Discover Keeling Capital | With Béla Hanratty

Fund Fact Sheet

Size and horizon: This vehicle will be approximately $100mm. It’s a 12 year fund, accounting for the fact that we’re investing into funds that have 10 year duration and we have two years to make our initial commitments. 

Verticals of focus of funds: We are 100% focused on climate. So that is mostly decarb, and therefore mostly energy, both generation / distribution and end uses, plus some food and ag and carbon management. We’ll also have some exposure to circularity or biodiversity, but those aren’t core focus areas. We’re heavily focused on hardware solutions.

Geography focus: Because we’re investing in technology, we naturally gravitate towards the centers of innovation. So we expect something like 75-80% of the fund to be allocated to North American managers with the balance in Europe. That is not to say that Europe doesn’t have some great innovation, but the venture market doesn’t have the depth of the US and we see fewer really outstanding investors here. 

Stage: Venture funds from early stage to growth (anywhere from pre-seed up to series B+ entry).

Investment size: We’ll typically write $5-10mm tickets, but can also write smaller tickets where there might be capacity constraint, or we want to build a relationship with a smaller fund.

 

How would you describe Keeling Capital and your investment thesis/guiding principles in one sentence?  

Keeling Capital is a climate finance platform providing the on-ramp for investors to get into the climate tech space, starting with a climate venture fund-of-funds. 

The name, Keeling Capital, by the way, is named after the Keeling Curve, the plot of atmospheric CO2 concentrations, now around 420ppm. Climate is at the heart of everything we do.

Can you tell us a bit about yourself, the key partners/experts in the team?

I’d love to! I have the extreme privilege of building Keeling Capital with my best friend, Ross Madden, who I have known since we were 14 when we were in school together. We both cut our teeth in financial markets working at investment banks in London for the better part of a decade. Seven years ago, I realised that I didn’t want to peddle trade ideas to hedge funds for the rest of my career and pivoted to where I felt I could really make a difference with my time and energy – at the nexus of capital and climate. So I have been fully in this space since then, really since the beginning of this climate tech wave and in that time have watched the commercial opportunity grow and grow and grow. Then, a few years back, Ross started working with a large UK family office, deploying capital into this exact strategy – a portfolio of climate venture funds. Last spring we were sitting on a ski lift together, when I had already been iterating on this idea for a climate venture fund-of-funds, and I got him initially to agree to sit on my investment committee. At that point, I had my hook in, so he didn’t really stand a chance. It wasn’t long before he was pretty heavily involved and now he’s my full time partner. Our third team member is Tony Lent, who is based in the US. We like to joke that Tony is both very old and a massive nerd.  In all seriousness though, he brings a huge amount of experience and technical depth to the team, having been operating and investing around the energy transition and climate for almost 30 years. There is only a tiny handful of people in the world who know as much about climate as Tony does. We’re super lucky to have him. 

What do you look for in funds? /What will convince you to invest in a fund ?

Honestly, we’re pretty difficult to get an investment out of. We guard the spots in our portfolio jealously and we’ve spoken to hundreds of GPs at this point, all in climate, so it takes meaningful differentiation to get us over the line. Really what we are looking for is managers that have some unfair advantage somewhere along the VC value chain – sourcing, selecting, value-creation or exits – that can drive outsized financial returns. Generally, we want to see real technical depth in the investment teams. We wouldn’t necessarily rule out software investors pivoting to climate, but it is a tough sell and we haven’t yet seen any in that mold that we’ve been convinced by. Also, we look for cognitive diversity. We are excited to back people who have a unique way of looking at the world.

Can you give a few examples of funds you previously invested in and why?

Talking about the managers we’re partnering with is one of my favourite things, but I’ll keep this succinct. We’ve made three commitments so far out of this fund – At One Ventures fund II, Evok Innovations fund II and Congruent Ventures fund III. I’d say of all of them that we are humbled by their depth of expertise and thoughtfulness of their process, but I’ll just pick on At One, since you had one of their partners, Laurie Menoud, speak at your flagship event last year. At One are what we would call a “climate generalist”, so they invest across everything from energy to agriculture to carbon management and even biodiversity. The heart of the firm is the founder, Tom Chi. I very rarely use the word “visionary”, but I actually think it applies to Tom. He’s technically brilliant, an amazing first-principles thinker, and unusually mission driven. He has also built an incredible team around him including the partners, Laurie, who I mentioned, and Helen, both of whom are rockstars in their own right. These things together with their laser-focus on disruptive unit economics are a powerful combination. We think we’ll see great things from them. I could give you a similarly effusive take on both Congruent and Evok, but I promised to be succinct. 

What are tips for new fund managers trying to get in front of limited partners?

A few things:

– Number one : ask questions and listen to the answers. This is really sales 101, but apparently it isn’t universally understood. You have to know who you are pitching to. So before you launch headlong into your sales spiel, understand what the potential investor is looking for, and adapt your pitch accordingly. For example, it could be that they are early in their journey on climate or they can’t meet your timelines, so it doesn’t make sense to give them a hard sell, but rather just have a conversation and build credibility. If you don’t ascertain that at the beginning, you end up wasting an opportunity to cultivate a new ally and, of course, possible future investor.  

-Number two : create value for the people you want to be your investors. Whilst there is obviously an investment conversation at the heart of a dialogue between a manager and potential LP, LPs inevitably have other things going on, their own personal or organisational goals. If you do a proper job of  asking questions, you can understand what those are. Then, circle back with useful introductions or content that don’t directly relate to them giving you money. It builds important relationship capital and that makes a difference. After all, these are long-term relationships – if they invest, you’re going to be partners for a decade-plus! 

– Number three : be tenacious. People are busy, so if you haven’t heard back from them, assume that it is because you’ve fallen off their radar. Politely follow up until they tell you explicitly that they are passing.

I should point out that, as a fund-of-funds, we are both getting pitched to by GPs as a potential LP and also constantly talking to our own prospective investors, so we very purposefully integrate the above tenets into our own fundraising efforts. We practice what we preach.

With the rise of new climate tech funds, do you get more solicitation from GPs from climate tech funds? 

Yes and no. Over the last couple of years, say from 2020, there has been an explosion in the number of new managers. However, we have seen the pace of fund creation slow markedly from early this year. This is a difficult fundraising environment and people can’t start a venture fund on a whim, which was almost the case at the top of the market. Our universe of managers within climate and venture or early growth is about 275 or so currently. That is growing, but very slowly. This is a good thing. The threshold for starting a new fund should be high. If someone is going to start a new manager, they should have a damned good reason for doing so. “Climate is a big opportunity and I want to be a VC” doesn’t qualify as a good reason. There should be some gap in the market that the team and strategy is uniquely positioned to address. Otherwise, there are lots of other areas of the climate fight that people can get involved in. 

What do you think will be the next big thing in deep tech? 

The frontier of innovation is constantly evolving as markets mature and new bottlenecks are identified. Currently a lot of climate tech is focused on addressing the bottlenecks to scaling a handful of fundamental technologies – wind and solar, EVs, batteries. I’d say that’s the current big thing – either upstream stuff like mining or processing critical minerals, or downstream stuff like home electrification or charging infrastructure. I think the next big thing will be around energy abundance. We need really vast amounts of clean energy – electricity, really – to fully decarbonise our economy, restore the climate with carbon removals, and to raise the living standards of a few billion of the world’s poorest people. Things like advanced nuclear fission, particularly micro reactors, and enhanced geothermal systems, particularly very deep drilling, are still early, but hold a lot of promise. That, and synthetic biology, which, again, is early but is an area we’re actively exploring.

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