Market Forces Change DCVC’s First Climate Fund Goal to $500M

DCVC wanted to raise $500M for its first climate fund, but the market had other plansDCVC’s target for its first climate-focused fund, DCVC Climate Select, has been all over the place and highlights the roller coaster venture fundraising conditions of the last few years, and how LPs aren’t as quick to back new strategies from established managers. The Silicon Valley VC firm launched the fund in December 2022 with a $500 million target, according to a SEC filing. This climate fund is targeting climate startups at the mid-stages where the firm thinks the climate startup ecosystem is currently underfunded, according to materials from a recent New Mexico State Investment Council meeting where the GP presented. Tiger Global’s latest fund raised $2.2 billion of its $6 billion target. In the first half of 2023, firms including Founders Fund, Insight Partners and TCV all slashed their fund targets.

Deep tech venture capital firm DCVC had set its sights on raising $500 million for its first climate-focused fund, DCVC Climate Select. However, the market had different plans. Just over a year after launching the fund in December 2022, DCVC lowered its target to $300 million due to a slow response from limited partners (LPs).

The Silicon Valley-based firm launched the fund with a $500 million target, according to a filing with the Securities and Exchange Commission (SEC). But by December 2023, after a year of fundraising, only $157 million had been brought in by DCVC. This resulted in a significant reduction in the fund’s target, with a new figure of $300 million being reported.

A recent article in New Mexico Inno reported that the New Mexico State Investment Council (New Mexico SIC) had committed $50 million to the fund, which aligns with the lowered target of $300 million. “This is consistent with our expectations for the fund,” shared Nate Nickerson, spokesperson for DCVC, in an email to TechCrunch.

DCVC, co-founded by Matt Ocko and Zack Bogue, is known for its investments in deeptech companies such as MosaicML, which was later acquired by Databricks. Bogue is also known for his involvement in companies such as Square, AngelList, and Uber, as well as his annual event “Deep Tech in Davos.” During this year’s event in February, Bogue highlighted AI applications for climate technologies as a major opportunity for DCVC, along with techbio and robotics.

The DCVC Climate Select fund is focused on mid-stage climate startups, an area that the firm believes is currently underfunded. This was shared during a New Mexico State Investment Council meeting where the general partners presented their fund. Despite this being DCVC’s first climate-specific fund, the firm has previously invested $360 million in climate startups over the last decade, according to a report from the New Mexico SIC meeting held on March 26, 2024.

While Nickerson stated that the initial $500 million target was simply a pro-forma number until the fund could start taking in funds from LPs, it is generally considered as the actual target for a fund. However, a source familiar with the matter revealed that DCVC had to adjust its expectations due to the current market conditions.

This source also mentioned that DCVC’s existing portfolio companies focused on climate have shown signs of success in 2024, which may have positively impacted the fundraising journey for the new fund. For instance, Twelve, a company that produces sustainable products traditionally made using fossil fuels, recently signed a 14-year purchase agreement with the International Airline Group (which includes airlines like Aer Lingus and British Airways) for 260 million gallons of their more eco-friendly aviation fuel.

“These are not small deals, small numbers, small evidence. This is the kind of financial performance that skeptics can’t ignore. It’s a huge sign of potential change in these massive industries. These disruptive companies are showcasing financial numbers that rival those of public companies. That’s a very persuasive fact pattern,” the source familiar said.

DCVC is not alone in adjusting its fundraising target or closing a fund with less capital than expected, following a challenging 2022 and 2023 fundraising cycle. Tiger Global’s latest fund, for example, raised only $2.2 billion out of its $6 billion target. In the first half of 2024, several other firms, including Founders Fund, Insight Partners, and TCV, all reduced their fundraising targets.

Fundraising has been challenging for venture capital firms across the board in the past few years. Although 2022 set a new record for U.S.-based firms with a total of $172 billion raised, analysts attributed this to funds raised in 2021 that closed in 2022. The real impact of the market situation was felt in 2023, with U.S. firms raising only $66.9 billion, the lowest total since 2017, and a 61% decrease from the record-breaking year prior.

However, climate investing has been one of the few areas that have seen increased interest from VC firms and has been successful in raising funds. So far, in 2024, climate-focused VC funds have raised more than $710 million, as per data from Preqin. This is on track to match or even surpass the $2.17 billion raised in 2020 and is not far behind 2022’s record of $2.9 billion.

While LPs and analysts have not painted a rosy picture for VC fundraising in 2024, and some even believe that it could be worse than 2023, DCVC’s climate fund may be headed in a better direction than what their recent SEC filings might suggest.

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Kira Kim

Kira Kim is a science journalist with a background in biology and a passion for environmental issues. She is known for her clear and concise writing, as well as her ability to bring complex scientific concepts to life for a general audience.

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