Interview with Mia Diawara, Partner at Lowercarbon Capital #40
Beyond carbon - the holistic view for climate
In this interview, you will hear about Mia’s path to a climate investor and her current interest areas in climate, and Lowercarbon’s ability and willingness to invest in hardware climate startups. Lastly, we hear Mia’s views on how the crunch in the current funding landscape is affecting climate startups and how climate founders could prepare for it.
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🌍Introducing Lowercarbon Capital
Lowercarbon Capital needs no introduction. Founded by Chris and Chrystal Sacca in 2020, it is undoubtedly one of the leading investors in climate tech.
Lowercarbon has over $1B assets under management having raised $800M in August 2021 and a $350M carbon removal specific fund in April 2022. It has made bold investments in +60 climate startups including many hard science companies like Commonwealth Fusion, Antora, and Sublime Systems. [Read Survivaltech.club’s interview with Sublime Systems here.]
Lowercarbon has three investment categories:
Slashing new CO2
Sucking up carbon
Buying more time
The first category covers solutions that address the 50+ gigatons we spew across the sectors annually. The second category, “Sucking up carbon”, is about carbon removal. It covers nature-based and engineered solutions and everything in between. The third field is about buying more time for communities and ecosystems at the frontline.
🧠Wisdom from Mia
When did you decide to work in climate?
I think everybody working in climate has their pivotal moment when they become aware of the climate crisis and want to devote their time and energy to tackle it. Mine was in freshman year during a biology class when we watched the documentary “An Inconvenient Truth”.
I had a moment of absolute panic and then complete incredulity where I wondered “how isn’t everybody focused on tackling the climate crisis?” It felt that every other problem we could be working on in the service of this society is exacerbated by the climate crisis. At some point, other problems may cease to matter to some extent if we don’t get global warming fixed.
How was your journey to becoming an investor at Lowercarbon?
After high school, I moved to California to attend Stanford and study Environment and Sustainability in the Science, Technology, and Society program.
This multidisciplinary program was great, as I honestly wasn't sure whether I wanted to become an engineer or a filmmaker. On one hand, I inherited an appreciation for humans’ place in the broader ecosystem (and the expectation that I’d get a PhD in a STEM discipline) from my parents, who are biologists. On the other hand, I have also been a dancer and a poet and was interested in filmmaking.
I discovered energy as the most exciting lever within climate through my studies. I did fellowships at the Natural Resources Defense Council and Rocky Mountain Institute and also a Master’s at Stanford in Civil and Environmental Engineering in the Atmosphere and Energy program.
At the end of my Master’s, I had an inclination that I wanted to tackle the climate crisis using the speed and scale of the private sector. I first wanted to build a skillset and understanding of the business, so I went to management consulting at Bain & Company. I worked across industries, spending time with private equity & venture firms doing commercial due diligence and assessing companies and working with utilities as well.
After three years, I wanted to return to climate and took a climate-focused role at the private equity firm TPG. TPG wanted to systematize its sustainability and climate work with portfolio companies, and I worked to build a climate roadmap for TPG. By the end of my time at TPG, I was wearing two hats. One was working with the portfolio companies and identifying their emission hot spots and levers that they could pull to decrease their emissions. The other was working with the TPG Rise Climate, TPG’s climate-focused impact fund. I helped frame the different climate areas and educate the investment professionals on climate and sustainability. I also ran an impact assessment team for the earliest investment opportunities of TPG Rise Climate.
Ultimately, I found myself drawn to the early-stage climate tech ecosystem and the emerging solutions. I thought of either doing an operating role at an early-stage startup or moving into climate venture. I decided to choose the latter and get to support a whole range of early-stage climate companies now.
Do you have a sectoral investing focus?
Many of us in the Lowercarbon are climate generalists, including me. This means I go into several rabbit holes and look at the whole ecosystem of climate solutions.
However, what tends to happen, is that there is organic gravitation toward certain categories. I’ve been recently thinking a lot about:
The holistic, “beyond carbon” view
I’ve recently spent time thinking about the distribution grid and ways to build grid resiliency. We have increasing electrification and are developing technologies that require a high electricity load. Therefore, we must come up with ways to prevent overload situations and build the distribution grid efficiently.
2. Built environment
Finding ways to decarbonize the built environment was a core part of my education. Also, I feel that it is still an underexplored and under-innovated area, particularly when it comes to building materials.
