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Climate Tech

Funding Friday: Transforming the Game

Heron Power and DG Matrix each score big funding rounds, plus news for heat pumps and sustainable fashion.

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A DG Matrix worker.
Heatmap Illustration/Getty Images, DG Matrix

While industries with major administrative tailwinds such as nuclear and geothermal have been hogging the funding headlines lately, this week brings some variety with news featuring the unassuming but ever-powerful transformer. Two solid-state transformer startups just announced back-to-back funding rounds, promising to bring greater efficiency and smarter services to the grid and data centers alike. Throw in capital supporting heat pump adoption and a new fund for sustainable fashion, and it looks like a week for celebrating some of the quieter climate tech solutions.

Heron Power Nabs $140 Million to Reinvent the Humble Transformer

Transformers are the silent workhorses of the energy transition. These often-underappreciated devices step up voltage for long-distance electricity transmission and step it back down so that it can be safely delivered to homes and businesses. As electrification accelerates and data centers race to come online, demand for transformers has surged — more than doubling since 2019 — creating a supply crunch in the U.S. that’s slowing the deployment of clean energy projects.

Against this backdrop, startup Heron Power just raised a $140 million Series B round co-led by Andreessen Horowitz and Breakthrough Energy Ventures to build next-generation solid state transformers. The company said its tech will be able to replace or consolidate much of today’s bulky transformer infrastructure, enabling electricity to move more efficiently between low-voltage technologies like solar, batteries, and data centers and medium-voltage grids. Heron’s transformers also promise greater control than conventional equipment, using power electronics and software to actively manage electricity flows, whereas traditional transformers are largely passive devices designed to change voltage.

This new funding will allow Heron to build a U.S.manufacturing facility designed to produce around 40 gigawatts of transformer equipment annually; it expects to begin production there next year. This latest raise follows quickly on the heels of its $38 million Series A round last May, reflecting hunger among customers for more efficient and quicker to deploy grid infrastructure solutions. Early announced customers include the clean energy developer Intersect Power and the data center developer Crusoe.

DG Matrix Also Lands $60 Million for Next-Gen Transformers

It’s a good time to be a transformer startup. DG Matrix, which also develops solid-state transformers, closed a $60 million Series A this week, led by Engine Ventures. The company plans to use the funding to scale its manufacturing and supply chain as it looks to supply data centers with its power-conversion systems.

Solid-state transformers — which use semiconductors to convert and control electricity — have been in the research and development phase for decades. Now they’re finally reaching the stage of technical maturity needed for commercial deployment, driving a surge in activity across the industry. DG Matrix’s emphasis is on creating flexible power conversion solutions, marketing its product as the world’s first “multi-port” solid-state transformer capable of managing and balancing electricity from multiple different sources at once.

“This Series A marks our transition from breakthrough technology to scaled infrastructure deployment,” Haroon Inam, DG Matrix’s CEO, said in a statement. “We are working with hyperscalers, energy companies, and industrial customers across North America and globally, with multiple gigawatt-class datacenters in the pipeline.” According to TechCrunch, data centers make up roughly 90% of DG Matrix’s current customer base, as its transformers can significantly reduce the space data centers require for power conversion.

Zero Homes Raises $16.8 Million to Streamline Heat Pump Adoption

Zero Homes, a digital platform and marketplace that helps homeowners manage the heat pump installation process, just announced a $16.8 million Series A round led by climate tech investor Prelude Ventures. The company’s free smartphone app lets customers create a “digital twin” of their home — a virtual model that mirrors the real-world version, built from photos, videos, and utility data. This allows homeowners to get quotes, purchase, and plan for their HVAC upgrade without the need for a traditional in-person inspection. The company says this will cut overall project costs by 20% on average.

Zero works with a network of vetted independent installers across the U.S., with active projects in California, Colorado, Massachusetts, Minnesota, and Illinois. As the startup plans for national expansion, it’s already gained traction with some local governments, partnering with Chicago on its Green Homes initiative and netting $745,000 from Colorado’s Office of Economic Development to grow its operations in Denver.

Climactic Debuts Hybrid Fund to Propel Sustainable Fashion Past the Valley of Death

Climactic, an early-stage climate tech VC, launched a new hybrid fund called Material Scale, aimed at helping sustainable materials and apparel startups navigate the so-called “valley of death” — the gap between early-stage funding and the later-stage capital needed to commercialize. As Climactic’s cofounder Josh Fesler explained on LinkedIn, the fund is designed to cover the extra costs involved with sustainable production, bridging the gap between the market price of conventional materials and the higher price of sustainable materials.

Structured as a “hybrid debt-equity platform,” the fund allows Climactic’s investors to either take a traditional equity stake in materials startups or provide them with capital in the form of loans. TechCrunch reports that the fund’s initial investments will come from an $11 million special purpose vehicle, a separate entity created to fund a small set of initial investments that sits outside Material Scale’s main investing pool.

The fashion industry accounts for roughly 10% of global emissions. “These days there are many alt materials startups that have moved through science and structural risk, have venture funding, credible supply chains and most importantly can achieve market price and positive gross margins just with scale,” Fesler wrote in his LinkedIn post. “They just need the capital to grow into their rightful commercial place.”

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