“Oh, shit. Am I getting recruited?”

– Riri, Black Panther: Wakanda Forever

 

We started sending these updates 9 years (458 weeks) ago. The goal has been to share resources that might increase the probability of success for startup founders building climate solutions. Still, the most frequent question we get is “Where can I learn more about climate and startups?”. Our community is about 23k people and so we asked you. 

 

The most requested book was Tony Fadell’s Build. Among the other top book recommendations were The Ministry for the Future, Speed & Scale, Earth for All, How to Avoid a Climate Disaster, Electrify Everything, and The End of the World Is Just the Beginning, as well as two startup building tomes, The Great CEO Within, and Venture Deals. 

 

The top resources you turn to include Bloomberg Green, Climate Capital from the FT, climate change coverage from The Economist, research from RMI, IPCC, IEA, as well as Project Drawdown, Canary Media, ImpactAlpha, The Information, Volts, Climate Tech VC, MCJ Collective, and Micromobility News.

 

Climatetech Fundraising

Founders always ask us about more fundraising resources but now VCs are also starting to ask about the rest of the capital stack. So it seems appropriate for us to share the next chapter in our Climate Startup Playbook.

 

Climate startups are just like other startups in that they usually require outside capital to help them grow. And, like other startups, climate startups will raise seed capital. But this is where the similarities end because most climate startups don’t just work with software; they look more like Apple versus Google. 

 

Google is one of the greatest startup stories. They raised money from angels like Jeff Bezos. And then notable VCs like Sequoia and Kleiner. Then they went public. This is what most VCs and startup founders aim to replicate. But the early fundraising story for today’s most valuable company, Apple, is likely a better reference. Chapter 2 of our Climate Startup Playbook is on climatetech startup finance. 

 

Other good reading 

We think early-stage fundraising will remain very challenging in 2023. Yes, multiple sources note the abundant “dry powder” in geographies like the EU as well as specialist climate funds. But the fundraising dynamics we see suggest this is a small part of the current story. First, many VCs are spending more time with existing portfolio companies, so they have a time allocation problem. And there remains a bad habit of announcing funds before they’ve been completely raised, so it’s unclear how much actual dry powder there is. And finally a lot of this AUM is in large, later-stage funds. 

 

As we note in our new fundraising playbook, revenue-based finance is having a moment and it seems that other types of credit options are also increasingly popular. It’s great to see the end of the “VC good, debt bad” reflexive response from startup boards, though it does increase fundraising complexity. Still, VC is core for startup funding and we’re seeing a return to old rules of thumb from the 2007 early-stage investing, when unicorns were hard to find and syndicates were essential. One clear takeaway for most investors and founders should be to focus on profitable growth. Even some of the most reputable VCs are being reminded that there are no shortcuts. It’s more critical than ever for founders to do their diligence on investors, especially on round leads. There will be many more failures in the coming months and lots of opportunities to learn. In climate this is going to be amplified by investment themes going in and out of favor.  

 

Voluntary carbon markets are seeing a lot more headwinds. The Science Based Targets initiative reiterated the view that scientific consensus agrees on prioritizing abatement of emissions before efforts like carbon removal. We think this is going to become an ever clearer signal to the private sector to stop trying to use gimmicks like junk carbon offsets. Voluntary carbon markets are going to struggle as more firms realize they’re likely doing more damage to their brands and should be investing in direct mitigation that increasingly means better, faster, and cheaper solutions for their core business. Some offsets might be scoped into regulated markets like the EU ETS, but a recent WWF report pointed to failures of the market to curb industrial emissions. 

 

Adaptation is getting more attention, even if clear impact pathways are harder to see. The New York Times explores how climate risk is shaping decisions about where to retire. Insurance rate increases and shrinking coverage continue to raise alarms in real estate markets like Florida. And climate is starting to change food production too. 

 

Micromobility is getting messy. Shared services are struggling, but ownership of ebikes, scooters, and onewheels is surging. Even as cars had their deadliest year, there are multiple campaigns calling into question micromobility safety. In the Netherlands, delivery couriers on e-bikes are being stopped by police for suspected speeding. In NYC, buildings are banning any vehicle with a battery, over concerns about recent battery fires. What’s actually happening with Onewheel and the CPSC? Micromobility is likely a bigger threat than electrification, to automobile sales, as two-car households discover 1 car + micromobility. It’s going to take some work to counter the fear, uncertainty, and doubt until automotive OEMs begin to see the opportunity, as BMW, Jeep, and Porsche are doing. 

 

Amplify 

Swell Energy recently raised a round, as Forbes notes: How Virtual Power Plants Have Gone from Geek to Must-Have Chic. A Heat Pump With DIY Installation Can Decarbonize Public Housing is talking about Gradient. This Week in Startups featured smart vents with Flair’s Dan Meyers. The team from Renewell highlights their approach to Turning Leaky Oil Wells into Renewable Energy Storage. 

 

On the adaptation front, Irving Fain, CEO/Founder, Bowery Farming talks with Goldman Sachs as it becomes clear that indoor vertical farming is decreasing costs and expanding crops. And One Concern’s climate risk modeling platform is featured as one of the 17 Ventures That Embody the U.N.’s 17 Sustainability Goals. 

 

Stonly and Zeev are talking about climate investing and fundraising strategies in the coming weeks. 

 

Asks and offers 

Our next fellowship program starts in January. Fellows work on everything from new investment research to building out Sync, our platform for founder and investor introductions. Application deadline is December 15th. 

 

Applications are now open for CIV:LAB’s Climate Fund I in NYC. The grant-making fund will support climate programs and organizations focusing on technology, workforce development, and education with grants ranging from $10k to $100k.

 

Newlab’s Founder Fellowship is returning for another year to support underrepresented climate and urban tech founders in NYC as you build solutions to our planet’s biggest challenges. 

 

Please don’t tell the Fed Chair. There are 410 opportunities across 65 Third Sphere portfolio companies: for instance, Sr Mechanical Design Engineer to make space-saving, robotic furniture with Bumblebee Spaces; Lifecycle Marketer to do stealth things with Chewie; High Performance Building Director to help automate high-performance building design with the Cove Tool; Supply Chain Manager to help Gradient deliver DIY heat pumps; Chief of Staff to help Thalo Labs wrangle carbon. 

 

Yes, you should forward this email to that person you just thought about.

 

Best.

Third Sphere Team

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You can find our previous updates here.