Month: November 2021

4 sustainable industries where founders and VCs can see green by going green

Environmental technology concept. Sustainable development goals. SDGs.

For the last fifty years, venture capital has had a pivotal role in discovering, bringing to market, and scaling transformative technology innovations in all economic sectors, from healthcare to transportation. As modern societies battle some of their most wicked challenges to date and aspire to reach net zero by 2050, more than a third of emissions reduction is expected to depend on breakthrough tech innovations. Are VCs around the world seizing these opportunities and, if so, what lessons can be drawn from the investment strategies of sustainability VCs, and adapted by regional and local funds to increase the pool of money for the cleantech startup ecosystem?

Record-high levels of VC funding in cleantech

If the ongoing COP26 conference is highlighting one message, that is the need to share responsibility. We need advocacy, policy instruments, innovative business models, and  financial instruments and strategies aligned around the same goals. 

But this alignment hasn’t produced the expected impact and returns in the past. Instead, it fueled a cleantech bubble.

Closer to the turn of the century, VCs – especially in Silicon Valley – were already looking at cleantech as the next big thing. Between 2005 and 2006, VC investment in cleantech rose from a few hundreds of million of dollars to $1.75 billion and further tripled by 2008. 

Yet the timing was unfortunate. A mix of factors including the 2008 financial crisis, increased competition from China’s solar energy industry, and reductions in the price of natural gas left energy sectors largely dependent on fossil fuels – and the valuations of cleantech companies spiraling down. VCs lost more than half of the investment directed in cleantech innovations between 2006-2011. 

Now, VCs are once again in the game. Pledges to combat climate change from all sectors of society are more urgent than ever. This time, Europe is leading the way towards decarbonization of the energy sector and the economy at large, driven by the EU’s ambitious agenda. 

In the first three quarters of 2021 alone, sustainability VCs’ investment in climate tech amounted to a record annual level of ~$31 billion, 30% higher than in 2020, according to PitchBook. While investments span across multiple industries, the EV sector attracted half of the money in areas such as electric mobility, charging infrastructure, and battery technology. Finally, cleantech exits are also on a roll, doubling in number compared to last year, up to ~60 at the end of Q3.

Yet, it’s worth noting that overall global VC funding grew faster during this time  – it was already 50% higher at the end of Q3 than in 2020. And climate tech still makes up only 6% of VC money. VC funds, especially those with a regional or local focus, are prudent about long-term returns, high capital intensity, and other particular risks associated with cleantech investments.

Next, The Recursive looks into the strategies and outcomes of sustainability VCs that use investment tools to fuel tech as a force for good.

hen there are the protein replacement companies that we wrote about earlier. Impossible foods Beyond flesh Memphis Meats, Mosa Meat, Nuggs, Future Meat Technologies, and Shiok Meats (a seafood company) are developing methods for making meaty proteins that are less dependent on animal husbandry. Perfect Day and its competitors do the same for the dairy industry.

There is also a tremendous need for new sources of protein to feed the animals that people around the world still love to eat. That’s why there are companies like Ynsect, that provides insect proteins for industrial fish farms; or Grubly Farms, which provides feed to families who raise their own chickens.

For these opportunities, which raise hundreds of millions in funding, there are others that require the kind of high-margin software solutions that have yet to be developed. These are visual technologies for tracking, monitoring, and managing food production. Sensors to improve the warehouse and supply chain, software to manage production and track products and products from farm to table. Venture investors are also starting to invest in these companies.

Blockinvest Ventures is hereby to help you understand more regarding the investment industry with conscientious advice. We hope that you can feel the article was helpful and don’t forget to subscribe our website for further news!

Crypto API provider Conduit wants to be the Stripe of decentralized finance

Financial institutions continue to search for ways to pile into the crypto market, and decentralized finance (DeFi) products are one mechanism that could help them capture share. Investors in DeFi products can earn yield on their capital by lending out their cryptocurrency in exchange for interest

But DeFi lending is far riskier than traditional lending, in part because of the volatility of the asset class. Just as “high-yield” bonds compensate investors with more cash for betting on riskier-than-average companies, DeFi lending can offer far higher interest rates than the traditional savings account wherein customers essentially lend their money to a bank.

Conduit is building a set of APIs that developers can use to build platforms that provide access to DeFi products. As VP of product at crypto wallet BRD, which Coinbase acquired in November last year, Conduit CEO and co-founder Kirill Gertman experienced firsthand the challenges of finding vendors that would provide the backend tools that his team needed to build its user-facing product. After a stint at Arrival Bank and half a year as product head at consumer fintech Eco, Gertman created Conduit to be the backend solution he was looking for but couldn’t find.

Conduit aims to be a one-stop shop for neobanks and financial institutions to plug their own products into the DeFi ecosystem, which Gertman said is made easier because Conduit itself is regulated and compliant, taking the compliance burden off of companies using its tools.

For consumers to earn DeFi yields, their fiat currency is first converted into stablecoins, a type of cryptocurrency pegged to the fiat currency’s value, so it can be invested into various crypto protocols like Compound and AAVE. Conduit offers two solutions to help companies access these yields.

The first is its growth earnings account, which neobanks offer to customers so they can invest their fiat currency in DeFi. The second is Conduit’s corporate treasury solution, which offers high-yield DeFi accounts to companies. 

“We do the ledgering, and we do a lot of stuff that basically creates a very simple bundle for [our clients], so they don’t have to worry about the complexities,” like how to convert dollars to stablecoins or how to calculate rates, Gertman said. 

Gertman declined to name specific Conduit customers, but said they fall into two categories — neobanks and small cryptocurrency exchanges, particularly in regions like Latin America. Its largest clients are in Canada, where its product first launched, and Brazil, and it is looking to expand into markets including the U.S. and Europe next, Gertman said. 

Gertman sees two types of benefits from the expansion of DeFi products, he said. The first is access — DeFi protocols are permissionless, allowing any user to lend and borrow funds without needing to provide a credit score, identity verification or collateral. The second is that DeFi connects users globally, allowing investors in countries with extremely low or negative interest rates to earn higher yield, and making it easier for companies to borrow money at favorable rates by drawing from a global liquidity pool, Gertman added.

Conduit says it plans to triple its headcount, which is fully remote, during the next year across the North America and LatAm regions by hiring engineering, sales and compliance professionals with localized knowledge. Regulation has played a role in which countries Conduit has targeted, he added, saying that a lack of regulatory clarity from the Securities and Exchange Commission (SEC) has slowed Conduit’s entry into the U.S.

Blockinvest Ventures is hereby to help you understand more regarding the investment industry with conscientious advice. We hope that you can feel the article was helpful and don’t forget to subscribe our website for further news!

Scroll to top