Can software save the world from climate change and other environmental threats? We’re not going to know the answer to that question for a very long time, but a venture capital firm is betting that companies that develop business management software for addressing climate change can be profitable while they are trying.
Collin Gutman is managing partner of SaaS Ventures, a venture capital fund based in Miami and Washington, D.C., that focuses on early-stage investments in so-called enterprise technology—that’s the tools that help businesses behind the scenes, largely software and services. It launched its first fund of $20 million in 2017 and second $50 million fund in 2020. It didn’t turn to climate-change investments until 2020, and, since then, a quarter of new investments have been targeted on climate tech. Here’s what Gutman has to say about the potential of climate investments, why they make sense now, and what a few of these for-profit climate startups are developing.
IEEE Spectrum:Why are climate change investments so new to your firm?
Collin Gutman: We’re not a double bottom line fund, we are pure profit oriented, if it does good, great, but not what we invest in.
In 2020, we were looking at a company called Optera. They had been a consulting company but had pivoted to developing software that takes information about a company’s supply chain, its set of vendors, and considers where the materials are coming from, who is providing them, and how they are traveling to calculate indirect emissions from the final product.
As we looked into this company, we discovered that their purchasers were not in the social responsibility arms of corporations, which is where the climate focus used to be, but rather, in the office of the chief financial officer or vice president of supply chain management. In some cases, these offices had created executive positions to oversee sustainability—a chief sustainability officer or vice president of sustainability.
This is an exciting trend.
The last two major high-level positions were the splitting off a CISO [Chief Information Security] officer from the office of the CTO, and the chief human resources officer splitting off a chief diversity officer. The next iteration is the chief financial officer/supply chain office splitting off a chief sustainability officer.
Seeing this, we realized that these sustainability officers need technology to help them. That area has come to be called ESG tech, for environment sustainability governance. And it can be profitable for a startup.
So we did invest in Optera, and started looking for other startups aiming to address this new market.
Tell me about your other climate tech investments so far.
Cloverly is also involved in carbon emissions tracking, giving companies and consumers more control over the purchase of carbon offsets, instead of having businesses buy offsets as an all or nothing decision. Cloverly’s tool predicts direct emissions from an ecommerce order, be it a manufacturer buying wool or a consumer buying an airline ticket, gives the buyer an opportunity to buy carbon offsets for just that order of wool or just one seat on a plane, and connects the buyer to venders that sell appropriate offsets.
Our other investments are connected to water.
We have a company called Klir that is developing operating systems for water utilities, bringing together data that are currently handled separately—essentially, a Salesforce for water tracking.
Another company, Neer, is developing an AI platform, integrated with sensors, to manage water flow and water quality. They will sell to utilities—and breweries, which have similar water management issues.
Finally, we invested in Fruitscout; they are doing crop yield management, including water management, predicting how foods will grow over time based on their current status, predicted rainfall, and other factors. They are building their model plant by plant, using AI. They started with apples and are doing agave next.
What are you looking for in a startup?
Mainly, a great founding team and a market worth winning. Everything else is details. And what has recently changed is the second part of that—we now see markets related to environment and sustainability as markets worth winning.
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Tekla S. Perry is a senior editor at IEEE Spectrum. Based in Palo Alto, Calif., she's been covering the people, companies, and technology that make Silicon Valley a special place for more than 40 years. An IEEE member, she holds a bachelor's degree in journalism from Michigan State University.