This month, there’s been a flurry of business news in the CDR world. We’re taking August off from the show, but before we go we’re going to dive into 10 stories that broke in the last few weeks, that have big implications for the carbon removal industry.
On this episode hear about companies putting CO2 into concrete, plastics, and fuel, new investment funds, announcements of new engineered carbon removal facilities, and analysis of the macroeconomic conditions the industry is facing.
To explain what’s behind these headlines, we’re by our regular business panel, Susan Su and Na’im Merchant.
They tell us all about news from…
· Twelve
· Avnos
· Octavia
· “500 Climate Unicorns in 20 Years?”
On This Episode
Resources
Sifted article on EU climate funding
Subscribe to Climate Workers Anonymous
My other show, Reversing Climate Change
Books referenced in the podcasts, at Bookshop
Full Transcript
Announcer: You’re listening to Carbon Removal Newsroom, a weekly show about current events in the world of carbon removal, from technology and innovation to policymaking and job growth. Brought to you by Nori, the carbon removal marketplace.
Asa Kamer: Hello and welcome to this week’s edition of Carbon Removal Newsroom. My name is Asa Kamer. I am the producer of the show and I’ll be your guest host today. So this month, there’s been a flurry of business news in the CDR world. We are taking August off from the show. But before we go, we’re going to dive into 10 stories that broke in the last few weeks that have big implications for the carbon removal industry. So stay tuned to hear about companies that are putting CO2 into concrete, plastics, and fuel.
We’re going to hear about some new investment funds to support the industry. And some announcements of new engineered carbon removal facilities that are being built in some different locations. And we’re also going to talk about a few items related to the macroeconomic picture that this industry exists within. Let’s take it away. To explain what’s going on behind the headlines, I’m joined by our regular business panel. I’ve got Susan Hsu, who is a partner focused on climate investing at Tova Capital. She also serves as a board member at the Carbon Business Council and a board advisor to the Environmental Voter Project.
Hi, Susan.
Susan Su: Hello.
Asa Kamer: And we also have Na’im Merchant, who is the Executive Director of Carbon Removal Canada, a new climate initiative focused on advancing inclusive policies and innovations to scale up carbon removal in Canada. He is also an Elemental Accelerator Policy Fellow and runs the Carbon Curve podcast and newsletter on the policies and technologies needed to grow the carbon removal market. And you all should definitely subscribe to the Carbon Curve. Hey, Naeem, how’s it going?
Na’im Merchant: Hey, so good to be with you.
Asa Kamer: Awesome. All right, you guys, so let’s get into it. Let’s wrap up the month, right, and do a little rapid fire fun here and give our listeners an overview of all the crazy news that has happened in the month of July related to the carbon removal industry. So Naeem, I’m going to start with you. On July 11th, CarbonCure, a company that injects CO2 into concrete, which stores it permanently and actually makes the concrete stronger, so they say, has raised $80 million to continue to scale up their company. So Naeem, do you think this is a major moment in the effort to decarbonize buildings and the built environment?
And is CarbonCure leading this effort?
Na’im Merchant: Yeah, that’s exciting news. I’m really happy for Rob and the rest of the team. CarbonCure is a wonderful company, a Canadian company too. And they were really excited about their raise. I think they’re really leading this effort to decarbonize buildings and think about embodied carbon in buildings and reducing the emissions of buildings as well as using concrete as a store for captured atmospheric CO2, which I think is really, really, really cool. So we’re celebrating their success for sure. This is a really, really exciting effort for them. And I think that they’ve been successful because their model is such that they can easily integrate their technology In existing concrete plants and what is a pretty low margin and generally risk averse industry.
And they’ve developed a solution that helps companies really incorporate their technology relatively straightforwardly. And then, you know, and then you can continue innovating from that point on and then continue in improving different processes involved in developing concrete that CarbonCure will just continue to build on. Not a big surprise for me. We, you know, we see large rounds in the CDR field of this size pretty regularly, it feels like these days. But also just more importantly and more relevantly, like carbon care has been around for a long time, you know, and we have we’ve been, you know, tracking The carbon removal space for less time than carbon care has been around for.
