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Bill Gates flies to Berlin to discuss Germany’s climate tech future

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German politicians, foundations, startup founders, state development bank KfW Capital  — and none other than American billionaire Bill Gates — met in Berlin yesterday morning to discuss a topic crucial to Germany’s future competitiveness: financing climate tech.

Gates spoke broadly about his experience funding capital intensive climate technologies in the US.

Elsewhere at the conference, there were discussions about launching a fund — comprised of public and private capital — to help climate techs build first-of-a-kind facilities (or FOAKs). Sifted understands the fund could be financed by Germany’s Win Initiative, and could have a target size of €1bn.

Startups struggle to finance capital-intensive infrastructure projects — like direct air capture or energy storage systems — as they often don’t have enough revenue, or are deemed to be too risky, to get the backing of a generalist VC fund. Meanwhile, banks are reluctant to offer debt-financing without seeing tech proven at scale. It’s known as the “first-of-a-kind valley of death” — a moment in a climate tech’s journey when it faces an increased risk of failure. 

The launch of a FOAK-specific fund — of which there are none yet in Europe — could be a significant move for Germany. 

“It’s impressive to see how a growing number of government entities, institutional investors and philanthropic organisations are joining forces to lay the ground for a new type of infra-venture-fund,” says Tobias Lechtenfeld, executive director at Tech for Net Zero, a joint initiative by the German Energy Agency (dena), Bill Gates’ Breakthrough Energy, an organisation working towards net zero, and venture builder 1.5°Ventures. 

“Solving the FOAK and NOAK (next-of-a-kind-facility) financing gap with a public-private fund — that would be an incredible win-win for Germany and Europe.” 

What we know

Sifted understands that the meeting on Wednesday included a preliminary discussion of what a FOAK fund could look like, and the final details of the fund structure are yet to be ironed out. 

The core elements of the fund are to be figured out by the summer. Then, it will take at least two years to fundraise and close the fund. 

The proposed FOAK fund would ideally be financed by Germany’s Win Initiative, announced in February this year, which plans to make €3.5bn of public and private capital available for growth financing for startups. 

The Win Initiative is designed to replicate France’s Tibi initiative, a program supporting startups as they ramp up their industrial and commercial phases. Tibi 2 launched last summer with 28 institutional investors — primarily insurance companies — pledging €7bn. 

Germany has already made moves to support climate tech ventures at the growth stage, unveiling a €1bn deep tech and climate tech fund (DTCF) last year — backed by the state’s €10bn ‘Future Fund’. 

But ecosystem watchers in Germany have long said that more private capital is needed to get larger amounts of cash flowing into startups.

Unlike the US, many insurance companies and pension funds in Germany invest in bonds and tend to avoid venture capital. According to a 2023 analysis by the VC firm Redstone, US pension funds own 10% of Germany’s tech unicorns, compared with 0.2% for German pension funds.

There are signs, however, that things are changing. Last year, KfW launched a €1bn fund of funds, dubbed ‘Growth Fund Germany’ to invest in German and European VC funds — funded primarily by private investors. 

Lessons from the US

The US is ahead of the game in terms of providing FOAK financing for startups. The US Department of Energy’s Office of Clean Energy Demonstrations (OCED), which was set up in 2021, has $25bn to provide non-dilutive funding to FOAK-stage ventures nationwide. 

Microsoft founder Gates, who was invited to Berlin to share his knowledge of scaling climate ventures, has also invested significantly in hundreds of large demonstration projects and FOAKs via investment platform Breakthrough Energy Catalyst. Last year, it announced a partnership with the EU to mobilise up to €820m between 2023 and 2027 to invest in climate projects, including large scale FOAKS.

Gates’ organisation also has a VC firm, Breakthrough Energy Ventures, which closed a $555m fund in January this year and is increasingly investing in Europe. It’s backed 13 startups in Europe, according to Dealroom data, including hybrid electric airplane startup Heart Aerospace, carbon capture startup Mission Zero and methanol fuel cell manufacturer Blue World Technologies.

Correction: This article has been updated to clarify that the €1bn fund is in euros, not dollars.

The piece was also updated to remove a quote from Robert Habeck on Friday 10th May at the German government’s request.

The headline has been amended to reflect the fact that Gates did not directly discuss the FOAK fund.

Updates with details throughout.

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