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Love it or hate it, there is no denying that venture capitalists have played a role in shaping the world over the past few decades. It’s just that most of the venture money in that period has gone towards funding software and internet companies.
That’s now starting to change. As the climate crisis worsens and governments look to reshape markets, venture capitalists are beginning to pour increasing sums into startups that will provide some of the solutions to cutting emissions. Throw in $374 billion into climate- and energy-related government spending included in the new US climate bill, and you can expect a startup supercharge.
“People are beating down our doors,” says Gabriel Kra, co-founder of the venture capital firm Prelude, in a discussion on Bloomberg Green’s Zero podcast. “The market size has just increased.”
Kra spoke to Zero about the role that venture capitalists play in building companies, which goes beyond the money they invest. He also talked about that time he got arrested at a climate protest, and why he’ll never say never on getting arrested again.
This is an edited and condensed version of the highlights of Kra’s interview. You can listen to the full conversation with Kra below, and read a full transcript here.
Akshat: Would companies you back have succeeded regardless of whether Prelude gave them money?
Gabriel: There are some entrepreneurs for whom the money is just a source of fuel. That’s a small segment. There’s a much larger segment where investors did something beyond funding them that helped them succeed.
A mentor told me early in my career that you spend a lot of your time as a VC helping the companies that need help, rather than the ones that are crushing it and only call you when they need some advice. So the most gratifying part of my job is when you find a team that needs help. Not out of distress, but because I know something or I have a set of experiences that they do not have.
Akshat: US investing in climate startups can be neatly split into two eras. One starting in the mid-2000s until 2011, and then the second one starting in 2012 that’s still going. What changed between the two eras?
Gabriel: Let’s take batteries as an example. We worked a ton on batteries starting in 2007 or maybe even a little earlier. A lot of those companies just flat-out failed. The electrochemistry didn’t work. The scaling didn’t pan out. But many battery startups are succeeding now. Partly because of the advances in machine learning and the cost of cloud computing that we can now bring to bear to solve hard problems.
The other thing that has changed is the sense of urgency. I now firmly believe that people, corporations, and governments all understand the problem. That has resulted in the right flows to the capital markets. Not just venture capital, but everything from early-stage investing to late-stage growth. There is capital available for great entrepreneurs who are tackling hard problems in a way that wasn’t possible in the first era. That is why this second clean tech boom has been more successful.
Akshat: How exactly does the Inflation Reduction Act boost US startups?
Gabriel: I’ve been focused on grid-scale batteries. The bill has tax credits for domestic manufacturing that make it economic for many startups to manufacture and sell their new batteries from day zero. It enables us to go faster and bring down the cost faster. And that brings manufacturing onshore, not just for startups but also for big companies. There are also standalone credits for energy storage that creates demand for batteries. We believed we had a robust and strong progression, but now people are beating down our doors.
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