From unicorn to Gigacorn: the climate finance startup with a 'secret sauce'

Every venture capitalist’s dream is the ‘Unicorn’ which has the capabilities of achieving a $1 billion valuation. Extantia, a startup in the emerging climate finance business, is the ‘Gigacorn’ that can achieve a 1 billion tonne (1Gt) saving in annual carbon emissions by 2050.

Often start-ups, scale-ups and small companies are the ones equipped with the innovative ideas and agile approach critical to transforming the energy market; however, they are held back by many barriers keeping these concepts from being tested and commercialised.

Lack of funding, proving the effectiveness of a business case and increased competition from companies that are already established in the sector are some of the factors hindering scale-ups.

One such European company that has successfully overcome these challenges and is becoming a force in the sector is the German venture capital provider Extantia. In the following exclusive interview with Laura-Marie Töpfer, General Partner at Extantia, we discuss the rise of Extantia and the impact they are making in the energy sector.

This article was originally published in The Global Power & Energy Elites 2022

The Berlin-headquartered venture capital provider formed by a team of entrepreneurs and financiers is all about ‘Climate First’ and investing in deep decarbonisation technologies coming out of Europe that can lead to a future world beyond fossil fuels.

Extantia considers Gigacorns as being ‘transformers’ that have a direct technology impact, such as carbon capture and removal and clean hydrogen; or ‘enablers’ with an indirect technology impact, such as electric vehicle battery recycling systems and carbon accounting software.

“When we say ‘Climate First’, what we mean is exceptional technology innovators that do two things in combination – slash emissions at scale and cut the cost gap to clean alternatives,” explains Laura-Marie Töpfer, General Partner at Extantia.

“We know that half of the global reductions in CO2 emissions through 2030 will come from technologies readily available today, such as solar and wind. But looking ahead to 2050, almost half of the necessary emission reductions come from technologies that are currently in the demonstration or prototype phases, such as hydrogen.”

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To enable its investment, Extantia is building a ‘Net Zero Circle’ community of individuals, many of them entrepreneurs who are likeminded. To date, three funds have been launched including an initial Pledge fund, which was run primarily as a proof-of-concept during 2020, and the $150 million Climate Flagship Fund II which was launched at COP26 in November 2021. The third, the Allstars ‘Fund of Funds’, has a twist in being designed to fund emerging ‘best in class’ climate technology fund managers who have the potential to “uplift the entire ecosystem”, as Töpfer puts it.

“The problem we have observed is that the climate technology field is fragmented with many small players and it is not clear how the few million investments can bring material changes to the space.”

Extantia’s investments are in the early stage from the seed level with amounts typically of a few million dollars up to about $8 million.

A key element in Extantia’s assessment of a company’s investment potential is its carbon reduction prospects, which are projected over the entire lifecycle considering both the total addressable market and the time to impact, alongside the commercial prospects.

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Once an award is made, Extantia also aims to go a step further to add value by catalysing practical support from its network of experts and other players such as the co-investors.

Examples of the diversity of companies that have seen investments to date include Betteries, which is upcycling lithium-ion batteries from electric vehicles into second life, and GA Drilling, which is developing ultra-deep drilling equipment for geothermal energy production. Another is Bloom, which is valorising lignin from biomass as an alternative to petrol-based chemicals in aviation, shipping and other value chains.

“This is exciting and a challenge because we are bridging two worlds that have typically not really spoken the same language: climate science and venture capital,” says Töpfer.

“I'd say this complementarity is actually our secret sauce as it's allowed us to build what I would call an integrated platform of capital, carbon measurement and company building.”