Lyft CSO & Freestyle Capital Co-founder Invest in Climate Tech

A New Approach to Climate Tech Investment

Raj Kapoor, formerly Lyft’s chief strategy officer and head of business, believes that a shift in focus is needed when addressing planetary conservation. He posits that relying on individual consumer changes or governmental regulations isn't the most effective path forward.

Enterprise Solutions as the Key

Kapoor, alongside Josh Felser, co-founder of Freestyle Capital and a seasoned entrepreneur, is placing their confidence in the potential of climate technology within the enterprise sector. They observe a significant change in corporate behavior regarding sustainability.

By late 2021, Fortune 500 companies were publicly committing to sustainability objectives, and a substantial 65% of the world’s GDP had pledged to achieve net-zero carbon emissions by 2050. For instance, Amazon is actively working towards net-zero carbon operations by 2040, recently reinvesting from its $2 billion climate fund into a company developing rapid charging technology for electric vehicles.

Introducing Climactic: A Venture Capital Firm

Recognizing this trend, Kapoor and Felser established Climactic, an early-stage venture capital firm dedicated to investing in startups focused on climate solutions from an enterprise perspective. To date, they have invested $50,000 to $100,000 in 11 companies, utilizing personal funds.

While they haven’t disclosed any plans for broader fundraising, Climactic has not yet filed any paperwork with the SEC to initiate a formal investment fund.

The Core Investment Thesis

Climactic’s central strategy centers on assisting enterprises in reaching their net-zero emissions targets. They also express interest in backing innovative consumer products that maintain value while prioritizing environmental responsibility.

Felser explains that they seek startups that can serve enterprises, creating a readily available customer base actively requesting assistance with the technologies needed to achieve their publicly stated sustainability goals.

Clean Tech Evolution

Kapoor differentiates between “clean tech 1.0,” which was largely driven by scientific breakthroughs from academia, and the current “clean tech 2.0.” The latter emphasizes entrepreneurs developing marketable products and software solutions.

This evolution means Climactic remains actively engaged, investing in technologies for carbon emission measurement and analysis, software optimizing supply chains, and mobility solutions for both transportation and logistics.

The Importance of Software

Kapoor stresses that the impact of software on the environment shouldn’t be underestimated, even if it’s difficult to quantify. He believes software will play a crucial role in addressing climate challenges.

Founders and Catalysts

Kapoor, previously a managing director at Mayfield, departed Lyft in April 2021 following the sale of its autonomous vehicle division to Toyota’s Woven Planet Holdings for $550 million. Felser had previously launched a climate action aggregation app (#climate) and co-founded Freestyle Capital.

The two entrepreneurs united due to a shared conviction: the inadequacy of nonprofit efforts to solve the climate crisis and the necessity for a profitable, sustainable solution.

Acknowledging Expertise

Kapoor acknowledges that Climactic’s specialized climate knowledge is currently “light” compared to more established climate investors.

Focus on Enterprise Needs

However, Felser notes that entrepreneurs are primarily seeking assistance with enterprise sales, marketing, and pricing, rather than detailed explanations of complex scientific concepts like cellular meat production.

Climactic employs consultants with experience in sales, marketing, and product development, bridging the gap between scientific innovation and effective market penetration.

Providing Essential Support

“We’re [providing] expertise in sales, enterprise sales and marketing, product expertise and general CEO coaching,” Kapoor states. “And that’s what’s currently lacking within the climate venture community.”

A Growing Landscape

Climactic’s emergence coincides with a surge in climate tech-focused funds, including Lowercarbon Capital ($800 million), 2150 ($312 million), and Wavemaker Impact. Kapoor is a limited partner in VSC Ventures, which focuses on helping climate tech startups refine their messaging through public relations. Rivian, a recently public EV manufacturer, secured $2.5 billion in funding, and Redwood Materials, a battery startup founded by a Tesla co-founder, raised $700 million.

Navigating Greenwashing

While increased attention is beneficial, climate tech investors must be vigilant against “greenwashing”—misleading marketing that portrays products as sustainable when they are not.

Felser points out the frequent use of the term “sustainable” in investor presentations, and recounts an instance where a circular economy company’s claims of sustainability were unsubstantiated in both material sourcing and manufacturing processes.

The firm is also wary of offset programs lacking proper verification, another potential red flag.

Due Diligence and Initial Investments

This scrutiny means Climactic prioritizes thorough impact due diligence over unsubstantiated claims. Their portfolio includes Orca Mobility, a compact autonomous delivery robot company; Rubi Labs, which converts carbon emissions into sustainable textiles; and Muon Space, developing multi-modal satellite remote sensing systems.