Welcome to Keep Cool

Hi team,

Hope you're well! I'm recuperating from a busy Climate Week. You know the drill for today; we’ll round up the deals and headlines across climate tech after a short section exploring one thing I found particularly noteworthy this week. 

In today’s email:

• Not a death sentence: On down rounds
• Fundraising announcements across climate tech
• Other climate tech and energy headlines

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DEALS IN FOCUS

One of the biggest venture deals in climate this week was for Indigo Ag, which raised $250M in equity funding to continue commercializing its products, which are geared at making agriculture more sustainable. Specifically, Indigo Ag works on products including:

• Microbial seed treatments to enhance crop health and yield. Often, this looks like applying beneficial microbes to seeds before planting.
• Crop nutrient products designed to improve nutrient availability to crops, ideally reducing the need for synthetic fertilizers.
• Indigo Ag has also tried to scale carbon credit-focused farming by working with farmers to implement practices that sequester additional soil carbon.

The climate challenges from agriculture are manifold. For one, agriculture is a significant source of methane emissions. By some estimates, methane emissions from cows alone have caused up to ~12% of anthropogenic global warming to date.

Of course, agriculture also drives a lot of land-use change. The expansion of beef farming, for instance, is a significant contributor to the loss of the Amazonian rainforest.

Further, fertilizer use, which has exploded in the past century to feed an ever-growing global population, adds nitrous oxide to the atmosphere, and nitrogen run-off from fertilizers also pollutes waterways and other components of various ecosystems.

All of that is to say, we need a diverse set of solutions to decarbonize agriculture while maintaining and expanding the crop yields that sustain civilization. 

Hence, all of the products Indigo Ag works on are ostensibly quite necessary. But they’re also quite difficult to develop and commercialize. Agriculture is typically a commodity business. Even if you have a solution that reduces emissions and keeps yields flat, if it costs more, it may be difficult for potential buyers to adopt. Dream state solutions are thus ones that make crops more resilient and / or increase yields while also driving emissions reductions. That makes for a more clear ROI model.

The alluring and daunting scale of challenges and opportunity in ag (via Shutterstock)

Can you get down with a down round?

I have no direct insight into how successful Indigo Ag has been in recent months at continuing to improve R&D, prove the efficacy of its solutions, and sell them. We have reason to suspect, however, that they're at least not hitting benchmarks they set for themselves previously.

While the amount of funding is a considerable headline number, according to some reports, Indigo Ag's latest fundraising round was a 'down round.' A down round is a round of funding that comes at a lower valuation than past rounds. Indigo Ag has also gone through two rounds of layoffs in the past year, which is another indication that past projections it made – which drove hiring decisions – aren't being borne out as quickly as the company would have liked. 

Every time we see a large round of financing for a climate tech company, we cheer. But there's often more than meets the eye. While Indigo Ag’s valuation drop likely wasn’t as precipitous as some reports speculated a month ago, down rounds are a problematic dynamic for venture-backed businesses:

• Forecasts: If a round was raised at a significant valuation, will the company be able to commercialize to 'grow into' that valuation?
  
• Dilution: Does the company need that much money? Or did it dilute its equity too cheaply, quickly, unnecessarily? Does it now face pressure to try to scale faster than it's capable of?

Both bullets drive home the same, central point. Developing and then making good on the right roadmaps for scaling and commercialization can be more art than science. Sometimes, when things don't go according to plan, you raise a down round. You lay off some of the staff you hired in recent years. But down rounds have compounding ripple effects:

• More dilution: When a company raises money at a lower valuation, it typically means that the investors in the new round acquire a disproportionate ownership stake compared to previous investors. This dilutes the ownership of existing shareholders, and high dilution can be demotivating for everyone involved. 
  
• Market signal: A down round is a sign of underperformance compared to past expectations. Investor value companies based on their growth potential; a lower valuation suggests that the company's prospects aren't as strong as potentially believed previously. This erodes confidence both internally (within the company) and externally.
  
