Software will not solve the climate crisis: deep technology investment is needed

In the year In 2011, Marc Andreessen famously wrote that “software is eating the world,” predicting that software companies would disrupt nearly every industry. His premonition has held true over the past decade. Software has had a far-reaching impact, bringing incredible efficiencies to business, transforming healthcare, and introducing countless conveniences into our daily lives.

However, while the software offers undeniable benefits, it is not a panacea for society’s biggest challenges, including the biggest of all, the current climate crisis. Software alone will never solve the myriad issues that contribute to the dire state of our planet. Hardware solutions and engineering-led innovations in the deep technology space enable some of the most important climate action.

The most exciting aspect of today’s deep tech climate innovations is that they are no longer science fiction or research experiments. Many of the most earth-changing climate solutions are close to commercialization. See how the deep tech ecosystem can rise to solve our biggest collective challenges.

Conducting deep technology on climate

It is not easy to overestimate the critical importance of deep technology in accelerating global decarbonization and renewable energy solutions. Much of the carbon capture and clean energy technology is now coming to market with deep technological innovations in hardware products. We’re seeing companies develop new ways to extract lithium from batteries to power EVs, slow carbon to carbon in ocean floats, and embed captured carbon dioxide into concrete to permanently store it there.

Perhaps unsurprisingly for a deep-tech fund, one of our company’s first investments in the market focused on advanced lithium-ion battery hardware developed by Solar Mobility. These swappable batteries enable “charge-as-you-go” EV power, which could make electric vehicles financially viable for the first time in markets like India.

Given these technological advances, there is no doubt that to overcome the many challenges threatening our planet, both the public and private sectors will need to look at inclusive climate solutions. Atoms And Bits. But the question remains, what role exactly can the VC community play in seeding deep technological climate change disruption?

Change from deep thinking to deep thinking

As Andreessen’s software predictions have played out in all corners of the business world, software investments in Silicon Valley and beyond hardware innovations have outpaced the capital that originally named the tech mecca.

Similarly, in climate technology, the first investments we’ve seen in this latest wave of climate innovation have focused on software or platform-based climate technology startups that offer services ranging from climate risk ratings to carbon accounting. But if investors are serious about cutting emissions, they should invest in some of the new technologies mentioned above. That’s not to say that measuring and analyzing climate risks using the latest software advances isn’t essential to climate adaptation and resilience. On the other hand, there are some software innovations, such as APIs for consumer products with carbon offsets, that do not have a meaningful climate impact.

That’s why we need special attention to solve the deep technology-related physics and chemistry problems that allow us to remove carbon from the atmosphere or reduce emissions. If not, there is no hope of mitigating climate change. We need to go beyond deep to address broader and more complex climate challenges.

For example, sectors such as mobility and transport attract 46% of climate technology investment but account for only 16% of global emissions. In contrast, areas such as the built environment sector – which accounts for an estimated 17% of global emissions – received only 5% of funding. These areas are ripe for deep technology disruption, and the VC community needs to expand its view of the climates in which to invest.

Dispelling deep technology myths

Along the way we’ll have to bust some really deep tech myths. The first is that you can’t build big companies with deep technology. Based on the past decade, many believe that unicorns and 10X exits can only be found in software. The team at MFV Partners recently helped show how this is simply false Prepare a list Deep tech companies have spent $1 billion, earning a combined $463 billion in roughly 120 tech unicorns. That’s right, nearly half a trillion dollars worth of value has already been created by deep technology.

Another myth is that deep tech companies require a lot of capital and take forever to become large assets. To develop this myth, our team analyzed the latest in-depth tech unicorns to understand how much money they took to get to the value of the unicorn. of Results We’ve reinforced what we know from experience: deep tech startup capital and time requirements are on par with other sectors. In fact, it took the median deep-tech unicorn $115 million in capital and 5.2 years to get there.

The deep-tech sector has seen remarkable growth over the past few years, with global investment in space quadrupling in recent years from $15 billion in 2016 to $60 billion in 2020. But with today’s larger and more complex challenges, there can be more. A deep technological future to solve society’s pressing issues – whether the economy is growing or shrinking.

It takes a little longer to prepare, but has a bigger impact.

Scaling up any startup is challenging. These challenges are focused on the climate technology sector and particularly on deep technology solutions. We saw this with Cleletech 1.0, where one of the key issues was that VCs couldn’t scale hard tech as cheaply and quickly as they could with software.

Hardware solutions require significant investment in team building, manufacturing capacity, inventory and distribution. As a result, many deep-tech climate companies require more capital investment up front and in the long term than their software-based counterparts. And while investors need to take a long-term view of runways, they don’t need an extremely long-term view of exits. The most influential climate companies of our generation will have successful exits in the next five years.

This is a critical point as we weather the current market headwinds and shocks. Investors often shy away from capital-intensive startups in times of failure. That, of course, happened when the first cleantech bubble burst and those who didn’t leave the scene completely shifted their focus from solar to capital-light software startups in the sector. This is an alarming short-term view that we must adopt when dealing with a climate crisis that requires urgent attention as our planet’s clock continues to tick.

With modeling disagreements over the next 10 years suggesting full-scale climate catastrophe, there is no time to waste when the reality is to deploy deep technological solutions that have real impact and reverse or reduce global threats. Climate. With that in mind, founders and investors should focus on solutions that can be brought to market in the near future and make a significant impact soon.

Karthee Madasamy is Founder and Managing Partner at MFV Partners..