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It’s useful for more than just decarbonization.
Obvious Ventures’ Andrew Beebe and Generate Capital’s Scott Jacobs reflect on the past, present, and future of climate tech.
They grew up on Biden-era climate regulations and tax credits. What happens now?
That won’t stop these investors from trying.
The more Hurricanes Helene and Milton we get, the harder it is to ignore the need.
From White House to green VC.
Ten years ago, if you were a hotshot senior advisor in the Obama administration, odds are good you exited the revolving door of the White House straight into a job in Big Tech. But there’s a new career trajectory that’s looking pretty good these days: federal government to climate tech. Since the latter Obama years and increasingly with the passage of the Inflation Reduction Act two years ago, former government employees are popping up at some of the most important companies and venture capital firms in the climate ecosystem.
That’s a testament to how far we’ve come since clean tech 1.0 in the 2010s, when Solyndra’s bankruptcy was blowing up headlines and the shale revolution was starting to derail renewable energy investment. As a more durable market started to rise from the ashes, a growing number of industry experts jumped into government to help fuel the revival — and then often back into industry to take advantage of a more favorable policy environment and an increased focus on corporate sustainability.
Alfred Johnson, co-founder and CEO of the tax credit marketplace Crux, told me that after growing up in D.C. but moving to Stanford for college, he was surprised to hear folks in Silicon Valley talking about government and private industry as if they had completely “mismatched objectives.” Prior to starting Crux, Johnson served as deputy chief of staff at the Department of the Treasury, his second stint at the agency during a career that’s taken him from campaigning for Obama to Blackrock, to founding his first startup, Mobilize, a platform that used to recruit volunteers for Democratic Party campaign events and progressive causes.
“The perspective that I’ve always had is that government and the private sector are fundamentally intertwined, and always have been,” Johnson told me. Crux itself demonstrates this public-private synergy: Not only did the IRA unleash an abundance of clean energy tax credits, it also made them much easier to trade — transactions Crux facilitates.
“If our goal is to mobilize trillions of dollars of investment into the clean energy transition,” Varun Sivaram, a senior fellow for energy and climate at the Council on Foreign Relations, told me, “the people holding the reins of power should absolutely not be the people who have never been in an investment committee room making a financial decision on a project.” Prior to his latest gig, Sivaram worked as an executive at Orsted, which he joined after a stint in the White House as the managing director for clean energy and innovation and a senior advisor to John Kerry, the administration’s climate envoy.
“After the IRA, I said, look, we’ve passed this extraordinary legislation. I would now love to help be at a company that can use this amazing public policy and build clean energy as fast as possible,” he told me. At Orsted he helped lead the internal R&D and artificial intelligence teams and founded Orsted Ventures, which has invested in Crux. Sivaram was also on the committee that decided to pull out of two offshore wind projects in New Jersey, resulting in a $4 billion impairment for the company. “I sometimes feel like Forrest Gump. I have had this front row seat to a lot of very important things,” Sivaram told me.
A lot of the recent revolving door activity can also be traced to the renewed vigor of the once-nearly-dormant Loan Programs Office, part of the Department of Energy, which the IRA imbued with $400 billion to guarantee loans to emerging energy technologies. LPO became a political football thanks to Solyndra, which received a loan guarantee from the office of more than $500 million. After Jigar Shah took the helm in 2021, he tripled the agency’s staff, bringing with him a cohort of private industry experts and advisors, many of whom held contract positions for about a year or two before moving back into industry to pursue other ventures in the climate tech and energy world.
Climate tech investment firms have also become a popular landing spot for former government talent. David Danielson, now a managing director at Breakthrough Energy Ventures, co-founded ARPA-E and worked in the Department of Energy in the second Obama administration. Jenny Gao, a vice president at Energy Impact Partners, went there fresh off a position in the DOE’s Office of Technology Transitions. And Clay Dumas, a partner at Lowercarbon Capital, worked in the Obama White House as the chief of staff and a senior advisor for the White House Office of Digital Strategy.
