The hydrogen plateau and IRA funding crutch with Toyota Ventures' Lisa Coca

Today on Equity, Rebecca Bellan sits down with Lisa Coca from Toyota Ventures during Climate Week NYC to discuss a key part of Toyota Ventures' $800 million portfolio - their Climate Fund. The fund's $300 million is laser-focused on climate innovation, but Coca says it casts a wide net beyond just mobility, backing startups from seed to Series A. So far, they’ve invested in companies like AM Batteries, which is cutting battery manufacturing costs by 40%, and Ecoletro, pioneers in green hydrogen production using hydropower. Together, Bellan and Coca are shedding light on the significant challenges in hydrogen, direct air capture, and methane reduction, and emphasizing that startups need to achieve cost parity with fossil fuels to drive real change. As always, Equity will be back with a news roundup on Friday. If you like what you hear, don't forget to leave us a review! Equity is TechCrunch’s flagship podcast, produced by Theresa Loconsolo, and posts every Wednesday and Friday. Subscribe to us on Apple Podcasts, Overcast, Spotify and all the casts. You also can follow Equity on X and Threads, at @EquityPod. For the full episode transcript, for those who prefer reading over listening, check out our full archive of episodes over at Simplecast. Credits: Equity is produced by Theresa Loconsolo with editing by Kell. Bryce Durbin is our Illustrator. We'd also like to thank the audience development team and Henry Pickavet, who manages TechCrunch audio products. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:11Rebecca Bellan?

  Hello and welcome back to Equity, TechCrunch's flagship podcast about the business of startups. I'm Rebecca Bellan and this is our Wednesday episode where we home in on a trend in the tech world and dive deep. It's Climate Week here in New York City. So today we're speaking with Lisa Koka, a partner at Toyota Ventures where she leads the firm's Climate Fund. Before joining Toyota Ventures, Lisa was at Intel's Emerging Growth and Incubations Division and was also a founding member of GE Ventures. Lisa, thanks so much for joining us on the Equity Podcast.

• 0:40Speaker 01

  No, Rebecca, I'm so happy to be here. Thanks for having me.

• 0:43Rebecca Bellan?

  Now, before we kind of dive in, I wanted to get a little bit of a rundown on Toyota Ventures and the Climate Fund. So could you just give us a bit of a backrounder about how much money and assets under management Toyota Ventures has and the Climate Fund as well?

• 0:56Speaker 01

  Yeah, sure. So Toyota Ventures began its journey investing early-stage startups in 2017. There is in total approximately 800 million assets, a little more than 800 million in assets under management across six funds, two legacy funds that were initially focused on AI. And then in 2021, the group was rebranded from Toyota AI Ventures to Toyota Ventures. And that's when the next generation of funds was launched. And so the AI funds pivoted to what we call our frontier tech funds. So they've got a much sort of broader mandate where they're investing.

• 1:40Speaker 01

  That was in the summer of 2021 was when the inaugural Climate Fund was launched. That first one was $150 million. Earlier this year, Climate Fund 2 was announced. So for climate as a whole, we have 300 million in assets under management. And you know, the sweet spot for us is really seed to Series A. Opportunistically, we'll go earlier or maybe a little bit later strategically. And the last comment that I'll make is that it's a pretty broad mandate. So most people I think we'll assume that because it's Toyota Ventures that we are solely investing

• 2:21Speaker 01

  at the intersection of climate and mobility, that we are solely investing at the intersection, but we have a much broader mandate than that.

• 2:31Rebecca Bellan?

  Yeah, and you know, we are both attending the Toyota Ventures event for Climate Week. There's a lot of really promising startups and those aren't necessarily, I mean, I think they could be useful to the mobility sector. But you know, you and I talked about a couple, AM Batteries and Eco Electro that I thought were really interesting. Would you give us a bit of a headliner for both of those?

