For more than 25 years, ecologists have been desperately trying to prove the economic worth of the world’s ecosystems, hoping that a markets-based approach would slow the destruction of the natural world. Forests, the world’s largest terrestrial ecosystem, have played a central role in that. People have long valued them for their lumber and the animals they harbor. Now scientists are asking the world to value them for more than that.
The approach has had mixed results. Forests have been protected or restored to varying degrees to prevent flooding, capture and store carbon, halt the spread of deserts, and preserve biodiversity. And yet, every year, people continue to cut down an area the size of Kentucky.
Recently, though, a fresh crop of startups has emerged to combat the trend. Their founders have been driven by everything from firsthand experience with record-breaking wildfires to a desire to see their favorite ecosystems live past the end of the century. Along with them, a handful of investors have embraced the challenge.
The market has significant potential. Globally, forests are worth as much as $150 trillion, according to the Boston Consulting Group. Still, for companies working in the sector, finding profitable ways to conserve forests remains an uphill struggle.
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“Forests suffer from the classic tragedy of the commons,” said Bill Clerico, founder and managing partner of Convective Capital. “So many of the benefits they provide are shared by all of us and are hard to directly quantify.”
Still, Clerico and other investors think that’s left the door open to new approaches. Much of the interest in forests over the last decade has centered around carbon credits. To offer those credits, forests that are conserved or restored need to be assessed and monitored to ensure that the forest remains intact and sequesters carbon at the anticipated rate. It’s a laborious and time-intensive task using existing methods, and in some cases, that data hasn’t been reliable.
Boosting the use of technology in legacy industries is a proven playbook for venture capitalists, in part because gains are easier to attain early in the adoption curve. “Given the enormous amounts of acreage and labor involved, technology has the promise to help make forestry far more efficient than ever before,” Clerico said.
“Data quality is the biggest hurdle in valuing forests for biodiversity, air quality and carbon sequestration,” said Duncan Turner, general partner at SOSV and managing director at HAX. “The high-fidelity ground truth data being collected from the newest crop of forestry startups is going to enable forest growth monitoring and projections at a quality and level that was previously unachievable for cost reasons.”
Still, many startups today depend on a robust and trustworthy market for carbon credits. “We are very worried about carbon scams creating a negative impact on the markets,” Turner said.
Even if those markets are able to stabilize and grow, they still pale in comparison to the forests’ economic value derived from other uses like lumber and conversion to farmland. “So far, all business models look at forests as assets or a harbor for assets. We ‘mine’ forests,” said Hampus Jakobsson, general partner and co-founder at Pale Blue Dot. “The issue is that at the same time, we need them for sequestration.”
The hope is that improving data quality and cost-effective monitoring will help increase the value of a conserved or restored forest, helping to offset the advantage that other uses provide. The shift couldn’t be more timely.
“Forestry tech is at an inflection point right now,” said Maren Bannon, founding partner at January Ventures. “As the planet heats up, the need for technology applied to forest conservation is becoming more pressing than ever.”
- Maren Bannon, founding partner, January Ventures
- Bill Clerico, founder and managing partner, Convective Capital
- Duncan Turner, general partner at SOSV, and managing director at HAX
- Joshua Posamentier, co-founder and managing partner, Congruent Ventures
- Hampus Jakobsson, co-founder and general partner, Pale Blue Dot
Maren Bannon, founding partner, January Ventures
What is your investment thesis for forest conservation and management tech in 2024?
The forest conservation tech space has suffered challenges related to validating and providing accurate data. Although you could view this as a red flag, I see it as an opportunity. We’ve been investing in forest tech for the last few years and think teams that can address the need for accurate, trustworthy data will be the winners.
I think forestry tech is at an inflection point right now. As the planet heats up, the need for technology applied to forest conservation is becoming more pressing than ever. The devastation due to forest fires across the globe, from California to Canada to Greece, puts the problem front and center and makes it harder for all of us to ignore. At the same time as the problem has intensified, advances in artificial intelligence, machine learning, cameras, drones and 5G connectivity are enabling innovative, step-change solutions to be built.
Which startups do you think are the most interesting in the space today? Which show the most promise for long-term growth?
We have invested in two startups that are quickly becoming leaders in the forestry tech space.
Treefera is an AI platform that delivers data on trees for financial institutions, landowners, carbon analysts, governments and NGOs.
Pano AI offers a solution for wildfire detection using AI to help identify and extinguish new fires before they become a threat. Harnessing the latest developments in cameras, 5G connectivity and AI, Pano provides real-time intelligence to coordinate rapid response to wildfires before they escalate. Its customers include utility companies, government agencies and insurance companies.
