A decade after the bubble burst, 5 climate tech investors explain why they’re all in

Climate tech has been one of the biggest successes of the last few years. By 2025, investors are expected to sink $1.5 trillion to $2 trillion annually into a wide range of startups that promise to upend everything from travel and commuting to agriculture, construction and more. Oh, and they’ll either trim carbon emissions or remove carbon dioxide from the atmosphere in the process, all while turning a profit.

Many investors — and companies — have been here before. A decade ago, the clean tech boom went bust. The recession lingered longer than many expected, natural gas prices plummeted as fracking boosted supplies, and demand for many clean tech startups’ products didn’t materialize. Some companies folded; others were sold at a loss. Investors generally didn’t fare well.

But that didn’t dissuade everyone. The Paris Climate Agreement in 2015 showed that governments, which had driven much of the clean tech boom and then sped its decline by withdrawing support, hadn’t entirely turned their backs on the problem. Some investors stuck with it, too, knowing that some of the bets would pay off even in the absence of public incentives.

And some of those bets have paid off, indeed. Battery technology startups, many of which were founded from the ashes of previous failures, have become investor darlings, feeding an industry that’s worth $40 billion today and growing 18% per year. They’ve solved some of the big scientific and engineering challenges, and their path toward commercialization is clearer than ever before.


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Not every company is going to succeed at hitting its targets, though. The recent downturn will only make it harder for those on the brink to hold on. “There’s a belief that countries and companies only care about climate when things are good,” said Christian Garcia, partner at Breakthrough Energy Ventures.

Still, climate change isn’t slowing down, which might make things different this time around. “Like all things, climate is cyclical — but it’s on a geologic cycle. The climate doesn’t stop changing just because of a recession. That means the need for solutions will only grow,” said Andrew Beebe, managing director at Obvious Ventures.

“No sector in the startup world can be recession-proof,” said Rajesh Swaminathan, venture partner at Khosla Ventures. “That said, there is now a strong sense of urgency around climate risks.”

Pae Wu, general partner at SOSV and CTO at IndieBio, agrees: “With a downturn comes a more choosy market, so new entrants will have to meet a very high bar, but this will come precisely at a time when we need every solution we can get our hands on to address the scale of this problem.”

So do they lean more bullish or bearish regarding the next few years? What’s a climate tech founder to do when faced with narrowing climate timelines and potentially tight funding rounds? We asked some of the leading investors in the space to share their perspectives on the sector and what founders can do to make it through the lean times.

We spoke with:


Given the scope of the climate challenge and governments’ efforts to tackle the problem, is climate tech recession-proof, or is it as vulnerable to market forces as something like SaaS?

Pae Wu: U.S. political will on this front is limited, so it will be incumbent upon the private sector to keep momentum and development aloft as U.S. politics swings again. Corporate pressure to act may help exert influence on the government to continue its efforts as well, especially in R&D. It might just be called something different, like food security, energy independence or supply-chain resilience.

I suspect the EU’s commitments are more resilient and, coupled with their willingness to bring regulation to drive innovations, I expect to see continued developments in climate tech.

With a downturn comes a more choosy market, so new entrants will have to meet a very high bar, but this will come precisely at a time when we need every solution we can get our hands on to address the scale of this problem.

“Everyone needs to get out of the lab. It’s time to prove. It’s time to show your tech works.” Andrew Beebe, MD, Obvious Ventures

Amy Burr: The pandemic has been a really challenging time for all sectors, but climate tech investments did not slow down due to its importance both at the individual level and at the corporate responsibility level. Because of this, I would expect that the sector continues to stay immune during a more severe economic downturn.

Christian Garcia: I would say it’s just as vulnerable, if not more vulnerable to recession. There’s a belief that countries and companies only care about climate when things are good. Financial market headwinds certainly affect climate investing overall, and as tech is the bellwether for risk capital, headwinds definitely flow down to other sectors.

Rajesh Swaminathan: No sector in the startup world can be recession-proof, as the source of capital from LPs slows down if the public equity markets take a hit over a long time. We do need to be more mindful about how we deploy the right capital into climate tech in this environment. We should also use what we learned from clean tech 1.0.

That said, there is now a strong sense of urgency around climate risks. Climate tech is getting commitments from LPs, governments, family offices, asset management firms and corporates, with many new VC funds coming to the market over the last year.

