The New Wave of ClimateTech: Interview with Amy Francetic of Buoyant Ventures
Amy Francetic is the Founder and Managing Director of Buoyant Ventures. Buoyant Ventures invests in growth-stage entrepreneurs who use digital technology to help the world mitigate and adapt to climate change. The fund seeks to be a catalyst for a cleaner and more resilient future.
Previously, Amy launched Energize Ventures, one of the largest first-time venture funds raised in Chicago. She also founded the cleantech accelerator Clean Energy Trust.
I enjoyed hearing from Amy on the new wave of technology innovation in cleantech and climate tech, its most significant challenges and opportunities, and how she stays motivated.
Why invest in cleantech and climate tech?
Amy Francetic: Climate change is such a big problem that deserves more capital. Over the last few years, larger institutional investors have put billions of dollars toward more sustainable investments. Every major bank now has an ESG product to offer. The shift is driven by the potential for outsize returns and investors who want their money to do more.
In the tech world, we are excited by the new crop of companies that have matured over the last five or ten years in climate tech. There are several growing areas of opportunity and new buyers for innovation. Similar to the institutional shift, these trends will change how VCs invest.
The cost of technology in climate tech has gone down. There have been strides in the optimization of energy infrastructure and equipment and new and better measurements to assess climate risk. Today, there are startups that can make a difference in the physical world through software and low-cost hardware, like sensors, that weren’t around a decade ago.
What areas of climate tech does Buoyant Ventures focus on?
Amy: We invest in digital climate solutions in the four largest industry categories: energy, transportation, agriculture, and the built environment. These categories are also the largest emitters. We look for solutions that help mitigate and reduce the current emissions of larger potential customers and communities. We also look for solutions that emerge from new areas of adaptation or investment growth due to climate change, like renewable energy solutions.
Why is investing in climate solutions important to you?
Amy: I’ve always loved to work at the intersection of science, engineering and business. In the early 2000s, I decided to commit the rest of my career to climate change. I had a health scare early on in my life–I had cancer. During my healing process, I realized how important the natural world was. I started to pay attention to how it made me feel: the smells, the sights, the peace of mind, the creatures, the physical activity. I understood how much nature rejuvenated me. When I had time to reflect, and after I had kids, I realized I wanted to dedicate the rest of my career to helping fight climate change and protect the natural world.
Both experiences changed my outlook on my career. I decided that I wanted to leave the world in a better place, and I could use my business skills to work with scientists and engineers to find solutions for a problem that could impact not only this generation but future generations.
I decided that I wanted to leave the world in a better place, and I could use my business skills to work with scientists and engineers to find solutions for a problem that could impact not only this generation but future generations.
How do you think about both financial and environmental returns?
Amy: Recent data from Cambridge and PitchBook shows that cleantech venture funds performing in the top quartile are delivering venture returns. The environmental impact grows out of the market opportunity for new companies in the sector. With a strong focus on ESG impact, those investments help reduce emissions, improve adaptation, and lead others to make better investment decisions.
When we evaluate an investment, our team looks across nine of the U.N’s Sustainable Investment Goals (SDG). We determine how the technology contributes to and will have measurable results toward those goals. We also follow the IFC Impact Principles.
What recent trends excite you in energy?
Amy: We made our first investment in a company called Raptor Maps. Founded by two MIT scientists, the company uses machine learning to analyze drone footage of solar panels for solar operators, owners, and maintenance engineers. They can identify inefficiencies in the solar panels and expedite repairs. It ultimately optimizes the performance of the solar plants.
There are also new innovations in data and risk management. Startups in climate tech have taken publicly available data from the NOAA and NASA and applied their algorithms, their secret sauce, to that data. They translate it into some measurement of climate risk. It is especially valuable to insurance companies as they seek to understand how to underwrite catastrophe insurance and investors in mortgage-backed securities and municipal bonds.
We recently found a company that has been working to identify which of the three million homes that have been deemed uninsurable due to wildfire risk in California are actually insurable and how to underwrite them. The company uses their refined data tools to make that evaluation.
Environmental-justice advocates in the U.S. have worked to bring attention to the heightened environmental risks faced by communities of color: higher levels of lead exposure, higher risks of facing catastrophic flooding, and poorer air quality, among others.
How can founders and venture investors think about and ensure that new climate solutions are equitable and not complicit in or further perpetuate environmental racism?
Amy: Data scientists have worked to collect climate data and identify risks like property loss or disasters such as sea-level rise, wildfires and hurricanes. These scientists can layer in socio-economic data and include those elements in their datasets as well.
