G2 Venture Partners will invest $500M in companies cleaning up legacy industries

The veteran sustainability investors at G2 Venture Partners have raised $500 million for their second fund, aimed at revitalizing long-standing industries with new technology.

Spun out of Kleiner Perkins’ Green Growth Fund in 2017, G2 raised an initial fund of $350 million the next year. That fund had several exits, including electric bus maker Proterra, which debuted on the Nasdaq exchange this week.

The partners tried to raise the same amount this time, but they ended up garnering so much interest that they hit the limit at $500 million, said founding partner David Mount.

G2 focuses on companies that pursue sustainability by injecting new technology into legacy industries. That may look like more nimble, digitalized forms of energy production, but it also could take the form of streamlined supply chains and manufacturing processes, or more efficient food production.

This time around, the investors can point to successes from the first fund as data points for their vision. In addition to Proterra, portfolio companies Luminar (lidar for autonomous vehicles) and Shift (a used vehicle marketplace) have also gone public.

“The thesis is working,” Mount told Canary Media. ​“Not because there is some bubble in cleantech, but because fundamentally what these businesses are doing to drive efficiency and bring technology into traditional industry is good business.”

The focus hasn’t changed — the firm still looks for companies at the stage of Series B or later, as well as growth equity investments. But check sizes could get bigger, Mount noted.

The fund will examine companies working on the ​“electrification of everything,” a strategy to decarbonize society by cleaning up the grid and shifting activities to clean electric power. That project has spawned several billion-dollar companies already, including Tesla, Sunrun, Proterra, Enphase and SolarEdge.

“The market is so broad and so large that there is still plenty of uncharted territory,” Mount said.

Former Proterra CEO Ryan Popple joined G2 as a partner in February, according to his LinkedIn page.

G2 is also interested in low-carbon food. Consumer tastes are driving the shift, as seen in the uptake of the products from brands Impossible Foods and Beyond Meat. But there’s need for innovation in agriculture that doesn’t deplete the environment, according to Mount. He also sees opportunities in compressing supply chains, where additional links in the chain from grower to consumer translate to unnecessary refrigeration and transport costs, not to mention carbon emissions.

Kleiner Perkins chairman John Doerr made a personal investment in G2’s Fund II. Legacy companies Shell, Mitsui, Daimler and ABB contributed as strategic investors.

This new funding comes at a time when unprecedented amounts of dollars are flowing into the cleantech space. Everyone from retail investors to major financiers and pension funds is looking for a piece of the sustainability action.

Companies have responded by beefing up their sustainability messaging, whether or not they change what they’re actually doing. G2’s leaders can credibly claim they were paying attention before this recent hubbub.

(Article image courtesy of Michelle Henderson)