Elevation Ventures Is Raising $50M for a Climate-Focused Tech Fund in SoCal
Interest in electric cars is spiking as gas prices rise to their highest prices in years, but supply chain headaches and the lack of infrastructure such as charging stations are keeping the demand pent up. And, the longer-term effects on power grids will mean there will be lots to upgrade, even after the transition to cleaner technology, like electric vehicles, comes online.
Elevation Ventures, a new climate-focused venture firm in Orange County, is raising a $50 million fund to focus on technology that can provide new products and services. The fund will target seed-stage companies in SoCal, though it might also invest in a few Series A funding rounds. Check sizes will range from $500,000 to $3 million.
Elevation has partnered with two local organizations with deep roots in O.C.: business incubator Octane and Sustain SoCal, a network of professionals focused on clean tech development.
A VC Built By Consortium
Elevation Ventures Managing Partner Neal Rickner is an Orange County native who recently moved back to the area from Silicon Valley, where he was the COO of Makani Technologies, a company that developed airborne wind turbines. It was acquired by Google in 2013, and then eventually shut down by Alphabet, Google's parent company.
Elevation Ventures Managing Partner Neal Rickner.
Image courtesy of Neal Rickner
He also worked with what’s known as “X,” (formerly Google X), a research and development facility founded by Google, which now operates as a subsidiary of Alphabet.
”I’ve been through the ringer...up there,” he said. “I learned the best I could from the best innovators in the world."
But it wasn’t until Rickner did some serious reflection in 2020, that he decided to move back to Orange County. He had some informal conversations with members from Aliso Viejo-based Octane’s team in 2017, but it didn’t coalesce until 2020. Octane acted as the catalyst and facilitator, bringing in Sustain Socal. Elevation Ventures was formed.
Octane already has a track record in investing. In 2016, it partnered with Visionary Ventures, a VC firm that backs ophthalmology and aesthetic startups, which have a strong presence in Orange County.
The organization has both for-profit and nonprofit branches and serves SoCal’s general technology and medical technology ecosystems—connecting people, resources and capital. One of its initiatives is a four-month accelerator program called LaunchPad that gives local founders access to a slew of advisors and resources.
Sustain SoCal is a hub of climate, sustainability and environmental experts, with a presence at UC Irvine’s innovation center, The Cove. The network comprises thousands of experts; most have been involved with clean tech and/or climate tech for 20 years or more.
Elevation expects to make 15 to 20 investments from this first fund, over the next two to three years, Rickner said. Even before the first close of the first fund, expected this summer, Elevation is already writing checks through a type of investing known as a special purpose vehicle. Typically set up as an LLC or limited partnership company, SPVs make a single investment into just one company.
Rickner, Octane CEO Bill Carpou and Sustain SoCal CEO Scott Kitcher put together a mission statement for their new venture firm in the fall.
”The three of us bring together the core ingredients for a VC fund to succeed,” he said. “And, we complement each other well. We have different networks and skill sets, but we’re mission-aligned and collectively-aligned.”
The team hopes to raise around $20 million by the summer. It’s raised just over $10 million so far, Rickner said.
“The first commitments are all from SoCal and know Octane or SoCal well,” Rickner said, adding that they’re targeting high net-worth individuals and family offices.
Elevation recently also brought on longtime climate technology investor Rachel Payne and former Seeder Clean Energy co-founder Alex Shoer.
Early Investments
Elevation’s first investment, for which it raised more than $1 million, was in Los Angeles-based Veloce Energy. The startup runs a software platform and installation system to enhance the move to a decentralized, distributed energy grid that enables anyone to trade electricity on its networks.
Rickner said companies like Veloce can accelerate the shift to these decentralized power systems “faster and cheaper” than enormous electricity providers.
In late April, the firm made its second investment (also through an SPV) in Carbon Collective.
The Alameda-based startup enables employees to use their retirement funds to fight climate change by divesting from companies that contribute to climate change and to re-invest in companies working to combat the climate crisis.
“Venture deals move quickly,” Rickner said, in explaining why he opted to raise money quickly via SPV rather than waiting for the fund to close. “These first two deals were great opportunities. We had special access, and we didn't want to pass them up.”
Rickner declined to disclose the amount of either investment.
Photo by Tyler Casey on Unsplash
Next Industrial Revolution
It wasn’t an easy decision to leave Silicon Valley.
“Part of the allure for me was [the opportunity to] work on something I’ve been passionate about for a long time,” Rickner said.
He credits the pandemic and lockdowns that followed with inspiring him, like many others, to reflect on what was important.
“A lot of people woke up and decided we had to take better care of our environment, that climate change was happening,” he added. ”When you take time, you realize there are more floods and fires and extreme events, and it became personal to a lot of folks."
Elevation will have plenty of opportunities to invest close to home, Rickner noted. Orange County is home to some of the biggest names in electric vehicles, including electric pickup truck maker Rivian Automotive, which is headquartered in Irvine.
But it will also have local competition. Laguna Beach-based Keiki Capital launched in 2017 to invest in climate tech startups at the pre-seed and seed level.
Rickner sees the time we’re living in as a transition into the next industrial revolution—and he sees opportunities.
“90% of the world economy, as measured by country GDP, has committed to net zero,” he said, referring to several nations’ pledges to move to power sources that are carbon neutral.
More than half of the world’s corporate and financial institutions, as measured by revenue and assets under management, have committed to a net-zero approach, he added.
“The previous industrial revolutions produced many billionaires,” Rickner said. “And this one will do the same.”
