Corporate VC
'Big oil' bankrolls more climate VC deals, a dilemma for founders
March 28, 2023
The flow of fossil fuel dollars into climate-tech VC deals jumped in recent years—but accepting checks from "big oil" isn't a straightforward proposition for some green startup founders.
More than one-fifth of all VC investment into climate-tech startups in 2022 was in deals with participation from oil and gas companies: $6.79 billion out of a total $36.47 billion.
Some climate-tech founders welcome the money, seeing these fossil fuel giants as key players in the move to cleaner energy.
"From my perspective, climate companies really have to work together with oil and gas companies to enable the energy transition," said Seonghoon Woo, CEO of Amogy, a startup that is using liquid ammonia to power commercial transportation.
On Wednesday, Amogy raised $139 million in a Series B1 round led by petrochemical giant SK Innovation. It is one of the biggest raises from a climate-tech energy company so far in 2023, according to PitchBook data.
Aramco Ventures, the venture arm of the world's largest oil producer, Saudi Aramco, also participated in the round. Woo pointed to Saudi Aramco's blue ammonia production—fuel derived by capturing carbon when splitting methane molecules in natural gas—as evidence that "they are really committed to the energy transition."
Many fossil fuel giants, fearing a scenario of "stranded assets" in which they have access to fossil fuel resources but cannot burn or sell them, are investing more in climate-tech startups.
But that investment comes with tough questions for founders. Working with a corporate VC at an early stage could scare off customers or other investors by signaling that a startup is working closely or exclusively with a particular client, according to Wes Selke, founding partner at mission-driven investor Better Ventures. Investors might speculate that the deal comes with conditions, such as right of first refusal in the company's future exit, Selke said.
Once oil and gas enters the mix, the water becomes even murkier. The risk, according to Selke, is when those backers start gaining more internal influence.
"As a founder your best bet would be to take their money if you need it, but keep them at arm's length," Selke said. That means keeping those backers off the startup's board and avoiding controlling stakes in the company.
As VC funding in climate tech jumped in 2021, participation by fossil fuel companies jumped with it. In 2022, the total value of VC deals where a fossil fuel CVC had participated grew from $5.26 billion to $6.79 billion, according to PitchBook data.
Fossil fuel companies are diversifying their assets, but that doesn't mean they're slowing down their emissions. Saudi Aramco has said that it doesn't plan to cut its carbon emissions until 2035. Meanwhile, the CEO of BP, which has a very active venture arm, reportedly said privately in February that he would dial back the company's push to renewable energy after disappointing returns in some green investments.
Featured image by Joe Portlock - Formula 1/Getty Images
More than one-fifth of all VC investment into climate-tech startups in 2022 was in deals with participation from oil and gas companies: $6.79 billion out of a total $36.47 billion.
Some climate-tech founders welcome the money, seeing these fossil fuel giants as key players in the move to cleaner energy.
"From my perspective, climate companies really have to work together with oil and gas companies to enable the energy transition," said Seonghoon Woo, CEO of Amogy, a startup that is using liquid ammonia to power commercial transportation.
On Wednesday, Amogy raised $139 million in a Series B1 round led by petrochemical giant SK Innovation. It is one of the biggest raises from a climate-tech energy company so far in 2023, according to PitchBook data.
Aramco Ventures, the venture arm of the world's largest oil producer, Saudi Aramco, also participated in the round. Woo pointed to Saudi Aramco's blue ammonia production—fuel derived by capturing carbon when splitting methane molecules in natural gas—as evidence that "they are really committed to the energy transition."
Many fossil fuel giants, fearing a scenario of "stranded assets" in which they have access to fossil fuel resources but cannot burn or sell them, are investing more in climate-tech startups.
But that investment comes with tough questions for founders. Working with a corporate VC at an early stage could scare off customers or other investors by signaling that a startup is working closely or exclusively with a particular client, according to Wes Selke, founding partner at mission-driven investor Better Ventures. Investors might speculate that the deal comes with conditions, such as right of first refusal in the company's future exit, Selke said.
Once oil and gas enters the mix, the water becomes even murkier. The risk, according to Selke, is when those backers start gaining more internal influence.
"As a founder your best bet would be to take their money if you need it, but keep them at arm's length," Selke said. That means keeping those backers off the startup's board and avoiding controlling stakes in the company.
As VC funding in climate tech jumped in 2021, participation by fossil fuel companies jumped with it. In 2022, the total value of VC deals where a fossil fuel CVC had participated grew from $5.26 billion to $6.79 billion, according to PitchBook data.
Fossil fuel companies are diversifying their assets, but that doesn't mean they're slowing down their emissions. Saudi Aramco has said that it doesn't plan to cut its carbon emissions until 2035. Meanwhile, the CEO of BP, which has a very active venture arm, reportedly said privately in February that he would dial back the company's push to renewable energy after disappointing returns in some green investments.
Featured image by Joe Portlock - Formula 1/Getty Images
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