Insights from Investible's Tom Kline and Patrick Sieb

A few short months ago, Investible publicly announced its target $100 million Climate Tech Fund, focused on investing in early-stage technology companies working on the most pressing challenge of our time. Since then, the fund has gone on to approve its first investments, while growing its network of limited partners (LPs), co-investors, advisors and those aligned with the climate community.

The fund is jointly-led by Investible’s Tom Kline and Patrick Sieb, supported by an expert team, and an experienced committee including Topaz Conway, Katerina Kimmorley and Investible co-founder Creel Price.

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Patrick will be featuring on our Climate Tech Investor panel at our Melbourne Showcase on April 6 - get your tickets here: https://events.humanitix.com/climate-tech-showcase-melbourne‍

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We caught up with both Tom and Patrick to chat all things Climate Tech:
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In the recent ‘State of Australia’s Startup Funding’ report, Climate Tech was the sector that excited most investors? Is this true and why is that particularly true for you both?

Tom Kline: It’s still early, and we’re at the start of a really significant trend. An opportunity that has the potential to be worth trillions and truly define our future. It’s becoming more clear to investors that the opportunity to build a better future is also one that has the potential to earn outsized returns. Only a couple of years ago, climate tech activity was relatively low in Australia, but the pace is accelerating and fast.

Patrick Sieb: It’s also worth noting that there have been a significant number of companies and solutions that wouldn’t have in the past been dubbed as Climate Tech, but are clearly having a positive impact on emissions. Examples of this are building automation and improved energy efficiency, alternative meat proteins or supply chain logistics software.

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Why is this sector important to Investible, enough so that a Climate Tech fund has been developed?

‍PS: Investible has been backing impact-driven startups—including in Climate Tech—for many years (Car Next Door, Applied EV, AirRobe), and the growing urgency of the climate crisis, plus interest from existing LPs and members of our global Club Investible community, have been key driving factors for the new sector-specific fund.

In the past few years, we’ve seen increasing numbers of founders building solutions in the space, particularly in Australia and Southeast Asia. We are proud to be the only fund dedicated 100% to early-stage climate tech companies in Australia and New Zealand.

‍TK: Investible’s alignment with climate efforts extends well beyond the fund itself. For the past two years we’ve been developing Greenhouse – a new hub for climate tech which will bring together founders, investors, researchers, corporates, operators and community members to ensure a resilient and renewable future. Greenhouse, which opens in 2023, will be located in the heart of Sydney. Lastly, Investible is a signatory to the IGCC’s net zero asset managers initiative, and is focussed on extending this focus on impact to our portfolio as a whole. Through these three major projects, we hope Investible can play a part in building a better future.

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How do you define Climate Tech?

‍TK: The impacts of climate change are already being felt in nearly every sector. As the challenges faced by global communities are so extensive, the solutions will be broad, and come from all sectors of the global economy. Our mandate is directed toward the six heaviest emitting sectors, as defined by the UN Environment Programme. These include Energy, Industry, Buildings and Cities, Food and Agriculture, Land and Forest Use and Transport/Mobility.

‍PS: Still, our mandate can be described in more open-ended terms. If a company has a positive impact on carbon emissions, whether directly or indirectly, we will consider it for investment. As we know, it’s going to take a huge amount of creativity and innovation to achieve net zero, and beyond.

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What do you look for in terms of attractive climate tech startups?

PS: The founder is and always will be the number one factor for investment in an early stage technology company. This doesn’t change with Climate Tech. We’re looking for that special blend of passion, grit and ability in a founding team. Technology startups in the climate space can come from hardware, deeptech or software sectors.

With deep tech, companies have less of an ability to do an iterative rollout, validate products with customers or experts, and lean into other elements that software companies might take for granted. That’s why it’s important to ensure someone is looking for a solution, before you have a product. Preferably we’ll see a customer saying “I need this”, and a founder who deeply understands the problem and the solution.

In the hardware corner – the IP element is really important. We need to understand the unique qualities and the defensibility of the solution, whether it was developed inside a university research environment or otherwise. While there is still potential for success without IP, investors will be a bit more reluctant. This is again, where the business and founding team become even more important.

With software - the risk tends to be a lot of people doing the same thing at the same time, almost more so at the moment, in climate. The fact that many of these people are coming out of tech and VC – applying their software experience to climate is great. However, we are seeing a lot of similar climate software and apps, and there’s a lot of capital chasing those deals. This means higher valuations, and a lot more competition, which makes it difficult for founders to win a majority of a market.

It’s been mentioned that there isn't enough domain knowledge of climate tech or climate literacy - is this true and how do you tackle this challenge?

‍TK: I don’t feel this is really true. Climate and the way we define climate tech is very broad. The same as any agnostic fund is investing across many industries, we do too. One of our core strengths at Investible is identifying the best early-stage founders and helping them grow.

Another reason we feel empowered with expertise and potential beyond the depth of our team and IC, is our robust advisor network that we can rely on for diligence and to support the companies we back. This group hails from a variety of industries, and many have founded companies or led research projects on their own.

The reality is, the vast majority of founders—in any sector—are going to know more about their solution and technology than us as VCs.

When you look at the broader APAC region, are there any factors that stand out for specific sectors or geographies?

PS: This is a really key question. While roughly 70% of the companies we back will be Australia-based, Investible has a strong network and operating capacity within Southeast Asia, and we’re incredibly bullish on the potential of the region due to both urgency and the unique dynamics at play.

In Australia, Singapore, New Zealand, you tend to have more deep tech, and generally the businesses will be globally focussed, from the start.

In countries such as Indonesia, Vietnam, Malaysia and Thailand, local specific dynamics will enable a leapfrogging of fossil-fuel based economic development. Electrification in these countries looks quite different, with a lot more smaller, smarter distributed assets. This part of the world has massive populations, and will also see massive climate impacts. The urgency looks different.

Will solutions from these countries be necessarily transferable to the entire world? Maybe not. But some of these markets are massive and growing quickly with specific dynamics and cultural elements creating very real barriers to international competition.

The Investible Climate Tech Fund launched late last year. What traction have you seen so far?

PS: A question we’re often asked is whether there is enough dealflow in this space. In the last six months, we’ve looked at 600+ climate tech deals, and are really pleased with the quality and depth, and diversity in Australia, Southeast Asia and elsewhere.

TK: While we have a five year deployment window, we think we will likely deploy much faster. The sector is accelerating fast, and with local projects like Greenhouse drawing global interest, and more of the best and brightest founders focused on climate change, we’re ready to help support in every way we can.

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Learn more at https://investible.com/climate

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Photo by Matthew on Unsplash