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BFD Expert Voices - Climate Deals

BFD Expert Voices

Seattle-based Lithos raised a $6.3 million seed round to give away basalt to farmers — and, in turn, capture vast amounts of carbon, Alan reports.

Why it matters: This isn't a mere ag-tech or carbon play. Lithos also aims to become the go-to software provider for carbon accounting and management for soil-based carbon removal. 

Details: Union Square Ventures, Greylock Partners and Bain Capital Ventures led the all-equity round.

It's the first climate-focused investment for both Greylock and Bain. 

Carbon Removal Partners, the Carbon Drawdown Initiative, Fall Line Capital and Cavallo Ventures participated. 

What's happening: Lithos is already the largest carbon credits supplier for Frontier — the $1 billion marketplace backed by Stripe, Shopify, Meta, Alphabet and McKinsey.

It’s also working with Yara, the Norwegian chemicals giant that is among the largest suppliers of nitrogen-based fertilizers.

Agriculture generated about 11% of U.S. greenhouse gas emissions in 2020.

How it works: Lithos provides basalt to farmers, who then spread it across their fields to improve crop yields. 

Lithos customizes each use to match every farmer's particular crop, soil conditions and farming practices. 

The company then measures how much carbon the basalt captures and sells those credits to buyers.

So far it's been sprinkled across more than 1,000 acres.

What they're saying: "Ten percent of this is the chemistry of the rock," co-founder Mary Yap tells Alan. "The rest is what happens when you get the rock and spread it in a field." 

Zoom in: Carbon credits are the company's primary revenue stream — and "the profit margins are very healthy," Yap says. 

That lets the company give the basalt away and also share a cut of its carbon credits revenue with farmers.

Lithos is planning to eventually license its technology to third parties. 

"We’re trying to get to a billion captures as quickly as possible," Yap says.

The intrigue: Greylock and Bain have traditionally focused on software. What drew them to Lithos is the company's goal to become the software provider for carbon credits management.

"We think every farmer will be farming carbon alongside their crops. And Lithos is the opportunity to be their carbon accounting and analytics system," Aaref Hilaly, a partner at Bain Capital Ventures, tells Alan.

Union Square Ventures has previously invested in carbon startups focused on the forests and the seas — and had been seeking a similar play for soil, investor Mona Alsubaei tells Alan.

What we're watching: Lithos is a logistics-heavy business, responsible for sourcing the basalt, transporting all that heavy rock to farms, collecting samples to measure carbon capture — all while maintaining what will have to be a top-flight website to reach its unicorn aspirations. 

"You're working with farmers, shippers, and enterprise sales," Mike Duboe, a partner at Greylock, tells Alan. Duboe adds that a focus in the months ahead will be streamlining logistics and getting scale there.

One fun thing: Yap, whose previous startup was the social payments company Tilt, which Airbnb acquired, co-founded Lithos with professors from Yale and Georgia Tech.

Editor's note: This story has been updated to correct a word in Yap's quote in the "Zoom in" section to "capture" from "dollars" (transcription error).  The story also corrects the fundraising figure to $6.3 million in the headline and first sentence.   

1 big thing: Volcanic seed round for farmers

A red tractor, viewed from above, spreads basalt rock across a field of row crops.

A tractor spreads basalt across a field. Photo: Courtesy of Lithos.

National Grid Partners, the corporate venture arm of energy company National Grid, invested $20 million across three energy software startups, the firm exclusively tells Megan.

Why it's the BFD: Corporate venture groups with deep industry ties are increasingly making their case to startups. 

Details: In its latest funding push, National Grid Partners backed underground mapping startup Exodigo, digital twin software maker Sensat and image signal processing startup Visionary.ai.

The corporate venture group led Sensat's $20.5 million Series B funding round, which also included existing investors.

Exodigo says the investment from National Grid Partners was outside a traditional funding round, but declined to disclose the amount.

Visionary.ai did not respond to requests for comment.

National Grid Partners president Lisa Lambert also declined to disclose the breakdown of how the $20 million in collective funding was split among the companies.

State of play: National Grid Partners manages roughly $400 million in funds directly off of National Grid's balance sheet and is not operated independently of the business.

The fund is expected to post returns on its investments in addition to finding strategic investments that can work with National Grid down the road.

Zoom in: The three startups tackle emerging areas within the larger energy transition.

Exodigo is co-located in Palo Alto, California, and Tel Aviv, Israel, and uses sensors to design and map underground piping. Lambert said National Grid's natural gas business was exploring a pilot program with the startup.

Sensat is a London-based startup that makes software that automates construction planning for utility-sized infrastructure projects. National Grid's U.K. business has completed several projects using Sensat's software, Lambert tells Megan.

Visionairy.ai is based in Jerusalem and makes software that refines and processes images, which Lambert says will work with National Grid on its network of cameras and monitoring equipment.

2. The BFD: National Grid Partners puts $20M to work

Illustration of a knob turning towards dollar bill signs of increasing size. 

Today we're speaking with Bill Clerico, the founder of newly formed venture firm Convective Capital.

Why he matters: Clerico previously founded WePay, a fintech startup that he ultimately sold to JPMorgan in a deal valued around $400 million in 2017. With Convective Capital's initial $35 million fund, he's planning to write checks around $1.5 million on average to technology companies combating, predicting and preventing wildfires.

The below has been lightly edited for length and clarity.

What in your view has been the big story in clean energy/climate tech this week?

The emergence of specialty venture capital firms in climate and the value that they can create for founders and investors. Firms like Convective as well as other specialists like Burnt Island Ventures represent a growing movement of venture firms with narrow but deep focus areas.

