\n<\/p>\n
Climate tech couldn\u2019t escape the frothiness that engulfed the startup world earlier in the decade. For both founders or venture capitalists, it was tempting to raise money. Interest rates were low, money was cheap, and investors looking for better returns were hungry to get in the game.<\/p>\n
Instead, Clean Energy Ventures took a different approach, and it appears to be paying off.<\/p>\n
\u201cWhen COVID hit, we really had to do some introspection and say, \u2018Look, we need to be super careful here. This is looking like a bubble.\u2019\u201d Dan Goldman<\/a>, co-founder and managing partner at Clean Energy Ventures<\/a>, told TechCrunch. His firm raised its first fund years before the pandemic, but it still hadn\u2019t deployed all the capital. \u201cWe tried to remain really disciplined during that period.\u201d<\/p>\n But as the pandemic bubble shrunk, so too did the amount of dry powder in Clean Energy Ventures\u2019s first fund. Late in 2022, Goldman and his colleagues started raising a second. Within six months, the team exceeded their initial target of $200 million. \u201cWe took a little bit of a pause and started making investments,\u201d he said.<\/p>\n Institutional investors soon said they wanted in. \u201cThat\u2019s when we asked our existing LPs \u2018Hey, can we go up a little higher than we originally targeted?\u2019 And they were very supportive of that,\u201d Goldman said.\u00a0<\/p>\n That little bit extra ended up pushing the total fund to $305 million, a hefty increase from the initial target and quite a bit larger than the firm\u2019s first $110 million fund. Clean Energy Ventures will continue to focus on early stage climate tech startups, though it will also add what Goldman calls \u201cpre-growth\u201d investments.<\/p>\n \u201cThose will typically be larger checks, maybe a little bit higher valuations. The startups will have de-risked the technology, and they\u2019ll have a product in the market, but still be at the early stages of market adoption,\u201d he said. \u201cWe\u2019re seeing some gaps in the market around some technologies in that area.\u201d<\/p>\n Such gaps have become a growing concern among investors, who recognize the particular challenges that hardware-heavy climate tech startups face on the road to commercialization. It\u2019s been called the \u201cvalley of death<\/a>\u201d or the \u201cfirst-of-a-kind\u201d problem, and investors have been experimenting with different approaches to ensure that their most promising portfolio companies can cross the chasm.\u00a0<\/p>\n For Clean Energy Ventures, the new fund will reserve 30% to 40% of capital for follow-on investments into companies that fit the \u201cpre-growth\u201d profile that Goldman referenced. The firm will also consider a \u201cwide range of different financial instruments,\u201d he added, to help bridge the gap. Initial checks will range from $500,000 for a smaller seed round up to $8 million for a Series A. Total investment per company, including follow-ons, will average around $15 million, Goldman said.<\/p>\n Among the institutional investors committing to the fund are Builder\u2019s Vision, Carbon Equity and the Grantham Foundation. Goldman said that industry LPs from Turkey, Thailand and Germany committed, too.\u00a0<\/p>\n \u201cThey said, \u2018We want to bring more technologies into our countries, we want to build a manufacturing base in our countries,\u2019\u201d he added. \u201cThey really like our focus on greenhouse gas emissions.\u201d<\/p>\n<\/div>\n