• 2:51Speaker 01

  Yeah, sure. Well, so before I jump into those, I will say you're absolutely right, Rebecca, that when you look at the slate of companies presenting, it's pretty broad. So we've got, you know, some companies up there that would fall into what we sort of categorize as our sustainability bucket, Food and Ag, Zymochem, which is it's fossil fuel-based alternatives, like chemical drop-ins. Yeah, and then we have the usual suspects for climate, batteries and hydrogen, very much within the strike zone for Toyota in terms of being strategic. I'll start with AM Batteries. AM Batteries was actually the

• 3:30Speaker 01

  first investment that I did when we, or when I arrived to Toyota Ventures. And it's super cool technology. For those of you who are familiar with the manufacturing of electrodes, it's messy, it's toxic, it's capex-intensive. AM Batteries has invented what they call the power to electrode technology. And instead of it being sort of a toxic wet slurry that they use in the creation of the electrodes, this is actually a dry mixing of the powder and electrostatic deposition. It eliminates the super energy-intensive steps for drying

• 4:15Speaker 01

  the electrodes. We don't have the toxic solvents. But equally important, there's like a 40% reduction in the energy usage of the Plants approximately forty percent CapEx and up to twenty five percent reduction in the cell unit cost. So a pretty innovative technology in the battery sector and we were drawn to it because a lot of the dollars for battery have gone into advanced chemistries and not as much into the actual manufacturing process. So we're big fans of that company.

• 4:48Rebecca Bellan?

  Yeah, it seems to be I'm seeing a lot of a push for energy efficient manufacturing and I think that's probably also one of the reasons why Ecolectro was interesting to you as well because it's hydrogen but produced with hydroelectricity. Is that correct?

• 5:01Speaker 01

  Yeah, well, so yeah, specifically the hydroelectricity that you're talking about refers to an actual alive pilot project that Ecolectro has in place with upstate New York with Liberty Utilities where they are taking hydrogen powered by hydropower. So their electrolyzers are powered by hydropower, excuse me, and they are producing hydrogen that is being blended with natural gas. This is a live demonstration. It's green hydrogen. It's small, but the technology that underpins

• 5:42Speaker 01

  Ecolectro's their electrolyzer is cutting edge anion exchange membrane technology and the AEM, so that's anion exchange membrane, the AEM technology has for many years sort of held the promise of delivering efficiencies to the production of hydrogen that has yet to be delivered by some of the other existing technologies like membrane technologies. For instance, one would be the proton exchange membrane, but Ecolectro, they are knocking the cover off the ball in terms of the technical.

• 6:23Speaker 01

  Milestones and efficiencies that they're achieving with their technology. It's truly, it's breakthrough.

• 6:29Rebecca Bellan?

  Yeah, and that's super important, I think, in terms of hydrogen specifically because you're seeing quite a lot, I mean, at Climate Week this week, there's a lot of hydrogen talks that are going on. I know that BMW and Toyota are also working together on developing some hydrogen fuel cell powertrain for passenger and commercial vehicles. And, yeah, I think that, to me, obviously, green hydrogen is important to get right. The use case, I find interesting for that because I think personally, it would make more sense for larger vehicles, big trucks, or planes to be fueled by hydrogen rather than maybe smaller vehicles. But I'm not sure, what is your thought process on that?

• 7:05Speaker 01

  Yeah, no, I mean, I agree. You know, the battery technology is such that the size and the weight of a battery required to power a large truck is just, it doesn't work. That math doesn't work, right? And so, yeah, hydrogen, low carbon fuels that are lighter weight, definitely hold promise. The elephant in the room, as it relates to hydrogen, is infrastructure. So, you can spend tons of money developing technology, improving your efficiencies, your current densities, you know, and building these huge industrial-scale

• 7:46Speaker 01

  hydrogen projects. But at the end of the day, it either has to be co-located with the use case, or you have to move it. And moving hydrogen is not easy. There is no, there has never been, and there still is not, you know, widespread infrastructure in place for the proper and cost-efficient distribution of hydrogen, right? So, agree with you with respect to sort of the hydrogen trucks, but then it's like, okay, well, so trucks are driving around, where do they get the hydrogen?

• 8:20Rebecca Bellan?