How well do the economics of forest conservation and management tech scale?
While governments and nonprofits play an important role in restoring biodiversity and fighting climate change, there are also massive opportunities for commercial solutions to restore and protect forests. Forestry tech startups need to create products that customers urgently need, and just as importantly, have the budget to pay for.
People have been trying to use market economics to conserve forests for decades with limited success. Why is it different this time?
A confluence of factors makes this the right time: the warming planet, regulatory changes and recent advances in AI. As AI makes it possible to ingest and analyze large datasets, it enables forest conservation tech products to be deployed at scale.
What are your views on marketplaces for carbon credits derived from conserved forests and/or restored forests?
Marketplaces for carbon credits can only be successful if the underlying assets are verified. Unverified credits lack accuracy and trust, thus driving opaqueness and price disparities in the market.
We’ve spent over a century suppressing wildfire. There’s a lot of infrastructure, resources, and inertia behind the current approach. When do you think that can change?
When combating the wildfire epidemic, we need to look earlier than just suppression and instead focus on prevention of the root causes of wildfires.
Bill Clerico, founder and managing partner, Convective Capital
What is your investment thesis for forest conservation and management tech in 2024?
Convective Capital is focused on technologies that can impact our wildfire crisis. One of the most critical jobs to be done in wildfire mitigation is forest management — essentially undoing the last century of harmful management practices and the interruption of the natural wildfire cycle. Driven by the wildfire crisis and record levels of funding in the Inflation Reduction Act and Bipartisan Infrastructure Bill, there is a renaissance happening in the ways we think about forestry.
Which startups do you think are the most interesting in the space today? Which show the most promise for long-term growth?
BurnBot uses robotics and AI to scale forest management and fuel treatment. The company has strong commercial traction with utilities and the U.S. Forest Service, and an experienced second-time founder.
Instinct Environmental makes forest sensor technologies built for collecting data in remote environments.
How well do the economics of forest conservation and management tech scale?
Given the enormous amounts of acreage and labor involved, technology has the promise to help make forestry far more efficient than ever before. Humans will have a huge role to play in this, but technology can help them work more efficiently with better visibility, planning, and reducing time wasted on low-value work.
People have been trying to use market economics to conserve forests for decades with limited success. Why is it different this time?
With the rise in wildfire to record levels (17 of the 20 largest wildfires in California history have happened in the last two decades, for example), the need for forest conservation and management is now at the forefront of priorities for governments, landowners, utilities and insurance companies.
There is a split between companies focused on forest restoration and those concerned with wildfire management. Which do you favor and why?
I don’t see a split here. Most scientists agree that fire is a natural part of the landscape in many parts of the world, and that healthy forests are more fire-resilient. Achieving healthy forests sometimes requires mechanical thinning and logging, which must be done properly and with conservation in mind — but if done so, can be a healthy activity for the ecosystem.
What are your views on marketplaces for carbon credits derived from conserved forests and/or restored forests?
Trees are one of the largest, cheapest and most effective carbon sinks on the planet, and it is hard to see a reduced-emissions future without them playing a key role. That said, there has been abuse of carbon credits in this space, and it’s hard to ensure that forest carbon absorption is truly incremental to baseline emissions. There’s a big opportunity for someone to restore trust to this market with high-quality credits.
We’ve spent over a century suppressing wildfire. There’s a lot of infrastructure, resources, and inertia behind the current approach. When do you think that can change?
The megafires of the last 10 years have shown that the policies of blanket suppression no longer work and that a combined strategy of management, mitigation and suppression is needed.
What is the biggest threat to forests in 30 years?
A lack of proactive management leading to disease and destruction by wildfire.
Is your interest in forest conservation and management limited to regions that have been affected by wildfires?
Our mission is focused on impacting the wildfire crisis, but we invest broadly across startups that can impact climate resilience and adaptation, including forests.
What is the biggest hurdle for getting forests valued for the ecosystem services they provide?
Forests suffer from the classic tragedy of the commons. So many of the benefits they provide are shared by all of us and are hard to directly quantify. Carbon credits, governments, and landowners can all play a role in solving that.
What role do you think afforestation can play in furthering climate goals in more arid regions?
Not my area of expertise, but seems like a good idea!
Do you view startups providing afforestation services as a long-term investment? Why or why not?
I think these services can help capture carbon and increase land values, so there appears to be a good long-term business model.
Duncan Turner, general partner at SOSV, and managing director at HAX
What is your investment thesis for forest conservation and management tech in 2024?
