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Climate deal talk vs. action

Apr 18, 2022
Illustration of a wind turbine with one broken blade.

Illustration: Megan Robinson/Axios

Climate deals continue to accelerate, and established climate investors find themselves challenged as new entrants' FOMO is boosting deal prices and speed.

Why it matters: Entrepreneurs and investors are typically optimists reluctantly reined in by reality. But when both groups detach from reality — through well-intended optimism or other means — things can easily go sideways.

State of play: Climate has attracted renewed interest from investors of all persuasions.

  • Generalist firms are adding principals and partners with some climate or energy experience to run the firm's entire strategy.
  • Others are directly investing in early-stage climate-focused venture firms as LPs.
  • And smaller firms that are climate outsiders have tackled less technical areas of climate technology like consumer goods or software.

Flashback: This happened in the health care industry in the late 2010s into 2020s. The common thread being a highly regulated and complex industry that excited investors felt was due for an overhaul.

  • The dangers are immortalized in scandals and alleged criminal activity at Theranos and Ubiome.

Yes, but: There's a pretty big line between potentially fraudulent activity and being in the wrong place at the wrong time, science-wise. Not every failed venture is criminal, and not every overlooked mistake is intentional.

What they're saying: Investors that have outlasted previous booms and busts in climate tech are still cautious about what some of their peers are investing in.

  • "With volume and attention comes hype, and those of us that have been around for a while are a bit reticent, knowing there are things that will likely get funded that maybe shouldn't," Blackhorn Ventures partner Micah Kotch tells Axios.
  • "We're entering a phase for energy where there are Theranos-like things that are raising money, and that raises the risk of dampening investment over time," Playground Global general partner Peter Barrett tells Axios.
  • "I worry that, with that much money going in and people being greedy, that it's not all going to be a good story. There are some bad stories, Enron-type situations, coming out over the long-term," Silicon Valley Bank market manager Matt Trotter tells Axios.

The bottom line: Buyer beware. The climate hype cycle is here and, as in past hype cycles, some questionable companies will likely slip in with the good.

Do you have an idea of which companies those might be? Shoot us an anonymous tip via Twitter DM or Signal (331) 625-2555.

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