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The New York Climate community was in full force this week. The energy in the city was contagious as activists, entrepreneurs, investors, government officials, and corporate sustainability teams gathered across the city to discuss major climate change issues. Energy Capital Ventures joined in on the fun. We were able to catch up with old friends and make new connections, all while having meaningful conversations around deeptech funding and emerging technologies. To say we learned a lot would be an understatement, but we’ve organized a few key takeaways for you here.
It is no surprise that the deployment of climate solutions will be a very local challenge. Although the federal government has set a strong precedent for green investments in the United States, the actual deployment and adoption of these technologies will require local support and coordination. The transformation of anchor industries in respective cities will be a primary driver in climate tech growth. For example, fossil-dependent states like Louisiana are beginning to see the diversification of fuel sources as an economic opportunity, as well as an opportunity to decarbonize significantly. By introducing hydrogen production and end use technologies, Louisiana will be able to preserve livelihoods and spur economic growth because it gives the fossil fuel industry a clear pathway to decarbonize all while leveraging existing infrastructure and skillsets. Other anchor industries that can drive the economic growth and decarbonization of US cities include the automotive industry in Michigan, steel in Indiana, and real estate in New York. All of these anchor industries are energy intensive and have the potential to reduce their emissions while providing new jobs and economic growth.
The future hydrogen economy got a lot of stage time. Attendees discussed the remaining challenges to securing hydrogen as a viable decarbonization opportunity. The obvious technological challenges still exist, like getting the cost of hydrogen down to $1/kg to be cost competitive with alternative energy sources. But there are plenty of smart people and money working on this, including ECV portfolio companies Cemvita and Osmoses. A big part of the conversation focused on building out the required infrastructure to be able to deliver and utilize hydrogen as a primary energy source. States should invest in hydrogen infrastructure before it's fully deployable due to numerous compelling reasons; to decarbonize, to create new jobs, to reduce fossil dependence, to improve air quality, to decarbonize otherwise difficult-to-electrify sectors, the list goes on and on. There was a call to action for states to start allocating money to the build out of hydrogen infrastructure so that when the technology is ready, it can be deployed and become a reliable energy source.
Policy development is probably the most important part of ensuring the deployment of emerging climate technologies. Much of the discussion focused on the recent climate policy achievements which we also discuss here. However, several policy makers and lobbyists urged the importance for startups to have thoughtful regulatory strategies and to start thinking about policy as a business function. Some of the key lessons that were highlighted included having resources allocated to policy. Depending on the stage of a company, it might make sense to have a full time employee dedicated to policy, especially in industries that will require a lot of policy development like carbon removals, which have historically been stimulated by voluntary markets. Startups should start engaging administrators well before they need funding or permits. With a robust regulatory strategy, startups can establish strong relationships with regulators, making navigating programs and processes much easier, increasing the likelihood of unlocking funding or permits when there is urgency. Startups should also take note of first movers. States often copy the precedent of familiar states. By taking note of early and pending climate related regulation, startups will be able to identify the most favorable markets and anticipate regulation of states that will inevitably be influenced. It is also extremely important to work in coalition with the broader technology industry. When it comes to policy development, emerging technologies should work together, not as competitors. Setting standards for new industries and minimizing the risk of failure is essential when securing the support of policy makers. The extent of a startup's regulatory strategy will depend on stage and resources. One thing was clear, policy should become a business function sooner than most people probably think.
Several of the speakers insisted that funding deeptech and hardware climate companies will begin to take different forms. Cap tables should remain less complex and entrepreneurs should opt for different funding models outside of venture capital alone. Hardtech companies don’t need to rely on only VC funding, and probably shouldn’t. There are significant capital requirements for scaling hardware companies, and creative funding mechanisms are emerging following Series A rounds, especially for companies that can bank early revenues. Whether its venture debt, off balance sheet funding from partners, or non dilutive government funding, startups and VCs should work together to understand alternative financing and consider it sooner rather than later.
In the past, climate week has been plagued with empty promises and greenwashed announcements. There’s always been a lot of discussion on how companies should move beyond making commitments and take meaningful actions on decarbonization to address environmental challenges as an ethical imperative and a strategic necessity for businesses in today's world. The most important takeaway from the week is that companies are really beginning to shift from commitment-oriented to action-oriented. It seems decarbonization commitments have been taking over headlines for the last few years, but there’s been limited follow through and achievement of those claims. Now, industries are mobilizing. Leaders are asking questions, collaborating with experts, making investments, and executing decarbonization strategies.
Energy Capital Ventures is lucky to be working with Corporate Limited Partners who are committed to achieving their decarbonization commitments by leveraging Green Molecules technology. Energy Capital Ventures is actively funding investments in Green Molecules and welcome collaboration with entrepreneurs and investors working in the space. If we missed you at climate week, don’t be shy! Reach out to us here.
Congratulations to ECV sponsored Wyatt Worthington for winning the APGA Cisco Invitational at Pebble Beach!
ECV was proud to sponsor the 20th Rice Alliance Energy Tech Venture Forum and to participate in the event.
As event season picks up, ECV is hitting the road! To schedule a meeting around any of the following conferences, please contact us below.
Chicago Climate Week- October 2-6, Chicago, IL
AGA Executive Conference - October 8-9, Austin, TX *ECV is a platinum sponsor*
Fortnightly Top Innovators 2023- October 10-12, Washington D.C. *ECV is speaking*
VERGE - October 24-27, San Jose, CA
FUZE - October 29-31, Houston, TX
Greentown Labs - November 1, Boston, MA
Greentown Labs - November 2, Houston, TX
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