Why We Invested in Vacuumschmelze

By Chris Wu and Aakash Dattani

A majority of the discussion, policy, and investment in the clean energy transition has been focused on renewable energy generation, storage, mobility, financing, consumer adoption, and related challenges. The underlying supply chain and enabling infrastructure needed to support this transition, given its scale, is less well understood, and underappreciated. The growing electrification of the global energy system, both in terms of generation, and final consumption relies on a commensurate growth in the supply of highly efficient electric motors and generators. High quality magnets are an essential component of both of these electrical devices. At present, China accounts for 87% of global permanent magnet production. Consequently, the global magnet supply chain, especially after COVID, is a source of significant risk for turbine manufacturers, electric vehicle OEMs (original equipment manufacturers), and the like, especially in the western world.

Solution

Vacuumschmelze (VAC) is an advanced magnetic materials and solutions company with a 100-year operating history. The company manufactures a variety of different products that play a key role in end markets driven by the energy transition including EVs, industrial efficiency, alternative energy, and electric flight through its soft magnet and permanent magnet segments. The company currently is the only Western manufacturer of significant scale producing permanent magnets, which is a mission-critical component that goes into EV motors, so they are uniquely positioned to serve as a key supplier for this high-value segment of the global magnetic materials market.

VAC has two operating segments: Hard Magnets (permanent magnets) and Soft Magnets (Temporary Magnets). The most common type of permanent magnets VAC produces are sintered NdFeB magnets and their associated assemblies. NdFeB sintered magnets are used in EV car motors to generate propulsion (rather than an internal combustion engine) and have the highest levels of magnetism of any known magnet. VAC also serves several market segments such as wind and solar energy, advanced manufacturing, and aerospace, in which it enjoys a large market share because of the superior performance, high customization, and advanced technology characteristics of its products.

Why We Invested

Almost all of VAC’s segments have differentiated products critical to the energy transition. Key end markets within the energy transition are expected to grow at double-digit CAGRs over the next five years. VAC has longstanding secure partnerships with many blue chip customers, which tend to be sticky on account of high switching costs, and the company’s customers have consistently demonstrated strong willingness to pay. VAC’s management team has extensive industry knowledge, each member of the management team brings 15+ years of relevant industry experience. The company’s R&D pipeline - supported by a demonstrated track record - generates innovative products with attractive, durable markets and opportunities for higher margins. Western auto OEMs are projected to drive demand for an additional 25,000 tons of permanent magnets per year by 2030, which VAC is well positioned to serve. At present, there are only three players in the advanced magnetics space that can take advantage of this massive opportunity and VAC is the only producer in North America or Europe and VAC is the only one who has signed an offtake contract with a Western OEM, General Motors. VAC is in the process of building a new North American facility to supply under this contract, which is likely to meaningfully scale the company’s operations, allowing it to play a greater role in supporting the energy transition. 

Impact

The company manufactures key products that are considered foundational components that go into EV motors as well as EV charging infrastructure. OEMs desperately need these components in order to meet the transportation sector’s goal of electrifying mobility. The transportation sector accounted for 27% of the US CO2 emissions in 2020, according to the EPA. As more electric vehicles are sold they will displace polluting internal combustion engine (ICE) vehicles. The greenhouse gas emissions associated with an electric vehicle over its lifetime are typically lower than those from an average gasoline-powered vehicle, even when accounting for manufacturing and mining of rare minerals.The International Energy Agency estimates that the lifecycle GHG emissions for a mid-size EV is ~53% lower than for gasoline-powered cars. VAC’s soft magnet products, such as closed loop sensors and common mode chokes, are mission critical components that are necessary for the continued rollout of solar energy. VAC’s permanent magnets are also a core component of wind turbines, where they are used in gearbox technology for offshore wind turbines and in direct drives for onshore wind turbines. By delivering more of these products to customers, the company will enable more solar and wind energy projects to come online, which ultimately will help decarbonize the grid by displacing GHG intensive fossil fuel-based energy generation.

