Climactic launches first fund as partners focus on impending M&A boom in climate technology

Image credits: Andriy Onufriyenko/Getty Images

A few years ago, while the pandemic was still in full swing, Raj Kapoor and Josh Felser started investing in climate change technology startups. They named the operation “Climax” and initially used their own funds to make the bet. Although we are both experienced founders, managers, and investors, this is our first time focusing on this specific sector and we started by testing the waters.

The company announced today that it has closed a $65 million founding fund and used it to support founders launching a climate technology software company.

Mr. Kapur and Mr. Felser both have long histories as investors, with Mr. Felser co-founding Freestyle Capital and Mr. Kapur spending seven years as a managing director at Mayfield Funds. They also founded and sold their own software startup.

It’s a little surprising that it took this long for the two to work together. Their resumes are strikingly similar. Felser said that in 1997 he founded Spinner (sold to AOL) and in 2004 he founded Crackle (sold to Sony). He also launched the nonprofit organization #Climate in 2014 and created a public-private coronavirus task force during the pandemic. Mr. Kapur previously served as chief strategy officer at Lyft, and before that he founded Snapfish (acquired by HP) and FitMob (acquired by ClassPass). He also launched a nonprofit climate social app in 2007.

Those experiences, combined with a growing concern about the state of the Earth’s climate, led the two to form Climactic.

“The biggest impact will be had if we can move the supply chains of the top 50 companies to meet net-zero targets, rather than just pay lip service,” Kapur told TechCrunch+. “To get there, we think the low-hanging fruit is software, because there are a lot of efficiencies to be gained.”

The company’s LP list reads like a Who’s Who of Silicon Valley: Reid Hoffman, Chris Sacca, Ev Williams, Mike Schlopfer, Chris Larsen, Allison Pincus, Mark Pincus, Logan Green, Stephen Simon. , Jeff Clavier, and John. Zimmer. The list also includes institutional investors Stepstone, MIO Partners, NfX and Mayfield. Paul Hawken and Van Jones are serving as strategic advisors.

Mr. Kapur said LP is open to pitches. “Most of them are just getting interested in climate change technology, so they’re saying, ‘What do I know?'” he explained. “We think of it like what they typically invest in: early-stage software that is less capital-intensive and can generate returns.”

So far, Felser and Kapur have found the space more welcoming than traditional technology. Other climate technology venture capital firms advised on the startup and guided other companies to deals. “It’s very collegial,” Mr. Kapur said.

“Instead of fighting over who’s going to invest in the next sales support software, we’re actually aligned around the world,” Felser says. “We’re all trying to make money. We’re also trying to make an impact and fight for this common goal. That’s the difference between technology in general and climate change technology. I really do.”

Kapur said Climactic structured its first fund to have room for syndicated transactions. One reason for doing so, Felser added, is that climate technology requires a higher level of expertise. Different companies bring different strengths to each deal, which in Climactic’s case includes expanding its business with a focus on software.

The company plans to make a total of 20-25 investments over its lifetime, with a focus on the seed stage. Half of the funds will be set aside for follow-on purposes. Once fully operational, the company plans to make eight to 10 investments a year, Kapur said. The two investors have put nine of their past 11 investments into the fund. Under the founding fund, we have made four investments so far.

It’s no surprise that the two are bullish on climate technology, but why else would they launch a fund focused on this space? To them, today’s climate change technology feels like technology from the 1990s.

“After the market started up in the late ’90s, there was a period when big companies started realizing they were falling behind. When that happened, a big M&A boom started,” Felser said. said. “I think we’re getting to the point where large companies realize they’re falling behind and need to buy smaller companies to catch up.”

With their backgrounds in the technology industry, Mr. Felser and Mr. Kapur have a distinctly different, but complementary, perspective on climate technology than many other investors. Many climate change technology companies are focused on deep tech, the big, risky, hardware-centric movement that venture capital was known for in its early days.

Instead, companies like Climactic are focusing on what has been the bread and butter of many venture capitalists in recent years: software that has low capital requirements and can scale quickly. Both Kapur and Felser are grateful that other companies are working on deep technology — technology that is desperately needed. But they also know their strength lies in software. So why not bring those skills to climate change technology? Why not combine them with venture capital’s favorite business model and the biggest opportunity?

Seems like a good paper to me.