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BFD Expert Voices - Climate Deals

BFD Expert Voices

A growing number of climate-focused investors are asking potential portfolio startups for detailed data on greenhouse gas emissions, writes Katie.

Why it matters: Investors are using the data to derisk climate investments, while aligning with net-zero goals and emerging regulation.

Driving the news: Early-stage venture firm Prithvi Ventures tells Katie it's working with analytics firm Boundless Impact to do life-cycle assessments (LCAs) of every startup as a condition of investment.

"As a VC, it's your fiduciary responsibility to do this," says Prithvi founder Kunal Sethi.

Boundless' LCAs don't rely on self-reported data or gross estimates and are a rigorous look at the environmental footprint and emissions impact for a startup.

Zoom in: Most investors aren't yet going as far as requesting LCAs for portfolio companies. Many are requesting Scope 1 and 2 emissions data.

Westly Group principal Shaun Chaudhuri says the firm collects key ESG metrics from portfolio companies on an annual basis, mostly around Scope 1 and 2 emissions, but is in the process of including more Scope 3 data: "We think these nonfinancial metrics are key to building sustainable business models."

It's now becoming increasingly common for that type of data to be disclosed to investors through the due diligence process before the term sheet is signed.

Obvious Ventures introduced the idea of the World Positive Term Sheet back in 2017. Earlier this year, VentureESG and the Leaders for Climate Action developed an environmental term sheet clause for both early-stage and growth companies.

Meanwhile, VCs are also collecting greenhouse gas metrics as a way to be transparent to limited partners, investors that invest in VC funds, particularly if the LPs are in Europe where greenhouse gas data is being required for regulations.

Big picture: The trend of investors requesting emissions data mirrors the broader one of companies across sectors increasingly collecting these metrics to meet net-zero goals and future regulations.

Some investors have turned to the increasingly crowded carbon-software space, like Pulsora and Metric, to manage their portfolio data.

What's next: Pulsora's head of business engagement, Nicole Peerless, says getting startups to track and manage their Scope 3 emissions for investors is the next challenge.

1 big thing: Startups are getting grilled on emissions

Illustration of an abacus with beads made from CO2 molecules.

Nuclear fusion developer Shine raised $70 million via a convertible note ahead of a planned Series D round, the company tells Alan exclusively.

Why it's the BFD: Net energy from a fusion reaction may be decades away, but Shine says it can break even within a year — without selling a watt of electricity.

Driving the news: Baillie Gifford and Fidelity Management & Research Company led the round, which closed last month.

"It started as a Series D late last year. Private markets have only deteriorated since then. It's been just brutal conditions to raise in," CEO Greg Piefer tells Alan.

Catch up fast: Nuclear fusion promises near-limitless energy with virtually no nuclear waste and few safety risks.

The sector has attracted plenty of capital, but producing a reaction that generates more energy than was put into it — known as net energy — is believed to be decades away.

Be smart: That timeline poses a challenge for startups seeking venture funding.

What's happening: Shine, based in Janesville, Wisc., is monetizing the technology it's developed in the short term even as it continues to pursue the longer-term dream of fusion energy.

Fusion reactions, for example, produce lots of neutrons. Shine has spun up a profitable business providing neutrons needed for industrial imaging and equipment inspections.

More recently, it's built a facility that will produce isotopes used in advanced cancer treatments.

Between the lines: "You can get paid a lot more for a neutron than you can get paid for the energy from a single fusion reaction," Piefer says.

Other fusion companies, such as TAE, have pursued a similar model.

What's next: Shine, for now, is keeping its neutron and isotopes businesses in-house, though it's considering spinoffs similar to what TAE has done.

"Our goal is to be a fusion energy company long term, and as those companies mature behind us, they may not want to be where we want to keep our attention," Piefer says.

2. The BFD: One way to turn a profit from fusion

Illustration of an atom with a coin as the nucleus. 

Asset management giant Nuveen invested $30 million in community solar services provider Perch Energy in an initial close of the startup's Series B, Perch tells Alan exclusively.

Why it matters: The investment targets a solar sector that's seen its growth stagnate in the U.S.

How it works: Perch acquires and manages subscribers for small, offsite solar projects known as community solar.

The model offers one of the only ways for apartment dwellers and lower-income households to access cheap renewable energy.

