12 April 2022 |

Supercharging an industry


Stripe changed the payments industry. Now, they’re going after carbon removal.  

Less than a week ago we covered a $640M raise for Climeworks, the largest ever for a Direct Air Capture (“DAC”) company. I figured that’d be a capstone on a torrid start to the year for a while, a new high watermark for fundraising / deal activity in the carbon removal and carbon market vertical. 

I did jokingly write this at the end of that newsletter:

…with Climeworks coming in and setting a new high watermark! Next up? A $1B raise? Never say never.

Never say never indeed. Today, Stripe, the payments giant, announced a $925M fund for advanced market commitments for carbon removals from DAC & other high tech carbon removal and storage companies. That’s wayyy more money than has been spent on carbon removals previously. The entire carbon offset market, of which removals are a small subset, crossed the $1B mark just late last year.

Known as the ‘The Frontier fund’, the new vehicle is a public-benefit corporation owned by Stripe. In addition to its own capital commitments, Stripe sourced capital from Google, Shopify (who also have their own fund to invest in climate and sustainability), Meta (fka Facebook), and the consulting giant, McKinsey.


The latest IPCC report left little room for interpretation with respect to whether or not the world needs Direct Air Capture:

The deployment of CDR to counterbalance hard-to-abate residual emissions is unavoidable if net zero CO2 or GHG emissions are to be achieved.

And yet, this is a subject of fierce debate. If the world is to successfully decarbonize, the lion’s share of the progress will come from reducing and eliminating existing emissions, rather than removing emissions directly from the atmosphere. So there are plenty of folks out there who argue money spent on carbon removal would have been better spent on driving those emissions reductions.

Zooming out, the world produces ~50B tonnes of emissions annually. That’s a big number, but that means there’s a lot of opportunities for reductions, some of which are more ‘low-hanging fruit’ than others.

Conversely, removing CO2 from the atmosphere and storing it is a complex engineering problem. To be sure, it’s one that Mother Nature has solved quite successfully. And there are countless companies taking advantage of her secrets:

Still, the world is so far behind schedule on reducing emissions that the IPCC agrees it’s important to develop additional engineered solutions to tackle and scale carbon removal. Pulling from another recent newsletter:

…humans have already emitted so many greenhouse gasses that the Earth is 1.1°C warmer than it was before the Industrial Revolution. Even if all emissions magically stopped tomorrow, there’d still be a strong case for removing excess atmospheric CO2.

Further, emissions obviously won’t plummet to zero tomorrow. Decarbonizing the entire world economy will be a long, slow slog. And some emissions are far more entrenched and intractable than others. A combination of engineered solutions for carbon removal + nature-based solutions will have to net these out. That’s where the Frontier fund comes in.


$925M is a lot of money to spend. Especially on ‘products’ that don’t exist yet. The largest currently operational DAC facility in the world will ‘only’ pull about 4,000 tonnes out of the atmosphere in 2022. That’s a long way from the gigaton level solution DAC will need to be if it’s to live up to its expectations (and warrant these sums of money). And even paying a premium price for said removals, say, $200 per tonne, wouldn’t get you up to a $1M spend. 

If Frontier were a traditional fund, they could spend all that money gobbling up equity stakes in countless carbon removal companies. That’s not what Frontier is though. Their approach isn’t about exchanging cash for equity in DAC businesses. The companies and entities making the capital commitments aren’t expecting a return on their investment – they’re lining up to buy future carbon removals. Frontier will broker this via advanced market commitments (“AMCs”). Which in many ways are just as helpful (if not more so) than equity alone would be. 

The concept of the ‘valley of death’ is relevant for many startups, and it roughly describes the period in a company’s development timeline where it needs to spend serious sums to develop its tech and / or product and commercialize it, but isn’t making any money from sales.

Diagram charting the 'valley of death'

This is especially salient for DAC companies; they need to invest significantly in hardware engineering and R&D. And most are just exiting the lab or proof-of-concept stage (no sales).

Frankly, that’s where a lot of firms flounder. Raising money for equity is one way to survive the valley of death. AMCs are great too though. Here’s why.

AMCs are basically an advanced purchase order for the carbon removals that carbon removal companies will produce in the future. They’re an important demand signal that doesn’t require forking over additional equity. As the woman at the helm of Frontier put it “build and we will buy.

Digging a bit deeper, they solve a sort of chicken vs. egg problem in the carbon removal market. With one announcement, Frontier basically 10x’d the amount of visible demand for carbon removals. People forecast the voluntary carbon offset market will grow to $25B or $50B in the coming decades… but there’s a big difference between forecasts and commitments in hand.

If DAC companies were on the fence previously about estimating future demand for carbon removals, an announcement like today’s goes a long way to convince them it’s a market worth developing for and eventually selling into.

For another perspective, consider the challenging path for DAC companies without any advanced signals of demand for their carbon removals. For one, their primary opportunity for funding to bridge the valley of death runs through equity financing in that scenario. They can pitch investors and pepper their decks with graphs from reports and studies touting expectations of future market growth. But that’s a very different conversation.

To be sure, AMCs don’t necessarily = upfront payment and cash flow. They can include this, but the majority of the money still changes hands when the carbon removals themselves change hands in the future. As Frontier describes it:

We expect annual amounts of money spent and tonnage removed to increase substantially over the life of the commitment as the field of carbon removal matures.

Still, there are opportunities for pre-purchases and upfront cash. And the demand signal overall reigns supreme. 


Frontier anticipates allocating their funds to DAC companies over the course of a decade. Stripe has already figured out a model that works for them; over the course of recent years they’ve already built a large portfolio of investments in carbon removal technologies out there via Stripe Climate.

In a sense, Frontier will operate the way much of the carbon removal market does today, except at a massive scale. The carbon removal market, especially for ‘high-end’ products like removals from DAC, is highly bespoke at current. Companies work with brokers and consultants who aggregate their demand and source supply from different projects to satisfy it.

Individual firms are starting to go it alone. Private equity firm Verdane announced independent agreements with three carbon removal companies just last week

Frontier, however, is setting out to aggregate this demand and then broker agreements at a billion dollar scale. Today’s announcement comes at the end of demand aggregation phase v1.0. Now, Frontier will vet carbon removal technologies, looking for scientifically sound, scalable, solutions to support. When these companies produce carbon removals in the future, those will get passed back to the original ‘buyers,’ i.e. the companies who committed capital to the fund.

It’s very hard to argue against what amounts to a $1B investment in carbon removal and DAC. That said… i’ll try anyways, for the sake of playing devil’s advocate. As long as we’re talking about scalability, let’s think about how scalable this model of market making is alongside how scalable the tech itself is.

Should there be one entity sitting at the center of brokering all of this activity? At some point, to scale, the market will need to stand-alone, with operational rails (efficient marketplaces, transparent verification processes, price discovery) to make it attractive without anyone playing middle man. Does all the money flowing into this bespoke vehicle take away capital from the broader market, slowing its maturation?

Perhaps. But I’m glad Stripe is playing the role they are anyways. Because as climate reports always reiterate, the time is past due. And the ‘broader’ carbon removal market isn’t quite ready for prime time yet, even though it needs to be. So I still land on the side of supporting what Stripe is doing; it’s a massive and critical catalyst for carbon removal development over the coming decade.

There are other companies building the operational rails for the carbon market I describe above. As they should. Between the two parallel efforts, hopefully we meet in the middle at a blossoming carbon removal market circa ~2030.   

In closing…looking to work in climate tech? The carbon removal industry just got a $1B boost. Start a company. Work for one! The future of that space got a lot brighter today. Not something we get to say everyday ☀️.