Much of the intriguing climate technology crossing our desks is theoretical or just hitting the market; think: technology that sucks carbon from the sky, emerging alternatives to lithium-ion batteries, and bioplastics that have yet to be seriously scaled up. This is not the kind of thing ArcTern wants to fund, managing partner Murray McCaig told TechCrunch.
The Toronto-based venture firm just announced the closing of a $335 million (USD) fund, its third and largest to date. ArcTern plans to inject this capital into climate-focused startups that can generate super-fast returns.
“If you're not making money, you're not having an impact,” McCaig told TechCrunch. “It's possible that at some point in the future it will be possible,” the VC admitted, in a nod to firms like Bill Gates' Breakthrough Ventures, which makes long-term bets on emerging technologies. However, McCaig said ArcTern aims to “The impact that will occur in the next 10 years, because the next decade is the most critical time to decrease our global carbon emissions.”
The investor appears to be referencing the Intergovernmental Panel on Climate Change here. The UN environmental group has said nations must halve greenhouse gas emissions by the end of the decade to limit warming to a global average of 1.5 degrees Celsius. Meeting that goal may help humanity avoid the most disastrous climate scenarios, but in reality that warming figure should be as low as possible, as soon as possible.
In any case, ArcTern has drawn a line in the proverbial sand. The investment firm focuses on startups that use proven technology in new ways, while researchers and investors with long-term appetites focus on things that will take a while to pay off. Of course, there are many ways to reduce emissions that typically have little to do with initial gains, such as reducing air travel and improving public transportation.
Materially, one of the areas ArcTern is focused on is decarbonization. mobility. Although electric vehicle sales have slowed lately, McCaig sees this as a “small problem.” The VC believes North America is about to reach an inflection point where EV adoption takes off like a rocket. as it has done in Norway.
ArcTern's recent bets in transportation include Seattle-based battery analysis company Recurrent. Another is the Los Angeles-based maker of battery-electric commercial vehicles. Omen Engines. (Of course, not everyone will perceive the same tipping point in a given sector. Take, for example, hydrogen passenger vehicles; are they a pipe dream or will we soon see hydrogen refueling stations around the corner? )
In addition to Toronto, ArcTern has teams in San Francisco and Oslo. “Climate technology tends to be fairly distributed around the world, more so than artificial intelligence and software, which tend to be concentrated in California,” McCaig added.
Investors in ArcTern's newest fund include TD Bank and Credit Suisse. The venture firm's second fund totaled $150 million, while the first, a seed fund, totaled $30 million.
