Natasha Vidangos, the Associate Vice President, Innovation and Technology Policy at Environmental Defense Fund, oversees EDF’s work to advance an efficient and equitable Clean Energy Transition, including efforts to enhance the impact of climate innovation. She joined us to discuss her work and how to navigate the climate investing landscape.

Love them or hate them, VCs will have a smaller footprint in the startup world moving forward. The metrics speak for themselves. Axios reports that the total value of M&A deals fell by 38% and volume declined by 18%; in the U.S., deal value fell by 39% and volume fell by 15%. There’s been a steady slowdown in startup funding.

Kinder voices than mine will blame it on external sources.  The pandemic, layoffs, the war, our jittery relationship with China  and other moments in time. I think it goes deeper to a flawed system. And while I hate to use the Silicon Valley Bro caricature, there’s a ring of truth to the “in-crowd” mentality, and focus on short term gains that pervades the VC community.  White bros who dress the same, talk the same, and move with same insouciance  are getting long in the tooth. Smart money and new ways of thinking are going to find a workaround. 

My favorite VC video, though a little long in the tooth, is this one, where Nicolas Tesla pitches a group of VCs. Bored, distracted and oh-so white, they can’t decide which of their buckets to put his product in, or even whether they want to see his deck. Marching out of lock-step is not only not done, the lockstep has been shown to have hazardous repercussions. 

A few recent examples?  Take Bobby Lee’s death at the doorstep of his San Francisco condominium. Bay Area VCs were quick to blame the death on San Francisco’s lawlessness, lamenting that the city had become an impossible place to do business.  While any death is a tragedy, Lee’s was ultimately found to be caused by ketamine, cocaine and a jealous relative in a sordid affair.  But the damage was done. VC bros became judges and executioners, and their words had consequences. 

Or take the case of Peter Thiel, the Silicon Valley entrepreneur,  who tweeted to his bros that they should be “getting their money out of Silicon Valley Bank.” He nearly single handedly started a run on the bank. It was something out of a moment from the Bailey Savings and Loan (It’s a Wonderful Life), only this time there was no Jimmy Stewart to let good sense prevail. 

What about the letter penned by leading VCs calling for a moratorium on ChatGPT and its ilk?  A letter signed by 1000 VC types including Elon Musk and Steve Wozniak asked for a halt to any further developments on Generative AI until it could be assessed further. Now, most of those very same signatories are pouring money into anything with the letters “A” and “I” in it. 

Lemmings are not good for innovation. And they’re not good for building new, more inclusive companies. Only about 1.87% of $31 billion held by 200 venture capital funds has been allocated to startups with diverse leaders, according to a report from the nonprofit Diversity VC.  A look at the VC landscape for 2023  by Deloitte found that while the VC industry has made some progress in hiring women, the numbers of black and hispanic hires are still quite dismal.  Why does that matter?  Because a diverse group of VCs is more likely to represent a diverse group of entrepreneurs. 

Forging their Own Paths

There are enough books like Brotopia by Emily Chang that expose the sexism, racism and general bad behavior of the Bro-boys, but it’s more instructive to look beyond them (especially if you believe they’ll grow more irrelevant. ) 

There’s going to be more of a grassroots “lets fund our own” movement from women, blacks and hispanics and that’s a good thing.  It’s painful and a waste of time for founders to grovel where they’re not wanted. 

Take Coralus (formerly SheEO) as an example, The model is more like a Tupperware Party meets investment club.  Members kick in $1,000 to be in the club. Women and minorities turn in their product realities. No idea or ask is too small and many of the applicants have very little to show in the way of profit yet. The group upvotes the best ideas.  They get funded with a no interest loans, but also get the benefits of a community of mentors/cheerleaders and shoulders to cry on, as they take their dreams through the start up process. 

Coralus CEO Vicki Saunders calls it a community-centered, blended finance model and believes it’s a transformative way to give more people an opportunity to have skin in the game.  She reports $16.5 million dollars in capital currently in circulation and a near-perfect return on the loans. Mary Ann Pierce, co-founder of Awaken Hub uses a similar philosophy, elevating women entrepreneurs, only this time in Northern Ireland.  Fearless Funds supports women of  color who are founders (a group that currently only secures .27% of VC funds).  Harlem Capital invests in black startups and entrepreneurs. And the LatinX community has its own variety of venture funds.

