Festive Fun | Systemiq Capital's Q4 2022 Highlights
Happy Thursday!
As we draw to the close of 2022, climate tech continues to boom despite a massive adjustment in the tech industry. According to Pitchbook, Q322 was the 3rd strongest quarter on record for climate tech with a total VC deal value of $4.8B (only Q221 was higher at $5.4B). Overall, 2022 climate tech VC deal value is tracking to match 2021, led by the post-IRA boom in the US. CTVC estimates dry powder across VC and growth/PE in climate to be north of $30B, concentrated in growth equity and PE. Similarly, broader VC dry power is also at record highs, estimated at $300B. Despite the crypto and tech crash, 2022 has already broken the record in terms of overall VC funding with $151B raised in the first 9 months of the year.
We are expecting 2023 to be a very different year for VC and climate tech as the world economy adjusts to the double shock of structurally higher inflation and rising interest rates. Rising rates are a net negative for the VC industry, as future cashflows have a lower net present value. Climate tech investments (and venture in general) are likely to shift towards opportunities that can generate positive cashflows sooner, and (deflationary) enablers that allow to do more with less. With the exception of investments benefitting directly from IRA support, we are seeing a reversion to valuations and revenue multiples in line with pre-Covid public markets, as opposed to the purely FOMO-driven markets of the past 24 months.
Against this backdrop, high quality founders continue flowing into climate tech – particularly as other areas in VC have dried up a lot faster and tech companies continue to “rightsize” after their 2-year hiring binge. Increasing high quality talent in climate tech is perhaps the single most interesting variable as we go into 2023, supported by climate policy and the broader corporate decarbonisation agenda.
During the holiday season, we found ourselves reflecting on the past year and those who have shown us continious support. In November we hosted our first Climate Tech Drinks event, where various VCs, investors and some of our portfolio companies joined us. This month we achieved the second close of our Fund II with $100m raised to date. Thank you for giving us the chance to do what we are passionate about! We hope that this year has been just as memorable for you, your colleagues and your loved ones. May your holidays and New Year be filled with joy!
Team Retreat…
Systemiq Capital team dinner
The team attended our first retreat in the countryside near London, led by long term friend of Systemiq, Alan Millard (The Table Group). The event exceeded expectations. Day 1 focused on building a deeper understanding of the team as individuals and of how we operate together. During Day 2, we focused on articulating our shared purpose, values and strategic anchors, and rounded this out with a practical session on running effective meetings. We left the offsite feeling like an even more cohesive team that understands how we can more effectively achieve our goals together and have put into action many of the practical recommendations. We plan to continue working with Alan and investing further in building our strong, high-performing team.
We invested in Ohme, which provides smart charging solutions to electric vehicle owners
Pre-Ohme board dinner drinks in Cork, Ireland
In October we made our third investment from Fund II, leading Ohme's recent fundraise. Ohme is a highly mission driven company, with a vision to speed up the transition to clean energy. They are building a network of distributed and connected users, customers and devices that maximizes value for EV drivers, OEMs, dealerships, fleet companies and energy companies. It uses a sophisticated set of hardware, software and data systems to manage, optimise and productize energy flows, consumption data, and customer behaviour.
Ohme is obsessed with customer satisfaction. They work closely with fleet managers such as Motability and the NHS, and they recently became Volkswagen's preferred EV charger provider in the UK.
Systemiq Capital's investment, led by Amy Varney, Irena Spazzapan, and Georgina Fleming, will help Ohme expand into new European markets where the demand for EVs is increasing rapidly. We made a small investment into Ohme's previous fundraise in 2021 and have been continuously impressed by their phenomenal team, led by CEO Dave Watson, Chairman Derry Guy, and COO Marie Barber.
What our portfolio companies have achieved in Q4 22
Basecamp (Fund II) – The Basecamp team hosted the Costa Rican ambassador to the UK, as they advance on signing a very significant biodiversity access agreement with Costa Rica, which will enable them to scale the source of genetic information from the country. We supported Basecamp by making the original connection to the Costa Rican government, with help from our partners in Systemiq’s advisory business. Big thanks to Fede for making the initial connection, and Guido for coaching the team on building trust at the highest levels of government.
Basecamp has also been featured in Forbes, WSJ and Sifted as they announced their $20 million Series A round led by Systemiq Capital to continue their search for proteins in nature that could benefit companies in industries such as healthcare, nutrition, and cosmetics.
