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BFD Expert Voices - Climate Deals

BFD Expert Voices

Government subsidies and corporate ESG mandates aren't enough to keep a climate startup alive, according to Voyager Ventures.

What they're saying: "Competitive unit economics are more important than ever this year," the firm's co-founder, Sierra Peterson, tells Alan in this week's Expert Voices Q&A.

Of note: Peterson and her co-founder Sarah Sclarsic recently announced that their firm had raised $100 million for a second fund to back sustainability startups.

This interview was lightly edited for length.

What's been the big news in climate tech this month?

Sierra: "We're beginning to see a U.S. manufacturing boom. How are we going to enable all that energy draw, coupled with demands on the grid from compute and artificial intelligence?

Given the long timelines in building out transmission and power, what does that mean for investment decisions we're making today?"

Sarah: "Domestic manufacturing, energy security, supply chains — they're questions about, fundamentally, how the U.S. maintains primacy in energy, semiconductors and technology more broadly."

Sierra: "We take for granted that the United States is going to be an economic powerhouse for decades to come. Other world powers are playing the geopolitical game. It sounds doom and gloom, but the stakes are high."

Sarah: "Figuring out how to produce nickel, copper, other metals in a way that doesn't involve huge amounts of emissions and toxic processes isn't just a question of ESG credentials. How do we actually build a supply chain we can sustain domestically and bring costs down?"

Sierra: "Companies that are just assuming in their unit economics models that they'll just be able to access cheap, abundant renewables. This is zero-sum for the time being: getting electrons to wherever you're going to manufacture should not be taken for granted."

Sarah: "There's under-recognition of the importance of batteries — which may seem an odd comment to make, given all the announcements of gigafactories and the rise of electric vehicles.

Batteries that are capable of decarbonizing heat for industrial production, providing local grid backup, or commercial and industrial power backup — recognition is lagging the reality of technological advancements and cost declines."

💼 First jobs: Dishwasher at a summer camp (Sierra); an admin at Harvard Medical School (Sarah).

👑 Proudest investments: Residential solar company Bright; and carbon-capture-for-trucks developer Remora.

🤦‍♀️ Facepalm investments: Not investing early in eventual unicorns Arcadia, Perfect Day, or Benchling.

1 big interview: Fueling a U.S. boom

Photo illustration of Sarah Sclarsic and Sierra Peterson of Voyager Ventures framed by colorful rectangles and circles

Voyager Ventures co-founders Sierra Peterson and Sarah Sclarsic. Photo illustration: Tiffany Herring/Axios; Photos: Courtesy of Voyager Ventures

Methane leak detection startup Kairos Aerospace has raised $52 million as it expands globally and tests new tech, the startup tells Alan exclusively.

Why it's the BFD: Methane is a potent greenhouse gas, but sniffing out leaks of the dangerous, odorless, and colorless gas has proved a challenge.

Catch up fast: Oil and gas companies often use ground sensors, special cameras, and low-level flights to pick up methane leaks. But those methods are inefficient or expensive.

There are services that use satellites to detect leaks, but those tend to see only the biggest plumes.

What's happening: Kairos Aerospace strikes a middle ground: it uses aircraft equipped with gas-detecting spectrometers to fly frequent, higher-altitude sweeps over entire oil- and gas-producing regions.

The startup says the approach balances efficiency and sensitivity, enabling it to quickly spot leaks that would otherwise be missed or go unnoticed for weeks or longer.

State of play: Kairos began raising its Series D last spring, as the Biden administration indicated it would move ahead on rules instituting new penalties for methane leaks from oil and gas infrastructure.

The latest: Kairos held an initial close of the round last week.

Hartree Partners and existing investors DCVC, Climate Investment and Energy Innovation Capital participated.

Kairos refers to the raise as a "first close," because it's considering another $5 million to $15 million investment, CEO Gregg Rotenberg tells Axios.

What they're saying. "We're having internal debate at the board level, given the level of demand-uptick in the first six weeks of 2024," Rotenberg says. "The market seems to have opened up, perhaps more than we expected."

Of note: Kairos can achieve profitability with the $52 million it raised, he adds.

Between the lines: BlackRock's decision to lead the Kairos raise underscores its funds' potential exposure to the Biden administration's new methane leak rules, which will take effect Jan. 1.

"They likely have positions in almost all of our customers or potential customers," Zack Bogue, managing partner of Kairos investor DCVC, says.

What's next: Kairos this spring expects to test a laser device that it would use with its spectrometer. The startup also plans to rebrand as Insight M later this quarter.

