The Breeze - Issue #9
Digital acceleration revisited, climate trends thread, trade winds
The Breeze is a free weekly email about climate tech investing.
In many ways COVID-19 has stalled society. In others, it has brought us into the future faster. It feels like the pace of innovation is accelerating. What does this mean for climate tech?
Last week Tobi Lutke, CEO of Shopify, said the recent spike in e-commerce is as if “2030 just jumped forward in time.” The shift from buying products in physical stores to online accelerated faster than expected.
We now have data on the digital acceleration trends that I discussed in Issue #3 (half-way down the post). Here are some updates to the categories I mentioned:
Video conferencing - Zoom shot up to 300M (!!) daily meeting participants from 10M in December.
Online education - New registrations on Khan Academy are up 20x (!!). Online teaching platform Teachable will close April with $3M monthly revenue on a $10M ARR, which is more than Feb 2019 to Feb 2020 combined.
Streaming - Xbox Live hit 90M monthly actives, up from 65M Q4 2019. Hours watched on Twitch grew 17% to 3B in Q1. Disney+ launched in December, hit 28M subscribers end of Feb, and is now over 50M. Netflix jumped 23% in Q1 2020 over 2019 to 182M subscribers worldwide.
Home exercise - Peloton attracted a record 23,000 concurrent riders (!!) for a live class.
E-commerce - online orders in aggregate are up 129% YoY for U.S. and Canada.
Digital finance - Robinhood is reportedly raising a fresh $250M, and Square moved quickly to make it easy to accept stimulus checks.
Digital health - telemedicine has moved into the mainstream.
VR & virtual events - Travis Scott’s musical performance in Fortnite drew 12M (!!) concurrent viewers. K-pop band SuperM sold 75,000 tickets at $30/each for their first show on April 26 in a series of online concerts, grossing more in sales than their February show at The Forum in California.
Some industries have not been so fortunate. Physical retail is declining quickly with 15,000 stores estimated to close, up 57% YoY. The demand for parking is down 90% (I hope this opens the conversation of rewilding parking lots). These are some of the many businesses cratering due to the pandemic.
In climate, the most noticeable collapse is the price of oil. BP profits dived 66% due to the drop in oil demand. The major oil-producing corporations and nations are scrambling to prop up the industry.
EV sales are projected to grow from 5M to 125M by 2030 (IEA). However with cheap oil, gas prices have dropped, making fossil fuel cars attractive. Yet with lockdowns, car sales have plunged, including used cars. An analyst at ARK Invest says in some cases, the total cost of ownership for a Tesla Model 3 is near that of a Toyota Camry or Ford Fiesta. That may be true, but will buying pick up?
The next few months will certainly see a blip of lower purchasing, but I don’t think the 2030 trend is wrong. Significant funding is flowing into EV charging infrastructure and software (see funding news below). Analysts remain bullish on Tesla, and other car manufacturers are forced to respond. The industry is in motion.
As EV models get cheaper, charging infrastructure proliferates, and charging gets faster, the total cost of ownership equation will tip more in the favor of EVs, and at some point fossil fuel car sales will implode. I’d guess that it takes another 2-3 years for a variety of lower-end EVs to arrive on the market, but when they do, consumers will respond. It expect that it will feel like an overnight switch, and fossil fuel cars will become stranded assets.
How about other climate-related trends in plant-based meat and dairy, solar, wind and storage, and sensor systems?
My speculation is that systems with decentralized characteristics will flourish as individuals take matters into their own hands. The big awakening from COVID-19 is that our institutions, systems and supply chains are stretched if not unreliable. People will seek to become less at the whim of government mandates and more independent or community-dependent.
This favors personal solar and storage, community solar, buying EVs, local food production, fewer car trips for shopping and services (that have moved online), but more delivery via cost-effective EVs and drones. Despite short-term project delays, the declining cost of electrification will push the industry forward.
Furthermore, we’re still at the beginning of software finding its way into these systems. Software is optimizing building energy efficiency, EV charging, food distribution and waste reduction, materials production and recycling, data collection and forecasting to name a few areas. As we’ve seen Shopify, Slack, and streaming accelerate the transition to digital work and life, software will help us scale our transition to a zero-emissions economy.
Which climate tech trends will accelerate due to society adjusting to COVID-19? What future will arrive faster than we’d normally expect? I’d love to hear from you. So join me here to share a comment, a research report, or the future you’re building for, and I’ll chime in too:
Nature’s Fynd, which develops proteins using a fermentation process based on a microbe found in geothermal springs, raised $80M Series B from Breakthrough Energy Ventures and Al Gore’s Generation Investment Management with Danone Manifesto Ventures, 1955 Capital, and Mousse Partners. Read more on GreenBiz.
FreeWire Technologies, makers of fast EV chargers that get a boost from an internal battery, raised $25M Series B from BP Ventures, Energy Innovation Capital and ABB Technology Ventures. Read more on Greentech Media.
Amply Power, providers of EV fleet charging solutions, raised $13.2M Series A from Soros Fund Management and Siemens with previous investors Congruent Ventures, Obvious Ventures and PeopleFund participating. Read more on TechCrunch.
SparkCharge, developers of a portable EV charger, raised $3.3M seed led by PJC with participation from Revolution’s Rise of the Rest Seed Fund, PEAK6 Strategic Capital, M&T Bank, and Tale Venture Partners. Read more.
(Previously called Snippets -- same section, new name!)
Tesla cofounder Marc Tarpenning of Spero Ventures shows that changes like getting rid of spittoons during the 1918 flu pandemic and bringing women into the workforce during WWII had lasting effects. He asks us what we want to keep from our current COVID-19 moment in The Future is Ours to Choose. (h/t Jonathan Kroll)
Mike Maples of Floodgate wrote an excellent piece about identifying breakthrough opportunities. “Breakthrough builders are visitors from the future, telling us what’s coming.” Read How to Build a Breakthrough.
Shopify announced Offsets, a way for stores to make shipping emissions carbon neutral, in partnership with Pachama. In September Shopify launched the Shopify Sustainability Fund, committing $5M annually to environmental investments.
Foreign Affairs published a 7-piece climate series including a piece on how private companies are Unlikely Environmentalists. By making investments into greener practices, leading businesses can influence their entire industries.
McKinsey outlines the required societal and economic shifts to reduce greenhouse gases in Climate Math: What a 1.5-Degree Pathway Would Take.
One more thing — at any given time I work with 2-3 climate tech startups by helping them fundraise. I have a slot open now. I work with startups leading our transition to a zero-emissions economy, including energy, transportation and mobility, food and ag. If you’re looking to raise a seed round from Silicon Valley venture firms, reach out.