And so I think a lot of people see the big headline number that they raised $80 million, but they’ve done a ton of work. I think it’s 12 plus years to get to this point. So I’m happy for them. I hope they succeed. I think they’re doing some really exciting work here. And we just have to remember that there’s some companies like One we’ll talk about. They haven’t been around for very long and did a big raise, but CarbonCure has done the work. They’ve been around. They’ve demonstrated their product works in different environments.
And so this raise reflects that. So I’m happy for them. And I like what they’re doing for decarbonizing the building sector.
Asa Kamer: Cool. And anytime you want to shout out Canadian companies and do your Canada boosterism, we’re here for it. Let me know. Oh, no, no, I love it. I absolutely love it. So Susan, the next day, July 12th, Air Miners, which I think most of our listeners know about, it’s an online community for carbon removal enthusiasts and entrepreneurs, has announced what they’re calling their kilotonne fund. So how does this fund work? And do you think that they’re, is this, you know, well matched? Are there startups out there who need this kind of early support?
Susan Su: Airminers has been doing a really great job since, whenever, when did they start out? 2019? Sometime in the 2018 to 2020 era.
Unknown speaker: Yep.
Susan Su: Building their community, just really very... Just very engagement and relationship focused. They’ve done such a great job just doing a lot of free education, free community building for everybody out there that’s interested in carbon removal. So I’m really excited for them that this is culminating in the Kilotonne Fund for them. The purpose of the Kilotonne Fund is to, in their words, to help close the funding gap. For carbon removal startups, carbon cures $80 million round, which by the way, is not that much. It’s like just enough probably for them. If you, I’m sure if you ask the CEO, he’ll be like, it’s just enough.
But there is still really a funding gap at various stages for carbon removal companies. And so at the very earliest stages in particular, something like the kilotonne fund is really there to step in. They do it in a very novel way, which is by buying carbon credits from those startups ahead of when they’re generated at a discount. They will then get the companies that participate in the program get early revenue, money that they can actually call revenue as opposed to investment. And the fund gets credits that they can later sell at a full price.
They are looking for any buyers who’d be interested in participating. I’ve talked to Tito and he said, you can email tonnes at airminers.org or just their website is airminers.org slash kilotonne to learn more about it. And I think it’s really awesome. It’s very collaborative. It’s very inclusive. It’s inviting people to really be part of the carbon removal journey. And that’s honestly what we need. And I was going to say on CarbonCure, one of the things I think they’ve done such a great job at is Making construction decarbonization part of the conversation.
And it’s not been overnight. They’ve been really hammering away at that. And that opens the door to other companies doing a similar thing or doing a follow-on thing, as we’ll discuss in a later news item. But we really need to thank these early groundbreakers for the fact that they bring carbon removal into these less visited corners of our economy that still nonetheless need it.
Asa Kamer: All right, Naeem, keeping you in the carbon utilization Area for now, that same day, July 12th, the company 12 announced that they’re going to be building a new plant that will produce aviation fuel made out of CO2 and water in Washington state. The plant will produce 40,000 gallons of fuel by next year, with the goal of producing a million gallons per year eventually. So what does this mean for the effort to eliminate the 3% of the world’s emissions that come from aviation? How does 12’s process compare to other means of decarbonizing aviation?
Na’im Merchant: Yeah, it’s a good question. I mean, this is a really, really exciting project. Obviously, it’s a drop in the bucket for the 99. 9% of jet fuel or whatever that number is that comes from traditional sources and kerosene and so on. But what’s interesting about this approach is that it reduces the emphasis on On aviation biofuels and aviation biofuels are often been contemplated as as the answer for decarbonizing this sector. And, you know, sometimes, you know, they’re also you’ll hear them called sustainable aviation fuels and often what people are talking about are aviation biofuels.
