Congruent raises new $300M climatetech fund despite market slowdown

Congruent Ventures, one of the first venture capital firms to focus squarely on early-stage climate-oriented startups, just bucked broader market trends and roughly doubled its assets under management.

The firm said Wednesday it had raised more than $300 million for a ​“Continuity Fund,” which aims to help existing portfolio companies grow their business from early stages into full commercialization. Congruent launched with a $92 million fund in 2017, then raised a $175 million fund in 2021.

The new raise is notable for the contrast it strikes with dour outlooks in financial markets broadly, and a pullback in investment for climatetech specifically, amid a tangle of inflation, high interest rates and the collapse of leading climatetech bank SVB. 

Climate-related startups raised $5.7 billion in the first quarter, 36% less than the previous quarter, according to a recent tally by Pitchbook. That’s the lowest deal value since mid-2020, and down about halfway from the peak of investment in Q3 2021. The number of startups that raised money plummeted last quarter, too.

“A lot of capital decided this was the hot, interesting place to be and piled in,” said co-founder Josh Posamentier. ​“We’re seeing the shakeout now.”

But Congruent hasn’t had to adjust its strategy, said Posamentier, who started the company with fellow investor Abe Yokell. The firm screens for companies that will make a material impact on carbon reductions, but ultimately, it invests for returns. ​“We are fully obsessed with unit economics,” Posamentier said, a useful antidote to fads and narrative-based investing. 

“We did slow down a little bit during the peak of the craziness because we couldn’t understand how people were underwriting deals at the prices they were doing them at,” Posamentier noted. Now, though, ​“investing at the seed stage in a down market is a great place to be.” 

Congruent’s new fund will double down on 15 to 20 of the firm’s early-stage investments as those startups grow revenue and raise late-B or C rounds, Posamentier said. Congruent assigns different partners to evaluate the continuity deals than the ones who led the original early-stage investment in order to run an independent diligence process. So far, the Continuity Fund has invested in Amp Robotics, Fervo Energy, Meati Foods and Span, but Congruent did not reveal the close of the fund until Wednesday. 

Congruent has exited a few investments already. Vic Shao’s fleet charging startup Amply got acquired by BP, as did Blueprint Power. Sense Photonics, a 3D lidar company for automation, was bought by Ouster. TeleSense, which makes software to reduce waste in grain storage, found a buyer in UPL, a global agribusiness.

Congruent’s new fund is just one sign that climatetech funding hasn’t slowed to a halt, even if it has trended downward in recent months. 

“The companies that are doing well are still able to raise money, and usually in oversubscribed rounds,” Posamentier said. And if the rest of the economy is struggling with rising costs of goods and services, that’s a great time to grow businesses that streamline manufacturing or supply chain — and cut carbon emissions while they’re at it.