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Crusoe Energy is tackling energy use for cryptocurrencies and data centers and greenhouse gas emissions
The two founders of Crusoe Energy think they may have a solution to two of the largest problems facing the planet today — the increasing energy footprint of the tech industry and the greenhouse gas emissions associated with the natural gas industry.
Crusoe, which uses excess natural gas from energy operations to power data centers and cryptocurrency mining operations, has just raised $128 million in new financing from some of the top names in the venture capital industry to build out its operations — and the timing couldn’t be better.
Methane emissions are emerging as a new area of focus for researchers and policymakers focused on reducing greenhouse gas emissions and keeping global warming within the 1.5 degree target set under the Paris Agreement. And those emissions are just what Crusoe Energy is capturing to power its data centers and bitcoin mining operations.
The reason why addressing methane emissions is so critical in the short term is because these greenhouse gases trap more heat than their carbon dioxide counterparts and also dissipate more quickly. So dramatic reductions in methane emissions can do more in the short term to alleviate the global warming pressures that human industry is putting on the environment.
And the biggest source of methane emissions is the oil and gas industry. In the U.S. alone roughly 1.4 billion cubic feet of natural gas is flared daily, said Chase Lochmiller, a co-founder of Crusoe Energy. About two-thirds of that is flared in Texas, with another 500 million cubic feet flared in North Dakota, where Crusoe has focused its operations to date.
For Lochmiller, a former quant trader at some of the top American financial services institutions, and Cully Cavness, a third generation oil and gas scion, the ability to capture natural gas and harness it for computing operations is a natural combination of the two men’s interests in financial engineering and environmental preservation.
NEW TOWN, ND – AUGUST 13: View of three oil wells and flaring of natural gas on The Fort Berthold Indian Reservation near New Town, ND on August 13, 2014. About 100 million dollars’ worth of natural gas burns off per month because a pipeline system isn’t in place yet to capture and safely transport it. The Three Affiliated Tribes on Fort Berthold represent Mandan, Hidatsa and Arikara Nations. It’s also at the epicenter of the fracking and oil boom that has brought oil royalties to a large number of Native Americans living there. (Photo by Linda Davidson / The Washington Post via Getty Images)
The two Denver natives met in prep-school and remained friends. When Lochmiller left for MIT and Cavness headed off to Middlebury they didn’t know that they’d eventually be launching a business together. But through Lochmiller’s exposure to large-scale computing and the financial services industry, and Cavness’ assumption of the family business, they came to the conclusion that there had to be a better way to address the massive waste associated with natural gas.
Conversation around Crusoe Energy began in 2018 when Lochmiller and Cavness went climbing in the Rockies to talk about Lochmiller’s trip to Mt. Everest.
When the two men started building their business, the initial focus was on finding an environmentally friendly way to deal with the energy footprint of bitcoin mining operations. It was this pitch that brought the company to the attention of investors at Polychain, the investment firm started by Olaf Carlson-Wee (and Lochmiller’s former employer), and investors like Bain Capital Ventures and new investor Valor Equity Partners.
(This was also the pitch that Lochmiller made to me to cover the company’s seed round. At the time I was skeptical of the company’s premise and was worried that the business would just be another way to prolong the use of hydrocarbons while propping up a cryptocurrency that had limited actual utility beyond a speculative hedge against governmental collapse. I was wrong on at least one of those assessments.)
“Regarding questions about sustainability, Crusoe has a clear standard of only pursuing projects that are net reducers of emissions. Generally the wells that Crusoe works with are already flaring and would continue to do so in the absence of Crusoe’s solution. The company has turned down numerous projects where they would be a buyer of low-cost gas from a traditional pipeline because they explicitly do not want to be net adders of demand and emissions,” wrote a spokesman for Valor Equity in an email. “In addition, mining is increasingly moving to renewables and Crusoe’s approach to stranded energy can enable better economics for stranded or marginalized renewables, ultimately bringing more renewables into the mix. Mining can provide an interruptible base load demand that can be cut back when grid demand increases, so overall the effect to incentivize the addition of more renewable energy sources to the grid.”
Other investors have since piled on, including: Lowercarbon Capital, DRW Ventures, Founders Fund, Coinbase Ventures, KCK Group, Upper90, Winklevoss Capital, Zigg Capital and Tesla co-founder JB Straubel.
The company now operates 40 modular data centers powered by otherwise wasted and flared natural gas throughout North Dakota, Montana, Wyoming and Colorado. Next year that number should expand to 100 units as Crusoe enters new markets such as Texas and New Mexico. Since launching in 2018, Crusoe has emerged as a scalable solution to reduce flaring through energy intensive computing, such as bitcoin mining, graphical rendering, artificial intelligence model training and even protein folding simulations for COVID-19 therapeutic research.