• Future prospects: Raising a down round makes it harder to secure future funding. Investors may be hesitant to invest in a company that has experienced a drop in valuation, as it raises questions about the company's solutions, management, and business prospects. This limits the company's access to capital and can hinder future growth prospects.

A down round isn't a death sentence, but it can significantly impact ownership, and other stakeholders' (investors, customers, policymakers) confidence. 

The net-net

So much of venture-backed commercialization and growth is a confidence game. When there are signs that past investor and company confidence and projections aren’t coming to fruition, it can have significant ripple effects, not just for the company, but for the industry in which it operates.

What incumbent stakeholders in agriculture have long known is coming to the fore again: making significant changes to the way the world produces food is really hard. Sugar cane and corn are two of only a few products the world produces more than a gigatonne of annually. Even as new, lower emission-production techniques come to the fore, actually shifting practices could take decades. It’s like trying to turn around an oil tanker in choppy seas. 

Given the breadth of its products and the difficulty of making change in agriculture, Indigo Ag’s business is a labyrinth of grand challenges. As other climate techs move from earlier stages to commercialization, many will find themselves grappling with similar ‘down round’ dynamics.

DEAL HEAT

Large venture funding rounds

🌱 Indigo Ag, based out of Boston, raised over $250M in equity funding to "drive innovation and growth in its sustainable agriculture programs." Flagship Pioneering, State of Michigan Retirement System, and Lingotto Investment Management invested. Indigo Ag has also gone through two rounds of layoffs in the past year. More here. (U.S., Food & Agriculture)

Medium-sized venture funding rounds

📊 Plan A, based out of Berlin, raised $27M in Series A funding for its carbon accounting and decarbonization platform for corporations. Lightspeed Venture Partners led. More here. (Germany, Climate Data Management)

⬇️ Immaterial, based out of Cambridge, U.K., raised $20M in Series A funding to develop advanced materials and systems for carbon capture and hydrogen storage. SLB led. More here. (U.K., Industry)

🚚 Fernride, based out of Munich, Germany, raised $19M in additional Series A funding for its autonomous yard trucking business. Deep Tech and Climate Fonds, Munich Re Ventures, Bayern Kapital, and others participated. More here. (Germany, Transportation)

🌳 CarbonScape, based out of Riverlands, New Zealand, raised $18M for its ‘biographite,’ which it produces from forestry and timber industry byproducts. Stora Enso, a paper mill company, led. More here. (New Zealand, Industry)

🔩 Metaloop, based out of Graz, Austria, raised ~$17M in Series A funding for its marketplace that connects scrap metal sellers with buyers. FirstMark Capital led. More here. (Austria, Industry)

🛞 RISORCE, based out of Belgium, raised ~$13.4M from Recytyre, Wallonie Entreprendre, and other investors to build an end-of-life tire recycling plant in the Liège province of Belgium. More here. (Belgium, Industry)

🧊 Mojave Energy Systems, based out of Sunnyvale, CA, raised $12.5M for its energy-efficient liquid desiccant systems (i.e., air conditioning products). One Ventures and Fifth Wall led. More here. (U.S., Built Environment)

Smaller venture funding rounds

🔥 Rain, based out of Alameda, CA, raised a $9.7M in seed funding for its aerial firefighting technologies. DBL Partners led. More here. (U.S., Climate Adaptation)

🌊 Oneka Technologies, based out of Quebec, raised ~$9.25M in Series A funding alongside ~$15M in grant funding across grants from the Ocean Supercluster, Sustainable Development Technology Canada, and the DOE for its modular desalination systems that turn ocean water and renewable wave energy into fresh water. The Hoffecker Family led the Series A round. More here. (Canada, Industry)

⚡ Yotta Energy, based out of Austin, raised $8 million in extended Series A funding to expand manufacturing of its solar battery technology for rooftops and EVs. Evergy Ventures led. More here (paywall). (U.S., Energy)

