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In The Climate Tiger, I share my thoughts and analysis on business strategies, tech news, trends, and secrets to supercharge the climate transition. And I would love to get your perspective on those.Â
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Last week, I attended an event at Change Now, the biggest sustainability conference in Paris. On the stage, Louis Coppey, VC at Point Nine Capital.Â
I used to read Louis's work on SAAS & B2B marketplaces a few years ago. We were both graduates of the same school, with a few years between us. Like many very rational students at HEC, I was drawn to B2B SAAS and followed Louis's "must-read" playbook to succeed in the industry.
But I didnât expect Louis to speak on a climate related event. And I was surprised when I learnt that Point Nine started investing in Climate tech and 20% of its portfolio is now climate related startups. That looked like a 360° shift. But according to Louis, « the role of VCs is also to time the market ».Â
It made me think of a recent trend I saw in the VC market recently. Many traditional software VC funds started to invest in climate tech.Â
Is climate tech the new crypto or AI? Is the enthusiasm around it fueled by hype, or an awareness of the global environmental crisis and the need for urgent action? After all, itâs not the first wave of climate technology hype. Between 2006 and 2011 a lot of VC lost money in the first âcleantech waveâ because the technology was not ready. Yet, the market has matured.
But I think there are even deeper reasons behind that new shift. Most VC maybe donât realize it at the moment, but climate tech can be just as disruptive as Saas was over the last decade.Â
This is a short essay to explain you why.
Letâs dive in.
Why climate tech is eating the world.
First, let's tackle a difficult question "Can SAAS produce the same return for investors in the future as it did over the past 10 years?"Â
And the answer is: "It's unlikely."Â
The last decade has seen an incredible growth of software businesses. When Marc Andreessen wrote "Software is eating the world" in 2011, the SAAS revenue was growing by 50% year over year. It was not difficult to find a greenfield category to launch a new software startup. As a tech founder myself, I sometimes feel the FOMO not have been born 10 years before, at the time when everything could be built.Â
But that was 12 years ago. Today, the competition grew so much that building a Saas is like entering a zero-sum game. Each new entrant competes for a shrinking slice of revenue left by incumbents. Each new SAAS business in the market is a smaller exit opportunity for VCs. And I don't think a new CRM today would have the same upside as at the time of Salesforce (the first « SAAS ») in 1999.
One way for VCs to solve this issue was to invest in "vertical Saas". In other words, in industries that have not been disrupted yet by software (construction, healthcare, education). It's one solution, but it won't last forever.Â
The other solution, and I think itâs the right one, is to invest in harder problems (like climate change).Â
2023 and the window of opportunity.Â
If you haven't lived in a cave for the past year, you might know that the tech ecosystem is suffering at the moment. Â
An investor last week told me that most of its portfolio companies in Series A and Series B won't make it over the next 24 months. So VC needs to recreate a totally new portfolio, this time from Seed and Pre-seed stages.
And I think thatâs a window of opportunity. More and more VC want to invest in climate related technology (plant-based food, energy, green alternativesâŠ) because itâs just the right thing to do now and for the next decade.
Climate tech is eating the world.Â
It's funny to read the piece of Marc Andreessen with a climate perspective today. Like software 10 years ago, climate related technology is ubiquitous. I believe it has the potential to reshape every industries. Letâs take a few quotes from Marc Andreessen.
Banking đ”
« The financial services industry has been visibly transformed by software over the last 30 years. »
In the 2020s, there is no doubt the banking and financial world is moving toward more sustainability. ESG, carbon credits, âgreenerâ banking alternatives. There is a shift in the financial world as consumers start to care about climate.
Entertainment đż
âTodayâs largest video service by number of subscribers is a software company: Netflix.â
Can Netflix or Hollywood create more narratives to cover climate change? I believe there is an increasing demand for it. I expect the entertainment industry will play a key role in educating people about the climate crisis.
Mobility đ
âThe trend toward hybrid and electric vehicles will only accelerate the software shift â electric cars are completely computer controlled. And the creation of software-powered driverless cars is already under way at Google and the major car companies.â
Mac Andreessen predicted the rise of electric cars - less the gridlocks of driverless ones - but still, the mobility industry is increasingly going electric.
Retail đ
« Todayâs leading real-world retailer, Wal-Mart, uses software to power its logistics and distribution capabilities »
Retail & fashion are two industries that will be reshaped by sustainable trends and products. Refurbishing, circular economy, and second-hand marketplaces will encourage incumbents to reinvent their business models.
Conclusion.
All things are going to be climate in the next decade. Like software conquered the world over the past two decades, climate products and alternatives are tapping every industry and I expect, will have a similar trajectory. So itâs the best time to build and invest in climate.
Thatâs it for today. That essay was a bit shorter than usual - last week has been hectic - but Iâll edit it and complete it over the coming months.
See you next Monday!