🌎 The SPAC struggle bus #162

Happy Monday! And HBD to the IRA!

Proterra filed for bankruptcy last week, making the electric bus company the latest in a series of climate tech SPAC flame-outs.

Meanwhile, the death toll rises after (climate-exacerbated) wildfires ravaged Maui. The Biden administration awards the first $1B+ for US DAC hubs and researchers replicate a nuclear fusion breakthrough.

In deals with week, ocean-based CDR sequesters $54M. Carbon accounting software attracts $50M and cultivated meat collects $35M.

Housekeeping note: CTVC will be on summer break next week. See you back here on Aug. 28. Thanks for reading!

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Proterra and the SPAC bus-t

Proterra filed for bankruptcy last week in a surprising turn of events for the electric bus maker. Despite Proterra’s 50%+ foothold in the US electric bus market, it’s the latest in a string of recent bankruptcy filings among climate tech businesses that went public via special purpose acquisition companies (SPACs) in the last two years.

Putting on the brakes: The SPAC boom and contraction has left a flurry of struggling public companies in its wake. It’s been particularly hard on early tech businesses, and while EVs may be relatively mature within the climate tech cohort, these companies are beginning to run out of charge.

In June 2022, EV manufacturer Electric Last Mile Solutions declared bankruptcy just a year after going public through a SPAC deal.
In June of this year, electric truck-maker Lordstown Motors also filed for bankruptcy protection after its 2002 exit via SPAC.
Less than a year after buying Romeo Power (at 11% of its SPAC merger value), Nikola is liquidating the assets.
Now, Nikola itself is on bankruptcy watch along with struggling EV companies including Canoo, Fisker, Workhorse, Lucid, Faraday Future, and Lion Electric.

A long road to profitability

For many of these companies, the SPAC playbook included lofty projections for businesses with substantial execution (and sometimes technical) risk and an uncertain capital plan to reach positive cash-flow.

Surprise, surprise—virtually none came close to hitting the target last year and all were deep in negative EBITDA (Earnings before interest, taxes, depreciation and amortization) territory.

SPACs were a rocky road from the start, and allowed companies desperate to raise more capital and investors seeking returns a quick-and-dirty way to the public markets. Unlike traditional IPOs, SPAC filings also allow companies to create (and inflate) profit projections.

Other factors, unforeseen during the high-flying SPAC craze, have also contributed to the struggles of public climate tech companies:

Supply chain challenges have additional stress on already fragile margins, especially in hardware-intensive businesses that rely on many cogs to come together.
Capital has become scarce as the macroeconomic environment prompts investors to turn away from non-cash flow generating assets, especially those beset with technical and execution risk
Triggering events, such as Lordstown losing its Foxconn partnership, have been the final nail in the coffin for some businesses, especially for companies that raised SPACs solely on these announced partnerships or offtake.

For most of these companies, the road to profitability is long and winding, and as capital becomes scarce, they either turn to debt or have no choice but to steer towards bankruptcy and restructure.

Lessons learned

Back in the zero-interest-rate heyday, even companies in the public markets could raise off the storybook of growth, and in such a frothy market, investors could bet on a “greater fool” always turning up to buy them out. With a macro environment that looks much less bullish, investors are now returning to the old adage: cash is king.

These are hardware businesses that face hardware challenges—high capital intensity at high volumes, limited access to raise capital, and a lack of solid cost-down economics. While a SPAC deal may be a rapid resource unlock for the business and a quick exit for investors, it also puts the company’s financials under the scrutiny of public market eyes.

But this isn’t a transportation or SPAC-specific problem in climate tech. Vertical farming companies have also taken a hit in recent months. AeroFarms and AppHarvest have both filed for bankruptcy this summer. Early ag tech entrants including Kalera, Fifth Season, Upward Farms, Future Crops, and Glowfarms have all gone bankrupt or shut down.

The risk that can’t be de-risked

These failures have been driven more by finance and execution problems than tech risks as companies driving from development to deployment face a road littered with manufacturing and margin challenges inherent to delivering products at real-world volumes.

Key Takeaways

TRL isn’t everything: Even hardware businesses with low tech risk can easily move into the red when the macro environment takes a tumble, especially with high interest rates that make it difficult to raise more capital.
Execution risk reduction: Mitigating execution risk means hiring the right talent, stacking the team with people who have experience navigating these types of execution challenges. Growing companies should also consider how to structure contracts in a way that can pass the costs of supply chain volatility on to customers.
Perfect storm: A culmination of external factors at play also contributed to the fall of these EV companies. The rapid shift from a growth-based investing story to a cash flow story and cascading supply chain issues hit hardware companies like Proterra and other EV makers hardest.
An exit isn’t the end: Companies are exposed to these risks for much longer than founders and investors may want to think. While climate tech startups take ~9 years to exit, exiting doesn’t mean a hardware business is out of the woods.