The challenge with that is that aviation biofuels aren’t always You know, they’ll have a lower carbon footprint than traditional jet fuel. But, you know, there’s land use implications that we need to keep in mind. There are LCA considerations. There are potential other ecological impacts that make many biofuels, not all of them, but many biofuels not actually that sustainable. And so I know that we’ll need biofuels to be part of this mix. I hope, you know, actually sustainably sourced biofuels will be part of that. I think it’s interesting that we are improving our ability to create these drop-in fuels.
I think that’s really important. With what 12 announced here is that we’re not going to need to retrofit Planes in any major way or build entirely new planes, which are long lived assets and very hard to replace. And so this is a really exciting opportunity because it solves an important problem around, you know, aviation sector emissions. And it doesn’t have some of the challenges that aviation biofuels have. I mean, what we’ve got here, though, is a potentially very, very expensive solution or alternative to traditional jet fuel and aviation biofuels. And so the question is going to be, how do they overcome that?
How does 12 and their partners kind of overcome that challenge? We’ll see, but I’m encouraged by all the innovation that’s happening in terms of decarbonizing aviation. I think people would be surprised to know that it makes up within the range of two to 3% of the world’s emissions. I think the way we talk about aviation emissions, it almost feels like it must take up a larger percentage, but it’s a few percent, but it’s important and it’s important we get this right. And we know that demand for air travel is gonna increase as more and more people enter middle income and beyond.
That’s something to just keep in mind as we think about what we need to do to decarbonize the sector. And I think the key here is that we’re not depending too much on any one alternative to our traditional jet fuel and that we have a solution for drop in fuels because it’s going to be a long time before we have, you know, A significant number of planes that are hydrogen powered or battery electric powered or whatever the case is. So I think this is a really, really great development. And I think the more innovation we have in this space, I think the better.
Asa Kamer: Great. And I’ve also read that as more people fly and as other emission sources are reduced, aviation could go from 3% to something like 5% to 10% of emissions. So glad we’re...
Na’im Merchant: Yeah, absolutely. And even beyond that, depending on how emissions come down in other sectors. So it’s an important one to figure out. It’s really important to figure out largely for that reason. But it’s an expensive problem to solve. And especially when we kind of start to think about non- Biofuels already have a significant green premium in many cases, but certainly this process would too. And I hope as we scale that the cost of this technology comes down in a way that we can use it in a meaningful way.
Susan Su: I would just add, being a founder in this space or Really decarbonizing anything that’s very hard to decarbonize. You have to hold these two competing thoughts in your head, which is one, that what you’re doing is so important and so big, and that’s why you’re out there doing it. You have the audacity to be a founder that thinks that they can transform aviation and decarbonize aviation. And then the other piece is The reality is that you know what you’re doing is one tiny drop in the bucket, but you still have to get up every day and put that drop in the bucket.
So I really admire founders that are able to do this just for scale and to like give some numbers around what I’m talking about. The average international flight, call it around 10 hours, uses 40,000 gallons of fuel. So at scale, if 12 does hit their 1 million, 1 million sounds like a big number. We’re terrible at numeracy in general as human beings. 1 million sounds like a big number, but 1 million gallons would be the equivalent of about 25 flights. So that’s them like really far away from today. If we succeed, we can get to 25 flights to be on the team working and sacrificing so much of their lives really to this cause.
Is very admirable and at the same time it’s small and at the same time it’s big. So I just think it’s the same as with carbon cure and it’s the same as with any really hard to decarbonize sector. It’s called that because it is really hard and we should give these founders as much support as possible, but also understand that they’re not going to be the silver bullet that solves all of our problems.
Asa Kamer: Well said, Susan, and I’m going to keep it with you while you’re on a roll. So the next day, July 13th, an article in Sifted found that VC climate funding in Europe over the first half of 2023 is down 43% compared to the first half of 2022. So what do you think is happening with this in Europe? And is this maybe a sign that the climate VC funding isn’t quite as recession proof as some have claimed?
