Climate Tech IPOs in 2022
Private investment into climate tech increased in 2020 and 2021.
Companies are attacking the climate crises from many different angles, giving investors numerous investment options within the industry.
Four companies within the climate tech industry that could go public in 2022 that investors should keep their eye on.
The investments in climate tech have been substantial over the past few years. Between the second half of 2020 and the first half of 2021, venture capitalists and private equity firms invested over $87 billion into climate technology, marking a 210% increase from what was invested in climate tech the 12 months prior. As the climate crisis intensifies, so has the need for solutions. Investors are betting big on private companies, in hopes that they can solve the climate crises, and help us all transition to a lifestyle that’s better for the planet.
The climate tech industry is broad and diverse. Not every company within the industry is attempting to capture carbon, clean the oceans, or generate energy from windmills. Four companies that are tackling the climate crises from four different angles could go public this year, and I think they should be on your radar if you're into climate tech investing.
1. Impossible Foods - Protein Replacement
Impossible Foods has been around since 2011, but started to make waves in 2019. In 2019, Impossible Foods made its grocery store debut and quickly became a top selling item. In the same year Burger King chose Impossible Foods as its supplier for its plant-based burger option, which helped put the company on the radar of meat eaters. The hype around protein-replacement and plant-based meat options has helped Impossible Foods raise over $2 billion. The company's last funding round came in late 2021 at a $4 billion valuation.
What’s to Love About It
Impossible Foods has shown tremendous growth over the past few years. In 2020 revenue rose 75% from the year before. What’s more impressive is that the company isn’t just getting the people who've established themselves as vegans or vegetarians, they’re enticing meat eaters to check out their product. According to analytics firm Numerator, 82 cents of every dollar spent on Impossible Burgers was money previously spent on an animal based product.
The meat-replacement market is small compared to other industries, but it's growing. In 2020 the global meat-replacement market was valued at $6.6 billion, in comparison, the global meat market was valued at $2.3 trillion in 2020. Barclays predicts that the alternative-meat market could grow to $140 billion by 2029, and Impossible Foods is well positioned to benefit from the change in eating habits that will fuel alternative-meat's growth. Impossible’s products can be found in 20,000 grocery stores and 30,000 restaurants.
Beyond Meat ($BYND) is probably the closest competitor to Impossible Foods, but publicly, Impossible Food’s management has been very supportive of Beyond Meat. To Impossible’s CEO Pat Brown, traditional meat suppliers are Impossible Food's competition.
Still, Impossible Food's management cannot ignore the other companies that have flooded grocery store shelves with plant-based meat products. Since Impossible Food’s and Beyond Meat’s rise in popularity, Morning Star and Boca, two legacy players in the space have stepped up their efforts and offerings, and Perdue Farms, best known for its chicken and pork, created Sweet Earth, a subsidiary that will focus on plant-based meat products.
With competition on the rise, Impossible was still able to increase revenue by 85% year-over-year.
2. Lime - Micro-mobility
For anyone looking for a cleaner/greener way to travel, but can’t afford a Tesla, there’s micro-mobility company Lime. Founded in 2017, Lime provides electric mopeds, scooters, and bikes for rent. Lime raised $523 million in convertible debt in November, setting itself up to go public in 2022.
What’s to Love About It
Lime operates in 120 cities across 30 plus countries, with more than 200,000 bikes and scooters spread across these locations. Craft.co shows the company made $420 million in revenue in 2019.
The COVID-19 pandemic did have a big impact on Lime. The company was forced to layoff a portion of its workforce and pause operations for a month. During that time Lime’s valuation dropped below the much celebrated $1 billion mark. But the company was able to bounce back in 2021.
In Q3 of 2021 the company hit EBITDA profitability, making it the second time the company achieved the milestone. Lime's CEO Wayne Ting stated that revenue during their profitable quarter wasn’t that much different from revenue during the same quarter in 2019, but that the company did a better job at controlling expenses in 2021.
Lime has raised over $1.5 billion from private investors and venture capitalists, and plans to put $20 million from its latest fundraising round towards decarbonization efforts.
The micro-mobility space is crowded. In addition to Lime, there is Birds ($BRDS), which went public by way of SPAC merger last year. There’s Germany based Tier Mobility, Estonia based Bolt, Stockholm based Voi, and Belgian based Felyx to name a few.
3. VinFast - Electric Vehicles
To take advantage of the EV boom, Vietnamese conglomerate Vingroup spun off its auto manufacturing unit VinFast. The hope is that VinFast can capture a piece of the electric vehicle markets in the U.S. and Europe .
What’s to Love About It
VinFast isn’t jumping into EVs totally blind. The company produced a gasoline-powered vehicle, and sold more than 25,000 units. To get the vehicle to market quickly, VinFast licensed the engine and other tech need for their vehicle from BMW.
Even if it is a relatively new auto company, the momentum of the electric vehicle boom is on VinFast’s side. In 2020, 5% of all new vehicles sold were electric vehicles. Experts predict that by 2030 EVs will account for 48% of all new cars sold.
VinFast's plan is to raise $3 billion from its IPO, and its shooting for a post IPO valuation of $25 to $60 billion, which would put it in the ballpark of Rivian Automotive ($RIVN). Rivian's current market valuation sits at $53 billion, with less than 1,000 vehicles delivered. VinFast has set its global sales target at 42,000 EVs, and hopes to start vehicle deliveries in late 2022.