Deals of the Week (8/7-8/13)

Venture Fundings

⚡ Verdagy, a Monterey County, CA-based industrial hydrogen electrolyzer developer, raised $73M in Series B funding from Temasek Holdings, Shell Ventures, Bidra Innovation Ventures, Bluescope Steel, Galp, and other investors.

⚒️ Cornish Lithium, a Penryn, United Kingdom-based lithium exploration and development platform, raised $68M from the UK Infrastructure Bank, The Energy & Minerals Group (EMG) and TechMet.

💨 Running Tide, a Portland, ME-based ocean-based carbon removal developer, raised $54M in Series B funding from Lowercarbon Capital, Foobar, Greenpoint Partners, Grantham, Foundry Group, and other investors.

🌱 Persefoni, a Tempe, AZ-based carbon accounting platform, raised $50M in Series C funding from TPG, Rice Investment Group, Prelude Ventures, Parkway, NGP Energy Technology Partners, and other investors.

🥩 Meatable, an Amsterdam, Netherlands-based cultivated meat platform, raised $35M in Series B funding from Agronomics, Invest-NL, BlueYard Capital, BRIDFORD Group, Milky Way Ventures, and DSM Venturing.

📦 Trove, a Brisbane, CA-based branded resale platform, raised $30M in Growth funding from ArcTern Ventures, Wellington Management, Prelude Ventures, G2 Venture Partners, and 31Ventures.

⚡Blue Laser Fusion, a Santa Barbara, CA-based laser-based fusion developer, raised $25M in Seed funding from JAFCO and SPARX Group.

⚡ General Fusion, a Burnaby, Canada-based Magnetized Target Fusion (MTF) nuclear energy developer, raised $25M in Growth funding from BDC Capital, GIC and the Government of British Columbia.

🔋 Kraftblock, a Sulzbach, Germany-based high-temperature energy storage system developer, raised $22M in Series B funding from Shell Ventures, Finindus, and A&G Energy Transition Tech Fund.

🌱 Neoplants, a Paris, France-based provider of air purifying houseplants, raised $20M in Seed funding from True Ventures, Heartcore, and Collab Fund.

🌾 Phospholutions, a State College, PA-based sustainable fertilizer developer, raised $11M from Advantage Capital, Conti Ventures, Tekfen Ventures, Maumee Ventures, Ben Franklin Technology Partners, and Keytrade.

⚡ Treehouse, a San Francisco, CA-based residential EV charging infrastructure developer, raised $10M in Series A funding from Montage Ventures, Trucks, CarMax, Assurant Ventures, Acrew Capital, and other investors.

💧 Matter, an Ahmedabad, India-based microplastic recycling platform, raised $10M from S2G Ventures, Builders Vision, and SOUNDWaves.

💧Membrion, a Seattle, WA-based membrane technology for wastewater treatment developer, raised $5.5M in Series B funding from Samsung Venture Investment and Lam Capital.

🏠 Skycool Systems, a Mountain View, CA-based passive air conditioning and refrigeration systems developer, raised $5M in Seed funding from Nadel and Gussman Ventures and D3 Jubilee.

⚡ Nuclearn.ai, a Phoenix, AZ-based automation platform for nuclear energy, raised $3M in Seed funding from AZ-VC and Nucleation Capital.

👕 Nature Coatings, a Los Angeles, CA-based carbon-negative pigment developer, raised $3M in Seed funding from Regeneration.VC, The 22 Fund, Leonardo DiCaprio, Safer Made, and Portfolia.

🛰️ Birdstop, a Concord, CA-based drone remote sensing platform for safeguarding critical infrastructure, raised $2M in Seed funding from Lerer Hippeau, Anorak Ventures, Correlation Ventures, Data Tech Fund, Graph Ventures, Techstars, and other investors.

🏭 Saeki Robotics, an Aarau, Switzerland-based manufacturing robotics developer, raised $2M in Seed funding from Wingman Ventures, Vento and GETTY.

💨 Erguvan, a Sarıyer, Turkey-based carbon credits and RECs marketplace, raised an undisclosed amount in Seed funding from Emirates NBD and Deniz Ventures.

