With all of Silicon Valley’s startup money, where’s the investment in climate tech?
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Our “Marketplace Tech” series “How We Survive” explores how tech can help the world adapt to climate change. In this installment, we look at venture capital’s role in climate tech.
Silicon Valley in California is not only home to the world’s biggest tech companies, but also the huge venture capital funds that back a lot of innovation. And those billions and billions of dollars are mostly controlled by firms concentrated in a quiet office park on one little street: Sand Hill Road.
So what are they doing to invest in climate tech?
“It’s not an area we’ve spent a lot of time in,” said Scott Kupor, managing partner at Andreessen Horowitz, a big-name firm that helped kick-start Skype, Twitter, Facebook and Airbnb.
Kupor said the venture capital community is a little shy about climate tech. A lot of them invested heavily in solar and other renewable energy 10 or 15 years ago, and lost a lot of money when many of those companies went under.
“I think a lot of the old models, unfortunately, assumed or depended on government subsidies to make the businesses work, and given how fickle those are with political climates, there was a lot of heartache when those things went away,” Kupor said.
Fast forward to today, when even if you want to put money into clean tech, the scientific innovations you might need for a cool, new climate tech solution may not even exist.
“It’s heartbreaking as an investor because it’s an area where we’d all like to be much more active, but it’s not obvious what a large check would do that would generate a return within the time horizon of a venture fund, which is less than 10 years,” said Paul Kedrosky, who runs SK Ventures.
Basically, it’s easier to fund products that are purely digital, like apps or social networks, than it is to get into super tricky real-world tech, like batteries and storage or infrastructure.
“The physical world — atoms — are a pain in the ass,” Kedrosky said. “Having to work with the physical world slows everything down dramatically.”
These days, Sand Hill Road does have some venture capital funds that are investing in sustainability.
“We look for mission-oriented entrepreneurs that are going after really big problems and big markets,” said Brook Porter with G2VP, a clean tech venture fund that is a spinoff from the legendary venture capital firm Kleiner Perkins.
Kleiner decided not to keep green investment in the core fund after all those failures a decade or so ago. And Porter said G2VP has a broad definition of sustainability.
“We’re not just investing in clean, renewable energy. We’re investing in 3-D printing, and new ways of approaching manufacturing and logistics, and collapsing supply chains and food to bring producers and consumers closer together,” Porter said.
G2VP invests in everything from electric buses to buying and selling used cars. So long plays toward a greener world, but nothing that’s obviously going to save us.
Then there are a handful of investors who want to make much bigger, faster moves.
“I think the opportunity is incredibly massive,” said Seth Bannon, a founding partner at the small venture capital firm Fifty Years based in San Francisco.
“We want people to realize that the technologies to mitigate and adapt to the climate crisis can create trillions of dollars’ worth of wealth,” Bannon said.
Fifty Years is investing about $50 million compared to about $350 million at G2VP. The biggest name in the game is Breakthrough Energy Ventures, launched by Bill Gates and other investors in 2016. It’s investing over a billion dollars specifically in clean energy. But Bannon said the entire tech industry needs to step up.
“It’s super frustrating to me when I see people that control hundreds of millions of dollars — and determine what companies get funded and what companies don’t — tweeting about the next e-gaming unicorn that they’re chasing, when you have millions of people who are being forced to migrate all because of a crisis that technology can solve,” Bannon said.
So when it comes to funding tech to help us adapt to climate change, the venture capital industry that gave us the semiconductor and personal computers, smartphones and social media, is mostly in the shallow end of the pool.