As we begin 2024, HG Ventures’ Jon Schalliol looks back on a tumultuous year for venture capital and sustainability tech investment, the strategic investments the firm has made, and other highlights.
2023 has been a year of mixed signals and mixed fortunes for the world of venture capital, with Pitchbook-NVCA data showing both the number and the value of investments failing to match 2022 levels, let alone the highs of 2021.
Early-stage founders in particular are finding the current environment tough. Many VC firms have become more demanding about the path to a revenue-positive position, and the data shows more investment going into later stage companies, with a reduction in relative share of investment in early-stage companies.
Sustainability-related tech is not immune to this overall market funk, although there are some indications that investment in this area have not fallen quite as fast as they have in other areas. One factor skewing this trend is the Inflation Reduction Act of 2022, whose effects are only just beginning to be felt as eligible companies reap the benefits of grants, loans, tax breaks and other incentives.
At HG Ventures, while we of course feel the effects of macroeconomic changes, we are relatively insulated when it comes to the tumults of the VC market through the strength and steady leadership of The Heritage Group. This has allowed us to continue investing in new companies and support our existing portfolio in 2023.
New Portfolio Companies in 2023
We could not be more excited about the new founders and teams to join our portfolio in the past year:
- SOLARCYCLE: In March, we joined Fifth Wall and others in investing in the $30M Series A funding round of SOLARCYCLE, a company focused on recycling and extracting value from end-of-life solar panels, projected to be a $2.7B market by the end of the decade. HG Ventures’, Ginger Rothrock outlined our investment rationale here.
- Bind-X: In August, we were excited to participate in the €10M raise for our first investment in a German startup, the industrial biotechnology company, Bind-X. The team at Bind-X has developed a microbe-based binding technology that is able to control dust arising from construction, in a significantly more cost-effective and environmentally friendly way than existing alternatives. The technology has multiple other applications, as HG Ventures’, Nick Arnold explains.
- Aclarity: The issue of PFAS removal and destruction is one on which many are working to develop solutions, and in November we were pleased to invest in Aclarity, another such company. Aclarity’s technology is a cost-effective chemical alternative to the incineration of PFAS; it centers on a proprietary anode that attracts PFAS in water and breaks down the core carbon-fluorine bond into carbon dioxide, fluorine, and hydrogen fluoride. We’ve known CEO, Julie Bliss Mullen, for a few years, and we were excited the company’s progress built to the right spot for us to join (no company is too early to connect!). Aclarity’s $15.9M Series A round was led by Aqualateral.
- One More! We made one new investment in the last week of 2023 (we’re here to support even during the holidays!), and we’re excited to tell you about it shortly.
Follow-on Financings in 2023
As companies continued to drive forward in their plans, we were glad to continue our support. The following are just the announced funding rounds we supported, with several more that did not announce:
- P2 Science: In February, we participated in a funding round by P2 Science, which was led by Lewis & Clark AgriFood. P2 is a green chemistry company, whose proprietary process transforms renewable forest-derived feedstocks into high-performance ingredients for use in a variety of personal care, cosmetics, and beauty products, as a sustainable alternative to petrochemical-based ingredients. We first invested in the company four years ago, when we co-led the Series C with Chanel.
- Material Evolution: In May, we increased our investment in UK-based Material Evolution, as part of the company’s £15M Series A round, led by Kompas VC. Material Evolution has developed a low-carbon alternative to Portland cement, and in this post, Ginger Rothrock expands on our investment rationale, while HG Ventures’ managing director, John Glushik got hands-on with the technology when he visited the company’s facility in Britain.
- Transcend: Also in August, we joined Autodesk and others in participating in the $20M Series B raise for Transcend, whose market-leading generative design software automates the conceptual and preliminary design of critical infrastructure assets, such as water treatment facilities, enabling asset owners to reduce design costs and timelines and prioritizes the incorporation of innovative and sustainable technologies. HG Ventures was one of three original investors in Transcend, and we were only too happy to renew our commitment in this funding round.
- Puraffinity: The following month, in September we made a follow-on investment in London-based Puraffinity, as part of that firm’s $13.9M Series A round, led by Octopus Ventures. Puraffinity is focused on the removal of PFAS, or ‘forever chemicals’, from water. We were an early investor in the company, and I was excited to meet the team at Imperial College in London in early 2019, ahead of our investment shortly thereafter.
Beyond these investments, the team has been deeply engaged in the VC and hardtech communities, seeking out new investment opportunities and fostering partnerships that add value to our portfolio companies. Highlights this year have included:
- The Heritage Group Accelerator: The Heritage Group’s accelerator program is also part of the New Ventures Group at THG, and this year it welcomed a new leader, Arvind Murthy, to the already outstanding team. They brought in an exceptional cohort of visionary founders (9 companies from 5 countries!), who resided just down the hall from my office for the intensive 13-week program. The program exposed them not only to venture capital expertise, but the invaluable technical resources of Heritage Research Group and THG operating companies. I can’t wait to see what these visionary individuals go on to achieve.
- Industry recognition: Our managing director, John Glushik was named by Global Corporate Venturing (GCV) as one of its “50 Emerging Leaders”, while senior director, Ginger Rothrock was recognized as one of “50 Rising Stars”. HG Ventures was also once again included in the Climate 50, an annually published list of the most recognized climate tech investors.
- Innovate UK partnership: The UK has a thriving climate tech ecosystem and is home to a number of companies in which we have invested. This year we renewed our partnership with Innovate UK, the government-backed organization that makes grants and other funding available to climate-focused startups. I wrote more about our commitment to this important partnership here.
- Leading the conversation around the future of roads: In November we published a report on the future of roads, and specifically the role that venture-backed technologies have to play in securing a sustainable future for this vital infrastructure. We will continue to drive the conversation around this important topic. The Future of Roads report is downloadable here.
We have also been excited to see so many of our portfolio companies achieve significant milestones in 2023, just a handful which follows:
- Following our introduction, Heritage Environmental Services will be running a pilot with a number of electric vehicles from Battle Motors. This is exactly the sort of practical added value we like to deliver to our portfolio companies.
- London-based supply chain traceability firm, Circulor entered into a partnership with Deloitte, unlocking enormous potential for the platform to be implemented with global companies.
- Currents is a marketplace for end-of-life electric vehicle (EV) batteries and has just signed an agreement with Nissan North America to be the exclusive marketplace for its vehicles’ batteries. Check out the official announcement .
- Puraffinity founder and CEO, Henrik Hagemann spoke at the United Nations Water Conference in the Spring, and writes about it here.
- Carbon fiber recycling company, Vartega this year increased its production capacity tenfold, moving into a new 82,000 sq ft facility in Denver, Colorado.
- ZwitterCo, whose fouling-resistant membranes make it practical and affordable to treat and reuse the world’s most challenging water, has just opened a new Innovation Center at its Massachusetts HQ. Forbes wrote about it here.
- Ateios Systems, an HG Accelerator alum, landed a $2.4M Defense Department contract, to improve battery performance and production.
Looking ahead to 2024, there are many reasons to be optimistic. In spite of the challenging funding environment, we continue to see incredible innovation in materials science, chemistry, environmental solutions, industrial systems and more, from all over the world.
We will continue to back founders with the vision to develop innovative solutions to industrial scale environmental challenges, and leverage The Heritage Group’s technical and market expertise to accelerate their path to success.