Who are the most prolific mainstream VC funds backing climate innovation? A look at the top 5.

We don't need more climate funds; we just need more climate funding.

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Climate-first funds like Breakthrough Energy Ventures, Lowercarbon Capital, Prelude Ventures, Clean Energy Ventures, Congruent Ventures, and Energy Impact Partners have been remarkably prolific in their work to back the new wave of startups innovating towards a livable future, but in line with the thesis for my course Climate Change for VCs through Terra.do, I wanted to take a closer look at the generalist venture funds most active in this space.

If you’re interested in this space, you might find our cohort-based course, Climate Change for VCs relevant. Applications are due June 9 for our next cohort. See more here.

Why it matters:

• Investing in climate tech has grown to an estimated $17B in 2020, thanks to a confluence of tailwinds from major institutional asset managers committing themselves to ESG and sustainable finance, to more and more corporates setting net-zero targets.

• But, this is still a tiny drop in the bucket. 2019’s $16B invested in climate tech only represented $0.06 for every venture capital dollar invested that year.

• We need every talented investor focused on efficiently funneling resources to the most promising innovations to get us back on track to limiting warming to 1.5 degrees C — a milestone that some scientists believe we’re just a few short years away from. Warming doesn’t stop just because we’ve reached the year 2050 or 2100, but will continue so long as emissions persist in the atmosphere, which could be hundreds of years past ‘net-zero.’ We need to invest aggressively in solutions now.

• In addition to controlling much more capital than climate-branded investors, generalist investors have the potential to bring enormous logo and network value to climate innovation. There’s a major role for them to play here.

Fortunately, there are some non climate-specific investors quietly making big moves in climate investing, with so little signaling fanfare that their names will likely surprise you. Five investors stood out in my research, and they share cap table space with many mainstream investors who aren’t yet active in climate innovation.

• In comparing these firms, it became clear that it’s not an either/or question when it comes to general venture-scale software or climate tech.

• Instead, the ability to invest in climate tech, with its longer timelines and greater risk across science, technology and deployment, springs from first logging massive wins across broader consumer internet and enterprise software verticals.

It’s my hope that their leading example, and profitable wins in climate tech, will draw more and more of their peers and co-investors into climate deals — as climate tech specialty funds become less common and climate folds into every portfolio.

Who are these five, and what factors stack the chips in their favor?

Which generalists make the best climate investors?

While big name Silicon Valley funds like Sequoia, Union Square Ventures, and Khosla Ventures have made front-page announcements about their commitments to climate change innovation, the biggest investors in the climate horizontal weren’t your typical Silicon Valley firm, and many aren’t even based in the United States.

When we frame this against the four pillars of non-monetary value that any private investor can bring to their portfolio companies — signaling value, network value, knowledge value, and financial value — the picture comes into focus.

It turns out that in the ultra high risk game of early stage climate investing, it helps to have near-infinitely deep pockets, patient backing, growth stage experience and the ability to follow-on, and connectivity with the world’s largest markets particularly Asia. Early, massive and monopolistic internet software wins are also a helpful — and shared — precursor to high volume, cross-sector climate tech investing at scale. 

Let’s take a look at five surprising climate investing stand outs from our analysis.

5 climate investing stand outs

1. Temasek Holdings

Temasek is a Singaporean sovereign wealth fund with $230B under management. It’s a massive fund that invests across a variety of asset classes, from venture-style direct investments in startups to investing as an LP in funds and more.

This broad mandate is part of what makes Temasek such a meaningful player in the climate tech ecosystem. They have the operational chops to go out and source and diligence early stage deals, as well as the deep pockets to continue financing companies as they scale into deployment.

Temasek has major public holdings ranging from Facebook (it did a $12.7B PIPE alongside Fidelity back in 2012) to Ping An (whose $35M private equity round it joined in 1994) to Alibaba (where it participated in a $1.6B private equity round in 2011 ahead of BABA’s 2014 IPO), so they’ve made some money.

These broader internet success have made it possible for Temasek to take on greater levels of early stage risk in climate tech, an inherently riskier-than-usual category because of the way many climate solutions intersect with infrastructure, regulation, enterprise chains and complex earth systems.

