Since 2003, New York-headquartered venture capital firm Union Square Ventures (USV) has backed over 100 companies, including Twitter, Stripe, and Coinbase, across North America and Europe. In January 2021, the firm closed its first dedicated climate fund at USD 162 million to invest in climate change mitigation and adaptation.
After writing checks for promising climate-focused companies like US-based Wren, which allows users to offset their carbon footprint via a monthly subscription, and Geneva-headquartered Transmutex, which turns nuclear waste into green energy, USV began exploring Asia and made an investment in Indian EV infrastructure startup REVOS in September. KrASIA spoke with Albert Wenger, managing partner at USV, about the emerging climate tech ecosystem.
KrASIA (Kr): What compelled USV to launch a climate-specific fund?
Albert Wenger (AW): The climate crisis has been accelerating over the last couple of years, with rising global average temperatures and sea levels. All around the world, there is an awakening that the crisis is imminent and more severe than many people had assumed.
We have taken a long-term view on what’s happening globally, the big investment opportunities, and the big problems that we need to address. That was the genesis. The climate crisis will emerge as one of the biggest threats as well as one of the biggest opportunities for humanity in the coming decades.
Kr: What brought you to India? Are you looking at other Asian markets as well?
AW: We have always gone to new geographies based on specific ideas. We try to map an idea or a thesis to different geographies to see where we can find the most interesting companies. For India, we were thinking about how electric mobility can become a reality in the country, and what it will take to do that.
Another area of interest is how more people who need air conditioning can gain access to it. That’s highly relevant to India because of heatwaves.
We are also exploring the idea of growing seaweed as a way of drawing down carbon from the atmosphere. It turns out there is a lot of seaweed farming in Southeast Asia. We have talked to some companies that are active in the region.
It is extremely unlikely for us to go to China because doing business there has proven to be difficult, although China has been ahead of the curve in climate tech. Globally, we are interested in companies that are accelerating the deployment of solar technologies.
Kr: What are the challenges for climate tech startups?
AW: It depends on what kind of climate startup you are. Some are carried by consumer adoption, some grow because of consumers and regulatory support, and some depend on government intervention to scale up. Overall, we are in a period of acceleration. But we don’t know exactly when this market is going to take off.
It is important for these startups to have some degree of financial discipline, so that if the market doesn’t pick up quickly, they don’t run out of money. What we love about the REVOS team is that they have made a relatively small amount of money go a very long way.
Kr: Do you think mainstream VCs aren’t as interested in climate tech because the market is still not ready to take off?
AW: Yes. Many of our best investments were in areas where we had the conviction that the market would be there, long before others had the same idea. Most recently, we have been very successful in crypto, where we invested when people still thought crypto wasn’t going to amount to anything.
Once everybody understands that a market is huge, it becomes much harder to make good investments, because everybody starts piling in, and everything gets priced to perfection. It becomes more difficult for investors to gain good returns. I am perfectly happy with the fact that many investors don’t yet believe that the climate market is vast.