Like many startups, climate tech companies often face a “valley of death” that lies between early stage funding and the growth capital needed to help proven technologies reach commercial scale.
Because climate tech startups are frequently hardware focused—physical problems tend to require physical solutions, after all—this valley of death tends to be much wider. Financing a first-of-a-kind power plant or factory can cost tens or even hundreds of millions of dollars.
A new fund hopes to bridge this financing gap, also known as the “missing middle.” Called the All Aboard Coalition, it aims to raise $300 million by October to help startups secure the $100 million to $200 million rounds required to build first-of-a-kind projects.
All Aboard will write checks for equity or convertible equity, but it will not offer loans or back specific projects. This approach places All Aboard firmly in the venture capital column rather than project finance, which is occasionally suggested as a way to bridge the valley of death.
The fund is led by Chris Anderson, the renowned curator and former head of TED Talks. Anderson, who transformed TED from a small conference into a global platform for spreading ideas, is now applying his network-building prowess to bridging a gap in climate technology investing. The coalition includes Ara Partners, Breakthrough Energy Ventures, Clean Energy Ventures, Congruent Ventures, DCVC, Energy Impact Partners, Future Ventures, Galvanize Climate Solutions, Gigascale Capital, Khosla Ventures, NGP Energy Capital Management, Obvious Ventures, Prelude Ventures, S2G, and Spring Lane Capital.
Some partners from the firms listed are investing in the new fund, though that is not a requirement to participate.
The hope is that the new fund will serve as a “Sequoia-like” signal in the sector. This means that when All Aboard invests in a company, other experienced funds will be more likely to follow suit.
For climate tech startups looking to cross the valley of death, they will collectively need more than $300 million—and likely far more than the $60 billion that the All Aboard members currently have in assets under management. Finding generalist investors who want to participate will be crucial for All Aboard to succeed, and for the broader climate tech sector to achieve commercial success.