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💸 Catalytic Capital, Additionality & Gigaton Scale Climate Impact

My Climate Journey

Photo by Isaac Smith / Unsplash

Table of Contents

Host: Jason Jacobs
Guest: Amy Duffuor | Principal | Prime Impact Fund
Category: 💸 Venture Capital

Podcast’s Essential Bites:

[4:48] “I work for Prime Impact Fund, which is an investment initiative of Prime Coalition, which is a 501c3 nonprofit. And Prime Coalition's mission is to partner with philanthropists to use catalytic capital to drive climate innovation. […] Prime Impact Fund’s […] sole focus as an early stage VC fund is to invest in technology companies with the potential for gigaton scale climate impact.”

[6:38] “The innovation in the Prime Impact Fund model is that all of the capital that's coming into the fund is what we call catalytic capital. So it is from high net worth individuals, family offices, foundations. And as a refresher on what catalytic capital is, it's much more structurally patient and flexible capital. And so we want to use that to de-risk early stage climate technologies for follow-on investors. […] So it's essentially capital that accepts disproportionate risk to generate positive impact, and help enable […] third party investment that wouldn't have been possible otherwise. So this can come in lots of different forms, whether it's recoverable grants, program related investments, which are typically used by US foundations, or mission related investments, which are equity subscriptions. But the whole idea is that these primarily tax exempt investments, as long as they can show that they've got a burden of proof of additionality, they can be used to support for profit companies.”

[17:45] “Additionality’s […] basic idea is that an investment wouldn't have come together […] but for our intervention. And this can manifest in a lot of ways. It could mean that a company is too early for mainstream funders. So we're not afraid of going into university labs. It could mean that there isn't a kind of a deep climate investor around the table that can help prioritize optimal climate impact, or the terms that are being offered aren't favorable to a founder, or the timelines mean that other investors can participate. There are lots of different ways that additionality manifests. But ultimately, it means that we're not chasing hot deals.”

[18:53] “When Prime started frankly, additionality was as simple as no one else is willing to fund this company, so we are, so we can move forward. Literally in 2013 and 2014 when Prime first operated in deal by deal syndication mode, that was the case now there's a ton of money pouring into climate. So additionality is shifting in the sense that it's less about not coming together for one explicit reason, but more about us focusing our efforts in more overlooked […] areas or verticals within the climate space. And now we've seen that sometimes our involvement in a company can actually spur other investors off the sidelines to participate, which we think is really great and an important field building aspect to additionality and just Prime's approach to climate investing in general.”

[20:14] “Our Northstar of investment criteria is gigaton scale climate impact. So a company has to have the potential to reduce at least half a gigaton of greenhouse gas emissions by 2050. So when we think about verticals or sub sectors, it's one that can really achieve that. So when you think about transportation, or buildings, or agriculture, there are lots of different areas, but then there are nuances within that. So in agriculture, for example, a lot of money has been flowing into ag tech, but it's primarily downstream towards the end consumer. Think of all the alternative protein companies, think of Instacart. There's less money that's going more midstream, and upstream closer to the producer. And so that can be an area where there's more whitespace for catalytic capital to play […] a more catalytic role.”

[21:08] “Other overlooked areas, too, when we think about places we want to focus on, […] [is] long duration energy storage […]. I think it's funny, we invested in a direct air carbon capture company […] about two years ago. We actually see so many companies that are coming to us now. So when I talk about additionality, being shifting, maybe in a year, two years, there's gonna be a lot of conventional venture money that's pouring into those companies, which I totally wouldn't have thought. And that may not be the most appropriate place for us to play in terms of catalytic capital. […] Another good example is electric aviation. […] So when we think about […] additionality and overlooked areas that really shifts over time.

[29:45] “Prime is primarily in hardware based companies in the climate space. They require more capital oftentimes, and they have a longer investing horizon. So kind of in the spirit of that, people that focusing on different blue tech solutions, the ocean is very unknown when you're trying to do any sorts of pilots, or there's a lot of concern now around the ecological impacts and frankly impacts of coastal communities that may mean people are really shying away and those pre-seed, seed and series A rounds, which are the rounds that we typically tend to participate in. So things like ocean sequestration, or ocean farming, or wave energy, I think all areas that people have tried to shy away from or even decarbonizing maritime shipping. […] So while there's money coming in to the space, a lot of that capital is either coming in at a point in time, […] where certain things have been de-risked, or could have more of a software bent. So there's a lot of money that's now pouring into some of these carbon marketplaces […]. And so we don't necessarily believe that they're bad investments at all, we just, we want to make sure that we're trying to fill a capital gap.”

Rating: ⚡⚡⚡

🎙️ Full Episode: Apple | Spotify (Original Title: "Amy Duffuor, Principal at Prime Impact Fund" )
🕰️ 1 hr 4 min | 🗓️ 08/30/2021
✅ Time saved: 1 hr 2 min

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