Collaborative Fund and the Wyss Institute partner to bridge the climate tech ‘valley of death’

For pretty much every startup, there’s a perilous period that occurs after things are up and running but the money isn’t flowing. Called the “valley of death,” the conundrum is especially challenging for climate tech startups, which tend to have a longer time to revenue than something like a payments SaaS, making the valley that much longer and more treacherous.

With some hard tech problems, whether they be fusion power, carbon capture or mushroom-based leather, another valley of death happens even earlier.

Traditionally, this is how it has worked: Founders start with government grants and pitches to attract investors. Particularly good pitches might convince more traditional investors to join larger seed rounds. But for many, the best way to cross the valley of death isn’t to bring more cash but to find the shortest route through it.

That’s the idea behind a new partnership between Collaborative Fund and Harvard University’s Wyss Institute. TechCrunch+ has exclusively learned that the venture capital firm is giving the Wyss Institute $15 million to build a lab focused on sustainable materials research, and in return it will get first crack at technologies and companies that come out of the institute.

“Moving the needle slightly is not going to have any real impact. We need to completely reimagine, completely reinvent what we already have,” Sophie Bakalar, partner at Collaborative Fund, told TechCrunch+. “Our objective is not just to fund these really breakthrough technologies, but find a way to get them out of the lab and into our lives.”

Collaborative Fund and the Wyss Institute partner to bridge the climate tech ‘valley of death’ by Tim De Chant originally published on TechCrunch

Executives say they’re committed to ESG, but data shows otherwise

Over the past several years, environmental, social and governance (ESG) initiatives took the business world by storm. The bottom line was no longer all that mattered. Customers and investors alike wanted to know how companies were tackling a host of ESG issues, from climate change to diversity, equity and inclusion.

More recently, the model has come under increasing fire. Political attacks on ESG principles combined with shaky macroeconomic conditions, a stronger push for profit over growth, and an energy crisis in Europe gave some companies cover for cutting back on their promises, especially if they weren’t entirely committed from the start.

To be clear, many companies are making great strides in cutting their carbon pollution, an effort that falls under the larger umbrella of ESG considerations. That could include using cleaner energy sources for manufacturing, more environmentally friendly packaging for consumer goods, or selecting cloud providers that strive to run the most energy-efficient data centers.

However companies approach becoming a greener organization, the question is whether they are staying true to their pledges, especially as economic conditions tighten. For some, ESG commitments are more about appearances than action. Unfortunately, the 2023 Google Cloud Sustainability Survey suggests that executive resolve is slipping. That, or those who were only in it for the marketing benefit are starting to come clean.

For proof, the survey found that this year, economic pressures have pushed ESG concerns down to the third position on the list of organizations’ priorities, from the top slot they occupied last year. “Many executives point to the macroeconomic environment and pressure from external parties to cut corners in their sustainability initiatives and prioritize client relationships and driving revenue,” the report stated.

Google commissioned The Harris Poll to survey 1,476 VP and C-suite executives from across the world in a variety of industry sectors. The report found that the number of sustainability projects being implemented, as opposed to merely planned, was down 8% from last year.

Executives say they’re committed to ESG, but data shows otherwise by Tim De Chant originally published on TechCrunch

To secure early-stage funding, entrepreneurs should build ESG into their business models

ESG has been under the microscope for the past 12 months with pressure from some Republican politicians in the U.S. who have called for investment managers to pull their clients’ money from ESG-focused investments.

Simplistically, their argument is that ESG prevents investors being able to access assets like fossil fuels and, by doing so, they will have missed out on soaring fossil fuel company valuations driven by rising energy prices. Those on the anti-ESG side argue that continuing to follow ESG doctrine in today’s market is therefore a failure of fiduciary duty by investment managers.

This of course overlooks one rather fundamental challenge: The Intergovernmental Panel on Climate Change (IPCC) in its recent AR6 report stated that the G7 economies needed to hit net zero by 2040, not 2050, if we are to avoid catastrophic climate change.