We are fans of granular data in nature-based carbon capture solutions, and think that there are some great opportunities to complement satellite imagery with “ground-truth” data. Proprietary datasets from on-the-ground, automated, high-fidelity data collection combined with satellite imagery creates a very compelling data moat that goes far beyond just an algorithm.
Aside from ground-truthing data, we’ve been looking for companies that apply automation and robotics to encourage reforestation and de-desertification. Arable land plays heavily into this area. We have not pulled the trigger on any wildfire management companies yet. We are actively learning about the space.
Which startups do you think are the most interesting in the space today? Which show the most promise for long-term growth?
Without naming specific companies, any that have proprietary technology to ground-truth carbon sequestration beyond a satellite image is compelling to us. We are concerned about the quality of nature-based carbon credits, and sense a crash in the carbon markets coming, where people will resort to high quality.
Granular data, quantified scientifically, will make a huge difference here. Companies enabling automated nature-based solutions (particularly in non-arable areas) will do very well. Decomposing trees emit a colossal amount of carbon. Automated forest audits that can help forestry managers to harvest trees close to their end of life could be another opportunity for these data-gathering companies.
How well do the economics of forest conservation and management tech scale?
Forests are huge! Current data collection techniques predate computers and automation. We see massive opportunities in automating these workflows with technology stacks that were developed for other industries, such as the autonomous vehicle industry. Automating the data collection while keeping forestry experts in the data-collection loop and making them more efficient at the work they’re already doing is a highly scalable venture.
People have been trying to use market economics to conserve forests for decades with limited success. Why is this time different?
The incentives are starting to change, as is the quality of the data. The high-fidelity ground-truth data being collected from the newest crop of forestry startups is going to enable forest growth monitoring and projections at a quality and level that was previously unachievable for cost reasons.
Such monitoring and projections have been some of the biggest blockers in proving additionality and duration in forest-based carbon markets. There is more demand for carbon credits from voluntary markets. UN Goals are pro-natural solutions. Carbon capture is profitable, and extreme weather patterns are placing a higher requirement on forest management to prevent fires.
There is a split between companies focused on forest restoration and those concerned with wildfire management. Which do you favor and why?
Restoration. Purely because we have had better exposure there.
What are your views on marketplaces for carbon credits derived from conserved forests and/or restored forests?
This is the most important step for the industry, but we are deeply concerned about some of the incentives and oversight applied to nature-based restoration. We are very worried about carbon scams creating a negative impact on the markets.
What is the biggest threat to forests in 30 years?
Humans. We don’t seem to have an international mandate or capacity to prevent deforestation. Extreme weather events will continue to get worse, largely as a result of human activity that contributes to an overall warmer earth. A carbon market crash could spell the end of profitable reforestation projects.
What is the biggest hurdle for getting forests valued for the ecosystem services they provide?
Almost all legacy industries are slow to adopt technology. That is 100% true for forestry organizations. Data quality is the biggest hurdle in valuing forests for biodiversity, air quality and carbon sequestration.
Attempts at valuing forests for their ability to suck carbon out of the sky have been ongoing for the last five to 10 years. As previously discussed, data quality (MRV) is, and has been, the major challenge in forestry carbon markets. The interest in the economic impact of biodiversity is much more nascent. We must avoid making the same mistakes with any attempt to monetize biodiversity by ensuring we build these markets and the associated models on strong foundational data.
What role do you think afforestation can play in furthering climate goals in more arid regions?
We need to be informed about the different trade-offs here, which we are not. One would think that reforestation should be prioritized over afforestation, as we could rely on the biodiversity spreading into known versus new areas, and adjacent versus separated.
Joshua Posamentier, co-founder and managing partner, Congruent Ventures
What is your investment thesis for forest conservation and management tech in 2024?
We see a multiprong approach to forest management and conservation:
Geospatial intelligence
We want to know what the current state of forests are and the structure of the above-ground biomass. We’ve already invested in Muon Space, which is developing capabilities in this space. Existing tools are limited for measuring forests well. We’re also investors in Rendered.ai, which helps build synthetic data for training AI models.
This is especially helpful with some new sensing modalities — synthetic aperture radar, for example, which isn’t particularly easy for humans to understand or label. New sensing modalities will also enable direct, high-resolution, wildfire-specific sensing that will dramatically increase the real-time situational awareness of fires and their management.
Active management
Active management is using modern systems to thin forests back to the steady state they evolved into. We’ve observed a lot of money being allocated to this end, but limited work being done. The challenge is lack of labor able/willing to do the work. Our focus has been on labor and productivity enhancement and ways to increase thinning efficiency.
