DCVC Wants to Raise $500M for Its First Climate Fund, But the Market Has Other Plans | Tech Crunch

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DCVC's aim for its first climate-focused fund, DCVC Climate Select, is all over the place, and the roller-coaster venture fundraising conditions of the past few years highlight how quickly LPs can't back down from new strategies from established managers.

The Silicon Valley VC firm launched the fund in December 2022 with a target of $500 million, according to an SEC filing. A year later, it lowered its goal to $300 million after its fundraising brought in only $157 million in commitments for the year, according to a December 2023 SEC filing. Now, a source familiar with the matter tells TechCrunch, things are starting to fall into place, and $400 million may be a more accurate reflection of where the fund is headed.

A recent New Mexico Inno story about New Mexico SIC's $50 million commitment to the fund said the $400 million goal “is in line with our expectations around the fund,” DCVC spokesman Nate Nickerson told TechCrunch via email.

DCVC is a deep tech firm co-founded by Matt Oko, known for decades of investments (acquired MosaicML, Databricks) and Zachary Bogue, known for Square, Angelist, Uber and his annual “Deep Tech in Davos” event. As part of a Davos event in February, Bogue Tech called AI applications to climate technologies one of the “major opportunities” for DCVC, along with biotech and robotics.

This climate fund is targeting mid-stage climate startups that the organization believes are currently underfunded for the climate startup ecosystem, according to information presented by GP at a recent New Mexico State Investment Council meeting. Although this is DCVC's first climate tech dedicated fund, the firm has invested $360 million in such startups over the past decade from other funds, according to New Mexico SIC's March 26 meeting.

Although Nickerson said the initial $500 million figure was just a pro forma amount before the fund took money from LPs, the industry standard is that the figure represents the fund's goal. Internally, people at the firm know the firm needs to adjust its forecasts to more “pure” market conditions, a source familiar with the matter said.

The person added that DCVC's current portfolio of climate companies are starting to see some success in 2024, which should help in the fundraising journey. An example is Twelve, which creates products that are traditionally made using fossil fuels from carbon. It recently signed a 14-year purchase agreement with the International Airlines Group – which includes airlines such as Aer Lingus and British Airways – to purchase 260 million gallons of twelve more sustainable jet fuel.

“These are not small deals, small numbers, small evidence. It's kind of a financial performance for skeptical consumers,” the source said. “A massive secular change is possible in these massive (industries). These disruptor companies are putting numbers across the board in line with what you'd expect with public companies one day. This is a very convincing factual model. “

DCVC isn't the only fund to cut a target or manage to close with less capital than planned after a difficult 2022 and 2023 fundraising cycle. Tiger Global's latest fund has raised $2.2 billion of its $6 billion target. In the first half of 2023, firms like Founders Fund, Insight Partners and TCV have lowered their fund targets.

2022 and 2023 will be tougher for venture firms across the board. But 2022 set a new fundraising record for US-based firms — $172 billion, according to PitchBook — and analysts say 2021 is closing in on 2021. 2023 saw real effects. According to PitchBook, US firms will raise $66.9 billion in 2023, the lowest amount since 2017 and a 61% decrease from the previous year.

On the other hand, climate investing is one of the few hot spots outside of AI that is attracting increasing VC attention and also doing well for VC fundraising. Climate-focused VC funds have raised more than $710 million so far in 2024, according to data from Preqin, on track to match or surpass the $2.17 billion raised last year, and not far off from 2022's record $2.9 billion.

While both LPs and analysts told TechCrunch they don't think 2024 will be a better year for VC fundraising — and some think it'll be worse than 2023 for DCVC's new Climate Fund — its recent SEC disclosure suggests things may actually be headed in a much better direction.

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