The sector, except for solar and maybe lithium-ion batteries, is still early and is in a different league compared to SaaS, which had tremendous runs in valuations in both public and private markets over the past decade.

The solutions we need to deploy, the pace at which we need to move, the wide range of technologies we need to de-risk and the “instigators” we need to support all provide compelling tailwinds for climate investments despite the broader market challenges.

Andrew Beebe: Like all things, climate is cyclical — but it’s on a geologic cycle. The climate doesn’t stop changing just because of a recession. That means the need for solutions will only grow.

That said, we expect valuations to come down from 2021 highs, and we expect some of the more fantastical reaches of tech won’t make it through the trough. So while the demand will continue, there will of course be casualties.

Many investors are advising their companies to conserve cash, slow hiring and so on. What are you telling your climate tech portfolio companies at this time?

Pae Wu: Focus on being a sustainable business — get to fundamentals. you can’t buy your way to scale right now. Capex efficiency is increasingly on our minds and green premiums simply aren’t on the table.

Amy Burr: Most of our sustainable portfolio companies have recently raised significant rounds and are in great shape or are raising now. That said, everybody is conscious of the potential for an economic downturn and what that might mean for their individual businesses. All startups are smart to make sure they are making wise choices with their money.

Christian Garcia: It’s important for companies to be able to survive this downturn, and so preserving cash will be important. As such, we have guided companies to extend runway as much as possible without sacrificing major milestones. That said, in “hard tech,” you can’t easily make cuts without sacrificing technical progress and milestones. It is important to prove commercial viability and be able to finance your road map.

Rajesh Swaminathan: One size doesn’t fit all — climate tech companies are different from most other VC investments in some ways. We focus on multiple key areas with our founders.

  1. Many climate tech companies are not at a stage where you can discuss metrics like ARR, CAC, profitability and revenue multiples that you would target in a SaaS firm. Instead, we focus on the highest-risk items that drive performance validation of the technology and cost reduction and de-prioritize less critical items.
  2. If some capex or minimum viable product-related spending is needed to achieve critical technical de-risking milestones, then spend that money wisely rather than waiting it out. Get the right counsel on where to cut and where to stick to.
  3. Focus on the right investors at reasonable valuations versus chasing valuations with less committed climate investors. One of the reasons clean tech 1.0 failed was because most investors headed to the doors when things slowed down. We did stay through and invested during a decade-long gap in climate tech investments.
  4. We have seen many overnight successes and exits in climate tech — these were 10 to 15 years in the making. We have seen a handful of others who stayed the course and committed to climate tech. It is valuable to tap into what we learned from those 15 years of successes and failures.
  5. I also recommend that if you are raising a Series A, bring in those that can also come into a Series B with a reasonable check size so you have a safety cushion if things go a bit south either in the market or with your milestones.
  6. Tap into other value-add partners like DOEs, bank loans, helpful corporate VCs, etc.
  7. Slowdowns are often a good time to attract top talent. Many leaders in other established businesses or industries are looking to make an impact in climate — tap them if their commercialization or scale-up experience can be relevant/valuable for your company. Do make sure they have a “fire in the belly” to scale up a startup.
  8. Focus on a few customers who are committed to deploying your solution. Iterate quickly (fail fast, learn quick) based on their feedback. The quality of your beachhead customer/partner matters rather than quantity. Some corporations can be excellent partners and some can just drag you forever in their climate tech greenwashing journey — know how to differentiate between the two.

Most importantly, do not lose sight of the urgency we need to address the climate challenge. A few tactics should change to get through a downturn, but the vision and the focus on the larger problem should not. Having the right investors, top-notch talent and advisers you can trust makes a big difference. As we say at Khosla, “The team you hire is the company you build.”

Andrew Beebe: Everyone needs to get out of the lab. It’s time to prove. It’s time to show your tech works. If you can do that on the current raise, you’ve got a real shot of breaking out. If you can’t, you need to hope we’re all wrong about how bad things might get.

How long will it be before climate-friendly agtech startups start to show financial returns? How long before they start reducing carbon at scale?

Andrew Beebe: It needs to be in the next 12 to 18 months. Capital will start to feel a lot less patient in the coming two years. Luckily, I think there are many solutions that are showing efficacy now — like Pivot Bio, Pachama or Toucan.