Other Fundings

✈️ Archer Aviation, a San Jose, CA-based eVTOL developer, raised $215M in Post-IPO equity from United Airlines, Boeing, Stellantis and ARK Invest.

🛵 Spiro, a Cotonou, Benin-based electric micromobility vehicles manufacturer, raised $60M in Debt from Societe Generale and GuarantCo.

🚗 Faraday Future, a Gardena, CA-based EV manufacturer, raised $17M in Post-IPO debt from Streeterville Capital.

⚡ Synthica, a Blue Ash, OH-based RNG project developer, raised an undisclosed amount in Equity funding from Goldman Sachs.

New Funds

Blackstone, a New York, NY-based investment firm, raised $7.1B for their Green Private Credit Fund III to finance solar companies, electric car parts makers and technology to cut carbon emissions.

BlackRock, a New York, NY-based investment firm, launched a $1.2B fund along with the New Zealand government to invest in renewable power projects.

Transition, a London, UK-based venture capital firm, launched their new fund backing startups that work within planetary boundaries.

Share new deals and announcements with us at [email protected]

In the News

The Biden administration announced $1.2B of support and two new facilities for commercial-scale DAC plants. These will be the first of four DAC sites funded by $3.5B in the Bipartisan Infrastructure Law. Check out the DAC Hub here and the official list of awardees.

Maui was devastated by raging wildfires, killing at least 96 people and all but destroying the town of Lahaina. Climate change seems to have played its hand in this disaster, as ~90% of Hawaii is drier than it was a century ago, and rising temperatures + drought = the fuel needed to start more wildfires.

After months of attempts, the Lawrence Livermore National Lab has replicated and achieved the second nuclear fusion ignition after the first success in December 2022. Learn more about this milestone and what it means here.

While it’s still early days for ocean-based CDR, Running Tide delivered its first carbon credits from sinking wood biomass in the ocean to Shopify. And Brilliant Planet, which grows and buries marine algae, received its first big purchase from Block.

GM wants to be your battery backup and first-class ride. The company revealed the new EV beast, the Escalade IQ while also announcing that it will equip all future cars with bi-directional capabilities to act as your home’s backup power supply.

Louisiana began an effort to rebuild their wetlands with a ~$3B project to divert sediment to the Barataria Basin.

The US is onshoring solar manufacturing. Singapore-based Maxeon solar is eyeing New Mexico and $1.2B of spending for their new solar manufacturing factory, thanks to the IRA. First Solar also announced its fifth American facility in Louisiana.

The UK’s strong start in renewable energy capacity expansion has slowed over the past few years and now lags most of the rest of the world.

Engine No. 1 ditched their ETF business (bought by TWC) and took a 3% stake in Vale, a Brazilian mining company, with no agenda to pursue an activist campaign. This is a shift from the public proxy fights with Exxon that brought it fame to a focus on private investments.

After days of hype across the scientific community, hopes for the room-temp superconductor have been all but squashed. Still, this was a great moment to bring this research and technology to the forefront of conversation.

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Hbd to the IRA! 🎉

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Widespread coral bleaching reaches the shores of North & Central America.

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Mapping the cost of carbon around the world.

Global clean energy companies hit $2.6T green rush in ‘22 revenues according to BNEF.

Climate x true crime pod.

Cirrus emissions from above the clouds. Google, American Airlines, and Breakthrough teamed up to develop AI that helps pilots avoid warming contrails. The engineers are proud!

CDR.fyi’s mid-year update on carbon drawdown.

Opportunities & Events:

🗓️ Activate New York Fellowship Recruitment: Join Active New York’s Open House on Aug 23rd to learn about how their fellowship supports early-stage entrepreneurs.

💡Greentown Labs Go Build: Apply by Aug 31st to Greentown Labs’ and Saint-Gobain's Go Build Program, supporting innovative startups at TRL 3 and above.

🗓️ Venture Houston 2023: Join Sophie at Venture Houston 2023 on Sept 7th to hear from numerous investors and leaders on decarbonization in a digital world.

🗓️ NY Climate Week Grants for Climate Tech: Attend a panel and open discussion regarding climate grants during NY Climate Week on Sept 19th, hosted by Streamline Climate and Enduring Planet.

🗓️ Greentown Labs Climatetech Summit: Register to Join Greentown Labs’ Climatetech Summit on Nov 1st-2nd to learn from over 200 climate tech startups and network with industry leaders across finance, policy, and justice in climate tech.