Behind the numbers at SOSV’s Climate Tech 100
For more than a decade, SOSV’s founder and managing partner, Sean O’Sullivan, has been putting venture investing to work in support of climate tech startups.
It wasn’t until last month, however, that we looked across SOSV’s five accelerator programs(1) to build a list of all our investments in climate tech. We decided to highlight a core group by creating the SOSV Climate Tech 100, a list of SOSV’s top companies addressing what we believe is the one of the greatest challenges facing mankind.
When we sharpened our pencils to look at the Climate Tech 100’s investment results, we were pleasantly surprised by what we found. As of April 2021, they have raised $1.85 billion to date and have a total valuation of $5.65 billion. The average company on the list is just four years old, and SOSV has invested $89 million, in most cases as the first investor.
From our standpoint, those results show that climate tech companies can attract the capital and generate the valuations that would please any VC. We know that the first wave of investment into climate tech companies, in the period from 2006 until 2011, performed terribly, and there is still some fear that Climate Tech 2.0 will also fall flat. We hope that SOSV’s results to date help dispel those fears.
After publishing the SOSV Climate Tech 100 last week, we had a lot of questions to explore. We’ve answered a few of them below, specifically around follow-on investors, the list breakdown by climate tech categories, and the distribution of our founders by geography, gender and training.
As the bar chart below shows, early SOSV funding is dwarfed by follow-on rounds from other investors. The dark bars below reflect the $89 million SOSV has invested while the lighter blue bars reflect the nearly 20x external leverage provided by other VCs, much of it at later stages, to amass nearly $2 billion in funding-to-date for the Climate Tech 100.
The follow-on funding situation today stands in stark contrast to a decade or more ago, when early stage climate tech investing was made very hard due to the absence of follow-on funding. That started to change around 2014, just 7 years ago, when we started our first life sciences accelerator, IndieBio. Today, there is no shortage of great investors; nearly 700 investors have written checks to the SOSV Climate Tech 100 companies.
We would like to express our appreciation to a select group of Climate Tech 100 investors who are clearly championing climate tech, including ADM Ventures, Bezos Expeditions, Bill Gates, Braemar Energy Ventures, DBL Partners, DCVC, Draper Associates, DFJ, Horizons Ventures, Ingredion, Khosla Ventures, Mayfield, Menlo Ventures, NEA, Prelude Ventures, Sofinnova, Softbank Vision Fund, Temasek, Tyson Ventures, and Unovis/New Crop Capital.
We are deeply grateful to every investor who is investing in a better, more sustainable planet. (To see a broader list of VCs active in climate tech, check Climate Tech VC.)
Climate tech categories
To help make sense of the companies in the Climate Tech 100, we assigned each to one of the five industry categories corresponding to the top five contributors to the 50 billion tons of greenhouse gas emitted each year.
SOSV’s investments do not map evenly to these emitter categories. We are very deep in biotech and food related startups, for example, thanks to IndieBio’s work, and we have fewer startups companies in the other four categories.
- 🍎 Food (50)
- 🏭 Manufacturing (28)
- 🚦 Transport (9)
- ⚡️ Energy (7)
- 🏢 Buildings Systems (6)
Below is a map of the full list by category.
Not surprisingly, the size of the funds raised by category mostly tie to the number of companies SOSV has in each category, with the exception of transportation, where SOSV has only nine companies but also some of the oldest and therefore most heavily funded in the portfolio. The companies in energy and building systems are similar in number but very young, and as a result have not raised large rounds yet.
Across all categories the range of technologies and market approaches is mesmerizing to watch.
The majority of SOSV’s most visible startups are from the IndieBio program and offer ‘alternative proteins” that use a variety of sources and technologies, including plants (NotCo), cell-cultured “meat without animals” (Memphis Meats, Finless Foods, Because Animals), fungi (Prime Roots), algae-based (New Wave Foods), bioreactor-grown (Perfect Day, Geltor, Clara Foods) and even insect-based proteins (LIVIN Farms and Hexafly for animal nutrition).
As cultured meats and other alternative proteins mature, another tier of startups has surfaced to support scale-up manufacturing and development, and we’re seeing some of those companies in our HAX program, including a platform for rapid enzyme development (Allozymes) and next-gen bioreactors (Unicorn Biotech).
In SOSV’s second most active category, most companies are at work either improving existing processes or introducing new materials.
In the fashion industry, for instance, we are backing startups that minimize defects in fabric weaving (SmarTex), fabricate eco-friendly materials (AlgiKnit, Spintex), create bio-engineered dyes (Huue, Pili), and offer custom jeans manufacturing (Unspun).
The opportunity for eco-friendly and recyclable materials touches countless sectors, and the 100 list for manufacturing includes wood (Lingrove), leather (MycoWorks), baby diapers (Zymochem), hair extensions (Aja Labs) and recycling / performance materials / upcycling waste (Novoloop).
