Relative to the size and urgency of the problem, climate change-focused startups comprise a comparatively paltry portion of venture funding recipients. Over time, however, their numbers have been rising.
At Crunchbase News, we’ve been following one particular sub-area: Startups at the intersection of fintech and climate. It is an area that’s seen rising funding in recent months for offerings that include carbon-tracking business software, environmentally friendly online banking, and products that make it easier to value ESG (environmental, social and governance) assets.
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Since last year, at least 40 companies at the intersection of climate, carbon-tracking and finance have pulled in $475 million in known funding, per Crunchbase data (see list below). The overwhelming majority of funding has been at seed or early-stage, which portends that there’s significantly more money to come as these companies scale.
February saw one of the largest funding rounds in the space with San Francisco-based Watershed, a developer of software for companies to measure their carbon emissions and drive them to zero. The startup, which counts Airbnb, DoorDash and Shopify among its customers, pulled in $70 million in a Series B round co-led by Sequoia and Kleiner Perkins.
Watershed’s financing stands out in particular because of the valuation set for the company, which is $1 billion. It’s a remarkably high number for a 3-year-old company that raised its Series A just a year ago, and an unusually rapid ascent from nascent startup to unicorn.
Beyond Watershed, other big rounds in recent months include:
- Xpansiv, a marketplace for ESG commodities, announced $115 million in new financing since last year from backers including Clean Energy Finance Corp. and Commonwealth Bank of Australia.
- Persefoni, a Tempe, Arizona-based startup offering a SaaS platform for companies and financial institutions to meet climate disclosure requirements and requests, raised $101 million in an October Series B financing led by Prelude Ventures and The Rise Fund.
- Patch Technologies, developer of an API for carbon removal, raised $20.8 million in a September Series A led by Coatue. Last February, it closed on $4.5 million in seed funding led by Andreessen Horowitz.
Measurement and compliance are a big focus in multiple recent funding rounds. The broad pitch is that for companies seeking investors’ favor for their sustainability-minded policies, it doesn’t help if you can’t tally up results.
Startups are betting it will prove to be an enormous market. Persefoni, in its last funding announcement, predicted that: “carbon and climate disclosures will be the biggest compliance market since the advent of Sarbanes Oxley and GDPR,” two regulatory initiatives that have required copious compliance investment.
The uptick in investment precedes the latest dire warning on the dangers of climate change from the the Intergovernmental Panel on Climate Change.This week, in a new report, the organization warned that: “Human-induced climate change is causing dangerous and widespread disruption in nature and affecting the lives of billions of people around the world,” adding that: “People and ecosystems least able to cope are being hardest hit.”
Developers of carbon footprint accounting tools and environmentally friendly finance apps aren’t going to single-handedly save coral reefs, of course. But they do address one key component of the problem, which is that you can’t manage what you can’t measure.
Illustration: Dom Guzman
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