During the last couple of years, I have been working with a good number of startups in the captured CO2 space with anything from direct air capture (DAC) to carbon storage and carbon utilisation. One quirky feature of this rather young space is that those companies currently don’t work well together. I have seen DAC companies bottle their captured CO2 and use it to make fire extinguishers for example, while utilisation companies buy industrially made CO2 to prove their technology. However the captured CO2 does not yet arrive at storage or utilisation companies. Clearly something is missing in the supply chain of captured CO2, so I have set out to discover what that is. To accelerate the development of the captured CO2 space, I decided to share my findings and insights in a Podcast: The Carbon Puzzle
In this podcast, I explore the missing pieces that are needed to make the supply chain around captured CO2 work in bringing the captured CO2 to the utilisation and storage sites. I interview a series of founders from direct air capture, CO2 logistics companies and storage providers to hear about their challenges on a firm level. Finally I will speak with an accelerator and a project developer to get a macro view of the captured CO2 environment.
The 7th Oxford Entrepreneurship Policy Roundtable (OXEPR) in May 2022 examined trends, challenges, and opportunities for building Climate Tech ecosystems. In recent times, the global climate emergency has deepened the interest in climate-related solutions through innovation and entrepreneurship. Start-ups are introducing innovative climate technologies and business models across a diverse range of established industries. Since the history of venture capital tells us of the importance of entrepreneurial ecosystems to support entrepreneurs, the roundtable focused on the emergence of entrepreneurial ecosystems for Climate Tech, focusing mostly on the European and North American context.
The roundtable noted a significant increase in venture capital investment over the last seven years. This climate tech boom is frequently compared with the clean tech boom that ended in bust in 2005. However, there are clear differences, especially because industry incumbents show greater interest in adopting fresh solutions. This is due largely because of the increased societal and regulatory pressures to reduce carbon footprint across a wide range of industries. To make this new wave of climate tech ventures successful will require a supportive ecosystem. The roundtable identified three broad challenges: (i) patient funding models for climate tech ventures, (ii) new models of collaboration between start-ups and industry incumbents, and (iii) government and philanthropic initiatives catalysing new markets.
Concerning the need for new funding models, the roundtable participants noted that Climate Tech start-ups are often capital intensive and require more time to bring products to market. The process of de-risking such ventures is also different from other sectors, especially software. Developing hardware-based technologies requires multiple stages of piloting at increasingly larger plant sizes. Proving innovative technologies thus requires considerably more capital and time, challenging the traditional venture capital model. Investors are actively exploring alternative investment models, including lengthening fund investment horizons, and experimenting with several types of blended finance. This leads to a blurring of lines between purely commercial and impact-oriented venture investment models.
Concerning the collaboration between start-ups and industry incumbents, the roundtable noted that Climate Tech start-ups often cannot enter markets by themselves but rely on partnerships with industry incumbents. Established corporations also have a strategic interest in Climate Tech start-ups because they face increased pressures to act on decarbonization. Therefore, large corporations increasingly seek collaborations with start-ups to complement or improve their internal development capabilities. For this they can invest through traditional corporate venture capital initiatives. There are also novel investment models emerging. The roundtable examined one of them where an independent venture capital fund works with a consortium of non- competitive corporates. The venture fund scouts for strategically relevant investment opportunities, makes venture investments, and facilitates strategic partnerships between its investment companies and the established corporations in the consortium.
Concerning government initiatives, the roundtable noted that Climate Tech ecosystems are shaped not only by government regulation, but also by other government initiatives. In addition to the traditional support mechanisms, several governments are proactively fostering the development of new Climate Tech initiatives. They explicitly take a system’s change perspective and focus on supporting catalytic investments that aim to create new markets. Government procurement policies are another instrument for initiating change, as government agencies are often important early customers for Climate Tech ventures. Beyond government, some philanthropic initiatives are also actively promoting the development of Climate Tech ecosystems. One prominent approach is the use of competitions and prizes, to focus entrepreneurial attention on specific challenges within the broader climate crisis.
Overall, discussions around these challenges highlighted the need for intermediaries supporting collaboration. They can play a role translating expectations and connecting the different parties to build ecosystems. Moreover, there is a broader interest in finding new organizational structures to better facilitate the venture investments required to tackle the challenge of Climate Tech.
This article is not based on rigorous research, but an observation of patterns I have seen over my 7 years of working with mission driven entrepreneurs. I will reflect on what I perceive patterns of generating impact are and where limitations to scaling these might lie.
The classic pattern of industrialisation
When speaking of industrialisation I’m referring to methods of production that increase productivity, offer a degree of standardisation, exploit resources and in most cases produce greenhouse gas emissions. Although often portrayed as the root of all evil, industrialisation within limits has its benefits. Think for example intensive agriculture: For all its faults it has dramatically improved crop yields, enhanced food security and improved human wellbeing. Only after a certain scale of intensive agriculture do we experience its detrimental effects, when taken to levels of deforestation, mono cropping and so on (long list…).
