The beautiful thing about climate tech -- if one of us wins, we all win. We default to sharing as much via these updates as we can in the hope that it benefits anyone in the climate startup ecosystem. That’s not always possible as some things are confidential etc, so we’re opening up a few slots for our LP meeting this week. Apply here.
We’ll cover notable changes like the surge in great generalist investors focused on climate as well as perspective on what’s currently getting funded. We’ll also have updates on our team, platform, credit and hardware playbook.
Climate tech is winning
It’s a wonderful day when The Economist is writing about high level techno economic models for the grid. The US is finally making headway towards building the transmission lines needed for renewables to supply more energy within and between states. Even more exciting, as solar and batteries with inverters are integrated into the grid, we'll get benefits like increased stability and lower cost grid expansion, fundamentally changing the energy generation and distribution paradigm.
Hopefully the UK catches up with their own grid upgrades. Wind energy surpassed gas in electricity generation for the first time. April also saw a record solar energy generation.
By the way, heat pumps are winning too, exceeding gas furnace purchases in 2022. Two of our portfolio companies have partnered up to make 2023 an even bigger year for heat pumps; Blocpower is working on the skill gap and Gradient is bringing the heat(pumps). Radiator Labs is making it possible to combine heat pumps with existing heating systems. And we’ll soon share two new investments that help electrify heating.
It’s helpful to always keep in mind that better/faster/cheaper is the primary driver of transitions like EV adoption. This is already visible in two and three wheelers as well as with bus fleets where EV sales are already around 50% of total sales. China is offering a master class on how to drive automotive electrification. It helps to be the center of global battery production, but that misses multiple parts of a better experience like autonomous driving, karaoke microphones and games and music options for all passengers. In the US, we have a lot of work to do with consumer EV charging, which, as we note below, ChargeLabs is working on.
AI is here to help
If AI is supposedly better at communicating health issues than most doctors -- maybe the contribution to climate will be helping drive more adoption of heat pumps, EVs, and other climate tech?
How can AI help us speed up consumer adoption of climate tech? Here’s what GPT4 thinks:
AI technologies like GPT-4 can address consumer adoption of climate tech through:
o Awareness: Personalized educational content created by AI can improve understanding of sustainable technologies, reaching wider audiences through channels like social media and chatbots.
o Branding: AI analysis of data can inform impactful branding and marketing strategies that enhance the visibility and appeal of sustainable technologies.
o Community Engagement: AI can identify key influencers for outreach, optimize community platforms, and facilitate knowledge sharing on sustainable technologies.
o Intermediaries: AI can train intermediaries and provide tools for recommending and installing sustainable technologies, empowering contractors and technicians.
o Corporate Partnerships: AI helps companies find partners aligned with sustainability goals and track the impact of partnerships on technology adoption.
o Digital Transformation: AI enables data-driven insights and process automation, influencing consumer behavior and contributing to sustainable practices in various industries.
(1-3) There are a few places you could start. First someone needs to work to rebrand heat pumps and then we need to help everyone see the brighter side of climate change. Communication is an essential skill that founders historically needed to seek out advisory and other help. For a lot of the basics, that may no longer be true.
(4-5) For a case study on what’s possible with creative corporate partnerships, see Netflix and GM.
(6) As for digital transformation, what do you do when you have one of the biggest hospitality platforms but you don't own the assets? Airbnb is now offering hosts cash rebates for heat pumps, helping to increase the visibility, attractiveness, and public awareness of climate tech. Airbnb's effort exemplifies the potential to influence the adoption of climate tech, helping normalize them and potentially influencing broader consumer behavior. Another benefit; engaging directly with hosts—an intermediary group— creates local champions of climate tech within more communities, further boosting adoption rates.
Help founders and their teams too
No, future updates will not be all about AI. But like at Google IO, it’s probably worth hammering the point that something transformative has happened and you really should have an AI strategy.
This isn’t just true for founders. Everyone in every org can likely find a way to level up , which is great for resource constrained startups who need to go faster. For example, one startup used RFP responses to train ChatGPT to help them automate responses to new RFPs (or more specifically new or differently organized questions). Another team used its support documentation to automate chat responses for customer support. Some of the most interesting opportunities are training on proprietary internal or company-specific data.
Patrick at Covetool said it best: “There’s a bit of work to help dispel fears that ‘this will replace my job’, counter disinformation and hype, [manage for privacy and sensitive data] and to see how AI can/should be embedded in your own tech stack and product.” He suggests this article for other founders and their teams. Here’s an AI on-ramping book recommendation from Seyi at Varuna.
For VC investors, GPT is making traditional and AI software investing much more complex.
Amplify (portfolio updates)
Renewell formally launched its first battery in California by transforming an abandoned oil well into a giant battery, converting an environmental liability into an asset. Wasted* launched in Northern Vermont, and is renting out purpose-driven porta-potties. ChargeLab, software for operating and optimizing EV charging equipment, raised an additional $15 million, bringing their Series A round to a total of $30 million. Gradient launched their first building scale deployment of their portable window unit that provides electric heating and cooling, expanding the world of practical solutions for renters in pursuit of energy efficiency.
Here’s a complete list of 307 jobs across 65 Third Sphere portfolio companies.
Third Sphere Updates
We make a lot of investor introductions for our portfolio companies. And our guidance to founders is always the same - you want to optimize for folks who
o do what they say they will do
o introduce you to investors, customers and talent
o help you raise equity and/or non-dilutive capital
The biggest problem is how to separate folks who do these things versus those who talk a good game. VCs have become very good at hiring PR firms, producing content etc. So it can be hard to tease out what they can actually do for you.
One thing that changed in the last few years - we now have publicly available investor rankings. The best lists offer an explanation on their methodologies. And increasingly for climate, they include a mix of climate funds as well as generalist funds who are also making thoughtful climate investments (per NFX data, this universe of investors grew more than 10x in the last 3 years).
What’s our secret to being loved by founders and co-investors alike? If you weren’t in SF or on Zoom for our “Everything is Hard” talk, this was an introduction to our hard earned insights as climate tech investors: 10 years, 100+ companies, 3 unicorns, and 12 exits in...
Full recording and slides from our full live presentation here: https://thirdsphere.com/hardware-talk/
Best,
Stonly and the Third Sphere Team
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