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Join the Ecobot team as they talk with environmental experts about their work and how they’re influencing the environmental industry.
Intro - 00:00:05:
Hey everyone, welcome to the Ecobite Podcast, where we will be diving into topics around the environmental industry. If you'd like more context to our conversation and or a crash course on the topic at hand, please view the Ecobite video recording before getting started. Either way, enjoy.
Liv - 00:00:28:
All right, welcome to Ecobite. I'm joined by one of my good friends, Grace Donnelly, Executive Editor for CTVC, and as always my cohost, Chris Fleming, and I am Liv Haney of Ecobot. Grace, thank you so much for agreeing to participate in this podcast.
Grace - 00:00:44:
Of course, I'm excited to chat.
Chris - 00:00:46:
So, Grace, I just want to start this off and just, you know, we hear a lot of terms these days and over the past several years and, you know, now you're here to talk about Climate Tech, but, you know, I've also heard about Clean Tech and Green Tech. I was wondering if you could just walk us through those different terms and give us an overview.
Grace - 00:01:06:
Yeah, it's tough to parse sometimes. And that's honestly part of the origin story of CTVC. When our co-founders Kim and Sophie started writing the newsletter in early 2020, it was hard to determine where those definitions fell. And the taxonomy they've created around what Climate Tech means helps us think more about it as a theme rather than industry. And lays out, ways to determine which types of technologies are really geared toward climate mitigation, measurements or adaptation, etc. So I think with Green Tech, it's a little bit... Too mushy of a term, I think. A lot of things can fall in that. And with Clean Tech, that specifically, I think, means something to investors, because there was the Clean Tech 1.0 wave of companies that were in clean energy that had some big failures, had some big successes as well. I think that clean tech was a bit of a dirty word in some ways for investors for a while. And so Climate Tech. brings us away from that and also encompasses some areas of technology geared toward emission reductions or measurement, etc., that weren't really being developed back in the Clean Tech 1.0 wave.
Liv - 00:02:34:
Awesome. That was a good explanation. Helped me understand it.
Chris - 00:02:38:
Yeah, thank you.
Liv - 00:02:39:
Piggybacking off of the final statement of what the broad scale investment trends are for the first half of 2023. Was the investment down across all of your subsectors that you mentioned, or is there some that we see that are increasing while others are maybe dramatically decreasing? Or how does that average out when you look in at each specific sector?
Grace - 00:03:07:
Yeah, absolutely. So in our report about the first six months of investment activity in 2023, We found that overall funding dropped about 40%, but that did look very different across different sectors of technology and also across companies that are in different stages of their growth. So we did see a big drop off. Most of the drop off is from funding in transportation and energy, which have traditionally been the largest sectors, they're attracting the most deals, the most funding out of our kind of and so. That was driven in part by the fact that growth funding, later stage funding for companies that are not so early on are ready to start scaling, are ready to start building and going to market and reaching their customers. That saw the biggest drop off. Early stage Funding for climate tech companies actually increased in the first half of 2023. There is still support there for some of these very new innovative ideas that are just emerging. And I think... you're seeing that investors were a little more hesitant to cut really big checks to companies that need a lot of capital to start to continue growing. And there are a few different factors there underlying those trends. There's been so much investment in transportation and in energy over the last few years. And you've seen really large companies come out of those sectors. You've seen a wave of SPACE exits, Special Purpose Acquisition Companies. You've seen you know, transportation companies take that route. And so there are
a wave of companies that already grew to a certain amount, grew to a certain stage, attracted a lot of money. And Now, a lot of the deals you're seeing are the next wave of companies are some of the enabling Tech. So even the deals and the funding that was happening in something like transportation, it was more maybe, you know, EV Charging Companies, it was maybe more software that's going to optimize batteries or manage fleet charging, things like that, that are more... enabling Tech and not necessarily just batteries and the electric vehicles themselves. It really, really differed the trends across. what type of Tech and the stage of the company. And we actually saw built environment funding increase slightly. And I think that's a sector that's been under invested in so far. And it seems like there is more interest now in some of those technologies. With the caveat that that segment of climate Tech is starting from a much smaller base than what we're seeing in transportation and energy over the last few years.
Liv - 00:06:10:
Can you elaborate on what is built environment?