VinFast plans to give U.S. consumers two vehicle options, the VF8 and the VF9. The price of VinFast’s VF8 model ranges from $41,000 to $48,000 depending on the trim. The VF8 model is said to have a range on the European cycle of 316 miles. The VF9 is going to be the company's flagship vehicle, with an estimated base price of $58,000 and an estimated range of 400 miles, again on the European cycle. Greencarreports explains that there is a difference of 20 to 25 percent between European NEDC and U.S. EPA fuel economy figures.
Success for VinFast won’t be easy, they are entering a very crowded industry. In the U.S. consumers have Tesla, Rivian, Lucid, GM, Ford, and soon Fisker, Polestar, and Canoo to choose from. We’ve reached the point where just being an electric vehicle isn’t good enough, VinFast will need a unique value proposition for consumers in order to compete with the legacy names and the domestic newcomers in the EV space.
4. Via - Transportation Technology
Via provides municipalities with software to help make the city public transportation systems more efficient and affordable.
Via was founded in 2012 and has raised over $700 million to date. Its last funding round in November 2021 brought in $130 million, and put the company’s value slightly above $3 billion.
What’s to Love About It
After taking five years to secure its first partnership, Via now has over 500 plus partnerships. Via’s software is helping cities efficiently manage their public transportation, school bus transportation, micro-transit, and paratransit programs.
The global market for transit technology software hit $20 billion in 2020 and is expected to grow to $60 billion by 2025 according to the Boston Consulting Group. In the U.S., the recently passed Bipartisan Infrastructure Deal will earmark $89.9 billion annually for public transportation over the next five years. The infrastructure bill marks an historic investment into public transportation, and could lead to more interest in Via's software.
Via saw strong demand for its software in 2021, which enabled the company to double its revenue year-over-year, and exceed its annual run rate of $100 million.
Of the companies discussed above, if I had to categorize them for a possible investment, Via and Impossible Foods would be my favorites, Lime and VinFast would be my least favorites.
Lime makes the least favorites because of Bird Global’s stock market performance. Bird went public by way of a SPAC merger, which at the time valued Bird at $2.3 billion. Currently, Bird Global’s market value sits at $905 million. What Bird’s stock performance signals to me is that investors aren’t ready to reward micro-mobility yet. Going public tends to have a “next big thing” sentiment attached to it, and micro-mobility is far from the next big thing.
Also, Lime’s past has been filled with issues between Lime and local authorities and public safety, and I foresee this issue continuing into the future. In Orlando, Florida, there have been loud complaints by business owners regarding Lime bike’s that are left thrown down in front of businesses or piled up on sidewalks in a junky fashion. Lime is a good idea, but human behavior, and how some of us treat things we don’t own isn’t so good at times.
As for VinFast, it makes the least favorite list because it’s a foreign car company attempting to break into the U.S. and European auto markets. At $41,000 VinFast’s VF8 comes in below KBB’s average price for new cars, which is great for future car buyers. At $41,000 and 316 miles of range, that puts the VF8 inline with the model 3, but the range listed for the VF8 could be reduced by 20 to 25 percent using U.S. range standards.
But it's not the range or the price that would cause me to shy away from VinFast, it's because I understand that it’s bigger than making and delivering a car. VinFast will also need to establish service centers, manufacturing plants, battery manufacturers, and a charging network (if its charge port isn't compatible with what’s already on the market.). Without a U.S. or European partner to assist with its infrastructure, VinFast will have a tough road ahead.
Then there’s the competition, the legacy auto manufactures who are starting to churn out electric vehicles, as well as the newcomers who are only focused on manufacturing EVs. VinFast faces too many headwinds for me to consider making an investment in the company at its IPO stage.
For the companies that made the favorites list, Via and Impossible Foods, I have to admit that there is some bias on my part.
I’m a public transportation slash Uber slash Lyft user. Public transportation in many parts of the U.S. is very inefficient. A tech based solution that can help public transit authorities run more efficiently will be welcomed by the millions of Americans that rely on public transportation daily. Bias aside, the infrastructure bill should benefit Via as public transit companies throughout the U.S. look to upgrade their services. Another reason to like Via, is because its software solutions can be applied around the world, any municipality with public transportation is a potential partner.
As a non-meat eater, Impossible Foods and Beyond Meat have been on my radar for a long time, and I’ve watched both companies morph from chemistry projects into big businesses. Years after its coming out party, the demand for Impossible Burgers is still strong. A GrubHub poll ranked the Impossible Cheeseburger as the most popular order in 2021. I love investing in companies whose demand I can see, like Nike and Apple, and I’d put Impossible in that list as well.
Climate Tech Investment Opportunities
Climate tech offers investors a way to make money and help the planet, but if you're considering investing in a climate tech IPO, don't get lost thinking about all of the money you hope to make or how much the company you're investing in is going to save the plant. IPOs are extremely speculative, and companies that receive lots of favorable hype in the private markets can get beaten down in the public markets, see Coinbase ($COIN), which currently trades at price that is 22% below its IPO price and Robinhood ($HOOD), which is currently trading at 60% below its IPO price.
Because a company is trying to save the planet, doesn't make it's a good investment. All the measurements that investors use to value other companies, like a solid balance sheet, a path to profitability, revenue growth, expense management, GAAP and Non-GAAP earnings, and free cash flow should be applied to climate tech companies as well.
2022 should be another interesting year for IPOs and I look forward to seeing how the climate tech industry matures over the next 10 months, especially the four companies discussed. Please remember that the IPO can giveth, and it can take away. Protect your investment capital, proceed with caution.