Susan Su: I’ve never claimed that climate venture is recession proof. I think those who claim that are probably in the midst of raising their funds. And so everything and anything you ever see come from a VC, especially if it’s on Twitter, you should take with a grain of salt because it’s probably serving a marketing purpose. More than anything, and you need to understand, you know, how it fits into their business goals. But I think it’s, it completely makes sense. I mean, Europe has always, the European venture ecosystem and particularly for climate has not caught up or it just hasn’t been on par.
I won’t say catch up because, you know, maybe it won’t, maybe it’s not meant to be exactly like it is in the U. S. , but it’s really not the same kind of scale that Or velocity that we have in the U S and if we’re seeing, or at least I definitely am seeing a slowdown in the U S then it’s certain that in Europe, we would see the same thing. I think the dynamics are a little bit worth commenting on. One is that in Europe, a lot of climate venture funding, especially that’s been in the slightly, you know, kind of later early stage or even into growth stages has been driven by CVCs or even entities that have some sort of state affiliation.
And so it’s interesting that’s where a lot of the drop-off is. It’s not necessarily in these like pre-seed and seed funds. It’s in, because there are plenty of those and there are plenty of those in the US and really all over, but it’s really in that kind of growth capital that these companies need on their eighth year, their 10th year. Companies like 12 or CarbonCure, that’s what they’re really after. So I think that’s really too bad. Total, the French oil and gas giant, recently divested themselves of their entire climate tech.
They had a CVC portfolio dedicated to climate tech, and they recently sold it to another investor. They are being totally mum as to the reason behind that, but we are You know, if that continues or if these corporates start to really step back, then that’s going to impact the European ecosystem even more because they are a really important player there. That said, I will note that round, that CarbonCure raise, the $80 million round was led by a European VC. So, you know, there’s always like this trend and anything you see in the headlines, especially when it comes to investing trends, it’s always a quarter behind.
Um, So I think there’s always reason to be hopeful and there are always good things happening, but the best European companies always seek to raise outside of Europe. In addition to, they might get their start in Europe, but later as they grow, they always need to typically move to the US for further fundraising.
Asa Kamer: That’s a good segue. So speaking of U. S. climate funding, also July 13th, and buckle in because we’re going to be on July 13th for a while, guys. I don’t know what was going on that day, but there was a lot happening in the world of CDR. On our last business episode, actually, Susan, you shouted out the work of Crime Coalition and gave them a good mention for the work they’re doing. And since you gave them that shout out, they announced a rather large $239 million fund that they’ll be investing in companies with scalable climate solutions.
So can you remind us what they do and what you think they can achieve with this level of funding here?
Susan Su: Absolutely. So Prime Coalition and their new fund is called Azola. Azola is essentially a rebrand of what used to be called the Prime Impact Fund. And Prime Coalition and Prime Impact Fund were kind of like, you know, brother, sister, like two sides of the same coin. Prime Coalition, which is the . org, it’s the nonprofit, they really focus on impact assessment, additionality, and really understanding the scientific viability, but also sort of the I already mentioned additionality, but it’s so important, really whether or not participation at the earliest stages would be additional to what that company could otherwise seek on the open market.
Prime Impact Fund, as it used to be called, was the both catalytic and venture investment arm associated with the nonprofit. And they really worked together, but they had this wonderful system of checks and balances Where the nonprofit side really did have a say in whether or not these companies that were being evaluated for investment would, number one, satisfy their carbon removal or carbon mitigation, climate change mitigation goals. They have quantitative goals around that. I think it’s one, is it half a gigatonne by 2050? People should look this up, but it’s in there.
It’s all over their materials. And, um, and then the prime input, the fund side would actually engage the venture community. They would place a venture investment. Um, I won’t go into too much detail about catalytic versus, you know, market rate. That’s something that maybe we can talk about on a different podcast is pretty complex, but they would then, you know, handle the investment side. Azola is essentially a rebrand of the prime impact fund. It’s the same team, but it’s, and it’s structured very similarly. That $239 million is made up of two separate vehicles, one that is so-called catalytic capital, which is where you need to be able to prove that company or the recipient of that investment needs a catalyst.
