Investors keep early-stage cleantech alive with lessons learned
Two veteran investors are launching a firm dedicated to funding early-stage cleantech startups, a rare bright spot following a drop in Silicon Valley funding for this category over the past several years.
Congruent Ventures, founded by Josh Posamentier and Abe Yokell, emerged Wednesday morning with a $92 million fund that will focus on backing entrepreneurs building startups around themes such as urbanization and mobility, food and agriculture, the clean energy transition and supply chains.
Yokell and Posamentier previously spent many years investing in cleantech startups (Yokell with RockPort Capital Partners, where he specialized in energy fintech, residential solar, data analytics and energy storage; and Posamentier with Prelude Ventures, where his investments included Ripple Foods and Yerdle).
The duo, which call their focus "sustainability investing," already have invested in nine startups, and they're working on backing their 10th and 11th, the investors told GreenBiz in an interview this week. "We think these companies will be supported by the macro trends and will also have an impact on the environment," Yokell said.
Limited partners in the $92 million fund include Prelude Ventures and the University of California's Office of the Chief Investment Officer. Yokell noted that Congruent was able to raise more capital than it expected for the fund.
Venture firms focused on early-stage cleantech startup are rare these days. That's thanks to the considerable losses that some Silicon Valley firms have suffered over the past decade related to overly aggressive investments in sectors such as next-generation solar panels, independent electric car companies and green building materials.
But a small handful of investors, with years of experience living through the cleantech bubble and bust, are launching new firms focused on using lessons learned to find more positive results. The underlying trends that led to cleantech investing still stand — growing and increasingly urban populations will need innovations around resources such as energy, food and water — but the methods to fund these startups will be different.
At least that's the theory.
Some of Congruent Venture's investments include polySpectra, a Berkeley, California-based company that has developed a new 3D printing process that quickly and cheaply can churn out strong materials that can be used for parts in an automotive or electronics factory, for example. "Additive manufacturing has a much lower energy footprint than traditional manufacturing," Posamentier said.
PolySpectra was also one of the first companies to go through a program called Cyclotron Road, which offers entrepreneurs access to lab space and equipment at Lawrence Berkeley National Labs, as well as some funding and business advice. Cyclotron Road is close to four years old and has emerged as a potential model that can help science and hardware-focused entrepreneurs build new companies.
Alongside these new programs for young cleantech-focused entrepreneurs, low-cost and ubiquitous computing technologies are helping reduce the overall costs to create new science and hardware startups. "The costs to start these companies has dropped dramatically," said Yokell, explaining, "a lot of it is computationally related but some of it is business model related and some is better outsourcing options."
Congruent Ventures isn't alone in tying its fund investments to underlying cleantech trends, with an investing lens informed by lessons learned.
Others include Breakthrough Energy Ventures, a billion-dollar fund from John Doerr, Bill Gates and Vinod Khosla; and Green Bay Ventures, a fund from NEA co-founder Dick Kramlich. There's also 1955 Capital, a fund from former Khosla Ventures Partner Andrew Chung, which is looking to bridge the gap for sustainability-related startups between China and the United States.
Even with some renewed interest, Congruent Ventures still faces a hard market. Early-stage startups can be higher risk than later stage ones, and the duo has something to prove following Silicon Valley's epic cleantech bust.