Investible – Climate Tech Fund Interview

Investible, an early-stage VC based in Australia and Singapore, recently launched a new Climate Tech Fund to back founders building solutions for the climate crisis, and to enable investors to capitalize on the historic opportunity. Read on to learn about the background, strategy and investment approach of the Investible Climate Tech Fund.

About the Fund

Tell us about Investible and your journey of the Climate Tech fund inception?

Investible is an Australian early-stage VC that delivers first access to innovation on a global scale. With a team of over 25 and offices in Sydney and Singapore, we provide the capital, expertise and networks for Founders to reach their full potential.

After more than 2-years in development, the Investible Climate Tech Fund was established to invest in early-stage technologies that will solve the world’s most pressing challenge: Climate change. In recent years, macro tailwinds behind the development of climate technologies have dramatically increased and many of the world’s most ambitious, innovative founders are now dedicated to helping build a sustainable future.

Detail on our investment themes

1.ENERGY – Decarbonising our energy sources through
electrification, new fuels and storage
a. Renewable energy deployment
b. Recovery and storage
c. Smart grid
d. Distributed energy networks
e. Forecasting and optimization software
2.TRANSPORT – Innovating new fuels and transport options
with technologies that support how we move
a. EV deployment, adoption and charging
b. Shared mobility
c. Fleet management and logistics platforms
3.INDUSTRY – Smarter ways to mine and manufacture, create new
sustainable materials and reuse what we already have
a. Circular economy
b. Waste material recovery & repurpose
c. Green manufacturing
d. Alternative plastics
e. Biomaterials
f. Green hydrogen
g. Additive manufacturing
4.BUILDINGS & CITIES – Protecting existing infrastructure and driving energy
efficiency in new physical structures and retro-fits
a. Energy efficiency
b. Building automation
c. Climate resilience
d. Green building materials
e. Alternative heating and cooling
5.FOOD & AGRICULTURE – Improving supply chains, minimising waste and
changing what is available to eat as tastes change
a. Alternative proteins
b. Food wastage
c. Precision agriculture
d. Indoor agriculture
e. Regenerative agriculture
f. Supply chain efficiency
6.FOREST & LAND USE – Using our limited natural resources more responsibly and efficientlya. Natural carbon capture & credits
b. Reforestation
c. Land use optimization
d. Water management

How does the fund play a role in the overall investment strategy across investible’s existing portfolio?

Investible is a global VC firm.  We will continue to identify and invest in and empower the audacious founders making the world a better place.  Our unique model invests through our early stage VC funds and the global Club Investible investor network, which enables investors to actively invest in and further support individual startups.

All of Investible funds have an ‘impact’ focus. Over the last 2-years, we have seen a sharp increase in the number of climate-focused companies applying for funding from across the APAC region. The Climate Tech Fund has been established to support this robust deal flow pipeline, identifying and investing in technologies to deliver a net zero future.

What is the product? (ticket size, fund horizon, tranche, investment thesis). Can you elaborate about the structure of the fund, potential return, and exit?

Climate technologies are already changing the way we eat, live, move and work. As the world moves toward ‘net zero’ carbon emissions, greater innovations will emerge to help make that transition faster and at scale. The next ten years in particular will see the economy transition across all sectors and new industries develop.

We believe a ‘once-off’ historic opportunity to build successful companies while helping preserve the quality of life on this planet lies ahead of us.  The consequences of not getting this right just don’t bear thinning about.

The fund targets a raise of US$75m, with a 10-year fund horizon, seeking to build a portfolio of 60 investments in early-stage climate tech companies in the APAC region and globally.  Our preference is to focus on seed stage, typically with check sizes in the ~US$500k range. We can also do pre-seed with smaller checks; as well as bigger checks (up to US$800k-1.5m+) at Series A and B, although these are typically follow-ons. The fund targets a return of 25%+ IRR. Exits will vary but we expect a combination of trade sales, IPO and secondary sales.

What are the typical LP’s profiles that have joined the fund (e.g corporates, DFI’s, Philanthropic Foundation)? What is the reaction of the fund when announced? Did you receive positive feedback from the market (supply: LPs vs demand: entrepreneurs response)?

We have had significant interest, with a large number of LPs already committed including high net worth individuals, family offices and institutions from across APAC and the United States.

Since announcing the fund, Investible has received very positive feedback both from LPs and entrepreneurs. There are increasing numbers of investors excited to have a dedicated investment vehicle for this sector, and to have a positive climate impact.

Entrepreneurs are excited to have dedicated capital focused on climate tech, as many companies in this space are deep tech or hardware which is not often within the remit of traditional VC.

Disbursement

Can you share the strategy to build your portfolio?

Investible’s robust dealflow pipeline has a diverse number of sources. In addition to the hundreds of cold reach outs from our brand’s presence in APAC, we receive quality referrals from founders, from members of our global investment network Club Investible, and active LPs. We also receive high-calibre referrals from our partners in the broader startup and venture capital ecosystem including our board of Climate Tech Advisors, and later stage VCs in Australia and South East Asia. 

We aim to build out a diversified portfolio across our six areas of focus (based on the UN Six Sector solution to the Climate Crisis) and diversity across software, hardware and deep tech.

Can you share the investments target: number of investments, area coverage, disbursement timeline?

