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  • Nathan Fewel, Max Bulba, Sherman Williams

AIN Ventures Sustainability Technology White Paper

Updated: Oct 31, 2022

By Nathan Fewel, Max Bulba, Sherman Williams

If you prefer to also watch a video summary of the Sustainability Technology White Paper, please click here.

Executive Summary: Affordable and independent access to energy has been critical to countries worldwide for centuries. An abundance of energy, mainly through fossil fuels, has led to an increase in human activity that is now having a negative effect on the planet.

Investing in a vertical as ambiguous as “sustainability” requires a refined definition of what kinds of companies fall under its wide umbrella. Any business, product, or technology that contributes to the continuation and development of modern life without compromising the ability of future generations to continue that process can be considered sustainable. We further focus our efforts on solving for climate change, the world’s largest sustainability challenge. Though not solely climate tech, our sustainability vertical focus encompasses all technologies designed to reduce, capture, or prevent the emission of greenhouse gasses (GHG).

In this white paper, we apply a unique dual-use technology investment lens that we believe will lead to outsized and venture-like returns. There are two primary factors at work.

  1. Increasingly frequent and severe climatological events have led to a shift in public opinion resulting in more substantive government action to incentivize sustainability technology.

  2. Technological advancements are enabling renewable energy markets to get closer to cost parity with fossil fuels. Countries will seek to leverage clean energy to power themselves in a sustainable, cost-effective, and perhaps most important, independent way. Cheap and independent access to energy is a significant national security issue. Though there is still technological advancement needed, sustainable technology can help overcome these challenges.

Venture capital-backed companies, supported by government regulation, incentives, and subsidies, will play a vital role in the development of a more sustainable future. AIN’s dual-use technology approach is well-suited to identify, invest in, and support those founders shaping the future in this critical sector. We have already been active in the space investing in companies such as Climate AI led by Himanshu Gupta and Zeno Power led by Tyler Bernstein.

This paper is meant to be comprehensive, yet not exhaustive. It is meant to serve as a resource to investors, founders, and AIN for years to come.

Over the last two centuries, societies have become more advanced and interconnected than ever before, but at a cost. Warming temperatures and an increase in weather disasters threaten the lives, homes, and livelihoods of millions today and future generations. The implication is clear: the world’s current way of life is unsustainable. Solving this problem will require significant investments in technology to both enable resilience and ameliorate the worst effects. This must include a combination of readily available decarbonization options, such as nuclear energy, as well as investment in technologies that are still early in their development. Venture capital will play a vital role in ensuring the next generation of sustainability technology comes to fruition.

This is not the first time investors have traveled down the sustainability road. A decade and a half ago, clean energy investing was the new, cutting-edge area for many VC firms. “Cleantech,” as it was known, drew over $25 billion in venture funding from 2006-2011. Unfortunately, investors lost more than half of that money. Digging deeper, only a handful of cleantech software companies generated any successful exit at all; those focused on building new materials, processes, or hardware returned less than 20% of investor money. Though there were many reasons for these difficulties, a few stand out. The primary headwinds were the following:

● Novel technologies required long incubation periods, which were incompatible with most VC fund timelines. Coupled with the often exorbitant price tag for early-stage research and development (R&D), development delays were fatal to many investments.

● In many cases, the core technologies never came to fruition or failed to scale. Many attempted to compete with entrenched commodities (e.g. biofuels), but were ultimately shown to be impractical or uneconomical.

● US solar startups saw their business models upended by a sudden glut of Chinese photovoltaic materials. Many sought an alternative to silicon, then a precious and expensive resource. But a wave of Chinese production caused the price of silicon to drop by a factor of eight from 2008-2010, undermining the value proposition of many US companies and driving them out of business.

● Incumbents either refused to take on the risk of investing in early-stage companies or were not interested in the sector. As a result, cleantech companies struggled to find acquirers.

● Government incentive programs in the space were underdeveloped compared to today.

