We launched Systemiq Capital Fund II!
Happy Wednesday!
This summer has brought extreme climate events and catastrophes: Copernicus reported August was the hottest month on record in Europe, Pakistan suffered from record-breaking monsoons that flooded one third of the country and the Shanghai Xuijiahui Observatory reported the highest temperature in the region since 1873, when record-keeping began. But this summer also marks a pivotal season in the fight against climate change. The US Senate passed the Inflation Reduction Act (IRA), the single largest climate investment ever passed by an American government, and a game changer for climate tech. California passed a law that bans the sale of ICE cars by 2035. The UK government awarded renewable energy suppliers contracts to build 11 gigawatts (GW) of electricity capacity, enough to power 12 million homes. And just two weeks ago, Patagonia founder Yvon Chouinard, transferred ownership of the company (valued at $3 billion) to a trust dedicated to fight climate change.
The worsening climate emergency is coinciding with a broader geopolitical and monetary polycrisis, generating a major bear market. Rising interest rates make growth companies particularly difficult to value, resulting in a “deep tech winter” that we expect to get worse over the winter as fighting inflation takes precedence over recession fears. Yet this downturn is completely different from the long winter in clean tech between 2010-15. We now have a diversified early-stage climate industry covering all aspects of the transition and strong tailwinds from policy, corporates and society (despite a noticeable change of winds from the likes of Blackrock and GFANZ). Early-stage climate tech continues to attract some of the best minds on the planet, with a new industry emerging to help talent move from traditional tech (and other) industries into climate (check out terra.do, workforclimate, climatebase). According to CTVC, climate tech VCs are sitting on $5-8bn of dry power while growth equity funds hold $10+bn. Capital continues flowing into new deals, but investors are holding back, decreasing valuations in a flight to quality. Hot areas in 2021, including carbon accounting, battery storage, cultivated food, and CDR, are deflating – with new areas emerging such as biodiversity, regenerative agriculture, methane and “nature plus CDR”. The complexity of climate tech is increasing as tech penetrates so far sleepier supply chains like waste, fashion, and shipping. We believe that system change investing is becoming ever more important to generate meaningful impact and great returns in a world of worsening climate conditions, increased complexity in potential solutions and multiple decarbonisation routes that are poorly understood by the majority of investors venturing into climate tech.
Thus, despite the challenges, we are very excited about this space and the journey ahead, and are thrilled to have you in our community. This is the first newsletter of a quarterly series. The purpose of the newsletter is to offer fund updates, provide interesting reading material and to highlight the amazing work being done in our ecosystem by Systemiq Ltd., our portfolio companies, and others.
We closed the first round of Fund II!
We have closed the $70 million first round of Fund II! Fund II is led by climate powerhouses Paul Polman, Jeremy Oppenheim, Systemiq Ltd. and Irena Spazzapan. The global economy will need a monumental transition to become a sustainable, carbon-neutral system and prevent the catastrophic impacts of climate change. Through its four verticals, sustainable food and materials, clean transport, climate intelligence and finance and climate restoration, Systemiq Capital’s Fund II will invest into the companies creating the new products, systems and tools that will enable this transition.
Our impact report just came out
This summer we published our first impact report! Since founding, our portfolio startups have achieved impressive climate mitigation milestones:
CoolPlanet saved 2.6m tons of CO2
BEDEO drove 50m kilometers on electric powertrains
Basecamp Research created the world’s largest database of proteins derived from nature
Charm Industrial delivered 90% of engineered carbon removals globally
ZeroAvia held 35 test flights on hydrogen-electric aircrafts
To read more about Systemiq Capital’s commitment to climate and biodiversity and the change driven by our portfolio companies, access the report here.
We led the Series A round of Basecamp Research, a novel protein platform
This summer we closed our first Fund II investment in Basecamp Research led by investment team members George Darrah, Irena Spazzapan and Amy Varney. Basecamp Research discovers novel proteins in biodiverse ecosystems, commercialises them with industry partners and routes a percentage of sales back to ecosystem guardians. We have been impressed by the founders and their fast progress towards their technical milestones since we invested a small cheque from Fund I into their seed round.
