This is the first in a series of new posts to give founders more insight into how and why we chose to invest in some of our companies. First up we will cover our recent investment in Heimdal.
As the world intensifies action to tackle climate change, it becomes more important than ever for technological innovation to do its part. Heimdal is a YC S21 startup aiming to extract CO2 from the atmosphere at scale, capturing it in carbon-negative industrial materials such as calcium carbonate (a key ingredient used to make concrete and glass).
It may come as a surprise to learn that the concrete industry alone is estimated to be responsible for up to 8% of the world’s greenhouse gas emissions. The source of these emissions is the use of calcium carbonate, extracted from mined limestone. The Heimdal process seeks to help solve this problem by extracting that key ingredient from CO2-heavy seawater instead, creating a form of synthetic calcium carbonate. The CO2 is then permanently ‘captured’ in those synthetic building materials which can be then sold to the construction industry as “carbon negative” alternatives.
It’s a unique take on the problem which was invented by the two founders, Erik Millar and Marcus Lima, while they were working on their masters programs at Oxford. As well as being good for the environment their idea taps into a potentially huge market opportunity as the concrete industry has a market size of $300bn annually and government policies around the world are compelling companies to reduce their carbon footprint.
Zillionize usually only invests in Y-Combinator startups at the seed stage, and our aim is to get involved very early with our companies to have the greatest effect. In the case of Heimdal, we discovered them a little late so missed out on the seed round. However, because we were excited by the idea and the founders we were still compelled to go ahead and agreed to ‘pre-invest’ in their Series A round.
Why did we feel so compelled and break our usual investment rules? Like any investment, there were a few reasons.
Hard technology and an exciting new market
All of the investment team at Zillionize comes from a software development background. That is reflected in some of our most successful unicorn investments being in the Enterprise Software space. But more than anything we are interested in, and admire, “hard technology”; whether it’s in software or other industries, hard ideas always get us excited.
We spent a lot of time looking into the detail of the chemical processes and market opportunity, including the emergence of ‘carbon markets’, which lay behind the idea and were impressed. Enterprise Software will always be a focus at Zillionize, but we also seek to keep a broad portfolio. The strength of the technology encouraged us to make Heimdal our first climate-tech investment.
Market fit and founder execution
When we make investments we are often inspired by the founders more than the idea. We have confidence that even if the initial product proves to be not quite right, the founders have the talent and guts to keep innovating until they get it right.
Heimdal is an occasion where we were immediately convinced that the market fit was right. The key ingredients all lined up: The idea was novel, involved hard chemistry, but was also demonstrable and easy to understand. The market size and the routes to market were clear and identifiable. The macro factors in terms of global policy and corporate responsibility which would drive the uptake of this technology also seemed clear.
Even with the best ideas, a lot can go wrong. However, we were convinced by the founding team of Erik and Marcus. With their background and the many steps they had already taken in getting Heimdal off the ground, (a strong slate of initial investors, commercial partnerships and agreements, prototype sites already identified and underway), we felt confident they would execute the next stage just as impressively and continue to innovate with new products in the long term.
Competitive landscape, disruption and social proof
For every investment at Zillionize we do homework on what competition any idea may meet. The core of our process is that any Investor can initiate a review and then later other investors will challenge the outcomes of a review. This is an area where we initially had some disagreements internally; Could Heimdal compete with the massive well-established companies making concrete? Do some of the pre-existing technologies claiming to be “carbon neutral” meet the same standard as Heimdal?
After some discussion, we concluded that ideas like Heimdal are new and disruptive, which is just what ‘old’ industries like construction need in the decades to come. We could also see we weren’t alone in thinking this and in the weeks running up to YC Demo day there was a lot of ‘social proof’ in terms of discussion online about Heimdal’s process and potential which kept Heimdal at the front of our minds until we decided to invest.
Summary
Heimdal closed an impressive seed round totalling $6.4 million earlier this year with investors including: Liquid2 Ventures, Apollo Projects, Soma Capital, Marc Benioff and others. We are excited at Zillionize to add them to our portfolio.
At Zillionize we are always looking for hard ideas delivered by an impressive founding team. In future investor notes, we will share more examples of our investment criteria and process. You can view the full series here.