It’s been a weird couple of years for CVC and climate tech. But when social justice and Big Oil are on the same page, I’ve gotta channel that Buffalo Springfield classic—stop, hey, what’s that sound? With all due respect to the ’60s and civil rights protests, the current war on the environment might be a bigger deal. So when serious corporate money teams up with the greenies, that gets my attention—for good, bad and the ugly that usually comes out of it (mainly bad).
Last year, corporate venture capital (CVC) invested over $23 billion in climate tech. In case you’re wondering exactly what climate tech is, it’s the term for the clean energy sector, encompassing energy storage, renewables, and electric vehicles. But within these broad categories, there is a slew of creative and innovative technologies with one goal—to reduce greenhouse gas emissions and cool the planet. So let’s take a look at how CVCs and climate tech are getting along.
CVCs and Climate Tech Can Be Fun. Seriously.
Some of the cooler (in the “that is so cool” way) concepts in climate tech are so out there I just can’t wrap my head around them. For example, apparently, supplementing a cow’s diet with this specific tropical red seaweed can reduce methane emissions (cow farts) by 80%. I mean, that’s just fascinating. Also, while we’re on the subject of cows, another project aims to reduce methane by replacing beef with insects. It turns out that some bugs have the same protein structure as beef; they are also more sustainably farmed than environmentally piggy bovines. So if you can get iron and other critical minerals from mealworms, why not? I mean, I can maybe think of some reasons. But as a solution to global hunger and malnutrition, I’m all for it.
Sadly, most climate innovation isn’t nearly as intriguing as finding ways to grow more seaweed or bug harvesting. Global corporations tend to put their gobs of cash into more mainstream technologies like zero-emission fuels, green construction, and renewable energy. My question is this: are these investments paying off for the investors? Or should they be putting more money into the off-the-wall stuff, like the entrepreneurs who are supercharging seaweed growth for cow noshing and removing CO2 from seawater?
Let’s look at some examples of corporate venture capital that are paying off and a couple that, in hindsight, weren’t such a great idea. One caveat here: it’s really too early in the game to definitively say that these CVC investments were a good call. But I’ve set a fairly low bar here. If the startup or scaleup is still in business and isn’t under SEC investigation, we’re calling that a win.
Let’s look at the company, not the investors. Why? Because Alder Fuels is such a blistering hot innovation that it’s harvesting capital from the most ferocious greenhouse culprits on the planet.
Alder has developed advanced pyrolysis technology that converts biomass and wet waste into biocrude oil that’s ready for the refinery. The pyrolysis process basically burns biomass into fuel without using oxygen. That’s a huge win for companies looking to reduce their carbon footprint.
Alder has gotten capital from public and private organizations—the DOE, DOD, and National Renewable Energy Lab (NREL) are repping for the government, while United Airlines, Honeywell, and AVFuel are pouring hundreds of millions into the project on the corporate side. Boeing has also invested in Alder and is offering their planes to test the fuel. Last year, Boeing promised that by 2030 they would be flying 100% sustainable aviation fuel (SAF) in their fleet. No word on whether those are United airplanes. Rolls Royce is also testing the fuel in its jet engines.
So far, Alder appears to be the gold standard for CVCs and climate tech startups. The company is only a couple of years old. BUT…it is still early. I have looked at most pyrolysis technologies: they are inefficient and expensive; however, SAF is hot to trot and being sold a huge premium to traditional jet fuel.
There’s another darling on the corporate dance card: ZeroAvia. This British company, founded in 2017, is developing zero-emission engines for smaller planes—the 40-80 regional hoppers. This particular innovation allows the planes longer ranges and greater payloads. As a result, early investors hope to have a jump on the lucrative regional markets.
IAG (parent group of British Airways, Aer Lingus, LEVEL, Iberia, and Vueling), United, and Alaska Airlines are the most recent CVCs to invest in ZeroAvia. As part of the deal, United will put 100 of ZeroAvia’s engines in their planes by 2028.
On the financial front of CVCs and climate tech, Barclays has put capital from their Sustainable Impact Capital investment fund into ZeroAvia. It’s part of their commitment to put over £175M into environmentally focused companies. And finally, Amazon’s Climate Pledge Fund has also invested in the company.
In full disclosure, we invested into this company while I was at the BIG CORPORATE JOB in the salt mines…I was originally against it and can tell you over a cocktail or three why…time will tell.
These guys have been in business since 2018—forever in the climate tech world. Their focus is what I consider first-generation clean tech—the solid-state battery components designed for battery-powered goods. They build lithium anode technology that powers everything from EVs to electric drills to airplanes and tactical defense weapons. These batteries are cheaper to produce than LiIon batteries and will fully charge in about 15 minutes.