Hoxton Farms (Fund II) – The team and broader industry received a major boost in November when an important milestones towards regulatory approval for cultured meat was achieved. The US FDA concluded that Upside Food’s cultivated chicken is safe to eat, although it is not yet approved for sale. A relatively unbiased article here explains the significance of this in more detail.
Ohme (Fund II) – Volkswagen chose Ohme as their preferred EV charger after a thorough evaluation of all solutions available in the UK market. The agreement extends to the Volkswagen, Volkswagen Commercial Vehicles, Skoda, Seat, and Cupra brands, and will see the company and its dealers recommending Ohme chargers to customers. Showrooms will also display Ohme Home Pro chargers, spreading awareness and helping customers overcome uncertainties about home charging and EVs in general. This is an enormous deal for Ohme, in parallel to UK fleet Motability going public in early December about the success of their initial pilot.
Naturemetrics (Fund I) launched a worlds-first nature performance monitoring service powered by eDNA. The video they’ve put together here contains both beautiful visuals and a clear articulation of what they’ve built. This could be a gamechanger for the way businesses, governments, and NGOs measure their biodiversity impact.
The Routing Company (TRC) (Fund I) has moved more than 200,000 people since the launch of its Pingo platform in 2021. TRC’s patented routing technology facilitates on-demand pooled transit for municipalities, corporate campuses, and universities across three continents. Its Ride Pingo app is rated 4.8 – the highest of any on-demand transit app.
Irena, Louis and Georgina explored the Capex Boom, Techno-Optimism and Circular Mobility...
Irena has been thinking a lot about the convergence of new monetary conditions with the climate urgency in the next 20 years, which will be the most critical for the future of humanity. Her thought piece on the capex boom explores how technology, voters’ needs and monetary factors might converge to form a very powerful trend towards increased investments in real assets or capex in the Western world.
Louis replies to Vinod Khosla's thought piece in the Economist, pushing back against Khosla's exaggerated techno-optimism.
Georgina’s thought piece on Circular Mobility explores how cars in and around cities cost the environment, society, and the economy. Venture Capital can play a role in minimising them, but it must separate the signal from the noise.
Second close of Fund II taking us to $100m raised
We are delighted to announce the second closing of Fund II and to welcome our new investors who bring a wealth of expertise and interest in climate technology. We anticipate reaching final close in Q2 2023.
Where we’ve been
Irena talked to Yoann Berno on the Climate Insiders podcast, they covered a range of topics including:
Systemiq Capital’s origin, goals and visions
What is sensical and non-sensical in the current venture world
The importance of hydrogen and how it can be used in the future
The role of the Middle East, is it a part of the solution or part of the problem?
Georgina was on a panel about Climate VC with Balderton and Eka Ventures at Earth Set hosted by Octopus EV.
In mid-November, Amy and George headed to the monumental technology conference SLUSH in Helsinki. They spent four extremely busy days meeting with people from across the European startup/venture ecosystem, alternatively sweating and freezing in the two habitats Finland had to offer (...sauna, in case the “sweating” was unclear).
We were all delighted to welcome a few of our new connections, including investor GS Futures and battery design start-up Ionetic, to our Climate Tech Drinks in London a few short days later.
Amy & George at SLUSH in Helsinki, Finland
In late November Matt and Amy attended Founders Forum Berlin. Amy was part of a panel about "Wartime Climate Tech Investing", where they discussed the war in Ukraine and the ‘war’ against the climate crisis, amongst other things. Matt led a roundtable discussion titled ‘Climate tech: what will be the impact of energy security on the pace of climate tech adoption?’. They met many amazing founders and investors at this brilliant event.
Amy on the panel at Founders Forum in Berlin, Germany
Systemiq Capital were also present at NOAH in Zurich, a 2 day climate technology conference focused on the DACH region in Zurich at the beginning of Dec. At the conference, Oliver Vince, COO of Basecamp Research, and George, held a fireside chat exploring the role of new enzymes discovered in nature providing an additional revenue stream for biodiversity. It turns out the code-base for the enzymes that will underpin the bioeconomy is in biodiversity…
George on stage at NOAH in Zurich, Swizerland
Where we will be in Q1
In the new year, the team will be focusing on the final close of Fund II. Reach out to us if you want to meet up!
