Why are VCs ignoring climate change tech start-ups?

climate change start-ups
Image credit: Vadim Petrakov / Shutterstock.com

ITEM: A growing number of tech start-ups are focusing on the problem of climate change – specifically, by developing technologies that can remove carbon from the atmosphere. Just one problem: most Silicon Valley venture capitalists aren’t interested in funding them because, to be blunt, there’s no clear business model for it.

According to the New York Times, venture capitalist Matt Rogers (who also co-founded Nest) has created a VC fund for carbon removal start-ups, but has found that few VCs are willing to join him – partly because they’d rather sink money into internet-focused start-ups that can (at least potentially) demonstrate a faster ROI, and partly because many of them lost a fortune when the so-called “clean tech” bubble of the 00’s burst.

Rogers is, to say the least, annoyed:

“We don’t need another photo-sharing app or another blockchain start-up,” said Mr. Rogers, who is investing his money through Incite Ventures, a fund he created with his wife, Swati Mylavarapu. “We need to solve the carbon crisis. But a lot of folks are chasing the easy money rather than taking responsibility for what needs to be done.”

There are dozens of start-ups thinking up ways to remove carbon dioxide from the air, a process will likely essential to successfully combating climate change. Two major scientific reports released last year – one from the National Academies of Sciences, Engineering and Medicine, the other from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) – found that, thanks to governments dragging their feet on reducing carbon emissions and adopting green energy, those measures may no longer be enough to halt the rise in temperatures. We’ll also have to remove a lot of the carbon dioxide already clogging the atmosphere.

The problem for carbon-removal start-ups, says the NYT report, is that there’s no money in simply removing the carbon dioxide:

Carbon dioxide is plentiful but lacks the chemical energy that makes fossil fuels and other materials useful for generating power. So far, no one has found an obvious way to turn capturing carbon dioxide into a profitable business.

One thing that might help is a government policy that either encourages investment in carbon-removal technologies or helps to subsidize them through schemes such as, say, a carbon tax. However, given the governmental track record in enacting serious climate change policies (to include leaders that claim climate change is not real, not manmade or a hoax invented by China), I wouldn’t hold my breath.

In any case, Matt Rogers has a point. While no one could fault Silicon Valley VCs for being cautious where they put their money, how many blockchain start-ups or social media apps do we really need? Is it not possible for VCs to take a chance on technologies that aren’t just innovative, but also add real value to society in some way?

To be fair, Rogers adds that it will take more than Silicon Valley VCs to kickstart carbon-removal start-ups – it will take a wide variety of investors who are willing to wait more than a couple of years to cash out.

However, he tells the NYT, Silicon Valley used to take those kids of risks all the time rather than go for the easy money – in this case, the software entrepreneurs that promise to generate a lot of wealth in a short period of time. And anyway, Rogers says, a fat lot of good that wealth is going to do them (or at least the rest of us) as the climate gets more extreme over time:

“Sitting on your pile of money while the oceans are rising may not help you stay dry,” he said.

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