“Climate Investing as a Critical Battle: SOSV Founder Announces Successful $306M Fund Closure”

According to founder Sean O’Sullivan, it took longer than expected for SOSV to receive the last check for their latest $306 million fund. The macroeconomic environment was likely to blame, with most VC’s agreeing that the past few years have been less than ideal for fundraising. O’Sullivan explained to TechCrunch that despite their proven success and impressive track record, closing the fund took about a year and a half, with the final push occurring in the last six months. He noted, “The caution that’s out there in the marketplace is the highest we’ve ever seen.”

Despite the challenging and lengthy process, SOSV still reached a significant milestone. The new fund of $306 million is now one of the largest pools of early-stage deep tech venture capital.

O’Sullivan elaborates, stating, “We’re concentrating on and doubling down on deep tech. This focus allows us to take advantage of the ever-expanding opportunities within climate and address the multiple industries affected by it.” However, he acknowledges that the market’s caution is a result of high interest rates, but believes it also reflects the slow pace of deep tech investing. He explains, “Many investors have recognized the economy-wide effects of climate change and the plethora of opportunities it presents. As a result, investing in this sector has become imperative.”

O’Sullivan shares, “This is truly a war effort. We can no longer pretend that this is just another investment opportunity of the day. It is an existential crisis for the planet and we must treat it with the urgency and intensity that it deserves.” He believes that this sense of urgency and intensity should lead to more investments in deep tech. However, he also notes that some firms and accelerators have taken the opposite approach, with a “more is more” mindset.

O’Sullivan disagrees with this approach, opting for a “less is more” strategy. He states, “We see others heading in a different direction, trying to cover all the bases with 200 companies in a cohort.” Instead, SOSV takes on a more selective approach, focusing on fewer companies and providing more capital, attention, and support to each.

One area that SOSV remains committed to is biology. O’Sullivan shares that when SOSV functioned primarily as an accelerator ten years ago, only 20% to 30% of companies in their programs were able to secure follow-on funding. This motivated them to change their approach and open programs like Hax and IndieBio, which provide deep tech startups with space to experiment and operational support.

O’Sullivan proudly shares, “Today, 60% to 70% of our companies secure funding after our initial pre-seed investments, which range from $250,000 to $500,000.” In fact, for every $100 million that SOSV invests in startups, they attract around $2 billion in follow-on capital.

The new $306 million fund remains true to SOSV’s focus on human and planetary health, an emerging trend among deep tech investors who acknowledge the close relationship between the two. O’Sullivan reveals that approximately 70% of the fund will be invested in climate tech companies, 25% in health tech, and the remaining 5% will be reserved for opportunistic investments.

The limited partners who contributed to the fund include a mix of family offices, institutional investors, and corporate venture capital. According to O’Sullivan, 25% of the total capital came from corporate venture capital, a significant amount because many corporations are in need of decarbonization technologies.

When it comes to selecting startups to invest in, SOSV remains open to a variety of technologies, from robotics to minerals and biomaterials to biomanufacturing. However, they maintain a special interest in those using biology to address climate change. O’Sullivan believes that in many cases, biological processes are the most efficient solution. He explains, “Biology can be 30 to 300 times – even 3,000 times – more efficient than chemistry when it comes to reducing greenhouse gas production.”

O’Sullivan concludes, “Climate is a physical world problem, and to tackle it, we need increased efficiency in our means of production. We serve a special purpose because we focus on deep tech and explore biology, chemistry, physics, and electronics, all of which are crucial to changing our means of production.”