“We will create God and then ask it for money.” – Matt Levine on OpenAI and the ultimate business model.

In the meanwhile, we’re going to ask you for money by offering you a mix of fun and planet saving products from our portfolio. We’re launching the Third Sphere Holiday Store; and if you hit reply, we’ll send your code for a free pair of Third Sphere socks. We hope the launch video will bring you some holiday cheer too.

 

New climate capital unlocked

The Cat (catastrophe) bond market has exploded in recent years, with outstanding bonds reaching a record $56 billion so far in 2025, up from $49.5 billion record year in 2024. These financial instruments allow insurers and governments to transfer disaster risk to capital market investors, who receive attractive yields but may lose principal if a specified catastrophic event occurs.

Beyond the overall increase in the cat bond market, there is something more noteworthy – cat bonds only provided post-disaster payouts—essentially functioning as insurance that kicks in after hurricanes, earthquakes, or other catastrophes strike. But for the first time, North Carolina’s $600 million cat bond demonstrates a new approach: it earmarks $2 million annually specifically to incentivize homeowners to install wind-resistant “super roofs,” and the bond’s pricing adjusts as the portfolio becomes less risky.

By linking coupon payments to infrastructure improvements and mitigation measures, these bonds could unlock billions in private capital for climate adaptation, fundamentally shifting cat bonds from reactive insurance tools to proactive prevention financing mechanisms. More from Bloomberg.

Customers are increasingly willing to pay for resilience upgrades, often because they’re opting for higher deductibles to control insurance costs and then putting together their own mitigation plans. Bloomberg again with the adaptation and resilience investment imperative.

And the driver of GDP growth in the US that’s not data center investment? It’s disaster recovery.

 

Intelligent work

As the self proclaimed connoisseur of financial shenanigans, Matt Levine has long been required reading for our team. So it was interesting to see him tease out some recent announcements from OpenAI. OpenAI has a $500 billion valuation largely as a bet that a lot of the value of AI will accrue to its builders, but it could hedge that bet by owning the users too. Or more specifically having a stake in regular businesses that it acquires and then adds AI to make those businesses better. Interestingly, one of OpenAI’s earliest investors has a similar view. Vinod Khosla explains why enterprises will struggle against AI native companies.

This certainly reflects our own bias. The AI and energy stack is interesting, but it’s been more interesting to us to meet founders putting the AI stack to work to build full stack AI companies in areas from architecture to transportation. There is value in taking the time to play with new tech and incumbents often aren’t set up well to do this, unless they’re relatively young and/or generating a lot of cash like the mag 7. If that’s true, then OpenAI is right to worry that selling AI at a premium might be less interesting than owning and transforming traditional businesses with AI.

We still believe that most of the disruption from AI will be in the knowledge economy, but those bits are coming for the atoms too. Yes, there are great recent demos of humanoid robots running, but real world automations are breaking into a sprint and these aren’t just demos.

In our own businesses, what’s perhaps most interesting is some of the ways that AI is helping with Speedstrapping – i.e. not needing much VC in the first place. For example, LLMs might help automate customer discovery, reducing the time and cost and failure rate of getting to product market fit. Here’s the research paper on how LLMs reproduce human purchase intent.

Rapid change and uncertainty isn’t just keeping us busy. Some of our favorite finance leaders have recently passed the baton. This is across hedge funds, asset management, and VC. Is it AI craziness to blame for at least 2 of the 3? Who else might be looking for an exit door soon? There certainly seems to be a replay of the housing crises happening with Credit Default Swaps, now being used as insurance against record breaking levels of AI & data center lending.

 

Holiday reading 

Poor Charlie’s Almanac – it’s a classic and it’s free. And it seems more relevant amidst technology uncertainty. Another benefit of running a business? It meas gets more contact with reality. When are customers willing to try new technology? Likely during the holidays. Want a simple way to stay top of mind with investors through the holiday season? Send updates – and you can just share this with your fav LLM to make sure your emails meet this template guide. All it takes is for one of your attempts to work out.

Founders are already citing the second chapter of our Speedstrap Playbook in their fundraise memos. Speaking of Speedstrapping, here are a few ideas on how you can compete for talent without big paychecks.

Jobs and Opportunities

Thalo Labs is looking for a Director of Software Engineering and Machine Learning to accelerate urban decarbonization by building the technology that measures, reduces, and captures greenhouse gas emissions in real-time at buildings. Wonderfil is looking for a California-based Software Engineer to join their team of innovators creating the most reliable refill technology for liquid and cream products. Singularity Energy is hiring their first Forward Deployed Engineer to work directly with utilities, grid operators, and corporations implementing real-time carbon tracking and grid decarbonization tools. Revivn is seeking a Director of Sales to drive growth in their hardware lifecycle management business.

There are 167 opportunities available across Third Sphere portfolio companies.

Portfolio News

Did we mention our holiday store? One good way to understand what’s happening across our portfolio is by looking at what you can purchase; from Future Motion’s latest electric micromobility offering, Antic, all the way to next gen fire suppression options from Fire Dome and Sonic Fire. Or maybe you’re curious about how far zero waste has come? Multiple products now use Shellworks compostable packaging or you could buy a Swell Cycle board 3D printed from bio-based material. There are so many teams offering consumer products that are just better, faster and cheaper and better for the planet too.

Outside of the consumer world, there is at least as much encouraging activity. Urbio’s district heating modeling platform is now available EU-wide. Focal is warming up hearts and even more SF venues. Wild Technologies is reinventing towing, solving a major pain point for gas and EV-powered vehicle owners alike. Plentify raised a series A round to export energy management solutions.

 

Third Sphere Updates

One team update we know you all have been waiting for — Stonly won his fight! And Miela sailed an 111 year old Norwegian ship down the pacific coast.

Let us know if you plan to be at CES this year. We’ll get a few folks together to walk the floor or meet up for a drink. Here’s to more fun sidequests in 2026. Happy holidays.

Best.
Third Sphere Team

P.S. Know founders we should meet? The companies thriving today were not working in popular areas when we invested. Our criteria are pretty simple – great team, bad logo, working demo, no customers and the potential to have a huge impact in some area of climate (probably the one that isn’t getting much media coverage right now).

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