At Series A, the Basecamp Research team has already signed 20+ country supply partnerships and created a DNA database that exceeds the size of Zymergen’s, a publicly traded synthetic biology company often considered at the cutting edge of genetic engineering. We look forward to working alongside the team to help them become a premier source of novel proteins for uses across industrial and agricultural sectors.
We invested alongside Collaborative Fund in Hoxton Farms, a startup providing alternative protein fat
We all know what a steak looks like, but have you ever wondered how plant-based meat producers will replace meat’s taste and texture? Late this summer, Irena, George, and Amy also closed a Series A investment into Hoxton Farms, a biotech company providing alternative protein companies with their hero ingredient, fat. Hoxton Farms cultivate fat cells in small, controlled environments to prevent and manage errors effectively. The team is chasing the alternative protein space, predicted to grow to $75bn-$392Bn in 2030, and eventually enter the dairy, confectionary, and bakery spaces.
George explored the state of play in biodiversity
Last July, George kicked off our blog series with a thought piece titled We need to bring biodiversity to the Bloomberg Terminal. In it, George deep-dives into how technological advances are creating opportunities for biodiversity investment and tracking, the challenges the industry faces and how cross-industry collaborations can halt and reverse the 6th extinction.
His latest blog, The bioeconomy’s code base is in biodiversity, explains how recent technological breakthroughs, including long-read DNA sequencing, are allowing scientists to access the wealth of naturally occurring enzymes on Earth. This creates an exceptional opportunity for planetary and human health that will require the right coordination and governance structures in place to align incentives for all stakeholders.
Where we’ve been
Irena talked to Henry Hamilton on the Venturing in Climate podcast, they covered a range of topics including:
Fundraising and investing in the current environment
Building a VC firm and adding value
What to be aware of when investing in hardware
Over and under-invested parts of climate tech
Cement and carbon capture and storage
George joined the best minds on biodiversity including investors and entrepreneurs from Just Climate, The Landbanking Group, Speedinvest and Pivotal Future on The Drop to explore four key questions:
Can markets help deliver the relationship we want with nature?
How will measurement, reporting and verification bring credibility?
How do we ensure just outcomes?
What collaboration will accelerate solutions?
What we have been reading
Louis recommends FutureCrunch’s “Collapse, Renewal and the Rope of History” by Angus Hervey
Amy is reading the Guardian’s “Eco beauty company ‘appoints nature’ to its board ot directors”
Georgina recommends Ray Dalio’s new book “Principles for Dealing with a Changing World Order: Why Nations Succeed or Fail” and an associated podcast from Gideon Rachman (FT) interviewing him
George recommends “Tales of a Shaman’s Apprentice” by Mark J. Plotkin
Jessica is listening to 20VC podcast with Harry Stebbings. Last year's interview with Lower Carbon Capital's Chris Sacca is a good starting point
Irena has discovered Vaclav Smil’s books this summer and recommends “How the world really works” for some no non-sense numbers and facts
Team Spotlight: Georgina Fleming, Principal at Systemiq Capital
Georgina has been on the investment team since day 1, where she brings differentiated international experience as an investor and operator. She led or co-led many of the Fund I’s investments, including Circulor, OpenInvest (exited), The Routing Company, and Jupiter Intelligence. Before joining the VC world, Georgina was an investment manager at a leading family office in SE Asia and also worked at a London-based credit fund financing physical commodity trading. She gained operating experience as the founder of an agribusiness firm and set up the Rwanda Water Resource Board reporting to the Prime Minister’s Office. Georgina’s dedication to climate & sustainable supply chains stems from her work in developing markets where she saw the devastating effects of climate change and the ecological damage caused by take-make-dispose models. In her spare time, Georgina promotes tech education in southern Africa.
