Mia Dawara, Ian Rountree, Mona Alsubaei, Abe Yokell, Sierra Peterson, Namratha Kothapalli, Shayna … [+]
Climate change and sustainability have been hot topics for decades, but progress has been painfully slow and the stakes get higher with every year that passes. Will 2023 be the year this begins to change thanks to new innovations in climate tech?
Between 2006 and 2011, CleanTech 1.0 saw the sharp rise, and even steeper decline, of climate-focused technologies. By 2015, VC investors lost more than half of the $25 billion they invested in CleanTech 1.0, thanks to inflated optimism around consumer behavior, unscalable technology, and supply chain setbacks.
This time around with ClimateTech 2.0, there’s optimism that we’re finally on the right track. While public officials and governments worldwide are setting regulations to enable a net zero future, sustainable technologies are also becoming more cost-effective. The price of wind and solar power has dropped 70-90% over the past decade. These evolutions carry massive implications for the future and feasibility of this new frontier in climate technology.
In preparation for the New Year, I spoke with leading venture capitalists focused on climate tech. What are their predictions for the year ahead?
#1: Climate tech will emerge as a bright spot in an otherwise gloomy environment
Abe Yokell, Co-Founder and Managing Partner, Congruent Ventures
“As tech and crypto retrench amid the economic downturn, climate tech investing will emerge as a relatively predictable safe haven for entrepreneurs, tech refugees, and investors. The inevitable impacts of climate change, alongside the recently passed Inflation Reduction Act, will create the conditions/precedent for a long bull run across the climate tech landscape.”
#2: “Future compatible” will be the new name of the game
Hampus Jakobsson, General Partner, Pale Blue Dot
“More and more companies and funds will realize that ‘climate tech’ isn’t only ‘carbon tech.’ It also means doing things that are ‘future compatible,’ such as using EVs, optimizing energy-intense processes, and making supply chains more transparent.”
#3: Hybrid and electric technologies will expand from passenger vehicles to trucks, planes, and boats
Ian Rountree, Founder and General Partner, Cantos Ventures
“Trucks, planes, and boats will begin to electrify (or at least go hybrid). Improved batteries, more efficient electric motors, and hybrid technologies extend range enough to apply to more than passenger vehicles.”
#4: To tackle emissions from the food system, we will look under our feet to fungi and soil
Shayna Harris, Co-Founder and Managing Partner, Supply Change Capital
“If we are going to tackle our great climate challenge, we have to address the food system, as it accounts for 1/3 of total emissions. I believe the answer is under our feet. First with fungi—the acceleration of fermentation-based solutions to create new, clean, protein-rich foods has the power to transform waste into food, and we are just scratching the surface of this deeptech innovation. Second with soil—as a critical carbon sequestration tool, it is imperative that we support regionalized , regenerative solutions, and this requires climate-first agtech, supply chain tech, and fintech solutions.”
#5: After years of promise, distributed and connected energy assets will enable scale in the utility power markets
Abe Yokell, Co-Founder and Managing Partner, Congruent Ventures
“Similar to mobile in the 2000s, distributed energy resources across solar, batteries, EVs, and flexible building loads such as heating, lighting, and air conditioning have been scaling without yet hitting the mainstream. In 2023, we will see massive scaling across the industry with large impacts to the overall utility power mix on the back of fundamental economics, the Inflation Reduction Act, and overall investment interest.”
#6: Climate investors will get serious about fission
Ian Rountree, Founder and General Partner, Cantos Ventures
“Investors will get serious about fission in 2023. With well-funded fusion energy projects well underway, it will dawn on more investors that fission has been relatively under-invested––and may well be our best shot at decarbonizing the grid fast enough to matter.”
#7: There will be a carbon credits scandal in 2023
Hampus Jakobsson, General Partner, Pale Blue Dot
“A lot of companies have raised money for creating, verifying, and selling carbon credits (which obviously are conflicts of interest), and at least one of the ‘success cases’ will either fail, fold, or mess up in 2023 due to malpractice in at least ‘opaque practices.’ This scandal will be a setback to the industry in both purchases and funding, at a time when we don’t need that.”
#8: The new generation of climate technologies will need to embed trust and transparency
Mona Alsubaei, Analyst, Union Square Ventures
“The recent capital and talent relocation to various climate-related markets brought exciting changes in the stakeholders involved, market dynamics, incentives, and economics. For example, the future electrical grid is bi-directional, with more transactions to settle and more participation from distributed energy resources (DERs) and smart devices. In carbon markets, we see a shift from lower quality credits, reliance on buying through intermediaries, and slow verification through few registries. Instead, there is more innovation in carbon removal projects, sales processes, measurements, and verification tools.
As these two markets and others continue to evolve, ensuring trust and improving access for new players are both crucial. Examples of how these are implemented could be: easy carbon measurements and verification to allow smallholder farmers to participate in carbon markets, or platforms to allow individuals to trade and sell in wholesale electricity markets.”
#9: The 1.5°C climate target will be missed, making climate adaptation and mitigation solutions critical
Namratha Kothapalli, Principal, Speedinvest
“We are pursuing investments in companies embedding climate adaptation into mitigation solutions. There are several emerging companies that touch on these themes across water, food & agriculture, heating, and cooling that mitigate and adapt at the same time.
Our rationale is that it is now very clear that the 1.5°C climate target is going to be missed. While reducing the severity of climate change is a worthy investment and avoiding the increase in every fraction of a degree matters, we also need to be prepared to adapt to the most severe consequences of elevated levels of greenhouse gases.”
#10: We’ll see increased focus on climate solutions protecting the most vulnerable
Mia Dawara, Partner, Lowercarbon Capital
“In 2023, we’ll see an increased focus—from investors, philanthropists, and government—on buying more time for communities and ecosystems as the impacts of climate change play out on a larger scale and with greater intensity, disproportionately impacting those who are already most vulnerable (as we saw this year with Hurricanes Ian and Fiona, and with devastating heat waves and floods wreaking havoc from Pakistan to the UK). In the year to come, we’ll see a push to define the landscape of scalable investment opportunities in adaptation and resilience and to identify the technologies and business models that will give us the best shot at protecting lives, livelihoods, and the natural environment while we move in parallel to rapidly curb emissions and suck carbon dioxide out of the sky.”
#11: 2023 will be the year of tech talent migration to climate tech
Sierra Peterson, Founding Partner, Voyager
“We’re going to continue to see entrepreneurs from household name tech companies think big about building in climate tech, bringing all their experience, their networks, and their enthusiasm to a market ready for decarbonization. These are people with significant experience in building for global scale, and they’re seeing billion-dollar climate business opportunities in transforming trillion-dollar legacy sectors and systems.”
#12: A new breed of nimble software-focused climate startups will emerge
Mar Hershenson, Founding Managing Partner, Pear VC
“Demand from consumers and businesses for climate solutions is accelerating. More founders are building climate companies. These are not necessarily the traditional heavy deeptech climate companies. We will see a new breed of nimble climate-focused companies.”
In conclusion
Sustainability and climate tech will be front and center in 2023, and the experts all agree it will be a year of forward progress. It has to be, because our planet can’t afford to wait much longer.
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