Fervo's IPO is a win for climate tech community
Illustration: Shoshana Gordon/Axios
Geothermal developer Fervo Energy's upsized IPO is validation for the incubators, universities and investors that are part of the climate tech community, many in the Bay Area.
Why it matters: The win could generate renewed interest from investors in climate tech, or at least its underlying trends, at a time when the term has fallen out of favor.
Catch up quick: Fervo might be growing in Houston, but the startup was born out of Stanford University, where founders Tim Latimer and Jack Norbeck were both studying.
- In 2017, the two were in an early class of Stanford Climate Ventures, which is a program now in its 10th year that helps climate-driven entrepreneurs hone pitches and hash out business models.
- There was a dearth of funding for climate tech that year. In 2018, Fervo Energy joined Activate's Berkeley Lab-linked fellowship program, which provides funding, lab space and connections.
- "They were sitting on something nobody was investing in, not government, not private capital. And so they came to Activate," says Activate CEO Cyrus Wadia.
The intrigue: After the Bay Area programs, Fervo raised a series of private rounds, including from some Bay Area climate tech VCs like Congruent Ventures, DCVC, Prelude Ventures, Galvanize and Capricorn Investment Group.
- Growth capital later came from San Francisco-based B Capital and Mountain View, Calif.-based Google, which was also a key anchor customer.
- Of course, not all of Fervo's early supporters were in Northern California. Devon Energy, which is Fervo's largest shareholder pre-IPO, is in Fervo's hometown of Houston.
- Breakthrough Energy Ventures, based in Kirkland, Wash., also played a key role throughout its development.
But many of its early investors and support system have been mission-driven around backing tools to help solve climate change, something that's fallen out of favor over the past year.
What they're saying: "This entire category needs wins, like, full stop. We need liquidity. We need IPOs," says Tyler Lancaster, partner and co-head of venture for Energize Capital, which did not invest in Fervo.
- This is "a very special time for our space," says one Fervo investor. "We've been waiting for this for a long, long time."
- "There's a perception that because the demand for power is so dramatic that clean doesn't matter. And I think that we would push back on that and say clean does matter. Perhaps it's not the No. 1 priority that it was several years ago, but it is still a priority," Fervo CFO David Ulrey tells Axios.
The big picture: Fervo's upsized IPO shows that while investors might be deemphasizing climate tech, they're scrambling to back the next generation of domestic energy sources.
- The combination of the Iran conflict and surging demand for electricity for data centers has turned Fervo's IPO into a hot buy.
- It probably won't make the "climate tech" term cool again, but the sector is adapting. Just like it did around "cleantech" a decade ago.
The bottom line: The climate tech era created Fervo. Now, as it joined the public markets, it's growing beyond it.
