While many climate investors are focusing their efforts on innovative deep-tech solutions, Patrick Sheehan at ETF Partners has other ideas.
“I have nothing against carbon capture and storage, except that it will probably be commercialized very slowly,” he told TechCrunch. Instead, Sheehan and his colleagues dive into software-focused companies that promise to keep moving the needle.
“There are those who say he’s a cop,” Sheehan said. “The more I look at it, the more I completely disagree with that idea. We need to find companies that we can scale quickly to have an impact over the lifetime of a venture capital fund. That’s a maximum of 10 years.”
It’s a sentiment that helped ETF Partners raise a new, over-leveraged €284m round of capital, the company’s fourth.
The company was founded in 2006 and has led a series of bull and bear markets. As of 2018, Sheehan describes his work as “more evangelical”. Since then, he has found limited partners to be much more receptive to climate technology. “It’s become much more of a good institutional product.”
Instead of fusion and e-fuels, ETF Partners is interested in finding more startups like Deepsea, a portfolio company from its third fund. Deepsea uses artificial intelligence to optimize marine shipping operations, including routing decisions, to reduce fuel use by 10% to 15%.
“Shipping’s carbon emissions are almost all fuel. With a little bit of software, which you can deploy globally in just a few years at almost no cost, you can reduce 0.3% of global emissions,” Sheehan said. “This is amazing – and fast.”
His company focuses on five industries, including energy, transportation, connectivity, consumer and food, and agriculture. “The umbrella thing over them is what I would call the intelligence layer over the infrastructure,” he said.
The fund will continue to specialize in European start-ups. Sheehan cites more favorable government policies and a population that almost universally believes climate change is real. “This is an incredible setting,” he said.
As a result, he finds that there is less need for investors to find companies developing breakthrough technologies that seek to change the market and more demand for companies that address sustainability.
“A lot of deep tech can be deep green,” Sheehan said. “But our focus is on revenue companies that are just starting to scale.”