3. The holistic, “beyond carbon” view
As there has lately been an influx of capital into the carbon market and carbon offsets, we have to make sure that we are not myopically focused on carbon reduction at the expense of other ecosystem services, and that we ensure that communities that have been stewarding land and protecting nature for centuries are also benefiting from the increased investment.
In particular, we need to co-solve biodiversity loss with climate change, as they are inextricably linked. If biodiversity loss is not addressed in tandem, it could be sacrificed in favor of emissions reduction.
Having listed these interest areas, I must say that this set might look very different in a month. I constantly channel my energy according to the deal flow and the changes in the ecosystem.
Your portfolio is full of amazing hardware startups, while most VCs are not investing in hardware. What enables Lowercarbon to invest in hardware startups in climate?
There are a few components at play here.
1. Shorter development cycles in hardware
There are converging, accelerating tailwinds bolstering hardware development that mean that today it takes fundamentally less time to build a company that develops hardware than ever before.
You can leverage cheap computing, machine learning, and AI to simulate what might otherwise be a long R&D cycles building successive prototypes. There’s a lot that you can do within the computer, allowing acceleration curves more similar to what we have typically witnessed in software.
2. Our team’s expertise in science and engineering let’s us understand technology risk
Investing in deep tech / hardware companies that are selling into or disrupting some of the largest markets in existence means we are primarily taking technology risk (rather than market risk). Basically, for many of the sectors we invest in, we know the markets are there if we can derisk the tech.
The incredible science and engineering backgrounds on our team means we have the capability to assess technology risk in a way that your average generalist or even climate-focused venture firm may not be able to. Our head of science, Clea Kolster, has a Ph.D. in carbon sequestration technologies, and my fellow partner, Christina Chang, has a Ph.D. in physical chemistry. This strong technical foundation enables us to understand and drive down the risk to get technologies market-ready. In turn, this gives us comfort in making investment decisions even in hard science technologies.
3. The size of the opportunity
On the other side of tech derisking, the markets are there, and they are massive. When you are targeting the entire steel industry and or all of baseload electricity generation, the opportunity at the end of the tech development period is incredible.
The opportunity size in many categories of climate tech is much larger than, for example, niche areas of B2B SaaS where a software company is selling software to a software company, which then sells its software to another company. Each derivative diminishes the company’s addressable market.
How does the crunch in the funding market affect climate startups? What should climate founders do to prepare for the upcoming years?
Anecdotally, we have seen less compression in valuations and less constriction in the capital available in climate tech as a segment relative to the broader market. That comes from a couple of reasons.
Firstly, climate tech companies are providing a real-world utility, and they’re often tackling problems that are being exacerbated by, or that are at the root of, the turbulence we’re seeing. Building technologies that unlock cheaper energy, smooth out supply chains, and increase access to materials puts companies in a position to benefit from some of the policy and regulatory changes we’re going to see to address the turmoil.
When you’re selling fertilizer, like Nitricity or Kula Bio in our portfolio, or when you’re selling materials like steel or cement that are the literal building blocks of economic development, there’s some level of insulation against economic downturn.
Secondly, we have seen a crazy influx of capital in the past years. A lot of early stage and late stage investors have raised capital and are still looking to deploy that capital. [Read more about the influx of capital to climate on CTVC’s $40B 2021 climate venture recap - article.]
However, we don’t know yet the full extent of the economic downturn and what may lie ahead. Our advice to companies has been to extend the runway and to make sure that they can stay afloat through that downturn. It can mean raising a small extension round, taking capital earlier when it’s available, and taking a hard look at your budget.
The Drop - climate conference in Malmö, Sweden on September 21
The Drop, a new climate tech conference is taking place in Malmö, Sweden on Wednesday, September 21.
The Drop is the climate tech conference for scientists, investors, startups, and doers. It is organized by a collective of climate funds and local community initiatives including Pale blue dot, 2150, REVOLT, Skåne Startups, and Almi among others.
➡️Apply to the waitlist here!
Matteo Guscetti, a contributor at Survivaltech.club has graduated from ETH Zurich as M.Sc.! He will spark on his entrepreneurial journey and thereby quit writing at Survivaltech.club. Thank you for the many amazing articles like the deep dive on the electrical grid and interviews with climate leaders like Jan Ossenbrink!
If you liked this article, please share it with your climate friends!🌍
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