Diamond List screens climate startups for angels, new sustainability investors

New funders are flocking to the climatetech sector every day, including mainstream venture capitalists, private equity firms, large corporations, billionaires, philanthropies and angel investors. They are faced with a bewildering array of startups to invest in, chasing almost every conceivable pathway to avert catastrophic warming.

How’s an investor supposed to get a handle on all of that? The recently launched Diamond List aims to make their job a little easier by compiling 75 promising climate-oriented startups vetted by investors who know the sector.

“There are so many investors that are trying to come into this space and get up the learning curve quickly — there’s this huge array of solutions,” said Janice Tran, CEO of Kanin Energy, a Diamond List company that captures industrial heat waste for power generation. ​“Diamond List helps investors get up to speed really quickly.”

Even experienced clean energy investors fall into patterns that could overlook potential winners. A PwC analysis of climate investing in 2020 found that 63 percent of dollars went to e-mobility, like electric vehicles and scooters.

That means the transportation sector is over-represented in cleantech investing relative to its share of carbon emissions, which is around 30 percent in the U.S. Startups tackling lesser-known sources of emissions may have a harder time finding investors who are familiar with that subject matter.

“The Diamond List companies are more evenly representative of solutions to the various emission sources — including less well-known ones — and geographies,” said co-creator Olya Irzak.

Irzak previously vetted and developed long-shot clean energy solutions at X, the internal ​“moonshot factory” at Google parent company Alphabet, and now leads Frost Methane, a startup that captures and monetizes planet-warming gases.

Irzak — along with co-creators Cassandra Xia, Zeina Fayyaz Kim and Jeremy Brewer — reached out to their network of climate-specialist venture capitalists, philanthropists and angel investors. The organizers asked for three anonymous nominations of intriguing climatetech companies at the seed or Series A stage.

The criteria included a fantastic founding team, potential to make an impact and solid financial metrics. Self-nominating was not allowed — Irzak’s company was not included in the list, for instance.

The survey yielded 75 companies, now publicly accessible at Diamondlist.co. The site also has more detailed information for accredited investors. The roster spans categories such as industrial emissions, natural solutions, developing-world solutions and HVAC innovations.

The name alludes to the Black List, a film industry effort to bring visibility to overlooked but excellent scripts, Irzak noted. Diamonds, of course, are a form of carbon, which happen to be created under intense pressure — and ​“as an early-stage entrepreneur, you’re under so much pressure in the pursuit of building something amazing,” Irzak said.

The list only went public in February, so it’s too new to fully assess the impact. The organizers will survey member companies about outcomes from being on the list and re-run the nomination and selection process annually to keep the list fresh, Irzak noted.

But members attested to a range of initial benefits. Climate finance startup Atmos Financial got exposure to hundreds of likely customers via Diamond List, said CEO Ravi Mikkelsen. Since Atmos mobilizes bank deposits to fund climate solutions, several other Diamond List members made for potential project partners.

“We were also put in front of and took meetings with investors whom we probably would not have met otherwise, and one investor did come into our last round,” he added.

Diamond List inclusion confers ​“external validation and heightened awareness” for startups raising their first institutional capital, said Taylor Huff, CEO of Diamond-Listed electrolyzer startup Origen Hydrogen.

The list has a strong reach with micro-VCs and angel syndicates, he added, as well as accelerator programs that officially support the list, including Third Derivative and Techstars. (Third Derivative is supported by climate think tank RMI, which also supports Canary Media.)

The landscape of early-stage clean technology funding has blossomed in recent years. Congruent Ventures, one of the few VC firms exclusively dedicated to early-stage climate impact investing, raised $175 million for a second fund this spring. The $75 million Energy Transition Ventures launched in Houston to invest in seed through Series B, with ​“select late-stage opportunities.”

Dozens of incubators and accelerators have sprung up to help startups hone their visions and compete for additional funding.

Diamond List won’t replace those resources, but it could complement them by democratizing awareness of which startups are taking a credible swing at tough climate problems.

(Article image courtesy of Li-Ann Lim)