In the field of climate technology, hardware devices have always been considered fundamental. However, Blue Bear Capital's investment strategy is rewriting this traditional perception: in this interconnected era, the value of software is equally indispensable.
"Almost all hardware development relies on software support," said Vaughn Blake, a partner at Blue Bear Capital, in an interview. This investment firm is adopting a software-centric investment strategy, which stands out in the climate, industrial, and energy investment sectors that typically focus on hardware.
Company partner Ernst Sack illustrated this concept with a vivid example: solar power plants inevitably face equipment failures that lead to a decrease in power generation. However, by deploying monitoring services like Raptor Maps, operators can minimize losses. "If we consider just a 10% performance improvement, in over 100 gigawatts of solar power capacity, that translates to an additional 10 gigawatts of generation, which is roughly equivalent to the capacity of 3-5 coal or nuclear power plants."
Image Source Note: Image generated by AI, image licensed from Midjourney
Blue Bear Capital sees opportunities far beyond traditional environmental technologies. Sack emphasizes that the applications of AI are extremely broad, playing a crucial role in wind energy, water treatment, refrigeration, as well as steel, cement, and chemical production, and extending to shipping and air logistics. "Pure hardware companies often serve only a single vertical, whereas software solutions are almost universally applicable."
To put this investment philosophy into practice, Blue Bear recently completed the fundraising of its $160 million third fund, with notable investors including the McKnight Foundation, Rockefeller Brothers Fund, and UBS Group. The fund plans to invest in about 15 companies, with initial investments of around $5 million each, while reserving $10 million for follow-on investments to maintain ownership.
Blue Bear has adopted a unique investment strategy, applying late-stage investment thinking to early-stage investments. As Blake stated, "In the markets we invest in, the likelihood of an IPO is relatively low, while strategic mergers and acquisitions or private equity-backed acquisitions are more common." Although the scale of individual exits may not meet the targets of traditional venture capital funds, through a portfolio approach, they expect to deliver similar returns to investors.
This shift in investment thinking not only reflects a new trend in climate technology investment but also showcases the immense potential of digital solutions in addressing climate change. With the perfect combination of hardware and software, the future of climate technology looks even brighter.