In 2013, Joseph Dear chiseled the epitaph on the last wave of investing in so-called cleantech, the business of finding more sustainable approaches to generating and storing power. He said that backing cleantech companies was “a noble way to lose money.” (Dear, who managed the investments of Calpers, the giant California state employees’ pension fund, died the following year.)
For sure, the last eight years were tough ones for anyone connected to renewable energy. In Boston, the bankruptcy of Solyndra, a California maker of solar panels, took down RockPort Capital, one of the leading venture capital firms that had put money into cleantech firms.
“Over the past decade, my biggest win was survival,” says Rob Day, a longtime investor in energy technologies who is based in Marblehead. His prior venture capital firm, Black Coral Capital, is no longer active, and today he’s running a new firm, Spring Lane Capital, with $156 million in capital.
But there’s a new wave of interest in what has been renamed “climate tech,” and lots of money is once again flowing. Bill Gates’s Breakthrough Energy Ventures in January committed an additional $1 billion to investing in startups that can reduce carbon emissions, and one of its top leaders, Carmichael Roberts, is based in Brookline. A former Massachusetts energy official and entrepreneur, Phil Giudice, joined the Biden administration in February as a special assistant to the president for climate policy. Malta, a Cambridge startup working on ways to store power using enormous vats of molten salt, raised $50 million last month. Among its new backers is Facebook cofounder Dustin Moskovitz.
And new investment groups, such as Buoyant Ventures and MCJ Collective, are starting to put money into startups working on challenges ranging from reforestation to finding more sustainable alternatives to palm oil to using drones to spot problems that may keep solar power farms from operating at peak efficiency.
Climate tech, explains Daniel Hullah, is “a big catch-all term, but it focuses on the fact that the motivating problem is climate.” Hullah is a Buoyant Ventures partner based in Somerville and previously worked at RockPort Capital. A decade ago, talking about developing new technologies that would impact the climate was “a bit of a third rail. So people would say ‘sustainability,’ ‘clean,’ or ‘green.’ Climate was too polarizing. But that has changed pretty dramatically.” Hullah says that one reason for that is that entrepreneurs, young people, and some large corporations are pushing back against the dominant messaging of the Trump era, which was “that climate wasn’t a problem that we wanted to address.” Further highlighting the issue is Gates’s recently published book, “How to Avoid a Climate Disaster.”
In promoting it, Gates has been emphasizing that buying an electric car won’t do enough to roll back climate change. And many of the companies attracting money from investors such as Breakthrough Energy Ventures and Prime Impact Fund are focused on industrial processes like making steel or cement that produce tons of carbon dioxide.
Roughly 8 percent of all carbon dioxide emissions are generated from cement and concrete production, according to Chatham House. One startup trying to tackle that is Somerville-based Sublime Systems, an MIT spin-out working on a production process that will have dramatically lower emissions and be able to run off renewable electricity. It has attracted funding from Prime Impact Fund. Another Prime-backed company, Leading Edge Equipment Technologies of Wilmington, is creating a process for making the silicon wafers that are central to solar panels with fewer emissions and at lower cost.
Will the new administration in Washington create more incentives and support for climate-related technologies? Matthew Nordan of Prime says, “I want to believe, like Fox Mulder on ‘The X Files.’ But we try to be realists at Prime. We don’t build anything that assumes policy or regulatory change into our investment strategy. If we write an investment memo about low-carbon air conditioning, we don’t assume it will be subsidized by the government.”
But Hullah says new disclosure requirements for publicly traded companies could get them to invest more seriously in reducing their own emissions, or purchasing offsets. And, he adds, with “more and more people going into different parts of the government with climate as part of their responsibility” — including “climate envoy” John Kerry in a Cabinet-level position — “I think we will make progress on things like getting more offshore wind permitted, rather than facing delays.” He’s expecting more momentum to build this November, when the United Nations convenes its next major climate change conference in Scotland.
Nordan says the current enthusiasm for backing startups aiming to impact the environment is “one part inspiring, and one part dangerous.” If the planet is going to reduce carbon emissions to net zero globally — a goal shared by many countries’ governments, as well as Gates — “we don’t need billions of capital, we need trillions,” Nordan says. “So everyone should welcome every dollar of capital flowing into this space.” Still, he says that when new investment funds “pop up and say that this time, it’s going to be different, and they will be able to more quickly perfect and deploy new technologies, “just like Instagram and Snapchat can, they are probably deluding themselves and it will lead to a lot of tears.”
Roberts, who helps run Breakthrough Energy Ventures, says that amid the pandemic, many of the businesses that have proven more durable and resilient are “companies plugging along with real engineering solutions to real-world problems.” Roberts says that Breakthrough has about 20 full-time employees, half of whom are based in the Boston area. Among its investments are Nature’s Fynd, a Chicago startup making meat substitutes using a fungi-based protein.
Most venture capital funds are set up with a 10-year time horizon, Roberts explains. They want companies to grow up and either get acquired or go public, so they can cash out within a decade. Breakthrough has doubled that. “It’s not because these companies are all going to take 20 years to come up with something that makes a difference,” Roberts says. “But if you’re looking to remove half a gigaton of carbon emissions a year, those kinds of technologies are probably getting deployed in multiple countries, on multiple continents. So a twenty-year fund allows you to go after big things, like half a gigaton of carbon.”
And everyone agrees that these companies need to find ways to make money, not lose it, on the path to saving the planet.