(Bloomberg) — Venture capitalist Chris Sacca is launching four climate tech funds worth about $800 million in total through his new firm Lowercarbon Capital LLC.
“The idea that a relatively small amount of money could be a huge lever in confronting this crisis, I love that,” he said.
Sacca made his name and lots of money with early bets on companies such as Twitter, Instagram, Uber, Stripe and Kickstarter. But in a surprise move in 2017, at the age of 42, Sacca walked away from traditional venture investing.
Though he stopped doing new deals at his firm, Lowercase Capital LLC, he started investing his own money in climate philanthropies and startups less than a year after his retirement, along with his wife Crystal English Sacca, and Lowercase partner Clay Dumas.
His driving thesis was “Let’s fund the unfundable,” he said. “What’s the stuff where the business case isn’t there yet, but with relatively small dollars there might be a super high leverage opportunity?”
The history of climate-tech investing is rocky. Between 2006 and 2011, venture capitalists lost half of the $25 billion they invested in clean energy companies. But in 2018, as Sacca was starting to make his first investments, firms including Bill Gates-backed Breakthrough Energy Ventures entered the game with a $1 billion fund to invest in the sector. VC money flowing into climate tech startups has grown 40-fold between 2013 and 2019, from $400 million to $16 billion, according to a 2020 PwC report.
In Sacca’s telling, clean-energy pioneers like Vinod Khosla and investors at Kleiner Perkins made way for the new wave of climate startups we see today. “They moved the whole field forward,” he says. “Getting technology out of a university lab is easier than it’s ever been. It used be a nightmare and they helped standardize that kind of stuff.”
Like other climate-tech VCs, Sacca wants his startups to reduce or remove emissions ideally at the scale of billions of tons each year. Many of Lowercarbon’s 50 investments to date—not all of which are public yet—have been for startups that remove carbon dioxide from the air using a variety of technologies.
A small portion of the portfolio would be for ideas that buy time for people on the frontline, says Dumas. “People that need to start bracing for impact traditionally haven’t had solutions geared toward them,” he says. That’s why Lowercarbon has invested in Cloud to Street, which is creating a model for vulnerable communities where traditional insurers don’t provide cover or are too costly for people to afford.
Lowercarbon has also built an internal science team, a growing trend among climate-tech VCs that have to vet cutting-edge innovations. Still, knowing that an idea can work isn’t the same as being able to scale it, which typically requires high capital expenditure in building the factories or machines needed to deliver the kinds of solutions that would help cut emissions.
But Sacca isn’t worried. “When you’re building a new social network, you spend a couple of years coding it all towards launch day. Then you put it out and no one cares,” he says. With climate tech companies, “we seed the science and we get to prototype. Then we find that first customer willing to pay for it, because what we’ve made is cheaper, better, faster, easier to use, more delicious or requires less maintenance. And we see that first incremental revenue faster.”
Many climate-tech companies, especially those removing CO₂ from the air, are to some extent dependent on supportive government policy. Without it, many of them are likely to struggle to scale their sources of revenue. “We’re not going to invest in companies on the basis of future regulation,” says Dumas. “If new regulation come into effect… that’s going to help us undoubtedly.”
What does worry Sacca is people. “Some of these geeks coming out of university have developed an incredible process in the lab. Now they need to scale and hire a plant supervisor. That’s a whole new situation,” he says. “For me the risk lies more at the individual level. The stuff that’s endemic to every single startup.”
Soon after retiring in 2017, Sacca was accused by entrepreneur Susan Wu of touching her face without consent and making her feel uncomfortable in 2009. He disputed Wu’s account, but wrote a blog post saying, “I now understand I personally contributed to the problem. I am sorry.” Among the many promises he made was to “use the privilege of my voice to strongly advocate for women and other underrepresented groups in tech.”
When asked if Lowercarbon has done that, he replied, “We’ve always had a diverse portfolio. Diverse founders create more diverse deal flow and diverse opportunities.” He said that climate-tech companies have a better representation from women and under-represented groups partly because many of them graduate in hard science and engineering. Dumas points out that Lowercarbon’s current portfolio is also geographically diverse with companies in 10 different states in the U.S., many countries in Europe and sub-Saharan Africa, and in India.
Sacca’s funds have a range of investors beyond the traditional players, he said. The Saccas will remain the largest partner, but the funds have more than 250 other limited partners. The smallest capital commitment is $15,000 and the largest they declined was for $150 million. The LPs include not just rich individuals, but also foundations, non-profits, universities and pension funds, Sacca said.
“As we look across these spaces, we see pure capitalists. Like people who would probably be hard to choke down a beer with,” he says. “When they do that, we all benefit actually.”
Sacca thinks climate tech is at a tipping point, especially because of the pace at which talented people are entering the space. “Covid created this reflective moment and so did being drowned in fire smoke,” he says. “A lot of these folks are hearing from their kids: ‘Hey, what do you do for a living?’”
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