Climate Crisis Brings Venture Money Back to Clean Tech

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Venture capital is returning to cleantech firms a decade after the “mini green bubble” saw private sector funding dry up. But John Thornhill argues that the investment boom in climate technology 2.0 is more promising than version 1.0.

Between 2006 and 2011, VCs spent more than $ 25 billion to finance clean technology and lost more than half of their money, according to a study by the MIT Energy Initiative.

Funding for clean energy companies has all but dried up from VCs. That was until 2020. According to PitchBook data released this week, more than $ 40 billion in venture capital was poured into climate technology companies from January 2020 to August 2021, already exceeding the total by 37%. from the previous two years.

This makes techFT # wonder if we are heading for another ‘green bubble’.

In 2006, conditions appeared to be favorable for the growth of the cleantech sector. The price of fossil fuels was rising. The legislation was making its way into various parliaments around the world, strengthening the investment rationale for clean energy companies. This year, An inconvenient truth, Davis Guggenheim’s film about Al Gore’s campaign to educate the world about climate change has been released, charting a bright future for biofuels, electrification and solar panels.

Silicon Valley invested money in clean energy start-ups with the belief that they could turn scientific breakthroughs into profitable businesses – just as chipmakers and biotech companies had done before.

But the global financial crisis put an end to the clean tech boom. The global decline in oil prices and the rise of the US hydraulic fracturing industry have made it impossible for biofuel companies to compete. Meanwhile, Chinese solar companies have started flooding the United States with cheap solar panels, taking advantage of government subsidies and low silicon prices.

But the unfortunate end of the 1.0 cleantech saga was not these external factors, but rather, as John explains, because companies weren’t ready for venture capital investment:

In his book Zero to One, Peter Thiel, the outspoken Silicon Valley investor, dissected the reasons for this crash, identifying several flaws in investor thinking. In short, a successful climate technology company must offer a clearly superior solution to a specific problem and be able to go global at the right time. “The world is not a laboratory: selling and delivering a product is at least as important as the product itself,” Thiel wrote.

Several important developments have taken place since the cleantech collapse 10 years ago. Renewable energies such as wind and solar are, for the first time, starting to compete with their fossil fuel counterparts in terms of price without depending on government subsidies. Electric cars and mopeds populate the world’s busiest cities after advancements in lithium-ion batteries made them an attractive alternative to those powered by gasoline and diesel.

John writes:

Just as version 1.0 of most technologies can be “a little sloppy and without an economic basis”, version 2.0 of climate technology is proving to be more realistic and resilient. “Technology is important, but only if you understand how to bring it to market and make the money to scale it,” says Katie Rae, managing director of The Engine, a Massachusetts Institute-backed venture capital firm. of Technology which has invested in several climate technologies. Starts.

Most importantly, Silicon Valley has changed its investment strategy. It no longer opts for capital-intensive renewable energy projects with high initial costs. Instead, he’s opting for smaller companies with niche products ranging from new battery storage technologies to lab-grown meat, low-carbon concrete, and sustainable aviation fuel,

This includes the American-Finnish start-up Carbo Culture, which recently raised $ 6.2 million in venture capital with the goal of removing 1 billion tonnes of carbon dioxide from the atmosphere by 2030.

John again:

Carbo Culture’s pilot reactor, which transforms biomass into biochar storing carbon in a stable form for a thousand years, has just entered service in California and the company plans to open its first commercial plant in Helsinki in 2024 to sell renewable heat. Henrietta Moon, co-founder of Carbo Culture, says it’s hard to start a business, let alone one focused on new technology. “The best help we can get is from the VCs,” she says. “I think there is a huge, huge opportunity to fight climate change.”

Read John Thornhill’s opinion piece here and Henry Sanderson’s excellent Big Read here on the Clean Energy 2.0 Investment Boom.

The Internet of (five) things

1. Hedge funds win big on Trump
A group of 11 hedge funds, including DE Shaw and Saba Capital, generated millions of dollars in potential earnings in a single day after a specialist acquisition firm that merged with Donald Trump’s new social media group rose 421% on Thursday. The former US president this week launched a social media outlet called Truth Social which aims to compete with Facebook and Twitter, creating a platform for his right-wing supporters ahead of a possible bid for power in 2024.

2. Renault’s chip problems are getting worse
Renault has warned it will produce nearly 500,000 fewer vehicles this year due to the industry’s chip shortage. This is a significantly larger drop in the group’s production than the 220,000 lost vehicles that Renault had predicted in early September. The darker forecast came as Renault announced a sharp drop in sales in the third quarter. Revenue for the quarter was 9 billion euros, 13% lower than the same period a year ago, far from the 11.3 billion euros generated in the same quarter in 2019 before the pandemic.

3. Snap goes the course of action
Snap lost a quarter of its value in after-hours trading on Thursday as the social media group posted a grim outlook for its fourth quarter, blaming Apple’s recent privacy changes. Parent company Snapchat has warned that next quarter revenue will be between $ 1.16 billion and $ 1.2 billion, well below the current consensus estimate of $ 1.4 billion, according to S&P Capital. IQ. Evan Spiegel, chief executive of Snap, said that since Apple introduced a new privacy policy between April and June, it has become difficult for advertisers to understand campaign performance, which has weighed on revenue. The rules, which Spiegel says have “shaken up” the industry, require apps in Apple’s App Store to obtain explicit permission from users to follow them for advertising purposes. Spiegel said: “It has certainly been a frustrating setback for us,” he said. “But I think in the long run these changes in privacy, and the protection of the privacy of iOS users. . . is something we fully support.

4. Facebook struggles to appeal to young users
Internal documents show that the number of Facebook users in the United States under the age of 30 is declining and that Instagram, which has enjoyed phenomenal popularity since its takeover by Facebook in 2012 for $ 1 billion, appears to be reaching limits of its growth among young users in key markets. , raising serious questions about the future of the company. The company’s solutions to its growing challenges – encouraging users to open multiple accounts – are causing technical, reputational, and legal headaches. In particular, Facebook appears to have difficulty in accurately counting the number of actual users of its services.

5. Supply chain finance is back in fashion
Mastercard has partnered with UK financial technology firm Demica to offer supply chain finance to its business clients, showing continued strength in demand for the loan product even after the collapse of Greensill Capital. Supply chain finance is a process by which financial institutions pay the bills a business owes its suppliers, who accept less than the full amount in exchange for faster payment. While this is an established financial product that big banks offer their corporate clients, the messy dismantling of supply chain finance specialist Greensill Capital earlier this year has drawn attention to how which it can be used to flatten and distort corporate balance sheets.

Technological tools

Sony’s A7 line has long been a popular choice for amateur photographers, offering high quality images at a competitive price. This week Sony released the ALPHA 7 IV Hybrid Camera, which showcases a series of new features and improvements over the ALPHA 7 III, including the switch from a 24MP sensor to a back-illuminated 33MP Exmoor R CMOS sensor. . The ISO range for shooting remains the same as the previous model, going up to 204,800. But the new model offers previously unavailable 4K UHD video recording.

The ALPHA 7 IV is available for Pre-order for £ 2,399.

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