The Thwaites Glacier in Antarctica, which is nearly the same size as Florida, is becoming increasingly unstable due to global warming. Researchers are hoping to reach the “Doomsday Glacier” for research this month, but icebergs are slowing them down. The urgency of the climate crisis is growing, and investors are taking note. Climate tech startup round sizes doubled last year, with more than 600 investments totaling more than $40 billion.
With 182 deals completed in Q4 2021, about a third of these were pre-seed and seed. With more entrepreneurs rushing into the fray to tackle one of humanity’s biggest concerns, the start of 2022 shows no signs of slowing down. We polled a worldwide group of investors to learn how they evaluate new prospects and what they’re looking for from the entrepreneurs who approach them in order to better understand the market forces and psychology driving climate tech.
Fundamentally, we’re bullish on the sector. This, I believe, is a current issue that we need to address. We’re food and agriculture investors, so we obviously think of it through that lens. We’re optimistic about voluntary carbon markets, for example. Those appear to be standing. There’s already a lot of flow going on in there. We have a distinct perspective and believe there is an inflection point when there is less corporate participation and more customer involvement. Rather than relying on the Microsofts of the world to buy a boatload of carbon credits, we’re looking into how consumers interact with these markets to address some of these challenges.
All it does, in my opinion, is confirm the idea that it is a significant opportunity. Given its existential character, it’s certainly the biggest opportunity in VC. I regard it as a net positive because I don’t believe there is enough funding available to fully investigate the fundamental issues.
We obviously saw health prospects on the agtech side, given where we’ve just invested. One company is working to improve soil health in order to increase carbon sequestration through better agricultural methods. On the forestry side, I believe something similar might be done. When it comes to carbon sinks, rather than pursuing highly sophisticated solutions like direct air capture, there are natural, established methods. So, if we can accelerate that, I believe it makes a lot of sense from a carbon-reduction perspective.
This is where some of these carbon markets can be integrated with the consumer. For example, consider what Moss is doing in terms of making these credits readily available for a variety of purposes, such as loyalty programs or customer purchases. In terms of engaging with some of these environmental solutions and digitizing those environmental assets, I believe it makes it much more tangible. Those downstream applications are novel, and there may be a larger audience willing to engage with them than just the corporate consumer.
A lot of this is about establishing trust and credibility in the industry. I believe those tools enable us to avoid double counting and track the provenance of these credits. Many of the advantages can be found there. It’s also a means to establish a more frictionless funnel between the projects and some of these applications, where things like quick offsets make a lot of sense, particularly in consumer applications.