  No, it's interesting. I mean, we spoke about this before that there's obviously we're seeing demand side challenges. There's been canceled projects. And I also find it a little bit interesting because, you know, the Inflation Reduction Act seems to have boosted a lot of American onshoring of EV, of battery production. There is a credit, I believe, for hydrogen, a $3 per kilogram of hydrogen produced, yet it hasn't really resulted in it feels like the same amount of private sector investment. How is the rate of investment that you're seeing? Is it flattening? Is it?

• 8:49Speaker 01

  Yeah. The way that I think about this, and this is based on, you know, having a couple of hydrogen portfolio companies and just, you know, waiting in the waters, is unfortunately, I think there is a falloff in hydrogen investment. And I'm not, you know, this isn't rocket science. It was actually reported by CTVC. But I think a lot of it is stemming from the fact that, number one, you're right, there isn't enough demand signaling in hydrogen or even for low carbon fuels as a whole, right? Compared to the demand signaling that we see for direct air capture, where you've got Google and Meta, you've got all these folks out there that are like basically prepaying, right? They're doing off take agreements

• 9:33Speaker 01

  for things that don't even exist, right? Yeah, it's the hope. I'm not, it's a good thing. I don't want to say it's a bad thing. It's a good thing. But it'd be great to see some of that happening as it relates to low carbon fuels like hydrogen and methanol. But the biggest challenge, because those demand signals aren't there, when you look at the landscape of climate tech investors, a majority of them have already placed one or two bets in hydrogen production. Most of those bets are going to require a lot of capital. And in the absence of the demand signaling, I think the VCs are saying, well, do I want to add another hydrogen bet to my portfolio? And a lot of folks are like,

• 10:18Speaker 01

  no, I'm going to double down on the companies where I've invested that are succeeding. If I've already placed a bet on a company and it's kind of wavering a little bit, I'll perhaps put in some more money to kind of right the ship. But getting new money into hydrogen startups is hard. So when they get to the Series B, right, it's like.

• 10:41Rebecca Bellan?

  Yeah, because then it's like you really need to provide a lot of money for them to scale. But and I do want to move on past hydrogen. But I think the one thing about Ecolectro that does have a sweet spot is that they're starting small and they're using the hydro dam, right? So.

• 10:54Speaker 01

  Yeah.

• 10:54Rebecca Bellan?

  And that allows them to have this kind of sustainable growth model that you don't always get with hydrogen companies. Is that right?

• 11:00Speaker 01

  Yeah, I mean, I think we were big fans. You know, a lot of this hydrogen startups were both trying to optimize both the technology and the scale at the same time. And Ecolectro singularly focused on the technology and they started small. And so the next logical question is, can you actually scale down electrolyzer technology to enable local production? And I think that's one of the next areas of exploration for that company.

• 11:32Rebecca Bellan?

  Yeah, the use of the hydro is really interesting. I was living in New Zealand for a few years, for our listeners who don't already know, and they have a lot of the countries run by hydro.

• 11:40Speaker 01

  Yeah.

• 11:40Rebecca Bellan?

  Because of, yes, just like a natural resource. There's a city called Rotorua that's completely.

• 11:46Speaker 01

  Yeah.

• 11:47Rebecca Bellan?

  I think completely powered by hydro. So I'd be curious if there's any New Zealand startups doing this, hit me up. Curious to learn more about you. Anyway, moving on. So we talked about maybe hydrogen's on the down low at the moment. Direct air capture seems to be on the up. You know, there's a lot of adaptation versus mitigation that is seeing a trend. Any other trends in climate tech investing that we should be paying attention to?

• 12:09Speaker 01

  As I think about that, there's definitely more of an emphasis, and I don't want to go back to hydrogen, but I do think direct air capture continues to command the attention of investors. But I think you're also starting to see more folks lean into the low carbon fuels, ex, you know, excluding hydrogen, right? And I think there's a lot of innovation on the startup side, as well as investor interest in low carbon fuels like ethanol,

• 12:42Speaker 01

  Methanol and sustainable aviation fuel in particular. Those groups have garnered some attention, particularly on the SaaS side. But I think there has been a definite uptick in terms of companies focusing on producing methanol. I think one of the other areas where you're starting to see a lot more focus is on methane. Strategies for reducing methane in the environment. You know, obviously, it has a much higher greenhouse gas intensity than CO2. So CO2 is more prevalent, but methane is more potent.