The Reums are making what they describe as a "meaningful" contribution to a multimillion dollar fund called Mint 10. They view it as a way to diversify their holdings away from illiquid shares in startups that won't pay off for years – if they're lucky – and equities, which they see as overvalued.
"I see this as a great alternative class, somewhere closer to a stock, albeit a little less liquid but more so than my venture and private equity stuff," said Courtney Reum. "To me, there's not much to find in the stock market that's a good deal."
A study last year showed baseball cards had a far superior return to stocks over the previous decade. The pandemic has triggered a frenzy in the card market, with huge spikes in trading and new records for coveted NBA rookie cards fetching more than a million dollars apiece.
The Reum brothers founded their Santa Monica-based early-stage consumer technology venture firm, M13, in 2016, after they sold their spirits business, Veev, for a hefty multiple to a St. Louis beverage conglomerate. M13 is now deploying its $175 million second fund backed by Virgin Group founder Richard Branson.
Reum thinks the still stodgy card industry is ripe for a shake up, eyeing big potential in influencers and creating content around the practice of "case breaking," the act of opening card boxes, which can draw big audiences on streaming platforms.
Reum, who remembers his mother driving him to card shows when he was 14 years old, views trading cards as similar to art, sports teams, Bitcoin or gold, which he's "bought a bunch of lately." What do all those assets have in common? There's a finite supply, which Reum believes inevitably drives the price up over time.
"I generally believe that something like gold or baseball cards, depending who you are, could be a couple percent of your allocation, up to like 10 percent," Reum said. "I think this is just as viable as gold or bitcoin or any of that."
Mint 10 will hedge its bets by buying a mix of cards from the three major sports that are both old and new.
"It's no different than how a long/short fund does their allocations," Reum said. "We have LP [limited partner] interest coming out of our ears."
Reum would not specify how large the fund will be or what his and brother's contribution is, owing to the fact that they are still fundraising. "It will be a multi-million dollar fund but we haven't finalized the amount yet," he explained. "We have a lot of interest but we want the strategy to dictate the raise vs the inverse, which is sometimes the case."
Courtney and Carter Reum are devoting some of their attention and dollars to Mint 10, an investment fund focused on trading cards.
The Reums are not alone in their newfound enthusiasm for trading cards. Just as people bored at home with extra cash in their pockets drove a wave of day trading, card sales have been on a tear during the pandemic.
During the first few months of the coronavirus outbreak, sales of basketball cards on eBay spiked more than 130%. Baseball cards saw a 50% spike while football cards had a 47% increase.
In July, a LeBron James rookie card shattered the record for a modern day NBA card, going for $1.8 million. But the record stood for only a few months as last month a card of Milwaukee Bucks forward Giannis Antetokounmpo fetched $1.812 million. (The card previously sold for $7,000 on eBay, but the buyer reportedly returned it because of a yellow stain.)
"I think you're going to see sales records over the next 12 to 16 months that shock the world," said Scott Keeney, a DJ, entrepreneur, and trading card expert who the Reums brought in to run the new fund. "I've seen more VC activity in the last four-to-six weeks around the card space than I would have ever dreamed."
Keeney compares Mint 10 to funds trading fine art, but he sees a much bigger upside in cards because of people like Reum, who have traded them since they were kids.
"This generation who grew up in the Junk Wax Era now has disposable income to spend," Keeney said. "Would they rather spend all this money on a piece of art that hangs on the wall that they might not be that tied to? Or do they want to own Magic Johnson's rookie card if they're a Lakers fan?"
Though most trading is done online these days, Keeney, along with fellow DJ, Steve Aoki, opened a brick and mortar card card shop last month in Hollywood, Cards and Coffee, featuring over $2 million worth of inventory.
With a widely accepted grading system and limited supply, the trading card market has come a long way from the scandals that scared away collectors in the 20th century. But the industry still has problems. Last year, the FBI launched a criminal investigation into the world of baseball card collecting that included the largest seller of cards on eBay.
"This doesn't sour us on the market one bit," Reum said. We are obviously aware of this process of attempting to cheat the system, and are diligent in research to avoid this scenario. However, we actually are glad this incident came to light and was taken seriously by the FBI."
The Card Reum Will Never Sell
On a recent Zoom video call conducted just after he had returned from a business trip to Austin, Reum excused himself and said there was something he wanted to show. He darted off screen and returned holding up a framed oversized 1985 Michael Jordan Interlake card.
He pointed to the bottom right hand corner where the words "Interlake Youth Incentive Program" were printed in small lettering. The card holds a great deal of significance for Reum because his father, W. Robert Reum, was an executive at The Interlake Corporation before becoming president and CEO in 1990.
The company signed on as a corporate sponsor of the Bulls in 1984. As someone who now spends a lot of time thinking about how consumer-focused startups should market themselves, the move still baffles him.
"Given they were a B2B diversified industrials company, whomever was running their marketing probably should have been fired for such a sponsorship," Reum laughs. "The Bulls were the worst team in the league, there was no internet for people to discover the company, and it was hard to see how the sponsorship would help sales of Interlake products. However, the sponsorship did come with eight floor seats. The year following the deal, the Bulls drafted Michael Jordan and the rest is history."
W. Robert Reum died two years ago at the age of 74 from complications from cancer and Reum has a hard time not getting choked up looking at the card.
"To me, it is a really personal way to honor my dad," he said.
The card is worth around $20,000 and could soar in value to half a million dollars if it is seen as Jordan's rookie card, according to Keeney. But this is one card Reum will never sell. He wants to acquire more of them.
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