SOSV Climate Tech 100: Insights for Founders on Investor Trends

SOSV Climate Tech 100: Investor Insights

On April 22nd, coinciding with Earth Day, SOSV released the SOSV Climate Tech 100. This compilation highlights the top startups that SOSV has backed since their inception, all focused on tackling climate change.

Lists of this nature invariably offer significant insights. A recent article in TechCrunch focused on the investment landscape, while a separate SOSV publication provided a more detailed analysis of the companies’ categorization and the backgrounds of their founders.

What Founders Can Learn About Climate Tech Investment

However, a crucial question arises: what lessons can founders glean from this list regarding climate tech investors? Essentially, which entities provided funding to the companies featured in the Climate Tech 100?

We conducted an analysis of the investors involved, identifying over 500 distinct participants. The findings are summarized below.

Key Investor Findings

The SOSV Climate Tech 100 attracted a diverse range of investment sources. Understanding these players can be invaluable for founders seeking capital.

• More than 500 investors contributed to the companies on the list.
• The investment landscape is broad, encompassing various types of firms.

This data provides a valuable resource for entrepreneurs navigating the climate tech funding environment. It demonstrates the significant interest and activity within this crucial sector.

A Dispersed Investment Environment

The involvement of 500 investors across 100 companies signifies substantial interest in climate technology. However, a majority of these investors are generalists, initially exploring the potential of this sector. Analysis of the Climate Tech 100 reveals that approximately 10% of investors participated in funding more than one startup.

Notably, fewer than 2% – just seven investors – provided capital to four or more startups. These included Blue Horizon, CPT Capital, EF, Fifty Years, Hemisphere Ventures, and Horizons Ventures.

Investor Activity Levels

This observed pattern aligns with data presented by PwC. Their 2020 State of Climate Tech report, covering the years 2013-2019, identified 2,700 unique investors backing 1,200 startups.

The report further indicated that only 10 firms, out of the 2,700, averaged four or more climate tech investments annually during that period. A listing of the most active firms is provided below.

Trends in Climate Tech Funding

A reduction in this fragmentation is anticipated with the establishment of more dedicated climate tech investment funds. Since 2020, four funds, each exceeding one billion dollars in value, have been launched with a specific focus on climate technology.

Furthermore, the growth rate of capital invested in climate tech – five times that of overall venture capital growth – is a positive indicator. This demonstrates increasing confidence in the sector’s potential.

Despite this growth, climate tech still constituted only 6% of total venture capital deployment in 2019. This suggests significant opportunities for further expansion and investment.

A Look at the Investor Landscape in SOSV’s Climate Tech 100

Venture Capital Firms

The majority of venture capital firms investing in the Climate Tech 100 are generalists, including Khosla Ventures and True Ventures. Others are specialized in deep tech, such as DCVC and France’s Elaia.

Founders should be aware that VCs frequently provide funding at very early stages, often alongside angel investors.

Increasingly, venture firms concentrating on specific climate tech sectors are becoming more prevalent in Climate Tech 100 investment rounds. These now constitute approximately 30% of the VCs within our dataset. For instance, AgFunder concentrates on food and agriculture, while Braemar Energy Ventures focuses on energy-related startups.

This emerging group of mission-driven investors warrants close attention from founders seeking funding.

Corporate Venture Capital

Climate tech is attracting significant interest from corporate venture capital (CVC) arms, driven by net-zero commitments – with over 100 firms joining the Climate Pledge – and a need to monitor innovation within their respective industries.

CVCs account for roughly 10% of the total VC participation. Specialist CVCs, like Ingredion and Tyson Ventures, which naturally focus on food-related innovations, represent 40% of this group.

While early-stage founders may not always find CVCs as readily accessible, corporations can offer valuable support beyond capital, including research contracts, pilot programs, and distribution channels.

Angel Investors

Angel investors typically provide support from a company’s inception through its Series A funding round. Our analysis of the Top 100 companies revealed over 150 unique angel investors, with over 70% of startups having secured funding from at least one angel investor.

Most angel investments fall within the $25,000 to $100,000 range, though some investors contribute as much as $200,000 or more. In some cases, angel funding has even enabled startups to complete seed rounds without venture capital.

The following chart illustrates the distribution of individual angel investments, displayed on a logarithmic scale, ranging from $1,000 to over $1 million.

Celebrity Investors

Celebrities are increasingly involved in climate tech investing. Natalie Portman and John Legend have invested in MycoWorks, a mycelium leather startup, while Leonardo DiCaprio serves as an advisor to Perfect Day, a company developing animal-free dairy protein.

While access to celebrities isn’t guaranteed, networking can open unexpected opportunities.

Many celebrities actively advocate for climate action and demonstrate their commitment through financial investments. Bono’s Rise Fund, Robert Downey Jr.’s Footprint Coalition, and Serena Williams’ investments in companies like Impossible Foods exemplify this trend.

Government Funding

Approximately 10% of the startups in our Climate Tech 100 have received grants or loans from government entities, often targeting early-stage research and development.

In the U.S., the National Science Foundation (NSF) and its Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, known as “America’s seed fund,” actively support startups. The Biden administration has proposed a $36 billion budget for climate initiatives, potentially benefiting startups through these and other programs.

Additional funding sources include regional, national, and international organizations, such as the Departments of Defense, Energy, and Agriculture.

Sovereign Wealth Funds

Sovereign wealth funds typically invest in diverse assets, including stocks, real estate, bonds, and venture capital funds. However, some directly invest in startups, generally at the Series A stage or later.

Given the early stage of the Climate Tech 100 companies, few have attracted investment from sovereign funds. Singapore’s Temasek, with over $230 billion in assets, has invested in Upside Foods and Perfect Day.

BPI France provides grants and investments to French startups, including Pili, while EIT InnoEnergy, funded by the EU, has supported hundreds of startups, including VoltStorage.

Family Offices

Nearly 10% of the Climate 100 startups have secured investments ranging from $25,000 to $2 million from family offices and trusts. Thirty family offices were involved, with four companies receiving funding from four or more, suggesting potential network effects.

Family offices can be challenging to identify due to their limited public profile. Founders should prioritize networking and visibility to connect with these potential investors.

Foundations and Nonprofits

Climate change is a key focus for many foundations and nonprofits. Organizations like the Bill & Melinda Gates Foundation and the Grantham Foundation are among the backers of the Climate Tech 100, alongside smaller, specialized groups like the CEDAS Foundation and the Westly Foundation.

These organizations often invest at earlier stages, providing grants and meaningful checks. While highly sought after, securing funding from these sources requires significant effort.

Understanding Investment in Climate Technology

An examination of investors featured in the Climate Tech 100 demonstrates the extensive diversity of investment sources within this rapidly developing sector. It is crucial to recognize the expansive nature of the climate tech category itself, encompassing areas such as food production, energy systems, construction, and essential infrastructure.

Investor perspectives and objectives also vary considerably, ranging from national wealth funds focused on bolstering food security and specialized venture firms seeking groundbreaking innovations, to individual investors motivated by a desire to contribute to a sustainable future.

Strategic Investor Alignment for Founders

Entrepreneurs should adopt a broad perspective when identifying potential investors, seeking those whose values and goals align with their own products and overarching mission.

Currently, unprecedented levels of capital are being allocated to the climate sector, and investors are actively seeking opportunities to contribute to what is projected to become a multi-trillion dollar market.

Key takeaway: Finding the right investor is about more than just funding; it's about shared vision.

Ned Desmond, previously COO at TechCrunch, currently serves as a senior operating partner at SOSV.