Climate-focused Congruent Ventures closes $300M continuity fund

·2 min read

Congruent Ventures, a climate-focused VC firm, has closed its first continuity fund with over $300 million in commitments.

Limited partners want exposure to later-stage climate startups—despite a downturn in VC dealmaking—in order to mitigate the climate risk embedded in their portfolio, according to Congruent managing partner Abe Yokell. The new fund nearly doubles the firm's assets to more than $700 million.

"A couple of the big [LPs] came to us and said, 'Hey, we would like to participate in what we've helped build, which is these stakes in the early-stage companies that are scaling. Can you think through how you want to institutionalize that?'" Yokell said.

Congruent's LPs span endowments, pensions and foundations, including pension fund CalSTRS, the Grantham Foundation, Three Cairns Group and Sobrato Capital. The Regents of the University of California was one of the first institutional investors to commit capital to Congruent.

Continuity and opportunity funds are becoming less common as VCs pull back from late-stage and growth investments. With less LP capital to go around, fewer startups are on a path toward major valuation step-ups. Even startup accelerator Y Combinator has signaled that it is veering away from continuity funds.

But climate tech seems to be singing a different tune: investing in climate has become more personal to people, Yokell argued. The vertical has indeed proven more resilient to the market downturn than other sectors. Earlier this month, S2G Ventures announced the close of its $300 million Special Opportunities Fund for climate and health tech.

One of the reasons why, according to Yokell, is that LPs are increasingly concerned with their own exposure to the climate crisis.

"These very large institutions have realized that they actually have embedded climate risk throughout their investment portfolio and they are looking for ways to both manage that risk and mitigate it and hedge it, frankly, over time," Yokell said. 

Re-allocating capital to firms with a climate focus is one way of doing that, even as LPs are slimming down their exposure in most late-stage venture. The market has become increasingly investor-friendly as late-stage startups demand far more capital than VCs are willing to provide.

The fund will enable Congruent to continue investing in select portfolio companies beyond the early stage, even as far as Series C and D rounds, Yokell said. The fund has a separate underwrite and provides an additional benefit to its portfolio companies by increasing their exposure to new investors as they scale. 

The continuity fund has so far made investments in four of Congruent's portfolio companies: alternative protein startup Meati Foods, recycling tech business AMP Robotics, geothermal tech developer Fervo Energy and Span.IO, which makes smart-home energy systems.

Featured image by N.Minton/Shutterstock

This article originally appeared on PitchBook News