Agenda

After soaring to record heights, and even appearing briefly to defy the VC downturn, climate investors in the first half of the year tapped the brakes hard, slowing total investment 20% and deal count 26% year on year, according to Sightline Climate. The slowdown has hit across all stages, and yet there were also massive funding rounds for companies like geothermal juggernaut Fervo ($244M) and hydrogen driller Koloma ($246M), among others. Three of the most experienced climate investors in the business will unpack the latest trends and project what’s next.

One of the most startling statistics in Sightline Climate’s investing report for 1H 2024 was the dramatically longer timelines associated with raising a Series B – 26 months or 2.5 times longer than a year ago. Climate investors have the “dry powder” but they are clearly more wary now. For this panel, we ask three founders who succeeded in closing Series Bs this year to join Sightline’s Kim Zou for a conversation: What does it take to close a Series B in 2024?

Early stage stage climate was the last to feel the chill, but investments in the first half (versus 1H 2023) in seed declined 12% and deal count tumbled 30%, while Series A investment fell 12% with deals down 23%. At the same time deal size for seed rose slightly, up 2%, and Series A rose 16%. Possibly related to all that are signs of category flight: only 13% of investors active in the first half of this year had prior climate investments versus 30% a year earlier, according to Sightline Climate . Our panel of committed early stage climate investors will untangle the trendlines and make sense out of early stage climate investing.

Many heavy capex climate companies are stalling as late stage investors and lenders are balking at the cost of scaling factories. Even if the company succeeds, the dilution can be crushing, or the debt service becomes a huge line item that destroys margins. For many VCs, the sole remedy had been to stay away from capex, and only invest only in climate software and sensing companies. But a new “second wave” of low-capex deeptech is emerging, where factories don’t cost hundreds of millions, and margins are healthy — even in year one.

In its current state, the global fashion industry is wasteful and emissions-heavy, responsible for an estimated 4 percent of greenhouse gas emissions and 4 percent of waste. Part of the answer is to decarbonize textiles, a goal several startups are pursuing. TomTex, for example, makes leather and textile alternatives using 100% bio-based inputs including mushrooms, coffee grounds and seafood shell waste. But how can startups find their way into the supply chains of fashion brands? The good news is that brands like Everlane are waking up to the sustainable materials. Can sustainable fashion technologies take advantage of openings like that? Our panelists will tackle how this conundrum – common across many climate categories – can be resolved.

The Insurance industry has no climate deniers. The frequency of $1 billion+ natural disasters has increased from one every four months in the 1980s to one every three weeks, according to the U.S. National Climate Assessment.  Facing huge losses, big name insurance companies are dropping coverage everywhere from California to Iowa.  At the same time, new insurance approaches based on parametrics (payouts based on weather metrics) and AI-based risk analysis are surfacing to address the property risks of climate change. Our panel spells out the future of underwriting against climate. 

Maritime transport produces nearly 3% of global greenhouse gas emissions, and the UN’s International Maritime Organization declared last year that the industry should take its carbon output to zero “by or around” 2050. Quitting heavy fuel oil (HFO), the predominant energy source today for shipping, will take investment and innovation in everything from new fuels to wind propulsion to reduced hull drag, as well as regulation updates to level the playing field among shipping giants. Setting the course for maritime decarbonization is our panel’s topic.

Hydrogen is a perfect green fuel. Burning it yields only water and heat. Actually producing green H2, however, usually takes electricity and natural gas (“grey” hydrogen in the spectrum), both problematic. An alternative is “geologic H2”(“white” hydrogen), the vast, naturally occurring H2 deposits in the earth’s crust. In theory, they can be discovered and exploited just like oil and gas are today. If that works, renewable energy’s prospects will soar. Earlier this year, Koloma raised an eye-popping $245 million Series B this year to pursue that vision.

Given that global temperatures have hit record highs 13 months in a row, it’s reasonable to ask whether decarbonization can move fast enough. What if extreme weather events produce huge death tolls? One response could be to pump sulfur dioxide into the stratosphere to cool the planet by reflecting the sun’s energy away from earth. Controversial in the extreme, yes, but more than ever the object of well-funded research. Our panel looks at the state of  the debate over this extreme climate tech.

