Australian venture capital firm Virescent Ventures has launched its second fund after deploying more than A$260 million ($171 million; €158 million) through its first Clean Energy Innovation Fund.
Fund II has a target of A$200 million and, like the first fund, will focus on climate-related technologies for sectors including agriculture and the energy transition.
Australia’s Clean Energy Finance Corporation launched CEIF in 2016 and established Virescent Ventures in 2022 to manage it.
CEFC’s original plan, which it did not pursue, was to create a A$1 billion fund in partnership with the Australian Renewable Energy Agency (ARENA).
ARENA remains on CEIF’s investment committee.
CEFC provided all the capital for CEIF I and will be a cornerstone investor for Virescent’s second fund, which will also seek investment from the private sector, including from family offices.
CEIF has invested in 33 climate tech companies, funds and incubators, with about A$28 million committed to firms in the food and agriculture space.
Other areas of focus include the clean energy transition, the circular economy, and mobility and smart cities.
Virescent managing partner Kristin Vaughan told Agri Investor that Fund II will have a similarly broad focus. “We’ve found this has been a successful approach, to build a mixture across various sectors, and to have a mixture of deep tech and business model innovation.”
While Fund I focused heavily on reducing emissions, Fund II will aim for more of a mix of climate resilience and abatement, Vaughan said. “The climate has changed; we are seeing opportunities and the need for those technologies now.”
Fellow managing partner Ben Gust agreed: “You’ve seen the recent floods and bush fires [in Australia]. There are all kinds of technologies for remote early detection that enable more rapid responses and prevention of harm – that’s an area that we’ll be looking at more for Fund II.”
Virescent’s investment mandate hinges on Australia’s net-zero targets, but Vaughan said the firm also seeks to add commercial value to its portfolio companies. “Everything we do has tremendous climate impact potential, but we’re always looking at that through the lens of, ‘How do you commercialize these? How do you generate strong commercial returns?’
“That is where venture can best play in decarbonization. There are a whole lot of other types of financing structures, but venture’s role is to generate strong returns for our investors.”
Virescent was an early backer of carbon farming biotechnology company Loam Bio, a firm that Gust cites as a good example of the successful commercialization of a start-up. “Its core technology allows for the improvement of productivity from the crops that it addresses, but in addition it’s drawing down and storing carbon from the atmosphere. The icing on the cake is it can create an additional revenue stream as a result of that.”
With a commercial season under its belt in Australia, Loam Bio is now establishing itself in North America.
Another portfolio company, AgriWebb, has had a similar journey, gaining traction with Australian farmers before extending operations to the UK and US, said Vaughan. “[Their team] provide a whole lot of services to farmers, right down to the individual animal level. With that data, they have a good handle on that animal’s emissions profile and can overlay their various climate and carbon products into that.”
CEIF has also invested in cultured dairy start-up All G Foods and land management software company Downforce Technologies.