A new report out of the World Economic Forum estimates $12.5 trillion in global economy losses due to the toll climate change is expected to take on the planet. Climate goals for many businesses have been pushed back or seem out of sight. This is where Venture Capital firm Climatic comes in — the firm’s $65 million inaugural fund is aimed at backing founders who are starting climate tech software companies.
Climatic Co-Founders and Managing Partners Josh Felser and Raj Kapoor join Yahoo Finance to discuss the challenges with climate tech, investing in climate tech, and how they plan on advancing climate tech to aid in reducing the harm that climate change poses on the world and the global economy.
“In general, people are pulling back a bit because they’re not seeing the distributions, the liquidity from their existing venture portfolio,” Kapoor says. “And the last couple of years, most existing venture managers have come for double, triple their fund size. They are feeling tapped out right now. What we’re seeing the last couple of months is light at the end of the tunnel for future sectors.”
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino.
Video Transcript
AKIKO FUJITA: What we have seen over the last few years is these major companies coming out with very ambitious climate goals. And then in the last year or so, pulling back that target or pushing back, I should say, that target even further partly because they haven’t necessarily made the investments that are required for that transition. A bit of a reality check, as well. And also you could argue that shareholders aren’t necessarily demanding that change in the same way they did the last few years.
I’m wondering what you’re seeing from your perspective and how some of those companies are looking to invest in can help accelerate that transition?
JOSH FELSER: Right. So we think that the E should be freed from the ESG. That’s another conversation. But we’re funding this innovation that is going to free, really help these companies generate the kind of innovation they need to hit their goals. I think we’re just seeing the kinds of companies from capital allocation to energy infrastructure, to using AI for insights and action really make a difference in these companies goals.
And I think we’re going to see some really interesting developments around Smart Software, and helping some of the biggest companies in the world, figure out how to reach these net zero goals that they’ve set in a way that doesn’t affect their earnings.
RACHELLE AKUFFO: And so Josh, Rachelle here. I just want to follow up because you talked about taking the E, the environmental part, out of ESG. What would that do you think for VC funding in this space?
JOSH FELSER: Well, the E– they’re all important. ESG and all are important. They’ve been lumped together for reasons that don’t really make any sense anymore. They’re so different. So I think it’s not to diminish the S and the G. But the E is a separate animal and needs to be looked at as different. Different funding, different use cases. It’s looked at differently within the organization as well.
So I’m hoping that we’re able to focus on all three, but not lump them together.
AKIKO FUJITA: Raj, let’s talk about the VC environment right now. You look at the last year, certainly been a bit of a pullback. I’m looking at data from PitchBook, specifically, looking at the number of active investors in the US, down 38% in the first three quarters of 2023. What are you seeing there? How difficult has it been to raise money for this fund?
RAJ KAPOOR: So I’m coming from a background where I was at Mayfield, which has been one of the longest standing Silicon Valley funds. It’s certainly a very different environment when you’re raising a first time fund in a new sector, which is climate tech in, probably, the worst time in 15 years. So it was definitely challenging. We got it done. But in general, people are pulling back a bit because they’re not seeing the distributions, the liquidity from their existing venture portfolio.
And the last couple of years, most existing venture managers have come for double, triple their fund size. So they’re really feeling tapped out right now. But what we’re seeing, especially the last couple of months is light at the end of the tunnel for a few sectors like climate tech and AI.