Analytics and risk management
We believe that the more transparently risk is priced around forests and fire, the more attention will be paid. Current pricing/risk analytics are coarse and don’t bring the same precision other verticals have seen — this is an opportunity waiting in the wings. We continue to look at this space but haven’t made an investment yet.
Likewise, downstream, companies are working on wildfire propagation modeling and simulation based on geospatial intelligence, which will enable more strategic thinning and active fire management.
Early detection and dispatch integration
It’s impossible to prevent all fires, so early detection is another tool we’ve focused on. The faster you detect ignition, the easier it is to knock it down or manage it. Often, reports come in very fast for early ignition, but locating the source is delayed to the point where it’s too late to hit with early management techniques.
Active fire fighting
This is a space we’ve seen a lot but haven’t determined what the right way for venture to participate.
Preemptive infrastructure
The focus here is on reducing the risk that human infrastructure creates fire. From undergrounding power lines to adding sensors and ultra-fast shut-offs to prevent prolonged arcs when there is a line failure or short in the field, to making the grid more resilient and distributed so that key parts can be de-energized while not cutting service to everyone.
We’ve also looked at companies with durable fire retardants for application in utility rights-of-way that prevent early ignition in the case of line failure. We haven’t made any investments there yet either.
Which startups do you think are the most interesting in the space today? Which show the most promise for long-term growth?
We’re biased, but Kodama, Pano.ai, Muon Space, Petra, and Rendered.ai are solid ones. There’s also BurnBot for certain kinds of preburn treatment, which has evolved quite a bit, as well as Vibrant Planet, which has one of the more compelling fire propagation simulation approaches.
How well do the economics of forest conservation and management tech scale?
These are very old-school markets. Like a lot of other sectors of clean tech, for some of the areas above, a tech-enabled development play may be the right call. These can get to profitability relatively early and grow organically over time for good returns and scale.
For others, it’s a classic SaaS sale that’s very sticky, where once you’re the default choice of tech, adoption is rapid and scales broadly. These are more of the classic Silicon Valley play.
People have been trying to use market economics to conserve forests for decades with limited success. Why is it different this time?
Forestry is by nature distributed, fragmented and very regional. The startups we’ve invested in are solving problems from undergrounding (utilities) and thinning (governments, mostly) to detection/dispatch (governments, utilities, municipalities and homeowners) and infra (utilities, funds). Nailing business models that can fund these businesses with venture capital (and generate the requisite returns) isn’t easy, but it is becoming easier as climate change accelerates and problems become more acute.
There’s an additional benefit that has yet to be realized in the world of GHG [greenhouse gas] reductions. Over the last handful of years, the fires in California have largely erased all of the other GHG reductions implemented to date — gigatons of GHG and particulate emissions. Reducing these measurably should count for something and eventually be directly or indirectly monetizable (more promise than fact, but with solid directional trendiness).
There is a split between companies focused on forest restoration and those concerned with wildfire management. Which do you favor and why?
All of the above! We’ve somewhat come to the conclusion that the active firefighting (boots on the ground) part of this spectrum is more public service than private company opportunity, but it’s a spectrum of opportunity.
What are your views on marketplaces for carbon credits derived from conserved forests and/or restored forests?
Again, it’s a spectrum. We’d love to see a rigorous MRV protocol around fire reduction, but in the meantime, our focus is sequestering thinned biomass. We’re tracking the work going on around measurement of avoided emissions, but are not counting on anything there yet, despite the fact that it could be one of the biggest sources of GHG avoidance in the world over the next five to 10 years.
We’ve spent over a century suppressing wildfire. There’s a lot of infrastructure, resources, and inertia behind the current approach. When do you think that can change?
It seems like practitioners, academics, and NGOs (mostly) are aligning on the need for a much more active stance to forest management instead of pure suppression, which demonstrably hasn’t worked well. I think there’s general recognition that more of the same will likely yield the same results (regular massive conflagrations that are nearly impossible to manage), whereas some of the thinning projects, like the Tahoe demo forest, were instrumental in preventing more loss, in examples like the Caldor fire.
The Nature Conservancy, for one, is driving both projects and research here and doing a lot to carry the torch with a lot of conservation credibility. This is a space where there’s got to be a lot of buy-in from public agencies, communities, academia, NGOs and the actual companies doing the work. Public policy has also ramped up to allocate investment, which provides fuel for this . . . fire.
What is the biggest threat to forests in 30 years?