Why We Invested in Cloverly

By Chris Wu

The Role of Carbon Removal and Voluntary Carbon Markets

Carbon removal technologies are likely to play a crucial role in limiting warming to 1.5°C. In its April 2022 report on mitigating climate change, the Intergovernmental Panel on Climate Change (IPCC) highlighted the need to rapidly deploy carbon removal technologies to counterbalance hard-to-abate residual emissions and meet net-zero targets at a global scale. High-quality carbon credits are necessary in order to scale-up the deployment and operation of carbon removal technologies. Carbon credits enable businesses to make earlier and more ambitious climate commitments by allowing them to reduce their current emissions through offsets. Further, an active market for high-quality carbon credits is necessary in order to catalyze the flow of investments for deploying existing carbon removal technologies and developing new technologies. Voluntary carbon markets (VCMs) allow carbon emitters to offset their unavoidable emissions by purchasing carbon credits generated by projects targeted at removing or reducing greenhouse gasses (GHG) from the atmosphere. Each credit – which corresponds to one metric ton of reduced, avoided or removed CO2 or equivalent – can be used by a company or an individual to compensate for the emission of one ton of CO2 or equivalent gasses. A high-quality carbon credit represents real, quantifiable, additional, leakage-proof, and permanent GHG emission reductions or removals. VCMs represent an important mechanism to scale high-quality carbon credits from $2 billion in 2021 up to $40 billion by 2030. 

Solution

Cloverly is an API-first marketplace for high-quality carbon credits, enabling businesses to meet their climate goals by offering seamless access to high-quality carbon removal credits from across the globe. While Cloverly is a marketplace for businesses of all sizes looking to offset their emissions voluntarily, it has seen strong traction in the enterprise segment, with customers across industries from logistics to financial services. Cloverly offers an API that matches any transaction with a carbon offset in real-time. Their API calculates the amount of carbon emissions generated by a particular activity and then purchases an offset instrument that pays for avoiding or sequestering the same amount of carbon elsewhere in the environment. Cloverly’s focus on project quality ensures that every carbon credit meets their criteria for additionality, permanence, leakage and other indicators. All projects listed on the marketplace undergo a rigorous quality evaluation process by climate science experts that look at 60+ quality indicators to pick the best projects in the voluntary carbon market. As a result, only 10% of carbon credits pass through their screening process and are deemed high-quality and eligible to be on their marketplace. Cloverly’s marketplace allows customers to buy both spot and forward credits in one click. That means they can purchase and build an inventory of credits that can be retired when needed to help them manage carbon credit price volatility.

Why We Invested

Our investment and impact thesis are premised on the catalytic role that VCMs are likely to play in the coming years. Active and efficient carbon markets will be necessary in order to create the right set of incentives for the deployment of projects offering high-quality carbon credits and the development of new carbon removal technologies. The rapid development and deployment of carbon removal technologies is imperative to the achievement of global climate goals, it’s estimated that 10 gigatons of CO2 will need to be removed from the atmosphere annually by 2050. As governments and corporations set ambitious climate targets that entail more than just reducing their emissions, the relevance of VCMs will increase. With the use of carbon capture technologies set to increase 13x, driven by the provisions of the IRA, VCM transaction volumes are likely to register exponential growth.

While today’s VCM is growing at a breakneck pace, it lacks some of the fundamental elements required to drive meaningful impact at scale. Cloverly has been addressing these problems surrounding access, ease, trust, and transparency since its inception as the first API in the world for carbon credits. On the demand-side, Cloverly’s approach is characterized by a focus on the enterprise segment, a recent change in strategy for which there is already clear evidence of success. Cloverly has seen strong growth in transaction volumes and customer acquisition, and has signed key partnerships with Visa, American Express, Redwood Logistics, Ecolytiq, and Salesforce. On the supply-side, what sets Cloverly apart is its ability to provide customers access to a vast and diverse, high-quality portfolio of both nature-based and technology-based carbon offset projects from across the globe. Its focus on high-quality offsets and sourcing and verification processes are key, and this was critical to us (and, we believe, to its customers), given the significant challenges associated with tracking and verifying project credentials and performance. Lastly, we believe the team, led by CEO Jason Rubottom, has a strong understanding of the problem and the market, as well as a clear and compelling vision for the company. 

Impact

We believe that Cloverly’s marketplace enables both SMBs and large enterprises to effectively offset their emissions through the purchase of high-quality offsets. Purchasing high-quality carbon credits, in addition to eliminating avoidable emissions, plays a critical role in accelerating the transition to net-zero emissions. Making and achieving credible decarbonisation commitments is challenging for businesses, particularly in emissions-intensive sectors. Credits allow businesses to reduce their emissions now through offsets, while taking cost-effective action to reduce future emissions through asset turnover and evolution of their business models. In the longer term, credits have an essential role in offsetting hard-to-abate emissions from products which lack low or zero emissions options. At scale, the carbon removal purchases that transact on Cloverly’s platform can improve the economic viability of emerging carbon capture technologies, thereby catalyzing the flow of capital to that sector. In the case of high quality nature-based offsets, which promote the preservation of natural ecosystems, they direct private financing to climate-action projects that would not otherwise get off the ground. These projects may also offer additional co-benefits in terms of biodiversity protection, pollution prevention, public-health improvements, and local job creation.

