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“When you see only problems, you’re not seeing clearly.” ― Phil Knight, Shoe Dog: A Memoir by the Creator of Nike
We used to think “hardware is hard” meant it was hard to build a successful hardware startup. We did the research and found that hardware and software outcomes are similar. But there are at least 5x fewer investors for seed stage hardware companies versus software. Turns out hardware is mostly harder for investors. Here's our analysis.
That’s why we’ll be discussing “design for finance” in NYC at climate week. Please join us.
Climate: Angry Al Gore
Al Gore may not have invented the internet, but he’s long been one of the most thoughtful climate investors and unafraid to speak directly into the mic. He recently spelled out clearly the latest strategies used by fossil fuel companies to undermine climate action including walking back of commitments to renewables and undermining the COP process. Well worth a watch.
Bloomberg has also covered this topic in some depth. If you’ve never listened to Drilled, this is an excellent introduction to the PR machine that made climate denial work. Why the seemingly sudden change of heart? The end of fossil fuels is visible. China’s biggest refiner announced that oil demand in China will peak THIS YEAR. Yes, because of EV adoption, the market for gas in China will shrink every year going forward. But additional pressure is coming for fossil fuels in the form of climate risk pricing.
Losses related to climate supercharged events in the last few years have led to a jump in insurance prices. The endless flood of fire and storm damage in our news feeds will continue to push prices up. Prepping doesn’t solve the problem, though many more folks are realizing how to keep the power on, as electricity grids become less dependable. We’ve long maintained that it’s tough to compare the price of electrons from a solar panel on your roof to one from a nuclear reactor, if the grid is down. We recently chatted with Semafor about why re-insurance repricing or climate risk will result in more founder and investor interest in resilience and adaptation.
Startups: Grit & Consistency
Fundraising is the hardest it’s been since the dot bomb era. So which startups will survive? A lot will come down to a simple idea that can be hard to evaluate: Who has the grit and is willing to grind it out. A lot more investors are revisiting this question and asking how do you figure out if people are willing to grind?
One thing we’ve observed about companies that survive long enough to ultimately win - someone was there to pull them from the brink of failure. This is best told in the Nike story - but there’s a deeper narrative behind what types of founders and companies garner that type of support. It’s usually earned from earlier evidence of persistence and consistency.
Adnan is building one of the fastest growing startups we’ve ever seen at Forward. But at the start of the pandemic it wasn’t clear Forward (then Livestories) was going to make it. Adnan recently shared his views in a letter to his kids about the benefits of consistency. You know we agree, we’re nearly 10 years into sending these updates.
Recently, One Concern announced a deal with Swiss Re. It’s a massive validation of 8 years of work. A lot of teams would have given up when they received poor press in the NYTimes or had to rebuild their platform or when investors lost interest because reinsurance seemed hard. And now One Concern is poised to become the credit score for climate risk.
Jobs + Talent
Asks + Offers
Portfolio Updates
Third Sphere updates
Fortune recently recognized our team and a few other great climate investors. See you at Climate Week!
Best, Stonly and the Third Sphere Team
You can find our previous updates here.
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