing our unique value proposition to founders. We’ve created a climate solutions platform that, in addition to providing early-stage startups with capital, hosts informative conversations through the MCJ podcast as well as a global community of climate-motivated individuals. We’ve heard from companies in our portfolio that our content and community have helped them with their storytelling and recruiting. We’ve also recently expanded our ability to support companies as they raise successive rounds of financing through our new Opportunity Fund.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

We’ve seen a lot of interesting technologies that address different aspects of the climate crisis. To name a few, there are a number of companies in the adaptation space making it possible for incumbent sectors to navigate the challenges resulting from climate change.

We’ve also observed technologies that offer the promise of decarbonizing industries that have historically been the largest emitters. Some examples include carbon-neutral methods for producing materials like cement or steel. More recently, we’ve been excited by the developments happening at the intersection of climate and Web3 (i.e. cryptocurrency and blockchain), which has created a nascent category of “Regenerative Finance” (ReFi).

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

Apart from those categories, we’re also seeing a lot of activity in the electrification of the built environment. Given 40% of global GHG emissions is attributed to buildings, this is both a ripe and critically important area to electrify.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

Our portfolio has entrepreneurs of all stripes and backgrounds. Some have technical expertise and others possess skills in other areas. This reflects a hallmark of climate tech entrepreneurship: If you have a passion for solving the problem, there’s a role for you to play.

If you are a marketer, you can put your skills to use helping to tell the right stories about climate. If you are a software developer, there is a world of digitization to be done that drives the adoption of services for climate tech companies. But in so-called “tough tech” categories, a technical founder with experience in the sector is a key asset.

David Frykman, norrsken Ventures

What is your climate tech investment thesis in H1 2022? How has it evolved since you started investing in this space?

We focus on companies that have an intentional and measurable impact, which we measure against UN Sustainable Development Goals and our own criteria.

Our view has changed a lot since we started. Our initial focus was on asset-light business models leaning towards software. However, after analyzing the needs and opportunities of the market, we quickly realized that the climate crisis will not be solved by software alone.

Our current thesis incorporates deep tech and hardware companies, and a far broader array of potential business models. The common factor is that they are all scalable, and have the potential to positively impact over a billion lives.

As a firm, we are constantly asking how we can get to net zero. In answering this question, it has become abundantly clear that there is an inevitable and massive need for fossil-free energy. Therefore, we are interested in investing across the entire energy and CO2-reduction space.

This includes technologies that contribute to the production of fusion and green-hydrogen energy; energy-demanding carbon capture and storage solutions; software for carbon accounting, and marketplaces for carbon offsetting.

This sector is heating up quickly. How has increased competition informed your dealmaking in the last six months?

The world is waking up to the scale of the challenge ahead and, as a result, there are more climate tech companies than ever before. In recent times, we have witnessed vastly increased demand from businesses and consumers alike for better solutions to the world’s most pressing climate challenges. When this increased awareness is coupled with better science, it is inevitable that the climate tech industry will be driven forward at pace, and increased investor activity will follow.

It remains true that the best entrepreneurs achieve larger funding rounds and higher valuations, but this doesn’t happen in isolation. The valuations/cheque-sizes always correspond to the underlying market opportunity. Often, these companies are operating in large markets with the potential of huge returns. Of course, rounds and valuations increase in step, which results in much larger rounds.

This is good news. We want companies that are tackling the world’s largest problems to be well-funded and to be given the very best chance of achieving their goals.

Which technologies are you paying attention to right now? How will they play a role in addressing climate change?

Energy production is huge for us. The world needs to hit the 1.5C target set in the Paris Climate Agreement, and our assumption is that electricity demand will double over the next 15 years.

With all this in mind, we have prioritized fusion, small modular fission reactors (SMRs); green hydrogen, carbon capture and storage; and solutions for carbon offsetting.

It is worth mentioning that while renewable energy presents some interesting opportunities, these methods of production have the potential to generate the vast amount of electricity required in a way that is far cleaner than gas and coal.

Alongside energy production, we’ve also chosen to explore solutions to carbon offsetting: technology that supports accounting and verification of efforts to neutralize carbon output.

At present, many global companies are very serious about carbon offsetting, but a variety of different methods are used, and the actual impact of some of these offsetting methods is unclear. We need to work towards a standardized method of accounting for carbon offsetting, to ensure that all efforts are credible and trustworthy.

Electrification is a global trend in transportation, power generation, and elsewhere. What do you think the next big trend is in this space, and why?

Electrification has played a big part in our investment thesis. We have backed companies like Northvolt, Einride and Heart Aerospace, to name a few.

As we move towards widespread electrification of traditional fossil-fuel-dependent industries, we need to vastly improve electricity production and storage. There is very little point in driving an electric car if the electricity it uses was derived from fossil fuels.

Therefore, to optimize the impact of the exciting new opportunities in electrification, we need to work towards a better ‘electricity network’ at a larger scale, from production to storage.

Yes, we always consult closely with scientists before pursuing any investment. Each company is put through the same rigorous assessment process, which measures the impact made versus the UN SDG goals, and our own internal frameworks. Our intention is to achieve the most holistic view possible, including all externalities of the business model.

Throughout our due diligence process, we involve industry experts and academics to make the most informed decision possible. One thing we have found is that members of the broader climate research community are incredibly committed to their work, and this feeling of community and collective responsibility creates a phenomenal pool of open source knowledge.

The VC industry is sometimes accused of being on a timeline that’s too short to be an effective change-maker for climate change. How does your investment thesis reflect that?

We recognize that standard fund terms may be too short to see some technologies go from seed stage to global impact, but there are different routes to liquidity for investors in the impact tech market.

There are an increasing number of later-stage investors in the market that enable early investors and angels to realize their investment before an M&A opportunity or IPO is on the horizon. Therefore, both angels and more traditional funds are not ‘locked out’ from making good on their investment timelines, even if the company in which they are invested takes 20 years to realize its full potential.

Do all of the entrepreneurs you’re working with have a science background, or is this a vertical where a non-technical founder can build? Have you seen that shift over the past year?

We have definitely seen a shift recently, particularly in deep tech startups. In the past, we used to see a high number of purely ‘technical’ founders at deep tech companies, but now co-founding teams typically include expertise across business, finance, and marketing, in addition to tech and science.

This blend is far more appealing to investors, and is becoming more common. There has been a market-wide realization that adding more skill sets across the team makes deep tech more scalable, and therefore more investable.