The Brief: Abundance of startups, scarcity of exits at Climate Week NYC

Greetings Agents of Impact!

In today’s Brief:

• Climate Week NYC: Where are the climate tech exits?
• Funding new managers’ business costs
• Capitol Gains: CDFIs lead the green transition

Featured: Climate Week NYC

Needed: Climate tech exits to keep the ‘circular capital economy’ spinning. All over New York City, climate tech startups are pitching solutions and climate tech fund managers are courting LPs. But for all the excitement at Climate Week NYC, investors are starting to get impatient about the still-anemic environment for climate tech exits. The market for initial public offerings is improving and potential acquirers are eyeing bargains. But the continued shortage of returned capital to plow back into new opportunities threatens to slow progress in mitigating and adapting to climate change. “For sustained progress, you need capital to keep going toward servicing more solutions, reinforcing the things that are working,” said Stonly Baptiste Blue of climate tech VC firm Third Sphere, which rented out the Anjelika theater in Soho for straight talk around exits and what he calls the “circular capital economy.” “The next wave of capital will likely come from the returns of this wave.”

• Growing pains. One especially tricky stage: growth-stage companies looking to build their first-of-a-kind, or even second- or third-of-a-kind, commercial plants. Such project finance is fraught with risk, and has spawned a cottage industry of impact investors and architects who are creating catalytic and blended financing models to get growth companies through that “valley of death” (for background, see, “Prime Coalition launches Trellis Climate to plug gaps for first-of-a-kind climate tech projects”). A Climate Week pitch event this evening organized by Trellis Climate, the Schmidt Family Foundation and other investors will focus on such first-of-a-kind, or FOAK projects. 

• Read the whole story.

Talk of the town. Other news and events from Climate Week NYC:

• Solve for X. MIT Solve and its partners awarded $1.3 million to “Solvers” from more than a dozen countries. SOS Biotech is moving “from seaweed to solution” with fertilizer and other products made from sargassum, the kelp that is exploding in the Caribbean and other seas (as is Mérida, Mexico-based Bioplastic and San Francisco-based Carbonwave). SXD provides design software to help clothing manufacturers reduce waste by more than 50% and, with its own products, passes much of that savings to workers in the form of higher wages. Ox Delivers, based in London and Kigali, Rwanda, is providing “transport as service” with purpose-built electric delivery trucks that help farmers get their goods to market and sellers procure produce at one-tenth the cost. “We’ve built a self-reinforcing mechanism, Ox Delivers’ Natalie Dowsett told ImpactAlpha. Cheaper transport drives up income and revenues – and increases the demand for transport.
  
• Startup pipeline. Founders pitched recycled textiles (Tereform), nanotechnology for cheaper carbon capture (Freshean) and low-carbon concrete for buildings that plants can actually grow on (Plantaer), among dozens of other climate tech solutions at ForClimateTech’s innovation showcase at Newlab in the Brooklyn Navy Yard, hosted by Second Muse and other partners. 

• Nuke revival, UN pact, green bank partnership. Fourteen of the world’s largest banks and financial institutions, including Citigroup, Bank of America and Barclays, pledged to provide financing to triple global nuclear energy output by 2050… The United Nations approved a blueprint, The Pact for the Future, to tackle the interrelated challenges of global warming, artificial intelligence, geopolitical conflicts, and inequality and poverty… US green banks announced a partnership to speed lending for low-carbon projects under the Inflation Reduction Act’s $27 billion Greenhouse Gas Reduction Fund. The US Green Bank 50 will share best practices and coordinate resources.

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Dealflow: LP / GP

Mission Driven Finance seeks to help new impact managers get going. Even in the improving fundraising environment, investors are reluctant to bet on new fund managers. “The two-year process it can take to get a fund capitalized makes it extremely difficult for managers without personal networks of wealth to build a fund while keeping the lights on,” noted Stephen Nunes of Mission Driven Finance. To support promising impact investment theses and managers, particularly women and people of color, Mission Driven Finance’s new Capital Partners unit will help emerging managers cover key business operation costs. Mission Driven Finance has raised $4.4 million to offer bridge financing, working capital advances, deal warehousing and capital for co-investments. “These solutions help fund managers demonstrate their theses to prospective investors, move faster, and attract more capital,” MDF said in a statement.

• Demonstration fund. MDF Capital Partners’ first deal is a working capital loan to iimpact capital, a new woman-led fund that will make equity investments in female real estate developers of color. “The newness of an exciting thesis can create friction for investors who don’t have a benchmark to assess it against,” said MDF’s Lauren Grattan. MDF Capital Partners’ secured investments from World Education Services, Tara Health Foundation, Trimtab Impact and Chordata Capital. It’s aiming to raise $10 million for the demonstration vehicle.
  
• Dive in. 