Christian Garcia: Very difficult to know. I think it’s always case-specific. We have a company, Pivot Bio, that we believe can start reducing carbon emissions on millions of acres within the next few years.

Which emerging climate techs, such as direct air capture or hydrogen-powered industrial processes, have the biggest potential for impact in the next 10 years? What are three climate techs that you see widespread by 2030?

Pae Wu: Process-oriented technologies, like supplanting energy-intensive chemical production with scaled biology or electrically enhanced processes, will alter energy dynamics of heavy industry in the next 10 years.

2030 isn’t very far, so widespread adoption of what some may call bridge technologies is where I see real change coming. So many of our problems come down to human-level issues limiting implementation and a basic fear of change, so our disruptions need to keep chipping away at that fear of change.

What does that look like? Things like emissions-free, drop-in replacements for petrochemicals and materials for the built environment that are not dependent on a green premium. Some of these are far enough along to potentially make a run at petroleum.

Arguably, electric vehicles should be the easy answer to “widespread” by 2030. But look, this is still a huge problem that touches every facet of our lives, and 2030 is only eight years away. In 2014, Hong Kong pro-democracy protests were raging, Moderna was creating a vaccine for Ebola, and Russia annexed Crimea and ratcheted up threats to Ukraine.

Not much changes in eight years. In 2030, the U.S. will have exceeded expectations if even 15% of our light-duty vehicles on the road are electric by then — 15% is tiny.

I sound very gloom and doom, but all I’m saying is it’s all hands on deck, and we need lots of solutions to hit at this from all sides. There won’t be a silver bullet, and if we investors are lucky/smart, we’ll get a whole bunch of climate tech Googles and Amazons — name your favorite giant disruptor — to bring to market while also successfully staving off the worst of climate change. We need everyone to be a winner.

Amy Burr: Hydrogen- and electric-powered technologies focused on logistics will be very relevant within the next 10 years. For example, our portfolio company Universal Hydrogen is building a green hydrogen fueling network and delivery method to implement hydrogen-based aviation now, without the need for expensive federal infrastructure that could take decades to build and implement.

Direct air capture to fuel production is also a very compelling use case for us, and our recent investment, Air Company, has begun to experiment with this technology in its production of alcohol, perfume and more.

Christian Garcia: I would bet on industrial hydrogen. Decarbonizing industrial heat and industrial processes is difficult, but hydrogen is probably the best path for that, and we think hydrogen production will get cheaper to enable that. Direct air capture has a lot more risk to it, so I would say that’s more a 2035+ target.

By 2030, electrification of light-duty and heavier-duty transport is the one thing I see as most likely to be widespread.

Rajesh Swaminathan: Carbon capture has a large opportunity. Fortera, our cement company that actually absorbs CO2, and a few other ideas we have seeded to permanently capture carbon, will make a big dent as the need to reduce the existing carbon in the atmosphere is very high. We are actively looking for more “instigators” in this area.

Green hydrogen will be critical for decarbonizing many industries (e.g., steel). We believe we have a winning solution with Verdagy, a company that we seeded two years ago and has since attracted top investors. Their ability to tap into dynamic pricing with a large area system and high current densities would make green hydrogen economical within 2024 (and deploying 100 MW systems), versus 2030 targeted by most others.

In sustainable and cheaper electrification, we have invested in an ecosystem of companies (some stealth) that will provide very high-energy-density batteries at low costs, extend the life of batteries significantly and enable direct recycling of batteries.

Sustainable and cleaner mining approaches are another area that could accelerate wider adoption. Together, these will ensure electrification accelerates faster and in a sustainable way.

We also see many opportunities like Impossible Foods (reducing methane emissions, animal husbandry and land use), Lanzatech (sustainable fuels), Mighty Buildings (construction) and Quantumscape (solid-state batteries) — all of which will have a big impact over the next decade.

Andrew Beebe: Nature-based carbon capture (Project Vesta, Agreena, etc.), decarbonization of industrial processes (Boston Metal, Kula Bio, Sublime), and flying cars, naturally (Lilium).

Many governments are becoming increasingly aggressive with their climate policies. How is that changing the way you evaluate potential deals, and how are you pivoting to match this new environment?

Pae Wu: It’s not changing how we think about our deals. It colors the discussion, but I am interested in companies that are durable and solving a problem, and not necessarily reliant on regulation to have a sustainable business model.

