It’s 7:30 in the morning, and Tom Chi is in a philosophical mood. Maybe it’s because he was once an astrophysicist, a profession prone to thinking expansively. Maybe it’s because his mother is a Buddhist. Or maybe it’s because his three-year-old venture capital firm just raised $375 million.
“Sometimes I say that I typically think in only two time frames: right around now — like now, the next two weeks — and 1,000 years from now. It’s actually not that uncommon for me to wake up and try to understand the dynamics of something. The 1,000-year perspective is interesting because a lot of things are unstable in a way that they couldn’t last 1,000 years,” Chi told me.
“The idea that everything is impermanent is just part of the way I see everything.”
When I mention that most venture capitalists tend to think five to 10 years out, a relative middle ground compared with two weeks and 1,000 years, he counters: “A person that is comfortable with impermanence is actually in a pretty good spot for venture capital.”
He’s certainly not wrong about that. Venture capital has had its ups and downs, and climate tech has had a few, too. It first rose as clean tech in the mid-2000s before collapsing and slogging through a wintery 2010s before. Five years ago, it hit its stride once more.
Chi’s firm, At One Ventures, where he’s co-founder and general partner, is emblematic of climate tech’s most recent incarnation. He filed the firm’s initial paperwork with the SEC on December 23, 2019, mere months before COVID upended the global economy and sent people into lockdown where they rethought their lives and, in some cases, founded climate tech companies. It also didn’t hurt that venture dollars were flowing at record levels up through 2021.
At One rode the two waves, investing in 27 companies, Chi said, and deploying just over half the capital in its $150 million initial fund, according to PitchBook data. Its bets span the gamut of climate tech, from practical startups — like renewable microgrid developer Okra Solar and battery recycler Ascend Elements — to the slightly zany, like de-extinction biotech Colossal Laboratories.
But Chi said that the first fund was just a prelude. The firm’s founding partners felt that $150 million was a reasonable target to get off the ground, he said, but that the team felt more comfortable operating funds in the $250 million to $350 million range. “I have a really good sense of what that portfolio theory is like and how to operate something like that.”
At One had targeted $250 million to $300 million for the second fund but ended up raising $375 million. Chi said investors were attracted to the firm’s focus on startups with strong revenue potential in the first fund. Only 20% of the portfolio companies had any revenue when At One invested, but “now 85% of fund one is in revenue,” Chi said.
A focus on revenue is just one part of At One’s approach. The firm judges startups on three fronts that it calls “the triad”: Does it work on deep tech that’s sufficiently disruptive? Are the unit economics “radically better” than the incumbents? And does it make a significant dent in an environmental problem?
Unit economics are something that clearly captures Chi’s imagination. “If you can find unit economics that are that good, and you’ve hired the kind of team that can get that over the manufacturing journey, then you are able to get into a supply limited state,” he said. “Which sounds terrible because, aren’t you leaving money on the table? No, supply limit is amazing because it means that you can grow the revenue in the business as quickly as you can address the supply side issue. And addressing supply side issues is only a debt level risk.”
Chi said At One also has a ranking system to determine which sectors to focus on. “Nature is air, water, soil and biodiversity. Within each of those four categories, we have stack-ranked the industries that are doing the most damage. So for example, within water pollution, the four biggest water polluters are agriculture, textiles, paper and pulp, and oil and gas. If all you did was deal with those four, you could deal with 93% of global water pollution. If you want to deal with the last 7%, it’s 1,000 more industries.”
The firm also pointed out that 40% of its portfolio company founders are part of groups traditionally underrepresented in the startup world, including women and people of color. That certainly outstrips industry norms — women received less than 2% of funding last year and Black founders just 1% — but it also highlights just how dismal things are when having “only” 60% white male founders is notable. Perhaps this new fund will make even more progress on that front.
It’ll certainly have ample assets to deploy when searching for those founders. The fact that At One Ventures was able to raise a new fund that’s 2.5x larger than its first one doesn’t just suggest that LPs are happy with the firm’s performance to date; they’re also extremely bullish on climate tech in general. Other firms have had similar success this year.
Part of that is due to climate tech’s track record in recent years. After a rocky start in the 2000s and early 2010s, the industry got religion and realized that the green premium wasn’t the lever that would upend the economy. Instead, companies had to work within global markets as they were. Yes, some policy tweaks and subsidies helped along the way, but climate tech’s relentless focus on unit economics — mostly in wind, solar and, more recently, EVs — helped show that climate-friendly technologies could be better and cheaper, too.
At One has found that thread and is working to apply it to venture investing. In the past, the timelines were too long to work for traditional venture capital, with returns extending well past the usual five to 10 years.
But the world has changed since then, and it appears LPs are starting to catch up. Perhaps they’re more patient with their capital. Perhaps they’re worried about the state of the world. Perhaps they’re starting to see the enormous opportunity ahead of them. Probably it’s a mix of all three. Whatever the case, we’ll need more of them if we’re to avoid the worst of the climate crisis, but at least the trends are heading in the right direction.