We are just at the beginning of this "unbundling" of venture capital. As generalist VC firms raise ever larger multibillion-dollar funds and build ever larger teams and platforms, the need and opportunity for artisan venture capital has never been bigger. These specialty firms are in huge demand from both investors who want exposure to the theses they are pursuing and founders who value their specialty networks and expertise.

By contrast, what is not receiving the attention you feel it deserves?

It's easy to overlook the commercial opportunity in climate investing. Some investors still carry scar tissue from "Cleantech 1.0" or shrug off climate as the realm of policy. The historic investment from the Bipartisan Infrastructure Framework and Inflation Reduction Act combined with historic levels of net-zero emission commitments from companies and exciting evolutions in technology mean the stage is set for an exciting decade of innovation. With that comes a historic opportunity for private capital to help build the future.

In three-ish words, what change would you make to clean energy/climate-tech investing?

3. Expert Voices: Convective Capital's Bill Clerico

Photo illustration of Bill Clerico with forest and wildfire imagery.

Photo illustration: Gabriella Turrisi/Axios. Photo: Courtesy of Bill Clerico

🔋 A bundle of billions to build batteries: The Department of Energy yesterday awarded $2.8 billion in grants to 21 companies working on batteries. (See map below.)

The Biden administration and lawmakers on both sides of the aisle have called for building a domestic energy supply chain. The money is a significant boost to those efforts.

🌊 Seeking the "narwhals" of ocean tech: Propeller, a fund that invests in companies tackling climate change via ocean solutions, unveiled its first $100 million venture fund Thursday morning, our Generate colleague Andrew Freedman writes.

This is the first major blue economy venture fund, and it could help catalyze other players in the climate tech world to look to the sea for new opportunities. 

The fund is being led by Brian Halligan, co-founder and executive chairperson of HubSpot. It will have a multiyear partnership with the Woods Hole Oceanographic Institution in Massachusetts.

🏭 Meanwhile, at Tesla: Elon Musk yesterday confirmed plans to build a lithium refinery on the Texas Gulf Coast "in a bid to gain more control" over the battery supply chain.

Musk made the statement during the company's Q3 earnings call. The company narrowly missed revenue expectations — but reported $3.3 billion in revenue. Ben Geman has more.

🙋 Heads up, HR: In late 2017, a handful of U.S. tech companies started giving their employees paid time off to respond to climate disasters. The trend soon fizzled. 

As Florida recovers from Hurricane Ian, and climate change threatens to bring more rapidly strengthening storms like it, grassroots organizations are reviving the idea. Axios' Ayurella Horn-Muller has the details.

4. 🌡️ Temperature check

Illustration of a pattern of repeating thermometers with different temperature levels.

This Energy Department map, pinpointing projects that were part of a White House announcement yesterday, shows the electric-vehicle Battery Belt will sweep from coast to coast in coming years.

Why it matters: The map vividly shows how America's hubs for tech and manufacturing — and therefore influence — are escaping their traditional bubbles, and extending to smaller cities nationwide.

5. Mapping the battery belt

• Baseload Capital, a Swedish climate investment fund, raised $24m in new financing via convertible loan from both existing and new investors, including Breakthrough Energy Ventures. https://axios.link/3TjfjTW

• Hoxton Farms, a London-based developer of lab-grown cultivated fat, raised $22m in Series A funding. Collaborative Fund led, and was joined by Fine Structure Ventures. https://axios.link/3grO3Uw 

• Innovative Solar Systems, a utility-scale developer based in Asheville, North Carolina, is for sale “at a firm price” of $150m. The company has a 10 GW project pipeline, with a particular focus on Texas. https://axios.link/3eIucQP 

• VanEck, a New York-based investment firm, has launched the VanEck Green Infrastructure ETF. https://axios.link/3VMJrsG 

• Rock Tech Lithium, a Vancouver-based mineral exploration company, has entered into a five-year definitive supply agreement with Mercedes-Benz AG, with a total estimated sales volume of about $2b CAD (~$1.5b USD). https://axios.link/3EUiZXW

• Nanotech Energy Europe B.V., a fully owned subsidiary of Florida-based Nanotech Energy,  has signed a master purchase agreement to supply 1+ GWh battery energy storage systems through 2028 to Smile Energy in Athens, Greece. https://axios.link/3shrGDX 

• The United Kingdom Atomic Energy Authority has selected Commonwealth Fusion Systems to support the authority’s work on a magnetic confinement system for its tokamak fusion energy program. https://axios.link/3Tk6yZL 

• ReneSola, a Connecticut-based solar developer, has energized its first IPP project in Hungary. The project, Csomád 1-2, encompasses two solar PV plants totaling 10.2 MW. https://axios.link/3VJug35 

6. Hot deals

• WiTricity, the Massachusetts-based wireless EV charging provider, has hired Hubert Wolters as its first vice president for business development for Europe. Wolters was previously managing director at Eldor. https://axios.link/3yYSwoq 

• Crusoe Energy Systems, a Denver-based data center provider that repurposes waste energy, has hired Tara Green as chief people officer. Green was previously  head of people at Aurora. https://axios.link/3EYwO7Q 

7. Its personnel

Happy Thursday! We're just about there folks, so let's get to it.

🍺  Meet us IRL! Axios Pro is holding a subscriber-exclusive happy hour next Tuesday night in NYC. Space is limited! RSVP now.

🕰️ Megan can only really think about Taylor Swift's "Midnights" release later tonight, so please hold all her calls.

🛠️ Alan and his wife have some popcorn wall to remove in their new house. One handyman suggested sanding it down, another proposed simply plastering over it. Thoughts on this? Suggestions welcome.

Thanks to George Moriarty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and wildfire tech founders.

October 20, 2022

1 big thing: Volcanic seed round for farmers