Venture capital firm World Fund announced on Friday the successful closure of a 300 million euro ($325 million) fund dedicated to supporting startups focused on addressing climate change. Despite the challenging investment landscape, particularly in climate technology, World Fund, which was incubated by the environmentally conscious search engine Ecosia, managed to raise the funds.
The tech industry has faced difficulties due to increased inflation and interest rates following the Russia-Ukraine war in 2022. Central banks responded by raising interest rates to curb inflation, which dampened investor enthusiasm for tech investments. World Fund’s founding partner, Danijel Višević, revealed that the firm encountered resistance from some institutional investors during the fundraising process, especially given the complexities arising from the Ukraine war and the collapse of Silicon Valley Bank in 2023.
Višević stated that macroeconomic conditions and events such as the SVB collapse led to a shift in investment preferences toward safer assets like bonds and cash, resulting in a retreat from stocks, particularly tech stocks. Consequently, private tech valuations experienced a significant decline.
However, World Fund’s portfolio remained resilient, with Višević emphasizing that they did not suffer from the drop in valuations. In fact, they witnessed some positive valuation movements.
The institutional investors who contributed to World Fund’s fund include the European Investment Fund, U.K. Environment Agency Pension fund, BPI France, PwC Germany, German state-owned investment bank KfW, and Lithuanian energy firm Ignitis Grupe.
World Fund aims to address the funding gap, known as the “valley of death,” that hinders climate tech firms at the Series B stage, where scaling operations becomes challenging due to insufficient funds. Series B refers to the second round of funding for companies that have achieved specific milestones.
Recognizing the need for a substantial fund, Višević explained that even a 100 million euro fund would not be sufficient to support climate tech companies in Europe. These companies require funding to bridge the gap and establish production facilities. Although they may not have profits or revenue at the Series B stage, they possess valuable technology and invest heavily in research and development through various programs.
To address this issue, World Fund plans to make initial investments in startups during the early stages and reserve additional capital for follow-on rounds, ensuring that companies have sufficient funds to continue developing products and scaling their operations.