2. The BFD: BlackRock backs methane startup

an illustration of a methane molecule being enlarged by a magnifying glass

Sage Geosystems has raised $17 million in a first close of a Series A to develop a geothermal system that stores and dispatches energy with pressurized water, the startup tells Alan exclusively.

Why it matters: The company has developed what it calls a geopressured geothermal system to harvest energy from pressurized water, and it attracted some major oil and gas drillers as investors.

State of play: Conventional geothermal energy projects use hot rock deep beneath the Earth's surface to heat water to generate electricity.

Sage Geosystems says it's using not just the heat underground but also the pressure.

How it works: A pilot project last year produced 200 KW of energy for 18 hours, which Sage Geosystems termed a long-duration demonstration of its tech.

It also dispatched 1 MW for 30 minutes in a "load-following" demo that would provide energy with shifting demand.

The latest: Oklahoma oil and gas giant Chesapeake Energy led the initial close of Sage's Series A.

Arch Meredith, Helium-3 Ventures and existing investors Virya, Nabors Industries and Ignis Energy participated.

Sage Geosystems is aiming to hit $30 million in the round. It held initial close in December, about a year after it started fundraising.

What's next: Sage plans to start construction of a 3 MW commercial project in Texas in the next quarter. It's aiming to bring it online by the end of the year.

The startup says it plans to generate revenue from engineering services and a royalty on its IP and ultimately from licensing.

3. Exclusive: Geothermal energy storage

Illustration of a cross section of the earth with a quarter inside

🌋 Geoengineering trials kick off: Researchers in the U.S., Australia and Israel have started three field experiments in different types of geoengineering including marine cloud brightening, solar radiation management and ocean alkalinity enhancement, per WSJ.

The goal is to answer questions about risks and benefits and see if the projects could lay the groundwork for larger-scale initiatives.

✋ Detroit pushes back on EPA tailpipe rules: Automakers — GM, Ford and Stellantis — are saying they can't transition their truck-heavy fleets quickly or profitably enough to electric vehicles to meet upcoming regulations from the EPA, per Reuters.

The White House could enact the EPA's new tailpipe emissions standards as soon as March, which would require boosting U.S. EV market share to 67% by 2032 from less than 8% in 2023.

☀️SunPower's $175m: Solar company SunPower said it's secured $175 million in financing through a second lien term loan from Sol Holding, a major shareholder and subsidiary of TotalEnergies and Global Infrastructure Partners, per Barrons.

The Richmond, California-based company also raised $25 million from a revolving debt capacity. SunPower issued a going concern in December, and stock-watchers have been waiting to see where additional financing would come from.

🤖 Super Cruise expands: Motorists using General Motors' Super Cruise driver-assistance technology can now go hands-free on more back roads across rural America, Joann Muller reports in What's Next.

Alan's take: The service remains by far the best hands-free driving software that I've experienced.

4. Temperature check

Illustration of an ice cream cone with a melted puddle of ice cream that looks like the earth.

• AIX Ventures, a Newark, Calif.-based VC firm whose AI focus includes some climate'y startups, raised $202m for its second fund. www.aixventures.com

• Hippo Harvest, an SF-based indoor ag startup, closed a $21m Series B led by Standard Investments, joined by Congruent Ventures, Amazon's Climate Pledge Fund, Hawthorne Food Ventures, and Energy Impact Partners. https://axios.link/3uBPebE

• Israeli insect protein tech startup FreezeM raised a $14.2m Series A from the European Innovation Council Fund and undisclosed industrial investors. https://axios.link/4bPs8z8

• Fever, a Stockholm-based startup that has developed software for virtual power plants, has raised a €10m seed round led by General Catalyst and including La Famiglia and Norrsken VC. https://axios.link/3UHQFA6

• SunKing, a Kenyan off-grid solar company, secured $7m in debt from Lendable. https://axios.link/3OOmSlh

• Celadyne, a Chicago-based fuel cell tech developer, raised $4.5m led by Maniv and Dynamo Ventures, joined by EPS Ventures. https://axios.link/3SEpfIz

• Getmobil, a Turkish refurbished electronics marketplace, raised a $4m seed round led by Dutch Founder Fund, joined by 212, İşBank affiliates Maxis and Arya, TechOne, and Logo Ventures. https://axios.link/3SX3Hs2

• Simplyblock, a Berlin-based cloud-storage developer for more efficient data centers, raised a a €2.5m seed round led by 42CAP, joined by Antler and Begin Capital. https://axios.link/3I1SJeA

• Illumine Industries, a Chennai-based sustainable design and engineering company, raised ₹17 crore (~$2m) in a Series A led by Anicut Capital. https://axios.link/3uGxBY3

