A Venture Capitalist’s Take on AI and Climate Change Impact

Key Concepts:

• Climate Tech VC Fund (Pre-Seed & Seed)
• Sector-agnostic, Technology-agnostic approach
• Enabling growth and protecting against unmitigated downside risk
• Pre-Seed Specialization Gap
• False Dichotomy of Software vs. Hardware in Climate Investing
• Net Zero Targets & Nature-Based Targets
• High Upfront Ownership
• AI in Climate Tech (Benefits & Environmental Impact)
• Importance of Solving Real Problems and Customer Obsession

1. Planeteer Capital and its Focus:

• Planeteer Capital is an early-stage (pre-seed and seed) climate tech VC fund launched in 2022.
• Hannah Freriedman serves as an early-stage venture partner, focusing on meeting entrepreneurs, recommending investments, and supporting portfolio companies.
• The fund size is $54 million plus.
• The fund aims to fill the pre-seed specialization gap by providing both capital and climate expertise to early-stage founders.
• Planeteer writes checks up to $3 million in the seed stages.

2. Addressing the Funding Gap in Climate Startups:

• Historically, funding for impact startups, especially in the climate space, has been low.
• Planeteer aims to change this by focusing on the pre-seed stage, where specialized support is crucial.
• There is no shortage of climate startups, with younger generations increasingly focused on solving these problems.

3. Investment Strategy and Criteria:

• Planeteer's investment strategy is sector-agnostic and technology-agnostic.
• The fund focuses on business models that enable growth and protect against unmitigated downside risk in a climate-changed reality.
• They look for companies that can cut off the tail end of the distribution curve and protect against unmitigated downside risk.
• The fund avoids the false dichotomy between software and hardware, recognizing that both can play a role in climate solutions.

4. The Evolution of Climate Investing:

• Clean tech 1.0 focused on mitigation and renewable energy, driven by large corporate involvement and net-zero targets.
• The next wave of climate investing should focus on business models that enable growth and protect against downside risk.

5. The Importance of Pre-Seed Specialization:

• Traditional venture capital can be like a "sledgehammer," not always suitable for the unique challenges of climate startups.
• Climate businesses often require scaling across new markets, dealing with hardware and supply chains, and protecting against downside risk.
• High upfront ownership with climate specialization early on is crucial for venture capitalists to make solid returns in this space.

6. Journey of Starting Planeteer Capital:

• The process of starting the fund took longer than expected.
• The founders had partners who understood the generational transitional challenge and the upside potential.
• Hannah's background in circular economy investing with Closed Loop Partners provided valuable experience in early-stage venture capital.
• Running discounted cash flows on pre-revenue companies and focusing on commercialization strategies were key skills brought to Planeteer.

7. The Role of AI in Climate Tech:

• Planeteer uses AI in its workflows to automate processes and improve productivity.
• AI has increased the volume of pitches from founders but not necessarily the quality.
• Founders who come from industry and can demonstrate a deep understanding of commercialization are more compelling.
• AI is transformational to the underpinning of the businesses.
• AI is not necessarily new under the sun in some of these climate supply chains.
• Example: AMP Robotics uses computer vision to sort recyclables, improving efficiency and profitability.

8. The Environmental Impact of AI:

• AI and data centers are driving significant load growth, posing challenges for energy systems and grids.
• Some companies expect their data center footprint to consume more energy than three times all of New York City.
• This load growth presents an opportunity to drive demand for clean energy systems, including renewable energy, geothermal, and nuclear.

9. Advice for Entrepreneurs Building Sustainably:

• Solve real problems and be obsessed with the customers for whom you are solving those problems.
• The most sustainable companies are built by founders who identify with the problem of their customers, not just with the idea of building something amazing.

10. Notable Quotes:

• "There's so much engineering to do in service of the planet."
• "I think a lot of people try to make uh climate investing about a dichotomy between software and hardware. And I think that's a really false dichotomy."
• "...what are the business models that are going to be able to enable growth and the growth of revenue for all industries um, going forward as the world gets more volatile and weirder in a climate changed reality. but also what are the businesses that are going to a be able to cut off the tail end of the distribution curve and protect against unmitigated downside risk..."
• "You have to solve real problems and you have to be obsessed with the customers for whom you are solving those problems."

11. Technical Terms and Concepts:

• Climate Tech VC: Venture capital focused on companies developing technologies to address climate change.
• Pre-Seed & Seed Stage: The earliest stages of startup funding, typically used for initial product development and market validation.
• Sector-Agnostic: Not limited to specific industries or sectors.
• Technology-Agnostic: Not limited to specific technologies.
• Unmitigated Downside Risk: The potential for significant negative consequences if climate change is not addressed.
• Clean Tech 1.0: The first wave of clean technology investment, focused on mitigation and renewable energy.
• Net Zero Targets: Goals to reduce greenhouse gas emissions to as close to zero as possible.
• Nature-Based Targets: Goals to protect and restore natural ecosystems to mitigate climate change.
• High Upfront Ownership: Acquiring a significant equity stake in a company early on.
• Discounted Cash Flows: A valuation method that estimates the present value of future cash flows.
• Computer Vision: A field of AI that enables computers to "see" and interpret images.
• Machine Learning: A type of AI that allows computers to learn from data without being explicitly programmed.
• Load Growth: An increase in the demand for electricity.

12. Synthesis/Conclusion:

Planeteer Capital is strategically positioned to address the funding gap in early-stage climate tech. By focusing on pre-seed and seed investments, providing specialized expertise, and adopting a sector-agnostic approach, the fund aims to support innovative companies that can both drive growth and mitigate climate risks. The fund recognizes the importance of AI in climate solutions while also acknowledging its potential environmental impact, advocating for sustainable energy systems to power AI infrastructure. Ultimately, Planeteer emphasizes the importance of solving real-world problems and prioritizing customer needs for long-term success in the climate tech space.