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“Power stays in the shadows” - Lewis Strauss, Oppenheimer movie.
Climate requires more investors to consider hardware investments. So we’re trying to unpack what we’ve learned about making hardware less hard. Or at least enabling hardware startups to survive long enough to get to growth stage revenues and impact.
On Medium you'll find part 1 of 10 in Chapter 3 in our Climate Startup Playbook - Hardware For Climate Startups.
Climate We’ve come to refer to this stage of climate action as “The Empire Strikes Back” because after a lot of policy progress, there are growing signs that work is being undone. Beginning on January 1 in 2024, large buildings in New York with high carbon emissions, will begin paying fines. All the while, various stakeholders have sought exemptions and carve outs.
Prime Minister Sunak’s home was covered in fabric protesting his government's approval of expanded oil and gas licenses in the North Sea. UAE is negotiating terms and conditions for climate protestors at COP28, many of whom will be there to protest the current head, who is also CEO of Abu Dhabi National Oil Co. The FT reviews the many ways in which governments face a series of backlashes to their green policies.
Financial incentives helped usher in cheap solar and electric vehicles. Now billions are slated to go towards building energy efficiency but are stuck in a debate on how to balance modeled energy savings and real-world results. As many product folks will readily remind you - you can be on time, on budget or on quality, but you usually can only pick 2.
Efficiency is in a race against extreme weather. From food systems to people, we're all feeling the heat and need new systems and places. From crop failures to climate migration, the world is transforming, and we are being forced to adapt.
One of our core beliefs is that combining benefits, like better quality and resilience, drives adoption. “No kill” meat is likely benefiting from the same weather resilience related tailwinds as vertical farming. Great branding, like “No kill“ doesnt hurt either (see “Natural Gas”). And for the first time, we’re seeing a shift in supply chain where buyers are looking beyond price to include some premium related to volatility of supply.
Who else is adapting to the new weather patterns? Insurers - who are continuing to withdraw from massive regions, stranding homeowners. Reading between the lines a bit, it’s very unlikely that their shareholders want to shrink their business, but they also can’t operate at a loss. This introduces some interesting systemic questions - do governments subsidize insurers so they can maintain coverage? If coverage shrinks, what happens to the cost of mortgages on assets that are no longer covered?
Startups Generalist VCs remain interested in climate tech startups. We’ve noted before that investors interested in climate increased nearly 10x over the last few years. But there are a few caveats.
This is a good proxy for shifting sentiment on climate investing overall. If the general VC ecosystem has pushed for better unit economics and more efficient growth, will climate startups be held to different standards? We don’t think so. And without generalist VCs (ie. folks not primarily focused on climate benefits) most climate startups won't make it. This is likely a problem for whole categories, as we’ve seen in areas like indoor vertical farming, where capital requirements are relatively high and investors mostly blinked in the face of poor unit economics especially with high energy prices in the EU or yet-to-be-proven-at-scale economics in the US.
That said, the history of tech is built on exceptions. It would be hard to name all the failed search engines and social networks. Indoor vertical farming is no exception. In the midst of the “this category wont work” gloom, Bowery (a Third Sphere portfolio co) announced a 3x expansion with Whole Foods.
Reminder to founders: People weighing in on your business from afar usually miss a lot of the detail that separates failure from success. Even board members with information access frequently get it wrong.
Why? The folks who are building usually are consumed with building versus taking the time to explain, in the required level of detail, what is working and what remains challenging. Conversely folks who are winding down and exiting are understandably eager to explain the structural challenges that brought about their demise vs specific shortcomings in their team and execution.
Portfolio Updates Not on the list of IPCC climate mitigation pathways: Famous actor building a Mezcal brand buying ads that enable local electric transit. Nicely done team Circuit.
Congrats team CYCLE for a successful $10m series A raise. One step closer to fully electrifying last mile commerce.
Congrats team Perl Street and Swell Energy for this massive collaboration to get more sustainable tech into low income homes.
Congrats Bowery for this expansive partnership with Whole Foods.
ESPN2 will never be the same now that Onewheel is on.
And here’s Sandeep at Covetool in a featured INC Magazine video.
Here is team Oonee making history with new bike infrastructure. Beyond bike lanes Jersey City is now home to a network of secure bike parking and charging infrastructure.
Flair and Gradient were featured by Bllomberg in Bloomberg.
Here’s a great explainer on what Forward is doing to build one of the fastest growing startups we’ve ever seen to help with everything from ebike rebates to flood recovery. Forward’s New Platform Brings Agencies and Nonprofits Closer
Asks and Offers
Here’s an opportunity to join the Resonant Link team as a VP of Engineering to help deliver the next generation of low cost, high efficiency wireless charging.
Circuit is looking for a NY Area Sales and Biz Dev Manager to deliver more electric powered transit services.
NYC Department of Environmental Protection is looking for water focused startups to pilot solutions in predictive analytics and asset monitoring, chemical compound identity and composition analytics, tools for pollutant removal, etc. The call for applications is open until August 23.
There are almost 300 open opportunities across 77 companies in our portfolio.
Upshift is expanding to NYC and looking for founding members.
See you at NY Climate Week Finally, the Third Sphere Team will be in NYC for climate week and hosting our classic "Everything is Hard" talk and mixer on Monday Sept 18th. Join us.
Best, Stonly and the Third Sphere Team
You can find our previous updates here.
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