We can identify areas of investment opportunity and make sure that the climate solutions that we come up with are suitable for diverse communities. It is valuable to measure that disproportionate risk and quantify it so others can figure out how to change their approach to their portfolio and investment strategy. Founders and investors can be very sensitive to this area of risk.
We can also back diverse founders, who have a harder time getting access to institutional capital. As an investor, it is too easy to stay within your bubble and network. It is important to be conscious of that, and it is always on our minds when we make investment decisions.
What is the hardest challenge for founders in energy to overcome?
Amy: You have to understand how to sell to your customer. In cleantech and climate tech, you sell to a large utility, manufacturer or someone that sells to those customers. Founders have to know how to sell to larger customers that have longer decision-making timeframes. They also have to be cognizant that these customers seek solutions that will create economic value first.
Founders are not selling to individual consumers as end customers, but large institutions and organizations that move slowly. Once you’ve got their attention, you have to figure out how to grow that customer. It is great from a market share perspective to continue to expand to more customers, but you also have to service and take care of your existing customers. You have to add existing features to your solution that will return more value to that customer and all your other customers. The question is: where do you spend the money as a startup? That’s hard.
What is the hardest challenge for investors to overcome?
Amy: You’ve got to be patient. We are overdue for policy tailwinds that will accelerate innovation in cleantech. I’m hopeful that will come after the next election. It is super frustrating to face such an uphill battle with solutions that we know are critical. We know we are running out of time. The scientists should have a stronger voice in this. The policy-makers should listen to the scientists. I hope we can get federal support in the U.S. so that we can move faster.
What is advice you would give to founders in energy?
Amy: Energy is not for tourists. It’s complicated. It is important to be technical and know your solution. You must also know how it fits into the market and market regulation. In “Cleantech 1.0” from 2007 to 2010, money flowed into solutions with significant regulatory challenges. There was not enough respect for how to interface with public utility commissions, elected officials, city and state governments. You have to understand the policy on a deep level.
Maybe a company can’t afford a team of government affairs folks, but we encourage them to spend time getting to know the elected officials in their key areas. Weigh in your opinion on a utility commission decision. Go to D.C once a year. Meet politicians in areas where most of your business is or the most influential members of the committees. That is all time well spent. It is important to have context and such a critical part of understanding the space.
Energy is not for tourists. It’s complicated. It is important to be technical and know your solution. You must also know how it fits into the market and market regulation.
What do you find unique to the tech ecosystem in Chicago?
Amy: Over the last ten years, the venture community has grown in Chicago. I enjoy the camaraderie and support. There are more and more funds, investors, and repeat entrepreneurs.
An organization that is helping to fortify the clean energy ecosystem in the Midwest is Clean Energy Trust. I helped found the organization and serve on the board of directors. For the past ten years, Clean Energy Trust has convened leading researchers, entrepreneurs, investors, and large customers in the region to help support innovation. I love learning about all the new, creative companies being formed in the region, many by first-time entrepreneurs.
There are a few key advantages to investing from the Midwest. When we travel, Chicago is a day-trip to anywhere in North America. On a regular basis, I travel a lot to meet with companies and investors. You can source deals and work with investors across the country.
The Midwest is also the center for innovation in Energy and AgTech. There is invaluable customer traction here. When we invest in a company, we seek to add value beyond the money itself and find customers to scale their business. We have some of the top industrial customers, in addition to rich research centers and academic institutions.
The federal government recently invested in AI and quantum research at Argonne National Labs. We’re excited about how it will spill-over into the entrepreneurial community. When stuff like that happens, it attracts some of the best minds to the problem. They will anchor a network of research on that front, even beyond Chicago. It is great to have that hub next door.
What is a book you’ve enjoyed recently?
Amy: My friend recently gave me a book called The Nature Fix by Florence Williams. I’m surprised it took me so long to find it! Williams puts into scientific language what I have instinctually known. She details all the health benefits of nature onto people’s physical and mental health. She travels to and learns from different cultures that preserve and protect nature.
Fill in the blank: I wouldn’t get through quarantine without….
Amy: Access to nature! I love getting outside in the sunshine and fresh air with my family. I love to walk my dogs, go to the lake, or get on the trails.
What advice would you give your younger self?
Amy: I wish I had figured out what was meaningful and purposeful earlier. I came to where I am now through life events, my family, and the effects of my health. I have a long time to work, but in the grand scheme of things it is not that long. To be impactful in your work, it can be helpful to be specialized. Choose a problem that is meaty and deep that you can chip away at.
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This article has been edited and condensed for clarity.
