Now’s the time for sustainable investments to shine. There are billions of dollars in funding in both public and private markets dedicated to new sustainable investing and demand for consumers for a more conscious capitalism has never been stronger.
As founders and investors reawaken to a sustainable morning in America a few areas are going to demand hardware, software and business model innovations.
Some of these sectors have been on the investment radar for the past year or two and others are just beginning to capture investor attention, but they all have something in common: the investor appetite for new businesses addressing the food supply chain; energy management and construction for homes and offices; carbon sequestration and monitoring and management of offsets; and new biomaterials and processes for packaging and industrial chemicals replacements have never been stronger.
If we’re going to feed the world, let’s start with the food chain.
COVID-19, the disease caused by the SARS-CoV-2 virus, has exposed significant holes in the food supply. Companies like AppHarvest, which agreed to go public through a SPAC earlier this year are only one of several companies remaking agriculture through the application of technology. There’s also Plenty, Bowery Farms, Unfold, BrightFarms and Revol Greens, working to upend the agricultural supply chain. If those companies are looking at new ways of growing crops, companies like Apeel Sciences and Hazel Technologies are trying to find ways to preserve food from spoilage. Treasure8 is looking at ways to use food waste for new food and ingredients and they’re not alone.
Then there’s the protein replacement companies that we’ve written about previously. Impossible Foods, Beyond Meat, Memphis Meats, Mosa Meat, Nuggs, Future Meat Technologies, Shiok Meats (a seafood company) are devising methods to create meaty proteins less dependent on animal husbandry. Perfect Day and its competitors are doing the same for the dairy industry.
There’s also tremendous need for new protein sources to feed the animals that people around the world still like to eat. For this there’re companies like Ynsect, which is providing insect proteins for industrial fish farms, or Grubly Farms, which is providing feed to the families raising their own chickens.
For these opportunities that are raising hundreds of millions in financing there are others that require the kind of high margin software solutions that are yet to be developed. These are visual technologies for tracking, monitoring and managing food production; sensors for improving the storage and supply chain, software for managing production and tracking produce and products from the farm to the table. Venture investors are beginning to invest in these companies as well.
These are multibillion-dollar business opportunities and while only a few could be considered low-hanging fruit, they’re all ripe opportunities for founders to pluck.
A clean energy company now has a market cap rivaling ExxonMobil
They built this city
There are venture investors that are looking closely at the built environment and seeing tremendous opportunities.
Several firms have taken to financing companies addressing the opportunities closest to their California homes (if the pandemic, wildfires and drought haven’t driven them out) by backing a number of companies working on alternative dwelling units designed to alleviate the housing crisis in California. Dvele, United Dwelling, Cover, Cottage and Rent the Backyard are all working on making prefab housing accessible and affordable.
While many of these companies are taking existing technologies and coming up with new process efficiencies to make these buildings less expensive others like Mighty Buildings and Icon Build are both incorporating 3D printing into their design-build process. They’re both using novel materials that they’ve developed internally to make their homes sturdier and cheaper than traditional homebuilding techniques currently are.
As these startups develop new ways to build homes companies like Cove.Tool and others are developing new ways to come up with more efficient and easier building designs. Again, software will have a role to play in the process and Cove.Tool, Ecobot (a tool to make it easier to manage and conduct environmental assessments) and UrbanFootprint, which uses a SimCity approach to help urban planners, will make meaningful strides in helping to reduce the carbon footprint associated with construction.
Tools for energy management inside of buildings will have a seat at the sustainability table as well. Think of companies like VoltServer, which is adding data controls to electricity distribution alongside startups like Blueprint Power, Blue Pillar and monitoring companies like Enertiv and Aquicore that are all looking at ways to monitor and manage distribution energy distribution in buildings (Sense, Bidgely, Neurio, Wattly and Verve are doing this for homes). New early stage hardware startups like Span, which pitches an all-in-one energy management hub to replace the humble fusebox, or TurnTide, which has a new digital engine technology that makes HVAC systems and motors more efficient, are also raising significant capital from investors.
Rearranging the carbon scales
As the year dawned, TechCrunch highlighted a push by investors to get early access to the growing market for carbon monitoring and management technologies. We discussed companies like Pachama, Cloverly and Wren that were working on ways to provide offsets to consumers — or monitor the offsets being produced.
