VCs are investing in these hot climate technology areas.

• Tens of billions of dollars have been made available to startups trying to solve the climate crisis.

• A new chapter is underway following the passage of the Inflation Reduction Act last year.

• Regenerative agriculture, energy-analysis software and commercial shipping are ripe for disruption.

Venture-capital and private-equity funds have raised a lot of cash over the past year in search of the next big climate solution, and now is the time to spend it.

About $64 billion flowed into these funds in the fiscal year that ended in November, more than double the total last year, an analysis by Climate Tech VC found. That means tens of billions of dollars have been made available to startups trying to solve the climate crisis.

Several venture capitalists told Insider that a new era was ushered in last year’s passage of the Affordable Care Act, which included $370 billion in federal subsidies aimed at expanding renewable energy and boosting the manufacturing industry in the United States. Industries known to be big polluters such as agriculture, utilities and commercial shipping are ripe for change, the VCs said.

“Climate is like the Internet, disrupting every corner of the global economy,” said Andrew Beebe, managing director of Obvious Ventures, which has more than $1 billion in assets under management. “Some of the best targets for venture capital can be a dirty little secret in Silicon Valley, where governments control the fastest.”

Support from policymakers will help offset rising interest rates that could make investors reluctant to fund large industrial projects, said Veri Maxwell of climate-focused Galvanize Climate Solutions.

Maxwell added that the influx of money was encouraging more entrepreneurs and former Big Tech employees to enter the field.

One major headwind is that not enough startups are growing beyond the venture stage and entering the public markets to raise capital, Maxwell said.

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“We don’t have enough of those huge success stories, both financially and in terms of impact,” she says. “There are whole categories of companies that no one is thinking about starting yet. We need a lot of innovation, but the number has increased dramatically in the last three or four years,” he said.

There are three industries that climate VCs will bet on in 2023.

Regenerative agriculture

According to a UN-backed study, the world’s food system accounts for one-third of greenhouse-gas emissions. While there are known practices that reduce emissions on farms, such as planting cover crops that help the soil store more carbon or using less fertilizer, some startups are trying to change that, but there is no market to encourage this behavior, Maxwell said. .

Galvanize led a Series B funding round for startup Regero Ag, a technology platform that works with food companies and farmers to track and reduce their green-gas footprints.

He told Insider that he is excited about new innovations in reducing methane emissions from livestock. There are additives for feeding cows that can reduce the amount of methane emitted by up to 90 percent. Methane is a more potent greenhouse gas than carbon dioxide, so reducing it significantly could be a win-win for the climate.

Energy analysis for companies and consumers

As more people buy electric cars and install solar panels, and utilities bring more renewable energy and battery storage online, tools are needed to manage how all these elements connect to the power grid. Consumers want to know the best time to charge their car or use electricity at home to avoid high prices. Especially as the seasons change and severe weather events become more frequent, utilities must ensure that there is enough electricity to go around.

Meanwhile, companies and cities that generate electricity for vehicles and bus fleets need tools to manage them in an energy-efficient way.

These shifts create opportunities for companies with smart analytics software, said Sean Cherian, a partner at Energy Impact Partners, a firm that raises capital from large utilities and corporations with $3 billion in assets under management.

The firm led a Series C funding round for Grid X, a startup that helps utilities design energy rates and inform customers of how their actions affect their bills.

Commercial shipping

The European Union is regulating emissions from diesel-powered cargo ships that enable our common interests. Maritime transport is exempted from the EU carbon market, a key part of the EU’s climate policy, but this period expires in 2024.

The industry is not investing much in research and development, which means there is room for new entrants in new battery technology, using low-carbon fuels or other solutions to reduce the industry’s climate footprint, he said.

There are batteries that power commercial ships, but today such batteries take up too much space to keep the economy running on transoceanic voyages, he said. For now, battery-powered cargo ships are best suited for short trips, such as up and down the US East Coast.

One startup working on electrifying those shorter trips is FleetZero, which has built batteries that look like shipping containers to make it easier for cranes at ports to swap out newly charged ones.

Apparently the venture didn’t invest, in part because it was concerned about long-distance travel, Bebe said. But Fletchero closed on $15.5 million in funding last year.

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