“Every company and every industry will be transformed by the transition to a net zero world. The next 1000 unicorns won’t be search engines or social media companies, they’ll be sustainable, scalable innovators – startups that help the world decarbonize and make the energy transition affordable for all consumers.”
I believe that we are at the eve of one of the greatest value creation opportunities of the coming century. Achieving the ambitious but necessary rapid reductions in emissions will be paramount to the future of humankind. It is clear that we cannot continue using the limited resources we have in the way we have, but at the same time it is extremely unlikely that we would be able to abandon the way of life we have built. This is all compounded by the callous attack of the Russian Federation to the Ukraine. We have been torn from the world order we thought we lived in and the realities are now bare in front of us. Energy is power and we can no longer remain reliant on Russian gas, oil and minerals.
My prediction is that the transition to green societies will be accelerated and financed with unparalleled vigor by the EU. Although the transition will be painful in the sense that energy and food will cost more, we should never let a good crisis go wasted. In the coming years there will be a huge demand and an opportunity for startups solving issues within the planet positive tech spheres as we look for our salvation in technology.
Western lifestyle is going to feel the squeeze
While we tally, the effects of climate change are becoming tangible in our everyday life. Extreme weather phenomena are becoming more common and more unpredictable. In the future the morning coffee you drink will be a luxury only few can afford while chocolate will become only a memory as cocoa producing regions may become unsuitable for farming in the next 30 years. We don’t even need to talk about meat as livestock accounts to ca. 14,5% of global emissions, any government looking to cut total emissions will look to stifle demand by increasing the price of meat so far that it will only be available for the wealthiest strata of society.
The same story continues if we look at the climate crisis through a wider scope. Concrete is responsible for ca 7-9% of global emissions and it is not probable that we will stop building infrastructure & housing any time soon. New electric & hydrogen-based solutions will be needed to cost efficiently replace carbon fuels in automotive, aviation and marine traffic.
While it is not feasible that we would replace all virgin materials, we will probably see a surge of tech looking to close the loop on certain key resources. Plastics will be split back to olefins, rare earth minerals recycled efficiently and superior tech introduced like quantum computing and new batteries.
For investors, owners, managers and other stakeholders, accepting the status quo of operations is a huge risk. In the U.S., the Securities and Exchange Commission is expected to require more disclosures from publicly listed companies on the risks of climate change to their businesses. Meanwhile, the Biden administration has recently declared climate change an “emerging and increasing threat to U.S. financial stability”.
Exponential growth in the number of startups solving these problems are required
Investors and politicians should be wary of large corporations claiming that they will shift their businesses towards a net zero carbon footprint. After all, large corporations are not very good at innovation. They are streamlined to execute their current working business models and very few radical innovations usually directly fit that model. For the managers of these companies, the fear of loss will always be greater than the desire for gain.
Startups then again are another story. From a starting position the entrepreneurs have no market share or revenues so there is nothing to lose. Furthermore, most startups are aiming to build a monopoly in their respective markets.
Traditionally the Nordics have been extremely strong in what can be considered circular economy, advanced materials and synthetic biology and there is plenty of world leading research relating to these subjects within universities and research centers. In the last 10 years we have had an entrepreneurship boom where being an entrepreneur has changed from being something perceived to be a lesser alternative to a corporate career, to a purpose driven way to change the world we live in. Now is the perfect time for founders to take those 10 years of experience and work with the existing IP in universities to create the next 1000 unicorns!
If I look at our own portfolio, the seeds have already been sown with companies such as:
eniferBio -> Producing edible protein from side streams
Betolar -> Bringing Roman Opus Caementicium to the 21st century with a significantly lower carbon footprint compared to Portland cement
Skyfora -> Helping clients adapt to climate change scenarios through next gen weather instruments and AI modeling
Kuva Space -> Bringing real time global hyperspectral data to validate and measure carbon sequestration
Solar Foods -> Creating food from electricity and air
Infinited Fiber Company -> Turning trash grade textiles into a premium quality circular textile fiber that reduces the reliance on virgin raw materials
If you are or want to become an entrepreneur, now is the perfect time to change the world.
The opening quote is from a yearly letter that the CEO and founder of Black Rock Larry Fink writes to CEOs of the companies that are in their portfolios. A good read for any entrepreneur or investor into the thoughts of one the most successful and influential wealth managers.