• 13:26Speaker 01

  So a number of companies, like I said, both on the startup side from an innovation perspective, as well as from a venture capital perspective. I think methane has been an area where you're starting to see more activity.

• 13:38Rebecca Bellan?

  Now, I guess my question there is if you figure out ways to kind of reduce methane, does that, and this is maybe like a broader philosophical question, but does that like create incentives or whatever for companies to care less about reducing their own output of methane? Right? Like the cattle industry, I mean, as other countries start to embrace, you know, meat eating, the cattle industry is kind of taking off again, having another revival, I think, in developing nations.

• 14:05Speaker 01

  I mean, look, there's two aspects of the methane release. There's food and ag and there's industry, right? And so I do think there's always the question of if you're developing methane technologies that enable oil and gas to continue to do what they're doing, is that kind of defeating a purpose? So that's one, and that's a debate. You can hear people take both sides. For Toyota Ventures, interestingly enough, the bet that we have made is on a company called Alora. We haven't done, well, that's not true. We have two. So we've invested in Vow, which basically.

• 14:44Rebecca Bellan?

  It's clean meat, right?

• 14:45Speaker 01

  It's clean meat. It's made from cultured cells. But instead of doing a cultured cells of like chicken or beef. Beef, which you will invariably compare to the taste of real chicken.

• 14:58Rebecca Bellan?

  Yeah.

• 14:58Speaker 01

  Or real beef, they're going after other types of meats, right? So their first product is like a Japanese quail.

• 15:07Rebecca Bellan?

  Oh.

• 15:07Speaker 01

  But it's cultured cells, right? So you're leaning into sort of the meat eaters. I'm hate to, I'm total carnivore, so big fan about. Uh, the other bet that we've made in that space is in a company called Alora. That's doing ocean agriculture. Most folks may know this, but rice is the second largest contributor of methane emissions to the air after beef and agriculture.

• 15:35Rebecca Bellan?

  Wow.

• 15:36Speaker 01

  Yeah, it's pretty, it's up there. That's because the way that rice is grown, the environment, the sort of waterlogged nature of the patties is a great breeding environment for bacteria. And so then when they release, when they actually drain the rice patties to harvest the rice, all that methane gets released into the air. And so Alora is actually, it's a moonshot, but it's an ocean agriculture company. They're starting with rice and the goal is to actually be able to cultivate crops on the ocean's surface.

• 16:07Rebecca Bellan?

  Wow.

• 16:08Speaker 01

  Yeah, it's pretty cool, pretty cool stuff.

• 16:10Rebecca Bellan?

  I didn't know that about rice. This seems like a fun fact for, uh, big beef to deploy.

• 16:14Speaker 01

  It is. Well, you know what? It's funny, cause I'm not gonna say which conference. Well, I was at a conference a couple of years ago. It was a clean tech conference and they had plant-based meats, burgers and I'm not gonna lie, I'm not a big fan of those, but in any event, but then they had, so they, they weren't serving the meat, but they were serving rice. And I was like, I was like, okay, you know, you gotta like.

• 16:35Rebecca Bellan?

  You're like, it's not my job to educate you, but please do some, do some background research. Yeah. Well, we are tasting the Vow cultured meat.

• 16:42Speaker 01

  Yes.

• 16:43Rebecca Bellan?

  At the event. I'm excited to do that. I'm a vegetarian, so we'll see if it makes me feel sicker or not.

• 16:47Speaker 01

  Well, I don't know, no, you can't eat that if you're a vegetarian.

• 16:50Rebecca Bellan?

  Well, I don't wanna kill animals, but like I still miss meat sometimes. So let's see. I mean, I'm just, I'm keeping an open mind, you know? Let's see what happens. Just a little taste. Let's see.

• 17:00Speaker 01

  All right.