⚡💦 Peregrine Hydrogen, based out of Santa Cruz, CA, raised $7.8M in seed funding for its dual green hydrogen and chemical production technology. Bidra led. More here. (U.S., Industry)

🌞 BoxPower, based out of Grass Valley, CA, raised $6.5M in Series A funding for its solar microgrid solutions. Aligned Climate Capital led. More here (paywall). (U.S., Energy)

⚡ Electron, based out of London, raised ~$5M for its "marketplace software for flexibility and distributed electricity." East Innovate led. More here. (U.K., Energy)

🔋 Green Li-ion, based out of Singapore, raised $4.1M in equity funding from Twin Towers Ventures to build its battery recycling facility in Oklahoma that will take waste battery scrap and used batteries and turn them into new cathode battery materials. More here (paywall). (Singapore, Industry)

🌞 Mona Lee, based out of Boston, MA, raised $3.25M in seed funding for its residential solar installation business. More here. (U.S., Energy)

📊 Openvolt, based out of Dublin, Ireland, raised ~$1.6M in pre-seed funding for its API that provides access to electricity data. Cavalry Ventures led. More here. (Ireland, Energy)

🔌 Cardino, based out of Berlin, raised ~$1.07M in pre-seed funding for its EV resale marketplace. Silence VC and FJ Labs led. More here. (Germany, Transportation)

🌞 Solfy, based out of Barcelona, raised ~$1.07M from Ona Capital for its residential solar energy marketplace focused on self-consumption. More here. (Spain, Energy)

Other funding rounds

💵 Bloomberg Philanthropies, based out of New York, plans to invest another $500M into its Beyond Carbon campaign, which has a stated goal to "shut down every last U.S. coal plant." More here. (U.S., Energy)

⚡️ TotalEnergies, based out of Courbevoie, France, plans to invest $300M in a joint venture with Ahmedabad, India-based Adani Green Energy to develop renewable energy projects in India. More here. (India, Energy)

🔋 In grant funding, Xcel Energy, based out of Minneapolis, MN, raised $70M from the DOE to deploy 10 MW / 1,000 MW-hour iron-air batteries at two different sites in Minnesota and Colorado. More here. A bevy of other long duration storage projects also received grants. For instance, Westinghouse received funding to deploy a 1.2 GW-hour thermal energy storage system alongside a wind farm in Alaska.  (U.S., Energy)

🔌 The Climate Pledge (co-founded by Amazon and Global Optimism) has committed $10 million to C40 Cities (a global network of climate-concerned mayors from global cities) to launch Laneshift, a new initiative targeting emissions reductions in road transport and to deploy EVs in Indian cities. More here. (India, Transportation)

✈️ ZeroAvia, based out of Hollister, CA, raised an undisclosed amount of Series C funding for its hydrogen-electric planes. Airbus, Barclays, and the investment arm of Saudi Arabia's megacity project NEOM led. More here. (U.S., Transportation) 

🛒 In acquisitions, Redwood Materials, based out of Carson City, NV, acquired Offenbach, Germany-based Redux Recycling, taking control of its battery recycling facility in Bremerhaven, Germany. More here. (Germany, Industry)

🔌 XCharge Group, based out of Hamburg, Germany, raised an undisclosed amount of Series C funding from Shell Ventures and other investors for its battery-integrated EV charging solutions. More here. (Germany, Transportation)

New funds

💵 HSBC, based out of London, announced it will provide $1B in additional financing to early-stage climate tech startups and that it will also invest $100M in Breakthrough Energy Catalyst, a new platform to invest in companies using climate tech to decarbonize their businesses. More here. (U.K., Funds)

💵 Bill Clinton and Ziv Aviram, the Israeli billionaire and co-founder of Mobileye, announced they will invest $1B in a new fund that will focus on technologies that address global warming challenges. More here. (International, Funds)