Jan 12th Irena will be in Milan meeting Italian family offices interested in climate tech
Between 23-25 January Matt and Irena will be on the US East Coast and look forward to meeting founders, existing and prospective investors
In mid-Feb George will be in San Francisco to connect with portfolio companies, founders and other advisors and friends in our ecosystem
What we have been reading
Books:
Paul Collier’s “The Future of Capitalism”
Edward Chancellor’s “The Price of Time”
Steven Johnson’s “How We Got to Now: Six Innovations that Made the Modern World”
Philip E. Tetlock’s and Dan Gardner’s “Superforecasting: The Art and Science of Prediction”
Kim Stanley Robinson’s “The Mars Trilogy”
Reports & Articles:
McKinsey’s and Business of Fashion’s “The State of Fashion 2023” report by Imran Amed, Anita Balchandani, Sarah André and Achim Berg
The Century of Biology’s “Atoms are Local” by Elliot Hershberg
Frontier’s “Carbon Removal Knowledge Gaps” by Frauke Kracke, Joanna Klitzke and Nan Ransohoff
Russell Napier’s “We will see the return of capital investment on a massive scale”
Podcasts:
The Economist podcast – Money Talks: The new Rules of Investment with Wei Li and Mohamed El-Erian
Latest News from Systemiq Advisory
Circularity for Critical Raw Materials - A major shift is underway to a clean energy economy. But this transition depends on raw materials – such as cobalt, nickel and lithium – used in everything from solar panels to electric car batteries… and most of these materials are mined and processed outside Europe. A new report calls on policy makers and industry to implement circular economy strategies at scale to ensure secure and sustainable access to critical raw materials. Factsheets shows the supply chain pressures and opportunities for 8 key imports, while a report, produced with the support of the European Climate Foundation, explores the application of CE approaches in more detail.
From its Keeping 1.5 Alive series, the Energy Transitions Commission released its Degree of Urgency report in November. It includes at-a-glance assessments of progress on methane, nature-based solutions, road, power, built environment and energy efficiency
A Financial Times report examines whether an industry that has lobbied against green changes in the past can turn around its net contribution to the environment.
Philanthropy for Climate Action - Despite the devastating impact of climate change, less than 2% of philanthropic capital is directed towards climate mitigation. This allocation needs to be scaled fast. But, says Systemiq’s founder Jeremy Oppenheim, it also matters where and how philanthropy uses its capital. A report by Systemiq and RMI for IKEA Foundation shows that shifting to alternative and plant-based proteins, supporting the market for electric two- and three-wheeled vehicles and providing targeted financial support for fair and inclusive clean energy access are among the highest-impact opportunities that global philanthropy can seize upon in the fight to reduce greenhouse gas emissions.
And finally - Better Travel & Tourism, Better World - Launched at the World Travel & Tourism Council, a new report for centres on the first-ever global, fully-costed strategy for the whole travel and tourism industry. The sector could account for 1/3 of the Earth’s annual carbon budget by 2030 but making it net positive could have important implications for transport, hospitality, food, buildings and energy providers.
Thank You’s
A special thank you to everyone who went above and beyond this year with introductions, diligence, advice and help:
Alan Millard and Sophie Drummer for guiding us in creating a more cohesive team and in building a healthy organisation; Ajay Chopra, Avidan Ross, Bilal Zuberi, Carey Lai, Dan Scholnick, Gus Tai, James Cham, Kane Hsieh, Matt Margolin, Pedro Noyola, Russ Fradin, Sandeep Bhadra and all our amazing Bay Area friends for your engagement, coaching, and lasting friendship from the other side of the ocean; Ben Dixon, for always keeping us in mind for interesting circular economy startups; Brent Hoberman, Chloe Wates, Jesse Peterkin, and the whole Founders Forum team for the invitation to FF Berlin and opportunities to address the gathered individuals; Federico Apestegui, for introducing BaseCamp Research to the Costa Rican government; Feike Sijbesma, for introducing us to great founders and mentoring our founders; Fiona Mischel, for making superb introductions to founders and advisors across the biomanufacturing space; Kitty Parker Brooks for advising prospective investment opportunities on selling to CPGs; Marc Boughton, for helping us to think about the institutionalization of Systemiq Capital; Michele Tarawneh, for supporting us grow our climate biotech investing ; Pete Goult, for introducing us to exceptional founders in the materials space, and leading the exceptional Planet Positive Chemicals report which is helping us dissect venture scale opportunities in net zero chemicals; Peter Harris for the advice and connections as we build a strong operations backbone for the Fund; Rene Backes, for kindly providing insights into the buying preferences for a large chemical company for biomass based chemicals; Steve Weiss, for ongoing expertise and support in investing into the most exceptional biomanufacturing companies, particularly in the bay area; Walid Haram for the connections and introductions in the Middle East; thanks also to Cornelius Walter, Guillaume de Dorlodot, Jeremy Brewer and Stephen Brenninkmeijer.