Many startups encounter challenges after their initial funding rounds, growing too large for venture capital but still requiring additional cash. This issue is particularly pressing for startups focused on industrial-scale hardware, such as those in the climate tech sector, due to the significant capital needs.
Traditionally, infrastructure funds have addressed this gap, yet many have been reluctant to invest in climate technology.
However, one firm sees this as an opportunity. Ara Partners has raised an $800 million infrastructure fund aimed at reducing carbon emissions in traditionally difficult-to-decarbonize industrial sectors.
Originally targeting $500 million, Ara Partners exceeded expectations, gaining strong interest from both new and existing investors, including pension funds, insurance companies, endowments, foundations, and sovereign wealth funds worldwide.
The new fund has already made three investments, including a household organic waste recycling company in Ireland and a biofuels terminal developer. The fund’s decarbonization strategy emphasizes repurposing existing assets for low-carbon initiatives.
This substantial fundraising occurs amid political uncertainty regarding decarbonization in the U.S., but also amidst growing clarity about its economic viability. Companies have progressively reduced the costs of low- and zero-carbon technologies, making them competitive with existing methods.
Ara Partners, for instance, has previously invested in Divert through a private equity fund. This company donates salvageable food and converts non-edible waste into biogas, which can be sold or used to produce electricity and heat on-site. This approach is both environmentally and financially beneficial compared to traditional methods of disposing waste in landfills where it generates methane pollution.
Ara Partners is set to announce its fourth investment under this strategy soon.
