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BFD Expert Voices - Climate Deals

BFD Expert Voices

Y Combinator's Demo Day on Tuesday and Wednesday featured 31 startups focused explicitly on addressing climate change in some way.

Why it matters: Y Combinator is one of the most respected startup accelerators in Silicon Valley, having produced companies like Airbnb and Coinbase, and this year's climate cohort was its biggest and best funded to date. 

By the numbers: YC funded all 31 startups to the tune of $500,000 each, an increase from previous cohorts that received $125,000 for completing the program. 

The funding increase was announced in January. It includes the existing $125,000 for 7% of the company that was standard at YC, plus an additional $375,000 in an uncapped SAFE note with a "most favored nation" clause that ensures YC will get a favorable return regardless of when it converts the debt.

It's the most climate-specific investments YC has made in a single cohort, a YC representative confirmed to Axios. It has funded 91 climate startups to date.

Zoom in: The companies funded cover a range of increasingly popular areas within climate technology. A representative sample follows, in alphabetical order. 

Alga Biosciences is a San Francisco agtech startup that produces engineered cattle feed that makes cows burp less methane. 

Pelm is a San Francisco payments startup that wants to integrate utilities à la Plaid. It claims to have signed five utilities covering roughly 16% of the U.S. population.

Phoenix Hydrogen is a California- and Arizona-based commodities investment software company that focuses on the hydrogen market.

Plover Parametrics is a San Francisco and Washington, D.C.-based data analytics startup that sells to insurance companies to bolster coverage of weather or natural disaster events. It claims to have signed letters of intent with three insurers.

Posh is a Bay Area battery recycling startup that wants to reuse rare materials from EV batteries. It claims it has signed $4.7 million in letters of intent in the past six weeks.

SixWheel is a San Francisco trucking startup from a former Cruise engineer that claims to be able to fit diesel trucks with hardware that converts them to hybrid electric. 

Unravel Carbon is a Singapore-based enterprise software company for tracking and reporting emissions. 

The bottom line: Silicon Valley sees climate tech as a growing investment opportunity after years of avoiding the market due to previously unsuccessful bets.

1 big thing: Your Y Combinator Demo Day digest

Illustration of the Y Combinator logo with leaves on top, forming a tree.

The Biden administration is set to invoke the Defense Production Act to accelerate domestic production of the metals and minerals sorely needed for the energy transition.

Why it matters: The move has unleashed a surge of investor interest in mining and refining — and a reckoning with what "sustainable" might mean in the context of mining.

Environmental groups and investors are starting to rally around metals- and battery-recycling, which the Biden order is also expected to emphasize. 

A 2020 white paper from the International Council on Clean Transportation concluded that 90% of the critical materials needed for batteries could be sourced from recycling programs.

Yes, but: According to that same white paper, the benefits of those recycling programs won't kick in until 2040 at the earliest.

Many EV batteries that might be broken down for their components are instead finding a second life through another type of recycling: on-site energy storage. That means fewer batteries to disassemble for raw materials.

Overall, recycling could reduce the cumulative use of raw materials by 25% as a percentage of known global reserves — a significant reduction, but a far cry from being able to displace mining.

Go deeper: Investors at Energy Impact Partners, Silicon Valley Bank and DCVC tell Alan that they're seeing more startups promoting AI-driven tech to make mining more precise with fewer environmental impacts.

These include DCVC 's PlotLogic, Y-Combinator startup KorrAI, and Silicon Valley Bank client KoBold Metals, among others.

"At current prices, there are very few projects, if any, that aren’t going to be making money," says Scott Yarham, global head of battery metals pricing at S&P Global Platts.

Sign of the times: AstroForge, the YC startup aiming to mine asteroids. "Instead of bringing back the entire asteroid, we break it up, refine, and return only what’s valuable." (Oh, is that all?)

Be smart: Environmental organizations will wrestle with their position in this new paradigm where sourcing the materials they've long championed may well cause the same harms they've long opposed.

For project investors, that may mean unusual alliances and unexpected opponents — namely from organizations with decades of experience successfully challenging mining operations.

Expect to start hearing these buzzwords: "responsible mining" and "sustainable mining." 

What they're saying: "There’s a lot of organizations that are just anti-mining anyplace, anytime, anywhere," says Collin O'Mara, CEO of the National Wildlife Federation. "We want to make sure we’re getting the ecological integrity and the community input as a way to mitigate a lot of the concerns."

💭 Thought bubble: A striking number of environmental organizations contacted this week punted on the question of mining and critical minerals. 

We can't remember the last time an environmental group didn't have a comment on the topic of mining.

What's next: Lobbyists can start planning how to spend their next Christmas bonus — the law governing hard rock mining celebrates its 150th anniversary next month.

Earthjustice, the other environmental organization to talk with Climate Deals, and a leader on mining issues, wants to see updates on three areas: protecting Indigenous communities, keeping mining companies accountable for cleaning up their operations, and recycling.