• 17:01Rebecca Bellan?

  Anyway.

• 17:07Rebecca Bellan?

  Before we start to wrap up, I wanted to get your thoughts about the impact of the Inflation Reduction Act on early-stage companies.

• 17:14Speaker 01

  Yeah, look, I think that the IRA can be hugely impactful for these startups. They still have to slog through retiring the technical risk, but it's like potentially a pot of gold, you know, at the end of the rainbow. What I will say is, I am not alone in this statement, and I think in the way that we think about this in the investor community, is startups, they have to find a path to profitability without the IRA. And that has nothing to do with the current, you know, political situation.

• 17:54Speaker 01

  It's just, at the end of the day, the green products and the climate tech products have got to find a path to cost parity with the fossil fuel-based alternatives.

• 18:10Rebecca Bellan?

  Right.

• 18:11Speaker 01

  We will never solve this if that doesn't happen, the climate conditions, right? Consumers, one thing, right? Some consumers will pay up, they'll pay the green premium, but industry will not. So I think the IRA is great. It can potentially, once they produce their products, that extra money can maybe help them move down the cost curve, but it's not a silver bullet for solving.

• 18:36Rebecca Bellan?

  Yeah, you don't want to see like, oh, we're, okay, we're profitable, oh, let me look at your balance sheet, oh, you're, you've just bolstered by IRA money, it's not actually revenue that's coming in necessarily, or not enough at least to combat the costs of your business.

• 18:48Speaker 01

  Exactly, exactly. I mean, that's one of the things that we, you know, a lot of the startups that get like non-dilutive money, they'll get awards from the DOE, and it shows up on the income statement as revenue. But it's not revenue, right? Like, revenue is customer sales.

• 19:06Rebecca Bellan?

  Right.

• 19:06Speaker 01

  So it's good. It's all good. I'm not trying to suggest otherwise.

• 19:10Rebecca Bellan?

  Someone once told me that a lot of early-stage companies, when they get IRA funding, it impacts their valuations and like, almost artificially inflates them. I wasn't sure about that myself. What do you think about it?

• 19:21Speaker 01

  When they get IRA dollars?

• 19:23Rebecca Bellan?

  Yeah, but I suppose you can't get that all at once, right? You have to prove certain things out.

• 19:26Speaker 01

  Yeah, so I don't think there are very many VCs out there that are valuing startups based upon dollars that they might get from the IRA, because it's just not sustainable. And what happens if that goes away? You know what I mean?

• 19:44Rebecca Bellan?

  Right, yeah.

• 19:46Speaker 01

  Regardless of the whatever administration, at some point, all of those dollars, they get sunset. They're not in perpetuity. I think non-dilutive funding is great, but again, I can't speak for other VCs. We're not valuing companies based upon the revenue line item that is generated from any sort of non-dilutive capital or any sort of government subsidies.

• 20:14Rebecca Bellan?

  Yeah, that makes sense. Okay, well, we are just about out of time. Where can our listeners connect with you online?

• 20:20Speaker 01

  Oh, Lord. I have the worst social media presence. So where can they connect with me online? So I guess my LinkedIn, it's Lisa B. Coca. But literally, that's it. Like, yeah.

• 20:34Rebecca Bellan?

  That's okay. You know, you're probably healthier because of it.

• 20:36Speaker 01

  Yeah, yeah, I don't know about that. And also, you know, Toyota Ventures, www.toyota ventures. Yeah, that's the other place.

• 20:45Rebecca Bellan?

  www.toyota ventures. You got it. And then, awesome, well, thanks again for joining the show. To our listeners, you can find me on X at Rebecca Bellan and on threads, RebeccaBallon_underscore_writes. And you can also find Equity on X and threads at EquityPod. Talk to you all Friday.

• 21:06Rebecca Bellan?

  Equity is produced by Teresa Loconsolo with editing by Kel. Bryce Durbin is our illustrator. And we'd like to give a big thanks to our audience development team and Henry Pickavet, who manages TechCrunch Audio Products. Thanks so much for listening, and we'll talk to you next time.