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WK633: The next startup crisis and securetech x.0
To help make more effective intros between founders and the right capital sources, we’ve just launched the Capital Stack Compass (creditdb.ai). It’s a database of 300+ lenders and non-dilutive capital providers including equipment leasing, asset finance, project finance, revenue-based financing, and more. Naturally, we built an AI-powered matching chatbot too. Still a work in progress, but live and usable. You can chat with the tool, and contribute or edit provider info if you know lenders we’re missing. Feel free to share with startups or lenders in your network who could use it or add to it. We’d love to know if it’s useful.
Jeff Currie (Carlyle’s Chief Strategy Officer) frames what’s unfolding in the Strait of Hormuz as a supply shock roughly the size of COVID, but in reverse. COVID was a 20 million barrel-per-day demand shock. This is a 20 million barrel-per-day supply shock. The IEA is calling it the greatest global energy security challenge in history. Brent crude is above $110, airlines are cutting flights, and countries from the Philippines to South Korea are in supply chain emergency management mode. And unlike money, “you cannot print molecules” to solve the problem. The disruption cascades through plastics, fertilizers, jet fuel, trucking, petrochemicals, and then into everything those supply chains touch. Several of our portfolio companies sit directly in these disruption paths: Shellworks is replacing petrochemical plastics with bio-based packaging, Nevoya is electrifying trucking fleets, and Applied Carbon produces biochar that reduces dependence on synthetic fertilizers. Startups even beyond the aforementioned categories are smart to prepare for both increased demand, and for fortifying their own supply chains. This might include paying ahead for the next years worth of travel and shipping while it’s still cheap.
Currie also reminds us that the push to renewables and nuclear were born out of the 1973 oil embargo. The original energy transition was about security, not the environment. AI dominance is also fundamentally energy security. You can’t run data centers without secure power. Which helps explain the continued shift towards renewables (despite political pushback). US electricity demand surged 3.1%, the biggest jump in years, driven largely by AI data centers. Solar handled 61% of that growth. For the fifth consecutive year, it topped all new power capacity additions in the US, with 43 GW installed. And US battery manufacturing went from essentially zero domestic cell production at the end of 2024 to 20 GWh by end of 2025, on pace for 96 GWh by year-end 2026. Globally, renewables now account for 49.4% of installed electricity capacity, up from 30% just in 2023. IRENA’s director was blunt: countries that invested in the energy transition are weathering the current crisis with less economic damage. Spain cut its dependence on fossil fuel pricing by 75% through renewables alone. Italy is restarting nuclear plants. And on balconies across Europe, consumers are building their own distributed energy infra. Germany alone now has over a million balcony solar systems. The UK just approved plug-in solar. And plug-in, permissionless solar is seeing its own state-by-state push in the US. Textile re-use is another good example of how to break from depending on (increasingly disrupted) fossil fuel dependent supply chain (cue the shameless RTV plug). And New ESPR rules now ban the destruction of unsold clothes and shoes. This of course benefits climate action too; an estimated 4-9% of EU apparel was being destroyed before consumers ever wore it, accounting for 5.6 million tons of CO2 per year.
While software eats itself, more people than ever are asking how to invest in and build hard tech. As we wrote in WK621, “hardware moats come from places VCs have historically tried to avoid: energy constraints, component supply chains, regulatory limits, manufacturing complexity. These used to be called ‘barriers’ for a reason.” Thankfully, hardware founders love to share hard-earned lessons. The PopSockets episode on Cleantechies is a great speedstrap listen. The company scaled to 290 million units across 115 countries on less than $500K, bootstrapped with insurance money from the founder’s house fire. But even more shockingly, they never raised institutional capital. Zack Anderson’s “Simplify, Then Add Lightness” draws on Colin Chapman’s Lotus F1 philosophy: they won races not by adding power but by removing everything that wasn’t load-bearing. The same applies to hardware startups. And a hardware founder shared his expensive lessons shipping 500 units: cable length specs that caused assembly failures, a heatsink miscommunication that cost half a mold remake, and 0.5mm tolerance errors that combined with coating variations to produce day-one customer complaints. Meanwhile, AI is collapsing hardware design cycles. We noted in WK621 that “the design iteration that used to take weeks now takes hours.” Shaun flagged a thread about tools now generating fully editable, parametric 3D CAD models from text or sketches. He worked in a lab researching this years ago. What took a research team then is becoming accessible to any engineer now. On the software side, customer discovery changes too. A founder who wanted to build vertical SaaS for pest control took a technician job instead of doing customer interviews. Immersion beats research when companies decreasingly grant access because of an overwhelming uptick of slop SaaS pitches. And a technical founder’s first-year-in-sales retrospective offers a useful reminder of a few things that are more important than ever for a shot at any market capture: define clear ICPs, use high-touch personalized sales, run monthly A/B tests, and expect significant ghosting at every funnel stage. AI use is unavoidable if you want to move competitively fast but there’s a catch, and it’s not just avoiding slop. An HBR study of nearly 1,500 workers found 14% are experiencing what researchers call “AI brain fry,” cognitive fatigue from excessive tool use. The tools are powerful, but the true costs and toll on us are still emerging. One developer wrote a piece on how AI code agents produce errors that compound silently at scale. 20,000 lines in a day sounds productive until you realize nobody reviewed any of it.
Flair secured a Series B led by RectorSeal, validating the smart HVAC zoning category and opening distribution through RectorSeal’s contractor network. Focal Heat was named FC Most Innovative. Cove was also featured in FC for its AI-driven building performance optimization. Shellworks announced their Series A for their bio-based packaging platform. Sonic Fire Tech landed an NPR interview on WBUR’s Here & Now, with Geoff Bruder talking acoustic fire suppression to a national audience. Merino launched their $3,800 through-the-wall heat pump, a single-room unit that plugs into a standard 120V outlet and installs in under an hour. TechCrunch profiled founder Mary-Ann Rau’s journey from Apple AirPods firmware to climate hardware. Upshift picked up two media features, including a Climate Capital Substack profile. Kemp Gregory appeared on the Cleantechies podcast discussing orphan oil well remediation. And General Oceans shared Reynko funding news.
The Urban Future Prize Competition is accepting applications through April 27: $120K in non-dilutive funding across Climate Adaptation and Climate Mitigation tracks, plus a spot in ACRE, NYC’s longest-running climatetech incubator. Since 2017, their alumni have raised $515M. Hiring: Our portfolio companies are actively building. Mill is looking for a Senior Firmware Engineer in San Bruno. Singularity Energy needs a Senior Product Manager for their Utility Carbon Platform in Boston. Arbor is hiring a Data Engineer (Austin/remote). Nevoya needs a Director of Transportation in Texas. Shellworks is looking for a Growth Associate in London. Circuit is hiring Driver Ambassadors in Orlando. See all open roles at jobs.thirdsphere.com. Shaun is speaking at an upcoming Climate Week event and you can join by registering here before it fills up. Also during SF Climate Week: Wild Demos The Future of Trailers. Stay urgent, P.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). Did someone forward this email to you? Here’s how you make sure not to miss the next one. You can find our previous updates here. |
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