In the ever-evolving landscape of climate technology, startups often encounter a significant hurdle known as the “valley of death.” This term describes the challenging phase between securing initial funding and obtaining the substantial growth capital necessary for scaling proven technologies to a commercial level.
Climate tech ventures, particularly those focused on hardware, face an even broader valley of death. The nature of their innovations often requires substantial financial investment, with the costs of developing pioneering power plants or manufacturing facilities reaching into the tens or hundreds of millions of dollars.
To address this critical financing gap, a new initiative has emerged, aiming to raise $300 million by October. This fund, known as the All Aboard Coalition, is designed to assist startups in securing the additional $100 million to $200 million needed to bring their groundbreaking projects to fruition.
While the $300 million target may appear modest in the context of capital-intensive climate technology, the true strength of this fund lies in its extensive network of influential climate investors. This network is strategically positioned to signal to larger institutional investors that these startups are worthy of their backing.
At the helm of this initiative is Chris Anderson, a prominent figure known for his role in transforming TED Talks into a global platform for sharing innovative ideas. Anderson is now leveraging his expertise in network building to address the funding challenges faced by climate technology.
The coalition comprises a diverse group of investors, including Ara Partners, Breakthrough Energy Ventures, Clean Energy Ventures, Congruent Ventures, DCVC, Energy Impact Partners, Future Ventures, Galvanize Climate Solutions, Gigascale Capital, Khosla Ventures, NGP Energy Capital Management, Obvious Ventures, Prelude Ventures, S2G, and Spring Lane Capital.
All Aboard plans to provide equity or convertible equity investments but will not engage in loaning funds or financing specific projects. This strategy firmly positions the coalition within the venture capital realm, distinguishing it from project finance approaches that have been suggested as potential solutions to the valley of death.
Some partners from the aforementioned firms are contributing to the new fund, although participation is not mandatory. The overarching goal is for All Aboard to serve as a significant indicator in the climate tech sector, akin to the influence of established firms like Sequoia. When All Aboard invests in a startup, it is anticipated that other seasoned funds will follow suit.
For climate tech startups striving to navigate the valley of death, the collective funding needs will exceed $300 million, likely surpassing the $60 billion in assets currently managed by All Aboard members. Attracting generalist investors will be crucial for the success of this fund and for the broader climate technology sector to achieve meaningful commercial milestones.