While many climate investors concentrate on breakthrough, deep-tech solutions, Patrick Sheehan of ETF Partners has a different perspective.
“I don’t have anything against carbon capture and storage, apart from the likelihood it’ll be commercialized too late,” he shared with Truth Voices. Instead, Sheehan and his team are investing in more software-centric companies that still have a significant impact.
“Some may see that as a cop-out,” Sheehan noted. “But the more I consider it, the more I disagree with that notion. We need to find companies that can scale quickly to make a difference within the lifespan of a venture capital fund, which is at most 10 years.”
This approach has enabled ETF Partners to raise a new, oversubscribed €284 million fund, marking the firm’s fourth.
Founded in 2006, the firm has navigated through various bull and bear markets. Up until 2018, Sheehan describes his efforts as being more “evangelical.” Since then, he has noticed a greater receptivity towards climate tech among limited partners. “It’s now seen as a strong institutional product.”
Rather than focusing on fusion and e-fuels, ETF Partners is targeting startups like Deepsea, a company in their third fund’s portfolio. Deepsea employs AI to optimize maritime shipping operations, improving routing decisions to reduce fuel use by 10% to 15%.
“Shipping’s carbon emissions are almost entirely fuel-based. With a bit of software, deployable globally in just a few years at a minimal cost, you can reduce global emissions by 0.3%,” Sheehan explained. “That’s astonishing — and quick.”
The firm concentrates on five sectors: energy, transportation, connectivity, consumer, and food and agriculture. “The overarching theme is what I’d call the intelligence layer on top of infrastructure,” he said.
The fund will maintain its focus on European startups. Sheehan mentions favorable government policies and a general public that widely recognizes the reality of climate change. “That’s an incredible context,” he remarked.
Consequently, he sees less need for investors to find companies developing breakthrough technologies aimed at transforming the market and more demand for companies addressing sustainability.
“Many deep-tech innovations can be profoundly green,” Sheehan observed. “But our focus is on companies generating revenue and beginning to scale up.”