And then there’s Overture, a climate tech VC founded by former Obama staffers, which aims to help climate tech founders take advantage of government programs and navigate regulatory complexity. “In some ways, campaigns are startups — you start small with a big idea,” Michael O’Neil, one of Overture’s co-founders and partners, told me. “We used to say in the White House, How do you make the room bigger? How do you get more minds and more talent involved to make better decisions?” Now they ask the same questions to help founders build out their technologies. Overture announced the close of its first $60 million fund earlier this year.
It’s not just climate-specific companies and investors who are benefiting — big tech companies still attract plenty of former government employees, although the locus of that energy is now concentrated on corporate sustainability and decarbonization efforts. Lisa Jackson, VP of environment, policy, and social initiatives at Apple, served as the Administrator of the Environmental Protection Agency under Obama. Melanie Nakagawa, the chief sustainability officer at Microsoft, previously worked as a climate advisor to Biden’s National Security Council, while Google’s director of climate and energy research, Ali Douraghy, came straight from the DOE.
Tech industry efforts to run operations with clean energy and back emerging climate solutions have also had an undeniably positive impact — most notably Frontier’s commitment to purchasing over $1 billion of carbon removal credits has catalyzed demand in the nascent industry. This initiative, led by the payments platform Stripe and co-founded by Alphabet, Meta, Shopify, and McKinsey, is also powered by a former government employee, Jane Flegal, who worked in the Biden White House as the senior director for industrial emissions.
While it’s true that the traditional off ramps for former government employees remain — the financial sector also still looms large, Sivaram told me — what’s new is that “there’s now actual money in starting your own company, in working at a venture fund,” he said And this, he believes, is how it should be.
“You want people who understand the nuances of the federal government and the IRA in order to effectively run companies that take advantage of the IRA. It is no secret that the government wanted companies to basically take this money. So many of us made this move.”
One VC dedicated to funding tech-based fire solutions has already found hundreds of potential investments.
In a warming world where winter snow is melting earlier and rain is arriving later, “wildfire season” has become somewhat of a misnomer. Some parts of the country now see blazes popping up practically year round. This, combined with decades of fire management policy that promoted suppression over natural and controlled burns, has turned certain states — California, most famously — into tinderboxes.
With wildfire smoke becoming a standard component of Silicon Valley summers, it’s probably no surprise that numerous data analytics and artificial intelligence-focused startups have sprung up to address the issue. There’s even a San Francisco-based venture capital firm, Convective Capital, devoted solely to funding wildfire solutions.
“My big question coming into starting Convective was, are there enough companies in this category?” Bill Clerico, founder and managing partner of the firm told me. The answer, he found, was yes. After establishing Convective Capital in the beginning of 2022, he said, “we’ve identified about 500 of what we call fire tech companies.” They run the gamut from startups that work on wildfire suppression to those dealing with identification, prevention, mitigation, and insurance against damages.
Rhizome, a company making an AI-powered wildfire risk mitigation platform for utilities, is one of the firm’s most recent investments. “Think of it as Sim City for the grid,” Mishal Thadani, CEO of the Washington, D.C.-based startup, told me. “You obviously need to know, as extreme weather events hit, how this is going to affect your assets,” he explained.
Rhizome’s platform gives utilities insight into, “if there is an asset failure, given the asset type, the type of failure, and the burn probability given the vegetation makeup and the dryness conditions, what’s going to be the likelihood of a wildfire ignition?” This information helps utilities decide where to put their money, whether that means replacing a power line or pole, insulating conductors, undergrounding power lines, or trimming back a bush. Last month, Rhizome announced a $1 million investment from Convective Capital, not tied to a particular funding round. The company raised $2.5 million in its pre-seed round last year.
