What SOSV’s Climate Tech 100 tells founders about investors in the space
On Earth Day, April 22, SOSV published the SOSV Climate Tech 100, a list of the best startups that we’ve supported from their earliest stages to address climate change. There are always valuable insights embedded in a list like the 100. A TechCrunch story captured the investment perspective, and an SOSV post went deeper into the companies’ category breakdown and founder profiles.
One big remaining question is: what can founders learn from the list about climate tech investors? In other words, who invested in the Climate tech 100? We dug into the “who’s who” for those 500+ co-investors and here is what we found.
An active but fragmented landscape
If you think 500 investors in 100 companies is a lot of investors, you’re right. There are clearly a lot of investors interested in climate tech, and most are generalists just testing the waters. For the Climate Tech 100, about 10% of investors invested in more than one startup and only seven (less than 2%) wrote a check to four or more. They included Blue Horizon, CPT Capital, EF, Fifty Years, Hemisphere Ventures, Horizons Ventures.
That pattern tracks well with data from PwC, which found that 2,700 unique investors had backed 1,200 startups in their ‘State of Climate Tech 2020’ report covering the 2013–2019 period. PwC’s report found that only ten firms out of 2,700 made four or more climate tech deals per year on average over the 2013–2019 period. The most active firms are listed in the table below.
There is reason to believe that the fragmentation will diminish with the launch of more funds focused on climate tech. Four billion-dollar-plus funds have launched since 2020 that fit the description (see the chart below.) It’s also encouraging that capital deployed in climate tech grew at five times the venture capital overall growth rate over the 2013–2019 period. Even so, climate tech still only represented 6% of total venture capital deployed in 2019, so there is plenty of room to grow.
The investor who’s who in SOSV’s Climate Tech 100
We looked into the various categories of backers: VCs, CVCs, angels (including celebrities), governments, sovereign funds, family offices, foundations and non-profits.
Most of the venture firms that invested in the Climate Tech 100 were either generalists, including Khosla Ventures, True Ventures and Horizons Ventures, (the Hong Kong-based early investor and serial backer of four of the Climate Tech 100), or deep tech funds such as DCVC, Future Ventures, France’s Elaia, and Australia’s Main Sequence Ventures. It’s important to note that VCs routinely write checks for very early-stage companies, often coming at the same stage as angels. Founders should keep that in mind.
More recently, venture firms that specialize in one or more climate tech categories have started to appear in Climate Tech 100 syndicates. Today, they represent about 30% of the VCs in our data set. AgFunder, for example, is focused on food & agriculture while Braemar Energy Ventures looks at energy startups. Prelude Ventures invests in carbon reduction and Unovis funds companies that reduce the need for animal products. Fifty Years and Future Positive take a broader approach to social good investments. For founders, this new class of mission-focused investors is important to watch.
Various CVCs are keen on climate tech, both to honor the commitments to net-zero (over 100 firms joined the Climate Pledge) and to keep track of innovations in their sector. CVCs represented only about 10% of the total VC group. Specialist CVCs like Ingredion, Whole Foods Market or Tyson Ventures — unsurprisingly, focused on food — accounted for 40% of the CVC group. That said, CVCs account for only about 12% of the VC investments in the Climate 100, which is probably explained by the fact that the average company is only four years old.
Although CVCs may not be rich targets for early stage founders, it’s important to note that corporates can be helpful beyond the cap table by providing contracts for research, pilots, co-operations and distribution, and access to infrastructure, such as fermentation tanks.
They generally support companies from formation to series A. We counted over 150 unique angel investors across our Top 100, and over 70% of the startups who have successfully raised capital had at least one angel investor on their cap table. Angel investors can be great to help startups get off the ground with initial capital and advice. While the majority of angels wrote checks in the $25k to $100k range, some doubled down to go as big as $200k or more, and on rare occasions angels enabled startups to close seed rounds without a VC. The following chart shows the distribution of individual angel checks, with amounts in logarithmic scale, from $1k to over $1M.
Celebrities are also active in climate tech. Natalie Portman and John Legend are investors in our Climate Tech 100 (in the mycelium leather startup MycoWorks), while Leonardo DiCaprio is on the advisory board of the animal-free dairy protein startup Perfect Day.
Not every founder has access to celebrities, but you never know who you might bump into!
Plenty more celebrities are outspoken about climate and putting their money where their mouth is. Bono, for example, has made more than 20 investments through his $5 billion Rise Fund with TPG. Robert Downey Jr. has made seven investments via his Footprint Coalition, and Serena Williams has written checks to Impossible Foods, Pachama and Myro. Elon Musk as usual is taking his own path by underwriting the $100 million XPRIZE for Carbon Removal technologies.
About 10% of startups in our Climate Tech 100 won grants or loans from government entities. Often those funds target early stage R&D.
In the US, the National Science Foundation (NSF) and its Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, dubbed “America’s seed fund,” actively support startups. The Biden administration has requested a $36 billion budget to fight climate change, some of which may find its way to startups through those programs and others.
Other startup backers were regional, national or international organizations, such as the Departments of Defense, Energy or Agriculture, Space Florida, Bayern Kapital (Germany), the Austrian Research Promotion Agency, the Atlantic Canada Opportunities Agency, the New Brunswick Innovation Foundation (Canada) and the European Innovation Council.
Sovereign funds generally invest in assets such as stocks, real estate, bonds and VC funds (including Softbank’s $100B Vision Fund 1), but some sovereign wealth funds invest directly in startups. They generally come in at series A and beyond. Because our Climate Tech 100 companies are so young, only a few have such investors.
One of the most prominent in the Climate Tech 100 is Singapore’s Temasek (>$230 billion AUM as of 31 March 2020), which has invested in the SOSV alternative protein companies Upside Foods (fka Memphis Meats) and Perfect Day. BPI France offers grants and makes investments in many French startups, including SOSV’s Pili (biopigments), while EIT InnoEnergy, funded by the EU as a key part of the European Green Deal, has funded hundreds of startups including SOSV’s VoltStorage (redox flow battery).
Close to 10% of the startups in the Climate 100 received investments ranging from $25k up to $2 million from 30 family offices and trusts. Four of the Climate 100 received funding from four or more of those backers, so there are likely network effects in play. Unfortunately, family offices can be hard to find for those not in the know because they often do not have websites nor announce their investments. To connect with them, founders need to develop their networks and ensure their startups are as visible as possible.
Foundations and non-profits
Climate is a focus for many foundations and non-profits, and large organizations like the Bill & Melinda Gates Foundation, Novo Holdings and the Grantham Foundation appear among the backers of the Climate Tech 100, alongside smaller, more specialized organizations like the CEDAS Foundation, the Straubel Foundation (environment), the Fink Family Foundation (waste & biodiversity) the Westly Foundation (at-risk children in California) Endeavor (impact) and others. Many come in at the earlier stages, from angel to series A, writing meaningful checks that are usually grants. The most visible foundations tend to be in high demand and difficult to reach but worth the effort for non-dilutive funding.
Writing The Climate Tech Investment Playbook
What’s clear from this analysis of the investors in the Climate Tech 100 is the enormous breadth of investors types working across this fast emerging category. It’s important to keep in mind how broad the category itself is — climate tech touches everything from food to energy to construction and more — as well as the outlooks and mission of investors, from sovereign funds investing in food security to hard tech funds looking for revolutionary technologies, to angels (celebrity or not) trying to invest in a better future for their children’s sake.
Founders should zoom in and out across that landscape to find investors who line up with their products and mission. Clearly, there has never been more money lined up against the climate sector, and investors are eager to make an impact on what’s likely to be the trillion dollar opportunity of the century.