Humankind has been on a mission for energy sources since the first caveman discovered he could control fire, and the current focus on climate tech won’t change that. Scientists argue about when that illuminating moment occurred, but it was somewhere between 300,000 and 1 million years ago.
Since then, we’ve used various materials to create heat and light, ranging from wood to dried animal dung to whale oil. Then came kerosene, of which gasoline and diesel were once unwanted byproducts.
Compared to the entirety of human history, the fossil fuel-based energy systems we depend on have only existed for a quick blink. But, like toddlers, we tend to think of this system as how things are or how things must be because that’s how they’ve always been.
Our Energy Needs Are Changing
As the world population grows — and lives longer — we need more energy. And we need tremendous amounts of it! There is no final number we can cite to describe our global energy demands or even our domestic use. But consider:
- Agricultural energy
- Transportation and fuel
- Food storage
- Climate control (HVAC at the residential and commercial levels)
- Electricity for internet and technology
- And new energy sinks that crop up, like crypto-farming or NFTs
This article is the first in a short series dedicated to corporate venture capital in climate tech. Think of it as a general performance record. We’ll work through some definitions and discuss major players and ideas in climate tech. In future articles, we’ll cover:
- Corporate venture capital vs. financial venture capital for climate tech
- Specific success and failure stories in CVC for climate tech
But first, let’s get some definitions out of the way and decide on parameters for measuring success. Then, we’ll discuss how one major organization uses corporate venture capital in climate tech to affect its suppliers and consumer behavior. Finally, we’ll talk about climate tech/food tech, specifically edible insects. It’s going to be a fun read!
Defining Corporate Venture Capital, Climate Tech, and Success
Corporate venture capital is money earmarked by an organization to fund startups that achieve a financial AND strategic goal for the company. Corporations build their own interval VC (venture capital) or invest into external independent funds to find and evaluate startups, a process we’ve discussed already.
What Is Climate Tech?
“Climate tech” is a newer phrase. Climate tech refers to technology that addresses climate change by reducing emissions and creating a more sustainable world. It covers a wide range of areas, from renewable energy, energy efficiency and waste management, to nanotechnology and biology-based solutions. Examples of climate tech include renewable energy sources such as solar, wind, and geothermal; energy efficiency technologies such as energy storage and smart grid systems; green construction technologies; carbon capture and storage; and bio-tech-based climate adaptation technologies.
These are all some new ideas in climate tech, and many more are coming! We can imagine tremendous profits for the corporations and investors that select the winners. But since we’re talking about environmental and human health, the real winners must do more than generate income.
Defining Success in the Climate Tech Arena
Successful climate tech advancements must do more than make money for investors. The whole point is to impact our carbon levels and GHGs. Therefore, successful climate tech ideas must deliver quantifiable results. Whether we count tons of carbon stored, degrees cooled over years, or tons of emissions reduced, there must be hard evidence and meaningful numbers. This is one of the reasons that many ideas, companies, and even categories (look-up Enhanced Rock Weathering) have struggled and will struggle, there is a lack of an economic model built on provable reality.
With all that in mind, let’s look at some overall successes in climate tech.
Corporate Venture Capital Successes in Agri-Tech
Corporate venture capital backing agri-tech have been one of the faster growing segments. But let’s take a step back and forget about transportation for a minute.
Forget Transportation for a Moment
You’re thinking, “Wait, what about transportation and electric vehicles (EVs)?” Yes, those advancements are essential to the future of energy; however, there is still a real math problem comparing the actual energy efficiency (“carbon footprint”) of an EV vs. an ICE (Internal Combustion Engine). The economic and intellectually honest debate must take into consideration the carbon footprint from cradle (sourcing the raw materials like lithium, cobalt, iron ore, nickel) –> to the supply chain –> manufacturing –> using the product and the carbon footprint to fuel it –> to disposal (the grave).
On Climate Change and Ag
Bayer.com stated that, “Rising temperatures and weather extremes threaten our food system where it begins — on the farm.” Our ability to grow enough food is threatened by a growing population, changing weather patterns, and input costs. And food is at the intersection of three large interconnected challenges: (1) Water: it takes a lot of water to grow food and produce energy, (2) Energy: it takes a lot of energy to clean and move water and a lot of energy to grow food, and (3) Food: it takes a lot of water and energy to grow food.
So Bayer is paying Brazilian farmers to capture carbon from the atmosphere by encouraging them not to till fields during dormant periods but to plant cover crops instead. Rather than empty dirt lots, these fields support other plants that will continue translating carbon dioxide into oxygen.
