Clean Energy Ventures Raises $305 Million to Support Early-Stage Climate Startups – NBC Connecticut

• Climate-focused venture capital firm Clean Energy Ventures said Wednesday it has raised $305 million for its second fund.
• The fund was oversubscribed due to investor appetite for technologies that reduce greenhouse gas emissions.
• Areas of focus for the new fund include industrial decarbonization, plastics and grid improvement technologies such as virtual power plants.
• Private equity investment in the energy transition is also growing, reaching almost $30 billion in 2023.

Clean energy stocks may underperform in the public market. However, there is still strong appetite for decarbonization-focused companies in private markets, with the new Clean Energy Ventures fund being the latest example.

The climate technology company said Wednesday that it has raised $305 million for its second fund, five years after closing its first fund. The latest fund was oversubscribed – with an initial target of $200 million – but interest from limited partners including The Grantham Foundation, Builders Vision and Carbon Equity led to a higher raise.

The company is already investing new money, focusing on technologies beyond traditional green investments in solar and wind energy.

Daniel Goldman, co-founder and managing partner, identified industrial decarbonization as one of the important industries – in particular technologies that reduce emissions in the cement and steel industries.

“When we think about where we need to make a material impact and where there are sectors where technology hasn’t really changed for many, many decades, steel and cement are at the top of the list. So we think there’s a huge opportunity there,” he told CNBC.

Two other areas of focus for the new fund include plastics – both more efficient recycling and cost-competitive bioplastics production – and technologies that improve distributed energy networks, such as virtual power plants.

Clean Energy Ventures has backed 20 companies in its first fund and has already made six investments through its second fund, including Israeli green ammonia company Nitrofix and UK-based sustainable aviation fuel company OXCCU. Clean Energy Ventures is also opening a new office in London, and Goldman called the European opportunities “truly amazing,” while pointing to opportunities in Israel.

Much has changed in the renewable energy landscape since 2019, when Clean Energy Ventures launched its first fund, including the rise – and then fall – of special purpose vehicle acquisitions. In the Covid era, SPACs have proven to be a popular avenue for clean energy companies to access public markets. Since then, many have performed poorly, leading some to argue that the enthusiasm around SPACs caused companies to go public when they weren’t ready.

However, Goldman said the end of SPAC trading and the poor performance of publicly traded clean energy stocks have not negatively impacted investors’ perceptions of the value of clean energy investments or the view that greener investing comes at the expense of profits. Clean Energy Ventures’ limited partners, which include institutional investors, asset managers, family offices and registered financial advisors, are not impact investors – in other words, they are focused on profits.

None of the companies from Clean Energy Ventures’ first fund have gone public, but the company sees an IPO as something to have rather than a necessity. Goldman said Clean Energy Ventures’ approach is to focus on strategic sales – backing companies developing technologies that might be interested in a much larger company, say an energy or industrial giant.

No companies from the first fund have been acquired, although Goldman says there are interested buyers.

In other private markets, private equity funds are playing an increasingly important role in energy transition transactions. Private equity-backed energy transition deals grew to more than $25.9 billion in 2023, up from just $500 million in 2018, according to Mike Collier of financial advisory firm Weaver.

Private equity plays a key role because it can provide a springboard for companies that have grown out of venture capital but are not yet ready to enter the public markets.

Clean Energy Ventures helps its portfolio companies get to the next stage by partnering with private equity funds, and Goldman said the company has seen increased interest from that market over the past six months.

“I’m not saying they (private equity) come in and take technology risks at an early stage, but once you have a demonstration – or a first of its kind – they can become comfortable with coming in for more projects much earlier than they traditionally have.” – he said.