● Renewable energy generation was an economic non-starter. Though that might have been the problem many companies were trying to solve, the deck was stacked against innovators in the space. In 2009, coal generation cost $123 per MWh, combined-cycle natural gas $83 per MWh, and solar $359 per MWh.

Why the World is Different Now

At AIN, we believe sustainability tech now has a viable path to deliver venture-like returns. Several differences from the last boom/bust cycle stand out.

Climate Volatility and Public Opinion

The forcing function of warming temperatures and increased climate volatility has led to a shift in public opinion. Though no specific event can be attributed to climate change, there is an unmistakable trend of increasing extreme weather events alongside increasing global temperatures. The twenty-year period ending in 2020 saw more than twice as many flood disasters as the previous twenty-year period as well as more than 30% more storm disasters. The economic damage resulting from the 2000-2020 period was nearly $3 trillion, compared to $1.6 trillion from 1980-1999.

Over a similar time period, public opinion toward climate issues has flipped. The need to transition to a sustainable future has become conventional wisdom, and it simply was not a decade ago. According to Pew Research, three-quarters of Americans now say human activity contributes to climate change, as opposed to only one-third in October 2010. Consequently, 65% of Americans expressed dissatisfaction in a January 2022 poll with the federal government’s response to climate change thus far, demonstrating a significant appetite for change.

Climate concerns are now being translated into tangible action. One clear example is the talent exodus from traditional Silicon Valley ventures into climate-related companies. Climatebase, a talent directory, has seen half-a-million people apply for jobs through its platform since 2020. Ultimately, AIN believes that entrepreneurs want to work on the world’s most difficult problems, and sustainability tech enables founders that opportunity. On the government side, we have seen a slew of new legislation (to be discussed later in this paper) to address these issues, creating durable support among diverse political and business interests unseen during the previous cleantech boom.

Market Maturity and Incentives

Another major difference is the development of markets and incentives under the sustainability umbrella. In the first cleantech boom, there was government action, but minimal organic growth within the sector. Today, the market is flourishing organically, albeit still with extensive government support. In the 2010 timeframe it did not make economic sense to build-out renewable energy generation capability due to meager incentives and immature technology. Today, renewables are at cost parity with (and often even cheaper than) their fossil fuel competitors. Costs of utility-scale solar generation and wind generation have fallen 90% and 72% since 2009 respectively, while coal has fallen 3% and combined-cycle natural gas by 27% over the same time period. Though cost is not the only relevant metric and these figures are sensitive to geography and subsidies, the sheer magnitude of the renewable energy market shifts have created an entirely new playing field for sustainability technology. Illustrative of their potential, McKinsey estimates 5% per annum EBIT growth for energy and decarbonization technologies from roughly $300 billion in 2022 to $1 trillion in 2050.

Corporate America has taken notice. About 400 large, US-based companies have committed to net-zero goals. Even major players in the oil industry who were largely absent from the cleantech movement are becoming involved. Chevron has announced a $300 million venture fund dedicated to decarbonization technology and Exxon Mobil has set aside $3 billion for carbon capture investment. It is important to note that these actions are a function of the two factors we have discussed: new sustainability market dynamics coupled with public opinion shifts and subsequent government action. Companies are responding to increasingly robust government incentives, and cheap renewable power is making sustainable choices cost-effective. We are seeing private companies pivot in real time to get ahead of a generational shift in government and consumer priorities.

Sustainability-focused companies also have much improved financial support throughout the entire product development and commercialization process. Venture capital investment in climate tech is again robust–$56 billion in 2021. In addition, markets have seen an unprecedented infusion of later-stage growth equity capital from many of the biggest firms in the industry. Similar to their corporate counterparts, these growth equity funds are reacting to maturing technological development, sustainability markets, and government incentives. Exit activity in the broader sustainability space also reflects a more developed industry. In 2021, there were 104 exits totaling $114 billion in the energy, transportation, and agriculture sectors, with about 60% coming through mergers and acquisitions.