That’s practical, not technical, but Bayer is also working on digital tools that will allow consumers to select their groceries based on the carbon footprint created. Imagine choosing a pack of steaks or a bag of rice based on its carbon footprint to produce. Will the emissions created show up on food product labels? That may someday be a reality. Before that, Big Farm and Big Meat will begin publicizing their carbon offsets and advertising net-zero-carbon meats. Ultimately, public pressure and the invisible hand of the market might force more farmers to implement environmentally friendly methods.
I actually think this is a clever idea; however, I do debate the current measurements and assumptions that go into the carbon footprint. I am a believer in the buy, eat, drink, and produce energy locally, BUT there are always tradeoffs (except for cars since we all know the best cars from across the pond). Ever read The Omnivore’s Dilemma?
An old boss of mine once asked me what was more sustainable: a plastic or paper bag? The answer: it depends. What are you using it for? How long does it need to last? Where did the materials come from and at what cost? What is the cost to dispose of the material? etc…
We’re Talking About Bayer, the Aspirin Company
This is a perfect example of corporate venture capital working in climate tech. You’re surely familiar with Bayer, a German pharmaceutical and bioengineering company. You might have some of their aspirin in your medicine cabinet right now.
Pharmaceuticals and agriculture are closely linked. A big pharma company like Bayer relies on ag to supply raw materials they need for:
- Vaccine development and manufacturing
- Antibody production for vaccines
- Diagnostic compounds
- Bio-material used in antibiotics
- Animal fats and oils
- Therapeutic molecules used in medications
Bayer doesn’t specifically deal in produce or meat beyond the products they need for pharmaceutical development and production. But by investing in a software developer and research tools to monitor farmers — something far out of their wheelhouse — they can affect:
- The behaviors of their suppliers
- Global emissions
- And consumer behavior
Corporate Venture Capital and Climate Tech in the Food Sector
In a previous piece, we discussed how transportation and energy prices affect food prices in the US. So you’re already aware of the impact of transportation costs on food. By now, the reality is hitting your dinner table.
As transportation and energy storage costs rise, food costs will also increase. So upcoming advancements in both transportation and storage are going to be huge. In a future article, we’ll explore some specific examples.
But another way corporate venture capital is attempting to tackle climate change could be directly related to our diets. Per Bloomberg, during the first six months of 2022, more than $12.7 billion were invested into “food tech” startups. We’re talking about meat alternatives, protein cells, and crickets. Now, is replacing meat actually a good idea? A debate for another day, but if you look at the meat alternative space at the time of this posting…I am bearish.
Climate Tech/Food Tech: Is Eating Insects Better for the Environment?
This is an interesting notion and probably worth an entire blog on some other day. To the human body, animal proteins are similar from one animal to the next. So the protein you find in an egg, a steak, or a boneless, skinless chicken breast is all about equal in your tummy.
Plant proteins are different and more difficult to digest. But your body can still use them. Regardless of the protein source, your body needs X ounces daily for cell renewal and muscle growth.
The Argument for Edible Insects
The argument for insect-based proteins is that:
- Edible insects offer animal protein your body needs
- Insects require less care and upkeep than traditional livestock, meaning lower GHG output at insect farms
- Our demand for protein will increase as our population increases and ages, so we need more protein sources
- Insects can be fed farm waste, reducing our need for crops and reducing the agricultural waste dumped in landfills
Whether you’re open to an insect-based meal or not, key players are running with the idea.
Funding & Statistics
According to Meticulous Research, the edible insect market will be worth $9.46 billion by 2030 here in the US.
Also, the Canadian government just dropped $8.5 billion Canadian into insect agriculture for future use in human and pet foods (and 8.5 billion Canadian dollars equals about 6.4 billion USD as of November 2022).
So, are you ready to start eating crickets to reduce climate change? We believe it’s only a matter of time until Burger King offers a “Hopper” and McDonald’s offers “Crickin Nuggets.” It might come sooner than you think. …Especially once consumers see how climate-friendly insect protein is, using their handy Bayer app at the grocery store.
Related Reading & Resources:
HBR.org: Making Sense of Corporate Venture Capital
CBInsights.com: 14 Lessons From Venture Capitalist Fred Wilson
Cultivationcorridor.org: Accelerators & Incubators
Agweb.com: From Pharmaceutical to Farm
Pitchbook.com: Venture Capital Fund Data 2022
[…] What’s the incentive for corporations to throw all this cash at a climate tech startup? I’m sure there’s some level of tree-hugging altruism involved. But I’d guess that the broader imperative is that stockholders—even the big, cold-hearted institutional investors who really call all the shots—are demanding greater attention to innovation that will decarbonize these industries and slow down the inevitability of a warming planet. I mean, all the money in the world is pretty much useless if it’s too hot to grow food crops. […]