💰 Lowercarbon Capital, based out of New York, raised $550M across two new funds to invest in pre-seed and seed-stage climate tech companies as well as existing portfolio companies. The funding brings the firm's total AUM over $2B. More here. (U.S., Funds)

💰 Astanor Ventures, based out of Brussels, raised ~$385M for its second fund to invest in food and ag tech startups. More here. (Belgium, Funds)

💰 FIEE Sgr, based out of Rome, Italy, raised ~$100m for a long-short fund to invest in energy transition companies' equity and debt. While a fund positioning itself to take active short positions is a first for my coverage, I don't hate it. More here. (Italy, Funds)

💸 Cortado Ventures, based out of Oklahoma City, raised $80M for its second fund. The firm invests in early-stage tech companies, including ones in the energy sector. More here. (U.S., Funds)

💸  Trailhead Capital, based out of Boulder, CO, raised $50M to fund early-stage companies focused on expanding regenerative agriculture practices and products. More here. (U.S., Funds)

ELSEWHERE IN CLIMATE AND CLIMATE TECH

🏭 Onshoring: First Solar announced it broke ground on its $1.1B, 3.5 GW per year solar panel manufacturing plant in Iberia Parish, Louisiana. 

Verdagy, a leading electrolyzer manufacturer, is opening a new 100,000-square-foot facility in Newark, CA, to manufacture electrolyzers at scale and domestically.

Amogy also announced it will invest $40M to renovate a 53,000-square-foot facility in Houston that was previously used to manufacture oil and gas equipment to make its "powerpack" clean energy solution. Amogy's product is an ammonia-to-power technology that 'cracks' liquid ammonia to separate hydrogen for use in a hybrid fuel cell system that can power electric motors.

♻️ Tech deployment: Blue Whale Materials announced it will build its first U.S. battery recycling and material processing plant in Bartlesville, Oklahoma, to reclaim lithium, cobalt, and other materials from used lithium-ion batteries.

⬇️ Tech deployment: Climeworks and Great Carbon Valley are joining forces to evaluate building large-scale direct air capture and storage projects in Kenya, which has ample geothermal energy resources. The companies are targeting megatonne capacity with plant construction starting in 2028.

♨️ Tech deployment: 25 state governors and the Biden administration pledged this week to quadruple the number of heat pumps in U.S. homes by 2030.

🌲 Innovation: A consortium of carbon removal companies, many of which we've covered (for instance, see here), released the Reykjavik Protocol to provide a unifying set of principles for carbon credit suppliers to responsibly bring their solutions to market and reduce industry-wide conflicts of interest. There's a lot in here; if you're interested in nature-based solutions or carbon markets, I suggest a perusal. 

📜 Policy: The Biden Administration launched a new initiative to train the next generation of 'green economy' workers (think training for wetlands restoration, solar panel installations, forest management, etc…). The Civilian Climate Corps is modeled after the New Deal-era Civilian Conservation Corps; it's a paid training program and will aim to employ 20,000 people in year one.

Internationally, Canada, Germany, Japan, Nigeria, and the Federated States of Micronesia joined the Global Methane Pledge, which is spearheaded by the U.S. and the European Union and aims to reduce global methane emissions by 30% by 2030 via voluntary actions.

📉 Not all roses: Zinc-air battery manufacturer Zin8 Energy Solutions, based in Vancouver, has cut all non-essential staff. The CEO also resigned as the company explores asset sales. 

🚫 so good news: Prime Minister Rishi Sunak weakened the U.K.'s own climate goals, citing that the U.K. has already made more significant emissions cuts than other G7 countries. Specifically, he delayed a gas car ban by five years and eased commitments on heating and insulation for buildings.

🌞 Closing on good news: Both Brimstone, which makes limestone-free cement and thus can reduce the CO2 emissions from cement production drastically, and Sublime, which makes cement electrochemically and can also drastically cut emissions from production, have received certifications in recent months that their cement is up to par for commercial use.

Have a great week ahead, y’all,

— Nick

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