The fundamentals are still the same: solve a problem, get to market, and if a regulatory framework greases the skids for one market over another, then great.

Amy Burr: The Federal Aviation Administration (FAA) is the largest governing body in aviation and is working with companies like Joby Aviation to make sure there is a path forward to electrification and more.

As investors, we have a healthy mix of near-term investments that can help us move the needle on sustainability within the next few years, as well as longer-term technologies that can impact the industry in the next 20 years. It takes a very measured approach to meet these various regulatory requirements. A firm like ours has to consider the checks and balances of investing in a new sustainable technology to ensure that we meet each new phase of regulations.

Christian Garcia: We still believe that climate tech needs to be either cheaper or better or both. That said, government efforts and corporate efforts have extended the demand for green premium products, so it is certainly helpful.

Rajesh Swaminathan: Innovation can come from anywhere, and the impact/need for these companies is global. Government policies are critical, but they come and go, as we saw with clean tech 1.0, and are also subject to changes in the political landscape.

Building companies takes seven to 10 years, if not more. We have continued to invest in clean tech over the last 15 years when there was hardly any positive market signal. We are energized by some of the positive climate policies coming in (these are good but not sufficient), and look to help our portfolio companies understand and tap into many of these opportunities.

Andrew Beebe: Not changing. We knew this would happen, and the regulatory climate will only continue to work in our favor. We have no choice, so it’s not a matter of if the regulation comes — just when. We’ll be there with solutions as it does.

How will rising interest rates affect startups that rely on inexpensive capital for deployment (e.g., wind, solar, nuclear)?

Amy Burr: Startups that require low-interest debt should start thinking through the plan for the next few years now before it’s too late. Maybe startups should focus less on government or venture debt and instead should be considering equity rounds.

Christian Garcia: Growth will slow across all assets.

Rajesh Swaminathan: It is always helpful to have multiple levers we can work around — if one hurts (e.g., high-interest rate), we are able to tap into other levers. Government policies related to climate is one such helpful lever — the $8 billion announced by the DOE for hydrogen hubs is providing much-needed capital for industrial decarbonization. These initiatives also send a positive signal to hydrogen installations being planned in the near term.

Andrew Beebe: Not helpful for very new tech (cold fusion). For wind, solar, geothermal or batteries, it’s not a big deal since it’s relative. Do I build a new capex-heavy gas plant or do I build a capex-heavy wind farm? That wind farm will have a (relatively) lower cost of capital for sure.

Aging electrical grids seem ripe for reinvention. Why aren’t we seeing more startups in that space? Which emerging climate technology interests you the most/has the greatest untapped potential?

Pae Wu: Grids are a common good, so changing them is very hard. Doesn’t mean we shouldn’t try. Combining a real technological innovation with a business model that would succeed in the face of the trillions of dollars it would cost to redo the grid or build a new grid in the U.S. is probably the moonshot we really need.

Short answer — I don’t know.

I’m looking for climate technologies that can address big problems in transport and logistics, chemicals, natural resources and water. Oh, and the grid.

Amy Burr: While we don’t invest in the electrical grid, this mindset is very similar to how we approach sustainable aviation fuel (SAF). SAF companies that can have immediate impact are important to focus on now, but we also need to invest in the next SAF technologies so that SAF availability grows and it can continue to be seen as a viable fuel source.

In addition to more traditional SAF production methods, direct air capture startups can enable new sustainable aviation fuels by pulling CO2 from other processes and repurposing it.

Christian Garcia: The grid is challenging because the primary customer/industry participants are regulated. PUCs are slow to move. Distributed grid infrastructure, wildfire management and high-temperature superconductor transmission lines are just a few areas we are interested in.

Rajesh Swaminathan: This is certainly an important area for innovation. Historically, many founders had focused on generation and storage. Now, there is more focus on H2, agtech, DAC and industrial decarbonization. But the smart grid is seeing interesting innovations in T&D, HTS cables, grid electrification, power electronics and many others. Better policy initiatives and less risk-averse signaling from utilities would be a great help.

Andrew Beebe: Have you ever tried to sell to a utility? There is great tech available with things like DC high-voltage lines, DERMS, etc, but utilities (and governments regulating them) are slooooow.

What would need to change at the government level in terms of legislation or regulation to prompt you to invest even more in climate tech?

