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👂🏼 You’ve likely heard of the phrase: “if you build it, they will come” but do you know where it originates from?

⚾ Well, it’s from the 1989 classic American film, “Field of Dreams”, in which Ray Kinsella (played by Kevin Costner) hears a voice compelling him “if you build it, he will come” in reference to the construction of a baseball field in the middle of rural Iowa.

🏟️ [Spoiler alert] At the end of the movie, after many trials & tribulations, the remote baseball field that was initiated by Ray’s fever dream indeed attracts a large crowd of spectators.

🏗️ In this issue, we are going to discuss the role of venture building within climate finance. In this case, the hope is that by building scalable climate ventures from the ground up they (i.e. customers, partners and investors), will indeed come as they did in “Field of Dreams”.

🤔 What’s the deal with Climate Venture Building?

💸 As we mentioned on our issue covering Climate Venture Capital (VC), which we co-authored with The Radical Fund, VC has an important role to play within the broader climate finance space in catalyzing innovative startups that have the potential to create climate mitigation and adaptation impact at scale.

😵‍💫 However, VC funding in Southeast Asia is experiencing a bit of a paradox…

📈 On the one hand, dry powder—which is defined as the amount of capital that has been committed to VC funds, minus the amount that has been called for investment—is at an all-time high in Southeast Asia (Bain, Google & Temasek, 2023).

📉 On the other hand, funding towards tech startups in Southeast Asia is at an all-time low (Deal Street Asia, 2024).

❓ So what explains these seemingly paradoxical trends?

💰 Well, as mentioned above, dry powder is committed capital but it hasn’t yet been deployed, whereas the actual funding statistics depict deployed funds. This means that this dry powder isn’t being deployed at the same velocity as before due to investor caution.

🌟 However, if we double-click on the sectors that are attracting funding then there is a bright spot: ClimateTech.

⬆️ Over the course of the past 5 years, the proportion of VC funding towards ClimateTech startups has increased from ~3% to closer to 10%! (DealStreetAsia, 2023)

📲 ClimateTech is a critical asset class to invest in because—as we mentioned in last week’s project finance issue—there is still huge financing gap of around USD800B for both mitigation & adaptation needs in developing Asia (IMF, 2024).

🤔 So how do we catalyze more investments into ClimateTech?

👷🏼 Well, one way is through venture building…

❓ So which sectors are critical here? Well, as we mentioned on our decarbonizing agriculture issue: energy, agriculture & land use (nature) are of the utmost importance here.

🔑 The key is to identify the opportunities that have both a huge potential climate impact yet are also feasible to be deployed both from a commercial viability as well as operational execution perspective.

💰 Through this exercise, we end up with the following list of that has a ~USD150B potential economic opportunity in Southeast Asia by 2030.

💥 The idea is that by launching and scaling ventures within these areas, the “dry powder” chart starts to converge towards the actual funding chart.

👋 Later on in this issue, we interview Wavemaker Impact whose investment thesis is along these lines. You might recognize the name from previous issues, since we covered a few of their portfolio companies already, including:

1. 🌾 Rize on our decarbonizing agriculture issue

2. 🧑‍🌾 Agros on our sustainable agriculture issue

3. 🌄 BumiBaru on our land use issue

4. 💵 Refy & RegenX on our financing decarbonization issue

⏭️ In the next section, we're shouting out yet another portfolio company of theirs that focuses on solar energy ☀️…

📚 Want to learn more about this topic?

1. “Southeast Asia’s Green Economy 2024” by Bain, GenZero, Standard Chartered, and Temasek

2. “What is Venture Building?” by B-works

📢 Shout-out to Helios!

⚡️ The renewable transition is fundamental to a net zero world and astonishingly, residential solar accounts for more than 40% of the battle in Southeast Asia! Helios exists to put solar on the roof of every single eligible home first in the Philippines, then across SEA. They do so by using solar to create an offer that their customers simply can’t resist: add solar with Helios and they’ll help lower the cost of your home by up to 30%.

👏🏽 Find out how at joinhelios.com and be part of our mission to deploy 100GW of residential solar in the next 5 years.

🗞️ Recent News

🎙️ Interview with Marie of Wavemaker Impact

💡 Why were you initially inspired to launch Wavemaker Impact?

🌏 Southeast Asia emits about 7% of global emissions, but receives less than 3% of climate funding. If we don’t hit our 2050 climate targets, three of Southeast Asia’s largest cities—Jakarta, Bangkok, and Ho Chi Minh City—could be underwater by 2050. 77% of the region’s population lives and relies on coastal areas for their livelihoods.