🚨 Just in: The Interior Department this morning announced the "formation of an interagency working group to gather information and develop recommendations for improving Federal hard rock mining regulations, laws, and permitting processes."

2. BFD: Minerals' mining landmines

Illustration of a lightning bolt stuck in mud

The message wasn't quite so blunt, but there was a measure of "duh" in the proposed guidance that the Federal Deposit Insurance Corporation published yesterday, which calls on banks to assess and disclose basic climate risks.

The measure comes on the heels of the SEC's 3-1 vote on March 21 to issue new proposed rules for financial institutions on climate disclosures.

Why it matters: FDIC is telling large banks to consider the physical impacts of climate change, as well as governance measures and how the institutions might be affected by the energy transition. 

The details: The guidelines would apply to banks with more than $100 billion of assets — many of which are continuing to bankroll projects that are driving climate change, even as they tout their supposed green credentials. 

Of note: The move by FDIC leaves only the Federal Reserve as the last major U.S. banking regulator that hasn't issued guidance on climate change.

3. FDIC to big banks: It's the climate, stupid

Someone tell Frank Sobotka: Red Hook Container Terminal in New Jersey slashed its fuel costs by 81% with its fleet of 10 electric terminal tractors, which the terminal sourced from manufacturer BYD. The trucks are being used to move containers at Port Newark and to transport goods to other nearby terminals in the Garden State. They're helping slash greenhouse gas emissions by 91% compared to the terminal's previous diesel fleet. Technology from Amply is helping manage charging. 

When you're a billionaire, why worry: Warren Buffett's Berkshire Hathaway joined Saudi Aramco and six other companies to receive the lowest possible score on climate from the investment group Climate Action 100+. Buffett has long resisted efforts to disclose his company's climate risks. 

4. 🌡️ Temperature check

Illustration of an earth emoji combined with a sick face emoji.

🚤 Flux Marine, an East Greenwich, Rhode Island-based electric boat maker, raised $15.5m. Ocean Zero led, and was joined by Boost VC and Winklevoss Capital. http://axios.link/7BPJ 

🤖 Arcus, leveraging AI for dynamic energy and emissions cost management, announced an $11m CAD (~$8.8m USD) Series A led by Longbow Capital. http://axios.link/uZjX

⚡ Enel X is partnering with Ontario's Independent Electricity System Operator and the Ontario Energy Board on a battery storage and demand response aggregation pilot project. IESO's Grid Innovation Fund has invested $3.3m CAD (~$2.6 USD) in the effort. http://axios.link/5eDB

🚢 RINA, the inspection, certification and consulting engineering multinational based in Italy, signed a memorandum of understanding with Italian ship-builder Fincantieri to develop decarbonization measures, including lower emissions fuels and renewable power sources. http://axios.link/cWKE

⛽ SGH2 Energy Global, GS E&C and KOSPO/Southern Power also entered an MOU to jointly develop, design, build, own and operate a fuel cell power plant in Ulsan, Korea, which they're saying will be the first to source hydrogen fuel from plastic waste. 

Sempra (NYSE: SRE) has signed an MOU with TotalEnergies to cooperate on renewable energy projects. http://axios.link/TSVi

🔋 Enphase Energy (Nasdaq: ENPH), an energy tech company and supplier of microinverter-based solar and battery systems, is partnering with Vermont's Green Mountain Power for a battery lease grid services pilot that will provide Enpase Energy Systems to GMP customers. http://axios.link/xfMr

🔋 LS Energy Solutions, which provides grid-connected energy storage, delivered its first all-in-one AiON Energy Storage System to V20 Energy, a New Jersey-based storage project developer. The project — set to provide 14.6 MW of energy storage from 17 AiON-ESS containers — is expected to be interconnected to the grid in Q2. http://axios.link/fca1

5. Hot deals

Data: Wood Mackenzie; Chart Thomas Oide/Axios

National oil companies generate more than half the world's oil and gas output, making them among the world's largest polluters. Yet they're spending just 2.5% on the energy transition — compared to 15% being spent on the transition by oil majors.

6. National oil companies way behind

Situational awareness: ⛏️ The Senate Energy and Natural Resources Committee is holding a hearing this morning on "domestic critical mineral supply chains."

🚨 The price of Axios Pro: All Access will increase to $2,499 tomorrow. Subscribe today to lock in our special launch pricing and get all five subscriptions for the price of three. 

🥾 Megan followed Alan's lead and took advantage of Axios' mental health days today, so she is hitting the trails and hopefully avoiding the crowds in Joshua Tree National Park. She'll be back tomorrow to close out the week with you.

🎵 Alan has gotten into Beach House all of a sudden, about 15 years late. (He also really wanted to like the surprise new Arcade Fire single, but ... just couldn't. We'll check back again in 15 years.)

Thanks for reading Climate Deals! Share with your colleagues, mentors and investors, and nab that All Access sub. before prices go up!

March 31, 2022

1 big thing: Your Y Combinator Demo Day digest