Now companies, including Nori, are bringing those kinds of management tools to the blockchain and offering agricultural-focused carbon offsets in conjunction with government entities like the U.S. Department of Agriculture.
Well, there have been additional startups to enter the fray since then, and a clutch of companies (many coming out of Y Combinator) that are looking at providing better ways for monitoring carbon emissions. These are companies like CarbonChain and SINAI (two YC graduates) or Normative, a European company offering an easy way for companies to audit emissions, and ClimateView, which provides visualization tools for emissions reduction planning.
Carbon monitoring is fine, and traditional carbon offset tools are certainly gaining consumer interest, but what about more novel ways to capture carbon and sequester it? Those companies are also getting a fair amount of investor attention. Think of CarbonCure, which is embedding carbon into cement that’s used in buildings. Or look at Soil Carbon, a startup out of Australia that uses fungi to fix carbon dioxide in the soil, providing much-needed nutrients. LanzaTech is capturing emissions from industrial plants and converting it into fuels and chemicals.
These are, in most cases, small scale projects, but some companies like ClimeWorks and Carbon Engineering are plotting massive plants to suck carbon out of the air and either sequester it underground or use it in the production of other potential energy sources — like hydrogen. It’s another multibillion dollar market that venture investors are vying to capitalize on.
Investors and utilities are seeding carbon markets with new startups
Fake plastic, from real trees?
There are, right now, roughly 5.225 trillion macro and micro pieces of plastic floating in the oceans of the world and around 46,000 pieces per square mile. These square miles of massive piles of ocean garbage weigh over 270,000 tons. And every day, humans add another 8 million pieces of plastic, according to Greenpeace.
That’s gross. It’s also toxic.
And what plastic trash doesn’t wind up in the oceans either ends up in landfills (which isn’t great) or gets burned in a waste-to-energy facility (which is better, but still isn’t good from a climate perspective).
Plastic is one problem, but don’t think that choosing paper instead of plastic gets consumers off the hook. Deforestation to make paper products can cause desertification, soil erosion, damage crop lands and increase greenhouse gases in the atmosphere.
These problems are only becoming more apparent and more pressing given the increase in single use plastics as a result of increasing use of delivery options in countries impacted by the COVID-19 pandemic. So it’s no wonder that startups are coming to the rescue here too.
Indeed, the industry is so valuable that it’s produced its first SPAC-based public offering. Earlier today Danimer Bioplastics agreed to be acquired by a special purpose acquisition company in a transaction that could value the company at $890 million. Earlier this year, a company founded by a former Danimer executive raised $133 million in an early-stage investment to build up another bioplastics alternative.
At the early stage, Notpla is one of a number of companies to raise money for a biodegradable plastic alternative. Another company working on the problem is Genecis, a Y Combinator graduate, turning food waste into biodegradable plastics.
If plastic alternatives represent one solution to the waste problem, creating better, more durable and sustainable paper-based alternatives is another. Packaging startups Varden and Vericool are taking this approach, developing new ways to treat paper products to create alternatives to individual packaging used in coffee makers (Varden) and replacing plastic coolers with a paper-based replacement (Vericool). Very cool indeed.
Plastics are only one portion of the massive industry made from the filtration and cracking of oil into gasoline and petrochemical products. Still more work needs to be done to find replacements for the other chemicals that are made as byproducts from oil. Startups are tackling these issues too.
We’ve written about Solugen and Zymergen, two companies that are making biochemicals that can replace existing industrial petrochemicals in a range of applications, but back in 2016 Ginkgo Bioworks announced a partnership with Genomatica focused on using synthetic biology to facilitate manufacturing of industrial chemicals.
How to Proceed?
While many of these companies are deeply technical, specialized kinds of startups whose founders have deep backgrounds in fields like synthetic biology, energy transmission or engineering, there are opportunities for software and services that provide simple process efficiencies for industries that haven’t had them.
As Jennifer Holmgren told the audience at TechCrunch’s virtual Disrupt 2020, all of these processes will be less centralized and more distributed. And the simple fact of that distribution will create demand for an orchestration layer of software and services to manage distributed processes.
“I think IT is going to play a huge role. AI is going to play a huge role in process control. All of these things are going to be key to the future [distributed] process technologies in my mind,” Holmgren said.
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