ImpactAlpha, July 13 – Prime Coalition launched independently run Azolla in 2021 as a successor to its $50 million Prime Impact Fund. Azolla’s blended capital fund combines $80 million in philanthropic capital with $159 million in impact-aligned investment capital to boost promising early-stage climate solutions that cannot attract conventional investors.
Dozens of investors backed the fund, including Grantham Environmental Trust, Cisco Foundation, smaller family offices, donor advised funds and private foundations, with some catalytic investors writing checks as small as $10,000.
“All of this capital is designed to focus on climate solutions that are unlikely to receive sufficient funding in other places,” Azolla’s Amy Duffuor told ImpactAlpha.
Climate gaps
When Prime was founded a decade ago, early stage climate investment was scarce. Today, the sector is attracting increasing interest, bucking broader market trends, including a downturn in later-stage climate tech.
But gaps remain. Many technologies with big commercial and decarbonization potential have long development timelines, lack successful comparisons, or com with other risks that scare investors off. And sectors such as alternative protein have fallen in and out of investor favor.
Prime’s portfolio companies have gone on to raise capital from commercial investors, including Breakthrough Energy Ventures, Prelude Ventures and lowercarbon capital. That track record helped Azolla quickly surpass its $200 million target.
Additionality
Azolla will write average checks of $2 million, with equal amounts catalytic and commercial capital. The firm assesses the commercial potential of the fund’s investments while Prime evaluates their impact potential and the need for catalytic capital.
Azolla has made six investments since its first close last October, including industrial heat pump maker Heaten, indoor carbon removal company Carbon Reform, and Funga, which optimizes forest fungi to sequester more carbon and boost the resilience of forests. Its latest investment, Mountain View, Calif.-based Scalvy, makes modular electric powertrains that can speed up EV development and deployment.
Hanson Gong of Oogway Capital and Gong Family Investments invested in both the catalytic and market rate portions of the fund. The Azolla fund’s structure “allows us to maintain mission alignment across pools of capital leveraging both growth and foundation capital.” he said.
