For more than 25 years old, conservationists are desperately trying to prove the economic value of the world’s ecosystems, hoping that a market-based approach will slow the destruction of the natural world. Forests, the world’s largest terrestrial ecosystem, have played a central role in this. People have long valued them for their timber and the animals they host. Now, scientists are asking the world to appreciate them more than that.
The approach had mixed results. Forests have been protected or restored to varying degrees to prevent flooding, sequester and store carbon, halt the spread of desertification, and maintain biodiversity. And yet, every year, people keep reducing an area the size of Kentucky.
Recently, however, a new crop of startups has emerged to buck the trend. Their founders were driven by everything from first-hand experience with record-breaking wildfires to a desire to see their beloved ecosystems alive after the end of the century. Along with them, a handful of investors have embraced the challenge.
The market has significant potential. Globally, forests are worth up to $150 trillion, according to Boston Consulting Group. However, for companies working in the industry, finding profitable ways to conserve forests remains an uphill battle.
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“Forests are suffering from the classic tragedy of the commons,” said Bill Clerico, founder and managing partner of Convective Capital. “So many of the benefits they provide are common to all of us and are difficult to quantify directly.”
But Clerico and other investors believe that has left the door open to new approaches. Much of the interest in forests in the last decade has centered around carbon credits. To offer these credits, forests that are maintained or restored must be assessed and monitored to ensure that the forest remains intact and sequesters carbon at the expected rate. It is a laborious and time-consuming task using existing methods and in some cases, this data was not reliable in some cases.
Boosting the use of technology in legacy industries is a proven playbook for venture capitalists, in part because profits are easier to come by early in the adoption curve. “Given the vast amounts of acreage and labor involved, the technology holds the promise of helping to make forestry much more efficient than ever before,” Clerico said.
“Data quality is the biggest barrier to valuing forests for biodiversity, air quality and carbon sequestration,” said Duncan Turner, general partner of SOSV and managing director of HAX. “The high-fidelity ground truth data collected by the newest crop of forestry startups will enable forest growth monitoring and forecasting at a quality and level previously unfeasible for cost reasons.”
However, many startups today depend on a robust and reliable market for carbon credits. “We are very concerned about carbon scams creating a negative impact on markets,” Turner said.
Even if these markets are able to stabilize and grow, they still pale in comparison to the economic value of forests derived from other uses such as timber and conversion to agricultural land. “So far, all business models see forests as assets or as a port for assets. We ‘exorcise’ the forests,” said Hampus Jakobsson, general partner and co-founder of Pale Blue Dot. “The thing is, at the same time, we need them for commitment.”
The hope is that improved data quality and cost-effective monitoring will help increase the value of a preserved or restored forest, helping to offset the benefit provided by other uses. The change could not be more timely.
“Forestry technology is at an inflection point right now,” said Maren Bannon, founding partner of January Ventures. “As the planet warms, the need for technology applied to forest conservation is more pressing than ever.”
- Maren Bannonfounding partner, January Ventures;
- Bill Clericofounder and managing partner, Convective Capital;
- Duncan Turnergeneral partner at SOSV and managing director at HAX
- Joshua Possamentierco-founder and managing partner, Congruent Ventures;
- Hampus Jakobssonco-founder and general partner, Pale Blue Dot;
Maren Bannon, Founding Partner, January Ventures
What is your forest conservation and management technology investment thesis in 2024?
The forest conservation technology space has experienced challenges in validating and providing accurate data. While you could see this as a red flag, I see it as an opportunity. We’ve been investing in forestry technology for the past few years, and we believe that the teams that can address the need for accurate, reliable data will be the winners.
I think forestry technology is at an inflection point right now. As the planet warms, the need for technology applied to forest conservation is more pressing than ever. The devastation caused by wildfires around the world, from California to Canada to Greece, is putting the problem front and center and making it harder for all of us to ignore. As the problem intensifies, advances in artificial intelligence, machine learning, cameras, drones, and 5G connectivity enable the construction of innovative step-change solutions.
Which startups do you think are the most interesting in the space today? Which show the most promise for long-term growth?
We have invested in two startups that are quickly becoming leaders in the forestry technology space.
Treefera is an artificial intelligence platform that provides tree data for financial institutions, landowners, carbon analysts, governments and NGOs.
Pano AI offers a fire detection solution using artificial intelligence to help identify and extinguish new fires before they become a threat. Leveraging the latest advances in cameras, 5G connectivity and artificial intelligence, Pano provides real-time intelligence to coordinate rapid response to fires before they escalate. Its clients include utilities, government agencies and insurance companies.
How well is the technology of the economy of forest conservation and management?
While governments and non-profit organizations play an important role in restoring biodiversity and combating climate change, there are also huge opportunities for commercial solutions to restore and protect forests. Forestry tech startups need to create products that customers urgently need, and just as importantly, have the budget to pay.
People have been trying to use the market economy to preserve forests for decades with limited success. Why is it different this time?
A number of factors make this an opportune time: a warming planet, regulatory changes and recent advances in artificial intelligence. As AI makes it possible to ingest and analyze large data sets, it enables the development of forest conservation technology products at scale.
What are your views on markets for carbon credits from preserved forests and/or restored forests?
Markets for carbon credits can only be successful if the underlying assets are verified. Unverified credits lack accuracy and trust, thus leading to opacity and price disparities in the market.
We have spent over a century suppressing wildfires. There is a lot of infrastructure, resources and inertia behind the current approach. When do you think this might change?
In combating the wildfire epidemic, we must look beyond mere suppression and instead focus on preventing the root causes of wildfires.
Bill Clerico, founder and managing partner, Convective Capital;
What is your forest conservation and management technology investment thesis in 2024?
Convective Capital focuses on technologies that can impact our wildfire crisis. One of the most critical tasks to be done in wildfire mitigation is forest management—essentially undoing the last century of harmful management practices and disrupting the natural wildfire cycle. Driven by the wildfire crisis and record levels of funding in the Inflation Reduction Act and bipartisan infrastructure bill, a renaissance is happening in the way we think about forestry.
Which startups do you think are the most interesting in the space today? Which show the most promise for long-term growth?
Burnbot uses robotics and artificial intelligence to scale forest management and fuel processing. The company has strong commercial traction with utilities and the US Forest Service, and an experienced second-time founder.
Instinct Environmental manufactures forest sensor technologies designed to collect data in remote environments.
