DCVC’s take on its first climate-focused fund, DCVC Climate Select, is all over the place and highlights the roller-coaster business fundraising conditions of recent years and how LPs aren’t as quick to back new strategies from incumbents.
The Silicon Valley VC firm launched the fund in December 2022 with a target of $500 million, according to SEC filing. A year later, it lowered its goal to $300 million after the fundraising year brought in just $157 million in pledges so far, according to a December 2023 SEC filing. Now, a source familiar with the matter tells TechCrunch that things are starting to fall into place, and that $400 million may be a more accurate reflection of where the fund is headed.
ONE recent New Mexico Inno article about New Mexico SIC’s $50 million commitment to the fund, which also states the $400 million goal is “consistent with our expectations for the fund,” DCVC spokesman Nate Nickerson told TechCrunch via email.
DCVC is a deep technology company co-founded by Matt Ocko, known for decades of investments (such as MosaicML, acquired by Databricks) and Zachary Bogue, known for Square, AngelList, Uber and the annual “Deep Tech in Davos” Event. As part of the Davos event in February, Bog shouted AI applications for climate technologies as one of DCVC’s “major opportunities”, alongside biotechnology and robotics.
This climate fund targets mid-stage climate startups where the company believes the climate startup ecosystem is currently underfunded, according to materials from a recent New Mexico State Investment Board meeting where GP presented . While this is DCVC’s first dedicated climate tech fund, the firm has invested $360 million from other funds in such startups over the past decade, also according to the New Mexico SIC meeting on March 26.
While Nickerson said the initial $500 million figure was just a pro forma amount before the fund could take money from LPs, the industry standard is for that number to represent a fund’s goal. Internally, people at the company know the company has had to adjust its expectations to more “sober” market conditions, the source familiar with the matter said.
This person added that DCVC’s existing climate portfolio companies are starting to see some wins heading into 2024 that could help their fundraising journey. One example is Twelve, which creates products traditionally made using fossil fuels from coal. It recently signed a 14-year purchase agreement with the International Airlines Group – which includes airlines such as Aer Lingus and British Airways – to buy 260 million gallons of Twelve’s more sustainable jet fuel.
“These are not small deals, small numbers, small items. That’s the kind of financial return for skeptical customers,” the source said. “A huge cosmic change is possible in these massive ones [industries]. These disruptive companies are putting numbers on the board in line with what you’d expect from public companies one day. That’s a very convincing pattern of events.”
DCVC isn’t the only fund to cut a target or hold a final close with less capital than expected after a tougher fundraising cycle in 2022 and 2023. Tiger Global’s The latest fund raised $2.2 billion of its $6 billion goal. In the first half of 2023, companies such as Founders FundInsight Partners and TCV all lowered their fund targets.
Fundraising became incredibly difficult for venture firms throughout 2022 and 2023. While 2022 set a new fundraising record for U.S.-based companies — $172 billion, according to PitchBook — analysts said this was due to largely in funds raised in 202022. The real effects were felt in 2023. US companies raised $66.9 billion in 2023, according to PitchBook, the lowest total since 2017 and down 61% from the previous year .
On the other hand, climate investing is one of the few hot spots outside of AI that is attracting increasing VC attention and doing well for VC fundraising as well. Climate-focused VC funds have raised more than $710 million so far in 2024, according to Preqin data, on track to match or surpass the $2.17 billion raised last year and not far off its record 2022 of $2.9 billion.
While both LPs and analysts told TechCrunch they don’t expect 2024 to be a much better year for VC fundraising — some believe it could be worse than 2023 — for DCVC’s new climate fund, things may actually be headed in a better direction than recent SEC filings have indicated.
