Much of the exciting climate technology crossing our desks is theoretical or just coming to market — think, technology that captures carbon from the sky, emerging lithium-ion battery alternatives, and bioplastics that haven’t yet seriously scaled up. Those aren’t the things ArcTern wants to fund, CEO Murray McCaig told TechCrunch.
The Toronto-based venture capital firm just announced the closing of a $335 million (USD) fund – its third and largest to date. ArcTern plans to pump this capital into climate-focused startups that can deliver extremely fast returns.
“If you’re not making money, you’re not making an impact,” McCaig told TechCrunch. “Maybe in the future at some point,” the VC admitted in a nod to companies like Bill Gates’ Breakthrough Ventures, which makes longer-term bets on emerging technology. However, McCaig said ArcTern aims “The impact that will happen over the next 10 years, because the next decade is the most critical time for reducing global carbon emissions.”
The investor appears to be referring to the Intergovernmental Panel on Climate Change here. The United Nations environment group said nations must halve greenhouse gas emissions by the end of the decade to limit warming to a global average of 1.5°C. Sticking to this goal can help humanity avoid the most catastrophic climate scenarios, but really This heating rate should be as low as possible, as soon as possible.
Either way, 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 some time to complete. Of course, there are many ways to reduce emissions that usually have little to do with startup profits, such as reducing air travel and improving public transit.
Materials, one of ArcTern’s areas of focus is decarbonization motility. Although electric vehicle sales have slowed recently, McCaig sees this as “clean”. VC believes that North America is about to reach a tipping point where EV adoption takes off like a rocket, as is the case in Norway.
ArcTern’s recent carry bets include Seattle-based battery analytics company Recurrent. Another is the Los Angeles-based maker of battery electric commercial vehicles Harbinger Motors. (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 fueling stations popping up around the corner?)
Along with 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 tends to be concentrated in California,” McCaig added.
Investors in ArcTern’s newest fund include TD Bank and Credit Suisse. The venture capital firm’s second fund reached $150 million (USD), while its first – a seed capital – amounted to $30 million.