At the 2021 United Nations Climate Change Conference, countries pledged to scale down their use of oil and fossil fuels. The latest scientific evaluation from the IPCC sets the scene for a future climate change conference (not too far in the future) making the pledge to scale out fossil fuels and accelerate the already significant investment into an electrified and decarbonized future.

Whether you believe in ESG or subscribe to the “woke capitalism” viewpoint, it simply can’t be ignored.

So the fiduciary duty of investment managers when seen through that lens would suggest a long-term imperative to ensure that the funds they manage are not placed into assets that will become stranded or obsolete. In other words, investing using ESG metrics and favoring renewable and climate tech type investments makes economic and investment sense in the long term.

This approach is one that we follow, and we’re not alone. Despite recent controversy, the ESG investment market is estimated to be worth $53 trillion globally by 2025 and data, reported by Bloomberg, from the European Fund and Asset Management Association (EFAMA) has shown that the EU’s highest environmental, social and governance classification, known as Article 9, drew in €26 billion ($28 billion) in 2022. That coincided with bond funds seeing client outflows that were greater than since the global financial crisis in 2008, while equity funds also suffered, losing €72 billion over the same period.

To secure early-stage funding, entrepreneurs should build ESG into their business models by Walter Thompson originally published on TechCrunch

From seed to Series A in 7 months: Why and how Odyssey Energy Solutions moved quickly

Want a sneak peek at the electrical grid of the future? Don’t look to the U.S., Europe or China. Instead, head to Nigeria, where Odyssey Energy Solutions has been hard at work. There, a shaky and incomplete grid has driven many businesses and communities to invest in mini- and microgrids that are powered by renewable energy and capable of running independently.

Odyssey has been building a platform to help developers launch, build and manage distributed renewable energy projects in emerging markets like Nigeria, Kenya and Sierra Leone. Those efforts helped the company raise a $5.3 million seed round last summer.

Now, just seven months later, Odyssey has closed a $15 million Series A, TechCrunch+ has exclusively learned. The round was led by Union Square Ventures, with participation from Equal Ventures, Twelve Below, Transition, Equator, MCJ Collective, Abstract Ventures, Founder Collective and Climate Capital.

The company collects data on each project that flows through its platform, which it then uses to help investors vet future projects. Some of that data also helps developers procure equipment for their projects, be it solar panels, inverters or other key supplies. And on the tail end, Odyssey has software to control the energy flowing through developers’ mini- and microgrids.

When the company raised its seed round last year, business was good. Odyssey co-founder and CEO Emily McAteer told TechCrunch+ that her company had already built up a network of project developers and had a significant amount of capital in its target markets flowing through the platform. Its software products were also helping developers procure supplies for less and more easily manage the mini- and microgrids that they had built. At the time, raising a Series A in short order wasn’t in the cards.

But that changed in the months that followed. “We had some proof points that we wanted to hit in launching those products, and we sort of hit them very quickly,” McAteer said. Some key hires also helped them rapidly understand some other pain points that Odyssey customers frequently experience. McAteer referred to this combination of team and product as “a springboard.”

From seed to Series A in 7 months: Why and how Odyssey Energy Solutions moved quickly by Tim De Chant originally published on TechCrunch

Without Black representation in climate tech, ‘the planet will burn’

Historically, the Black community in the U.S. has been disproportionately affected by the effects of climate change. Relegated for decades to a vulnerable economic and social class, the community is nearly always at risk of facing the brunt of natural disasters, no matter where they occur.

This issue has inspired many Black founders and investors to enter the climate space, given that the conversation of today’s current crisis is led by white people and is hence missing some key perspectives.

“It’s crucial we see more Black investors and creators tackling climate change because the battle against this existential crisis demands everyone’s intellectual prowess, personal character and uniquely lived experience,” Stonly Blue, managing partner at early-stage venture firm Third Sphere, told TechCrunch+. “When Black individuals are given the space and autonomy to expand their ambitions beyond societal ‘survival,’ the potential for innovation is immense.”

The Black climate tech community is growing, according to investors and founders TechCrunch+ spoke to. But while funding to underrepresented founders in the space is dismal, it represents the sheer potential that remains.

