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Featured: Climate Finance
Venture capital investors in climate tech are closer to government than they might want to admit. The climate investment ecosystem has been buffeted in recent months by the collapse of Silicon Valley Bank and the decline in climate tech financing from venture capital funds. But it has been bolstered by a network of co-investors that has helped climate investment remain remarkably resilient compared to other tech sectors, data ecologist Eric Berlow writes in a guest post on ImpactAlpha. Unlike banks where inter-dependencies increase systemic risk, co-investment relationships among venture investors are designed to mitigate risk. The Climate Co-Investor Tracker, co-developed by Vibrant Data Labs and SecondMuse and launching today on ImpactAlpha, shows these patterns of co-investment. One clear takeaway: The most central co-investor of U.S.-based climate-relevant companies is the U.S. government. At least 96% of climate tech VC’s are just two degrees of separation from at least one government grant.
- Catalytic capital. Using the co-investor map, Berlow tracked patterns along the co-investment food chain from pre-seed to post-venture to quantify the role of grants and loans. In this climate investment ecosystem, grants to early stage companies appear to significantly increase their survival to late venture and their ability to raise follow-on money. This ‘grant bump’ disappears from late- to post-venture. At that stage, loans appear to play a significant role in increasing survival rates and total money raised. “Silicon Valley Bank was the most structurally central lender in this ecosystem,” Berlow writes. “This strategic weak link in the investment life cycle must be filled by other lenders.”
- Climate Co-Investor Tracker. The latest in Berlow’s series of climate finance trackers on ImpactAlpha, the co-investment tracker is designed to facilitate collaboration and complementarity by allowing everyone to see who is investing in what and co-investing with whom. The tracker includes investors in at least two U.S.-based climate-relevant companies between 2017 and 2022, and links funders that co-invested in at least one company. “This is an ‘all-hands-on-deck’ problem with inherently high ecosystem risk because a large set of critical challenges must all be overcome for any one solution to succeed,” Berlow writes. “All the hands need to see what the others are doing so that they can actively swim against the tide to fill critical gaps that mitigate ecosystem-level risk.”
- Keep reading, “Venture capital investors in climate tech are closer to government than they might want to admit,” by Eric Berlow on ImpactAlpha. Join Vibrant Data Labs, SecondMuse, ImpactAlpha and other partners for the virtual launch of the Climate Co-Investor Tracker at San Francisco Climate Week, today, at 2pm ET / 11am PT. Register here.
Dealflow: Financing Fish
Aqua-Spark invests in sustainable aquaculture startups in Vietnam and Finland. The Dutch impact investment firm was one of the earliest investors in the “blue economy,” focusing on sustainable aquaculture at a time when total agrifood venture investing was a $2 billion market, compared to about $30 billion today. Aqua-Spark has invested nearly $500 million in startups supporting sustainable fishing and seafood. Its latest deal: Tepbac, a startup helping shrimp farmers in Vietnam, one of the world’s largest shrimp producers, monitor and manage their farms. Tepbac makes a device that monitors water conditions and an app that helps farmers automate tasks. Venture firms AgFunder and Son Tech Investment also backed the company.
- Unconventional start. Tepbac got its start as a media company that published global aquaculture news. Founder Phong Tran hails from a family of shrimp farmers and saw an opportunity to help farmers digitize their operations. Tepbac supports more than 1,5000 farmers and says it has helped them cut costs by up to 20% and increase profits by as much as 30%.
- Alt-proteins. Aqua-Spark also invested in eniferBio, a fungi-based alternative protein company in Finland. eniferBio makes mycoprotein, which is used as a meat alternative and also for animal and fish feed. “Greening aquaculture feed by eliminating our reliance on wild ingredients and reducing our footprint is one of our biggest priorities in getting to a more sustainable aquaculture industry,” said Aqua-Spark’s Lissy Smit. The firm led eniferBio’s €11 million Series A round. Tesi, Valio, Voima Ventures and Nordic Foodtech VC also participated.
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Wire Group launches a second fund as it fully deploys its first. Dutch impact advisor Wire Group launched its first fund in 2019, after a decade helping European family offices develop impact investing strategies and ink deals (see, “Wire Group’s new impact fund-of-funds offers global footprint for Dutch family offices“). Its first fund of funds is closing up investments with three final deals: a women-led fund that invests in diverse climate tech entrepreneurs; a tech fund that is supporting ecosystem regeneration; and a financial inclusion and healthcare access fund fo Africa and Asia that is looking to raise $1 billion.