Temasek’s notable climate investments:

• Bolt Threads — Bio-fermented, alternative textiles

• Bowery — Sustainable, high-efficiency, pesticide-free indoor vertical farming

• Calysta — Bioreactor-fermented protein for fish, livestock and pet products

• Commonwealth Fusion Systems — Developing a compact fusion power plant based on the ARC tokamak concept

• Eavor — Geothermal for baseload power

• Form Energy — Low-cost, multi-day energy storage for renewables

• General Fusion — Developing a fusion power plant based on magnetized target fusion

• Growthwell — Plant-based food solutions for enterprises and brands

• Impossible Foods — Plant-based meat products for consumers

• InnovaFeed — Large-scale insect breeding for sustainable aquaculture

• Next Gen Foods — Plant-based meat products, focused on the Asian consumer market

• Perfect Day — Animal-free, fermentation-based dairy products

• SES — Lithium Metal batteries for electric vehicles

• Sophie's Bionutrients — Bioreactor-grown protein using industrial food waste

• Stem — AI-enabled energy storage for commercial and industrial

• Sunseap — Clean energy provider focused on the Singapore market

• Sustenir Agriculture — Pesticide-free, high-efficiency indoor agriculture for the Asia market

• Upside Foods (formerly Memphis Meats) — Sustainable, cultured (cell-based) meat

• v2food — Plant-based meat products for consumers, focused on the Australian market

2. Horizons Ventures

Horizons Ventures is Hong Kong billionaire Li Ka-Shing’s venture firm that invested in Spotify, Facebook, and Siri pre-Apple. Li Ka-Shing is known for being a real estate magnate, but actually built his early fortune in plastic manufacturing, becoming the largest supplier of plastic flowers in Asia.  

Like Temasek, Horizons Ventures has deep pockets and early, big wins in major returners in mainstream consumer internet and enterprise software. Its stakes in Facebook, Slack, Zoom (as early as the Series B), Spotify and Oscar Health all delivered strong returns for the fund that act as a buffer enabling it to take on greater risk in emerging categories including cell-based proteins, zero-emissions aviation, and satellites. 

Horizon’s notable climate investments:

• ALE — Collecting climate data via satellites (that also produce on-demand shooting star demonstrations)

• Algama — Micro algae for sustainable protein production

• AlgiKnit — Algae-derived, biodegradable yarns and textiles

• Atomo Coffee — Molecular coffee to cut water use and tropical deforestation

• Beyonder — Hybrid battery cell technology

• Eat Just — Plant-based alternative to egg products

• Endless West — Molecular wines and spirits to reduce water and land use

• H2Pro — Green hydrogen production using Electrochemical, Thermally Activated Chemical (ETAC) instead of electrolysis

• Impossible Foods — Plant-based meat products for consumers

• Modern Meadow — Sustainable, animal-free leather and other materials using biofabrication

• Nourish Ingredients — Fats and oils for plant-based meat and dairy products

• Perfect Day — Bioreactor-fermented, animal-free dairy products

• Soil Carbon — Microbial products to enable and accelerate soil carbon sequestration

• Syzygy Plasmonics — Photocatalytic chemical reactors to reduce cost and emissions for major commodity chemicals like plastics and fertilizer

• The Boring Company — Underground tunnels for public transportation and more

• v2food — Plant-based meat products for consumers, focused on the Australian market

• ZeroAvia — Zero-emissions, hydrogen-electric aircraft

3. Valor Equity Partners

By now, you’re probably starting to see the pattern. Growth stage capital has played a key role in early stage climate tech, with big funds investing earlier — especially if they see a strategic advantage to getting a peek at a company that could be a great fit for their growth equity portfolio later on. 

Valor manages a total of $7.3B and primarily focuses on growth stage investing, including private equity rounds and leverage buyouts, but early on made a name for itself by investing in the Series A rounds for PayPal and Tesla. The firm recently closed a $1.7B growth fund. 

While Valor isn’t a common name you hear in climate tech conversations (and climate isn’t a deliberate part of their brand), in reality they’ve invested in a relatively high volume of early stage rounds in technology companies solving for a vertical-agnostic set of frontier problems, ranging from carbon sequestration to mass transportation to alternative food production. 

One way to read Valor’s fairly extensive and risk-tolerant participation in early stage climate and sustainability plays is as a positive signal for future growth, profitability and markups in this space. 

Valor’s notable climate investments:

• Arcadia — Platform enabling consumers to support clean energy

• Artemys Foods — Hybrid beef alternative combining cell-based (lab-grown) and plant-based proteins

• Blue Ocean Barns — Seaweed to reduce methane emissions from livestock

• Boox — Reusable shipping boxes for ecommerce

• Charm Industrial — Converting waste biomass into bio-oil for sequestration and green hydrogen production

• Climax Foods — Data science to accelerate plant-based food development, starting with dairy

• Endless West — Molecular wines and spirits to reduce water and land use

• EverCharge — Smart charging solution for apartments, condominiums, and fleets

• For Days — Circular fashion brand that collects and recycles old clothes into new products

• ForA: Butter — Plant-based butter

• Good Karma Foods — Plant-based milks

• Living Carbon — Genetically engineering trees to sequester carbon more effectively

• MycoWorks — Mycelium-based leather

• No Cow — Plant-based protein bars and snacks

• Shameless Pets — Pet food made from upcycled food waste

• Spero Foods — Plant-based cheese products

• Square Roots — Modular urban indoor farming

• Tesla — Electric vehicles and clean energy production and storage

• The Boring Company — Underground tunnels for public transportation and more

• Zero Egg — Plant-based egg substitute

4. Box Group

Box Group is a $165M early stage fund founded by David Tisch, prolific angel and co-founder of TechStars NYC, that primarily invests in SaaS, healthcare, fintech and ecommerce, with portfolio standouts including Warby Parker, Behance, Airtable, Flexport, Glossier and Stripe. 

