Cleantech for UK is expanding! Latest to join is Zero Carbon Capital, who are solving the biggest challenges of decarbonisation with pre-seed and seed investments in ambitious teams building hard-science solutions across Europe. We sat down with Sarah Jones, Principal at Zero Carbon Capital to discuss her cleantech journey.
How did you find your way into the cleantech space?
I’m a scientist by background, with a PhD in Bioprocess Engineering. I originally left research to work with university technology transfer at Imperial College and the University of Oxford – the job being to help academics commercialise their innovations. After that, I led the climate programme at the Creative Destruction Lab, an accelerator for scientific startups. Through that, I came into contact with Zero Carbon Capital, and joined them when they recruited the team for their second fund.
Tell us about Zero Carbon Capital!
The Managing Partner and Founder of Zero Carbon Capital has 8 years experience investing in pre-seed deeptech startups with a climate focus. She started as an angel investor in San Francisco. Joined by her partner in 2019 they started ZCC with a UK-focused fund that they ran themselves, making seven excellent investments in scientific entrepreneurs with climate-tech solutions. With that fund serving as a proof of concept, they brought me on, alongside two other colleagues, and raised a £20m fund.
We are based in London and Berlin investing across Europe in deeptech climate startups at pre-seed and seed stages. Our team is uniquely placed to make these type of investments because we’re all scientists by background and have years of experience in business, tech commercialisation, and startups investing.
How does your scientific background impact your investments?
We invest at the pre-seed and seed stages of investment, and we’re often the first institutional money that supports a given company. At that stage, there are often outstanding R&D questions related to the product, so it’s crucial that we understand the technology behind the product in detail.
To bring about the huge transition that is net zero, we need scientific solutions - fundamental changes in the products, processes, and activities that support our modern lives. We can leverage our scientific backgrounds and commercial skills to identify companies that are pioneering products and processes for deep decarbonisation. The confluence of science and business, and of improving the economy while also respecting the planet, are what drive our investment thesis at Zero Carbon Capital. As a global society, we also need progress in many other areas to support the transition to net zero-policy development being key for unlocking the road ahead for these new companies and products. . . .
Can you give us some examples from your portfolio?
ZCC’s second fund (£20m pan-European fund) has already made significant progress with investments in 12 companies that align with our visions for a net zero 2050.
Ionate is a UK company developing smart transformers to bolster the grid. As we increase the electricity supply needs, as we electrify our processes and systems, we need sufficient grid capacity, and we need the grid to be able to handle the intermittency issues of renewables such as wind and solar power. This smart transformer enables that, and makes for a more robust future grid.
NetZeroNitrogen is solving one of the biggest global emissions areas - nitrous oxide emissions from using fertilizers on crops. Synthetic nitrogen fertiliser is responsible for 1 Gt CO2e/year, partly from the production process and mostly from the release of nitrous oxide when the fertilizer is applied to the fields. NetZeroNitrogen is harnessing the power of bacteria to fix nitrogen directly from the air so that crops can grow without the reliance on excess synthetic fertilisers.
Level Nine is a Berlin-based startup who are engineering novel biocatalysts to enable the economically viable production of biochemicals. At ZCC we think a lot about how we will replace petrochemicals with low emission alternatives. A good solution is from biomass waste feedstocks such lignin from forestry and paper and pulp. Level Nine’s catalysts are able to convert the hardy biomass feedstocks like lignin into chemicals in an efficient and cost effective process, enbaling bioprocessing to replace petrochemicals production
How do you support your companies scaling up, and what issues do they face when financing their journey?
We take active roles on the board or our portfolio companies and spend a lot of our time supporting our portfolio companies with strategy and advice for building their company. We are also very active in helping them fundraise through our large network of co-investors and later stage investors.
We’re one of few investors who invest in hard science and hard tech at the very earliest of stages. There is some capital available for such innovators at series A, but a lot of that stage of capital is focused on software. The problem is that if such money pots dip their toes into hardware investments, they expect revenue generation from very early on. Sometimes, that’s just unrealistic – R&D timelines are longer for hardware technologies, and investor timelines often do not accommodate that. We need lots more capital like ours, investing in deeptech for climate with the right expertise to assess the companies and with a pragmatic view of how to successfully reach our 2050 goals.
Series B and onwards, when you need to build actual factories, there’s very little money available. You need tens, sometimes hundreds of millions to build production facilities for these types of products. A lot of the big pots of money aren’t comfortable with their risk profiles. Such existing sources of unwilling capital can be banks who offer debt and project financing, who want the startups to have proven repeatedly that they are commercially viable. The issue is, they need that level of funding for their first-of-a-kind (FOAK) project that proves the viability. There are some blended finance options, but it’d be nice to see the government step in to support in unlocking such capital flows.
What regulatory hurdles do you observe your companies tackle?
As we’re dealing with cutting-edge technologies, the innovations we support are often impacted by regulations which have not been updated to reflect the nature of breakthrough technologies. Sometimes there aren’t any regulatory frameworks at all, in cases where a whole sector is in its infancy, such as Carbon Dioxide Removal. These policy developments need to be sped up, so that innovations are not hindered by either non-existent or outdated regulations.
We’re heading into a new political cycle: any key policy wishes?
I’ve looked at the sheer volume of subsidies going into oil and gas. It’s such a massive pool of money that needs to be redirected to climate-positive technologies. While it might be politically difficult, the money is clearly there.
Lastly, I wish for urgency. We need to act urgently to redirect and unlock money and regulate strategically, to enable cleantech deployment.
Thank you for sharing your insights, Sarah! We look forward to working with you.