The environmental benefits come from avoiding or reducing petroleum-derived materials, animal destruction, toxic chemicals, long-range logistics, and waste in general.
This category is probably the most visible because consumers experience electric vehicles and ride-sharing services every day.
SOSV’s most successful investments in this category are GetAround (car sharing) and JUMP Bikes (e-bike sharing, acquired by Uber and now part of Lime). As early stage investors we are looking for the ‘next big thing’ in transport, in particular startups servicing less visible industries, like shipping (Neptune Robotics).
From a technology standpoint, energy is one of the most difficult categories because it demands heavy R&D investment and attracts fewer entrepreneurs; at the same time, energy breakthroughs are incredibly valuable because improved energy efficiency helps all industries reduce GHG emissions.
Among the SOSV Climate Tech 100 startups in this category are VoltStorage (Redox Flow residential battery), SunGreenH2 (green hydrogen technology deep decarbonisation), and Green Li-ion (battery rejuvenation).
🏢 Buildings Systems
Heating, cooling and more generally making our homes smarter is urgent due to an increasingly erratic climate and to the billions of people who may soon want and can afford to cool and heat their homes.
The Human Factor
It takes determined, resourceful, passionate founders to make any startups a success. When we studied the attributes of the SOSV Climate Tech 100 founders, we saw some patterns that stood out in contrast to our overall portfolio.
Highly trained scientists over-index among the leadership of the Climate Tech 100 companies, with 40% counting at least one PhD co-founder, with the highest proportions in the manufacturing (particularly biomanufacturing) and energy categories.
That may reflect the abundance of PhDs looking to fill relatively few tenure-track university jobs, which has helped more scientists look to entrepreneurship as a career option. Until recently, many scientists looked to the corporate world or government as their sole alternative to academia, which usually meant foregoing their research and science commercialization interests.
SOSV’s programs at IndieBio and HAX offer science entrepreneurship as a ‘third way’ by supporting breakthrough research. Scientists can turn their work into commercial applications with the help of pre-seed funding, the SOSV programs’ well staffed and equipped lab environments, and follow-on investment from top tier VCs.
In our Climate Tech 100 portfolio, 40% of the companies have at least one female founder. Their proportion is higher in food and manufacturing than in energy, transport and building systems. This may reflect the fact that women now outnumber men among life science graduates (in the US, women earn 59% of bachelor’s degrees in biological and biomedical sciences). In any case, the 40% is remarkable because according to the ‘Female Founder Report 2020’ published by Crunchbase, only 12% of tech startups in 2019 had at least one female founder.
The companies on the SOSV Climate Tech 100 list are based in 14 countries, with the US (65), Canada (9), Singapore (6), and the UK (6) at the top. Founders themselves come from dozens of countries.
In contrast, only 46% of the companies in our complete, 1000-company portfolio (including non-climate startups and numerous software companies) are based in the US.
Why are so many climate tech companies in the U.S.? Most climate tech startups are deep tech, and the ecosystems for deep tech startups are not equally developed around the globe. To get these companies off the ground requires many STEM graduates, access to lab space and equipment, and grant funding and a deep bench of funders who make sizeable investments early. A fluid job market also helps, by reducing the career risk for founders leaving research or academia to try a startup. The U.S. remains a powerhouse across all those attributes, which helps explain its strength in climate tech.
That said, there are other countries and regions rising. Standouts include Canada and Singapore, both coming on fast as startup nations. Much of those countries’ success stems from open-door policies for talented students and engineers from across the planet, matched with startup-friendly policies. Another mover is Latin America, where notable expertise has developed in biotech research and innovation.
The VC Path
What impact the SOSV Climate Tech 100 companies will have on climate in the years ahead is hard to predict, given that many involve radical new technologies and entirely new markets. We hope our climate tech portfolio will produce winners in both the climate fight and returns to our investors. We will only find those winners by accepting that many failures are inevitable, which is a reality endemic to very early stage venture investing.
Fortunately, there are now hundreds of investors with billions in capital to deploy, driven to help scale up climate tech solutions across dozens of product categories. It’s a massive sea change compared to seven years ago. That helps explain why today there are literally thousands of founders in the EU, to take one region, working on climate tech.
As we all work to see remarkable companies emerge and scale, it’s important for everyone to realize that innovation is not linear and, to take one example, we have just barely entered the S-curve in the cell-cultured meat sector.
There were zero companies 10 years ago, and when we invested in Memphis Meats 5 years ago, there were fewer than five. Today, with Memphis Meats is among the leaders as we write this post, there are over 50 startups competing in this space according to data from the Good Food Institute (a non-profit supporting alternative protein innovation), and a new wave of startups is emerging to make the ‘picks and shovels’ to help those companies scale and succeed.
Venture investors excel at driving that kind of technology and market building momentum, and that’s exactly what we need more of now.