The intrigue: Community solar projects have been snarled in grid-connection backlogs.

New installations fell 16% in Q2 and remained flat from last year.

Yes, but: Perch says it's doubled its client roster since closing its Series A last year, with about 740 MW of capacity in its portfolio.

Meanwhile, Nuveen plans to connect the Boston-based startup with its sprawling portfolio of apartments and low-income housing.

3. Exclusive: Reinvigorating stagnant solar

Illustration of a stack of solar panels with a currency band 

Geothermal heating and cooling startup Bedrock Energy closed an $8.5 million seed round for its focus on big apartment and commercial buildings, the company tells Alan exclusively.

Why it matters: Bedrock says its deeper boreholes allow it to service properties that have so far been too big for most conventional geothermal projects.

Catch up fast: Geothermal companies drill into the Earth's surface to draw heat aboveground for warmth, and to pump warm air underground for cooling.

How it works: Bedrock uses a single 3,000-foot steel coil to drill holes as deep as 2,000 feet. 

The oil and gas drilling technique enables Bedrock to get more heat from fewer boreholes.

The steel tube's name: "the Immortal Coil."

Driving the news: Wireframe Ventures led the all-equity round, which closed last month.

Overture Climate VC, Long Journey Ventures, Cantos, Toba Capital, First Star Ventures, Divergent Capital, and Climate Capital joined.

Wireframe managing partner Paul Straub joined Bedrock's three-member board.

4. Exclusive: Bedrock's big-building plans

A picture of two Bedrock Energy trucks loaded with heavy industrial equipment at a job site.

Bedrock Energy uses a single steel coil, left, to drill unusually deep boreholes. Photo: Courtesy of Bedrock Energy.

Carbon-offset startup CNaught emerged from stealth with a $2.25 million round, the company tells Katie exclusively.

Why it matters: The voluntary carbon-offset market has been growing dramatically, but it's also been mired in controversy over offsets that don't actually avoid emissions.

Details: CNaught, founded in 2022, said the pre-seed round was led by Greycroft and included Australian VC Carthona Capital and Nashville- and SF-based Long Run Capital.

How it works: CNaught CEO and co-founder Mark Chen described CNaught as a "robo-adviser for carbon offsets" that can help its customers buy carbon credits with more transparency and more easily. 

Customers include web-privacy company DuckDuckGo, home builder Homebound and ride-sharing company Hitch.

Big picture: The market for voluntary carbon offsets is being pushed by companies setting net-zero goals, as well as emerging carbon-disclosure laws.

Over the weekend, California Gov. Gavin Newsom signed into law a carbon-disclosure bill that requires big companies doing business in the state to report their greenhouse gas emissions.

The federal Securities and Exchange Commission is working on more guidance around what it will require U.S. companies to disclose around carbon and ESG. Europe already has its guidelines in place.

5. Exclusive: Robo-adviser for carbon offsets

Illustration of the carbon dioxide symbol surrounded by fans of money with the "O" replaced by the no symbol.

👀 Coming up — the hydrogen hub winners: The Biden administration on Friday is to announce which applicants will receive $7 billion in federal grants to build regional hydrogen hubs, per Reuters.

There were 79 applicants that sent letters to the Department of Energy expressing their interest in the grants. The agency then chose 33 teams to move forward in the selection process.

🗳️ Selling the IRA to voters: The big climate and infrastructure laws passed in recent years are linchpins of President Biden's 2024 campaign — but educating voters about them is proving tough, Axios Pro's Jael Holzman and Nick Sobczyk report.

Former House Majority Leader Steny Hoyer acknowledged Democrats' policies aren't "showing up in the polls" as many people are naturally fixated on gas and grocery prices.

Just three in 10 Americans have heard of the IRA, per a Washington Post poll in July — nearly a year after the law was enacted. 

💨 A jet ski for the sky: Jetson, an Italian developer of personal electric aircraft, raised a $15m seed round from investors Rikard Steiber, will.i.am, and Luca Spada.

The $98,000 eVTOL is one of several ultralight personal flying machines coming to market in the next year or so, including the $190,000 Helix from Pivotal (formerly known as Opener) and the Hexa from Lift Aircraft, Joann Muller writes in What's Next.

