5 areas where VCs can play an outsized role in addressing climate change

While global tech and finance leaders have suggested that the world’s first trillionaire will be someone tackling climate change and that many climate unicorns are on the way, current VC levels are dwarfed by the mind-boggling funding amounts that are needed to give humanity a fighting chance.

As of October, climate-tech startups had raised over $32 billion in 2021 and, according to Dealroom and London & Co., U.S. VCs invested nearly $50 billion in climate-tech companies between 2020 and 2021. However, depending on whom you talk to, the climate finance gap currently sits at $2.5 trillion to 4.8 trillion.

To put this gap into perspective, total global VC funding (across all sectors, including climate) in 2021 was at an estimated $643 billion, and most countries in the world, aside from a handful, have a GDP under $4 trillion. Additionally, a sharp uptick in the number of climate funds and startups has some experts worrying about the potential of a bubble, and doubters may argue that traditional VC investment strategies are too risky to make a meaningful contribution to addressing climate change.

So where precisely do VCs factor into global efforts to address climate change? Indeed, a vast portion of the investments will be allocated toward infrastructure investments, as well as emergency funding, which will not yield venture-like returns. By the same token, new policies and national programs will be spearheaded by governments, and as conditions worsen in certain countries, foreign aid agencies will be crucial players.

Accordingly, we won’t be looking to VCs to write billion-dollar checks, create new policy incentives, or provide shelter and food to populations in need. However, VC funds and their investment strategies and networks have unique features that give them an important position in these global efforts.

Below we outline five key areas where we believe VCs can play a role in addressing climate change:

Image Credits: Jamil Wyne and Abrar Chaudhury

Backing and de-risking proven climate technologies

Venture capital has a vital role to play in de-risking climate technologies, which can help bring costs down, accelerate adoption rates and transform markets to enable a decarbonized future. Any hope of addressing the climate crisis requires helping entrepreneurs to mitigate technology risks and scale their innovations quickly and cost-effectively.

Metalenz PolarEyes upgrades digital sensing with polarized light

Tech sees differently, and can fuse multiple types of data we can’t even perceive: lidar, IR, ultrasonic, and so on. Metalenz, maker of highly compact “2D” cameras for advanced sensing, hopes to bring polarized light into the mix for security and safety with its PolarEyes tech.

Polarization isn’t a quality of light that’s often paid much attention. It has to do with the orientation of the photon’s movement as it waves its way through the air, and generally you can get the info you need from light without checking its polarization. But that doesn’t mean it’s useless.

“Polarization generally gets thrown out, but it really can tell you something about what the objects you’re looking at are made out of. And it can find contrast that normal cameras can’t see,” said Metalenz co-founder and CEO Rob Devlin. “In healthcare, it’s been used historically to tell whether a cell is cancerous or not — the color and intensity don’t change in the visible light, but looking at polarization it works.”

But polarized light cameras are pretty much only found in medical or industrial settings where their specific qualities are needed, and therefore the devices that do it are fantastically expensive and rather large. Not the kind of thing you would want clipped to the top of your laptop screen, even if you could afford the six figure price.

The advance Metalenz made when I wrote about them last year was reliably and inexpensively manufacturing the complex micro-scale 3D optical features to make a tiny but effective camera on a chip. These devices, Devlin said, are currently coming to market as part of an industrial 3D sensing module, partly in partnership with STMicroelectronics. But the polarization thing has more consumer-relevant applications.

“Polarization in facial recognition tells you whether you’re looking at real human skin, or a silicone mask, or a high quality photo or something. In automotive settings, you can detect black ice, it’s really difficult with normal cameras but it jumps out with polarization,” said Devlin.

In the case of facial recognition, the unit could be small enough to sit alongside a normal camera in a front-facing array, like the lidar unit in iPhones that currently scans the face using tiny lasers. A polarized light sensor would instead (in this example) split the image into four, presumably corresponding to four different axes of polarization, each of which shows a slightly different version of the image. These differences can be evaluated the way the differences between images taken a small distance or time apart can, allowing the geometry and details of the face to be observed.

Polarized light is split into 4 streams, showing different details of a face.

Image Credits: Metalenz

Polarized light has the advantage of also being able to tell the difference between materials: skin reflects light differently than a realistic mask or photo. Perhaps this isn’t a common threat in your everyday life, but if a phone manufacturer could get the same “Face ID” type feature, with added anti-spoofing security, and use something less exotic than a tiny lidar unit, they’d probably jump on the opportunity. (And Metalenz is talking to the right people here.)

The automotive and industrial side is also useful, as telling what a given pixel you’re looking at is made of is a surprisingly complex question that usually involves identifying the object it’s part of. But using polarization data you can tell the difference between lots of materials instantly — and in fact this is part of the value proposition of Voyant’s new lidar. You don’t even need a lot of resolution – one polarized pixel for every hundred normal ones would still offer huge insight on a given scene.

Demo of PolarID, a facial recognition system using polarized light instead of 3D sensing.