National Security Implications

Severe climate events put people at risk through displacement, low water supply, interruption to food supply, and disrupted infrastructure along coastlines. Although sustainability tech is not defense tech, the two are not unrelated. Even the Pentagon has taken notice of climate change’s effect on national security, stating:

Climate change is reshaping the geostrategic, operational, and tactical environments with significant implications for US national security and defense. Increasing temperatures; changing precipitation patterns; and more frequent, intense, and unpredictable extreme weather conditions caused by climate change are exacerbating existing risks and creating new challenges for US interests.

Russia’s invasion of Ukraine and weaponization of fossil fuel has painted a clear picture of the security implications of energy choices. Plentiful, affordable, and independent sources of energy are a vital national interest around the globe. Beyond its environmental benefit, moving beyond fossil fuels provides a hedge against unpredictable, authoritarian regimes. The national security incentive will supply a durable driver for governments to move beyond dependence on fossil energy.

Why Venture Capital?

The IEA estimates $4 trillion per annum in clean energy investment will be required by 2030 to meet net-zero goals by 2050. While much of this investment will be dedicated to project finance and infrastructure development, venture capital will play a vital role. Referring to sustainability technology as “the largest economic opportunity of the 21st century,” renowned venture capitalist John Doerr compared today’s moment to the dawn of the Internet: “the Internet was under-hyped for its potential societal importance and economic impact, and it over-delivered…the same holds true for the clean economy, maybe even more.” For an economy founded on fossil fuels, moving into a more sustainable future forces a reconsideration of how all industries do business.

Technology must be the catalyst that makes this vision a reality; however, much of the technology that will be needed to meet ambitious climate goals does not exist at scale today.

It is for that simple reason that venture capital has a vital role to play. If the world is to keep warming below the IPCC 1.5°C target, we will need significant investments in ideas and products at the earliest stages. Further, these products must be designed, constructed, and commercialized within the critical next decade. Now is the time to invest in sustainability technology. Innovation is required in both software and hardware. AIN believes that innovation born of venture capital investment must form the physical foundation of tomorrow’s climate infrastructure. Software alone is insufficient; deep tech venture capital investment, involving both hardware and software, is what will move the needle on climate.

The coming decades present once-in-a-generation opportunities to invest in sustainability technology. Venture capital investors must be willing to take significant risks, but conditions have never been better for these investments to provide outsized returns. At AIN Ventures, we believe we are well-positioned to take advantage for years to come.

Dual-Use Advantage

AIN’s competitive advantage is our dual-use investment approach. We invest in those technologies that have strong commercial and government use cases. As an idea typically associated with defense tech, dual-use investment frameworks often bypass critical sectors. Sustainability is one such overlooked sector, despite its economic importance and its profound implications for national security.

We see three advantages to taking a dual-use investment approach.

  1. An increasingly robust incentive structure is in place for founders to build and scale their companies, including support for technological development at the highest risk, early stages.

  2. The government has positioned itself as an early customer for these technologies.

  3. Government action provides a future roadmap of where economic activity is likely to flow, providing informed investors an opportunity to have a first-mover advantage.

Legislation and Incentives

The past three years have seen a flurry of sustainability-related legislation, illustrating the close association between sustainability technology development and federal funds. For example, in December 2020 Congress passed the bipartisan Energy Act of 2020 as a section of a larger omnibus bill. The law allocated over $30 billion for carbon capture, renewable energy (including nuclear power), and energy storage R&D. Congress also extended tax credits for wind and solar energy development and agreed to an 85% reduction in hydrofluorocarbons, a potent GHG resulting from the air conditioning process.

The Infrastructure Investment and Jobs Act built on the foundation of the Energy Act of 2020 and addressed several of the latter’s blind spots. Signed by President Biden in November 2021, the law allocates over $7 billion for a national network of electric vehicle (EV) charging stations and grants for alternative fueling technology, including hydrogen. The nation’s electric grid is another major target; $5 billion will go to grants for grid hardening and $6 billion to upgrading the system’s resilience and reliability. Carbon capture technology remained a priority, with several billions of dollars dedicated to spurring technology development and demonstration. The bill also creates an Advanced Research Projects Agency-Infrastructure, following the lead of the Departments of Defense and Energy to promote innovative solutions.