At the moment, Soelect has closed its Series A funding round, where they pulled in capital from GM’s Ventures arm. This $11 million infusion has brought Soelect from the late scaleup stage to the pilot-lining of their primary technologies.
Why did GM invest in EV technology? The company is looking for partner companies in both hardware and software that will eventually bring GM into zero emissions status. In providing early capital, GM is betting that they will gain “most favored customer” status should Soelect or another tech company really take off.
And a Moonshot
I’ll grant you that investing in Silicon Valley and DC isn’t exactly breaking new and exciting ground when it comes to CVCs and climate tech. But for something really crazy and super fascinating, let’s head over to Helios Space in Israel. Helios isn’t in the scaling stage like the two earlier examples. They’re still raising seed money. So far, only two CVCs have taken the bait—Doral Energy and Anglo American.
Why do I seem skeptical? Well, Helios is developing technologies to cleanly refine ores in steel and critical metals production. Mining is a dirty business, and I think we can all get behind a more sustainable way to extract and refine metals. Where Helios kind of loses me is that they somehow plan to harvest lunar soil (you read that right) for the elements that bind to it—iron, silicon, calcium, lithium, and titanium—and the oxygen that floats around it all. Helios is planning three small-scale missions to the moon in the next three years to test out this theory.
And no, they are not completely nuts. The founder has NASA’s former space resources lead on the team and some funding from the Israeli Space Agency. Space Force is also working with Helios to develop and build the lunar payloads.
While skeptical, is it worth a hedge bet?
The More Practical Part
On a more earthly note, Helios is using the moonshot thing as their way of showing some leg. Their technology makes iron with a lot less energy and no direct emissions. How did they figure that out? In the research process of extracting oxygen from regolith (all those critical elements), they also found that they could extract oxygen from iron ore—without using carbon.
Founder Jonathan Geifman has his head out of space enough that Helios is in talks with about 15% of the global steel industry to produce steel in a Helios furnace. So if I were a corporate VC looking at Helios, I might focus on clean steel production—and with my board seat, I’d ask to play astronaut when they go to the moon.
Again, it’s early days for Helios, but they have the government backing that gives investors some comfort in backing the real wild hare stuff.
The Flameout for CVCs and Climate Tech
And then there’s Rivian. The EV car manufacturer was a darling of the investment world while it tinkered with a line of so-ugly-they’re-kind-of-cute SUVs. Ford put $500 million into the company, while Amazon threw in a cool $700 million. It’s a shame they didn’t put some of that cash into the literal nuts and bolts. Everything for Rivian went sideways (at best) when they had to recall all 13,000 vehicles on the road because a loose part on the steering wheel could cause the driver to lose control of the car.
Ford’s interest in Rivian is obvious, while Amazon’s is less so—but only slightly. They want to convert their delivery trucks to electric, and Rivian seemed like the best bet. Amazon still owns about 18% of the company but has recently announced another partnership with Stellantis to make both delivery EVs and in-dash delivery software.
In mid-December, Rivian announced that their partnership with Mercedes-Benz to build electric commercial vans in Europe had been scrapped. I’m not sure what Rivian’s next move is, but I don’t think I’ll put CVC money into this one.
Buy What You Know, No Matter Whose Money You’re Spending
Because there’s always an exception that proves the rule and all that BS, let’s look at these CVC-fattened startups and find the common threads.
In all five examples, the corporate money found synergy with the startup’s innovations. Airlines understand the jet fuel industry and have a vested interest in finding cheaper, cleaner sources. Honeywell is another corporate investor at Alder—I forget they make jet engines and my thermostats—so again, there is that synergy. Amazon has invested in ZeroAvia, but hey—they fly a lot of packages and are always looking to reduce those costs.
As far as GM’s investment in Soelect, they need partners to move completely into the zero-emissions space. But more importantly, GM engineers understand battery technology.
And then there’s Rivian. The hype here has been so extreme I’m not surprised they weren’t able to live up to it, but this is soap-box derby-level engineering, and they screwed that up. I’m not sure you can say that Ford and Amazon made a bad call from any perspective except that they trusted Rivian’s team to follow up and maybe test their designs.
I included Helios in this list about CVCs and climate tech because it’s that fabulous combination of ridiculous and sublime, with a dash of alchemy mixed in. It’s unusual for power companies like the Doral Group to invest in either space or steel, but it’s an exciting idea (clean extraction, not lunar farming) that may pay off.