Toyota Ventures started in 2017 to help startups figure out what the future will look like, with an eye towards ensuring Toyota as an automaker and brand would stay at the forefront of innovation.
While the firm initially targeted mobility startups, the crossover into climate tech was a natural progression. Today, Toyota Ventures has over $800 million in assets under management across six funds, with $300 million dedicated to its Climate Fund.
During Climate Week NYC, Rebecca Bellan sat down with Lisa Coca, a partner at Toyota Ventures who leads the firm’s Climate Fund, to talk about trends and challenges in climate tech investing.
The two kicked off this week’s episode of Equity with a rundown of some of Toyota Ventures’s portfolio companies, including some of “the usual suspects for climate – batteries and hydrogen – that are very much within the strike zone for Toyota,” Coca said. Among those that stood out are AM Batteries, which promises to reduce battery manufacturing energy usage and capital expenditures by 40% each, and Ecolectro, which produces green hydrogen using hydropower in upstate New York.
Ecolectro notwithstanding, the two also discussed the decreased investor interest in hydrogen companies amid a lack of demand signaling. Particularly when you compare demand for hydrogen with technologies like direct air capture, says Coca.
“You’ve got Google and Meta and all these folks out there that are basically prepaying, doing off-take agreements, for things that don’t exist…it’s a good thing, but it would be great to see some of that happening as it relates to low carbon fuels like hydrogen and methanol,” Coca said.
(Separately, at a Toyota Ventures event in NYC Tuesday, the firm’s founder and general partner Jim Adler said climate tech startups should try to secure future offtake agreements to drum up enough demand to survive the downturn in funding and thrive.)
During the podcast, Coca went on to note that the majority of climate tech investors have already placed one or two bets in hydrogen production, but most of those bets require a lot of capital, and in the absence of demand signals, VCs aren’t ready to add another hydrogen pet to their portfolios.
Coca also discussed the startup impact of President Joe Biden’s Inflation Reduction Act (IRA), which includes billions in incentives to onshore and develop energy technology.
“It’s potentially a pot of gold at the end of the rainbow,” Coca said.
But, she said, startups still need to find a path to profitability without IRA funding.
“At the end of the day, green products and climate tech products have got to find a path to cost parity with the fossil fuel-based alternatives,” Coca said. “We will never solve this if that doesn’t happen…some consumers will pay up. They’ll pay the green premium. But industry will not.”