Harvard & Climate Tech Investment
Exploring the State of Climate Tech and Harvard's Contribution to the Space
Phoenix is a pre/seed stage venture capital firm investing in Harvard and HBS-founded startups. Further, we look to build community among alumni and Harvard’s startup and venture ecosystem. Subscribe to stay up-to-date!
Guest Author: Amy Varney (HBS 2021) is an investor at climate tech VC Systemiq Capital, which invests in Seed, Series A and Series B B2B climate tech startups in North America and Europe. Systemiq Capital has deep climate expertise and extensive connections across multiple industries, making them an excellent partner for commercializing climate innovation. Here, Amy tells us why founders in climate tech are in exactly the right space, and why Harvard founders are perfectly placed to accelerate.
Climate tech will take center stage in 2024
As the effects of climate change become more and more obvious across the globe, it is easy to become disillusioned. However, as the urgency for action increases, so does the number of entrepreneurs turning their attention to creating innovation that can help alleviate the problem. Spurred on by a confluence of exciting technology trends, financial incentives, favourable policies and a shifting macroeconomy, 2024 looks set to be a milestone year for climate tech.
What is climate tech?
Climate tech refers to technology that helps prevent or mitigate the effects of climate change. When we talk about climate tech, it's important to remember that it's not an industry, but a theme that cuts across many industries e.g. fashion, food, agriculture, chemicals, mining, financial services and so on. This is quite a shift from the cleantech 1.0 era (c. 2006-2011), which primarily focused on energy and fuels. A considerable amount of venture capital flowed into cleantech 1.0, only to result in many high-risk infrastructure projects that didn't yield the expected returns. This led to a significant crash, causing venture capitalists to retreat.
However, the situation began to change post-2015 as a result of the Paris Agreement. This led to a resurgence of venture capital funding for climate tech, which broadened in scope and grew at a remarkable rate in the late 2010s.
Why is climate tech so exciting right now?
Climate tech innovation has accelerated significantly, propelled by advancements in a variety of technologies, but particularly by heavily decreased costs of electrification (think cheaper renewable energy and batteries), computational advances (think AI, increased processing power and declining costs of data storage) and biotechnology advancements (think advanced genetic engineering tools such as CRISPR and the cheaper cost of sequencing DNA).
The undeniable effects of climate change have also made it an issue that businesses cannot ignore, because their customers and investors are demanding action. This is spurring greater market demand for new products and services that solve climate pain points. Plus, in the last couple of years, governments and regulators have finally made it significantly more feasible to get climate solutions to market e.g. funding mechanisms such as the US IRA and policy incentives such as the European Green Deal.
From an entrepreneur's perspective, climate tech presents an unparalleled opportunity to work on the defining problem of our era and a chance to make significant financial and impactful returns.
Harvard and climate
Expert climate VC funds like Systemiq Capital are certainly ready to invest in the transformative climate technologies of the future, and we look for this in exceptional pools of climate tech talent. One of the most remarkable pools of climate tech talent is Harvard University. The Salata Institute, the Harvard Climate Entrepreneurs Circle, the HBS Business and Environment Initiative (to name just a few initiatives) are all perfectly placed to accelerate climate tech innovation from the university. The impact of Harvard’s climate initiatives and students interest in the space is evident in Phoenix Fund’s portfolio:
Minimum: A YC-backed company using an API to calculate the carbon footprint of basically anything, and automatically neutralises the impact through market-leading carbon removal projects.
PowerX: A YC-backed company enabling restaurants to reduce utility costs by 30%, enhance food safety, and drive operational efficiency.
SustainFi: A marketplace for climate investments focused on environmental commodities.
Ruuf: A YC-backed company accelerating the transition to Solar in Chile by offering no-money-down installations of solar panels.
What will happen in 2024?
2023 was a rough year for lots of climate tech startups. Valuations got over inflated in 2020-21 and many startups coming back to market to fundraise in 2023 found themselves in a valuation trap. Furthermore, investors were more cautious due to the economic backdrop, meaning many of those raising their first round of financing also struggled.
However, there are reasons to be positive for 2024. Firstly, one of the main outcomes of COP28, the climate change summit held in December 2023, was the agreement to explicitly phase out the use of fossil fuels. It might not sound like it, but this is major progress, and is a further tailwind that will accelerate climate innovation. Secondly, there is a glimmer of light at the end of the economic tunnel and VC funds are becoming more eager to deploy capital. This, alongside the increasing march of enabling technologies - electrification, computation and biotech advances – means we can expect to see some exceptional climate tech startups rise from the ashes in 2024.
Larry Fink once said that he thinks the next 1000 unicorns will be involved in climate technology. I wonder how many of these future unicorns will be founded this year?
If you’re interested in climate tech, send Amy a message on LinkedIn.