Pae Wu: We don’t invest because there is legislation or regulation — we invest because it’s imperative for these solutions to exist. One of SOSV’s earliest decarbonizing investments was back in 2009 — a mobility play that is now Jump Bikes.

We’ve been doing this before it was hot, and we’ve done so across diverse sectors — animal ag with Perfect Day and Not Co and Upside Foods; HVAC with Flair; large-scale transport with Neptune Robots and Aeromutable; emissions-free nylon with Ozone Bio; fashion with Mycoworks and Algiknit; petrochemicals with Capra.

Amy Burr: Government regulation to keep these types of technologies affordable would better encourage airlines to use sustainable aviation fuels or alternative propulsion methods. For example, President Biden’s “Build Back Better” initiative proposed a sustainable aviation fuel tax credit to help cut costs and rapidly scale domestic production of sustainable fuels for aviation.

We need to see more legislation like this to enact change, or the cost will continue to be a barrier to entry for many major travel providers.

Christian Garcia: We don’t really change how we view this landscape based on governments. Governments, frankly, can be fickle. When we started BEV, within months the U.S. pulled out of the Paris Climate Agreement and began defunding climate R&D. Today’s is a better policy environment, but it’s also fickle.

Rajesh Swaminathan: Many things need to be accomplished — a larger infrastructure investment commitment, adoption of green premiums so renewable energy can be competitive with the subsidized fossil industry, better tax incentives for renewables, continuing ARPA-E/DOE fundings executed at a faster pace, etc.

The government should also make an effort to not lose American competitiveness in climate tech. I have seen too many technologies and industries developed in the U.S. move to Asia or China because we did not do a good enough job of nurturing, scaling, protecting and helping them win big in a sustainable way.

While I was at Bell labs (Lucent), no one thought Huawei would disrupt telecom. I have seen many such examples in the semiconductor industry and clean tech (solar, lithium-ion batteries). At one point, there were almost 200 solar companies with many innovative ideas, but today, a handful in Asia are driving most of the growth. The story is similar with lithium-ion batteries.

While climate tech is a global challenge and solutions need to be scaled across the world, it is an important industry that should not just go away from the U.S. This is extremely critical to drive job growth in the U.S. and attract capital to these industries in the long run. It is also important to have manufacturing excel in the U.S. so we are not left stranded when the geopolitics changes and hits the supply chain around these technologies in a few years.

Andrew Beebe: We’re all in. We love the government support, but we don’t wait for it. That said, true mandatory carbon trading systems would help. SEC disclosure regulations will help when finalized. More long-term subsidies (like the EV tax credit) will always help. None of this is necessary, but none will be turned down.

What will be the safe climate tech investment in Q3 2022?

Amy Burr: All investment requires some risk-taking, as you are funding future development. There is no truly safe climate tech investment.

Rajesh Swaminathan: If we play too safe, we will only be doing incremental innovations and not try hard enough to change the world.

Investing at a later stage in Impossible Foods, which addresses climate change in a major way, may be considered a safe investment today, but it was not a “safe investment” when Khosla Ventures seeded it a decade ago. So, from a technology perspective, we don’t want to do “safe” early-stage investments.

You can see “safe” investments on the later stage/deployment side of things. Solar is pretty much de-risked at this point. Helping grid storage attain a scale similar to solar is perhaps a safer bet today for relatively shorter-duration storage opportunities.

There is innovation needed even in the grid storage area if you want to address longer-duration storage.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

Pae Wu: Hit me up!

Amy Burr: Many of our portfolio companies are referred to us by other investors or come through the interest form on our website.

I’m looking for startups that solve big problems in travel in really creative ways. JTV has five investment themes to serve as a guide: the seamless customer-centric journey; reimagining the accommodation experience; next-generation aviation operations and enterprise tech; distribution, loyalty, and revenue management; and sustainable travel.

Beyond the big picture, I’m looking for companies with a great story and a great team. No 30-slide presentations, please!

Christian Garcia: Network referrals are the best way to receive a pitch. What matters most are passion, articulation of the problem you’re going after and why you’re the best to solve it.

Rajesh Swaminathan: You can apply through our website. Feel free to reach out to me on my LinkedIn or email.

Andrew Beebe: Know your audience. Make sure we are at the right stage (Series A or seed), make sure we’re interested in your space (see our website), and make sure that we aren’t invested in something directly competitive. Send us a deck ahead of time.