Cariqa raises $1.1 million to boost EV charging in Europe. Improving the economics of electric vehicles and their supportive infrastructure will speed the transition away from fossil fuel-powered vehicles. Berlin-based Cariqa raised early funding for an EV charging marketplace to link drivers to charging station operators. Founder Issam Tidjani said the company’s goal is to ensure charge point operators “maximize their utilization rates and revenues while ensuring drivers pay a fair and transparent price.” Cariqa’s backers include Anthemis, which invested via its $50 million Female Innovator Lab fund for early stage female founders, as well as California-based VC Plug and Play, Golden Egg Check, Vento Ventures, Techstars and Singapore’s Hatcher+.

• Price transparency. Many EV charging stations are underutilized because they’re located in low traffic zones or payment systems are too complicated. To attract customers, charging point operators often offer discounts or work with intermediaries, cutting into their profits. Meanwhile, “EV drivers are demanding more price transparency and charging optionality,” observed Jeremy Brown of Anthemis. Cariqa’s app, which launched this month, alerts drivers of charge points and pricing at 420,000 charging stations in 30 European countries.
  
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Dealflow overflow. Investment news crossing our desks:

• Brookfield closed on $2.4 billion for its Catalytic Transition Fund for emerging markets. The fund, which launched with $1 billion from the United Arab Emirates’ Alterra fund, secured backing from Canadian pension fund manager CDPQ, Singaporean sovereign wealth fund GIC, Prudential and Temasek. (Brookfield Asset Management)
  
• KKR raised $4.6 billion for its Ascendant Fund, its first middle-market buyout fund. “Employee ownership will be central to each of our investments,” said KKR’s Pete Stavros. Ascendant, which focuses on North America, has done six deals including Canadian dental care chain 123Dentist and Missouri-based Marmic Fire & Safety. (Reuters)
  
• Ghana’s Kofa raised £6.2 million ($8 million) to expand its EV battery swapping network through a partnership with clean energy project developer PASH Global. (Shell Foundation)

• The Frontier network of corporate carbon credit buyers inked an offtake agreement with CarbonRun to buy $25.4 million in carbon removal credits generated through “river liming.” (Frontier)
  
• Singapore’s ABC Impact invested $30 million in Aye Finance, a financial services firm providing credit to India’s micro and small businesses. (YourStory)

Podcast: Capitol Gains

City First’s Oswaldo Acosta on the leading role of CDFIs in the green transition. “We are all green banks now,” says City First Enterprises’ Oswaldo Acosta on the latest Capitol Gains podcast. The CEO of the Washington, DC-based community development finance institution, or CDFI, joined Capitol Gains’ hosts Matt Posner and James McIntyre for a Climate Week episode to discuss the intersection of community finance and clean energy in the rollout of the Greenhouse Gas Reduction Fund. “There’s a sense that CDFIs are stepping into a role they’ve never played before, but our deep community ties give us the upper hand in ensuring this clean energy transition is equitable,” explains Acosta. 

• Innovative financing. CDFIs are building new financial products to meet the needs of developers and communities, says Acosta. “We’re creating bridge loans for renewable energy projects, leveraging tax credits, and providing low-cost financing for energy-efficient affordable housing.” The results: “We’re seeing growing interest from private investors looking to deploy capital with a social impact lens,” says Acosta. “CDFIs are the conduit for making those investments both impactful and profitable.”
  
• Keep reading, and listen to, “City First’s Oswaldo Acosta on the leading role of CDFIs in the green transition (podcast),” by Matt Posner and James McIntyre on ImpactAlpha. Listen to previous episodes of Capitol Gains with Urban Institute’s Brett Theodos, Activest’s Homero Radway and Brookings’ Amy Liu. Capitol Gains is a member of the ImpactAlpha Podcast Network. 

Agents of Impact: Follow the Talent

Elizabeth Boggs Davidsen of the US International Development Finance Corp. will become GSG Impact’s new CEO… Climate Asset Management taps Andrew Dyson, previously with CAM’s co-owner Pollination, as non-executive chair… Aligned Climate Capital adds Rachel Powlen, previously with NUImpact, as operations assistant, and Min Ah Chang, previously with David Shin CPA, as a part-time bookkeeper.

Illumen Capital welcomes three new interns: Cornell University’s Femi Olonilua, Saadhvi Mamidi of UNC Chapel Hill, and Viridiana Santacruz of UC Berkeley’s Haas School of Business… Ownership Works has several new openings, including partnerships senior manager and data and impact senior manager… The US International Development Finance Corp. is looking for a project finance specialist in Bogota.

Quantified Ventures is hiring a climate finance vice president in Washington, DC… ImpactAssets has an opening for a remote investment services associate… Kimberlee Cornett of the Robert Wood Johnson Foundation, The California Endowment’s Amy Chung, and Ford Foundation’s Megan Walsh Thompson are among speakers in Mission Investors Exchange’s upcoming 100 Women In Finance Impact Investing Symposium. 

British International Investment is accepting applications for its impact and investment graduate analyst program… Convergence will launch its “State of Blended Finance” report, including a second report focused on climate blended finance, on Wednesday, Oct. 30… The new Taskforce on Inequality and Social-related Financial Disclosures, or TISFD, has launched to help companies and financial institutions screen for inequality-based financial risks.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– Sept. 24, 2024