Image Credits: Metalenz

All this depends on the ability of Metalenz to make the polarized camera units small and sensitive enough to use in these situations. They’ve reduced the breadbox-scale units used industrially to a cracker-sized one they’ve been testing with, and are working on a Skittle-sized camera stack that could be added or swapped in for other camera units in robots, cars, laptops, perhaps even phones. It’s firmly in the “development” phase of research and development.

Metalenz is currently working off last year’s A round from 3M, Applied Ventures, Intel, TDK and others, the type of crowd you expect to invest in a potentially lucrative new component type. If interest in PolarEyes is anything like what the company had for its first sensor, we can expect another raise to cover the scaling costs soon.

First EV mass transit bus by Swedish-Kenyan startup Opibus begins operation amidst plans for regional launch by 2023

The first electric bus by Swedish-Kenyan EV startup, Opibus, has hit Kenya’s roads marking the beginning of the company’s venture into the mass transit industry. Opibus first announced plans to roll out electric public transport buses last year when it raised $7.5 million in a pre-Series A round.

The startup is now running a pilot in readiness for the commercial launch of EV buses in Kenya later this year, and across Africa by the end of 2023.

Opibus has over the last five years been in the business of future-proofing existing gasoline and diesel vehicles by converting them to electric. EVs come with a range of benefits including a reduced cost of transport and no carbon emissions. The startup, which was founded in 2017 by Gardler, Filip Lövström and Mikael Gånge, has so far converted over 170 vehicles for different clients including mining companies and tour firms.

The company is now slowly pivoting to the building of EVs and supportive infrastructure like public charging stations. Brand new Opibus electric buses will cost $100,000 and $60,000 for conversions (which the startup is using in the pilot program).

“This first year, we will be testing 10 buses commercially in Nairobi to ensure that the product fits and is optimized for the usage patterns. Once we get this valuable feedback, we will make the required changes and get all our production partners lined up to scale the roll out as rapidly as possible,” Opibus chief strategy and marketing officer, Albin Wilson, told TechCrunch.

Opibus specializes in making electric buses and motorcycles.  Image Credits: Opibus

Opibus says its vehicles are designed and built locally, giving them a competitive advantage in terms of a lower price by the time they reach the market. Additionally, local production means that the output can be tailored for local market needs.

“Our strategy is to design and develop a bus that is viable in price, durable and accessible for this region…We are building a product that allows for a rapid scale up, that can leverage global and local manufacturers. Meaning our design is easily implemented across the African continent, as it is a product tailored for the use case, and very cost effective,” said Wilson.

The startup is now eyeing the rest of Africa through partnerships that will drive the adoption of EVs across the continent..

Uber’s partnership with Opibus, which was announced last month, for example, will see the deployment of up to 3,000 electric motorcycles, manufactured by the startup, across Africa by 2022. Motorcycles under Uber are used as taxis and for deliveries in its different markets.

The EV sector in Kenya is budding and has over the recent years attracted new players including BasiGo, which made its debut in Kenya in November last year. BasiGO, which recently imported two EV mass transport buses for its pilot, plans to sell locally-assembled electric buses using parts from China’s EV maker BYD Automotive. The BasiGo buses come in 25 and 36-seater capacities, with a range of about 250 kilometers while those by Opibus come in 51-seater capacity with a range of 120 kilometers.

Toyota Ventures backs seed extension into Agtonomy, turning tractors into autonomous vehicles

Agtonomy co-founder and CEO Tim Bucher was born and raised on a farm and was deep into his own farming business when he took a computer course while at UC Davis and got hooked.

It was that parallel agriculture/technology career that led him to start Agtonomy, a hybrid autonomy and tele-assist service startup that turns tractors and other equipment into autonomous machines to provide a low-cost, technology-enabled labor force for local farms to manage such equipment.

It came out of stealth mode last September with $4 million in seed funding from a group of backers that included Grit Ventures, GV and Village Global.

Grit and GV came back again to invest in the South San Francisco-based company and were part of a $5 million seed extension that includes backers like Toyota Ventures, Flybridge, Hampton VC, E²JDJ and Momenta Ventures. The latest funding gives Agtonomy $9 million in total funding to date.

Having just raised funding, Bucher wasn’t expecting to raise again so soon, but when he saw the outlook for 2022 that agtech was going to be the No. 1 “hot area” for the year and beyond, he decided to take the additional funding.

“Five years ago, it was hard to get any VC attention related to agtech, but there has just been overwhelming interest from investors, and though we are just starting out, local agriculture needs help now,” he added. “The funding will accelerate our trials and additional partners and essentially turbo-charge our activities and ability to double down at the speed in which we are moving, which includes expanding the team.”

Bucher anticipates having 50 trials going and to double the company’s 20-person headcount in the next few months.

Agtonomy is as simple as calling an Uber driver, he said. Using a mobile phone app, a farmer can assign a job to one of the tractors, like mowing the field. He believes self-driving technology like this, and what other companies like John Deere are doing, will help to alleviate the decades of labor shortages in farms around the world.

The company has a small fleet of what he called “proof of concept” electric vehicles that have been operating for a year at Bucher’s Trattore Farms. He says the farm work on his farm is almost entirely done with these vehicles.

