When it comes to saving the planet, Raj Kapoor, Lyft’s former chief strategy officer and head of business, doesn’t think asking consumers (or the government) to change their ways is an effective strategy. Instead, he and Josh Felser, the co-founder of Freestyle Capital and a serial entrepreneur, are betting that the future of climate tech begins in the enterprise.
“What we’re seeing is that the enterprise is totally changing its behavior,” said Kapoor. “By the end of 2021, the fortune 500 will all have shared sustainability goals publicly and 65% of global GDP has committed to net-zero carbon emissions by 2050.” Amazon, for example, is making efforts to have net-zero carbon operations by 2040 – and recently dipped back into its $2 billion climate fund to back fast-charging technology upstart for electric vehicles.
To capitalize on the awareness, Kapoor and Felser have spent the last year working on Climactic, an early-stage venture capital firm that wants to invest explicitly in startups working to fix the climate from an enterprise angle. The investors have backed eleven companies to date, cutting $50,000 to $100,000 checks using personal money. They declined to comment on any fundraising plans, but at this point, Climactic has not filed any paperwork with the SEC indicating plans to raise a formal investment vehicle
Climactic’s primary thesis is helping enterprises hit their net zero emissions goals, followed by an interest to back new consumer products that will not sacrifice value in pursuit of being better for the planet. Felser said that they’re looking for startups that help enterprises, as they become a “captive base of customers that have all publicly raised their hands and asked for help with the innovative technologies they need to meet their publicly started goals.”
Clean tech 1.0 was more about scientific innovation, led by scientists and academia, while clean tech 2.0, happening right now, is about entrepreneurs creating vehicles or software that is ready to go to market sooner, Kapoor said. The shift means that Climactic is keeping busy, investing in everything from technology hoping to measure and analyze carbon emissions, software that leads to more efficient supply chain and mobility tech for both transportation and goods.
“Just because it’s hard to quantify the impact of software on the planet does not mean we shouldn’t be funding it,” he said. “We can solve that problem, and software is going to help in this battle.”
Kapoor, who was also a managing director at Mayfield, left Lyft in April 2021 after the ride-hailing giant sold off its autonomous vehicle unit to Toyota’s Woven Planet Holdings subsidiary for $550 million. Felser, meanwhile, launched an app #climate that aggregates the climate change actions from leading nonprofits and matches them with social media Influencers before eventually co-founding Freestyle Capital. The entrepreneurs eventually teamed up thanks to two catalysts: the planet dying, and the realization that nonprofits were not going to change the planet so there had to be a for-profit, sustainable solution.
Background in mind, Kapoor admitted that Climactic expertise specific climate knowledge is “light” compared to the “OG climate investors.”
It’s good news, because Felser said that entrepreneurs are largely asking Climactic for enterprise sales, marketing, and pricing help; not nitty gritty explanations on the bounds of cellular meat commercialization. The firm has employed a number of consultants who have been former head of sales and marketing at other companies, leading to cross-pollination between scientists in charge of revolutionary technology, and people who are less in the weeds (and thus more equipped to help market it to the general public).
“We’re [bringing] a knowledge of sales, enterprise sales and marketing, product expertise, and general CEO coaching,” said Kapoor. “And that’s what’s missing from the climate venture community.”
Climactic is breaking out in a time when many are launching climate-tech focused funds, including Chris Sacca’s Lowercarbon Capital which just landed an $800 million fund, 2150’s new $312 million fund, and Wavemaker Impact’s launch. Kapoor is a limited partner in VSC Ventures, a firm that similarly wants to help climate tech startups hone in on storytelling through public relations guidance. On the other side of the table, recently-public EV manufacturer Rivian raised $2.5 billion in one of the largest climate tech deals of the quarter, and Redwood Materials, a battery startup launched by a Tesla co-founder, raised $700 million.
While a spotlight is positive for any nascent sector, climate tech investors must wade through greenwashing, deceptive marketing spin that says products are sustainable when they actually aren’t.
“The word sustainable is appearing in a lot of decks,” said Felser. The other day, he spoke to the CEO of a circular economy company that creates material for more durable clothing. “I looked at it and I’m like, ‘Wait, the source of the material is not sustainable, the manufacturing process is not sustainable…that feels like a sustainable marketing plan, not a sustainable company.” The offset world has similarly received a fair amount of criticism for startups that don’t have the right verification of offsets before selling to enterprises, another red flag that the co-founders are looking for.
The noise just means that Climactic’s first bets will face due diligence around impact, not claims. The bar hasn’t hurt the moonshots (literally): Climactic portfolio to date includes Orca Mobility, a compact autonomous delivery robot company, Rubi Labs, a service that turns carbon emissions into sustainable textiles and Muon Space, which is building multi-modal satellite remote sensing systems.
