You’ve probably heard of unicorns, and you may have heard of soonicorns. But have you heard of gigacorns?
Unlike its other more common cousins, the term “gigacorn” doesn’t refer to valuation. Instead, it tells us how well a startup can help fight carbon dioxide emissions, climate change and its implications.
According to venture capitalist Christian Hernandez, who coined the term, a gigacorn is a company that has managed to lower or sequester CO2 emissions by one gigaton per year while being commercially viable.
Hernandez describes himself as a gigacorn hunter, and he’s not hunting alone. The venture capital firm he co-founded, 2150 VC, counts among its limited partners Crédit Suisse, sovereign funds from Norway and Denmark and the venture arms of BMW and Toyota.
With $312 million to invest, 2150 VC’s goal is to find and fund future gigacorns in urban tech. “We think of our scope of investment as being the broad ‘urban stack,'” 2150’s partner and co-founder Jacob Bro told TechCrunch.
Some might feel this focus on urban tech is counterintuitive, but 2150 is taking the view that cities are here to stay.
Its scope is also broader than it may sound. This so-called urban stack covers “all the inputs and outputs and the operations of a city from the materials that we use, the proteins we consume, the energy that powers the city, to how we heat and cool our homes, how we move things around and keep citizens healthy, safe and secure,” Bro said.
“We need all hands on deck. No single solution will solve the climate crisis, and we need to back thousands of parallel bets.” Jacob Bro, 2150 partner and co-founder
2150 VC’s portfolio includes companies such as carbon accounting platform Normative and Leko Labs, a Luxembourg-based construction startup that’s developing sustainable wood-based building materials. It also has investments in firms focusing on biodiversity, cooling and energy efficiency for buildings.
To better understand where and why 2150 VC is betting, we spoke with Bro and Hernandez about impact investing, regulation and the growing number of funds dedicated to climate tech.
Editor’s note: This interview has been edited for length and clarity.
TC: Your thesis seems to be that countries won’t stop developing cities, and that the focus should be on mitigating the impact on climate caused by urban areas. Can you explain why you took this approach?
Jacob Bro: The founding partners of 2150 come from different backgrounds — from technology and real estate to corporate innovation and venture capital. We partnered around the same realization: that the urban environment consumes the vast majority of natural resources and generates 70% of greenhouse gasses.
Cities can’t be stopped. Urbanization is accelerating given the concentration of prosperity, education, healthcare and culture in cities. So we need to solve the “urban prosperity versus energy” paradox urgently.
Christian Hernandez: In the words of the UN Secretary General [António Guterres], ”Cities are where the climate battle will largely be won or lost.” We want to direct our capital and efforts to the hardest to abate sectors; those that can have the greatest impact.
Buildings and industry represent 60% of emissions, yet they received only a quarter of all private equity and VC funding. Decarbonizing concrete (8% of emissions) and steel (7%) is hard, but it’s critical. According to the International Energy Agency (IEA), over half of the technologies needed to achieve net-zero by 2050 are available today. So we are very much focused on identifying and scaling the most impactful ones.
We often talk about “carbon now” versus “carbon later,” meaning that the value of reducing carbon emissions at scale today — given the 25 gigatons we need to cut by 2030 — is much greater than the value of reducing carbon in 20 years.
Within climate tech as a whole, which verticals are you most bullish about?
Bro: Within the urban value chain, we rank the biggest problems and opportunities. We consider impactful areas, including cooling, window technologies, cement and concrete, alongside enabling technologies like carbon accounting.
You once wrote that “policy and regulation will make or break our investments.” Can you explain?
Hernandez: Policy is an important component of the work that we do, which is why we recently brought on board Christopher Burghardt, an experienced climate tech entrepreneur who has served as head of policy for the likes of First Solar and Uber.
Regulation and policy play a key role in accelerating (or inhibiting) the deployment of the technologies that we back. As an example, New York state passed the Low Embodied Carbon Concrete Leadership Act (LECCLA), which mandates a lower carbon footprint in concrete poured for state-funded projects to accelerate adoption of lower carbon cement and concrete.
On the other side of the Atlantic, each European country has its own processes and regulations for the testing and approval of cement mixes, which can take six to eight months and inhibits the adoption of new technologies.
