- Mike Moritz and John Doerr are co-leading an investment for the first time since Google in 1999.
- The VC legends are investing in Watershed, a new startup founded by three former Stripe employees.
- Watershed’s mission is to help companies reduce their carbon footprint.
- Visit the Business section of Insider for more stories.
Legendary investors Michael Moritz and John Doerr are joining hands for the first time in over two decades.
Moritz, a partner at Sequoia Capital, and Doerr, the chairman of Kleiner Perkins, are co-leading an investment in Watershed, a new software startup founded by three former Stripe employees. It is the first time they have co-led an investment since Google in 1999. The once-rival VC firms are located 0.2 miles apart on Sand Hill Road in Menlo Park, Calif., the epicenter of the VC industry, and have competed for Silicon Valley’s hottest deals since each was founded in 1972.
The series A round, the estimated amount of which wasn’t previously reported, closed last summer. Kleiner, and Sequoia declined to comment on the amount raised. A source familiar with the deal tells Insider the amount was in the double digits of millions. Stripe’s cofounders John and Patrick Collison also participated in the round.
At its core, Watershed’s mission is to help companies reduce their carbon footprint in weeks, not years. The timing is critical, according to the company’s founders, because the world needs to slash its carbon emissions in half by 2030 to avoid the worst impact of climate change. According to a report from the United Nations’ scientific panel on climate change, that means limiting global warming to 1.5 degrees Celsius to reach net-zero emissions by mid-century.
“Climate change will affect every part of our lives and we’ve got a very, very narrow window in which to turn the tide,” Taylor Francis, one of the three cofounders of Watershed, tells Insider. What’s at risk is the continuation of extreme weather patterns, like what Austin, Texas is experiencing this month, or the “orange sky” level wildfires seen last September in California, he adds.
Saving the planet is one thing, but there’s also a business need for Watershed, according to its investors. The need to cut carbon emissions “will soon be a matter of urgency for every management team,” Moritz tells Insider. Watershed’s software will make it possible to “monitor and modify corporate activities.”
To tackle this massive problem, Watershed’s cofounders are pooling together their skills and expertise to build software tools that can not only measure a company’s carbon footprint but also produce actionable plans for reduction. To sign up, companies upload raw data about their business activity to Watershed’s platform. From there, Watershed will show the company where every kilogram of carbon comes from, and benchmark emissions against other companies in similar industries.
“You can’t manage what you don’t measure,” Kleiner’s Doerr tells Insider. “Nowhere is that more true than our emissions crisis. Watershed gives companies the actionable data they need to measure their carbon footprint and drive reductions as a business imperative.”
Watershed’s founders are also leaning on the expertise of their investors. Aside from showing their support with their checkbooks, Moritz and Doerr are also joining Watershed’s board. Moritz is also on the board of Stripe.
“John Doerr has been investing in companies, policies, and organizations to try and decarbonize the world long before it was in vogue,” said Francis. “They are both in the weeds with us on specific customers, on specific candidates, on decisions about what to focus on.”
The San Francisco-based company’s three cofounders are all first-time founders born out of different departments at Stripe. Christian Anderson helped launch Stripe’s climate initiative, Avi Itskovich was a software engineer, and Taylor Francis worked on Stripe Atlas, the service that allows anyone with $500 to incorporate a global business and get a US bank account.
What drew them together was their love for nature and sushi. Over a few months of talking over backpacking trips, hikes, and casual dinners in San Francisco, they decided to turn in their Stripe badges in the summer of 2019.
“I think 10 years from now, we will look back at this time as being this kind of extraordinary inflection point where all the pieces finally lined up with orange skies and wildfires on the West Coast and record-breaking hurricanes in the Gulf on the same day,” said Francis. “So, it’s just kind of impossible to ignore the impacts of climate.”
While still in stealth mode, Watershed managed to attract a dozen key customers, including Shopify, Square, Sweetgreen, Imperfect Foods, TransferWise, and unsurprising, Stripe.
In recent months, Corporate America has stepped up its efforts to tackle climate change. In January, Microsoft announced an ambitious plan to become carbon negative by 2030. Similarly, Amazon has made a pledge to become net carbon neutral within the next two decades. And, Apple also announced plans to become carbon neutral across its entire business by 2030.
Broadly speaking, corporate pledges to go climate neutral are helpful, but government commitment is also needed to be effective, Tensie Whelan, a professor at NYU Stern Center for Sustainable Business, tells Insider. Much like corporate diversity pledges, companies are often eager to add their names to a joint initiative like Amazon’s $2 Billion Climate Pledge Fund, but progress has been slow to track so far.
In recent years, climate change has also become a contentious workplace issue for technology companies as employees call for greater measures to reduce their impact. Last year, Amazon employees who criticized the company’s work with oil and gas companies said the company threatened to fire them for speaking out.
Another problem is VC funding. Many investors who invested heavily in the so-called clean-tech boom of the 2000s lost a lot of money. According to an MIT Energy Initiative analysis in 2016, investors poured about $25 billion into startups from 2006 to 2011 but lost more than half their money in the end.
As a result, more than 90% of the companies funded after 2007 didn’t return the capital invested, according to MIT and Pitchbook, and funding for cleantech startups fell significantly during the last decade.
For investors Moritz and Doerr, this decade feels different, and Watershed presents a unique opportunity because a lot more companies are now incentivized to tackle climate change.
“Just like the early days of other enterprise software categories—databases, ERP, sales-force management—corporate climate management has been the preserve of consultants and custom programming,” said Sequoia’s Moritz.
“Watershed is turning climate management into the next category of enterprise software,” he adds.