They’re not just able to go out and raise from any venture investor, either because it’s very early in the R&D and there’s just too much scientific risk on it. That’s usually the main reason. And then the second vehicle of Azola is actually what they call a follow-on fund, but it’s basically like a typical venture fund that is operating against market rates and has the ability to follow on to whatever their catalytic fund invests in. So a really good example is, this is from their Prime Impact Fund portfolio. And again, Azola is a rebrand of Prime Impact Fund, but same team, same kind of like operating company.
A really good example is the company Gradient. I don’t know if anybody knows the company Gradient, but it’s an industrial design and technological innovation for bringing a modular heat pump so it can cool, it can heat, that kind of fits over your window. But imagine a very beautiful window AC that doesn’t block out your window. And by the way, it’s not just an AC, it also heats and cools and it’s hyper-efficient. And it uses a lower global warming potential coolant. So the current coolants out there are often like 2,000, 3,000, 4,000 times the global warming potential of CO2 itself.
And they’re using one that is on par with CO2. And so that company, when they first got started, nobody wanted to fund them. There was like way too much risk. It’s hardware. It was unproven. And so that was a perfect place for the catalytic fund to go in and say, we can really make a difference here. We’re going to fund you until you get to the point where regular investors, regular VCs are, we’re going to, you’re going to de-risk, we’re going to de-risk you until you get to that point where regular VCs can come in.
And then the other side of their fund, the market rate follow-on could then follow on to that investment later on and kind of deliver a different, you Both rate of return, but also cater to a different LP set. So the key to remember is that for the Catalytic Fund, it can be philanthropic dollars that go into that as LPs, as opposed to just regular return seeking LPs. So it is really a superpower. And yeah, I think they’re really brilliant as an organization because they have that scientific grounding. They really have like a moral backbone that a lot of venture funds do not have in the form of their nonprofit side organization that reviews the emissions reduction potential of everything that they do.
Asa Kamer: Great. And thank you for that. And I believe Azolla was the plant that grew so widely through the ocean that it sucked down so much CO2 that it changed the Earth’s climate like many, many million years ago and cooled it off. So hopefully they have that same success. Naeem, going to stick on July 13th for you. So Avnos, which was a previously little known DAX startup, announced that they’d raised $80 million from ConocoPhillips, Shell, and JetBlue. So with so many DAX startups vying for limited funding, what are they doing to attract so much money from these large corporations all while they were basically in stealth mode?
Na’im Merchant: Yeah, I mean, you know, just to kind of borrow something that Susan said earlier was, you know, I think it’s about your superpower. And I think this particular company has one. And I think, you know, there’s a lot of direct air capture companies out there. And I think differentiating is becoming increasingly difficult. And so I think aside from, you know, the Probably stellar team that’s come together around this and the right connections with the right people to attract this kind of funding while in stealth mode. And again, I think another point Susan made earlier was a good one.
It was, you know, for a company like this, $80 million might be a windfall or it might be I think it’s really just enough. It’s hard to say. It depends on what they’re trying to accomplish. And with them being in stealth mode, it’s hard to get that sort of insight. But in this case, I think what I can say about what’s going to kind of make it possible for a new DAX startup to attract money from large corporates and other investors Is figuring out what your particular technology’s superpower is. And this one, it was, you know, it’s the water production that comes through their process that I think is something on like a five tonne to one tonne ratio of CO2 removed.
And that’s especially relevant as we’ve seen kind of, you know, hear more about parts of the US and other parts of the world experiencing higher than normal kind of drought levels. And so there’s There’s something that’s a differentiator there. And I think, you know, I’ve talked to a company, for example, that’s figured out and still obviously early stages, so probably shouldn’t say figured out, but is working on how to operate direct air capture facilities in, you know, an effective way in cold weather environments. So every kind of company that’s going to come to this space that’s looking to raise money is going to need all of the necessary components that are required to be successful in that space.
