Europe is the fastest-growing region for climate tech in the world. And the sector has just gotten another tailwind as a Berlin-based team today launches the region’s largest climate tech fund.
World Fund is aiming to raise €350m in total and has so far secured commitments for roughly half of that. It’s targeting a final close in 2023. The team plans to make 40 investments, mostly in Europe: 30 at seed and Series A and 10 at Series B and up, says partner Danijel Višević. The average ticket size for the early-stage investments will be €1m to €3m, and €5m to €8m for later-stage companies.
“Our thesis is that climate returns are an early predictor for financial returns. A climate return is every solution that can help us to get to a decarbonised world,” says Višević, whose background is as an economist, journalist and communications professional. “These companies will be the most valuable over the next decade.”
The firm isn’t joking about climate returns. Portfolio companies will have to be able to show they can reduce greenhouse gas emissions by at least 100 megatonnes of CO2 equivalent annually, which is about a quarter of the UK’s greenhouse gas emissions in 2020.
I want to see things that can be scaled up quickly because we only have very, very few years
Climate tech companies have raised a record $32.3bn so far in 2021, of which 28% went to Europe-headquartered startups.
While Europe has seen a flurry of early-stage climate and impact-focused firms launch in the past two years (Revent, Pale Blue Dot and 2150 to name a few), those with deeper pockets are few and far between. The World Fund team says Europe lacks bigger climate-focused firms; there are 41 in North America with more than $100m assets under management, compared with only six in Europe.
LPs and partners
Christian Kroll, founder and chief executive of German eco-friendly search engine Ecosia, is a venture partner and the two organisations will work closely together, even sharing an office. Ecosia is an LP and Kroll was a key member in creating the organisation. World Fund partner Tim Schumacher is also an Ecosia investor and board member.
“We’re part of an ecosystem that wants to solve climate change, and Ecosia hopes to be in the centre — or at least somewhere in the middle — attracting as many players as possible to accelerate solutions,” says Kroll.
Other LPs include Trivago cofounder Rolf Schrömgens, serial entrepreneur Verena Pausder and her husband Philipp Pausder.
The firm's other three partners aside from Višević — Schumacher, Daria Saharova and Craig Douglas — are career investors. Višević says the combined portfolios of these three have made seven times the initial money put in, a key selling point for the first-time firm when it speaks to LPs.
The team also includes mechanical and chemical engineers, physicists and a mathematician.
The tech the World Fund team wants to see
So what kinds of technologies should climate tech investors be pitching to the team?
Višević says he wants to eat a filet mignon that has been made without killing any animals and is tastier and healthier than the real thing. He also wants to see new batteries that work without lithium and new, eco-friendly ways of generating heat for heavy industry processes like making steel.
“I want to see things that can be scaled up quickly because we only have very, very few years,” says Kroll. “We need something that is ready in one or two years and we need companies that have that kind of scaling mindset.”
He says climate tech companies have to be as ambitious in their hiring and fundraising plans as companies like on-demand delivery business Gorillas, which hired thousands of people in a year and has raised hundreds of millions of dollars. (Though hopefully with better company cultures.)
Kroll also wants to see companies that “solve climate change together with nature and not against nature”.
“When tech and nature are working together, then you can be really successful, but at the moment, all the tech bros only understand half of the potential solutions,” he says. “We can do that differently.”