Why We Invested In Pear Suite

By Sophia Friedman

Community Health Workers (CHWs) are frontline public health workers who typically share ethnicity, language, socioeconomic status, and life experiences with the community members they serve. CHWs have been identified as a valuable resource that can deliver services around the healthcare journey in a culturally sensitive way, thus leading to positive health outcomes. While the market for care navigation and care coordination is crowded, there is tremendous potential to leverage CHWs as a resource on a larger scale to drive improved health outcomes for underserved communities. The US Department of Health and Human Services’ recently announced of the availability of $226.5M in American Rescue Plan Funding to launch a Community Health Worker Training Program, and there have been (and are expected to be more) shifts in Medicaid funding for the development of community health centers and reimbursement for services provided by CHWs that were not previously reimbursed, therefore creating new opportunities for innovative CHW models. 

Solution

Pear Suite aims to be a trusted care navigator to guide otherwise underserved populations through their health journey. Pear Suite empowers CHWs to support older adults and individuals in underserved communities by providing culturally sensitive, empathetic care navigation. CHWs are lay members of the community who typically work in association with the local health care system in both urban and rural environments. CHWs typically share ethnicity, language, socioeconomic status and life experiences with the communities they serve (NIH). Pear Suite leverages CHWs to connect people to resources (vaccination resources, food access, transportation, housing support, economic support) and also helps them to get onboarded to digital health programs or telehealth to support their health journey.

Pear Suite’s platform allows the CHW user to build custom care journeys to automate patient support and facilitate person-centered interactions; achieve higher activation rates through personalized recommendations and goal tracking; engage patients using omni-channel communication tools; and track real-time metrics to evaluate impact and drive actionable solutions.  Pear Suite has both SaaS and tech-enabled services lines of business: the SaaS product is used by Pear Suite’s clients for their CHWs and the services product provides outsourced CHWs employed by Pear Suite to supplement the clients’ teams. 

Why We Invested

Pear Suite transforms social determinants of health data into actionable solutions and empowers community health workers to provide culturally sensitive care navigation. Without actionable data, healthcare organizations struggle to address the social drivers of health at scale. Researchers estimate that a lack of data and inaction prevents 20M adults from living at home and costs billions annually.  Pear Suite's cloud-based platform enables anyone to leverage data to better assess and address the social drivers of health in a scalable, cost-effective, and person-centered way. Pear Suite’s Cofounder and CEO, Colby Takeda, is mission driven and has a strong impact orientation to maximize the CHW as a valuable community resource to drive improved health outcomes by addressing often overlooked sociocultural factors that have a strong impact on health. 

Pear Suite has traction with several different customer types. While sales to date have focused on government agencies, Pear Suite is expanding to focus its sales on healthcare organizations and startups as well as payor clients. Pear Suite has developed both a strong SaaS platform as well as a services business to address the multiple facets related to operating in the CHW market. We believe that Pear Suite is differentiated via its focus on CHWs as a key stakeholder in the patient journey with ability to drive impact both in terms of improved outcomes for patients and improved socioeconomic opportunities for the CHWs themselves.

Impact

Pear Suite was founded to address the lack of focus on social factors within healthcare. More specifically, there are many solutions in the healthcare space that aggregate healthcare data, but few are focused on translating social determinants of health (SDoH) data into actions to help individuals address their needs. Existing solutions do not lead to an action on behalf of the member, as solutions typically focus on what the data means to payors or providers. Therefore, Pear Suite seeks to leverage data to assess what actions can support long term outcomes for patients.

Community health workers are uniquely positioned to drive impact as frontline public health workers who typically share ethnicity, language, socioeconomic status, and life experiences with the community members they serve. As a result, they understand the sociocultural needs of that community and can effectively drive better health outcomes. The platform provides resources such as better understanding local food resources, support in accessing SNAP benefits, understanding affordable senior housing options, enrolling in virtual physical activity classes, connecting users to technology classes so that they can better leverage tech to manage their health and so on. 

In addition to the impact in terms of improving health outcomes for the patients that Pear Suite will reach, the company can also create better economic outcomes for CHWs. The CHW role provides a potential path for upward mobility for individuals within a community. CHWs often move on to work as clinicians, nurse practitioners or in government agencies. Therefore, this role provides a meaningful starting point from which to kickstart workers’ careers.