Congruent Ventures, a venture capital firm dedicated to early-stage climate startups, has a new fund to invest.
On Thursday, the young San Francisco-based firm closed a $175 million second fund, bringing it to $300 million under management. Amid a booming market for sustainable businesses, Congruent is among a relatively small group dedicated to funding companies that are just getting started, and may not even have a product or revenue yet.
"There’s no out-of-bounds — if you’re early[-stage] and you’re doing sustainability, we’ll look at it," co-founder and managing partner Joshua Posamentier told Canary Media.
Congruent's first fund supported 29 startups, running the gamut from grid hardware to fintech, "insuretech" and steaks made from fungi. The new fund has already invested in seven companies.
When Congruent closed its first fund in 2017, Silicon Valley was still nursing its bruises from a late-2000s wave of investments in thin-film solar, algal biofuels and other cleantech long shots that didn't make it.
"Our biggest concern was that we would not have sufficient follow-on capital after we did pre-seed, seed and Series A," said co-founder and managing partner Abe Yokell. "Generally speaking, [that concern] is completely resolved."
Congruent's limited partners have followed up with later-stage investments, but so have lots of outside investors. It's become routine for Congruent to kick off a "tiny seed round" only to see the company raise a $20 million Series A in short order, Posamentier said.
Some examples include Amply, a provider of managed charging for electric vehicle fleets, which raised $13.2 million last year from investors including Soros Fund Management and Siemens, and Span, a maker of digitally controllable home electrical panels, which raised $20 million in January from investors including Munich Re Ventures’ HSB Fund and Amazon's Alexa Fund.
The company noted that limited partners invested in the second fund include:
UC Investments, the Microsoft Climate Innovation Fund, affiliates of Prelude Ventures, the Three Cairns Group, and Cambridge Associates clients including the Jeremy and Hannelore Grantham Environmental Trust and the Surdna Foundation, among other institutions, foundations, and family offices.
Since Congruent's launch, the cleantech sector has embraced Wall Street's obsession with special-purpose acquisition companies (SPACs), whereby startups go public via acquisition by a shell company. For a company that's tapped out of available venture capital, a SPAC offers hundreds of millions of dollars in cash and a potentially favorable valuation, given market enthusiasm for the sector.
But that can also have a distorting effect, pushing the envelope on valuations for later-stage startups. Even Congruent's early-stage portfolio has been fielding inbound interest from SPACs in search of acquisition opportunities.
"I think it’s the wrong call for almost all those companies at the valuations they're talking about," Posamentier said.
Then again, SPAC exits returned money to limited partners who can now invest it in a new wave of companies, Yokell noted.
"If there had been a total wipeout in value from the last cohort of energy...and climate tech, that would be a worse outcome than what's happening with SPACs," he said.
Also different from the first time around: Yokell and Posamentier have moved on from proving the value of an early-stage climate venture capital firm and are focused more on building an institution. Their staff has grown to five investors, and they expect the shop to keep expanding.
"We’ve never been busier on the deal-flow side, and the quality of deals is going up as well," Yokell said.
Another dedicated early-stage fund launched last week in Houston. Energy Transition Ventures, led by industry veterans Craig Lawrence and Neal Dikeman, is targeting a fund of $75 million to invest in disruptive energy startups. The firms is looking at seed through Series B, with “select late-stage opportunities.”
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