Toyota Ventures was founded in 2017 to help startups envision the future, with the aim of ensuring that Toyota, as a car manufacturer and brand, remains at the forefront of innovation.
The company initially targeted mobility startups, but the move into climate tech was a natural fit: Toyota Ventures now manages more than $800 million in assets across six funds, with $300 million dedicated to climate-related funds.
During Climate Week NYC, Rebecca Beran spoke with Lisa Coca, partner at Toyota Ventures and head of the firm's Climate Fund, about trends and challenges in investing in climate tech.
This week's episode of Equity began with an overview of Toyota Ventures' portfolio companies, including “batteries and hydrogen, which are always on the list of climate change solutions, and are right on Toyota's radar,” Coca said. Among the standouts were AM Batteries, which is committed to reducing energy use and capital expenditures in battery manufacturing by 40%, and Ecolectro, which uses hydroelectric power in upstate New York to produce green hydrogen.
Despite Ecollectro, the two also discussed declining investor interest in hydrogen companies amid poor signs of demand, Coca said, especially when comparing hydrogen demand with technologies such as direct air capture.
“You have people like Google and Meta who are basically doing up-front off-take deals for things that don't exist, and that's good, but I think it would be great to see that happen with low-carbon fuels like hydrogen and methanol as well,” Coca said.
(And speaking at a Toyota Ventures event in New York on Tuesday, the firm's founder and general partner Jim Adler said climate tech startups should try to secure future offtake deals to spur enough demand to thrive through the funding dwindle.)
During the podcast, Coca noted that most climate tech investors already have one or two investments in hydrogen production, but most of those investments require a lot of capital and with no signs of demand, venture capitalists aren't ready to add another hydrogen pet to their portfolios.
Coca also spoke about the impact on startups of President Joe Biden's Inflation Reduction Act (IRA), which includes billions of dollars in incentives for the domestic adoption and development of energy technologies.
“There could be a pot of gold hidden at the end of the rainbow,” Coca said.
But startups need to find a way to make money without IRA funds, she said.
“Ultimately, green products and climate technology products have to find a path to cost parity with fossil fuel-based alternatives,” Coca said. “If that doesn't happen, this problem will never be solved… Some consumers will pay. They'll pay the green premium. But the industry won't.”