Georgina’s areas of expertise include clean mobility, circular materials and climate intelligence solutions. If you are focusing on any of these topics, please do get in touch!
In the run-up to COP27, Systemiq Ltd.’s team has published reports on the path forward for chemicals, fertilizers, spatial intelligence data, and more
Chemicals. Systemiq’s new Planet Positive Chemicals report developed with the Center for Global Commons at the University of Tokyo shows a stark choice for the chemical industry. It can become an enabler of a sustainable global economy and create 29 million new jobs, or it can align with 4 degrees of global warming by 2050, with catastrophic consequences for the planet. Access additional media coverage in The Guardian, ESG Investor, and Business Green.
Fertilizers. Greenhouse gas emissions from mineral nitrogen fertilizer use can be reduced by around 70% by 2050, according to a report Systemiq Ltd. released in September with the International Fertilizer Association (IFA).
Spatial Intelligence Data. Driven by Systemiq Ltd. Partner Guido Schmidt-Traub, the SPACES Coalition has teamed up with WEF to produce “Location Matters: Using Spatial Intelligence for Business Action on Nature and Climate”, a report on how and why leaders can incorporate insights from spatial data into strategy and operations.
Natural Resources. A new publication by Janez Potocnik and Izabella Teixeira of the International Resource Panel (IRP) addresses the missing piece of the world’s efforts on climate change: the strategies to reduce and improve our use of Earth’s natural resources.
Tipping Points. Systemiq’s The Paris Effect and research by the Food and Land Use Coalition were featured in the Global Tipping Points conference. Systemiq will soon release the third ‘Paris Effect’ report for COP27, building on the findings that, by 2030, low-carbon solutions could reach mass market in sectors representing 90% of emissions.
Our portfolio companies are also making headlines
American Airlines invested in ZeroAvia and provided an MoU that gives AA the opportunity to order up to 100 engines from ZeroAvia’s hydrogen-electric powertrain development program. Also watch a ZeroAvia plane taxi on hydrogen!
Circulor is working with a German consortium to develop a battery passport to track critical minerals to help new EVs qualify for the IRA tax credit.
Charm Industrial released a public protocol for bio-oil sequestration authored by Carbon Direct and EcoEngineers, and public life cycle analyses for every carbon delivery, bringing much-needed transparency and credibility to carbon certificates.
BioMADE, the Department of Defense-sponsored Bioindustrial Manufacturing Innovation Institute, will develop and collaborate with Microbyre and Advanced Biofuels and Bioproducts Process Development Unit (ABPDU) to deliver TeselaGen Inks Contract.
NatureMetrics, in collaboration with Dendra Systems, reached the semifinals of the XPRIZE Biodiversity during the Biodiversity Forum in Davos.
Facilitated by a Systemiq Capital introduction, Jupiter Intelligence and Aon announced a collaboration to assist financial institutions in calculating the potential impact of climate change on their balance sheets.
Towards the second closing…
The team kick-started fundraising in the past couple of weeks and plan for a second closing by end of year. We are having great conversations with new investors, and long-term friends of the Systemiq family. We look forward to executing this next milestone whilst we continue generating a fantastic pipeline of companies and close another 2-3 deals in the coming months.
Upcoming dates
In the next few months, the team will be on-the-go. Reach out to us if you want to meet up at any of these events!
Sept 29th – 30th Irena will be in Turin for Italian Tech Week
Oct 5th – 6th Georgina will attend the Sifted Summit in London
Oct 13th George will head to the Natural Capital Summit in London
Oct 13th – 14th Georgina will be at the GreenTech Festival in London
Oct. 19th Jessica will be at BVCA's Emerging Manager Summit in London
Nov 1st – 4th Louis will fly out to Lisbon for Web Summit
Nov 16th – 18th George and Amy will be in Helsinki for Slush
Dec 6th – 7th George will attend NOAH in Zurich