What is a Gigacorn? Climate tech investors explain
Recently, I wrote about how VC-investment firm Extantia’s Dr Laura-Marie Töpfer is hunting for gigacorns. She and a handful of other investors are looking beyond the profit-motive lens; they’re on a quest to identify start-ups capable of tackling climate change in big ways.
Given the scale of the climate problem, this new term sets a high threshold for achieving the unique honor of becoming a climate-impact unicorn. Read on to learn how.
After Ailen Lee dubbed the term “unicorn” to describe companies valued over $1B, the magical creatures proliferated. It’s as if giving the metric a title spawned a greater desire to attain it.
Now, a new framework has risen from the climate tech investment community. Could the same ambition unfold with the new term “gigacorn”?
Source: https://news.crunchbase.com/news/unicorns-get-more-magical-2020/
So, what exactly is a gigacorn?
Christian Hernandez of 2150 defines “gigacorn” as follows:
Gigacorn (noun) def: a company that has achieved lowering or sequestering CO2 emissions by 1GT/year while being commercially viable.
How much is a gigaton?
Here are some stats from the IEA that put this metric in perspective:
In 2020, a total of 31.5 Gt of CO2 were released into the atmosphere. (IEA)
2021 CO2 emissions predictions by region: China (~10Gt), US (4.46 Gt), EU (2.4 Gt), India (2.35 Gt)
2021 CO2 emissions predictions by sector: Coal (14.2 Gt), Natural Gas (7.35 Gt)
In other words, this is a huge amount of CO2 to reduce. Yet, it’s a critical ambition for the planet. In 2020, the UNFCC suggested the world has a remaining carbon budget of just 400 Gt CO2e for a 67% chance of achieving the 1.5 degree warming limit.
How hard is it to reduce a gigaton of CO2e?
In reality, quantifying CO2 reductions is difficult because technologies may not directly replace existing heavy emissions. “Swapping out” CO2 sources only works when you actively reduce existing sources of emissions, not only add cleaner technologies into the mix.
But for the sake of conceptualizing the term gigacorn, let’s see how much CO2 the wind energy sector reduces by providing clean energy in the US each year.
In the US, the following fossil-fuel-based electricity sources emit the following amounts of CO2 per kWh in pounds:
Coal (2.23)
Natural gas (0.91)
Petroleum (2.13)
The average of these is 1.75 pounds of CO2 per kWh. In theory, the amount of renewable energy power generation you produce could subtract these amounts, as long as it doesn’t require the use of CO2 in its own operations.
Wind energy accounts for 338 billion kWh of energy produced in the US, which would be the equivalent of 591.5 billion pounds of CO2 emissions for fossil fuel sources on average. Meanwhile, a gigaton = 2.2046 trillion pounds.
Given this rough estimate, the entire US wind energy sector only “swaps” about 27% of a gigaton of CO2 per year.
Do any gigacorns exist?
The short answer is no. So far, this is still a hypothetical ambition.
However, the ESG platform PlanA, has adopted the lingo to describe how it hopes to use its recent $10m in raised funds to become a “gigacorn.”
How will Plan A use this capital investment? To advance our leadership position in the corporate sustainability and ESG software market. The goal has not changed: grow our positive impact on the planet by helping businesses transform – we are aiming to become the next Gigacorn by overtaking 1 Gt of carbon emissions under management in the next two years.
You’ll notice this definition diverges from the original definition. There’s no guarantee that “managed emissions” equate to effectively reduced CO2 emissions.
Nevertheless, the term could catch on in the climate tech investment community as more VC firms want to equate success with measurable impact.
Solving the gigacorn equation
By sector, the largest contributors to CO2 emissions are electricity production (25%), food and agriculture (24%), industry (21%), transportation (14%), buildings (6%), and other (10%). Land and ocean sinks currently absorb 24% and 17% of CO2 each year. Getting the emissions and sinks back in sync is one of the challenges for limiting global warming.
So far, some of the most popular potential “gigacorn” start-ups are focusing on transportation, meatless or lab-grown beef, low carbon cement, supply chain emissions, fusion energy production, and more.
Which VC firms hunt gigacorns?
Hunting gigacorns is a new pastime for a certain league of VC investors.
2150
So far, VC investor and 2150 co-founder Christian Hernandez has been one of the most vocal proponent of gigacorns, drawing from his previous experience in investing in urban infrastructure. He wrote about the concept in the article “On Gigacorns and Sustainability Tech” and he spoke with Climate Tech VC about how the “urban stack” presents unique opportunities for climate impact.
2150 suggests the following possible framework for VCs to embed climate metrics into their investment process:
“Investors into a VC fund can set certain climate-specific metrics and KPIs that they can require GPs to report back as a condition of their investments into funds. At 2150, we track the amount of CO2 mitigated, captured or used per company, and how many millions of tonnes of waste have been saved, recycled or upcycled by companies in our portfolio. Both of these metrics are reported back to LPs. On the founder front, we work with them on individual metrics relevant to specific businesses, which can be anything from litres of clean water saved to improvement in health outcomes.”
2150 invests in
Normative (Sweden), a corporate carbon accounting measurement and reduction plan platform.
CarbonCure (Canada), a sustainable concrete solution embedding recycled CO2 in cement.
Aeroseal (US), a company improving building efficiency and emissions with its HVAC duct sealing solution.
AMPD Energy (Hong Kong), a company providing a industrial-scale battery cell technology designed for construction.
Nodes and Links (UK), a project and risk management platform for impact improvements, benchmarking, and more.
Extantia
Another VC investment firm making the term “gigacorn” part of its branding is Extantia. On its website, it states:
“We are actively searching for companies that have the potential of becoming a “Gigacorn”, that is, companies capable of saving at least 1Gt of CO2e a year that are commercially viable with unicorn potential. We back exceptional entrepreneurs who achieve this either through direct technology impact of at least 100 Mt of CO2e a year or indirectly as a significant enabling force across sectors.”
In an interview, Extantia’s General Partner Dr Laura-Marie Töpfer noted that there are plenty of prototype stage climate technologies that need funding to get to the next stage of implementation:
“Half of the global reductions in CO2 emissions through 2030 will come from technologies readily available today, your solar and wind. But looking ahead to 2050 almost half of the necessary reductions come from tech that is in the demonstration or prototype phase, like hydrogen-based processes, for example. So we said, we need more venture capital investments to take those emerging technologies to prime time readiness quicker and that was the birth of Extantia.”
Extantia invests in:
Betteries (Germany), an EV battery-as-service company which recycles batteries at their end of life.
Ineratec (Germany), a low-carbon fuel company providing modular chemical reactors.
Bloom Biorenewables (Switzerland), a company researching plant-based petrochemical alternatives.
GA Drilling (Slovakia), a novel geothermal drilling technology.
& More
Other companies weighing in on the question of potential gigacorns in a recent Sifted article included Revent, Contrarian Ventures, SYSTEMMIQ Capital, Inven Capital, and Rubio Impact Ventures.
Is the phrase “gigacorn” here to stay?
Whether more VC firms and companies will adopt the term “gigacorn” in their branding has yet to be seen. Either way, bringing awareness to the importance of impact as a source of value creation is important no matter how you spin it.
Should more brands use the phrase gigacorn to describe their climate ambition, or is this just a passing fad? Let me know what you think in the comments.
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