Last year, U.S.-based Black climate tech founders received only 1% of all capital invested in climate tech startups, according to Crunchbase. That’s $214 million out of $21.5 billion. In the first quarter of this year, it was even lower: such founders raised $24 million of the $3.4 billion allocated or only 0.7%.

Data visualization by Miranda Halpern; created with Flourish

While striking, these investment levels are quite close to what Black founders have raised overall. Last year, Black founders raised 1.2% of all venture funding, and last quarter, they received 0.69%. That stubbornly low figure is almost certainly not representative of Black participation in climate tech, even though the actual number of Black people involved in the space is unknown. The lack of funding and dearth of DEI data suggests that the venture community writ large is overlooking a vast amount of untapped potential.

“The planet will burn if we don’t maximize the talent and genius embedded in the entire human race,” Donnel Baird, founder and CEO of BlocPower, said.

The early innings for Black climate tech

According to Blue, a growing number of Black venture capitalists are starting to take an interest in climate tech. Many hail from the energy, mobility or infrastructure sectors, as they intersect with the need for climate action.

On the other hand, those building the tech often have to work with material science, hard technology or industrial processes, and due to the time and complexity involved, they often choose against venture funding. However, that doesn’t mean there isn’t economic opportunity in backing those who do.

Anthony Oni, a managing partner at Energy Impact Partners, noted that this sector would eventually become the largest economic and wealth-building opportunity in this lifetime, and the startup ecosystem can’t afford to ignore ideas, no matter their origin.

Without Black representation in climate tech, ‘the planet will burn’ by Dominic-Madori Davis originally published on TechCrunch

Quilt raises $9M seed round to become the Nest of heat pumps

Last year, Americans bought more heat pumps than gas furnaces, a striking split that’s likely to widen in the coming years as consumer awareness and climate regulations foster their uptake.

Heat pumps are already widely used to cool homes across the Southeast, and they’re making inroads in the Northeast and Midwest, where consumers are warming to the concept of using one device for both heating and cooling. But despite their growing appeal, not all consumers are sold on the idea. Some find the technology unfamiliar; others find it unattractive to look at.

Quilt hopes its product can tip the scales. Founded last year by a trio of former Google employees, the startup has been hard at work designing smaller, sleeker and smarter heat pump systems. Today, Quilt is announcing $9 million in a seed round led by Lowercarbon Capital and Gradient Ventures, with participation from Incite Ventures, MCJ Collective, Garage Capital, Climate Capital and Spacecadet.

Many heat pump systems are in fact so-called ductless mini-splits, which are notable for the indoor unit that hangs high on the wall. For the amount of heating and cooling they provide, the indoor units aren’t big, but they’re not sleek either.

“A lot of people, in the purchase process, they get hung up on this idea that they have to put big, ugly white plastic boxes all over their house,” Paul Lambert, co-founder and CEO, told TechCrunch+. Many units also use TV-style remotes instead of traditional thermostats, and most aren’t compatible with smart thermostats like Nest. “It feels, in some dimensions, like a step backward.”

The company hopes to follow Nest’s lead and create a smart product that’s defined by better design and consumer friendliness. But where Nest added some smarts to a home’s existing heating and air conditioning system, Quilt hopes to catch consumers as they upgrade the whole thing, leveraging what might be considered an HVAC supercycle. Much like how people upgrade iPhones in waves, the team’s founders think the time is right to dive into the heat pump space.

Quilt raises $9M seed round to become the Nest of heat pumps by Tim De Chant originally published on TechCrunch

VC funding of women climate tech founders is abysmal. Here’s how it could improve

The venture community has realized several things in recent years: Climate change isn’t going away, and there is a huge opportunity to invest in companies that promise to define entire segments of the future economy.

With a few hiccups along the way, venture dollars have begun to flow with increasing volume and regularity to climate tech startups over the last few years. That capital is adding up; since the start of 2021, climate tech startups have raised $88 billion, according to PitchBook data.

