The Fintech-Climatetech Migration
Will Fintech Save the Climate?
Pardon the clickbait headline. But also thanks for clicking ;)
Since Rally Cap launched in 2020 as a scrappy micro fund, our flywheel has been fueled by a collaborative collective of strategic fintech angels — think early employees from Plaid, Stripe, Mercado Libre and Jumia.
Like lookouts on a ship, this unique community’s insights have helped us tack a dynamic course avoiding stormy seas and unearthing hidden treasures, a la Pomelo, Simetrik, Stitch and TripleA.
That early success (plus, of course, a dash of luck and charm) gave way to our $20m flagship fund backed by later-stage funds like Tiger, Breyer, Bain, Infinity, Propel and Better Tomorrow. Marrying their macro insights with those crowdsourced bottom-up from the grassroots, our capital stack matured into a predictive 360° view of the market. This ability to sense where capital, tech and talent will flow generates our unique alpha.
These days, many of the Rally Cap machine’s sensors are indicating a global market convergence towards a new focal point: climate. Because, increasingly, everything is climate. And we already knew software is eating the world and every company will be a fintech. Put it all together and a generational shift is underway.
Amidst this new backdrop of opportunity, we’re seeing an army of fintech folks refocus their passions. These are not jaded ex-fintech addicts or trend-chasers, but rather successful execs who once sought to completely overhaul the global financial system — and oftentimes did — and are now aiming their arsenal of skills and experiences to tackle global warming. Climate founders and funders are welcoming them with open arms.
Indeed, the most common conversation I have with our angel LPs these days begins with,“I’m thinking of getting into Climate, can we catch-up?”
And I’ve met countless super angels and emerging managers going all-in on climate, with many more GPs and senior investors bringing their fintech-heavy CVs to both climate and generalist funds tackling the space. See Ben Eidelson (ex-Stripe) and Anay Shah (ex-Remitly & -Tala) at Stepchange; Bill Clerico (ex-WePay) at Convective; Helen Lim (ex-Finca) at At One; Tommy Leap (ex-Mercury) at Jetstream; and on and on and on.
There are certainly some push factors at play, as an over-deployment of capital saturated increasingly mature verticals and a general market downturn caused a broad pause as the reset kicks in. But there are many more pull factors: urgency (“I just had a kid”), opportunity (“holy shit, this IRA thing is for real!”), and huge, outsized, unprecedented commerciality.
Even more than a binary shift though, this is a convergence; for example, we’re already seeing the appeal of our fintech alpha playing a key role in accessing otherwise closed/oversubscribed US deals, ie Eli and Fleet and Goodlynx.
Whatever the cause, a mass migration is underway. And clickbait headline aside, Rally Cap is all-in on the synergistic tailwinds at play:
- From Impact to Upside
Some interesting parallels arise when comparing the legacy of impact climate startups and historical financial inclusion efforts; there are of course impact funds who have made amazing progress on both fronts for years, but I’d argue that the latter didn’t really become mainstream — and as scalably impactful — until founders found a way to attract venture capital. This was really the birth of “fintech.”
Similarly, today, the sudden commerciality of climatetech in the US, is attracting venture capital at historic rates, and, feeding the flywheel, proven builders looking to marry the personal and professional. Fintech execs with a proven history of attracting venture dollars at scale in an industry frequently dismissed as “too impact-y” will bring enormous talent impacts to a market finally teeming with capital upside. - Capital Markets & Finance
Financing will play a huge role in the adoption of many climate technologies and they’ll need to tap into talent pools with experience raising debt, structuring and scaling lending products and building the products and services that drive a positive (and compliant) customer experience — all the way from providing credit for HVAC improvements in single family homes to the largest infrastructural innovations. - Commercial Acumen
Many climate companies have originated in academia, policy, deep science, government and public utilities; tapping into this new growing pool of fintech executives can bring founder-level expertise in everything from managing a company’s P&L and sales ops to fundraising and M&A. - GTM:
- Many who got sucked intro crypto’s fairy tale promises sought full “disruption;” fuck the banks, we’re going to rip, replace, disintermediate and destroy. This approach rarely works in a world where distribution, consumption and policy are so intertwined. Yes, some neobanks emerged and won. But many more raised tons, burned tons and flamed out. Most of the unicorns minted were enterprise-grade B2B software companies empowering the banks and legacy incumbents with fintech solutions.
- This success has minted an army of executives who understand how to leverage venture capital to build, grow and manage exceptional sales operations and account management. I know this is heresy in certain climate circles, but climatetech companies need to figure out how to empower and enable legacy utilities, oil and gas companies, and the other massive enterprises currently controlling production, distribution and, arguably, policy.
- Fintech folks know how to digitize this aging incumbent infrastructure. Banks and utilities aren’t a perfect analogy, but the monolithic — and often monopolistic — power brokers, pun intended, control distribution (transmission), consumption (rate payer relationships) and all the associated data. - Software Infrastructure
The fintech transformation has in many ways been catalyzed by the successful implementation of infrastructural building blocks (a la Plaid and Stripe) and various BaaS platforms; these APIs, connecting accounts and profiles, moving massive amounts of data securely and dynamically, have enabled an entire generation of new business model feasibility. There is a race underway now to build out these ubiquitous pick-and-shovel enablement software layers within climate, to catalyze company models we can’t yet fathom. - Policy
Fintech requires regulatory finesse — you can’t move fast and break things when you’re dealing with customers’ funds; similarly, regulatory relations, and, yes, lobbying, is critical in climate. - From Projects to Products
Many of the challenges that plagued previous chapters of climatetech are directly attributable to the project-based nature that defined much of the innovation. Fintech product managers can help morph the market demand for consultative contracts and project finance into enterprise-grade recurring software business models.
Here are a few examples of how Rally Cap’s portfolio companies are actively tapping into this trend:
- Eli, executing an API-first “ecosystem enablement” strategy honed by fintechs like Plaid, brought on-board one of Rally Cap’s LPs — an exited fintech founder — to build out their financial services and lending strategy.
- Fleet, an AI-powered SaaS solution leveraging increasing compliance requirements and back-to-work initiatives to power the next generation of commuting, is looking to replicate the success Guideline brought to the 401k space. They’ve tapped Rally Cap to help advise on and source talent for their nascent fintech strategy.
- Goodlynx, founded by an ex-Wall Street quant, an energy tax policy specialist and an exited fintech founder, is productizing a space — energy project finance and tax credit transferability — currently dominated by services-oriented middlemen, with a software-first approach; similar to Fleet, our capital stood out because of the appeal of our network of fintech operator LPs.
If you’re building or investing into this fintech → climate talent and capital migration, we’re actively raising and deploying and we’d love to hear from you!