And I think Susan’s probably better suited to speak to that than I am. But I certainly think that in the director capture space in particular, The need to kind of be clear about what problem does your technology solve that other DAC companies are not solving is definitely necessary, but obviously not sufficient. So I think that’s what it’s going to take. And I think that’s especially true while you’re in stealth mode.
Asa Kamer: Also, July 13th, Brimstone announced that their carbon negative concrete product was approved by an industry standard third-party inspector, and they found that their concrete is as strong or stronger than regular cement. So this is a huge milestone, and they can now truly make carbon negative cement because not only is it as strong, but it’s also carbon negative cement. So what is the path from here for Brimstone? How does this product start to make a dent in the 8% of global emissions that come from cement?
Susan Su: This is incredible. Brimstone’s been at it for a while. They have a whole host of really great strategic and just kind of top tier investors. I’m Impressed and I’m really thankful that they’re out doing this really hard work. It’s just the beginning though, and it’s going to continue to be super extra, very, very hard what they’re going to do because their process is fundamentally different. Um, it’s using, it’s using calcium silicate for, as an input to the process. They actually are from what I, my understanding, they actually have to, uh, Build differentiated and their own manufacturing facilities.
So that’s going to be a big challenge for them where they’re going to need support, hopefully project finance and government support. That’s going to be a little bit later on. So I think in terms of the path from here, it’s really engaging. By the way, they’ve had funding from the National Science Foundation and ARPA-E. So they likely have some of those relationships that they need, but I’m sure on their mind is how do we deepen those relationships? How do we branch out into the other departments that we’re going to really need buy in from?
And in particular, not just at the federal level, but at the state and regional level to really kind of like put the nuts and bolts to the actual manufacturing component of their business, which is the main thing. I read an article that said they were already starting to have discussions with potential buyers, potential offtakers for their product, which is great. One of their investors is Fifth Wall, which has a $600 million climate fund. Fifth Wall was historically a prop tech fund, and then they kind of pivoted to really be all in on climate a couple of years ago and raised the fund, I think, just last year, a year and a half ago.
And so, you know, with fifth walls LP set, which is a lot of folks in the real estate and construction business, that’s going to be very helpful to them. And so I’m sure like the next step is a lot of just sort of like pulling it, pulling in all of the strategic relationships they can. And it’s going to be a long time before they actually make a dent in the 8% of global emissions that come from cement. The next step is really just getting sign off on a facility, which it sounds like they’re starting to do, but going from kind of the lab scale that they’re at now to actually being able to do some sort of demonstration level capacity to eventually at scale, it’s a very, very long path and it’s going to require not just capital, but a lot of connections.
So I would bet that’s what they’re focused on right now.
Asa Kamer: Back to you, Naeem. July 13th as well, Deep Sky, which is a company in Canada, working to make Eastern Canada a CDR hub, thanks to the availability of carbon-free hydropower. They announced their first partnership in this effort to create a CDR hub. Thank you so much.
Na’im Merchant: Cheering them on. I love to see that sort of ambition. And their hypothesis, as you mentioned, is that Eastern Canada is attractive because of the excess renewable energy capacity that exists there. And I think they have really ambitious plans for what they want to do with carbon removal in Canada. And I think like any project developer, they’re going to need to think about regulatory hurdles. They’re going to need to think about Operating in an environment that currently lacks, you know, supportive carbon removal policies, which is part of what we’re trying to solve.
And, you know, they need to figure out how to gain that kind of community acceptance, especially as they take projects beyond the pilot phase and go beyond that. You know, like many others, I think they’re taking on a big challenge. They’re trying to be that drop in the bucket. And so I think just to continue borrowing from Susan’s great mentor. But I think that their approach to try to do a lot of technical and scientific due diligence on different CDR technologies, like Captura, and then pilot the best ones and then scale the stuff with the most potential is a smart approach.