Bro: The EU has built up enormous pressure on the financial sector with its Sustainable Financial Disclosure Regulation (SFDR) and is currently raising the pressure on non-financial sectors as well. This is a game-changer in many ways that people have been waking up to in the last couple of years.
Frustratingly, there is still way too much friction and inertia at the national and local policy levels. We just don’t have time for populist debates about saving a few hundred jobs on a cement plant here or a handful of mining jobs there. So far, only five countries in Europe have or are about to introduce requirements for embodied carbon in buildings, and the targets are not ambitious enough.
We’re now seeing more funds dedicated to climate tech than just a few years ago. How do you feel about that?
Hernandez: McKinsey estimates that the total cost of the transition to net-zero will amount to $275 trillion between 2021 and 2050. This will clearly not only be funded by VC but will also require later-stage capital, which has now come into play with TPG, EQT, General Atlantic and others all raising billions of dollars for sustainability in the past two years.
It will require trillions of dollars in infrastructure, and a whole new financial industry around carbon offsets. All of this is now coming into play.
Bro: The climate tech space is amazingly collaborative, and we have been pleased to partner with like-minded peers at Breakthrough Energy Ventures, Lowercarbon Capital, Energy Impact Partners, ETF Partners and others. We are also seeing generalist funds actively come into the space.
We need all hands on deck. No single solution will solve the climate crisis, and we need to back thousands of parallel bets. We open source and share our research deep dives openly with other investors to help educate them on the challenges and possible technological solutions, and other climate funds do so as well.
But the private sector cannot do this alone; governments need to step up their game. Like many great achievements of science and engineering in the past, we need funding for research, innovation and deployment at infrastructure scale alongside regulatory frameworks that supercharge adoption.
Do you encourage your portfolio companies to make their technologies available to emerging countries?
Hernandez: As we highlighted in our recent deep dive on concrete, over the next 30 years, the new megacities of the world will be built in China, India, Southeast Asia and Africa. This is where millions of tonnes of concrete will be poured and used.
As mentioned in our cooling deep dive, as heat waves rage across the Indian subcontinent, air conditioning will be needed not just for comfort, but to survive, and the current energy-inefficient architecture of AC units will only make the problem worse. So, yes, we must accelerate the deployment of climate technologies across the Global South.
Our thesis is that Europe and North America will be early adopters of these technologies due to customer choice and regulation, and that our adoption will accelerate the price-cost curve for these solutions so that they can achieve price-parity and achieve wider adoption worldwide.
Bro: The paradox between prosperity and energy consumption is by far the biggest in emerging economies. Net-zero is ultimately a means to an end; it’s about creating a better life for as many people in the future, and therefore we absolutely need sustainable solutions to scale globally.
The only way to achieve this is to make alternative products that are better and cheaper, that don’t destroy nature so they can outcompete the ones that do.
Do you pay attention to university spinouts?
Bro: We actively engage with universities. As an example, we are an affiliate of Princeton’s Andlinger Center for Energy and the Environment, and often speak to specialists when evaluating an investment.
We also have a Ph.D. in chemistry and a Ph.D. in microbiology in the broader team. So, yes, access to the university ecosystem and emerging technologies is important, but most of our investments are done at Series A and B.
What is one unconventional quality you look for in entrepreneurs?
Hernandez: I always say that the best entrepreneur is one with a maniacal delusion that their idea will succeed, the technical and business acumen to make sure it does and the humility to know that they cannot do it alone.
Bro: A great founding team is exactly that — a team. It’s rarely a single person and rarely a very conventional bunch. That team must be able to both suspend your disbelief and have the conviction and magnetism to attract talent and capital to the mission.
The group has to possess the grit and adaptability to always find their way and not lose sight of the goal while sticking to first principles. It’s pretty extraordinary when it happens.
Is it okay for entrepreneurs to cold email you, or do you prefer warm introductions?
Bro: Of course! We want to speak to as many mission-aligned entrepreneurs as possible keeping in mind our remit of the urban stack and our core focus at Series A and B (although we have pursued seed and later-stage investments occasionally). Please email us at dealflow@2150.vc.