The pattern of impact here is thus, that industrialisation will initially bring improved utility. As the scale increases the net impact of the utility will be diminished by adverse effects of production, up to a point of over-production. Beyond this point we are over-consuming the produced good with no additional benefit, but all the adverse effects of production and added adverse effects of over-consumption.
Going back to the food example this point is reached where food is wasted, over-consumption leads to obesity and our scale of intensive agriculture harms the planet.
The offsetting pattern
Offsetting in a nutshell is where one activity with positive environmental impacts is promoted to make up for another activity’s negative environmental impact. This approach is debatable, but considering that there might be positive effects on human wellbeing for example from industrialisation, offsetting can be useful to reduce the negative environmental effects from it. The challenge with offsetting comes from the fact that activities which initially have a positive environmental impacts can become harmful when done too much.
A perfect example of this is planting trees for carbon sequestration. Each tree planted will capture CO2 while it grows, providing a positive marginal impact by reducing atmospheric CO2. Trees however require resources themselves such as soil nutrients and water. Therefore when too many trees are planted in an area or the wrong species of tree is planted they will adversely impact the surrounding ecosystem. We have seen eucalyptus being planted in South Africa to serve offsetting demand. This has led to the trees drying out the surrounding grass lands, destroying biodiversity, increasing risk of wild fires and ultimately realising more CO2 into the atmosphere than they capture. In this example the scale of activity did not just result in negative marginal impact, but led to a net negative overall impact.
Therefore offsetting activities cannot be scaled indefinitely and no single activity should be considered a silver bullet.
The pattern of environmentally friendly substitutes
A common activity in ecopreneurship is developing an environmentally friendly substitute to an existing product. Bringing this to the market can then replace the original product with its environmentally adverse impacts. Think the electric car, the biodegradable plastic or the paper straw.
What’s important to note in this example, that the highest impact will stem from not producing and consuming the product at all. The straw you never used will always have a lower footprint than even the most environmentally friendly one that still requires some resource to produce. Every car that is not made is always better than even an electric one. Yet some products are needed and simply not having them is not an option (for whatever reason). In this scenario the positive impact will grow with each product replaced. Eventually the marginal impact will decrease until a point is reached where no more of the unsustainable old product exists. When we continue producing the new sustainable alternative beyond this point, our graph will go back to looking like the first one and over consumption will bring adverse effects unless by some miracle we have products that require no resources and energy, and that create no waste.
With these in mind, it is important to consider what products we are bringing into the market place and to be mindful of the limitations to scale that exist for them. Infinite growth on a finite planet seems to remain a mare for the foreseeable future.
The attention economy is the umbrella concept for businesses trying to capture users attention on screen and sell this attention to advertisers. It can be found in various news websites, entertainment apps such Snapchat and Instagram, mobile gaming apps, etc.
Their way of gluing the user to the screen may differ, but the business model behind them is very similar. Provide “free” content that increases the time a user engages with the platform to maximise the advertising content that can be displayed. This has created a market worth over 380bn USD.
While there has been much discussion about this industry (for example the use of personal data to improve the success of the ads), recently new ventures have popped up that aim to capture some of the enormous economic value to do good.
One of these is the UK ad-tech start-up Good Loop. Good Loop was founded 2016 with a mission to “make the internet a more positive place for everyone”. The founders Amy Williams and Daniel Winterstein recognised the problematic practices around presenting users with unsolicited ads for the benefit of private corporations. They found a solution by developing a tool that allows users to choose whether they want to view ads before displaying them. If users choose to do so, 50% of the advertiser’s money is donated to charitable causes. This gives control over their attention back to users, whilst raising money for good.
Another example has been developed by the UN World Food Programme. They have created an online game (available in your browser and as apps on android and iOS) called freerice.
The game is simple: You answer questions and for each correct answer, the World Food Programme donates 10 grains of rice to people in need. While you are playing the game (giving your attention), advertising is displayed to you, which pays for the rice. Besides being a fun little distraction on your break and tackling world hunger, the game is really informative and teaches users about sustainability issues.
Cecilia Thirlway, creator of ceciliaunlimited.com and lecturer in entrepreneurship, has written a review of the book Ecopreneurship: Business practices for a sustainable future. She provides a critical examination of the contents, highlights the key findings and places the research into a broader context. I very much enjoyed reading the review and hearing her thoughts on the book. Thank you Cecilia!
The report defines green startups as businesses that:
Are younger than 10 years
(very) innovative and/or
have a significant employee/turnover growth
contribute to the environmental objectives of a Green Economy
With these characteristics Green Startups can be considered a subgroup of ecopreneurial ventures. There main criteria making them a subgroup is the age restriction, which excludes inner-organisational ecopreneurship (such as ecologic intrapreneurship), and the strong growth motivation which excludes some of the grass roots ecopreneurial ventures that value local embeddedness and subscribe to the small is beautiful philosophy.
Another interesting finding is that Green Startups are as profit oriented as commercial Startups, which seems to break with ecopreneurial attitudes to profitability. This raises the question whether Green Startups are challenging the status quo and working towards a sustainable economy or perpetuate a neo-liberal mindset under a green label.
The publication is only available in German, but the key facts are summarised in English.