And it’s an exciting model. And I think we see a lot of carbon removal technology developers. And what you need to start seeing as the technology developers You know, build up more mature technologies are more project developers. And so, you know, it’s encouraging that Deep Sky decided to choose Eastern Canada as that hub for carbon removal. And I think what you have in places like Canada and across the US are different geographies that have, you know, different properties. And this is true around the world, actually, but, you know, different geographies that provide something particularly useful in achieving your goals around carbon removal, whether that’s the right ecological environment.
The coastline, the energy inputs, the technical skills that exist, a lot of that exists in Eastern Canada. And so you’re really well set up for success there. And yeah, we know the deep sky folks well and we wish them the best. And I’d love to see kind of more models around project development because a lot of technology developers are not going to want to do the actual deployment at scale. They’re going to want to license out their technology or take on similar type of Approaches and they’re going to need people who are good at doing the actual, you know, doing part of deploying carbon removal at scale.
And, and so I’m, I’ll be looking at this model and, and, and, you know, hoping for the best for deep sky and, and, and just watching on how this, this project evolves.
Asa Kamer: And that’s actually a wonderful segue to our, my next question, which is for you, Susan. So on July 19th, The Kenya-based DAC company Octavia announced their plans for the first ever DAC plant in the Southern Hemisphere. For an interview with the CEO, check out last week’s episode of this show in your feed. So Susan, what is the value proposition for a DAC company that can’t access subsidies like 45Q in the US? And they’ve said so far they’re not taking investment from the oil and gas industry. So how should they plan to compete in a global market for DAC credits when they’re operating without some of these more lucrative funding streams?
But at the same time, they do have access to some very favorable energy and geology down in Kenya in the Rift Valley where they’re operating.
Susan Su: It is absolutely true that the oil and gas industry has deep pockets to finance DAC. And I think we should just recognize that the dollar amounts that are required for DAC to, especially later on for it to really get built out are the kind of dollar amounts only seen in oil and gas. So I’m glad you called that out. I think the story with Octavia, which is still extremely early, I think they raised less than half a million dollars total. So this isn’t like going to happen anytime soon. They’re really just Kind of have a great brand and they’ve got a concept out there.
It’s a similar story to Deep Sky actually, which is we have this part of the world that has a very favorable That has very favorable unit economics around energy, and that has a clean energy mix. So Kenya is, by some estimates, I mean, it depends on who you talk to and who you believe, but at minimum around 80% clean energy from geothermal and large-scale hydro, and now increasingly solar. Some folks will claim that as high as, you know, 100%. It’s definitely not 100%. But 80% is really good, is very, very high.
And they have a lot of, in some cases, excess capacity. And so I imagine that part of the value proposition around what Octavia is trying to do is to, because DAC is incredibly energy intensive, and it’s also one of the main reasons that many investors won’t touch DAC is because it is just unit economics upside down due to the energy intensity. I think they kind of like caught on to that and are going about it in a way that’s going to sort of flip the narrative on how to make DAC affordable.
I think that’s really smart. And I also think that Kenya is absolutely well poised to be They’ve been making a lot of moves in the climate leadership arena. They have a lot of goals at the government level. They want to get to 100% clean and renewable energy by 2030. By the way, that’s another way that you know that they’re not at 100% today because that’s actually the Kenyan government stated goal is to be at 100% by 2030, which is like, compare that to the US. I mean, we are way behind and we don’t even pretend.
To want to try to catch up to that level. And they’re doing an enormous amount of forestry protection. They’ve banned charcoal, which contributes to deforestation as well as carbon emissions and pollution. They are electrifying their transportation and mobility sector really, really fast via two and three wheelers. So it’s really a, um, I think they said this on the Octavia website, but it’s like a young population. They claim, you know, it’s the young population. That’s like very feeling the effects of climate change and as willing and motivated to combat it. It is not just a claim.
It is so true in my observation. It is a very favorable cultural environment for a climate tech startup. Now, a deep tech company, that’s a whole different story. But hey, it’s early and I think it’s really exciting. I wish them the best. I think their premise makes a lot of sense to get on the grid where there’s a lot of low cost energy. And yet, of course, as with all companies in carbon removal, it’s a very long path.
