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What is Planet A?
Florian Schabus - We're an early-stage climate tech fund investing in new technologies and innovations that help us tackle the climate crisis. We’re a relatively new fund, closing our first fund in January 2023. Still, we have delivered about 22 investments across the board. The core of what we're doing is impact measurement. To be serious about climate investment, we must put science first. That's why we have three people on our fund who work with life cycle assessments, and we rigorously quantify the impact of the startups we are investing in. If we invest in a company, we're then sure that that company can create scalable impact whilst also having a sensible business model.
Planet A is very interested in the CDR space with several investments, and the team is very excited to be part of the overall community.
New Tech
What are some of the most exciting technologies that have come across your desk recently?
Florian Schabus - We look very broadly across various aspects of CDR. The CDR landscape ranges from reforestation efforts to proper deep-tech stuff, which is exciting, but not all of it is necessarily VC-backable, so we have some limitations. I look at the technological removal side of things or software intermediaries (insurance, etc.), where there are business models that would fit a VC scaling framework.
On the one hand, we look at cost and energy-efficient carbon capture, such as direct air capture (DACC), but also rolling out BECCS, so bioenergy with carbon capture and storage and biochar is important for us. Then, we look into storage solutions. I am particularly excited about utilisation or storage options with an economic value. Think of cement, where you can use the CO2 sink as a material and build new stuff out of it rather than just sequestering it somewhere, bridging this gap between a marketable product and a CDR credit. It's exciting. We look for those co-benefits and diversified revenue streams technologies might have. It's hard to name a single one, as a lot of innovation is happening across the whole space.
Due Diligence
When conducting due diligence for new potential investments, how do you ensure that start-ups and their solutions are truly sustainable and equitable?
Florian Schabus - We mainly look at the environmental side of things. We have three people in the fund who are experts in life cycle assessments, which is the gold standard in science and how we assess the environmental impact of potential investments.
So, how much CO2 does the process consume? What's the land use? What's the resource use? We analyse how they might generate or avoid CO2 and break it down into KPIs so that we can then use that and reference it to other solutions in the market. We can then say, “Hey, compared to a standard process, that new process might save two tons of CO2 per unit that they produce,” that’s our main framework to find those technologies that make sense from an impact perspective.
From the social dimension, that's an interesting one. It's something that we have yet to formalise in our process. It is a big concern for us. We have invested in companies that create carbon credits with very high core benefits and social benefits, for instance, planting mangroves in Africa with a lot of community engagement. That's an essential factor but something we must formalise in the investment process.
Investment Advice
What advice would you give to entrepreneurs and startups aiming to secure investment in the carbon dioxide removal industry, based on your experience as an investor?
Florian Schabus - When we look at a company, we assess different dimensions of it, and it almost boils down to different risk categories. One is the technical or science risk, another is the market offtake risk, and the third is the scale-up risk. And if you have those three things in mind, that's a good framework. From a technology perspective, we want to see solid techno-economic assessments and pathways to reach low cost. This rigorous assessment lets us understand if they can produce competitively because bringing costs down is the big challenge. It’s closely correlated to energy consumption, of course. A comprehensive technical and economic assessment helps us understand the process from a cost and energy perspective. It also allows you to benchmark your process against others because it is a cost game, whether CapEx or OpEx.
On the market side, any validation of offtakes or long-term agreements you might have with potential buyers is an excellent sign that you can sell those credits.
The third one is on the scale-up side of things that's generalising now but relevant for most technologies. If you're operating at a technology readiness level of three to four, you might be in the lab now. It's still far from building an industrial-scale reactor, right? So, we would like to see from the teams, on the one hand, that they understand the challenges but also that they have the necessary skill sets to not only have the tech work in the lab but also have the engineering capabilities to scale this up and de-risk it to the extent that it then can work in a larger facility. Those would be the three things that I recommend people to look into.
Funding Gaps
Where are the biggest gaps in funding, and how is this impacting the industry's goal of gigaton-scale deployment?
Florian Schabus - Large funding gaps exist across the whole climate Hardware space. So, not only CDR but it especially applies to CDR, which is one problem right from the start. Getting more technologies out of the lab and universities and having that early support will likely come down to something other than Venture Capital. Those businesses are usually too early, risky, and hard to assess for investors. So we definitely come in at a later stage. The other one is growth funding. We haven't seen many companies raising a Series A or Series B because the market is relatively young and immature, but that will happen over the next couple of months, and it will be interesting to see if growth investors are willing to step in because those companies might not be hundred per cent fit for VC. After all, you're raising money to build physical plants and roll that out and prove things on an industrial scale, which doesn't fit the traditional mindset of a venture capital investor.
So suddenly, you have to think about project financers and debt providers like Banks, and there’s still a big gap in the market because those traditional players are not used to financing new technologies. So, those are two things we need to have much more capital flowing into the market.
Challenges
What's the biggest challenge your portfolio of companies faces, and what do you think is required to solve it?
Florian Schabus - All the tech risks mentioned before are challenging for individual companies. Still, if you look at the market overall, the biggest challenge is living up to the expectation of becoming this trillion-dollar market everyone is talking about. That means triggering enough demand for all those credits that we're going to generate, which will likely be an issue in the mid to long term. There are not a lot of voluntary commitments out there, and lots of companies are putting in money, but we have to be clear that in the long term, governments and the public sector must play an essential role in high-price removal credits.
So I think as an industry, there's still a long way to ensure that there is demand for that at scale and that governments play an active role in scaling up CDR, which, if you think about it, is a bit of a common goods problem. It's like your wastewater treatment, for example. So it does make sense that the government play a role there. Still, we're a long way from getting there and unlocking more significant financial flows, as I'm sceptical that voluntary commitments alone will bring us to the scale that we have to get to. And this industry should be very vocal about policy advocacy and play a very active role there, as that will likely make or break its long-term success.
