Climate tech heats up in the Pacific Northwest as startups raise more than $1B since 2020

A crane moves a section of a Starbucks cafe being built by Vancouver, B.C.-based Nexii. The climate-tech company constructs energy-efficient buildings made from less carbon-intensive materials than traditional structures. (Nexii Photo)

The Canadian company that has set the country’s record for going from launch to unicorn status in the shortest amount of time isn’t in software. It’s not even in fintech or biotech. It’s in climate tech, and more specifically, it’s working to green the construction sector, shrinking the carbon footprint of buildings occupied by Starbucks cafes, Popeye’s, Marriott Courtyards and others.

Nexii, which this month announced that it raised a $45 million round and reached a $1 billion valuation, is just one of the latest examples of a climate tech company to hit it big.

The Pacific Northwest — home to established tech heavyweights including Amazon, Microsoft and Boeing — is now fostering the growth of up-and-coming climate-tech powerhouses. Climate tech businesses in Washington, Oregon and British Columbia have amassed roughly $2 billion in venture capital equity, according to a GeekWire analysis. More than half of that was raised since the start of 2020.

Vancouver, B.C.-based Nexii has secured a total of $128 million in funding since it launched in 2019. It has 350 employees.

“Nexii is part of this wave of change to make the [construction] industry more efficient and green and affordable,” said Gregor Robertson, executive vice president of strategy and partnerships. “We need to achieve all of those together to really change the industry successfully.”

The construction field is not alone in this challenge. As the world scrambles to staunch carbon emissions from every possible source — construction, transportation, electricity and agriculture included — essentially every industry is going to need to embrace its own “wave of change” and find planet-saving ways of operating. Experts worldwide agree that we need to reach carbon neutrality by 2050 to avoid the most cataclysmic effects of climate change.

Four massive iron flow batteries built by Wilsonville, Ore.-based ESS Inc. Each can provide 400 kilowatt-hours of energy storage and have a 25-year operating life. They’re shipped to installation sites “dry” and are then filled with an iron and saltwater mix. (ESS Photo)

And investors are ponying up to back the field like never before. Within the first six months of 2021, clean tech companies internationally received $14.2 billion in capital — a figure just shy of the VC total for all of last year, according to research by PitchBook.

Local companies in climate tech that have raised the most capital since their launch include:

  • ESS Inc., an Oregon company building long-duration, iron-flow batteries that went public in May through a merger with a special purpose acquisition company (SPAC); the company was valued at more than $1 billion
  • General Fusion, a B.C. company developing a commercial scale fusion power plant, which has raised $260.7 million
  • NuScale Power, a Portland, Ore.-based business building small, modular nuclear reactors with $236 million from investors
  • Rad Power Bikes, a Seattle startup selling electric bikes that has raised $175 million
  • Svante, a B.C. company with technology that can capture carbon from industrial sources, which has raised $150 million

GeekWire found more than 30 companies that are developing climate friendly technologies that have landed venture capital.

Leaders of the climate tech companies say that a suite of factors are driving success. Their innovations curb carbon emissions, but just as importantly they cut costs for their customers. Add to that consumer pressures to reduce environmental impacts and stronger climate-related policies.

This is only the start of the funding surge. Venture capitalists, private equity firms and large corporations are all raising climate tech funds worth millions or billions of dollars to support companies in the space.

While the sector is seeing huge growth in investing, it still represents a modest fraction of venture capital. Pitchbook reports that in the U.S., climate tech only made up 2% of VC tech deals and 7% of the capital being allocated.

More than a dozen additional climate tech companies are under development in the Pacific Northwest, but have not raised VC dollars.

Climate tech “is very much in the mainstream, is very much in the forefront of investors’ minds — sustainability-oriented investors or mainstream VC firms,” said Bryce Smith, founder and CEO of LevelTen Energy. “It is considered kind of a must-have space for most investors these days, which is very different than five years ago.”

LevelTen, a Seattle-based company launched in 2016 that facilitates the purchase of renewable power, recently announced a new VC round that brought its total funding to $62.3 million.

Part of what’s striking about the region’s climate tech companies is the range of innovations being developed and commercialized. Some draw from the Northwest’s historic strengths, including aviation and maritime fields. Others spin out of institutions like the University of Washington, Washington State University and Pacific Northwest National Laboratory. Some startups reflect areas of expertise at these sites, including batteries, software engineering and agriculture.

“If there’s anything I could say about the group collectively, it’s just how different and diverse the solutions are that people are developing,” said David Kenney, executive director of VertueLab, a Portland-based nonprofit supporting early-stage climate tech startups.

Columbia Power Technologies, or C-Power, is a wave-energy company that spun out of Oregon State University. The business, which formed in 2008, originally aimed to create large-scale offshore wave farms that would power the grid, a vision that proved overly ambitious.

Five years ago C-Power began working on a project to generate smaller amounts of clean energy that could recharge offshore vessels, underwater vehicles and equipment.

“The ocean is a power desert,” said CEO Reenst Lesemann.

Columbia Power Technologies (C-Power) this fall will be conducting sea trials of its SeaRAY autonomous offshore power system at the U.S. Navy’s test site in Hawaii. The system provides energy via wave power that can be used for underwater vehicles and open-ocean environmental sensors. (C-Power Photo)

So C-Power wants to create energy oases in the marine environment. Its new focus includes combining data server and transmission capabilities with clean power production. This fall the company is deploying one of its autonomous offshore power systems for sea trials at a U.S. Navy test site in Hawaii. Lesemann is also trying to raise a venture capital round (C-Power has raised $10.2 million in the past, plus $30 million in grants from federal agencies). The company is taking its first orders from commercial customers.

“The pipeline is definitely starting to fill,” Lesemann said. “It’s the confluence of decarbonization, and having a value proposition to reduce operational costs.”

David Griest, a Seattle-based managing director with SJF Ventures, has been investing in impact-focused companies for more than two decades. He’s seeing lots of companies in the climate tech space with strong business models and strong economics — companies like C-Power, LevelTen and Nexii that are finding a confluence between financial success and decarbonization.

Among local businesses, SJF Ventures has invested in Kent, Wash.-based Novinium, a company that revives underground cables and reports that it has saved 660,000 metric tons of carbon emissions. The innovation that Griest sees from climate tech companies makes him hopeful for the future of the planet.

“I fall on the optimistic side,” Griest said. “I continue to be inspired every day. That’s what keeps me excited, just seeing what’s emerging and all these great new ideas. Entrepreneurs continue to inspire us.”

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