Grace - 00:06:13:
Okay, so at CTVC, we think about climate Tech in a couple of different ways. We've broken it out into seven climate verticals, which include energy, so that's clean power generation, anything from wind and solar to grid management to hydrogen, things like that. We have food and land use, which includes innovation in agriculture, nature restoration. We have transportation, which is electric vehicles, batteries, micro mobility, aviation, all those kinds of things. A built environment, which is really about... building materials, so innovation in construction that reduces emissions, whether that's cement, or also heating and cooling, like heat pumps and energy efficiency technology. Then there's carbon, which includes carbon removal, point source, carbon capture, carbon marketplaces. Then we have climate management, which is a little more about measurement. Earth observation technologies, tracking emissions, assessing climate risk, and then industrial is the seventh, which includes manufacturing, metals and mining, steel, all these kinds of activities and Tech that would help. mitigate climate impact there. And so companies have to fit within one of those seven verticals and then also be either monitoring, mitigating, adapting or removing greenhouse gas emissions basically. So there are four functions that if you fall into one of those seven categories and also are addressing one of those actions, that's how we decide like this is a climate deal, this is a Climate Tech company and this gets included in our assessment of trends in the space.
Chris - 00:08:14:
You know, you were talking about the trends you all saw over the first, well, the previous two years and then the first six months of this year. Every day I turn on the news and it's forest fires, record heat indexes, nobody has water or there's too much water. Are you seeing potentially more investment considering all that's going on right now and the rest of this year and into the future?
Grace - 00:08:44:
I mean, I think that's a hypothesis that some people had, you know, that this is this is urgent. This is this is happening and despite, you know, what might be happening in the rest of the economy, we have to continue to invest in these solutions. Um... And I mean, on some level there is so much funding coming into climate technology. I mean, we're not only, we're focused on tracking, you know, Venture Capital deals. But, there are estimates that we need to spend about $9 trillion annually on climate through 2050 in order to really meet our goals. That's about nine times the annual investment we're seeing right now. Venture capital is only about $40 billion of that total. So it's this small segment that really shows what's happening in the earliest stages, especially. And so it really requires investment from a lot of different kinds of capital allocators. And I think one of the things we're trying to do is bring that awareness to founders, to climate Tech founders. You know, where do you need to go if you need to build your first factory or pilot plant or something? How do you get the resources to start that? And so there is investment still happening. But I mean, I'm talking to you guys in a week where we've had record heat days more days of the week than not. And so it does. It does feel sometimes like there's not enough urgency necessarily from other financial institutions that could be supporting these industries. It is a critical time though because you do have all of this government support coming in from the Inflation Reduction Act, from the IJA, from the chips act like all these things are breaking together and really changing the economic equation for some of these climate technologies. And so it's an opportunity to really put those resources behind the solutions that are most needed. But it feels very overwhelming seeing the news every day, I think, you know, and some technologies, I think. there's a clear connection there between what we're seeing happening in the world and what innovators are trying to solve for. I don't know if I have any other thoughts on that, but yeah.
Liv - 00:11:18:
No, that's a good break done. I think, or one other thing I guess I want to ask about is, You mentioned a lot of different funding sources. So we've got government grants and then... Why is Venture Capital Funding important for climate Tech? What about the process of VC Funding, the goals of VC Funding? How is that? type of funding going to positively affect Climate Tech growth rather than just like it's more money? Is there anything specific about VC Funding that really sets it apart?
