KONYA, TURKEY – SEPTEMBER 13: Rows of solar panels are seen on a Tekno Ray solar farm on September 13, 2018 in Konya, Turkey. By 2023, Turkey wants to generate 30 percent of its electricity from renewable sources in order to reduce its dependence on energy imports from Iran, Russia and Iraq. Due to its geographical location, Turkey has the second largest solar energy potential in Europe with an average of 7.2 hours of sunshine per day. (Photo by Chris McGrath / Getty Images)
Chris McGrath | Getty Images
Ecosia, the search engine that uses its advertising revenue to plant trees, has launched a € 350 million ($ 405 million) venture capital fund to focus on the climate crisis.
The so-called World Fund will invest in the “next generation” of founders who want to tackle the problem, Ecosia said, and measure its success in terms of “climate returns” as well as financial returns.
“Our goal is to solve climate change,” Christian Kroll, CEO of Ecosia, told CNBC before the start on Tuesday, just days before the COP26 climate summit.
“We have been doing that at Ecosia for a long time by planting trees,” said Kroll, adding that the company has planted 136 million trees to date. “But that alone will not be enough to solve climate change.”
research published Tuesday shows that climate technology startups have raised more money so far this year than any other year, and as of early 2021, $ 32 billion has been pumped into startups fighting climate change around the world.
The search engine Ecosia has 15 million monthly active users and expects annual sales of 25 million euros (29 million US dollars) this year. However, the size of its user base pales in comparison to Google, which has billions of users.
Kroll said Ecosia is “extremely well connected to many start-ups in the air conditioning sector,” but could not support them with the money it makes through its search engine.
“Our promise to our users is that if they look to us, we will use the money to plant trees,” he said. “If we were to put that in risky start-ups and then it didn’t work out, it wouldn’t go down so well.”
He hopes that setting up a separate VC fund that will raise capital from alternative sources will help eliminate this problem.
Bill Gates, the billionaire co-founder of Microsoft, said in an interview that aired on Wednesday: Climate Tech will produce eight to ten Teslas, one Google, one Amazon and one Microsoft. The people at Ecosia takes a similar view and believes that the most valuable companies of the next decade will be those that enable a decarbonized world.
More than half of the funding for the World Fund has already been provided by entrepreneurs and large institutions, Ecosia said, adding that the fund has made three investments that are yet to be announced.
“We have invested in a vegetable meat company that is revolutionizing the high end of the market and a cocoa substitute that is reducing deforestation,” said Danijel Visevic, head of investments at Ecosia and head of the World Fund.
The World Fund supports around 40 companies in their early and growth phases.
An important caveat is that every company in which the World Fund invests must contribute to a significant reduction in carbon emissions. In particular, the fund only invests in companies that have the potential to remove 100 megatons of carbon dioxide from the atmosphere each year.
“Everything comes back to that number, regardless of technology,” World Fund partner Craig Douglas told CNBC.
The World Fund said it would support carbon-reducing companies in areas such as food and agriculture, transportation and the “built environment”.
Ecosia claims the World Fund is the largest of its kind in Europe, while the largest in the world is operated by Gates’ Breakthrough Ventures and is worth $ 2 billion.
Global VC investment in climate technology has grown from $ 6.6 billion in 2016 to $ 32.3 billion in 2021, according to a report by advertising agency London & Partners and VC analytics firm Dealroom.co means an almost five fold increase in funding.
The VC industry has traditionally been reluctant to invest in air conditioning startups, but Dara Saharova, a General Partner with the World Fund, said companies in the sector established between 2008 and 2013 now have a market capitalization of around $ 800 billion .
“There are a lot of people in Europe who are investing $ 1 million to $ 5 million and there are now some large institutions willing to invest more than $ 30 million per company,” said Douglas. “But there is practically no one in between.” He added that the World Fund was created to fill the void.