On May 28, 2020, GreenBiz hosted a webcast, “This is Climate Tech,” to discuss several timely topics related to the emerging industry. Climate tech is a rapidly growing industry that offers innovative products and services created to combat the negative effects of climate change. It differs from “cleantech” (a term that’s been around since the early 2000s) because it focuses on solutions to climate change issues and empowering corporations, governments, and individuals to make a positive impact on the climate. Such solutions include geoengineering, alternate energy, cleaner water, solar radiation management, afforestation, and more.
The topics covered in the webcast included the impact of COVID-19 on climate tech, the investing landscape of climate tech companies, and what climate tech entrepreneurs need to do to succeed. The three panelists featured on the webcast are long-time venture capitalists with extensive experience and knowledge of the industry: Nancy Pfund, founder of DBL Partners; Andrew Beebe, managing director of Obvious Ventures; and Andrew Chung, founder and managing partner of 1955 Capital.
Chung founded 1955 Capital to find solutions to global challenges in several industries including healthcare, education, agriculture, and sustainable manufacturing. The investment firm has focused on providing sustainable and scalable solutions to solve the pressing challenges of developing nations. A graduate of Harvard and Wharton, Chung has had 15 years of experience with climate-focused businesses. As a general partner at Khosla Ventures, he managed $500 million worth of assets and was instrumental in launching several climate tech companies.
During the webcast, Nancy Pfund shared how the climate tech industry has evolved over the years. During the early 2000s, the majority of investors in climate tech were “tourists” without a long-term commitment to make a positive impact on the climate. That has changed with an increasing awareness of global warming and understanding of the inevitable need for more sustainable energy sources. DBL Partners was one of the first investors for several climate tech companies such as PowerLight Corporation and SolarCity.
Andrew Beebe explained how he specializes in solutions related to sustainable systems. His experience in the climate tech industry began with investing in solar energy companies with a focus on cost reduction, making solar energy more practical to use throughout the world. Beebe noted the emergence of a second generation of entrepreneurs in the climate tech industry. These entrepreneurs were part of larger corporations such as Tesla before they started their ventures, and they’re bringing a higher level of expertise, experience, and acumen to the climate tech industry. Beebe said he believes there’s been a “societal shift” with an “urgency not seen before” in entrepreneurs and investors. People are looking to do something that has a “real impact, and that is measurable, tangible, and predictable.”
Andrew Chung talked about how the climate tech industry has always had a lot of potential, and entrepreneurs have many areas in which they can explore disruption. The global markets for sustainable food, agriculture, and energy are massive, and technologies like solar, batteries, and LED’s have consistently improved over decades with costs and performance improving by an order of magnitude or more. He pointed out that what has changed over the years has been a rise in confidence among corporations, investors, and entrepreneurs, with success stories like Impossible Foods, Quantumscape and Lanzatech, which Khosla backed while Chung was a GP there. Companies are more assured that they can succeed, and investors now have precedents for solid returns on their climate tech investment.
Chung said he believes that the COVID-19 pandemic has been a reminder of the critical importance of investing in disruptive technologies to find more sustainable solutions that can mitigate global environmental risks. According to Chung, a “perfect storm of different elements” has made it “an incredible time to be an investor, entrepreneur, or executive looking at some of these technological solutions.” Chung is especially optimistic about investing in sustainable food supply chains, mentioning 1955 portfolio company Nature’s Fynd, which has already created advanced solutions to the climate crisis and recently received $80 million in funding from investment firms led by Al Gore, Bill Gates, and others.
Pfund said she believes a strong history has demonstrated that global economic downturns provide opportunities for innovation and finding solutions that otherwise weren’t considered important. She observed that some “blockbuster companies” have been formed during difficult times. Beebe agreed with his fellow panel members and added that the COVID-19 situation has shown how the world can collaborate to find a solution to the pandemic — and a larger collaboration will happen to find solutions for the climate crisis.
While discussing corporate investment in climate tech, the panel agreed that corporations have much more interest in it now than a decade ago. Corporate involvement is critical for startups, as it provides a strategic partnership that gives access to greater assets, resources, and markets. According to Beebe, certain sectors such as oil and gas are finding it harder to transition to climate-friendly technologies, whereas the automotive industry has already started to pivot towards greener innovations.
Chung pointed out that it’s up to the entrepreneurs to show corporations and investors what they can do for them. Investors can get overwhelmed by the sheer volume of pitches — so an opportunity must demonstrate a clear differentiation with a unique value, whether the entrepreneur is offering a widget or a service. Investors also look at the scalability and affordability of the technologies. Pfund notes that DBL Partners has established metrics to gauge a technology’s environmental impact. Beebe’s method is not as specific, especially for early-stage startups; he believes in looking at the founders’ values and assessing whether they’re making a long-term commitment to climate goals.
The panelists also discussed stimulus packages for the recovery of the green economy. Pfund asserted that “policy plays a pivotal role”; if the government puts in policies and regulations that encourage companies to find environmentally friendly solutions and alternatives to their operations, this will act as a catalyst for the climate tech industry. Chung encouraged “entrepreneurs and executives to look at the global picture of these types of stimulus packages” to have a broad mindset and evaluate if their solutions are better suited for specific regions of the world. This could help them partner with certain governments that may be supportive of the particular sort of solution being offered by the entrepreneur.
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