Bucher expects a commercial launch to happen in 2023, and the company will initially start with a few hundred tractors. In comparison, some 300,000 tractors are sold each year, he added. The tractors can be anywhere from $500,000 to $1 million, with companies like John Deere typically going after big farms.

In contrast, Agronomy’s autonomous vehicles will cost around $50,000, which Bucher believes will encourage larger farms to purchase a swarm of smaller machines that can run 24 hours a day, be more environmentally friendly and not tear up the land.

Jim Adler, the founding managing director of Toyota Ventures, said in a written statement, “We see huge potential in agtech and are making investments accordingly. Fully autonomous vehicles will become a reality on farms where they are desperately needed.”

Similarly, Bucher believes that many of the autonomous vehicles today cater to more “convenience technologies,” while companies in the agtech space are building similar vehicles in what he calls “necessity technology.”

“It is kind of a perfect storm with consumer demand, climate change, electrification and labor shortage in farming,” he added. “We can solve these much sooner in agtech than having the other kinds of autonomous technology in our lives. With ours, it allows all of us to eat good food.”

Editor’s note, Jan. 18 at 9:05 a.m. reflects a change that Toyota Ventures did not lead the round.

Tado, the German smart home energy startup, plans to go public via a SPAC at a €450M valuation

Tado, the German smart home startup that specializes in thermostats and more recently moved into flexible “time of use” energy tariffs based on loadshifting technology, is today announcing the next step in its life as a business. It’s going public by way of a SPAC deal.

GFJ ESG Acquisition, a German SPAC entity focused specifically on sustainable technologies, said it will combine with tado and list the new company on the Frankfurt exchange. GFJ and tado are now working on the PIPE transaction, which when completed is expected to value tado at €450 million ($514 million at today’s rates). The new business will continue to trade as tado.

A spokesperson for tado said it is not disclosing how much it plans to raise in the listing, nor when the listing is expected to happen, except that it will likely be in the first half of 2022.

The move comes swiftly on the heels of two big developments for tado. Last week, tado acquired aWATTar (yes that is how the company styles its name…) to expand from energy consumption hardware inside the home, to software to better manage energy consumption and costs based both on how the customer uses energy, and how pricing varies depending on the fluctuations of that energy source (which can include renewable sources like solar and wind, as well as more traditional channels).

Also, in May, tado raised $46 million. At the time, the company said this would be its last round before a listing, and that’s what is playing out now. Altogether the company had raised just shy of $159 million, with an impressive list of investors, including Amazon, Siemens and Telefonica. Its valuation in those private rounds was considerably lower than the €450 million it expects to achieve with its market cap at listing: it was around $255 million according to PitchBook data.

The deal is notable because it will be one of the first big green tech startups in Europe to go public. Tado’s bigger goal is to build services to help manage energy use in and end-to-end system, starting at the power grid and terminating with consumers, in their homes. That business has taken two different turns so far. It first started as a maker of smart thermostats, and business that has now sold some 2 million devices. Then, tado diversified into energy tariff and managing use is catapulting the company into a wider business based on big data, predictive analytics and harnessing the wider and very fragmented markets of renewable energy and energy hardware systems.

The company today says that it has sold more than 2 million smart thermostats, and its energy-management technology connects some 400,000 buildings and households in 20 countries, with more than 7 gigawatts of energy capacity under management. Its works with some 18,000 systems from 900 OEMs, and claims that customers using its load-balancing technology save an average of 22% on heating costs annually.

As concerns about climate change continue to become ever-more urgent, and services for consumers to make choices to reduce greenhouse emissions become more readily available and affordable, a new window of opportunity has opened up for green tech and clean tech companies. This listing underscores how one of them feels now confident enough in that traction to make the leap into being publicly traded to grow further.

“The entire team at tado is extremely proud to partner up with GFJ,” said Toon Bouten, CEO of tado, in a statement. “We share the same convictions and the same passion for environmental technologies. And we are determined to jointly help our customers save money and reduce their ecological footprint. Together, we are in a great position to create a more sustainable energy future.”

When the deal is closed, Bouten will step down as the head of the company, with Oliver Kaltner (who lists his current role as President of office solutions provider Room) will be taking on a role as CEO, with Christian Deilmann as CPO and Johannes Schwarz as CTO. Emanuel Eibach will remain CFO. Gisbert Rühl shall become chairman of the supervisory board. Josef Brunner, Petr Míkovec, Toon Bouten and Maximilian Mayer shall also join the supervisory board.

“Both GFJ and tado are determined to turn up the heat on fighting against climate change in a smart way. tado already is a market leader in the very spirit of a new wave of green tech companies,” added Gisbert Rühl, CEO of GFJ. “We are excited to bring in capital and expertise to help them grow even stronger and foster their technology development. Around 21% of energy consumption in the EU is used for heating and cooling private housing alone. If the EU and Germany want to fulfil their commitment to becoming the world’s first climate-neutral economy by 2050, there is no alternative to decarbonising the housing sector.”

tado, as a public business, will gain a new level of transparency to the market, which will be good for the wider green tech industry as a whole. For now, the company is projecting that it will be making more than €500 million in annual revenues in three years, by 2025.