Climate technology 2.0 must sell venture capital on its future



Like vanilla ice cream on a hot day, the Earthshot Award for Environmental Initiatives this week delivered a dollop of optimism for our warming planet. In a glittering ceremony in London, award winners from around the world told heartwarming stories of how they restored Bahamian coral reefs, reduced air pollution in India, generated clean energy in Thailand , reused food waste in Italy and preserved the forests of Costa Rica.

But the title of the awards, which echoes President John F Kennedy’s mission to shoot astronauts to the moon, is somewhat misleading. Although they serve as an inspiration to local communities around the world, none of these initiatives are likely to have an impact big enough to mend the breach in our atmosphere. As the recent intergovernmental report on climate change made clear, only substantial and urgent reductions in greenhouse gas emissions and the removal of large amounts of carbon from the atmosphere can now make a difference. The real Earthshots will be disruptive technologies, such as fusion energy or massive carbon capture: these require billions of dollars in investment compared to the £ 1million prize awarded to each Earthshot winner. .

The challenge is how to turn promising technological innovations into successful global solutions. Here, governments have an indispensable role to play by funding basic research, coordinating international action and shaping markets by adopting widespread carbon pricing, for example. But the encouraging news is that venture capital is also playing an increasingly important role. 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 37% above the total for the previous two years.

“There is so much momentum right now. We love it, ”said Katie Rae, Managing Director of The Engine, a Massachusetts Institute of Technology-backed venture capital firm that has invested in several climate technology start-ups.

According to her, the climate emergency means that we must reconfigure almost all of our economic systems: from the production and transmission of energy to the transport of people and goods, including cultivation, manufacturing and construction. . This is where the traditional handbook of the venture capital industry can be used to make speculative investments in risky businesses and evolve the technologies that work, says Rae. “Capitalism is part of the solution.

However, many venture capitalists remain scarred by the cleantech collapse at the turn of this century when they invested $ 50 billion in green businesses with dismal results. In his book Zero to oneSilicon Valley outspoken investor Peter Thiel dissected the reasons for the 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.

Today’s climate tech entrepreneurs have had to endure the residue of investor skepticism and build businesses that offer a market-ready solution now rather than anticipating the adoption of large-scale carbon pricing, said Rae. 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 evolve it,” she says.

Take the case of Carbo Culture, an American-Finnish start-up, which recently raised $ 6.2 million in venture capital with the aim of removing 1 billion tonnes of carbon dioxide from the atmosphere here. 2030. Its pilot reactor, which transforms biomass into biochar storing carbon in a stable form for a thousand years, has just started operations in California and the company plans to open its first commercial plant in Helsinki in 2024 to sell carbon. 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.”

The trend is encouraging, but the schedule – much like eating soothing ice cream on a hot day – is short. Like David Attenborough, said one of the Earthshot Prize board members, hope is eternal but we do not have eternity. “We have to do it now.”

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