• Catalyst Fund, a Nairobi-based accelerator managed by BFA Global, invested $1.8m in nine early-stage climate startups in Egypt, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda. https://axios.link/3wiRPYq

• Fenix Parts, a portfolio company of Stellex Capital Management, acquired Pacific Rim Auto Parts, a Fort Worth, Texas-based automotive recycler. https://axios.link/42EHsdI

• Ather Energy, an Indian e-scooter maker, is close to hiring banks for a Mumbai IPO, per Bloomberg. It's raised around $125m from firms like Hero MotoCorp and GIC. https://axios.link/3HYJzQ3

• Australian solar thermal company Vast received a Nasdaq non-compliance notice for failing to maintain a minimum market value of $15m for its publicly held shares. https://axios.link/42D9PsJ

• Solar Square, a Mumbai-based rooftop solar company, has acquired utility-scale solar consulting company PV Diagnostics for an undisclosed amount. https://axios.link/3T0xFvo

• JPMorgan's $2.5tn asset management arm exited Climate Action 100+, a climate-focused investor group, per FT. https://axios.link/3SHDwUJ

• Oregon's treasurer proposed tripling "climate positive investments in private equity and real assets" to $6b by 2035. https://axios.link/49ye5fi

• The $280b New York State Common Retirement Fund is expected to restrict investments in eight integrated oil and gas companies, including ExxonMobil, following a review of the companies' energy-transition readiness, per Reuters. https://axios.link/49Fd3hH

• General Motors agreed to invest $150m in Canadian miner Nouveau Monde Graphite as part of a multi-year supply agreement for refined graphite. https://axios.link/3I2Q8Rq

• Noveau Monde also announced it's raised $87.5m from Panasonic Energy, Mitsui and Pallinghurst, and entered an offtake agreement with Panasonic. https://axios.link/3wmxEsQ

• EnerSys, an industrial battery company based in Reading, Pa., says it will build a lithium-ion gigascale factory in Greenville, S.C. https://axios.link/3SVFBOh

• Automakers Stellantis and Renault announced plans to cut EV production costs to improve margins and compete with rival Chinese models. https://axios.link/42GsOTa

• Falling energy prices are undercutting French giant EDF's negotiations with industrial customers and its ability to keep its nuclear plants online, per Reuters. https://axios.link/3HZK24f

Editor's note: We corrected this section by removing a deal blurb about OpenAI raising funding, which was based on old news.

5. Hot deals

• Siva Sivaram was named CEO of solid state battery maker QuantumScape. Sivaram was previously president of data-storage firm Western Digital. He succeeds Jagdeep Singh, who is QuantumScape's largest individual shareholder and will remain chairman. https://axios.link/42JSCOq

• Rob Clark was named SVP and chief communications officer at Xcel Energy. Clark was previously an executive with FGS Global. https://axios.link/4bxPJnT

• Ann Klee was appointed to the board of directors of Assent, a supply chain sustainability management company. Klee was most recently EVP of Suffolk Construction. https://axios.link/49BkPco

• Andrew Kankula was named VP of business development at Sion Power Corporation. Kankula was previously an SVP at Polypore. https://axios.link/3I0NWdb

• Dean A. Del Vecchio was named EVP and chief technology and innovation officer at PPl Corporation. Del Vecchio was previously EVP and chief information and operations officer for Guardian Life Insurance. https://axios.link/3SY6tgu

• Michelle Edler joined Pearce as CEO. Edler was formerly COO of Datavant. She succeeds Bret Forster, who will transition to the board of directors. https://axios.link/3SNqXaO

• Josh King joined Milestone Environmental Services as CFO. King was previously CFO of Layne Water Midstream. https://axios.link/42FM8jj

• Mike Howard was appointed to Atlas Energy Solutions' board of directors. Howard is the chairman and CEO of Howard Midstream Energy Partners. https://axios.link/49h1WLR

6. It's personnel

🥃 Sip of the week: This Classic Old Fashioned from Erin Petrey, a director at Inspiration Mobility and, as it happens, cocktail editor at Bourbon & Banter.

"Yes, I did indeed write over 5k words about the Old Fashioned," Petrey says. Got a submission? Send it our way!

🎸 Katie thoroughly enjoyed Chuck Prophet and his band. Highly recommend!

☃️ Alan's daughter has firmly entered her "Frozen" phase. 🎶 Do you want to build a newsletter? 🎶

Thank you to Michael Flaherty and Chris Speckhard for today's edits.

And thank you for reading Climate Deals! Please share with your friends, family and climate-focused mixologists.

February 15, 2024

1 big interview: Fueling a U.S. boom