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DCVC hopes to raise $500 million for its first climate fund, but the market has other plans

DCVC has set a broad target for its first climate-focused fund, DCVC Climate Select, underscoring the roller coaster ride of venture funding over the past few years and how limited partners have not been so quick to back established fund managers’ new strategies. .

The Silicon Valley venture capital firm launched the fund in December 2022 with a target size of $500 million, according to U.S. Securities and Exchange Commission (SEC) filings. A year later, the company lowered its target to $300 million, as its financing commitments at the time only reached $157 million, according to a December 2023 SEC filing. Now, a person familiar with the matter tells TechCrunch that things are starting to fall into place and that $400 million may more accurately reflect the direction of the fund.

DCVC spokesperson Nate Nickerson told TechCrunch via email that a recent article by New Mexico Inno describing the New Mexico SIC’s $50 million commitment to the fund also noted that the $400 million target “is consistent with our commitment to the fund.” expected”.

DCVC is a deep tech company co-founded by Matt Ocko, known for decades of investing (such as MosaicML, acquired by Databricks), and co-founder Zack Bogue, known for his work on Square, AngelList, Uber and Known for its annual “Davos Deep Tech” event. As part of an event in Davos in February, Bouge pointed to artificial intelligence applications for climate technology as one of the DCVC’s “big opportunities”, along with technobio and robotics.

The climate fund targets mid-stage climate startups and the firm believes the climate startup ecosystem is currently underfunded, according to materials the general partner presented at a recent New Mexico investment committee meeting. While this is DCVC’s first climate technology-dedicated fund, the firm has invested $360 million in such startups from other funds over the past decade, according to the New Mexico SIC’s March 26 meeting.

Although Nickerson said the initial $500 million figure was just an estimate before the fund secured capital from limited partners, industry standard is that the number does represent the fund’s goals. Inside the company, people knew the company would have to adjust its expectations to more “sober” market conditions, people familiar with the matter said.

Going into 2024, DCVC’s existing portfolio of climate companies is starting to see some wins, which could help the fundraising journey, the person added. One example is Twelve, a company that makes products traditionally made using carbon-based fossil fuels. The company recently signed a 14-year purchase agreement with International Aviation Group, which includes airlines such as Aer Lingus and British Airways, to purchase 260 million gallons of Twelve’s more sustainable aviation fuel.

“These are not small transactions, small numbers, or small evidence. For skeptical customers, this is a financial performance.” said a person familiar with the matter. “These huge long-term changes are possible [industries]. The numbers these disruptive companies put out in their boardrooms were consistent with what you’d expect from a public company. This is a very convincing fact pattern. “

DCVC isn’t the only fund to lower its targets or close with less capital than expected after a tougher funding cycle in 2022 and 2023. Tiger Global’s latest fund raised $2.2 billion of its $6 billion target. In the first half of 2023, Founders Fund, Insight Partners, TCV and other companies all significantly lowered their fund targets.

In 2022 and 2023, financing for venture capital companies will become extremely difficult. While 2022 set a new funding record for U.S. companies at $172 billion, according to PitchBook data, analysts said that was largely due to funds raised in 2021 set to be completed in 2022. The real impact will be felt in 2023. U.S. companies raised $66.9 billion in 2023, the lowest total since 2017 and a 61% decrease from the record-setting year before, according to PitchBook data.

On the other hand, climate investment is one of the few hot spots outside of artificial intelligence. It is attracting more and more attention from venture capitalists and is also performing well in terms of venture capital financing. Climate-focused venture capital funds have raised more than $710 million so far in 2024, and are on track to match or exceed the $2.17 billion raised last year and not far off the record of $2.9 billion in 2022, according to Preqin.

While LPs and analysts alike told TechCrunch they don’t expect 2024 to be a significantly better year for VC funding — some think it could be worse than 2023 — the new climate for DCVC For funds, things may actually be heading in a better direction than they were in 2023. Its latest disclosure to the U.S. Securities and Exchange Commission shows.

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