The most recent major climate provisions contained within the Inflation Reduction Act further validates the dual-use model in sustainability investment. From clean hydrogen to building materials, Congress allocated approximately $370 billion in total funding and incentives among nearly every subsector of sustainability. But some of the bill’s less-publicized provisions are likely to have an outsized positive effect for entrepreneurs. Over $1.5 billion will go to upgrading America’s national labs, a hotbed for R&D. An “advanced energy project credit” offers up to a 30% tax credit for investments in capital-intensive equipment used for clean energy production, storage, or carbon capture, among many other qualifying projects. But perhaps the primary driver of innovation will be the technology-neutral clean electricity production and investment tax credits, which will replace the current credits tied to specific generation methods. The new credits incentivize emissions reductions versus the use of certain types of technology. This is critical for deep tech entrepreneurs because subsidized technologies often enjoy perpetual government support and lock out competitors with new, cutting-edge but immature innovations. The new incentive structure will level the playing field for deep tech entrepreneurs within the space.

With multiple monumental climate bills passed since 2020 under both Republican and Democratic administrations, it is apparent that sustainability has become a fixture of Washington’s priorities. This legislation represents perhaps the primary advantage of a dual-use investment approach: the government can meaningfully lower the cost of technological development and commercialization and improve the likelihood that game-changing technology makes it to market.

Government as an Early Customer

A second major advantage is leveraging the government as an early customer. The White House invoked the Defense Production Act (DPA) in June 2022 to facilitate meeting emissions targets. The act gives the executive branch authority to require private companies to prioritize federal government orders and allows the president to “allocate materials, services, and facilities” for those purposes deemed necessary for national security. Applying the DPA will lower the cost of capital necessary to scale companies by de-risking commercialization and positioning the government at the front of the line with billions of dollars ready to purchase new technology. Though having government as a first customer is not a guarantee of success (see our Valley of Death paper), it can appreciably drive down the costs of scaling novel products.

Market Signaling

AIN’s dual-use investment approach also provides a useful tool to narrow sustainability down to a few high-potential technology categories. By paying close attention to Washington’s sustainability actions and intentions, dual-use investors can develop a picture of what the future investment landscape looks like. Government non-dilutive funding and tax incentives create strong signals for entrepreneurs to build in certain areas–especially in highly regulated sectors like this one. At AIN, we consider government action to be a key leading indicator, among others, of where future innovation effort and spending will go.

Through both legislation and executive action, the federal government has signaled where its priorities are in this space. The White House has distilled its commitment to sustainability into five target areas, and these are generally consistent with the previously discussed legislation:

  • 100% carbon-free electricity by 2030

  • 100% zero-emission vehicle acquisitions by 2035

  • Net-zero emissions from procurement by 2050, including a focus on clean construction materials

  • Net-zero emission building portfolio by 2045, with a 50% emissions reduction by 2032

  • Overall net-zero emissions from federal operations by 2050, with a 60% reduction by 2030

Informed by Washington’s stated priorities and efforts to spur action, AIN sees four primary areas for investment that optimize for monetary returns as well as environmental impact:

  • Energy production and storage

  • Zero-emission transportation

  • Materials and buildings

  • Carbon capture, utilization, and storage (CCUS)

The following paragraphs are intended to be brief introductions to these subsegments and not exhaustive. We will expound on each focus area in future publications.

Major Categories and Landscape

Energy Production and Storage

Energy production and storage is at the core of the sustainability discussion. In 2021, only a fifth of US energy consumption came from low-carbon sources. But achieving a clean energy future is not as simple as generating a certain level of renewable power. Wind and solar, though potent energy sources, suffer from intermittency that results in significant power gluts on the grid during high-production times and no power during downtimes. These swings place heavy stress on the grid and often result in lost energy when supply exceeds demand. For these sources to continue to scale, energy storage technology must grow with them.