The firm has also quietly made a number of climate-focused bets over the past couple of years, including at least a small handful that have seen strong valuation markups since Box Group’s initial participation. 

As a primarily seed and series A fund with a highly diverse portfolio, it’s impressive to see Box Group’s work in the broader climate tech category. It would be easy for this fund to stick with feel-good, LOHAS ecommerce plays that don’t necessarily move the needle on big problems, but instead they’ve decided to invest closer to the true frontier. 

Box Group’s notable climate investments:

• Arcadia — Platform enabling consumers to support clean energy

• Artemys Foods — Hybrid beef alternative combining lab-grown and plant-based proteins

• Bowery — Sustainable, high-efficiency, pesticide-free indoor vertical farming

• Dandelion — Cost-competitive residential heating and cooling using geothermal

• David Energy — Distributed energy management platform

• Geltor — Animal-free collagen for the cosmetics and personal care industries

• Kula Bio — Bio-based alternative to nitrogen fertilizer

• Palmetto — Clean energy services for residential customers

• Solugen — Plant-based alternatives to petrochemicals, starting with hydrogen peroxide

• The Shell Works — Compostable packaging made from seaweed

• Upside Foods (formerly Memphis Meats) — Sustainable, cultured (cell-based) meat

5. GV 

With $5B under management, Google’s prolific corporate venture arm has made over 800 total investments across its 12 years of operation, including hits like Flexport, Stripe, One Medical, Docusign and Giphy (note: they did also invest in Juicero 😀).

As a percentage of their overall portfolio, their climate investing has been minuscule, but they have tended to double down and support their climate portfolio as companies scale from early into later rounds. It’s a privilege to be able to follow a company from its earliest venture rounds through later stage successes, and serving as a reliable later stage asset ‘customer’ plays a critical anchoring role for the early stage investing ecosystem. 

It will be exciting when GV’s most common co-investors — Sequoia, Andreessen, General Catalyst, Lightspeed and others — start throwing more of their weight behind that fund’s climate bets. 

GV’s notable climate investments:

• Air Protein — Turning CO2 into edible protein

• AMP Robotics — Smart robotics for industrial recycling sorting

• Benson Hill — Ingredients for plant-based protein manufacturers

• Bowery— Sustainable, high-efficiency, pesticide-free indoor vertical farming

• Climate FieldView — Agricultural intelligence platform for farmers

• Dandelion — Cost-competitive residential heating and cooling using geothermal

• Impossible Foods — Plant-based meat products for consumers

• Meatable — Sustainable, cultured (cell-based) meat

• Ripple Foods — Plant-based milks

Honorable mentions

Other funds that we wanted to call out here are Coatue, Baidu Ventures and NEA. 

COATUE is going to be a critically important player in creating later stage pull for all the early stage climate activity we’re seeing in the last year and a half. They’ve made meaningful investments in Universal Hydrogen, Sila Nanotechnologies, Weave Grid, Form Energy, Impossible Foods and Dcbel.  

BAIDU VENTURES has backed a lot of robotics, manufacturing and biotech companies, so we know they’re not afraid of risk. But it’s also exciting to see them get into climate-adjacent deals with investments in AMP Robotics, Huidian Cloud, MyDadao (an EV car sharing platform), and EV car brands Nio and Weltmeister.

NEA was fairly heavily invested in clean tech 1.0, and saw a lot of its early renewables and storage bets go under. They’ve been understandably cautious to get back in, but they’ve jumped on the Dandelion Energy bandwagon, and invested in the algae- and plant-based food revolution via New Wave Foods.

Who’s next?

There is a ton of high quality capital out there looking to do great work at the frontier of climate innovation.

Some of this is driven by their own LPs — pensions funds, endowments and family offices who are increasingly incorporating climate impact and general ESG sensibilities and targets into their allocation strategies. Some of it is driven by GPs wanting to take a stance in the climate crisis.

Going forward, a lot of it will be driven by what friend (and Climate Change for VCs alum) D’arcy Coolican calls Product-Zeitgeist Fit. That is, it’s simply time. The world’s best thinkers and doers are jumping in to start or join climate companies solving massive problems and capturing substantial value, and that means the world’s best capitalists will follow suit.

One last thing — I lead a course on Climate Change for VCs through Terra.do, and we’re starting our next cohort with folks from institutional funds, CVCs, family offices, starting June 9. You can learn more or apply here.

Special thanks to Jose Montoro, Nishant Mani, and the great folks at Climate Tech VC for inspiring and/or giving feedback on this post. Data sourced from Pitchbook, company websites and news articles.