The sector’s potential is practically limitless: the problems presented by climate change will be with us for generations, meaning that solutions could build companies that last for decades, if not hundreds of years. And the slight dip in funding that the climate sector saw last year isn’t indicative of lost investor interest, nor are the slow-pacing Q1 figures; for many, not just those in climate tech, the market is slow.

But just like in other parts of the startup economy, those dollars are far from evenly distributed. Women founders have received just 6.9% of venture dollars in climate tech in Q1, according to Crunchbase, which is down from 8.9% in 2022.

It will take the perspectives and knowledge from all things and all people to tackle our changing planet. But while climate tech and its backers might be experiencing an awakening, founders who identify as women have yet to experience it.

Gender bias is still persistent

“The funding gap is astounding,” Emily McAteer, co-founder and CEO of Odyssey Energy Solutions, told TechCrunch+.

A key driver appears to be the discrepancy in round size between companies with male-only founders and those with mixed-gender or female-only founding teams.

VC funding of women climate tech founders is abysmal. Here’s how it could improve by Dominic-Madori Davis originally published on TechCrunch

Despite a rocky start, climate tech is in a good position to tackle the rest of 2023

Last year, climate tech seemed to be invincible while the venture capital and startup worlds were fretting about a downturn and scrambling to conserve cash. Climate tech investors and founders in 2022 may not have hit the heights of 2021 but they didn’t drop off a cliff either.

In the first quarter of the year, we started to see cracks in the firewall that separates climate tech from the broader tech industry: The space saw a decline of more than a third in both the number of deals and money invested compared with a year earlier.

Still, there are plenty of possible reasons why the sector’s sudden stumble was merely a misstep and not the beginning of a downward spiral.

For one, the Inflation Reduction Act may have encouraged some to close deals sooner than they planned to. Many founders I’ve spoken with said that the law, which was signed in August, was both welcome and unexpected. Not only did it provide support through new regulations and incentives, it also brought certain climate technologies into the national conversation.

As a result, some founders felt the need to speed up their plans. That might have left the pipeline a little dry in the new year.

“The correction for climate tech companies was mostly at entities that SPAC’d or went public as if they were a single winner-take-all entity.” Arch Rao, founder and CEO, Span

Then SVB collapsed. The bank’s failure didn’t hit climate tech as hard as some other sectors, but the bank had been friendly to climate tech startups, accounting for some 60% of the total financing for community solar projects.

But the real impact was felt at a deeper level: SVB’s collapse didn’t make running a VC firm or a startup any easier no matter what it focused on. “Operationally, if you’re running a firm, the SVB stuff put new deals down,” Abe Yokell, managing partner at Congruent Ventures, told TechCrunch+. “You couldn’t make capital calls; you couldn’t use your lines of credit or somebody on your syndicate could not.”

So, between SVB and the market reacting to a new regulatory regime, it’s no surprise that Q1 strayed a bit from previous trends.

But what does the rest of 2023 look like?

Yokell suspects that the pace of deals will largely hold up. “My suspicion is that on a deal-count basis, it’ll be pretty steady as she goes,” he said. “We’re still seeing a lot of flow at the early stage as well as the mid- to late-stage.”

Despite a rocky start, climate tech is in a good position to tackle the rest of 2023 by Tim De Chant originally published on TechCrunch

Bend is taking on Brex and Ramp with a green twist and a $2.5M seed round

When the SEC announced that it planned to require companies under its purview to disclose their climate-related risks and emissions, plenty of companies started publicly clutching their pearls.

Tracking down the extent of their pollution would simply be either too expensive, too difficult or both, they said. No surprise there: Companies strike a similar tone every time a new regulation is proposed. The reality is that the requirement likely won’t be nearly as difficult as they claim, but what if tracking some of their most challenging emissions were as simple as swapping out their corporate spend cards?

“For most companies, 75 to 80% of their emissions typically are Scope 3 emissions, which is all the goods and services that they’re buying,” said Ted Power, co-founder and CEO of Bend. “And so what that means is that the best way for companies to reduce their missions is to address all of those goods and services they’re buying.”

Power and co-founder Thomas Moore started Bend to help companies tackle their Scope 3 emissions. The startup began by selling access to its API for carbon accounting, but the team soon shifted focus to the corporate spend market.

