VCs’ love for clean tech may not be reciprocated.

VCs' love for clean tech may not be reciprocated.

The Changing Landscape of Climate Tech Investments

Investing in climate tech has become a hot topic among venture capitalists (VCs) in recent years. With the increasing urgency to combat climate change and address environmental issues, VCs are now considering the impact of their investments on the world. However, some of them are also questioning whether the desire to do good is overshadowing the need to make substantial returns.

One VC grappling with this dilemma is Tess Hatch, a partner at Bessemer Venture Partners. She acknowledges the importance of investing in climate tech but wonders if the focus on feeling good about making a positive impact is clouding the financial realities. Hatch’s concerns are not unfounded, considering that over half of the $25 billion invested in clean tech between 2006 and 2011 resulted in losses for investors.

Despite the risks, clean tech has experienced a revival in recent years. Many VCs argue that this time is different, citing advancements in technology and market dynamics. However, developing these technologies takes time and money, which could make some limited partners apprehensive about their returns. Hatch believes that strategic investors, who fund smaller startups in their industry, may be a better fit for climate tech investments. These strategic investors tend to be less sensitive to valuation and can help accelerate the energy transition by partnering with startups.

Rebecca Boudreaux, the CEO of renewable hydrogen maker Oberon Fuels, echoes this sentiment. When seeking funding, Boudreaux found that venture capitalists were not interested in what her company was doing. Instead, they advised her to seek out strategic investors. This aligns with the idea that strategic investors have a better understanding of the industry and its unique challenges.

Amogy, a company working on clean energy transportation, is also backed by strategics, including players in the oil and gas industry. CEO Seonghoon Woo believes that strategics are crucial investors in the current market because they can be more flexible with valuations. Woo emphasizes the importance of collaboration with established technology and large companies to successfully transition to cleaner energy solutions.

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However, this does not mean that VCs should completely avoid climate tech investments. There are climate-specific funds, such as Breakthrough Energy Ventures and Lowercarbon Capital, that specialize in understanding the challenges of the sector. Additionally, some clean tech companies do fit the traditional VC model, particularly those with attractive software-as-a-service (SaaS) metrics. Kim-Mai Cutler, a partner at Initialized Capital, points out that software alone won’t solve the climate crisis. Other sectors, such as hardware, may require additional investments.

Bessemer Venture Partners, for example, has invested in Halter, a company that combines hardware and software in a collar to help dairy farmers manage their cow herds. Hatch believes that entrepreneurs need to carefully consider which funding option makes the most sense for their company. While venture capital may be suitable for some, other companies may benefit more from strategic investments.

In this evolving landscape of climate tech investments, VCs must balance their desire to make a positive impact on the world with the financial realities of their investments. Strategic investors can provide the expertise and resources needed to navigate the industry’s challenges, while climate-specific funds address the specific needs of clean tech companies. By carefully evaluating funding options and aligning with the right investors, entrepreneurs can make significant progress in combating climate change and creating a sustainable future.

Surf Air Tries Direct Listing after Failed SPAC Attempt

In a rare move, Surf Air, an electric regional air carrier, attempted to go public via two alternative methods. Last year, the company’s plan to trade via SPAC fell through, leading it to opt for a direct listing instead. However, Surf Air’s debut didn’t have a smooth takeoff. Shares were initially priced at $20, but they traded well below that, opening at around $5 and closing down about 40% at approximately $3 per share.

Despite the less-than-favorable market reception, Surf Air’s CEO, Stan Little, remains optimistic. He believes it is the company’s responsibility to execute its plans and prove its value to investors who may still have doubts. Little remains committed to showcasing Surf Air’s potential and securing the necessary capital to grow.

Nexio Up for Sale amid Strong Financial Forecast

Nexio, previously known as Complete Merchant Solutions (CMS), has reportedly been put up for sale. The fintech company, which provides merchant acquisition services and payment solutions, has forecasted $16 million in EBITDA for this year. It is estimated that Nexio could be sold for around $176 million. Raymond James is facilitating the sale, which is currently in its second round.

Nexio went through a consolidation process in December, aligning its brand with its parent company, CMS. The company’s officials declined to comment on the sale. Nexio has approximately 100 employees and has attracted significant investments from GCP Capital Partners, Western Heritage Capital, and Performance Equity Management.

As the world faces the challenges of climate change and the need for sustainable solutions, the landscape of investments is evolving. VCs are reconsidering their strategies when it comes to climate tech, balancing the desire for positive impact with the need for financial returns. By partnering with strategic investors and exploring alternative funding options, entrepreneurs in the clean tech space can navigate the complexities of the market and accelerate the energy transition.