How Venture Capital Handles FOMO Climate Tech
Climate trading continues to accelerate, and established climate investors find themselves challenged as FOMO from new entrants increases prices and speed of trading.
Why is this important: Entrepreneurs and investors are usually optimists reluctantly held back by reality. But when both groups detach from reality — through well-meaning optimism or other means — things can easily go awry.
State of play: The climate is attracting renewed interest from investors of all persuasions.
- Generalist companies add directors and partners with some climate or energy experience to manage the overall strategy of the company.
- Others invest directly in early-stage climate-focused venture capital firms as LPs.
- And smaller companies that are climate outsiders have taken on less technical areas of climate technology like consumer goods or software.
Rollback: This happened in the healthcare industry from the late 2010s through the 2020s. The common thread being a highly regulated and complex industry that eager investors said needed an overhaul.
- The dangers are immortalized in scandals and alleged criminal activity at Theranos and Ubiome.
Yes, but: There’s a pretty big difference between potentially fraudulent activity and being in the wrong place at the wrong time, from a scientific standpoint. Not all failed ventures are criminal, and not all overlooked mistakes are intentional.
What they say : Investors who have survived previous ups and downs in climate tech are still cautious about what some of their peers are investing in.
- “With volume and attention comes hype, and those of us who have been around for a while are a bit reluctant, knowing that there are things that will probably get funded that maybe shouldn’t. “, said Micah Kotch, partner of Blackhorn Ventures. says Axios.
- “We’re entering a phase for energy where there are things like Theranos raising funds, and that increases the risk of holding back investment over time,” said Peter Barrett, general partner at Playground Global. says Axios.
- “I fear that with so much money and people being greedy, not everything is a good story. There are bad stories, Enron-like situations, that come out in the long run,” Silicon Valley said Bank. market manager Matt Trotter says Axios.
The bottom line: Buyer beware. The climate hype cycle is here and, as in past hype cycles, some dodgy companies will likely slip in with the good.
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