Enthusiastic investors keep pouring in. It is Amazon employees who have seen the company’s stock price rise steadily; former venture capitalists, hoping to get rich financial returns in a new hot field; parents or expectant parents who panic about leaving the planet damaged by global warming to their children .
Their backgrounds and motivations vary, but they are all prepared to write checks to support companies that are responding to the climate crisis.
“Capitalism and market forces have allowed us to enter this warming planet,” Mike Rhea said. “This is the only thing that can get us out of it.”
Rea is an executive director E8, An investment network based in Seattle that focuses on climate technology. He received a steady stream of inquiries from potential investors. E8 was established 15 years ago and is expected to reach 140 members by the end of this year, an increase of 40% over last year. It is currently raising a new fund, and it has also made a $1 million investment through Decarbon8, a charitable fund division that was just established last year.
This situation occurs repeatedly among international investors, from investors who support early-stage entrepreneurs to investors who are scrambling to expand for profitable global companies. Over the years, global venture capital transactions have hardly exceeded US$1 billion, and climate technology has become a frenzied area of financing.
- By the first half of this year, international companies in this industry had received 14.2 billion U.S. dollars in capital, which was only slightly lower than the total venture capital investment for the whole year of 2020. PitchBook’s research.
- Plus billions of dollars in reports Large climate-focused funds Raised by private equity firms including TPG in Texas and Brookfield Asset Management in Toronto.
- According to data from PitchBook, among venture capitalists, three companies in Vancouver, British Columbia, have recently raised a total of US$144 million in venture capital funds, while US investors have raised nearly US$846 million.
- Even the crowdsourcing platform Indiegogo reported that the funds raised in the first half of 2021 for “green technology” fundraising activities increased by 282% compared to the first half of 2020.
- Despite the promising trend, Pitchbook reports that so far this year, climate technology accounts for only 2% of all venture capital technology transactions in the United States and the world; the industry has received approximately 7% of funding from US technology financing
For veterans of “climate technology” or “energy transition”, the industry’s new enthusiasm-covering renewable energy, batteries, decarbonized transportation, green buildings and low-carbon agriculture-should have appeared long ago.
“I have always believed that the rest of the world will recover at some point because these problems must be resolved,” said David Kenny, executive Director VertueLab, A non-profit organization established in Portland 14 years ago. “It sounds dramatic, but we really have to solve these problems or we will die.”
Global and Pacific Northwest climate technology companies have been conducting extensive inspections of carbon reduction technologies. According to GeekWire research, in the past 12 months, climate-focused companies in Washington, British Columbia, and Oregon have received more than $742 million in venture capital.
The Pacific Northwest has a role to play in cultivating the next generation of companies. Efforts include:
For more than two decades, SJF Ventures has been investing in impact-focused companies. David Grist, the company’s managing director in Seattle, said that in the past, everyone thought that a company would either do a good job or make money. Now, more and more companies are based on both business models.
“The environmental impact of some companies is directly proportional to the financial impact: the more solar panels deployed, the more mobile phones recycled, and the more eggs raised on pastures sold, they are exactly in line with financial performance,” Grist said. “This is not a charity.”
The resurgence of climate technology
Although climate technology has become a hot field, it has to get rid of past failures.The typical representative of this difficult history is Solindra, A California-based solar company that went bankrupt in 2011 despite receiving $1 billion in private investment and $500 million in taxpayer support. Other clean technology efforts also ran into trouble in the late 2000s and early 2010s, tarnishing the field.
“We saw this during the Great Depression, when many clean technology funds lost a lot of money related to solar and biofuels,” Kenny said.
Griest’s company was able to survive these periods, and SJF Ventures recently raised a fifth fund, reaching $175 million-an increase of more than 10 times from the initial period.
“Over the years, we have been very, very lucky,” he said. “We focus on companies with high capital efficiency. Many ups and downs were early, capital-intensive, large-scale projects, but they were not successful due to various reasons.”
But will the recent surge translate into irrational prosperity and fuel the Internet bubble of green technology?
Kenny worries about too little investment in early-stage startups that drive the development of clean technology pipelines. He pointed out that if there is not enough support for budding entrepreneurs, then ultimately there will be too few reliable venture capital options.
“all of these [later stage] Capital will either lose interest,” he said, “or start investing in things that have not been thoroughly reviewed, or they will start taking risks beyond the investor’s profile, and some of them will lose some money. “
Decarbonization Revolution
The essence of venture capital is that not every investment will have a return. But in general, the three investors we interviewed are optimistic about the future of the climate industry and its potential to have a significant impact in realizing returns and mitigating global warming.
Griest sees many promising companies looking for funding.
“Overall, we are seeing more and more truly compelling opportunities,” Grist said. “With the increasingly fierce competition between renewable energy and fossil fuels, this is exciting for us. This is an exciting market dynamic that can bring more business and investment opportunities.”
Since the beginning of 2020, global investors have been raising huge venture capital funds for climate technology investments. According to Pitchbook’s research (see chart for details), China has raised the most funds, and the United States, Canada and Sweden have also raised large amounts of funds.
However, the challenges posed by the need to shift from carbon emission engines and processes in all imaginable fields are very daunting. The world is already suffering from high temperatures, wildfires, more severe hurricanes and catastrophic floods. How much carbon reduction can be brought about by new innovations, and how fast?
“One of the reasons I like to enter this field is to see that technology can change the industry in a very short period of time,” Kenny said. “We have seen this on the Internet. If the decarbonization revolution-does not sound as sexy as the Internet revolution-if it is popular because it is mandatory, or because it is the cheapest, or because the product is better, or For any reason, technology can scale very quickly.
“You go back to the industrial revolution. It was a very dramatic change. The way we make everything and the way we impress people are very fast. I am hopeful,” he said, “because I believe technology has a lot of hope.”
Regarding Rea, he emphasized that no matter what your investment price is, there are many options to participate in and truly enhance your climate impact from multiple directions.
“It’s not enough to just make a policy, we will see what happens. Also, it’s certainly not enough to just be an investor and not care about the policy,” he said. “If you care about this, you have to do both at a certain level in the investment and policy departments.”