The problem is not simply a lack of data, Thadani told me — utilities often know things about their assets such as last inspection date and outage history, and have systems that can render the surrounding landscape and other infrastructural features. The problem is that data is not part of a holistic system that can provide comprehensive insights. If risk analysis is being performed, Thadani said, “it’s being done on a super scrappy spreadsheet basis.”
Rhizome aims to build the “connective tissue” between a utility’s disparate data systems, then combine that with other geographic datasets on climate, weather, and vegetation. From there, the company uses its machine learning models to assess the likelihood of extreme weather events and their subsequent impacts. Ultimately, this allows utilities to provide regulators with more quantifiable information on their plans to improve grid resiliency and prevent wildfires, beyond just citing a figure for how much money they want to spend.
Utilities are not exactly known for their technical prowess, but are hungry nevertheless for solutions to their wildfire woes. Pacific Gas & Electric, the nation’s largest utility, was driven into bankruptcy after being found liable for a spate of enormous California wildfires in 2017 and 2018. After reemerging from bankruptcy in 2020, it now has a plan to spend $18 billion on wildfire mitigation through 2025. Other utilities such as Hawaii Electric and Berkshire Hathaway Energy face billions in potential liabilities for wildfires in their service areas.
The most common customers for companies in Convective Capital’s portfolio are utilities, governments, and insurance companies. “These are tremendously deep-pocketed institutions, but they are not, you know, necessarily the most fast-moving or innovative,” he told me. “And so that is the fundamental challenge of building a wildfire technology company.”
So far, Rhizome has announced partnerships with two utilities, Seattle City Light and Vermont Electric Power Company. But Clerico acknowledges that getting traditional institutions onboard is no easy task, even when the benefits seem clear. The magnitude of the destruction in recent years has served as an accelerant, though — something the vegetation management platform provider AiDash has seen first hand. Abhishek Singh, cofounder and CEO of the startup (which is not in Convective’s portfolio), said that when he founded the company in 2019, “Every investor warned us not to do this because utilities don’t buy and they won’t invest.” But that’s not what he’s experienced.
AiDash raised $58.5 million in an oversubscribed Series C round earlier this year, led by the impact investor Lightrock, and has five utility partnerships, including Southern California Edison’s holding company, Edison International, as well as Duke Energy. The company uses satellite data and AI analytics to assess vegetation near utility infrastructure for wildfire risk. It can also detect faults by fusing satellite data with other sources such as thermal or LiDAR-based imagery. (Convective Capital sees the value proposition in using satellites for vegetation management, too — it’s invested in one of AiDash’s direct competitors, an Amsterdam-based startup called Overstory.)
When Singh founded AiDash in 2019, both the size and cost of satellites were plummeting, leading to far more launches and thus far more data. . “Since the history of the first satellite until 2018, there were 2,200-odd satellites launched,” he told me. “From 2019 onwards, each year close to 1,000 satellites are getting launched.” The company purchases mounds of that data to conduct its vegetation analyses.
Vegetation management is typically the largest line item in a utility’s operations and maintenance budgets, Singh told me, costing the entire sector around $6 billion or $7 billion annually. “It’s also the single largest cause of utility-caused wildfires, as well as the cause of most outages,” he said, as power lines coming into contact with trees, grasses, and shrubs can easily spark a fire. Anything that can help them trim that budget and preempt the need for costly equipment repairs is worth a lot. “These are all million dollar contracts,” Singh told me.
But big data platforms alone are just one tool in the vast toolbox that comprises a holistic approach to wildfire management. “There’s no panacea, where you just do one thing and then it solves the problem,” Clerico told me. “It’s going to get solved as a combination of consistent and repeated forest management, building towns and cities that are fire adapted, building great infrastructure, and then having the ability to detect and respond quickly. All of these things are huge, multi decade, multi billion dollar investments.”
So for the foreseeable future, Convective Capital will have its work cut out for it. But when I asked Clerico if one day, in a beautiful, far-off dreamland, there might not be the need for a dedicated wildfire tech VC, he said he hopes so.