🤑 On the flip side, the green transition is a US$2 trillion opportunity in Southeast Asia. There is a tremendous potential to create ventures that will drive the green transition in the region, serving businesses and customers.

💭 The evolution of the startup ecosystem in the region means that we have a large pool of experienced entrepreneurs and operators that know how to create value for costumes, build products and scale teams. Wavemaker Impact started with the thought: “What if we could find the best entrepreneurs in the region and discover together the biggest opportunities to build venture grade companies?”

💚 On a more personal note, all of the founding partners of Wavemaker Impact have kids, and thinking about their future is a key motivation in doing something impactful in the climate space.

🛠️ How exactly is Wavemaker Impact tackling early stage ClimateTech investing?

💸 Wavemaker Impact is Southeast Asia’s first climate tech venture builder VC firm. Our goal is to build and invest in a portfolio of companies that can abate 10% of the global carbon budget. To do this, we partner with experienced entrepreneurs to co-found 100x100 companies—startups with the ability to abate 100 million tonnes of carbon dioxide equivalent emissions and achieve $100 million dollars in revenue on an annual basis at scale. 

🤝 We focus on the five biggest drivers of carbon emissions in the region: agriculture, land use, energy in the built environment, industrial processes and transportation. Importantly, we focus on commercially available technology (rather than deep tech or R&D solutions) where adoption and scale are the main challenges and can be addressed through business model innovation—an approach that the VC and startup ecosystem is very experienced in.

⚖️ We have developed a successful venture building model that is focussed on connecting large carbon opportunities, value creation and most importantly a customer incentive that will drive adoption of green technology and new behaviors at scale.

📈 We currently have 10 companies in our portfolio and will build another 6-8 companies this year. Our portfolio includes:

• Agros: Enabling smallholder farmers to increase their revenue by up to 60% through sustainable agricultural practices starting with replacing diesel irrigation with solar irrigation and is now expanding into soil testing and inputs.

• WasteX: Increasing margins for SME agri producers throughout the region through monetizing their waste streams through biochar production.

• Helios: Southeast Asia’s first solar mortgage provider, accelerating the adoption of residential rooftop solar across Southeast Asia.

• Rize: Joint venture with Temasek, Breakthrough Energy Ventures and GenZero to decarbonize rice cultivation in the region.

• RegenX: Supporting commodity crop producers to access financing and increase revenue through the adoption of regenerative agriculture practices.

• Bumibaru: Restoring and increasing the carbon sequestration of degraded and deforested land in Indonesia by turning it into productive agricultural land.

• Refy: Supporting renewable asset developers in the region accelerate the deployment of small scale project through better access to project financing.

• ElevateFoods: Helping MSME food processors in India increase revenue through higher processing capacity and access to export markets in order to reduce food waste in the agri-food value chain.

• Octayne: Converting agricultural waste into a drop in replacement for coal in Indonesia and the region.

• MetroElectro: Turning commercial and industrial estates in to decentralized power generation and storage plants to meet the growing demand for renewable energy in Australia.

😲 What is a misconception or surprising fact about venture building in the ClimateTech space?

🤨 There’s a misconception that climate tech ventures have to have deep-tech or science solutions. Based on our calculations, 50% of global carbon emissions can be abated by technology that we have today. In a lot of cases, commercially ready technology exists - what’s missing is the incentives and business models that drive adoption at scale. For example, solar penetration in SEA is still around 5%. There’s a lot that venture can do to accelerate the adoption of renewables in the region.

🎬 What can readers support Wavemaker Impact?

☀️ We’re always looking for experienced entrepreneurs who are interested in exploring climate tech for their next venture. Please also reach out if you are interested in learning about our portfolio companies—our 100x100 ventures are looking for customers, team members and partners.

🦸🏻 What do you do when you’re not saving the world?

I’m spending time with my 6 year old son 👦🏻. I’ve also recently learned how to dive 🤿 and love exploring great dive spots across Southeast Asia🌏.

⏭️ Next week, we’ll be wrapping up our climate finance series and transitioning to our energy transition series through a transition finance issue with a special co-author.

❓ Did you enjoy this week’s issue? If yes, please do forward to your friends who would enjoy the read as well. Also, if you did, we think that you’ll like our friend’s newsletter, u-path:

📧 Feel free to let us know what you thought by giving us feedback at [email protected].

🌊 SEA you next week!

Karina & Massimiliano