“The thesis is that by making it free and embedding it in a corporate card, there’s a much bigger addressable market, and we can engage more folks in what is essentially the same thing under the hood in terms of the carbon accounting,” Power said.

Like many other credit cards, Bend offers rewards, though not the usual cash back or points-based fare. Instead, it offers carbon offsets. The company is announcing a $2.5 million seed round, TechCrunch+ has exclusively learned.

Since it’s a small team, the company has piggybacked on a selection of projects from Frontier, the advanced market commitment created by Stripe, Alphabet, Shopify and others.

Carbon credits are transacted through Patch, the carbon market. That offers a few advantages compared with a DIY approach. For one, Patch has a relatively large market of vetted projects. And two, it offers a sort of insurance: If one of the projects goes bust or doesn’t deliver on its promises, buyers can swap credits for new ones. Bend only buys those that cost at least $100 per metric ton. “It’s investing in these very scalable carbon very sort of scientifically based carbon removal projects that, if successful, will come down the cost curve,” Power said.

Bend’s current roster of projects includes CarbonCapture, Charm Industrial and Living Carbon. The first two are different approaches to carbon capture and storage, while the latter uses engineered trees that grow faster and in theory sequester more carbon (experts have raised questions about whether they really do, however). That lineup may change, of course. “Ultimately, our goal is to support the best projects,” Power said.

A crowded market

TechCrunch+ has covered the corporate spend market exhaustively in recent years due to a hotbed of startup activity. Brex, Ramp and Airbase, among the better-known, yet-private unicorns competing from the U.S. market, have raised more than $3 billion in combined capital while private, according to Crunchbase data.

Bend is taking on Brex and Ramp with a green twist and a $2.5M seed round by Tim De Chant originally published on TechCrunch

Former NBA star Rick Fox’s startup gets $10M pre-seed for concrete that removes CO2

No doubt that Rick Fox has had plenty of emotional moments in his life. There was the birth of his children, of course, and as a member of the Los Angeles Lakers in the early 2000s, he won three NBA championships. But last week, it’s clear that his third act — that of a startup founder — is becoming one of those moments.

“I’ve been a part of a lot of amazing journeys and industries, from entertainment to movies and TV. I’ve been on sets with Oscar-winning actors and directors, and I’ve been on championship NBA teams. There’s been nothing more rewarding for me in my life than to be a part of this team where we’re leaving something behind,” Fox told TechCrunch+.

Fox’s new challenge isn’t just building Partanna, a startup, but one that can make a dent in climate change. For him, it’s personal. Like many of us, Fox was sitting at home early in the pandemic mulling the challenges that were facing the world. The Bahamas, where he grew up and now lives, wasn’t just in the midst of a pandemic. It was still reeling from the destruction wrought by Hurricane Dorian in 2019.

“It got me to a point of thinking about a bigger crisis, which was one that we were facing at home in the Bahamas, which is the consistent impact of the climate and the storms that were happening on a yearly basis at a different level than what I grew up with.”

Then he got a call from his manager, who had been displaced by the Woolsey Fires that swept through Malibu in 2018. In the recovery efforts, she ran into Sam Marshall, an architect who had been working on a new formulation for concrete for the last several years.

“She called me up one day and she said, ‘Hey, you have to meet this gentleman. He’s been working on concrete that acts like a tree,’” Fox recalled. “And I’ll never forget that statement, because I had just stepped out of the shower and I was drying off, and I’m thinking to myself concrete that acts like a tree — how does that work? But then I also thought, if it does work, then it’s going to be on the forefront of changing how we build in the world.”

Marshall had been working for years with other concrete experts, and the time was right to start a company. The two founded Partanna in 2021, and now the company is announcing $12 million in pre-seed funding from Cherubic Ventures, TechCrunch+ has exclusively learned. The company is valued at $190 million post-money, according to PitchBook data.

Former NBA star Rick Fox’s startup gets $10M pre-seed for concrete that removes CO2 by Tim De Chant originally published on TechCrunch