Kearney spent years clearing away bureaucratic barriers that were dissuading philanthropists, and especially their cautious lawyers. In order to use charitable money, Prime needed to document that investments wouldn’t otherwise be made by commercial investors. But Kearney also wanted to show that startups could eventually attract private capital and become thriving businesses that would later make a major impact on climate change.
Working deal by deal, Prime funded 10 startups with $24 million from 54 families and organizations from 2015 to 2018. Along the way, Kearney had help from Matthew Nordan, 45, a veteran investor, formerly of the venture capital firm Venrock, who had grown frustrated by the difficulty of funding early startups aimed at climate change.
After the early 2000s tech bust, many venture capital firms, looking for the next big thing, briefly piled into energy and “cleantech” startups. That boom ended in “abject failure,” Nordan said. “You can’t approach trying to build large industrial companies the same way that you try to spin the roulette wheel on the next Instagram.”
Those losses scared many private investors away from climate-focused startups for more than a decade. VC firms steered money to digital startups with shorter timelines and wider potential profit margins.
Entrepreneurs like Snydacker—with his plans to revolutionize lithium extraction—had to look for money among wealthy angel investors, who didn’t necessarily know the first thing about energy or climate. “You talk to 50 people and you hope that one person in the audience understands what lithium is and why it’s important,” he said.
In 2018, after years of facilitating investments on a deal-by-deal basis – a laborious process for everyone involved – Prime tried launching a fund. Prime Impact Fund, with Nordan as managing director, would operate a little like a venture capital firm. Rather than prioritizing investment returns, however, the fund team would focus on making an impact on climate change.
The initial goal was to raise $20 million. This month, Prime Impact Fund officially closed with $52 million from 76 investors, including family offices, foundations and individuals. It was topped off with $5 million from the John D. and Catherine T. MacArthur Foundation, which has championed the concept of “catalytic capital” that Prime represents. Added to the $24 million in investments Prime previously facilitated, the new fund brings Prime’s total fundraising to $76 million.
One of Prime’s skills is making it easy for rich people to get involved, said John Balbach, director of impact investment at the MacArthur Foundation. “It’s a way for new investors to dip their toe in the water and see the power of this type of investing,” he said.
The fund has already invested $9.1 million in eight companies, including Via Separations, Dave and Keller’s membrane startup. Prime’s $1 million last year helped the company triple its permanent staff, to nine, and let the founders, who are engineers, hire chemists to prepare for tests of its membrane at a paper mill this summer.
Lilac Solutions, Snydacker’s lithium-extraction startup, got $800,000 from Prime in late 2018. “That money allowed us to move from a small chemistry lab into a larger industrial facility,” he said. By February, Lilac raised $20 million in Series A funding from more conventional investors. It’s on track for a pilot project in the western U.S. later this year.