Climate change. I can’t remember the citation, but something like 40%+ of California’s forests are now effectively non-native to their new climates. This is pretty disastrous. The same goes for a lot of Canada’s arboreal forests.
Is your interest in forest conservation and management limited to regions that have been affected by wildfires?
No. This is becoming a universal set of challenges. Replacing forest fires (or at least huge conflagrations) with mechanized thinning and carbon sequestration could have a huge GHG impact, and represents a huge global opportunity. Priority should be focused on regions that are regularly burning or at near-term risk of burning even if they haven’t burned yet.
What is the biggest hurdle for getting forests valued for the ecosystem services they provide?
I think this is mostly an opportunity for independent third parties like NGOs and academic researchers to lead the charge on. The other problem is that there’s no apparent coordination at the state or federal levels for forest fires. This is something we’re closely focused on changing, though it’s a long road.
In the same way that the Department of Energy built the SunShot program to address solar cost reduction, or the Earthshot program for geothermal, there should be a cross-agency (U.S. Department of Agriculture, Department of the Interior, Department of Energy, ???) task force that can marshal resources across groups, eliminate overlap and redundancy, and create one voice for pushing forward with actionable solutions.
What role do you think afforestation can play in furthering climate goals in more arid regions?
Coupled with plant engineering, this could be helpful for carbon farming and climate change (CDR), but it is more of a real asset opportunity than something that’s going to have a near-term effect on arid environments.
Carbon farming (growing dedicated crops and converting to biochar on-site) can actually meaningfully remediate sandy, acidified soil and retain more water where it’s available. It’s an ancient practice (see the Amazon’s terra preta soil), and it can also enable a wider range of crop cultivation in drier environments, or where climate change has shifted what can grow easily.
Do you view startups providing afforestation services as a long-term investment? Why or why not?
As far as I’ve seen, these haven’t looked (to my lens) like venture plays, but rather real asset opportunities from a business and returns perspective. There’s probably some limited enabling tech, but most of the investment is deployment from the efforts I’ve seen in the space.
Hampus Jakobsson, co-founder and general partner, Pale Blue Dot
What is your investment thesis for forest conservation and management tech in 2024?
We don’t have a clear and ready thesis, but believe that conservation as well as afforestation are important to the climate. Some of the hard nuts to crack are how to handle biodiversity (if planting new forests), business model (if preserving), and in all cases, the competition with other land uses. We have invested in Overstory, which reduces the risk of forest fires, but the other companies are in nature risks or biodiversity.
People have been trying to use market economics to conserve forests for decades with limited success. Why is it different this time?
I don’t think it is that different. There will be carbon credits, but at least in my view, they have a questionable permanence given that people cut down forests, not to mention forest fire risks. If the forest is planted rather than naturally occurring, biodiversity usually suffers.
There is a split between companies focused on forest restoration and those concerned with wildfire management. Which do you favor and why?
Wildfire management, as this is both an emitter and a cost. If you can prevent forest fires, the forest has many other values.
What are your views on marketplaces for carbon credits derived from conserved forests and/or restored forests?
We think that all carbon credits are needed, but at the same time, we are wary of the variation in quality. It will be one of the larger economical-political challenges of the coming 10 years.
We’ve spent over a century suppressing wildfire. There’s a lot of infrastructure, resources, and inertia behind the current approach. When do you think that can change?
Things are changing; we are getting better at forecasting wildfires. The problem is that the risk of wildfires is increasing drastically. We’re essentially having a red queen effect — we seem to be moving backward as we’re running slower than the rest of the world.
What is the biggest threat to forests in 30 years?
Our inability to protect them. So far, all business models look at forests as assets or a harbor for assets. We “mine” forests. The issue is that at the same time, we need them for sequestration.
Is your interest in forest conservation and management limited to regions that have been affected by wildfires?
Not at all. I think we need it globally. Forests have so much value, and we know so little of the things we will find.
What is the biggest hurdle for getting forests valued for the ecosystem services they provide?
That we are viewing them either as short-term assets (lumber) or as a competitor to food production. An enormous amount of forests are cut down to make way for biofuels, coffee, cocoa, palm oil, and crops for animal feed.
In every email, we tell people to “not print this,” but paper mass isn’t the issue — the lumber is a by-product of our quest to fulfill our insatiable needs. If we would stop eating and using animals, our need for deforestation would also decrease. We’d need more land to grow crops for human feed, but way less.
Do you view startups providing afforestation services as a long-term investment? Why or why not?
The answer depends on what the business model is. I’m not saying we won’t, but we’re more interested in how we can use the largest part of the planet: the oceans.