Like every other stage of climate investing, the growth stage declined year-on-year in the first of 2024, down 33% with 13% fewer deals, according to Sightline Climate. On the face of it, that’s a surprise considering the rapid progress of key firms across many categories, many with powerful tailwinds thanks to the IRA and other factors. For big check writers, where are goal posts and what are the best plays? Our panel addresses that question from the standpoint of two major growth investors and a VC eager to see them step in.

Growth investors may have slowed the pace, but a few relatively new startups have nonetheless succeeded in raising huge rounds clearly designed to vault them very quickly into meaningful commercial deployment. The founders at geo-thermal power leader Fervo Energy, home heat-pump champion Aira, and industrial heat innovator Antora have raised more than $1.1 billion in little more than four years. By VC standards, such blitz funding is the outer limits; to have an impact on global warming, it may be the right stuff.

In August, Terrapower’s lead investor, Bill Gates, was in Kemmerer, Wyoming to break ground for Terrapower’s Natrium nuclear power plant, the first in the US to use liquid sodium as a coolant (instead of water) and also the recipient of the largest single federal commitment ever to a private project – 50% of the $4 billion project. Now it has to wait two years for NRC approval; powering up is projected for 2030. In the meantime, investments in nuclear fission grew 18% year-on-year to reach $1.3 billion since 2020, according to Sightline Climate.  Are we witnessing nuclear fission’s second coming? 

Nuclear fusion’s promise of limitless power is the holy grail of the energy sector, but containing the nuclear reactions that power the sun is one of mankind’s greatest technical challenges. So how close are we? Commonwealth Fusion Systems, an MIT spinout, has raised $2 billion and built the novel REBCO magnets required to contain super-heated fusion reactions in its Tokamak “donut” reactor. Commonwealth has projected that its plant under construction in Massachusetts will be on the grid in the next decade. Investment in fusion grew 7.5% year-on-year to reach $4.3 billion since 2020, according to Sightline Climate. How much more will it take?

In 2023, Google and Microsoft alone consumed 24TWh of energy each, the equivalent to the consumptions of 2.3 million US households. As energy big tech’s energy demands explode thanks to the demands AI tech in particular places on data centers,  how is Big Tech attempting to balance that demand-driven growth with net zero decarbonization commitments? Our panel will discuss Big Tech’s efforts to secure clean energy at scale, and what that means for startups in energy. 

At 7-8% each, steel and cement production are responsible for 15% of global greenhouse gas emissions, and in the past 4.5 years investors have funded dozens of startups – $2.8 billion for steel and $925 million for cement – aiming to decarbonize these indispensable industrial sectors. Compared to energy, where winning renewable technologies are well established, the best approaches to decarbonizing steel and cement are far from settled. Both MIT-spinout Sublime Systems and Electra use novel electricity-based (as opposed to heat) technologies to create green cement and steel, and both are on the path to their first production plants – Sublime with an $87 million federal grant (and a $75 million investment from Holcim) and Electra with an $85 million seed round backed by Bill Gates’ Breakthrough Energy Ventures. The greening of steel and cement may hinge on their success.

It’s technically challenging to manufacture lithium-ion EV batteries in high volumes, and just six incumbents – CATL, BYD in China, Panasonic in Japan, and LG Energy, Samsung SDI, SK On in South Korea – produce 80% of the world’s supply. Several battery startups aiming to challenge the Big Six legacy with better technology stumbled badly this year, mostly around production and technology issues. Sila Nanotechnologies, on the other hand, has raised $1.3 billion, including $375 million in June, for its silicon (versus graphite) anode batteries, which promise faster charging and greater EV ranges. Sila’s first plant is under construction, in Moses Lake, Washington, and the firm plans to ship their first EV batteries next year to three customers, including Mercedes.

Many global companies have pledged to decarbonize their business, and a growing number are updating investment teams as a way to find the new technologies. Among the most active are tech and energy-related companies. In this panel, VCs working inside the major corporations Shell, Siemens, and Amazon will discuss how venture fits into corporate decarbonization strategy, how founders should engage with them, and what criteria lead to investment, offtake agreements and acquisition.