Grace - 00:12:01:
So with the Venture Capital model, I think you're able to invest in earlier stage companies, riskier companies, you're giving an investment that buys you equity in a company. So you're providing funding, but you're owning a piece of the company embedding that it will grow and be successful and eventually go public or be acquired. And then you will get a giant return on your investment. But also knowing that you're going to put money into a lot of companies that don't make it, that never go anywhere. And so I think that allows, Venture Capital to back technologies that are a little earlier stage, you know, they're tech that may not be proven yet. It's this ecosystem of really thinking in big ideas. I think thinking about changing the world. I think a lot of people that get into the startup realm really have that mindset. And so I think investing in Climate Tech is, you know, a natural progression of that thinking in the world that we live in. But I think one challenge people are finding is that a lot of successful VC investments have been very focused on software companies. They know how to do that well, that the ecosystem. understands how to scale a software company and what kinds of resources they need. I think now that we're trying to build a lot of hard tech, We're trying to build infrastructure. We're trying to build, you know, manufacturing for these new technologies, that's a little bit trickier from a financial standpoint. And I think you're finding that. that companies may get to a certain size and raising another round of Venture Capital Funding might not be the best option for them. Selling more equity in the company just to build projects or something like that when they're trying to scale. we talk about the climate capital stack and where resources and financing is coming from and what options startups have. And so we're hitting a place where a lot of the hard Tech companies that are trying to scale They don't, it's not beneficial for them necessarily to do that through venture funding, but there's still technologies that are not proven enough to secure project financing or commercial loans. They can't just go to a big bank and say, I want to build my first project with this brand new technology. Can I have some money, please? They're like, no, this is too risky. We're not going to be able to, we don't think we'll be able to recoup our investments. So we're not going to lend to these kinds of companies. So, I think we're at a stage where the VC Support has been very crucial in establishing and starting to grow some of these companies. And I think there are, you know, you asked about government funding as well. I think, you know, if companies can get grant funding that they don't have to pay back. That isn't, you know, taking a piece of the company that the government owns or something, you know, that's also helpful. And that concessionary or catalytic capital that people talk about where early on maybe you're getting. a grant, maybe you're getting a very low interest rate or something like that, or an investment from someone who doesn't expect a huge return and really wants to put the money to use to solve these problems more than to get returns back to their investors. So I think we hear a lot about this valley of death for these companies where they've scaled to a certain stage and then are finding it difficult to get the financing and resources they need to get all the way to commercial scale and really widespread adoption of these technologies. So again, while venture is a piece that we've been focused on, we have been writing more and discussing more with our audience, other types of financial institutions, other types of lenders, other types of capital allocators that are out there to support these projects. The Department of Energy Loan Programs Office is one that's really working directly in that space. They go through a really rigorous diligence process to be able to vet riskier technology and say, you know, we have Department of Energy experts here who can tell us for sure or tell us with more, you know, confidence. Whether this is a company that's going to work out or not. And so we're willing to take what other investors might see as a riskier bet and give this company, really large checks coming out of that office, hundreds of millions to billions of dollars, even to build facilities or otherwise, scale these technologies. And we just saw on Friday, there was the first notice out for the EPA's Greenhouse Gas Reduction Fund, which will also put $27 billion into green banks and other financial institutions that are lending specifically with the goal of funding clean energy projects. And getting those to a place where more of the traditional banks or other lenders you might think of would be more willing to provide loans or support to those projects. So I feel like that was a really lengthy answer, but it's important. I think because that's how our company building ecosystem works, especially in the US and Europe. But there are a lot of other steps along the way and a lot of other types of investors and types of resources and support that go into actually successfully taking a company from early stage all the way through to commercial success.
Chris - 00:18:12:
So with the ESG goals of so many large companies now, are you seeing spinoff subsidiaries of those companies coming up with capital to fund some of these startup programs?
Grace - 00:18:25:
Yeah, that's definitely a trend where we're keeping an eye on and seeing more of is that you have, you know, venture arms of big corporations, you really have corporate involvement more in some of these emerging technologies than we've seen in the past. Whether that is having like you said, some department of the company, some amount of resources that are dedicated to investing as a VC entity into early technologies, or you're seeing a lot of big companies who are making agreements or advanced, purchase guarantees for certain products. Like you're seeing the Frontier Fund, which is a group of corporations that are committing to buying carbon removal, which is very expensive right now, but they're saying, you know, we're going to give these companies that are trying to scale this and develop this a guarantee that they're going to have a customer to buy it. And so I think you're seeing a lot of that as well in different types of technologies where the big corporations who, as you say, are trying to meet their 2030, 2035, rapidly approaching climate goals that they've set out, they are getting involved earlier on with some of the solutions that they'll use to get there. Helping fund sometimes agreeing to being a guaranteed purchaser or off-taker. And then also working with companies on pilot projects saying, you know what, you can use one of our facilities to install your big industrial heat pump that you need to prove works in the same way that our gas boiler works and we'll let you try that out and that way you can prove to others in this industry that this is a solution that works within the processes that already exist.
Liv - 00:20:28:
Do you think that, I mean, venture capitalist firms typically, like you're saying, come in relatively early on, they're willing to take riskier bets. Therefore, it seems like VCs can set the trend on who to invest with and what the future of climate Tech is and what the future of just investing in general. Do you think that that responsibility, like, do we need more responsibility put on VCs to continue to push that needle? Does there need to be a more symbiotic relationship between, okay, VC can take us this far, and once we get to a certain point, then we need to bring in traditional funding or looking into more government funding or international type funding efforts. What does that relationship look like?
