Carbon Markets are Ripe for a Reset — Our Investment in Funga
The carbon sequestration market has been heating up lately (no pun intended). As we grapple with a warming planet and the possibility of not reaching our 2050 net-zero carbon goals, it’s becoming clearer that we need to take additional steps beyond reducing carbon emissions to keep temperatures from rising above the critical target of 1.5 degrees celsius. In fact, the Intergovernmental Panel on Climate Change (IPCC) estimates that up to 10 gigatons of carbon needs to be removed from the atmosphere on an annual basis to meet our global reduction goals. This is fueling the growth of the carbon markets. In 2020 alone, there were 95M tons of carbon credits purchased, a twofold increase from 2017, and estimates for 2030 are as high as 1.5–2 gitatons. Tech companies are on the leading edge of driving the demand for carbon credits, as many are making sustainability pledges with the desire to present themselves as “climate friendly” in order to attract customers and top talent. So-called “net-zero” pledges by companies doubled from 500 in 2019 to over 1,000 in 2020.
However, there have been allegations leveled against the carbon credit market recently, including investigations by The Guardian and Source Material that suggest not all carbon credits are created equally and that many of them are low quality. As the market matures and becomes more sophisticated, buyers are starting to demand higher quality, nature-based solutions. This is one reason we’re proud to announce our latest investment in Funga, a nature-based carbon sequestration startup.
Funga harnesses the vast network of mycorrhizal fungi beneath the forest floor to accelerate tree growth and boost carbon sequestration. Similar to performing a human microbiome transplant, the company uses DNA sequencing to identify rich mycorrhizal fungal communities linked to rapid tree growth and then inoculates tree seedlings elsewhere with the selected fungal microbiome to accelerate their growth. Funga has completed two trials to date, which have demonstrated accelerated tree growth of 30–70% versus a control sample of uninoculated trees on the same plots. Many of the inoculated trees will be used for sustainable construction materials, which means the carbon lock up is long term. These features align Funga’s solution with current demand for effective, nature-based, long-term carbon credits.
We also backed Funga because of their impressive team. The company is led by Dr. Colin Averill, a climate scientist and expert in mycorrhizal fungi. He spent 15 years studying how soil microbial life controls forest carbon capture, earning his PhD from UT Austin and completing research at ETH Zurich. He’s been published in leading journals (and has a Ted talk on the subject!) and co-founded SPUN, a non-profit with the mission to map fungal networks on earth and advocate for their protection. Erika Randolph joined the team as Head of Business Strategy and Operations, an excellent complement who brings business acumen. She was most recently at Descartes Lab where she led their sustainability business unit and managed a team of scientists.
We back companies and founders at the cutting edge of science and technology in large markets ripe for innovation. Funga fits that mold well, and we’re excited to see how they shape the future of carbon offsets and challenge the markets to fulfill their true potential to save the planet. Their $4M seed round was led by Azolla Ventures with participation from Better Ventures, Trailhead Capital, and Shared Future Fund.
