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Climate Tech Primer for Founders

Enrique Allen
10 min read

Facing our Climate Crisis

Our UN Secretary General, Antonia Guterres has, with urgency, called climate change as the “defining issue of our time”.1 Our planet is facing an imminent crisis. If we do not collectively halve earth’s greenhouse gas emissions by 2030, global warming will increase above 1.5 degrees celsius, which would lead to catastrophic consequences.2

Greenhouse gases include CO2, mostly from the burn of fossil fuels, methane, nitrous oxide and fluorinated gases from a combination of agriculture, waste treatment, and industrial processes. These gases together trap heat in earth’s atmosphere leading to global warming.

Intro to Climate Tech

To combat climate change, Climate Tech focuses on decarbonization across all sectors of our economy from energy to mobility to food. We're undergoing one of the biggest transformations as a civilization: from fossil fuels to renewable energy.3 This means big opportunities for startups to use design to improve nearly every aspect of our lives. For example, our portfolio companies like Stripe are leading carbon removal initiatives and Ambrook is funding more sustainable agriculture.

We know it can be overwhelming if you're new to Climate Tech, so we're highlighting some of the basics for founders, designers and builders who want to solve earth scale problems. This primer is by no means exhaustive and is meant to be an entry point to dive deeper.

World GHG Emmissions Flow Chart

Follow the Money

  • Total funding for climate tech companies is on the rise: $1.6 billion in 2019, 3750% increase from 2013 (~$418 million). The majority of climate tech investments have been in mobility and transport.
  • Companies are starting to care; Amazon committed $2 billion to its “Climate Pledge” venture fund, Microsoft $1 billion to its Climate Innovation Fund, and Unilever 1 billion euro climate fund.
  • Around 300 companies have committed to net zero emissions before 2050.
Graph of VC investments in climate tech

How We Power Our World

Energy generation of heat and electricity powers our homes and offices. Together, this is responsible for 30% of global greenhouse gas emissions.4 Today, the primary source of electricity generation is from fossil fuels: 40% from natural gas, 19% from coal, and 1% from petroleum. Nuclear energy accounts for 20% of our country’s total electricity generation and, similarly, renewables make up 20% as well.5 As prices decline, renewables, specifically wind and solar, are increasingly growing as a main source of energy.

Companies that work in this space have targeted increased adoption of renewable energy sources, innovative funding or distribution models for renewables, and new energy storage technologies.

Graph of renewable energy investments

Examples of companies include:

  • Arcadia Power: Arcadia, founded in 2013, is a nationwide digital utility. Its digital interface allows members to more easily manage energy usage and payments.
  • Span: Span, founded in 2018, develops products that enable rapid adoption of renewable energy - most notably, a smart electrical panel.
  • David Energy: David Energy, founded in 2017, is a retail electricity provider that offers demand response and real-time energy usage data.

How We Move

How we move from one place to another - cars, plans, trains, etc. - accounts for 25% of global greenhouse gas emissions. It is no surprise that electric cars have seen substantial interest in the last few years. This sector has seen the most climate tech investments, estimated at $37.4 billion between 2013 to 2019.6

Interesting trends that we’re seeing in this space, in addition to electric vehicles, include micro mobility vehicles and EV charging capabilities. In the micro-mobility space, scooters, bike shares, and self-driving robots are increasingly becoming popular means of transportation in urban environments. Our portfolio company Remix is enabling cities to plan for their mobility future. On the battery side, a decrease in battery storage price of nearly 85% over the last 10 years has supported the growth of additional battery-based technologies as illustrated by USV's EV Charging Market Map.7

Graph of electrification and transportation investments

Examples of companies include:

  • Rivian: An electric vehicle manufacturer founded in 2009, Rivian builds stunning all electric trucks and SUVs.
  • AMPLY Power : Founded in 2018, San Francisco based AMPLY Power provides commercial fleet operations a charging-as-a-service approach to help fleets transition to electric vehicles.
  • Bird: A micro-mobility vehicle sharing platform that provides affordable and sustainable transportation including bikes and scooters.

How We Live

Shelter is one of our main needs for survival - the buildings that we live in and the construction of these buildings often come at a cost to our planet. Buildings and construction account for 39% of global greenhouse gas, the majority (~2/3) of which is from ongoing building operations. About one third of the emissions are as a result of initial construction, including materials and the building process.

Advancements in the space include high efficiency energy appliances, cooling, and heating, smart building energy management, and novel construction methods that reduce waste.