  • 60+ investments
  • 70% Australia – 30% international with a focus on SouthEast Asia
  • We are aiming to deploy the capital in under 5 years

How much of the fund will be the first tranche and follow on?

The Fund is reserving 50% of the capital for follow on investments.

Do you consider your disbursement strategy to play a more catalytic role or risk averse?

The Fund is predominantly focused on seed rounds so the majority of the investments will be catalytic. However, as the Fund is aiming to build a diversified portfolio, we intend that some of the investments will have a catalytic role and be focused on ‘moonshots’ while others will be lower risk/more defensible opportunities.

Would you be able to lead the investment deals?

Yes, the Investible Climate Tech Fund prefers to lead seed rounds.

How do you see the competitive aggressiveness of the fund performance projection and capital disbursement?

We believe the 5-year investment period is sufficient to deploy the capital into quality investments that will meet our 25% IRR target. Based on the number and quality of opportunities we have seen in recent quarters, we are confident in our ability to deploy the fund’s capital in under 5 years.

Industry

What do you see the climate solutions market is going to look like?

The challenge of climate change transcends any specific sector. As the challenges faced by global communities are so extensive, the solutions will be broad, and come from all sectors of the global economy.

On one hand, this makes it complicated to be an expert in all of the solutions and sectors. It also means that things are complex and interrelated – many of the problems are related to systems.

On the other hand, there are so many opportunities and solutions that have the potential for a real, material impact. There is no shortage of ground-breaking ideas; and the pace of innovation is accelerating. This plays to our strength and proven track record as an early-stage VC with a diversified approach, where we have the processes in place to screen thousands of companies each year and a strong network of experts in our corner to support Founders post investment.

As well as software solutions, some solutions will come from the deep tech sector and some will be hardware driven. Investible has assembled a group of advisors and broader relationships with research institutions and universities to assess these.

How do you see it’s changing?

The climate tech market is evolving to become mainstream everywhere in the world, driven in part by significant investor demand for ESG investments. According to PwC’s 2021 State of Climate Tech report, there was U$87.5 billion invested in 3,000 climate tech startups globally in H2 2020 and H1 2021, a 210% growth YoY. At this stage, it is unclear if it will mean most companies and VCs will have a climate component, or if there will be more fund managers that specialise in the climate tech sector.  Whilst we have met with a combination of both, there are a lot more of the latter in particular with passionate founders of all backgrounds.

There is a plethora of later-stage capital looking for climate opportunities; and large corporate institutions are looking to acquire technologies to help them transition their business to more sustainable future models. That trend is just getting bigger as public companies and investors move from carbon intensive industries to the solutions of a decarbonising world.

This trend is relatively recent and means deep tech/capital intensive solutions have many options to scale rapidly beyond early stage VC.

How do you see the opportunities of investment in climate solutions in Australia compared to SEA (in particular Indonesia)?

The key differences relate to the specific markets and their unique characteristics that will drive solutions addressing the local needs, which then can be expanded to other markets. One key element in that respect is the market size. Australian startups must go global quickly whereas SEA startups can thrive in the region before expanding further (with the caveat that every country has its own dynamics and rules).

Given that most of SouthEast Asia’s carbon sinks are located in Indonesia, it is imperative to make an exponential effort to ensure ecological stability while maintaining Indonesia’s economic development. In order to meet these pressing needs, creative solutions will be needed.

Potentially, we also see the value in bridging Australia’s R&D into the Indonesian market to develop a synergistic relationship between the two economies: one that continues Indonesia’s outstanding economic growth while delivering on global sustainability objectives.

There are also some areas of potential common interest and focus areas between the two regions. Sectorally, there are a number of similarities with tourism, transportation, agriculture and industrials and energy being strong elements of the Australian economy as well as a number of SEA countries, including Indonesia. That means Climate Tech solutions applying to these sectors will be strongly represented and relevant in both regions.

Some physical similarities such as large waterfront, large forests/land areas and great sun and wind resources are also interesting points of convergence.

How does Indonesia differ from the other market and how much Indonesia will weigh in the capital allocation?

Indonesia’s strong economic growth and demographic makes it particularly interesting; and as such has the potential to weigh heavily in the capital allocation.

Indonesians, aside from the size of their market, are extremely innovative, creative, and problem-solving in nature, to the extent that we see amazing entrepreneurs there, and have recently invested in two companies from the country through our sector-agnostic funds. These include the agritech food and supply chain startup Eden Farm, and workforce development platform MyRobin.

Due to the high number of unicorns in Indonesia, we believe many Indonesians are inspired to start their own journeys, especially in the sustainable sector, which is one of the most discussed topics among the Indonesian millennial generation.

Indonesia’s complex geography composed of islands makes centralised infrastructure inefficient outside of the big urban areas. Decentralised solutions driven by technologies in power, waste and production can thrive in Indonesia.

Beyond the direct climate tech related factors, it is an opportune moment to invest in Indonesian innovation. There is an abundance of experienced operators from the country with experience in launching and scaling their own startups locally and abroad. Additionally, the government is promoting entrepreneurship, and rising affluence is converging with interest in ESG amongst the youth of the population.

Contact Information

Tom Kline
Co-Head of Climate Tech, Investible (Australia)
tom@investible.com

Reena Sharma
VP, Investor Relations, Investible (Singapore)
reena@investible.com