- Impact incentives. Wire Group has backed nine other funds, which have invested in more than 140 impact companies. It’s now fundraising for its planned €80 million ($88 million) second fund to invest in an additional 12 to 15 managers. Investment themes include regenerative agriculture, health and nutrition, sustainable forestry, and inclusivity for marginalized groups. Wire Group is linking its compensation to impact as well as financial targets.
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AgDevCo extends $8 million in mezzanine debt for avocado farming in Kenya. The specialist investor in African agriculture is financing the Agris investment group, which is teaming up with a major Israeli avocado producer, Granot, to build a nearly 1,000 acre farm in central Kenya that the partners expect to create 2,000 local jobs. The farm, called Ndabibi, will export avocados to Europe and produce other crops for the local market. The partners intend to build an agricultural center on site as a local knowledge and training hub. Kenya is already among the world’s top 10 avocado producers.
- Market building. “Ndabibi will benefit the whole of the Kenyan avocado industry, providing producers across the country with the technical research and development we need to put Kenya on the map as a major avocado producer,” said Ran Kadosh of Agris, a division of investment firm Maris. AgDevCo provided mezzanine debt, which is “flexibly structured to support new avocado orchards, which take three to four years to reach maturity,” said AgDevCo’s Chris Isaac.
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Dealflow overflow. Other investment news crossing our desks:
- Florida-based residential solar company Sunergy Renewables agreed to go public via ESGEN Acquisition Corp., a special purpose acquisition company, or SPAC. The combined company is valued at $475 million. (GlobeNewswire)
- San Diego-based Cortica raised $75 million from the Autism Impact Fund, Ajax Health and Deerfield Management to provide value-based care for children with autism. (Fierce Healthcare)
- Mansa, a free streaming service for Black cultural content, snagged $8 million in a seed financing round led by MaC Venture Capital. (TechCrunch)
Impact Voices: Circular Economy
Catalyzing private capital for solutions to the plastic pollution crisis. A 2020 investment from Circulate Capital helped Jakarta-based waste management company Tridi Oasis weather the pandemic. Tridi ultimately formed a joint venture with a global recycling and waste management company to scale its model. Investments in basic waste management infrastructure, especially in emerging markets, remain few and far between, according to The Circulate Initiative. Waste management and recycling are often overlooked as an investment opportunity,” The Circulate Initiative’s Umesh Madhavan writes in a guest post. Investors deployed roughly $810 million annually between 2018 and 2022 into emerging-market plastic circularity solutions, according to the ocean plastics nonprofit, far short of the estimated $27.5 billion in required investment.
- Incentivizing impact. A global plastics treaty aims to end single-use plastics and mobilize private finance for the circular economy. “Policy, producers and cooperation can help crowd-in private capital,” Madhavan argues. “Extended producer responsibility” schemes in multiple countries have helped shift the financial burden of waste to producers and incentivize investment. Innovative financing instruments such as blended finance and blue bonds have emerged to raise funds toward ocean conservation projects.
- Keep reading, “Catalyzing private capital for solutions to the plastic pollution crisis,” by Umesh Madhavan on ImpactAlpha.
Agents of Impact: Follow the Talent
YPOawards KOKO Networks’ Greg Murray its 2023 Global Impact Award… Hugh Simpson, ex- of KPMG, joins Petra Funds Group as director of ESG… Decolonizing Wealth Projectseeks a remote vice president of programs… Standard Charteredis recruiting an ESG advisory analyst in London… Rippleworks Foundationhas an opening for a remote portfolio manager… New York State Insurance Fundis looking for a senior ESG and sustainability lead.
TIAAis hiring a private investment operations associate in Pune, India… The Earthshot Prize, launched by Prince William, seeks a marketplace grants and philanthropy senior manager in London… Crux Climate, which launched last week, is looking to fill several roles in engineering, marketing, and markets and transactions… One Acre Fundis on the hunt for an investor relations manager in New York.
The University of New Hampshire and Center for Impact Finance’s CDFI Research Consortiumissued a RFP for research related to measuring outcomes from CDFI investments… New Markets Support Company and Rhia Ventureswill co-host, “Narrowing the Black-White health gap: Opportunities for private investment to drive progress in the United States,” Wednesday, May 10… ReFED’s Food Waste Solutions Summitwill take place May 16-18 in St. Louis.
Thank you for your impact.
– April 18, 2023
