ZERO #10 (climate finance + startups)

38 different billion-dollar climate markets. Top 20 reasons startups fail. Climate risk is investment risk (BlackRock). 510 unicorns. White privilege in the US Capitol.

“We’re on the edge of a fundamental reshaping of finance due to climate change.”

Those words came last month from Larry Fink, CEO of BlackRock, the world’s largest asset manager with $7.8 trillion, alongside updates to their 2021 Stewardship Expectations. Fist bump, Larry. You da’ man.

Their increased climate focus is tied to this belief: “Sustainability is our new standard [because] our investment conviction is that sustainability risk — and climate risk in particular — is investment risk…We are firmly convinced that climate risk — physical and transition risk — presents one of the most significant systemic risk to the long-term value of our clients’ investments.”

This stance is important because they hold significant stakes in about 90% of S&P 500 companies, with a position that averaged 7.7% in 2020, according Jackie Cook at Morningstar.

Here are some actions and plans they highlight:

  • Voted against 55 directors/director-related items on climate-related
    issues (June ‘19 - June ‘20)

  • Put 191 carbon-intensive companies “on watch”, meaning they risk votes against directors in 2021 if they don’t show material progress on the management and reporting of climate-related risk

  • Asked 1,000+ companies to disclose a “business plan aligned with the goal of limiting global warming to well below 2 degrees Celsius, consistent with achieving net zero global GHG emissions by 2050…inline with the Task Force on Climate-related Financial Disclosures (TCFD) framework and metrics provided in the Sustainability Accounting Standards Board (SASB) standards”

  • Publishing new guidance on companies’ impacts on “natural capital — the environment beyond climate — and their impacts on people, including customers, employees, suppliers, and communities”

What might this mean for climate tech startups?

Potentially more corporate venture investments and renewable energy project finance. Perhaps it’s wise to become good friends with those 191 companies on the “watch list.”

38 different multi-billion-dollar climate ideas

This topic is a blast from the past (Spring 2020, which we’d like to forget). But it’s worth a fresh look.

In a friendly response to “It’s Time to Build” by Marc Andreessen (of the VC firm Andreessen Horowitz), Shayle Kann (of the VC firm Energy Impact Partners) wrote “What to build (climate edition).”

Shayle highlights almost 40 climate sectors that represent enormous economic and impact potential — e.g., direct air capture systems at scale, meat alternatives, bioplastics, underground power lines, infrastructure to support hydrogen storage and transportation, planting one trillion trees, HVDC transmission to move clean energy generation to where it’s needed, and lots of others.

But, as Andreessen notes, “The problem is desire. We need to *want* these things. The problem is inertia. We need to want these things more than we want to prevent these things.”

We’re not there yet in the US, and I still have these debates in my own house. (Win some, lose some.)

But we’re making progress. See the chart below from the Pew Research Center in January 2020, which shows the percentage of the US population surveyed saying that a certain issue should be a top priority for the President and Congress.

Note that “Environment” at 64% was just below “Economy” at 67%.

Granted, “Climate” was just at 52%. Given how much attention that climate change received in 2020, it’s possible that the next survey could show “Climate” and “Environment” at a higher percentage.

It’s also likely that Covid should show up and dominate this chart for near term priorities.

510 Unicorns and counting.

(Or at least, that’s what I count when I can’t sleep. Sheep are, like, so yesterday.)

Research firm CB Insights recently published its list of global private companies valued at more than $1 billion.

At this link, can download the infographic (logos) or an Excel file that includes their key investors, too.

The file is searchable by 15 sector tags, including Auto and Transportation companies — e.g., Quanergy Systems (LiDAR for autonomous vehicles), Via Transportation (smarter public transit), Bird Rides (e-scooters), Rivian (electric SUVs and vans), Nuro (robotics for self driving cars), and Aurora (autonomous vehicles).

In their Other category, they show a few cleantech companies — e.g., Zymergen (bio-based solutions for agtech, plastics reduction, etc.), Rubicon Global (waste management), and Sila Nanotechnologies (energy storage and EV).

(I kept looking for a category tag that showed “stupid sh*t no one really needs,” but couldn’t find it. But you know they’re somewhere on this list.)

The leading sectors are Fintech (14%), E-commerce & Direct-to-Consumer (13%), Internet Software & Services (13%), and Artificial Intelligence (9%).

And the top geographies are the US (49%), China (24%), the UK (5%), and India (5%).

They counted 393 unicorns in August 2019, but today that number is 510. Think about that. A 30% increase in 14 months during the worst pandemic in a century.

Doesn’t seem right (or fair), but here we are. Capital doesn’t always go to where we think it should. (That’s just one more reason to make a lot of money and go all Robin Hood on climate and other causes that matter.)

So what are we to do with this information?

Build a climate fintech company that uses AI, with headquarters in the US, and a key presence in China, the UK, and India.

