Lastminute’s co-founder: ‘A lot of money is going to be made solving the climate crisis’

Sus­tain­able busi­ness ven­tures have some­times strug­gled to attract the same lev­els of atten­tion from investors as star­tups in more fash­ion­able sec­tors. But there are signs that this trend is chang­ing.

Despite rep­re­sent­ing 6% of the ven­ture cap­i­tal mar­ket, the amount invest­ed in cli­mate tech star­tups increased from $418m in 2013 to $16.3bn in 2019, accord­ing to a report from PwC. This growth in inter­est exceeds most oth­er mar­kets and, for com­par­i­son, was three times the rate of increase in invest­ment in arti­fi­cial intel­li­gence over the same peri­od.

And the amount of mon­ey flow­ing into cli­mate tech star­tups has already topped $14bn in 2021 (as of 25 June), accord­ing to Pitch­book, which has tracked a sim­i­lar rise in the amount of mon­ey flow­ing into cli­mate tech ven­tures. This trend has con­vinced Brent Hober­man, co-founder of Lastminute.com and Made.com, and a ser­i­al investor, that now is the time to invest in cli­mate tech solu­tions. 

Cli­mate tech star­tups are gen­er­al­ly defined as any com­pa­ny that is inno­vat­ing on exist­ing prod­ucts and ser­vices to make them more sus­tain­able, whether that is through the reduc­tion of ener­gy use and waste, or use of nat­ur­al resources. It can cov­er indus­tries as diverse as fash­ion, food and trans­port.

“A lot of mon­ey is going to be made in solv­ing the cli­mate cri­sis and that’s why so much com­mer­cial ven­ture cap­i­tal mon­ey is going into this space,” he tells Racon­teur. “Almost every ven­ture cap­i­tal fund is now putting cli­mate tech high up on their pri­or­i­ty list.”

Avoiding another cleantech bubble

The last time cli­mate tech invest­ment expe­ri­enced rapid expan­sion, between 2006 and 2011, the bub­ble quick­ly burst. Ven­ture cap­i­tal funds poured $25bn of cap­i­tal into cli­mate-friend­ly ven­tures but the bet did­n’t pay off and over half of their cap­i­tal was lost, accord­ing to the MIT Ener­gy Ini­tia­tive. So what makes this time dif­fer­ent?

Hober­man has invest­ed in 12 cli­mate tech star­tups through per­son­al angel invest­ments and the two VC com­pa­nies — Founders Fac­to­ry and First­minute Cap­i­tal — that he co-found­ed. He believes the increased aware­ness of the cli­mate cri­sis, glob­al events such as the upcom­ing COP26 meet­ing, more patient investors and gov­ern­ment action means the same fate will not befall cli­mate tech investors this time around.

“It’s a time of mas­sive dis­rup­tion in this space and dis­rup­tion cre­ates oppor­tu­ni­ties for entre­pre­neurs,” he says. “If I want­ed to go back to being an entre­pre­neur, I’d look at the indus­tries that are the most dam­ag­ing to the envi­ron­ment and see how they could be fixed.”

For Hober­man and oth­er tech opti­mists, invest­ment in this space rep­re­sents the best oppor­tu­ni­ty the world has for com­bat­ing the worst effects of cli­mate change. He says: “I don’t believe that forc­ing peo­ple into this mas­sive behav­iour change is going to be enough, there is a need for new sci­en­tif­ic solu­tions.” 

Hober­man points to the car indus­try as an exam­ple. “You can either go back to rid­ing hors­es or keep improv­ing bat­tery tech­nol­o­gy and elec­tri­fi­ca­tion upgrades to make the indus­try more sus­tain­able.” 

First­minute Capital’s invest­ment in New York-based lab-grown meat start­up Fork & Goode is born of the same idea. “Per­son­al­ly, I don’t think peo­ple are going to stop eat­ing meat until we make lab-grown meat or plant-based sub­sti­tutes that are as good,” he adds.

Some cli­mate sci­en­tists believe that an over-reliance on tech­nol­o­gy to res­cue human­i­ty from the cli­mate cri­sis is detri­men­tal because it will not be enough to meet cli­mate tar­get of keep­ing glob­al tem­per­a­ture ris­es below 2 degrees. A 2020 report from aca­d­e­mics from the uni­ver­si­ties of Cam­bridge, Oxford, Not­ting­ham, Bath and Impe­r­i­al Col­lege Lon­don claimed that we should plan to respond to cli­mate change using today’s tech­nolo­gies, rather than wait for tech­no­log­i­cal break­throughs.

Hober­man believes that a bal­ance can be reached by invest­ing in long-term projects and com­pa­nies such as Fork & Goode and eco-friend­ly fash­ion brand Pan­ga­ia, which encour­age con­sumers to make more sus­tain­able lifestyle choic­es. 

He adds: “I’m not say­ing con­sumers should­n’t make sac­ri­fices, but if you think the answer is Extinc­tion Rebel­lion stomp­ing in the streets telling every­one to stop tak­ing cars to work, you’re wrong. That’s just protest the­atre, it’s not going to dri­ve the change we need. If they used their ener­gies to help find new break­throughs, that would be bet­ter.”

The sectors benefiting from climate tech investment

First­minute Cap­i­tal and Founders Factory’s cli­mate tech invest­ments have so far been spread across mul­ti­ple sec­tors, from the food indus­try to trav­el and fash­ion. Hober­man explains: “As an invest­ment fund our first love is find­ing great pas­sion­ate entre­pre­neurs solv­ing big prob­lems. If they’re doing that then we’re inter­est­ed and you’ve got our atten­tion.” 

Cer­tain sec­tors, such as the renew­able ener­gy sec­tor and biodegrad­able plas­tics, remain riski­er invest­ments because of the high­er amounts of ini­tial cap­i­tal required, accord­ing to Hober­man. How­ev­er these types of projects do offer the poten­tial for big­ger rewards.

The influx of cap­i­tal from a wide vari­ety of sources is anoth­er cause for opti­mism. Hober­man, who is host­ing a cli­mate tech event as part of Lon­don Tech Week, says: “You’re get­ting sup­port across the board from VCs, high-net-worth indi­vid­u­als and cor­po­rates, as well as pol­i­cy mak­ers – the whole econ­o­my is get­ting behind cli­mate tech invest­ing.”

With the Paris cli­mate agree­ment tar­get­ing an annu­al col­lec­tive spend of $100bn on cli­mate change solu­tions, sup­port from pri­vate finance will be impor­tant in sup­port­ing pub­lic funds in the tran­si­tion to net-zero emis­sions.