Grace - 00:21:23:
Yeah, I think. As we've talked about that, VC firms are just one piece of this larger capital stack. And it has to be a team effort. I mean, it has to be everybody committed to actually supporting the solutions that we need. And I think... I think that sometimes within the Venture Capital ecosystem, you can get these cycles of hype where all the firms are trying to invest in this new thing that is, you know, I mean, you're seeing it with AI right now, like everybody wants to be investing in AI. And so I think there is a risk of driving trends too much based on the newest thing, you know, the most exciting potential. And not maybe, I think I talked to a lot of people in Climate Tech who say they work on unsexy problems. I mean, a lot of people, you know, solutions for industry or, you know, how to make a chemical process less harmful to the environment and to greenhouse gas emissions. These aren't summer facing parts of our economy. And I think some people view them as not as exciting, but they're super important. And I think we see that in the mismatch between the venture funding that certain verticals have attracted and the amount of emissions they're responsible for. So I mean, we have outsized funding for transportation. Because we've had a ton of money going into electric vehicles, which are fun and exciting and people can go out and buy one. And you have very, very little in comparison going into the built environment or into heavy industry. And so I think sometimes while there are a lot of people very committed to doing good work and supporting technologies that will help us build a better future. There is a risk of overhyping certain things and I think we need to continuously have more inclusive conversations where people, different stakeholders. People with different responsibilities and different views of how this is going to work across different industries, deserve to be heard as well. We can't just base everything of the latest and greatest.
Liv - 00:23:56:
From just your experience in a media world. How can? messaging be improved? How can these processes, these unsexy processes unsexy is a new word that is going to be stuck in my head. But I can use processes that aren't as glamorous and aren't as accessible to everyday consumers or people. Can the importance of the stuff going on behind the scenes still be a message to the larger audience and still be understood to be important across investors or anyone?
Grace - 00:24:41:
Yeah, it's a great question and I think everything I just said about the hype, I mean, coverage of technology definitely plays a role in that as well, in which stories get written about what types of technology. I think this is a question I think about a lot. I don't know that I have a good answer yet. I think this is a lot of my work is is trying to understand and break down complex topics that, you know, might make your eyes glaze over if you hear them in normal conversation, but really make that accessible, make that information accessible to people. And connect it back to the impact that certain industries have on emissions, on reaching climate goals that we have. I think it's just about connecting the dots and really asking the right questions. I found that in some ways, not being an expert in any one part of this field is a benefit to me in doing my job well because I ask all the stupid questions and then I get, you know, plain language answers to share with our readers that break down why these things are so important and what types of technological approaches people are trying to take to solve them.
Chris - 00:26:00:
So given what's going on all around us with the climate currently, do you find that, you're always trying to work the messaging for CTVC, do you find that larger outlets are more receptive to what you have to say given what's going on right now?
Grace - 00:26:20:
That larger outlets are more receptive to.
Chris - 00:26:23:
To like your messaging, like if you had, you know, your press releases or more people willing to pick those up.
Grace - 00:26:31:
Yeah, so I mean, my job at CTVC, I'm spearheading the editorial content. So we have a newsletter that comes out twice a week. And one of our co-founders, Kim, is also now CEO of the platform. When we raised Venture Capital money to create an Intelligence Platform, with the goal of helping to educate investors on these topics, demystify this world of Climate Tech a little bit as big corporations and other organizations try and find the right Tech match for the problems they're trying to solve. But I'm focused really on creating. We do a lot of Q&A's, we do big deep dives on different technology areas or markets. And our readers are about 50,000 investors, founders, people who are working in a certain industry and focused on meeting sustainability goals, people working in government or academia on these topics. So, I'm not necessarily trying to reach bigger media outlets in the day-to-day work that I'm doing. But I will say there was a lot of interest in what we found in the H1 Funding report about what's been going on the first half of 2023. And I think there are a lot of eyes on the funding happening in this sector or within Climate Tech because you do have all of this government funding and government tax credits and things like that that are starting to flow into these areas. I think we aren't necessarily geared toward reaching a super broad or big audience. We're trying to reach decision makers and we're trying to get into the weeds on some of these things so that people within the industry can get a good sense of what's going on, and people who are maybe in adjacent areas of Climate Tech stay up to date on that as well. But I think the main goal of the work I'm doing on the newsletter is really breaking down some of these complex topics. I mean, we wrote, and sometimes it's not exciting, we wrote 5,000 words about Tax Credits a couple weeks back. Like that was, how will the Tax Credits in the IRA work? Like what are the changes that have been made to these policies that are aimed at opening up tax credit investments to a wider range of folks who have money to put into it. And so it gets really technical and sometimes it feels a little bit tunnel vision, I guess, you know, with everything else going on. I think there is interest in what the focus is right now for early stage investors, for growth investors. And I think the broader view is also really important. I mean, this is one part of the conversation, but I think because of the math, because of the economics of how this works, I mean, I think there is a lot left out of the conversation when you are just focused on VC trends. We're not talking as much about biodiversity. We're not focused as much on the value of preserving the natural world, you know, as much as people are focused on building new technology, you know, transforming industries that exist and trying to have an impact there.