After just five hours of training, you can soar as high as 1,500 feet and as fast as 63 mph — though only for about 20 minutes before needing to recharge.

6. Temperature check

Illustration of an earth in a roast pan with a meat thermometer.

• Beyond Next Ventures, a Japanese deep-tech VC firm, is targeting $168m for its third fund, with around $68m already closed, per TechCrunch. https://axios.link/3RUDF8x

• JetCool, a Littleton, Mass.-based provider of liquid cooling solutions for data centers, raised $17m in Series A funding. Bosch Ventures led, and was joined by In-Q-Tel, Raptor Ventures and Schooner Capital. https://axios.link/3LY4HbA

• Breathe, a London-based developer of battery management software, raised $10m in Series A funding. Lowercarbon Capital led, and was joined by SpeedInvest. https://axios.link/3PTKuVg

• Frontline Wildfire Defense, an SF-based wildfire detection and water sprinkler system, received an undisclosed investment from the Wyoming Venture Capital Fund. https://axios.link/3LVS8gQ

• Ara Partners, the Houston-based firm focused on industrial decarbonization, is nearing the $2b target for its third flagship fund, per New Private Markets. The firm is also raising a targeted $300m infrastructure fund. https://axios.link/48L7jDk

• Ekkio Capital agreed to buy green beauty brand Sanoflore from L'Oréal, per WWD. https://axios.link/3twiqQe

• Birkenstock, the German sandal maker founded nearly 250 years ago, raised $1.48 billion in its IPO and will begin trading today on the NYSE under ticker symbol "BIRK," Dan Primack writes in Pro Rata. https://axios.link/46nEv2b 

• Hyliion Holdings, the Austin-based developer of generators and electrified vehicle powertrains, is considering a sale of its core powertrain business. https://axios.link/46I361w

• Advanced Cooling Technologies, a Lancaster, Calif.-based thermal management provider, received five grants totaling $5.5m from the U.S. Department of Energy. https://axios.link/3LW4aHc

• Suniva, a Norcross, Ga.-based solar manufacturer that declared bankruptcy six years ago, said it will restart its Georgia cell factory next year thanks to IRA incentives, per Reuters. https://axios.link/3tsOQvc

• Automaker Stellantis and South Korean battery and electronics maker Samsung SDI announced plans to build a second EV battery plant in Kokomo, Ind. https://axios.link/3PPvnMH

• Honeywell and biomass company GranBio Technologies announced plans to collaborate at GranBio's planned U.S. SAF demonstration plant. https://axios.link/3Qdeugs

• The U.S. is considering dropping Treasury Department sanctions against Israeli mining magnate Dan Gertler to shore up U.S. metal supplies, per WSJ. Gertler was accused of corruption in 2017. https://axios.link/3FhtL9q

7. Hot deals

"Globally, the energy transition has not started, if, by transition, we mean that clean energy replaces fossil energy in absolute terms."

That statement is from Remi Eriksen, CEO of risk management firm DNV, which published a grim assessment of the world's progress toward decarbonization.

Holding temperature rise to 1.5°C above preindustrial levels — the Paris Agreement's stretch goal — is "less likely than ever" despite rapid low-emissions energy expansion, the firm said in its long-term outlook.

State of play: DNV sees global energy-related emissions peaking in 2024, but falling too slowly to be Paris friendly, with a 46% cut at midcentury, Ben Geman writes in Generate.

Geopolitical risks — notably Russia's attack on Ukraine — have boosted focus on energy security and local supplies.

Of note: Exxon confirmed it's buying shale heavyweight Pioneer Natural Resources in an oil-focused, nearly $65 billion deal that reshapes the balance of power in the most prolific U.S. oilfield.

buying shale heavyweight Pioneer Natural Resources

8. Quote of the day

Situational awareness: Tomorrow is the Axios BFD in NYC, so no newsletter, but we'll be back in your inboxes on Friday with what we learned there. Register to livestream the event here.

✈️ Katie's on a plane headed to BFD. She's excited to see her colleagues IRL.

🚄  Alan will soon be riding the rails from Providence. Send good thoughts for reliable Wi-Fi. 

Thank you to Michael Flaherty and Phoebe Neidl for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and New Yorkers.

October 11, 2023

1 big thing: Startups are getting grilled on emissions