The long-term view: why a new London-based Climatetech fund is taking an evolutionary approach

Late last month, London-based investor Kiko Ventures announced the launch of a $450 million "platform" to support climate tech companies. The aim, say its co-founders, is to take a more flexible approach to funding science-based startups working in the sector. Giving startups time to bring their products to market is key to the strategy.

It probably shouldn't come as a surprise that VCs have woken up to the lure of climate tech. As I write this, the UK is preparing for a spike in temperatures that will see a danger to health and life come into effect over the next two or three days. Weather events like this used to be relatively rare in Britain, but are now happening with increasing frequency. It's a similar story all over the world. From winter floods to summer droughts and heat waves, climate change poses real problems. A very good reason for the renewed interest in climate technology.

And according to Climate Tech VC, companies working on climate solutions attracted around $40 billion in investment in 2021. Investor enthusiasm is easily explained by the well-known equation that big problem + solution = opportunity for investors, but it's worth remembering that we've been to a similar place before.

For example, the late 2000s saw a boom in clean technology investment, particularly in North America. By 2012, the bubble had burst, leaving many VCs nursing burnt fingers. There were a number of reasons, but one of the main factors was the speed to market, or to be more precise, the lack thereof. VCs were used to working on three to five year time horizons. Perfect for software, but it wasn't a model that suited a hardware-focused cleantech industry.

What changed? When I spoke to Kiko Ventures founding partners Robert Trezona and Arne Morteani, I was eager to hear their perspective on the opportunities in the industry and how investors can avoid the pitfalls of the past.

Permanent investment

Kiko Ventures was set up by FTSE-250 listed investment firm IP Group. As Trezona explains, IP Group was already an active investor in climate technology, so the launch of the new platform essentially builds on existing investment strategies while establishing a brand specific to startups that are growing. tackle the greenhouse gas emergency.

“We are looking for transformative companies,” he says. "These can be companies that are working on scientific breakthroughs, but also companies whose business models can scale very quickly."

Kiko Ventures was launched with existing climate tech assets (IP Group) valued at £175m and has since made new yet to be announced investments. Portfolio companies include C-Capture (carbon capture technologies), Mixergy (hot water technologies) and Magnomatics (energy efficient motors and generators).

A common factor is that they are science and engineering-based companies – a status shared by many companies in the climate technology sector. According to Morteani, these companies are not always well served by conventional venture capital models.

"The problem with venture capital funds is that they run out of money, and then their behavior starts to change," he says. Kiko's structure is different. As a listed company on the London Stock Exchange, IP Group relies on institutional investments...