While many climate change investors are focused on innovative deep technology solutions, Patrick Sheehan of ETF Partners has other ideas.
“I don't really have anything against carbon capture and storage, other than the fact that it's probably been too long since commercialized,” he told TechCrunch. Instead, Sheehan and his colleagues are diving into more software-centric companies that promise to continue to be game-changing.
“Some people say it's the police's fault,” Sheehan said. “The more I look, the more I disagree with that idea. We need to find companies that can rapidly scale to have an impact within the lifespan of a venture capital fund, which is 10 years maximum.”
This sentiment has helped ETF Partners raise a new, oversubscribed €284 million fund, its fourth.
The company was founded in 2006 and has weathered a series of bull and bear markets. Until 2018, Sheehan describes his work as “more evangelical.” Since then, he has found limited partners to be much more tolerant of climate change technologies. “It became a much better institutional product.”
Instead of fusion and e-fuels, ETF Partners is interested in discovering more emerging companies like Deepsea, a portfolio company in its third fund. Deepsea uses AI to optimize maritime transport operations, including route decisions, reducing fuel usage by 10-15%.
“The carbon emissions from shipping come almost entirely from fuel. With just a little bit of software, it can be deployed around the world in just a few years, at almost no cost, and reduce 0.3% of global emissions.” ” said Sheehan. “It's amazing, and fast.”
His company focuses on five sectors including energy, transportation, connectivity, consumer, food and agriculture. “The overarching theme at the top of those is what I call the intelligence layer on top of the infrastructure,” he said.
The fund will continue to focus exclusively on European startups. Sheehan cited more favorable government policies and a public that almost universally believes climate change is real. “It's an incredible backdrop,” he said.
As a result, he has found that investors have less need to look for companies developing breakthrough technologies that aim to transform markets, and demand for companies committed to sustainability has increased.
“A lot of deep technologies have the potential to be very green,” Sheehan says. “But our focus is on companies that are just starting to grow their revenue.”