2022 is basically in the books. Other VCs are sending out their end of year letters. This is ours.
The Real Macro Story
96 million tons of CO2e was still emitted yesterday. This is not good.
Rebranding Cleantech: The Shift to Climate Tech
We now call cleantech climate tech because venture investors wanted to change the name so it sounds new. Energy companies call it energy transition so it sounds slowish and not disruptive to their current strategy. There is more cash than ever flowing into the climate sector; I can no longer count all the investors or keep up with the startups. This is probably good. Renewables are very big. As an example, Nat Gas new capacity additions for power generation in the US are consistently struggling to get to one third of renewables on a regular basis, hasn’t beaten renewables since 2018, and hasn’t beaten them twice in a row in over a decade.
Government Investments and Market Reactions
The US government has recently dumped so much cash into the sector on top of it all that no one can figure out where it’s all going to go yet. I’m not sure what to think about this, but it’s probably good if you’re a cleantech founder, ETV, or an ETV LP. Investors are mispricing risk again; this is probably not so good (unless you’re invested in ETV). The public markets are really choppy and whacked right now, because, well, things were overpriced, and now they’re rationalizing, and we have inflation and rising rates. Startup valuations are usually sort of tied to those public markets in the medium run, and people are figuring that out. This all probably doesn’t matter much unless you overpaid or overraised last year, then it really might. Or are in a climate tech startup, about the only venture sector that’s still frothy.
Energy Markets Steady Despite Historical Volatility
Energy markets are doing their thing.
We used more energy this year than we did last year by a little. Prices are, wait for it, kind of normal. A little historical perspective in the charts above. WTI is at $74/bbl, literally the same as the $75/bbl it ended 2021, despite hitting $120 twice in 12 months. And inflation adjusted essentially the same as it was to start 1986, and about 1/3rd lower than a decade ago. Henry Hub Nat Gas is $6.60 /mmbtu, about the same as two decades ago, and a tad above its 20-year monthly average of $4.60 when you adjust for inflation (30% and 65% in the last 10 and 20 years), right on its average for the last 12 months, up a $1 since 10 days ago, and down $3 since 110 days ago. Solar and wind are still cheaper than gas and coal and despite supply chain and price squiggles, are still getting cheaper on a raw cost basis. Lithium-ion batteries, wind, and crystalline solar are still beating everything else in growth, but fossil is still the bulk of supply. China is still adding massive coal fleets and renewables in a very weird edge effect.
Public Perception and the Reality of Energy Prices
People, however, are as usual ending the year whining about energy prices, even though they’ve been largely flat to deflationary in real terms over the lifetime of a millennial, and the twin towers of gas and renewables appear to have us on a permanent deflationary cost, if volatile price, path, government policy shocks notwithstanding. As usual, the main culprit on prices looking high are lead times and short and medium-term kinks and imbalances in various refining, transport, and supply additions, screwball government policies, or journalists and politicians not understanding real vs nominal prices. Energy at its core is not expensive. It’s cheap, deflationary, and getting more so as renewables proliferate. And while true, that’s cold comfort to anyone dealing with short-term nominal price volatility.
ETV Micro Story: Fund Success and Startup Growth
We did a second close on the fund this year, after our first close with GS Group in 2021. Our fund is now packed with really smart money. Like really smart money, strategics, fund of funds, family offices, founders. No, we really don’t tell people who they all are.
ETV’s Impressive Startup Portfolio
ETV has four awesome startups, with great founders. We’ve placed bets in many of the core sectors renewables, EVs, grid, hydrogen, and CCU. We’ve done Pre-Seed, Seed, B, and C checks. They are all growing like weeds. We funded two in our 1st 270 days, and 2 more in the second 270 days. We are very, very happy with them. We will not trade them for other people’s startups or founders. They all do about half of what I tell them they should do a few months after I tell them things. That’s probably ok, they are founders, they have to find their own paths.
Join ETV’s Growing Team
Here’s what they need variously: CFO, VP of Engineering, other random VPs, some manufacturing people, some sales and marketing people, and some product people, and a lot of engineers, electrochemists, EEs, ChemEs, MechEs, SW Engineers, operations people, etc. I’m sure I’m missing a few jobs. Feel free to just message random people at our startups on LinkedIn and say, “Your investor Neal told me to call you, I’m interested in joining.” They’ll probably respond because they’re afraid their investor actually sent you. And they are awesome, you should join them.
Connect with ETV
If you want to ask us about our fund, join, invest in or meet our startups, co-invest with us in the next one, great, send one of us a message through LinkedIn. If we haven’t talked to you in a while, definitely drop us a line.
Seeking More Founders and New Ideas
We need more founders to add to this list. It’s kind of a thing. Oh, and we really like founders, they’re fun. We also like new interesting ideas, and all any of us have been thinking about for 20 years are ideas in energy and climate.
Schedule a call here if you are a Founder
This is the ETV partners’ calendly. It goes straight to our calendar. I’m literally letting you just schedule 30 minutes with my partners Craig and Q. Seriously, this is not a trick. The venture capital job is literally to talk to founders.
Why Work with ETV?
Why would you do this? Because you want to raise money for your climate tech or energy startup, and we do that. Because you want an investor who’s been doing actual startup investing in climate and energy for a long time and knows where the bodies are buried and how to build a tech startup in energy. Because we’ve been in startups and go to bat for our founders. Because you look at our founders and are like, damn, they’re awesome, I want to work with the investors they’re working with.
Upcoming Events
Or you can come to our upcoming 4 part First Time Founder Series at the Ion Houston in January.
A Closing Note from ETV
To quote the well-known philosopher Kuiil, a retired agtech, robotics, and spacetech CTO, “I have Spoken”. On to 2023.
Energy is Life.
The Rest is Just Details.
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