Though numerous opportunities exist in generation, transmission, and distribution, energy storage is the area most suited to VC. Today’s energy storage technology is not up to the task of mitigating normal swings of intermittent renewables on a large scale. This is true for both short-term and seasonal storage. But technology has the ability to fill the gap. The total installed electrical energy storage capacity in the US is less than 1% of total electric power capacity, leaving enormous room for growth. And there is vast economic potential in this trend; one study estimated the total economic value of energy storage in the US at $228.4 billion over a ten-year period.

Though several viable storage techniques exist in some form or another, battery capacity is growing rapidly, despite its relatively small share of energy storage today. Sixty-four percent of US energy storage projects under development are battery-based. Large-scale battery capacity tripled in the three-year period ending in 2020, and utilities plan to install up to 10,000 MW of capacity by 2023 which would represent a tenfold increase over 2019 levels. Energy storage technology, and batteries in particular, appears to be fertile ground for VC investment in the coming decade.


In terms of opportunity for environmental and economic impact, the transportation sector is unmatched. Petroleum-based fuels account for about 90% of energy consumption in transportation and, as a result, transportation is one of the biggest contributors to GHG emissions in the US at 27% of all emissions. An independent analysis by Project Drawdown estimated that even if EVs account for just a fifth of passenger miles by 2050, it would mean a 7 gigaton reduction in GHG emissions.

The US is at or near a turning point in terms of EV adoption. Despite the number of new car registrations dropping by nearly 20% in the first quarter of 2022, EV registrations spiked by 60%. The EV share of the overall vehicle market now sits at a record high of nearly 5%.

With rapid EV adoption in progress, infrastructure concerns are coming to the forefront and this presents a significant opportunity. Along with the energy storage and grid performance solutions already discussed, the US must drastically scale up EV charging capacity. To meet federal targets, America needs 1.2 million public EV chargers as well as 28 million private chargers by 2030, about 20 times as many chargers as exist today. Though the infrastructure bill represents a good start, it only allocates funds for 500,000 chargers, well short of the needed number. Innovation to make EV charging cheaper, faster, and more accessible will be required to ensure the EV growth trend continues.

Materials and Buildings

Buildings account for half of all electricity usage in the US: 1.6 trillion kilowatt-hours in 2021. Beyond electricity, fossil fuel usage for heating as well as refrigerants for atmosphere control make a significant contribution. As a result, building operations account for 29% of US GHG. Innovations in reducing operational carbon are numerous and their implementation led to a 17.3% and 11.4% reduction in residential and commercial emissions, respectively, between 2005 and 2018.

But these improvements do not account for another major component of the building carbon footprint: so-called “embodied carbon.” Embodied carbon, or the carbon emissions attributable to building materials and construction, has a similar footprint to operational carbon in new buildings but is significantly more difficult to measure and track. This problem is one of the most pressing if the world is to meet its climate goals. Global floor space is expected to double by 2060, representing over 2 trillion additional square feet or the equivalent of adding an additional New York City every month for forty years.

Though embodied carbon innovation is in a much earlier stage than operational carbon, organizations have made tangible progress. The main driver of embodied carbon emissions is the production of concrete, steel, and aluminum (23% of global emissions). Processes for producing each of these materials at a greatly reduced carbon intensity have been developed (though have yet to scale). Perhaps just as important as innovations in physical materials, there are efforts underway to leverage technology that improves the transparency of the construction supply chain process to make finding and using clean materials easier. For example, Building Transparency, a non-profit, created the Embodied Carbon in Construction Calculator (EC3), a free cloud-based tool that enables builders to measure and reduce a project’s embodied carbon. Such tools will arm entrepreneurs with the information they need to build impactful companies in this space.

Carbon Capture, Utilization, and Storage (CCUS)

There is simply too much CO2 in the atmosphere today to meet warming targets without removing a significant portion of it. To keep the global temperature increase below the target 1.5°C, up to 10 gigatons of CO2 will need to be removed annually by 2050. Though critical to meeting stated targets, this is perhaps the most difficult sustainability area to invest in. These technologies, though increasingly available, are still largely in their infancy in terms of readiness and capital required to develop and scale the process.

