While many climate investors focus their efforts on breakthrough, deep-tech solutions, Patrick Sheehan at ETF Partners has other ideas.
“I’ve actually got nothing against carbon capture and storage, apart from the fact it’s probably going to be commercialized too late,” he told TechCrunch. Instead, Sheehan and his colleagues are diving into more software-centric companies that promise to still move the needle.
“There are those who say that’s a cop out,” Sheehan said. “The more I look at it, the more I completely disagree with that notion. We need to find companies we can scale rapidly to have an impact within the lifetime of a venture capital fund. That’s 10 years maximum.”
It’s a sentiment that has helped ETF Partners raise a new, oversubscribed €284 million fund, the firm’s fourth.
The firm was founded in 2006, and it has ridden a series of bull and bear markets. Until 2018, Sheehan describes his work as having been “more evangelical.” Since then, he has found limited partners to be much more receptive to climate tech. “It’s become much more of a good institutional product.”
Instead of fusion and e-fuels, ETF Partners is interested in finding more startups like Deepsea, a portfolio company from its third fund. Deepsea uses AI to optimize maritime shipping operations, including routing decisions, to trim fuel use by 10% to 15%.
“Shipping’s carbon emissions are nearly all fuel. With a little bit of software, which you can deploy globally in just a few years at almost no cost, you can shave off 0.3% of global emissions,” Sheehan said. “That’s astonishing — and fast.”
His firm focuses on five verticals, including energy, transportation, connectivity, consumer and food and agriculture. “The umbrella theme over the top of them is what I would call the intelligence layer on top of infrastructure,” he said.
The fund will continue to specialize in European startups. Sheehan cites more favorable government policies and a populace that almost universally believes that climate change is real. “That’s an incredible backdrop,” he said.
As a result, he finds there’s less of a need for investors to find companies developing breakthrough technologies that seek to change the market and more demand for companies that address sustainability.
“A lot of deep tech can be profoundly green,” Sheehan said. “But our focus is on companies with revenue that are just beginning to scale up.”