Europe-focused climate venture capital firm secures backing from major institutional investors amid “very difficult” fundraising environment.
Europe climate tech venture capitalist World Fund closed its first fund at €300m after securing support from investors including EIF, KfW Capital, Wachstumsfonds, BPI France, PwC Germany, NRWbank and Ignitis Group.
The Berlin-based firm also landed a few investors who had never previously backed first-time VC funds. These include the UK Environment Agency Pension Fund, the Wiltshire Pension Fund and Croatia’s Erste Plavi, as well as BPI France’s inaugural investment in a first-time fund outside of France. World Fund also raised €50m from the European Investment Fund.
The close, the biggest ever for a first fund by a European climate venture firm, according to World Fund, happened amid a challenging fundraising environment.
“Particularly for institutions, 2022 and 2023 was very, very difficult,” Craig Douglas, partner at World Fund, told Impact Investor. “Basically, nothing happened in 2023 during the first six months of the year. Everyone was either worried about interest rates, or they were over-committed in the private markets, or the balance between their portfolios wasn’t right, or they had reduced liquidity.”
Although World Fund had originally aimed to raise €350m for its first fund, it decided to lower its target to €300m amid this adverse fundraising climate.
Raising €350m “was always going to be ambitious, even in the best of times”. “So we are very happy, even at €300m, that’s a pretty good target to have got to,” Douglas added.
The tide started to turn from the second half of 2023 and the start of 2024, according to Douglas. “The last part was to get some pension funds and financial institutions to really join in,” said Douglas. “A few have started releasing funds again in 2024, which was good to see.”
According to Douglas, the climate performance potential of their investment strategy helped attract the larger investors. “We look for companies that have huge climate performance potential, and that really resonated with the financial institutions.”
Climate tech startups
The fund’s scale “demonstrates a continued growth in interest in climate tech from institutional investors and sends a welcome signal to European entrepreneurs”, World Fund said.
“We are on a mission to ensure that the best of European climate techs do not fail due to the dearth of funding beyond the earliest stages – that infamous ‘Series B valley of death’ that has plagued European companies for too long,” said Danijel Višević, managing partner at World Fund.
European climate and deeptech startups in their early growth stage often need a minimum of €30m in funding to scale up. However, that capital has often been unavailable.
“Europe still has a lack of investors who are willing to do early growth, or with enough technical knowledge to be able to take technical risk,” said Douglas. “If you look at the companies that have managed to succeed beyond that, a lot of them took capital from outside of Europe.”
World Fund will use the raised capital to make between 25 to 30 new investments in European startups developing technologies that have the potential to decarbonise entire industries.
The fund has already invested in 15 climate tech businesses including battery recycling company Cylib, Planet A Foods, a B2B sustainable ingredients company and Ecoworks, which offers modular, climate-neutral renovation solutions for the housing industry.