Investors are treading lightly. CCUS companies brought in over $600 million in 2021, but about 70% of that money went to carbon accounting and carbon fintech firms. The companies that need this money the most, those developing capital intensive solutions, have struggled to attract investment to build and scale. Relieving some of the pressure, CCUS remains a beneficiary of significant government support. As mentioned, the 2021 infrastructure bill allocated billions of dollars to the CCUS effort, and the Department of Energy has recently announced it will begin applying $3.5 billion of those funds to build large-scale, regional direct air capture projects. However, it remains unclear whether that support will be sufficient to prompt venture investors to fund ambitious CCUS projects.

We note that an extended element of CCUS is the possibility to not only capture carbon but also convert it into a usable product (C2X). The C2X market is nascent and its future uncertain, but the world already uses 230 million tons of CO2 as a commodity. Cement production using recycled CO2, for example, is already an area of active work and investment with high potential for environmental impact. Another promising area is sourcing carbon from recycled CO2 (rather than from fossil fuels) as an input for fuels already in use today. These technologies are dependent on outside factors (primarily the cost of clean electricity) to make a positive environmental and economic impact, but this is an area of notable potential.

What We Look For

The sustainability revolution is more than merely trying to iterate on existing products and processes. We are in the midst of a total redesign of the world economy. At AIN Ventures we seek to invest in sustainable technologies that will play a major role in this redesign. Please see the key elements we seek in companies below.

Quality of Founding Team

The most important factor AIN considers when investing is finding the right entrepreneur who can bring to life a world-changing idea. In all spaces, we place a premium on dedicated, creative founders who possess deep technical expertise in their field. We seek those singularly driven to accomplish their mission. Further, we believe that although many companies leverage government non-dilutive funding to incubate their technology, only those led by a relentless CEO will experience large-scale commercial adoption.

Unproven Product or Unproven Science?

As sustainability investors, we need to prioritize technology primed for growth and impact. There is a fine line between an unproven product or use case and an unproven technology or underlying science. Distinguishing between the two is crucial. If the correct founder is at the helm, companies do not need well-defined use cases or even a working product to receive investment. However, the core technology and science underpinning them must be beyond doubt. Remembering the lessons of the cleantech bust, speculative investments on immature technology can lead to extremely poor returns. Consequently, we must dedicate significant time and attention to technical vetting.

Double Bottom Line Approach

We prefer a double bottom line investment approach: a superb product that delivers significant profit and also positively impacts our country and its allies. Since the shift in public sentiment is key to the growth of sustainability investment, we believe our double bottom line angle is particularly well-suited to this vertical. As public concern about sustainability grows, companies whose product offering delivers both exceptional value and environmental benefit will gain a competitive advantage, leading to superior investment returns.

No Greenwashing Here!

We seek companies that live up to their promises. Recent research published in the Harvard Business Review demonstrates that companies who engage in greenwashing or otherwise fail to deliver on environmental commitments suffer in the marketplace. The companies we seek to invest into are not trying to make marginal contributions to sustainability and certainly do not attempt to greenwash; reducing emissions while generating real revenue is their core mission. In addition, we value leaders who make impact projections commensurate with their product’s true capability, and this is a key aspect of our diligence process.

Final Note

There are venture-backed startups in every industry working to make an impact and move humanity forward. But in the sustainability sector, nearly every company fits that description. At AIN Ventures, we feel privileged and are excited to invest in and support the most talented and ambitious entrepreneurs in sustainability technology.

Our expertise investing at the intersection of deep tech and dual-use tech uniquely positions us to lead the way in this critical effort. We are also able to leverage our extensive network to ensure our portfolio companies have access to all available resources. By helping our companies take advantage of government funding, government labs, accelerator programs, private grants, and venture capital funding, we provide a solid foundation for growth and success.

If you are an entrepreneur and you want to speak with AIN, please send your deck to Please also go to our website - We look forward to hearing from you.

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