While it’s true that tackling climate change involves a lot of work on a personal level, the Intergovernmental Panel on Climate Change (IPCC) estimates that we need to cut emissions by “more than 70 gigatons of CO2-equivalent per year to avoid a two-degree Celsius temperature rise.” And that doesn’t sound like something we can do unless businesses are being environmentally-conscious too.
While bigger businesses can invest capital in sustainability initiatives, smaller businesses that are working directly on technology to tackle climate change often need the support of venture capitalists.
Just today, Prime Impact Fund announced its new $50 million fund from backers including the Sierra Club Foundation, the David and Lucile Packard Foundation, and 52 others to “address critical funding gaps for climate solutions” and invest in “high-risk, high-reward” climate technologies. theRising sat down with Managing Director Matthew Nordan to learn more about the ethos and founding story of the fund.
How Prime Impact Fund came to be
“Prime Coalition’s Executive Director Sarah Kearney started Prime Coalition and I joined her as co-founder,” Nordan tells me in an email. “The intent from the beginning was to unlock catalytic capital to mitigate climate change, but we weren’t sure how,” he adds.
Luckily, Nordan had been funding companies through syndicates for several years. And through those experiences, he recognized the importance of helping entrepreneurs with expertise, not just the capital.
“It became clear that we’d serve entrepreneurs much more effectively with a captive fund that could price and lead rounds, and a full-time investment team that could support founders with more than capital, which is most of the help,” Nordan explains.
But with that desire to actually lead the financing rounds, what Nordan and Kearney needed was capital from other investors. Fortunately, the co-founders had built a strong network years prior to starting the fund, Nordan tells me.
“54 organizations had already invested with us via syndication, so that was a great starting point. Many of the new investors – the Sierra Club Foundation included – actually came to us,” he adds.
High impact areas in climate tech
While technology can’t single-handedly stop climate change — or any environmental issue for that matter — it can certainly play a critical role. “I don’t think there are any sustainability-related issues that can’t be advanced in part by technology,” Nordan tells me.
“Even social awareness and civil mobilization can be tech-enabled – just look at apps like Ant Forest in China, which have led to planting more than 100 million trees,” he adds.
While it’s true that technology can play a variety of roles in tackling climate change, Nordan and Prime Impact Fund are primarily focused on hard tech, where the toughest challenges often have to do with innovation as opposed to operational risk.
“We tend to focus on hard tech problems that are the trickiest to form capital for. There are a bunch of hot-button topics in that field which are particularly impactful, but don’t have the intuitive appeal of an app on your phone: categories like process heat, optical antennae, advanced geothermal, and plenty more,” Nordan explains.
How Prime Impact Fund thinks about investing in new startups
While many investors like to avoid the early-stage risks associated with climate tech companies, Prime Impact Fund focuses on companies that are often pre-revenue and don’t even have a team yet. At this stage, Prime Impact Fund might make an initial investment of one to two million dollars, reserving an equal amount for follow-on, Nordan tells me.
“The first portfolio company in the Fund, Lilac Solutions, is a great example – when we invested the company was just beginning to build its team and the board of directors was the CEO and myself,” Nordan explains.
“Sixteen months later the Lilac team raised an oversubscribed $20 million Series A round co-led by Breakthrough Energy Ventures, the Bill Gates-led billionaire fund for energy tech, and The Engine, a tough tech fund sponsored by MIT.”
To date, Prime Impact Fund has invested in eight climate tech startups.
Lauren Beauban is an Editorial Fellow at theRising, where she covers sustainability news and influential people in the industry. She is also interested in environmental policy and how it affects people. You can pitch her stories at email@example.com