PitchBook News - Amazon's $3B embrace of cleantech

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The Weekend Pitch

June 28, 2020

Presented by Silicon Valley Bank

On the first day of this summer, temperatures reached 100 degrees in the Arctic Circle. It's an easy thing to forget about these days, what with a pandemic going on, a presidential election looming, and a new civil rights movement emerging across the nation. But climate change isn't going anywhere. And every day, our window for mitigating the catastrophic effects prophesied by scientists gets a little bit smaller.

This won't come as breaking news to venture capitalists. More than a decade ago, the industry embraced a boom in cleantech investing. But the boom promptly went bust. Climate-friendly investing has remained in vogue in some circles, but the promise of a cleantech revolution never quite materialized.

If such a revolution does materialize in the future, it will help to have some of tech's biggest names leading the charge. And that, dear reader, brings us to the past seven days at Amazon.

Welcome to The Weekend Pitch. I'm Kevin Dowd, and you can reach me at weekend@pitchbook.com. With a new fund, a new arena naming-rights deal and a new acquisition, the world's most valuable company has made loud and clear its intent to be a leading cleantech investor. That's one of 11 things you need to know from the past week:

Amazon and Jeff Bezos this week announced a new $2 billion fund focused on climate-friendly investing. (Paul Morigi/Getty Images)

1. Greenbacks for green deals

Amazon this week launched a new Climate Pledge Fund that will devote $2 billion to investing in sustainable and decarbonizing technologies. Two days later, the company revealed it has acquired the naming rights to the new NHL arena in its hometown of Seattle, with plans to dub the building Climate Pledge Arena. And on Friday, Amazon unveiled a deal to acquire Zoox, a VC-backed maker of electric self-driving cars, for a reported $1.2 billion.

All that comes about four months after Jeff Bezos, Amazon's founder, committed $10 billion of his own fortune to a climate-friendly effort called the Bezos Earth Fund.

Entrepreneurs tend to follow the money. And $12 billion is a lot of money. It seems reasonable to expect the pair of new funds will motivate some founders to pursue new climate-focused ideas that may have otherwise struggled to find funding.

On the flip side, investors tend to be copycats. And Amazon is a popular role model. It also seems reasonable to expect the company's new initiatives will cause at least a few rivals to think about devoting additional funds to cleantech.

But will it be enough to shift the market in any meaningful way? That's the multibillion-dollar question.

We last saw such a shift late in the 2000s. From 2006 to 2008, the number of VC investments in the US cleantech sector increased by 137%, according to PitchBook data, and deal value more than tripled, as firms pumped billions into startups developing solar panels, smart grids and other capital-intensive forms of climate-friendly tech. But it didn't last. The financial crisis arrived. The rise of fracking made natural gas too cheap to pass up. Government-subsidized solar panels from China flooded the market, driving well-funded US upstarts such as Solyndra out of business.

Between 2011 and 2017, cleantech venture deal value declined by 44%. As awareness about the risks posed by climate change continued to grow, investment in startups aiming to solve such problems continued to shrink.

More recent years have hinted at a rebound. In 2018, for instance, cleantech startups in the US raised $7.1 billion in VC, the largest annual sum on record.

Looking at the sorts of companies raising large figures this time around shows how the cleantech market has shifted over the past dozen years. Companies building solar panels and other large-scale infrastructure products are no longer the belles of the ball. Instead, it's electric vehicle makers such as Zoox. It's startups such as Rubicon, which is developing a platform to streamline recycling, and Convoy, which is using software to make freight shipping more sustainable and efficient. It's companies like Indigo Agriculture, which this week raised $300 million in VC—at a $3.5 billion valuation, according to Axios—to fund its crop-sustainability technology.

In short, the "tech" part of cleantech seems more important to investors than ever before.

It's entirely possible that Amazon will be an anomaly, and that other investors will continue to be cautious about cleantech, still stinging from their last go-around in the category. But it's also possible that we're on the brink of another boom for investing in companies trying to do their part to make sure 100-degree days in the Arctic Circle don't become commonplace. Better late than never?

2. Globetrotting

In Asia, in the Middle East and in Europe, private equity firms were busy this week pondering massive funds and deals. KKR has reportedly raised more than $10 billion toward a $12.5 billion target for its latest Asia fund. A group of six investors struck a deal to pay $10.1 billion for a 49% stake in the new pipeline unit of the Abu Dhabi National Oil Company. And Allegro, an online-auction site based in Poland that's backed by Cinven, is said to be planning an IPO that could result in an $11 billion valuation.

3. SPAC-tion

Bill Ackman and his Pershing Square Capital Management registered a massive new special-purpose acquisition company this week with the SEC, a vehicle that could raise as much as $6.45 billion for a future acquisition. Another SPAC found its target this week, when Crescent Acquisition agreed to conduct an $845 million reverse merger with F45 Training, a chain of gyms backed in part by Mark Wahlberg.

4. Rules and regulations

On Thursday, US regulators formalized plans to loosen restrictions around the Volcker Rule, a key change that will make it much easier for banks to invest in venture capital. Earlier in the week, the NYSE filed an amendment to a document seeking regulatory approval to conduct more direct listings, which, along with SPACs, have recently emerged as a buzzy alternative for companies seeking to go public while avoiding the traditional IPO process.

