How Clean Energy Ventures Avoided the Pandemic Bubble and Raised a $305 Million Fund

Climate tech couldn't escape the frothiness that engulfed the startup world earlier this decade. It was tempting for both founders and venture capitalists to raise money. Interest rates were low, money was cheap, and investors looking for better returns were eager to get in on the action.

Instead, Clean Energy Ventures took a different approach, and it seems to be paying off.

“When COVID hit, we really had to do some introspection and say, 'Look, we have to be super careful here. This looks like a bubble.'” Dan Goldman, co-founder and managing partner of Clean energy companies, told JS. His company raised its first fund years before the pandemic, but still hadn't deployed all the capital. “We tried to remain very disciplined during that period.”

But as the pandemic bubble shrank, so did the amount of dry powder in Clean Energy Ventures' first fund. At the end of 2022, Goldman and his colleagues began raising a second. Within six months, the team surpassed their original goal of $200 million. “We took a break and started investing,” he said.

Institutional investors quickly said they wanted in on the action. “Then we asked our existing LPs, 'Hey, can we go a little higher than we originally intended?' And they were very supportive of that,” Goldman said.

That little bit extra ultimately brought the total fund to $305 million, a significant increase over the original goal and much larger than the company's first fund of $110 million. Clean Energy Ventures will continue to focus on early-stage climate tech startups, although it will also add what Goldman calls “pre-growth” investments.

“These will generally be larger checks, perhaps a slightly higher valuation. The startups will have de-risked the technology and have a product in the market but are still in the early stages of market adoption,” he said. “We see some gaps in the market around some of the technologies in that area.”

Such gaps have become a growing concern among investors, who recognize the specific challenges that hardware-heavy climate tech startups face on the road to commercialization. It has been called the “valley of death” or the “first of its kind” problem, and investors have experimented with different approaches to ensure that their most promising portfolio companies can bridge the gap.

For Clean Energy Ventures, the new fund will reserve 30% to 40% of capital for follow-on investments in companies that fit the “pre-growth” profile Goldman referred to. The company will also consider a “wide range of different financial instruments,” he added, to help bridge the gap. Initial checks will range from $500,000 for a smaller seed round to $8 million for a Series A. The total investment per company, including follow-on activities, will average around $15 million, Goldman said.

Institutional investors committed to the fund include Builder's Vision, Carbon Equity and the Grantham Foundation. Goldman said industrial LPs from Turkey, Thailand and Germany have also committed.

“They said, 'We want to bring more technologies to our countries, we want to build a manufacturing base in our countries,'” he added. “They really like our focus on greenhouse gas emissions.”

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