Chris - 00:30:12:
And the reason I asked that is because I actually saw your report referenced outside of your website.
Grace - 00:30:17:
Yeah.
Chris - 00:30:17:
So, I mean, it got traction away from Ural's direct publication.
Liv - 00:30:24:
Yeah, I wanted you segue into it, but talking about the expanded CTVC platform now. I want to talk about that a little bit.
Grace - 00:30:35:
Yeah.
Liv - 00:30:36:
But I also have a question of, do you think that CTVC can use something like the newsletter and the platform to spearhead some change if we're not paying enough attention to biodiversity can you guys say, hey, we need to pay more attention to biodiversity and set that trend set that discussion in motion or are you more reactive to what's happening in the environment. Environment, meaning the investment environment and the VC environment and climate Tech in general, or is there space for CTVC to take a proactive approach?
Grace - 00:31:24:
Yeah, I think the answer is a little bit of both. I mean, our Monday newsletter is really focused on aggregating relevant news from the week, sharing the deals that have happened in the last seven days. And so the writing I do for that newsletter typically is a reaction to some headline that has happened in the last week with our features that we publish on Thursdays. It can be anything. And I think the challenge is just that there's so much to talk about. And we do take it very seriously that we are helping start conversations, helping curate the discussions that are happening in the community because we've built trust in the Climate Tech community as a respected resource. And so I think, oftentimes there are things that are just getting so much attention that we really have to break them down. Um, like we need to prioritize, like demystifying one area or pointing out the pros and cons, breaking down the value chain and how this market is shaping up. But I think that at times, yeah, we want to get ahead of these conversations as well and bring attention to areas that investors might not be as familiar with or share resources. I think that is a part of the money newsletter as well is that we have a section that's a collection of a lot of different interesting stories or reports or tools. And some of that is maybe a little outside of the scope of what we would go super deep on, but is pointing people toward what's happening in environmental justice, what's happening more broadly in ecosystem restoration and preservation, those kinds of things. So I think there's an opportunity to do both. And it's really, it's really challenging to strike that balance when there's so much happening so fast. But we get a lot of great feedback from readers as well. And I think that helps us identify what really resonates and when we're hitting on topics that people want to know more about.
Liv - 00:33:30:
Awesome. Really quick, can you give a brief overview. What is the CTVC Expansion Platform and what will it be used for?
Grace - 00:33:43:
Yeah, so CTVC, as I mentioned, started as a newsletter back in 2020. And has been tracking the Venture Capital deals within climate Tech for the last three years. And so Kim is building out along with the co-founder Mark, an Intelligence Platform that's starting from that data set of Venture Capital deals, but also hope, you know, planning to build that out and really provide a clear view of where different technologies are along the path to scaling, and as well as the impact of different technologies, really trying to map out what are the hurdles going to be, who is investing in this, who is interested in using this technology as a customer, and what does the path look like to any type of Climate Tech really reaching broader adoption? So it's aiming to give a lot of different kinds of organizations, you know, companies that might be looking for the solutions they need to meet their climate goals, investors who want to really zero in on climate impact, all kinds of different folks, just a clearer view of the trends that are happening, how to get ahead of that, how to best use this innovation for the problems they're trying to solve.
Liv - 00:35:21:
Grace, thank you so much for joining us on Ecobite. It was a great conversation and I'm excited to continue to read the newsletter and see how CTVC expands.
Grace - 00:35:31:
Thanks. Yeah. Thanks for great questions.