5. Star shopping

LeBron James and business partner Maverick Carter have raised $100 million for a new media and entertainment outfit called SpringHill Entertainment, Bloomberg reported. One of the company's assets? "Space Jam: A New Legacy," a film starring James due out next year. In other celebrity investor news, former soccer star David Beckham was announced as a co-owner of Guild Esports, a new esports team in the UK that's reportedly seeking funding at a valuation of £100 million (about $123 million).

LeBron James is all smiles after pulling in $100 million from investors this week. (Ezra Shaw/Getty Images)

6. Palantir's IPO prep

Last week, Bloomberg reported that Palantir Technologies had raised some $500 million from Sompo Japan Nipponkoa Holdings, less than two weeks after reports emerged that Palantir was getting ready to file for its long-awaited public debut. In what may be a more intriguing bit of IPO prep, the data giant also made an unusual addition to its board this week, reportedly bringing on Alexandra Wolfe Schiff, the daughter of famed novelist Tom Wolfe, who left her position as a reporter at The Wall Street Journal to join Palantir.

7. Private to public

Seven years after Cerberus Capital Management took control of the grocery chain, Albertsons made its return to Wall Street this week, raising $800 million in a downsized IPO that fell below the company's initial expectations. In a much quicker turnaround, business intelligence provider Dun & Bradstreet set terms for an IPO that could raise nearly $1.4 billion, barely a year after being taken private by Thomas H. Lee Partners and others.

8. Say cheese

After weeks of rumors, the parent of Chuck E. Cheese filed for Chapter 11 bankruptcy protection; Apollo Global Management has owned the operator of family-fun centers since 2014. Across the Pacific Ocean, former industry icon Olympus is exiting the camera business, with an agreement to sell its camera division to private equity firm Japan Industrial Partners. Instead, Olympus will now focus on medical imaging and other medical devices.

9. Valuation hikes

Cybersecurity specialist Tanium raised new venture funding this week at a $9 billion valuation, up from a reported $6.7 billion figure logged in 2018. Australian design company Canva brought in $60 million in funding at a $6 billion valuation, nearly double the $3.2 billion valuation it landed just nine months ago, according to PitchBook data. And UK payments startup Checkout.com nearly tripled its valuation this week with a new round, taking its on-paper worth up to $5.5 billion.

10. Hot and cold

Investment in the biotech industry has been red-hot in recent months. So it wasn't a huge surprise to see Sana Biotechnology raise $700 million in funding. The travel industry, on the other hand, has struggled amid the pandemic. But that didn't stop Sonder, a short-term home rental startup, from banking $170 million in VC this week at a $1.3 billion valuation.

11. Pride

A few weeks ago, at the beginning of Pride Month, an Ohio-based venture firm called Loud Capital launched a new $10 million vehicle called Pride Fund 1 that will invest both in companies led by LGBTQ founders and other businesses aiming to serve the LGBTQ community. "Yes, it is about returns," Pride Fund CEO Densil Porteous told my colleague James Thorne this week, "but it's also about uplifting and the legacy that we're leaving."

View the full list online

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Buyout alternatives

(Christoph Burgstedt/Getty Images)

For investors, it's a multibillion-dollar question: Does private equity provide superior returns compared to the stock market? Eliza Haverstock writes that a growing group of academics have published research indicating that might not be the case. But don't expect LPs to turn away from PE any time soon.

In fact, LPs seem more committed than ever before to the private markets. As a new PitchBook analyst note highlights, that's certainly the case with growth equity funds, which combined to raise $41 billion during 2019, the strategy's highest annual total on record.

European realities

(Ralf Hiemisch/Getty Images)

After many months of waiting, private equity-backed restaurants and pubs across the UK are ready to begin opening back up in earnest. But Andrew Woodman writes that experts fear the sector may never be the same after the pandemic, with the rise in food delivery services and very wary customers combining to create a potential "death knell."

Our analysts explored other issues stemming from Western Europe's recovery from the crisis this week in their first full-length report focused on the France and Benelux region. One takeaway: While the restaurant industry and other spaces may be in for hard times, changing economic tides could be a boon for startups in the biotech and ecommerce sectors.

Startup name of the week

Longtime collaborators Martin Scorsese and Robert De Niro in 2004. (Evan Agostini/Getty Images)

What would have happened if, in 1991, Martin Scorsese and Robert De Niro decided to forego their plans to film a psychological thriller about a vengeful convict and focus instead on cybersecurity?

I don't think that's the question a startup called Cape Privacy is trying to answer. It is, however, the one I was asking myself this week, after the company raised about $5 million in seed funding to back its software, which is designed to enable secure data sharing and collaboration. It's probably for the best that Scorsese and De Niro stuck with their guns and made "Cape Fear." But I'll probably never be able to watch the movie again without wondering how it could've been spiced up with a little more data science.

Quote of the week

"I think VCs are kind of short-term focused, mostly stupid, pretty arrogant, and I don't think I'm their best friend because I kind of speak the truth in a way that makes them uncomfortable."

—Social Capital founder and CEO Chamath Palihapitiya, speaking about SPACs in a wide-ranging interview with Fortune