It’s sad that we’ve had to create specialized funds based on gender, ethnicity, and color. The mainstream VC community has built a crazy culture with the deck stacked against anyone who isn’t part of the inner circle. The reality is that they’ve done little to differentiate themselves or their services. The mostly white, mostly male dominated VC community had its chance to widen the tent but has been too slow on the draw. As we enter the next chapter of more intentional, DEI focused investment, we can only hope that they don’t model themselves in the image of what was, but what could be. 

Founders can decide for themselves what sort of investor they want, but if access to hard-to-come-by technology that can get them a step ahead of their competitors lies in the balance, I think we know what choice they’ll make. 

Ellevest CEO and Co-Founder Sallie Krawcheck is on a mission to get more money into the hands of women. In doing so, she’s asking one simple—yet complex—question: what would happen if we invested in women?

To address this central question at the 2023 Women & Worth Summit, Krawcheck shared an overview of the current state of financial wellness for women, including the many factors impacting their mental, physical, emotional, and financial health.

A self-proclaimed “Wall Street refugee,” Krawcheck is the first to admit that the last few years have been challenging. In doing intensive research, Ellevest launched the Ellevest Women’s Financial Health Index in September 2022 to gauge a holistic picture of financial health indicating how women are impacted by the economic and political landscape. “Not only are we looking at economic factors like the gender pay gap and gender wealth gap, but we’re also looking at access to paid family leave, percentage of women CEOs, the change in reproductive rights and health care in our country, and inflation.

When the index launched in 2022, the initial score of 1 indicated that women’s financial health is worse than it had been at any other time in the last five years. “When this started, we were just starting to see the impacts on inflation and, even though women’s employment rates increased, the impact of inflation were still yet to be seen.” In the first quarter of  2023, the index’s score raised to 2.3, due in part to increased consumer confidence and women comprising more than 10% of CEOS in Fortune 500 companies.

Even with the strides forward, Krawcheck clearly signaled the two factors holding women back: the continuing effects of inflation and attacks on women’s reproductive rights. “With these challenges, we see one way to move forward. The solution: investment,” said Krawcheck.

According to Krawcheck, investing in women would bring a significant return and build scalable wealth in ways that other avenues can’t match. “Investing in women can bring more return than investing in Nasdaq and can build a solid foundation of financial health,” said Krawcheck. Investment also signals that the impact can reach far and wide. “When women have more money, societies are more fair and economies are stronger,” said Krawcheck, including that women are more likely to donate to non-profit organizations and toward big-picture issues, such as climate change. “Women make their money go much farther and help our communities in bigger ways.”

While Krawcheck’s suggestion to encourage women to invest is just one step, she also sees it as a way to change a bigger narrative. “We’re shifting the conversation. When women invest, it’s no longer about how ‘we’re not good with money,’ but it’s about women leveraging money to do incredible things,” said Krawcheck. As more women have access to financial tools and educational resources to invest, Krawcheck argues that the stigma of women not being financially savvy will start to shift as they invest in aligned companies and those that have a broader impact in the world.

So what would happen if we invested in women? The bottom line, according to Krawcheck: a better world.

We are navigating a dynamic period as it relates to business, the global economy, and geopolitics. Business leaders and investors alike need to determine their investment strategy to navigate this ongoing uncertainty.

Throughout history and different economic cycles, capital investments in technology have endured because the innovation they create transforms society and businesses, even during the toughest times. Look no further than the COVID-19 pandemic – without amazing technological innovation, we would certainly not already be getting our fourth vaccine booster shots let alone our first, with most vaccines historically taking an average of 5-10 years to be developed. What’s more, businesses beyond the healthcare sector also survived – and thrived – through the COVID downturn due to technology investments in collaborative software, AI-enabled supply chains, and more. The pandemic accelerated key technology trends, and exposed gaps between companies that had the foresight to invest compared to those that lagged.

We have reason to be optimistic about the tech sector as a whole – and that is especially true when looking at enterprise tech. In a recent Gartner analysis, the message was simple: “Enterprise IT spending is recession-proof,” with worldwide IT spending expected to reach $4.6 trillion in 2023, up 5.1% since 2022.