Asa Kamer: Great. All right. Thank you, Susan. So we’ve made it through our nine headlines. We’re going to do number 10. It’s for both of you guys. It’s our last question. So earlier this month, Sean O’Sullivan, who’s the founder of the VC firm SOSV, which has over $1. 5 trillion of assets under management, And has invested in more than 250 climate startups said in an interview with Bloomberg that in 20 years, there will be at least 500 climate unicorns. So that’s companies worth over a billion dollars. So my question to both of you, is he right to be so confident?
And what’s your over under on 500 unicorns in 20 years?
Susan Su: Well, if I were Sean O’Sullivan, I would say the same thing because he runs a pre-seed and seed fund that’s already invested in 250 climate tech startups. And the rule of venture is ABF, always be fundraising, especially if you’re in an interview with Bloomberg and you probably have a bunch of your LPs on the other side of that interview. I think it’s, of course, it’s great to come out there and be confident about your portfolio. And I think, you know, SOSV is like, they’re walking the walk. They really, they’ve been doing it for a while.
They’ve been, they’ve kind of put their money where their mouth is in terms of climate tech. And I’m sure he really believes it. I think he, you know, unicorn these days, by the way, like a billion dollar company, a billion dollar valuation company. I don’t like unicorns these days. I feel like the real thing is what about a billion dollar revenue company? Now we’ve seen over the last two years, three years, that valuation can be quite a subjective measure of a company’s real contribution and what they’ll return to investors. And so do I believe that there can be 500 climate unicorns and is he right to be, he’s absolutely right to be confident because as the leader of a brand as big as SOSV, you’ve gotta be, if nothing else, you’ve gotta be confident.
And over under on 500, I believe it. I believe there could be 500 unicorns as per the current definition of unicorn, which is a $1 billion valuation company. We already have several dozen of those, I think now. And so many more that are not quite there, but they’ve got investors with deep pockets. So I could see the valuations creeping up for sure. Now, how many of those companies ultimately reach their goal of climate impact? Which is the more important measure than having a billion dollar valuation. That I think would be a lot fewer than 500, but I hope that it’s more than 100.
And I hope that’s what entrepreneurs and their investors remember at the end of the day is that none of us put food on the table from valuation, or at least not in the long term. Some investors certainly do for a short while at least. And, and that what we’re really here to do is make a major dent in the actual problem of unmitigated climate crisis. So I think it’s just important to keep that in mind as well.
Unknown speaker: Great name.
Na’im Merchant: You know, I couldn’t say that any better. I think Susan covered all the right points. I mean, yeah, you know, like, I hope there are many climate unicorns, but the thing that we really need to be thinking about is what kind of impact they’re having, not what kind of valuation they see. Hopefully, we can live in a world where the climate impact draws a straight line to your valuation, but that’s probably not the world we live in or are going to live in. I think it’s going to require entrepreneurs and investors that are actually doing this to keep the end goal in mind here is really the climate impact.
Yeah, I don’t have anything more to say on that piece. But I also think the point Susan made was also right around, there’s already a good chunk of climate companies out there that would qualify under that definition. And so the actual number 500, it sounds big. It’s probably doable, but yeah, it’s more important that they’re actually having that climate impact. And that’s what we should really be tracking. So well said, Susan.
Susan Su: I think revenue tracks better to climate impact than valuation does. And so when investors talk about valuation, it’s an easier thing to aim for, for sure. I think it would be a very bold person indeed that would go out there publicly and say, I believe there’s going to be 500 climate tech companies with a billion dollars in revenue. And if only that could be true, I would be thrilled because that would mean that they are at scale. Scale begets impact. And that means we’re on our way to actually making a difference.
Asa Kamer: All right. Well, with that, we will wrap up. Thank you guys so much for going through those 10 headlines with us from July. And folks, we’re taking August off. So I hope you guys have a great August. Take some time off. It may be the hottest August ever because we just had the hottest July ever. So be careful out there. Stay cool. And we’ll see you guys in September. Thank you, Susan. Thank you, Naeem.
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