RC Climate #4

Photo by vadim kaipov on Unsplash

Welcome to issue #4 of The Rally Cap Climate Roll-Up — The RCCR. As a refresher, RC has launched a $5m microfund to back exceptional founders building B2B enterprise climate software globally.

QUICK LINKS:

• Previous editions of the newsletter.
• Read about our thesis.
• Join our community.

I hope everyone had a wonderful Thanksgiving. I was fully flattened with my first case of COVID (do not recommend, two thumbs down), wasting away my 40th birthday with a 104° fever, a sick wife, a stir-crazy dog and an equally-stir crazy 1.5 year old with COVID, a double ear infection, a full-body rash from a low-budget bath bomb and a busted tooth (six thumbs and two paws way way down). There’s nothing like hitting rock bottom to appreciate everything you’re truly thankful for: Blippi, we owe you big time.

Anyhow, a couple of weeks back, I published a post on why we’re so bullish on the adaptation side of climate tech. It’s always a relief when something you blast out into the online ether finds a welcoming audience, and I’ve been energized by the positive feedback our thesis has generated amongst LPs, founders and other VCs.

This is the piece I wrote. But these are the pieces I wish I wrote:

• Alex Laplaza, founding partner at LowerCarbon, lays out why he’s equally bullish on adaptation tech, especially in emerging economies
• Bloomberg called adaptation “venture capital’s biggest climate blindspot”
• NYT continues leading the way on climate reporting, with this excellent piece highlighting various adaptation initiatives across the US
• h/t to our newest EU-focused VP Seb Traneus for surfacing this S&P Global article quantifying the potential hits to GDP in economies that don’t invest heavily in adaptation

Our investment thesis can be narrowed down to:

• Pre-seed
• Software-centric enterprise-grade B2B adaptation tech (ie, Amini AI, Earthmover, Ladris, Climate Alpha, etc)
• ~50% US, ~50% emerging markets

If you’re building in this space, please reach out!

It is also worthy to note that being pro-adaptation does not make me anti-mitigation — but, fund size is strategy, and, given our AUM and skillset, the software-centricity of the former is a better fit for Rally Cap VC. The calculus is also clouded by a deep skepticism of offsets and credits…this is the best quick articulation I’ve found on why they’re so doomed by fundamentally misaligned incentives. The revenue model many early-stage climate funds are betting on here feels eerily similar to buying the last hype cycle’s crypto companies’ promises of token-based returns. And, rewinding even further, there are plenty of ominous parallels to the notoriously scammy adtech industry before it.

More to come on this in subsequent posts, but let’s jump on to some of the recent deals we’ve been digging into:

Cool Companies Currently Raising (we’re always happy to intro!):

LATAM:

• Kilimo is raising a $5m round to expand its irrigation monitoring platform across LatAm’s ag sector.
• LogShare powers a platform enabling Brazilian trucking companies to reduce empty backhaul trips, dramatically reducing emissions and improving efficiency across the massive sector.

AFRICA:

• Earthbond is enabling Nigeria’s SMEs to easily access financing to convert to solar, critical in a market where oil subsidies have just been removed
• TurnAxis is building energy management software for large corporate customers, beginning in East Africa.

Given our increased focus on the US, we’ll also start capturing the domestic companies we’ve been chatting with here:

• Solesca is competing with Helioscope to bring better project management software to the C&I solar space
• FinEV is building credit products to accelerate commercial trucking fleets’ adoption of EV.
• Blue Dot is tackling personal and commercial auto electrification via scalable conversion tech
• Hive enables affordable EV adoption by innovating around the financing side and enabling drivers to pay what they save vs prior gas expenses
• Duckling is riding IRA tailwinds to launch a sales platform for home electrification contractors; tangentially, Carbon Free Homes is bringing a marketplace approach to making the process easier for homeowners, while tapping into contractors’ retraining incentives

What we’re Reading:

• Nick Van Osdol is an impressively prolific writer, churning out high quality, deeply insightful climate content; definitely worth subscribing to Keep Cool
• Unruly Capital detailed their decentralization thesis here.

Asks:

• We’re always looking out for additional venture partners and micro-LPs to help power our Slack community — please reach out here!
• If you know any larger institutional LPs interested in gaining exposure to global climate companies, our deck is here.
• CTVC continues outpacing most folks in the content game; aside from their invaluable weekly funding updates, deep dives like this one into “The Bits and Bites of Grid Tech,” are excellent primers for folks coming up to speed

Till the next one,
Hayden

Previous companies highlighted:

LATAM:

• Solfium (Mexico) — C&I solar financing, working with Pepsi, ABB Inbev, Engie, Scotiabank and Santander and on pace to do more than $5m in revenue this year (one of our first investments)
• AInWater (Chile) — AI-powered software for water treatment plants across LatAm, partnered with the likes of Nestlé.
• Silica is doing enhanced rock weathering atop Lithos (funded by USV, Greylock and BCV, and already the top provider of credits to Frontier) in Mexico, where the soil and farming ecosystem are ripe for this type of innovation.
• Splight leverages AI to power energy management for large corporate customers across the Americas; like many LatAm-centric tech companies, they have their eyes on expanding heavily into the US.
• WAS Co is a Mexican deeptech company using mining waste to create new types of concrete — 20% stronger, while reducing emissions by 50%. Currently raising a seed round.
• Tropiko provides a risk management and ESG reporting platform for Brazilian companies.

AFRICA:

• Wyre (Nigeria) — Energy management software, already expanding across the footprints of some of the largest banks in West Africa
• Zimi (South Africa) — Venture-built by our friends at Holocene, Zimi is building out the electric fleet infrastructure for Africa.
• Zeno Moto (Kenya) — ex-Tesla team building ground-up electric motorcycles, for individuals and fleets.
• Circadian is a team of well-seasoned industry experts selling energy management software into the main telco tower operators and alternative energy providers across the continent. We invested.
• Amini’s CEO is an ex-Nvidia exec building first-layer environmental data, via a constellation of satellites, for large corporate customers across insurance, supply/production chains, etc. We also invested ;)
• Pumpkn is selling a white-label lending tool — data collection, underwriting etc — tailored for banks and agribusinesses, beginning in SA.
• Ox — called “one of the best inventions of 2022” by Time Magazine — is bringing electrification and refrigeration, via custom-built EV 4X4 trucks, to commercial transportation chains across Africa. Very cool trucks, running atop their own fleet and supply chain management software.
• LipaGas is a Kenyan fintech building the distribution, underwriting and payment and collection rails for clean cooking, transitioning households and businesses from charcoal, kerosene and wood to LPG; co-founded by CEO of liquid, Africa’s largest fiber and IoT network.
• HydroIQ powers a SaaS-based operating system for water suppliers across emerging markets, beginning with Kenya and Nigeria.

MENA:

• Graze It (Saudi Arabia) — Low-carbon/-water data-driven cattle feed, currently partnered with some of the largest regional cattle owners and dairy product companies like Danon