Fit for The Future: Investing in Climate Change Tech

Investing in Climate Change Tech—Over the last few months, one of my recent investments has been top of mind. I’m excited to be investing in FullCycle, a private equity fund that invests in growth stage companies with developed climate-critical infrastructure technology.
The possibilities that this fund is creating are endless, and I’m looking forward to seeing this translate to a tangible impact on our world in the short to medium term.
FullCycle - logo

It's Never "Either/Or"

Climate change is a polarizing topic in our political sphere. When you hear Democrats and Republicans argue about climate change initiatives, only the most extreme positions are represented; the right side is accused of being “a capitalist pig who is only interested in making money,” or people on the left are “tree huggers who would sacrifice too many human needs for the sake of the planet.” But this false dichotomy, the ‘either/or’ choice, misses the point—there are so many companies innovating around climate disruption. This issue is not a ‘left’ or ‘right’ issue. It’s a human issue, and we all need to do our part. It is completely possible to make money AND save the planet at the same time.

FullCycle Climate-Tech Support

Climate tech is an urgently needed and rapidly growing market with so many companies innovating in the space. FullCycle focuses on accelerating the deployment of scalable technologies that can move us from a high-carbon economy to a low-carbon economy. They empower companies by standardizing offerings and accelerating rollout. It is important that the tech solutions work in the communities with less infrastructure, like Calcutta or sub-Saharan Africa, as well as they work in the wealthiest communities around the globe. FullCycle brings together dedicated financing, operational know-how, and regional expertise to help pioneering companies actualize the impact they’ve envisioned.

A Still-Commercial Enterprise

Those who invest in FullCycle are making an active, financial commitment to improve the habitability of our planet while at the same time proving that it can be a fiscally-rewarding enterprise. They understand that this work cannot be left to government officials. With the right financial support, private industry is making tangible strides toward lasting solutions to the climate crisis without sacrificing capital return.

For a FullCycle investment to be made, the climate tech needs to deliver an IRR (internal rate of return) in the mid-teens or higher in order to meet FullCycle’s goals of above market returns on a risk adjusted basis. They look for stable, contracted revenues from already-secured, signed agreements, and they expect increasing enterprise and/or exit values. Equity positions and investment rates are negotiated through a fixed or preferential basis.

Ready For Instant Deployment

These investments aren’t chasing pie-in-the-sky ideas; they are supporting technologies that can prove market readiness. This ensures that money spent is not money wasted; the dollars invested are going to climate-critical technology companies and associated infrastructure projects that are ready to make an impact right away.

NASA has a Technical Readiness Level (TRL) scoring system that helps them communicate where developing tech is in terms of ability to actually deploy. FullCycle uses this type of scaling system and looks for globally-applicable technology that is, at minimum, at the stage of prototype demonstrations, and ideally ready for full-scale implementation. This way, things can move quickly–capital is immediately deployed, the tech can be commercially rolled out, and impact can begin to be measured immediately.

CROI-20

FullCycle’s criteria for investment is very specific. They pour their efforts and their capital into market-ready technologies that can lead to scalable climate solutions and deliver compelling returns for investors. Beyond a financial ROI, they measure their investments with one other additional criteria: a CROI (or, “carbon return on investment”).

Capital Gains, Carbon Reductions

The analysts at FullCycle decided to focus on tech that addresses greenhouse gases. By prioritizing this measurement for climate impact, they adhere to more stringent metrics both for the fund and for the technologies it supports.
Investing in Climate Change - FullCycle-Synova
Many people look at long-term (100-year) time frames when considering climate-change impact. The analysts at FullCycle have decided to narrow their focus to technology that addresses greenhouse gases with the highest warming potential in the first 20 years of emissions. High-impact climate pollutants, including CH4, HFC, and N20, are responsible for nearly 50% of all global warming, despite making up only 24% of total atmospheric greenhouse gases emitted.

Their investments focus on the abatement of short-lived climate pollutants (SLCs), and FullCycle deploys capital in sectors of the economy that are the largest contributors of SLCPs. They only invest in companies that can prove a measurable impact of at least one giga ton of CO2e abatement per year, ensuring the most capital-efficient impact on climate at full deployment.

Companies Who Make The Grade

FullCycle’s first investment in late 2019 was with Synova, which converts waste to synthesis gas that can be used in a variety of applications.

Synova’s waste to energy/chemicals solution has drawn the attention of many. It recently announced a significant strategic partnership with Technip Energies and is set to start their next project in Portugal.

investing in climate change - SustainiTech
The second investment in Sustaintech, a company that supports indoor farming, to be able to grow a wide array of crops in any climate. This controlled environment agri-tech company is deploying in Alberta, Canada.

How I Got Involved

I first heard of this fund from fellow investor, David Scacco. David was the first Google Advertising Executive who was also an LP in AngelPad, the incubator that backed my startup, Vungle. I have always admired David, and we have a shared concern for climate change. I became interested in FullCycle’s highly experienced team of investors and the outsized 25% IRRs that they can return.

I have been looking for the right opportunity to deploy capital into climate change technology that has the potential to make a meaningful, immediate impact to save the planet now. The fact that someone I highly respect is also invested simply adds to the appeal for me.

How FullCycle Started

Ibrahim-AlHusseini-FullCycle-founder

Ibrahim AlHusseini was the son of Palestinian refugees who settled in Saudi Arabia. He grew up in the desert and developed a love for nature while scuba diving near his hometown of Jeddah. Eventually, Ibrahim came to the US and attended the University of Washington, where he founded a nutraceutical company.

Once he became financially independent, he found himself in a position to invest in and support other ventures. It was at that point that it became important to him to invest in passion projects. From early on in his career, Ibrahim understood that it’s not just about making money; it’s about translating capital power into public good.

It’s not enough to just support good causes with the small percentage of philanthropic dollars that wealthy people set aside. He believes that all capital invested can do both–earn a strong return and benefit society as a whole. He became an early investor in Tesla and began to share his philosophy publicly; those insights have formed the basis of everything he’s done since.

Eventually, this led him to tackle one of the world’s most troubling challenges; climate change. Ibrahim sees the need for climate tech as alarming and eminent. This is why the companies FullCycle invests in need to be ready to deploy now. “We don’t have the luxury of time;” says Ibrahim, “we need to replace old high carbon systems with carbon neutral (or even carbon negative systems), and FullCycle’s Climate Partners Fund is set to do this.” He quotes the Intergovernmental Panel for Climate Change (IPCC), which estimates that annual investments of $2.4T are needed simply to limit warming to just 2°C.

As I progress in my own investing career, I see the wisdom in this philosophy of doing good with my capital. I’m inclined to make investments that can change the world for the better, and investing in FullCycle and climate tech seems to me the best path to that end.