2021, the year of carbon software
One of the biggest climate tech narratives of 2021 had a lot to do with something I covered very closely in my journalistic past: the enterprise software industry.
Therefore, it seems fitting for the year to culminate with announcements related to two trends I’ve been following closely: a deluge of funding for startups developing carbon management applications and the acceleration of corporate commitments for emerging carbon removal technology.
The rapid rise of enterprise carbon management
On Tuesday, not-even-a-year-old French startup Sweep disclosed a $22 million Series A round — the biggest yet for the enterprise climate tech software category — led by Europe’s Balderton Capital. The infusion brings its total funding to $27 million.
The deal was disclosed barely six weeks after the monster $101 million Series B round — likewise, a record-breaker — for another software company every corporate carbon manager should have on its radar, Persefoni. Among the many competitive differentiators that this company touts, two really stand out for me: the depth of its management team — which includes former ERM partner Mike Wallace and the past CEO of the Global Reporting Initiative, Tim Mohin — and the company’s plan to offer a free version of its software for small and midsize enterprises. For me, that latter strategy will be key to scaling these carbon management software systems. Smart move.
Sweep also has some serious enterprise credentials and expertise on its management team. Its co-founder and CEO, Rachel Delacour, was co-founder of BIME Analytics, a business intelligence application eventually acquired by respected customer support software vendor Zendesk. As a result of the new funding, Bernard Liautaud, another big-wig from the European enterprise software scene, is joining the board. Liautaud was the founder of analytics company Business Objects, the first European software firm to make its initial public offering on Nasdaq back in 1994. (Business Objects was ultimately bought by software powerhouse SAP.)
When I spoke with Delacour about the Sweep funding last week, she told me the new money will be used to help almost triple the company’s headcount over the next 12 months including engineering, marketing and sales. (The firm currently employs just over 20 people.) One of Sweep’s biggest competitive differentiators, she believes, is its ability to help large companies gather very granular information across distributed organizations and supply chains. This sort of decentralized access and insight can help companies actually act on reducing emissions, rather than just reporting on them, she told me. “The closer we are to the emissions, the better the opportunity we have to address it,” Delacour said.
While she was cagey about Sweep’s customers, one of the named accounts she will talk about is Saint-Gobain, the big construction materials manufacturer.
What companies are Sweep’s biggest potential rivals? While most of its sales activity to date has focused on leads in Europe, her firm is most often asked about the Salesforce cloud sustainability management platform, which will get its own competition from Microsoft starting next year. “I love that,” she said, pointing to the rapidly maturing market for carbon management software.
$15 million and counting
The other big story I’m following this week is the commitment of $6 million to four new carbon removal projects by Irish-born software company Stripe. The new purchases (the third round under the Stripe Climate initiative that the company launched in 2020) bring the company’s total commitments to $15 million dedicated to helping scale emerging carbon capture and sequestration approaches. The company worked with 13 advisers to help select the solutions for this latest batch, which include:
- Mineralization play 44.01, which uses renewable energy to inject CO2 underground to react with peridotite, a type of igneous rock
- Ocean carbon removal startup Ebb Carbon, which uses an electrochemical system to remove acid from the ocean and “enhance” its ability to draw down atmospheric carbon dioxide
- Soil carbon company Eion, also focused on accelerating mineral weathering by working with farmers and ranchers to add silicate pellets to farms and ranches
- Direct air capture firm Sustaera, working on a modular system powered by renewable energy
Stripe is the first customer for most of these projects: It’s worth noting it was also the first client for Charm Industrial, which has sequestered more than 5,000 tons of carbon in the form of a plant-based oil on behalf of Stripe and other customers including Shopify and Microsoft. And Stripe contributed about 10 percent of the financing for the new Climeworks direct air capture facility in Iceland.
The money in this latest batch of purchases — the company’s second round of commitments this year, which represents Stripe’s desire to accelerate its involvement — is being paid out in two tranches. Stripe is paying $2 million upfront to help get projects off the ground (or in the ground as the case may be). That amount is equally split among the four companies, according to Nan Ransohoff, head of climate at Stripe, who chatted with me this week about the initiative. The other $4 million will be paid out if and when the technologies meet certain technical milestones.
Ransohoff said those metrics and timelines are different for each project, but they are based on a number of criteria, particularly the permanence of the solution (1,000 years or more); the physical footprint of the solution (ensuring that it isn’t constrained by access to arable land); the potential to reach a cost of less than $100 per ton of removal by 2040; and the ability to reach more than a half-gigaton of carbon sequestration potential annually. “The things that are risky are diverse, depending on the project,” she told me.
Of the Stripe project partners required to reach certain milestones to earn a contract renewal (a policy that started with Stripe’s second round of purchases), Charm Industrial met its first set of goals early and has received additional funding under Stripe Climate, Ransohoff said.
The money in the Stripe Climate fund comes from the company itself and from a program that lets businesses using the Stripe payments service direct a portion of their own revenue toward carbon removal projects — the amount they can choose to contribute is flexible, but Ransohoff said 1 percent is a fairly common commitment.
So far, 15,000 companies have contributed to the program under that model, according to Stripe. While their total financial contribution is undisclosed and still relatively small, Ransohoff said interest is growing. The payments company recently included optional enrollment for Stripe Climate as part of its account onboarding. So far, she said 8 percent of new customers have elected to participate under that workflow. “It is a testament to the fact that we are all waking up to the realization that climate change is happening and there is a latent desire to do something about it,” Ransohoff said.
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