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Cerulean Ventures, a new climate tech venture capital firm, will use its $10 million pre-seed fund to invest in startups developing solutions to protect nature and biodiversity through carbon removal, global renewable energy credits, sustainable supply chains and blockchain technology.
Santa Barbara, Calif.-based Cerulean was launched in 2022 with support from anchor investor One Small Planet, the nonprofit and venture fund of William Peterffy, along with strategic investors the Regen Foundation and Regen Network and several global family offices. Cerulean Ventures Fund I will focus on pre-seed and early-seed capital for founders to develop their operations and strategies and reach critical milestones.
Cerulean co-founder and partner Matthew Stotts told ImpactAlpha that the fund aims to solve “two of the hardest problems in climate” — greenwashing, and building businesses that don’t rely on a green premium, meaning the additional cost attached to some climate-friendly products and services.
“Typical climate VCs invest in market segmentation to carve out a small niche where consumers or industry will pay for what would be unprofitable for the mass consumer or commodities markets,” he said, citing sustainable sneakers and specialty coffees. “These investors default to treating climate like one of hundreds of investment niches where they can make money but may never really make change.”
“We really struggle with the ‘impact’ investing going on in climate,” he said.
‘Earth nerds’
The fund has stakes in four companies and entities to date.
Earthbanc is a Stockholm-based startup that has built what it calls the world’s first “vertically integrated, full-stack, nature-based carbon removal company.” It is working with clients including AstraZeneca, which use the measurement, reporting and verification software for carbon removal in agroforestry, agricultural and horticultural operations.
Jasmine Energy in Washington, DC, is launching a global market for renewable energy credits. The market is currently fragmented. S&P Global expects the US market to triple over a decade to $40 billion in 2033 thanks to tax credits from the Inflation Reduction Act of 2022, state-level clean energy targets and solar and offshore wind initiatives.
New York-based CommonShare uses artificial intelligence, or AI, to work with data aggregators, certifications bodies, retailers and manufacturers to fuel sustainable supply chains.
New York-based Regen Network and its foundation are building a global blockchain to protect land and natural resources for indigenous peoples and local communities. (See, “Building and musing about blockchain-based regenerative finance in Medellin“).
Cerulean is working with fellow “earth nerds,” Stotts said, “who see the potential of digital tools and technology to transform an extractive economy” into one that “profitably and transparently places the planet on the balance sheet of the global economy.”
Alpha in impact
Stotts told ImpactAlpha that most green-minded limited partners were putting money into venture capital funds focused on climate moonshots or incremental energy efficiencies, or relying on consumers to pay a premium for green products.
He said that Cerulean’s approach is not to map its investments to established markets and wealthy consumers. That promotes what he calls a misconception that green investments must be addressed with “charity” or concessionary investment. Instead, the firm is focused on startups with “proven and profitable” decarbonization solutions.
“The alpha in VC,” Stotts said, “comes from being consistently contrarian until you’re ultimately proven right.”