Here are three market transitions in enterprise tech that should be an investment priority this year and beyond:

Data is king – but it’s the ability to turn data insights into action that opens the door to innovation.

A recent HPE survey of global business leaders found that the majority of organizations today have a relatively low data “maturity” level (the average organization scored a 2.6 on a five-point scale, with only 3% reaching the highest maturity level of 5.0), meaning their ability to create value from their data is limiting their ability to drive real business outcomes, such as accelerating product innovation, advancing customer experience, or improving environmental and humanitarian supply chain standards. The impact of data-first modernization will differ from vertical to vertical but can have an immense impact on business and society as a whole.

Recognizing the power of data, the U.S. government commissioned breakthrough supercomputing technology to deliver insights from data as quickly as possible. As a result, in 2022, the U.S. reached the important milestone of the world’s first and fastest exascale supercomputer with the Frontier system for the U.S. Department of Energy’s Oak Ridge National Laboratory. With the speed to solve calculations that are eight times more complex and 10 times faster, this system enables our country’s top scientists and researchers to analyze huge data sets to solve society’s toughest problems around climate change, renewable energy, medicine discovery, and so much more. 

Access to more diverse data pools is underpinned by a decentralized, hybrid cloud ecosystem.

We are in the midst of the transition from a centralized to a decentralized age of digitization, where intelligent and networked devices, machines, buildings and infrastructures generate unprecedented amounts of decentralized data. This data holds enormous potential to advance how we live and work – but we must unlock its value.

Consider an example that resonates on a personal level with too many of us – cancer research. For a research company looking to determine how specific patients might react to a new cancer therapy, the only way to get the data needed is to go to leading cancer hospitals around the nation. In a centralized cloud environment, that data would be difficult to access because hospitals would not relinquish ownership of private patient data. But in a decentralized model, hospitals can maintain ownership and anonymity of their patient’s data, while still sharing the AI model insights from it, in a secure and decentralized machine learning network.

This is the value of AI solutions like Swarm Learning, which increases accuracy and reduces biases in AI model training by enabling access to larger datasets, without requiring companies to share the actual data. Catharina Hospital is an example of a healthcare institution utilizing hybrid cloud, AI, and data modernization initiatives to support data-driven patient care – specifically for those who suffer from heart disease. Heart failure can develop without any noticeable symptoms, so more access to better data (both inside and outside of the hospital) means Catharina can better pinpoint hard-to-find cardiogram anomalies and, in turn, help patients manage preventative care and treatment more quickly.

Enterprise technology will be key to enabling businesses to operate more sustainably than ever before.

Government regulations related to sustainable business practices are on the rise. Consider the mandatory climate risk disclosure rule that the U.S. Securities Exchange Commission (SEC) proposed last year. The rule would require all publicly traded companies to report on direct and indirect greenhouse gas emissions, as well as climate-related risks such as droughts and wildfires, requiring extensive data tracking, collection, and analysis. Company CFOs have perhaps been among those most keenly monitoring the SEC’s rule, but CIOs are also paying close attention, given the significant energy required to run the technology systems of today’s modern enterprises. In this new landscape, the CIO role will further grow in relevance and importance as large public enterprises look for ways to upgrade their data collection and reporting systems while reducing the environmental impact of their IT estates. Companies will seek innovative partners to provide upstream supplier climate impact data that can also help reduce the enterprise’s carbon footprint.

Companies are not going to stop investing in tech any time soon – in fact, downturns are times when so many have broken away with new innovations. Business investments to derive greater value from data, pursue hybrid cloud ecosystems, and enable more sustainable business transformation are prudent, especially as every company, regardless of industry, becomes a digital company.

The climate tech boom presents opportunities for investment and innovation. Taneja suggests the traditional venture capital model, focusing on short-term returns, needs to be revised for the long-term investments necessary for climate tech. He advocates a new approach that prioritizes impact over profit and involves collaboration between investors, entrepreneurs, and governments. Taneja also emphasizes the importance of building a diverse and inclusive climate tech ecosystem that includes people from different backgrounds and perspectives.

Techonomy Climate 2023 – VIRTUAL

We explored how the climate crisis affects every corner of the world and presents unprecedented challenges in Silicon Valley on March 28th. Watch the full livestream. Explore the full agenda and speakers.