The Next Wave of Climate Tech
Everyone is bullish on planet-forward innovation right now. Our investors share what they think will emerge from the pack.
Climate change has never been more prevalent or prominent in our daily lives, from the movies and shows we watch to how we shop and dine to the “once-in-a-lifetime” weather events we experience from coast to coast. But rather than viewing global warming as an insurmountable problem, bold entrepreneurs have galvanized around workable solutions to address its causes. As investors who bet on those entrepreneurs and the industry-transforming startups they’re building, VCs have a unique perspective on what “investing in the planet” looks like at scale. So we asked Revolution Growth Partner, Kristin Gunther, Revolution Ventures Partner, Clara Sieg, and Rise of the Rest Principal, Mahati Sridhar, for their thoughts on the current and future state of climate innovation. Here’s what they had to say.
“As investors with capital to put to work, we have to have a ‘challenge accepted’ mindset.”
What does investing in our planet mean to you as a venture capitalist vs. as a consumer?
“As investors, many of us recognize that we can make a large-scale difference by nurturing the seeds of change that will give us a chance of staying under the 1.5-degree threshold set by The Paris Agreement. While many think achieving that goal is unlikely, as investors with capital to put to work, we have to have a ‘challenge accepted’ mindset.” — Kristin
“I look for tech opportunities that enable sustainable B2B change versus small lifestyle changes. Our portfolio company GoodBuy Gear, for example, is leading the online recommerce movement for baby and kids gear because they empower retailers and brands to embrace sustainable practices while also supporting parents with more accessible price points.” — Clara
“While I have faith that some companies will proactively move toward environmentally sound practices on their own accord, I also think the government stepping up and stepping into the climate conversation will force meaningful change.”
What industries are ripe for transformation from a sustainability standpoint? What spaces are you watching?
“Industries like construction, commercial real estate, and transportation and logistics are looking into sustainable practices as regulatory pressures become more active over the next 5–10 years, requiring compliance. And while I have faith that some companies will proactively move toward environmentally sound practices on their own accord, I also think the government stepping up and stepping into the climate conversation will force meaningful change within industries that are hugely price sensitive and more removed from the sustainably-minded consumer.” — Mahati
“Climate change might finally push agtech to the forefront after years of slow adoption. Farming generates a whopping 10–15% of the world’s GHG emissions. But on a positive note, a number of really exciting precision ag companies are addressing this issue by reducing herbicide usage in a way that, importantly, generates ROI for the farmer. We recently invested in Carbon Robotics, which makes hardware-enabled software that uses AI/machine learning to identify weeds and kill them with lasers — eliminating the need for herbicides while increasing crop yield and improving soil conditions. In working with the company, I learned the key role that regenerative agriculture plays in decarbonization and our ability to feed future generations.” — Kristin
“Historically, there has been a mindset that what’s good for the environment is bad for the bottom line. That is no longer the case.”
What are some of the biggest barriers for consumers and institutions to adopting sustainable practices?
“Historically, there has been a mindset that what’s good for the environment is bad for the bottom line. That is no longer the case. With shifts in consumer expectations, a downward trajectory on the cost curve, regulatory changes, and opportunities from the Inflation Reduction Act, we’re seeing alignment in what’s good for the planet and good for business.” — Clara
“For consumers, it’s price and convenience. Sustainable goods are fast-approaching price parity with their non-sustainable counterparts. Until then, some consumers will opt to pay a premium for more sustainable products/practices while many won’t because of financial and accessibility barriers.” — Mahati
“The ‘why now’ is much stronger. Awareness is higher; the technology and data exists; and the global community understands and is invested in progress.”
Why do you think climate tech holds more promise today compared to the first wave of investing in the early 2000s?
“The first wave of cleantech investment was largely into companies making physical products (like solar panels) on very long timelines. These weren’t a match with the venture model as they were hard to scale, capital intensive, took many years to commercialize, and many of them relied on renewable energy sources that were astronomically expensive. Today, we’re seeing climate-focused businesses with models that work for VC returns: marketplaces for carbon credits, plant-based proteins, robotic recycling sorters, etc. Solar and wind prices have also come down exponentially and are really no longer a barrier. On a broader level, sustainability and climate have gained favor across the general population as well as the private and public sectors, which greases the skids for the startups launching today (whereas founders in the 2000s were swimming upstream in so many ways). As a long-time investor that has witnessed both waves, I’m convinced that this time will be different.” — Kristin
“The ‘why now’ is much stronger. Awareness is higher; the technology and data exist to track, identify, and target outcomes to reduce adverse climate impacts more closely; and the global community understands and is invested in progress toward more sustainable practices.” — Mahati
“It’s clear the [Inflation Reduction Act] will serve as a catalyst across the entire startup ecosystem.”
How might recent legislation support the evolution of the sector?
“The Inflation Reduction Act committed an astonishing amount of funding to support climate initiatives and technologies. We are just starting to understand better which sub-sectors might be the top beneficiaries, but it’s clear the legislation will serve as a catalyst across the entire startup ecosystem. The Farm Bill has also allocated funds to precision agriculture and, if reauthorized, will likely allocate even more to helping farmers transition to organic and regenerative practices.” — Kristin