With better smart management devices, we are able to track usage of power in our homes real time and adjust as needed. On the construction side, new construction processes such as off-side construction, modular construction, and 3D printing are pioneering new low cost methods.

Example companies include:

  • Katerra: Founded in 2015, Katerra is transforming construction through technology. Katerra is a platform to optimize aspects of building development, design, and construction.
  • Mighty Buildings: Mighty Buildings designs and manufactures low cost, modular homes with 3D printing technology.
  • Sidewalk Labs: Sidewalk Labs, a subsidiary of Alphabet, is reimaging cities and how we live within them to improve quality of life.

How We Eat

The global food system accounts for 19-29% of greenhouse gas emissions.8 Climate tech ventures in this space are primarily focused on improving efficiency in farming processes. These improvements include less intensive farming approaches, new forms of nutrition, capturing carbon in agricultural processes, and reimaging of food supply chains. Additionally, we are seeing the impressive rise of alternative foods and lab-based proteins which produce much lower greenhouse gas emissions than do animal-based proteins. Moreover, we are becoming more efficient in how we approach agriculture through the increase of AI, sensors, and robots which gather data for more efficient resource allocation.

Graph of sustainable agriculture investments

Example companies include:

  • Afresh: Founded in 2017, Afresh is reinventing the good supply chain with human-centered AI, currently delivering data driven insights on managing fresh produce in grocery stores.
  • Impossible Foods: Founded in 2011, Impossible Foods creates protein substitutes including the Impossible Burger, which is made with plant-based ingredients.
  • Xpert Sea : Founded in 2011, XpertSea builds technologies and financial solutions that modernize the aquaculture supply chain

How We Manufacture

Our manufacturing operations today contribute substantially to greenhouse gas emissions. This is especially true in industrial material manufacturing, such as for cement, iron, and steel production, and in highly intensive energy processes in other categories, such as paper and chemical operations.9 This sector makes up nearly 19% of the United States’ direct emissions. Increases in efficiency in these manufacturing processes will not only benefit the environment but also result in cost-savings for the companies themselves - a win-win situation.

Climate tech innovations in the space have included mitigation strategies for decarbonization, increasing material use efficiencies, transformative recycling, product efficiencies and demand reduction.10

Example companies include:

  • Ginkgo Bioworks: Ginkgo, founded in 2008 in Boston, designs custom microbes for customers across markets, replacing technology with biology
  • Opus 12: A seed stage company, captures carbon emissions like CO2, and converts said emissions into industrial inputs such as methane, ethylene, and ethanol
  • SINAI: Software to measure, analyze, price and reduce emissions in supply chains.

How We Capture Carbon

In addition to reducing emissions using technology mentioned above, we need to simultaneously remove 10-15 gigatons of CO2 per year from the atmosphere by 2050.11 Unfortunately gone are the days where reducing emissions alone could keep us below the 2-degree warming target. There are a number of Negative Emissions Technologies (NETs) ranging from plant-based, mineral-based, to chemical options. However, NETs have been dramatically underfunded in proportion to their importance. This needs to be fixed asap as it will likely take years or decades for basic research and pilot projects to scale and be cost effective enough for mainstream adoption.

Example companies include:

  • Carbon Engineering: Founded in 2009 with the mission to develop and commercialize carbon removal technology that captures CO2 from the air at megaton-scale.
  • Climeworks: Their direct air capture technology combined with the storage process developed by the Icelandic company Carbfix removes carbon dioxide from the air and stores it permanently underground.
  • Watershed : Founded in 2019, San Francisco based Watershed helps companies get to net zero carbon by analyzing a company’s full carbon footprint, mapping out a plan to get to net zero, fund carbon removal, and report progress to stakeholders.

What’s Next?

There are many more sectors and opportunities we did not cover from carbon offsets to the circular economy that we need to move towards, not to mention new markets we can't see yet that will be created by the next generation of category-defining companies. We're actively looking to invest in areas where design and software can make an outsized impact. If you’re a founder building a climate tech company, get in touch with us here. If you're a designer interested in working in climate tech, let us know here and read our Designer's Guide to Climate Tech.

Further Reading

Nan Ransohoff who currently leads Stripe's Climate team, wrote a post outlining a high level mental model for climate. A few years ago, Bret Victor wrote a great guide, "What can a technologist do about climate change." We're also inspired by firms like USV who open sourced their research and Obvious Ventures' strong point of view. In addition, I've started a playlist of articles, podcasts and books I'm collecting.

References

Credits

Special thanks to Sida Li for her research, Lauren Michael for producing this primer, and Ryan Orbuch for feedback. Illustration by Samia Ahmed.