Not quite.

But perhaps climate entrepreneurs can learn from the way these companies picked big problems to solve in huge markets, hired the best talent possible, and branded themselves to stand out.

Do a premortem analysis of why your venture could fail.

As grim as it may sound, this exercises asks us to flash forward to the hypothetical failure of our business.

As a team, your goal is to pick the top 3-5 reasons why the it could happen, and then plan mitigation strategies to limit these risks of sinking the ship.

Here’s McKinsey & Company’s guidance on the premortem analysis, and why it can be a useful tool: "Studies show that project leaders overwhelmingly tend to be overconfident. Despite their best intentions, executives fall prey to cognitive and organizational biases that get in the way of good decision making.”

Executives, overconfident? I know, shocking indeed.

Luckily, you don’t have to start from scratch.

Again, the good folks at CB Insights have compiled some research on the top 20 reasons that startups fail.

Many are not surprising, but it’s helpful to see them in a list, and to consider them in your business context.

  1. No market need (despite what we told ourselves while staring at our belly button)

  2. Ran out of cash

  3. Not the right team (“I could hire my brother-in-law. He’s an engineer.”)

  4. Got outcompeted

  5. Pricing / cost issues

  6. User un-friendly product

  7. Product without a business model (“But the tech is so cool.”)

  8. Poor marketing (“Let’s just post everyday on Twitter.”)

  9. Ignored customers (“We know what they need.”)

  10. Product mistimed (“I see the future.”)

  11. Lose focus (“Oh, look at that new shiny object!”)

  12. Disharmony among team / investors

  13. Pivot gone bad (“Did I mention that shiny object over there?”)

  14. Lack of passion

  15. Failed geographic expansion

  16. No financing / investor interest

  17. Legal challenges

  18. Didn’t use network

  19. Burn out (“I can sleep when I’m dead, and take care of myself after we exit.”)

  20. Failure to pivot (“Persistence wins at all costs.”)

Whew! You may be saying, “Why not just give up now? There are so many ways to lose.”

If so, then maybe you should quit. (Sorry, but entrepreneurship is borderline masochistic. And it’s not a quick journey.)

But if you’re still with me, then consider yourself warned. Here are the cow patties. Don’t step in them. Or at least wear tall boots if you have to.

White privilege and the cost of untruths.

The siege of the US Capitol by extremist Trump supporters last week was shocking and disappointing. There are lots of other descriptors, but we’ll keep this thing PG-rated.

Given the nature of the President’s speeches and Tweets over the last four years, and especially in the last few weeks, it was also not a surprise.

I’m not the first one to say this, but it’s worth saying again, and again.

The way that last week’s white mob was treated looks very different than how protestors of color are treated.

Have all BLM protests been without incident? No. But research shows that 93% were peaceful as of September 2020.

Imagine if BLM crowds at the US Capitol were to carry guns and forcefully enter that revered building. I don’t want to think about the brutal outcomes that we’d be talking about right now.

And the President’s language could not be more different:

  • BLM protestors = “Thugs.”

  • White nationalists = “Fine people. We love you.”

A noose was erected on the Mall, and a protestor was interviewed saying he planned to executive [those responsible for stealing the election.]

What decade is this again? Aren’t these Christian churchgoers?

To see some powerful images and comparisons from NPR, check this out: “Protests In White And Black, And The Different Response Of Law Enforcement.”

This is indeed a country of two systems. We need to open our eyes and fix that.

This is about more than one incident, more than one election. It’s a pattern. It’s contagious. And it’s spreading.

As a white dude, what ground do I have to stand on? Not much. But being married to a rockstar woman who happens to be an Africa immigrant, and having three biracial kids, I’m acutely aware of how different my upbringing has been and how much privilege I have.

As MLK said from the Birmingham jail, “Injustice anywhere is a threat to justice everywhere.”

Now what?

Here are two small steps towards building a more united America today.

  • Join me in donating to BLM. Justice requires education and the rectification of past injustices.

  • As a company, consider doing what two of my climate CEO Mastermind members at Entrepreneurs for Impact have done. Document and share your commitment to racial equity. We have to remind people about what is normal, decent, and (gasp) loving. See examples from Blake Sturcke, President of Encore Renewable Energy, and Rebecca Chilton, Head of Project Finance at Leyline Renewable Capital.

That’s all, y’all.

I’d love your feedback. Drop me an email.

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Keep on fightin’ the good fight.



P.S. Here’s where the name “ZERO” comes from.

P.S.S. At Entrepreneurs for Impact, we run a private, invite-only executive coaching Mastermind for climate CEOs and investors. Collectively catalyzing over $800M of value in low carbon sectors, it’s a heck of a group. If you want to learn more, check us out here.

Dr. Chris Wedding
Entrepreneurs for Impact, Founder
Executive Coaching Mastermind for Climate CEOs and Investors
(919) 274-7988