Crusoe boasts 99.9% combustion efficiency for its methane, and is also bringing additional benefits in the form of new networking buildout at its data center and mining sites. Eventually, this networking capacity could lead to increased connectivity for rural communities surrounding the Crusoe sites.
Currently, 80% of the company’s operations are being used for bitcoin mining, but there’s increasing demand for use in data center operations, and some universities, including Lochmiller’s alma mater of MIT, are looking at the company’s offerings for their own computing needs.
“That’s very much in an incubated phase right now,” said Lochmiller. “A private alpha where we have a few test customers… we’ll make that available for public use later this year.”
Crusoe Energy Systems should have the lowest data center operating costs in the world, according to Lochmiller and while the company will spend money to support the infrastructure buildout necessary to get the data to customers, those costs are negligible when compared to energy consumption, Lochmiller said.
The same holds true for bitcoin mining, where the company can offer an alternative to coal-powered mining operations in China and the construction of new renewable capacity that wouldn’t be used to service the grid. As cryptocurrencies look for a way to blunt criticism about the energy usage involved in their creation and distribution, Crusoe becomes an elegant solution.
Institutional and regulatory tailwinds are also propelling the company forward. Recently New Mexico passed new laws limiting flaring and venting to no more than 2% of an operator’s production by April of next year, and North Dakota is pushing for incentives to support on-site flare capture systems while Wyoming signed a law creating incentives for flare gas reduction applied to bitcoin mining. The world’s largest financial services firms are also taking a stand against flare gas with BlackRock calling for an end to routine flaring by 2025.
“Where we view our power consumption, we draw a very clear line in our project evaluation stage where we’re reducing emissions for an oil and gas projects,” Lochmiller said.
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John Legend and Natalie Portman want you to try wearing fungus instead of leather
Natalie Portman and John Legend are joining a group of venture capitalists and unnamed fashion brands backing MycoWorks, a company that just raised $45 million to commercialize its technology that makes a fungal-based biomaterial that can replace leather.
The goal is to get consumers to trade in their leather and lizard skin couture for some fungus fashion.
The company said it has inked some deals with big fashion brands as partners as it looks to bring its funky fungus to the masses in shoes, wallets, belts and other goods that traditionally use cowhide or other animal skins.
“We have been working with a few luxury brands and a major footwear manufacturer in very close collaboration,” said Matt Scullin, the chief executive officer at MycoWorks .
The unnamed fashion brands have already started producing products for stores in a range of items including shoes, ready to wear apparel and bags, according to Scullin.
MycoWorks likes to differentiate itself from other brands that want to bring a fungus among us or plant new plant-based fabrics in fashion — companies like Bolt Threads (mushrooms), Ananas Anam (pineapple fibers), and Desserto (cactus leather) — with its emphasis on the durability of its fabric.
“We’ve had the product tested in a huge range of different applications of various leather-based apparel to upholstery to standard leather goods like handbags and wallets. The key difference between our material and mushroom leather is that the structural components is so high,” Scullin said. “We’re confident in the material’s ability to perform in a really wide range of applications so there’s a wide range of uses for that.”
To that end, MycoWorks is focused on the high-end of the market. “There’s a misconception that brands are willing to sacrifice performance for sustainability and that’s not true,” Scullin said. “The real adoption occurs in an industry like this when the performance is there.”
Scullin won’t say how much the MycoWorks material costs nor would he talk about which specific companies are working with the company’s product right now. He did say that the company hopes eventually to be price competitive with not just the traditional leather market, but the plastic market for leather replacements, which is worth $70 billion per-year alone.
With the company’s current capacity it can produce tens of thousands of square feet of fungal material per yar, according to Scullin. That means MycoWorks still has a long way to go to catch up to an industry that produces billions of square feet of leather.
The funding for MycoWorks is impressive, but it also has to contend with some competitors that are getting traction of their own in the fashion industry.
In October, Bolt Threads announced the creation of a consortium alongside longtime partners Adidas, Stella McCartney and the fashion house behind brands like Balenciaga to explore mushroom leather-based products.
For MycoWorks investors — including WTT Investment Ltd. (Taipei, Taiwan), DCVC Bio, Valor Equity Partners, Humboldt Fund, Gruss & Co., Novo Holdings, 8VC, SOSV, AgFunder, Wireframe Ventures and Tony Faddell — the competition is expected. But they believe that MycoWorks functionality makes it the king (oyster) of the leather substitute world.
“Fine mycelial leather is customizable to client needs,” said DCVC Bio investor Kiersten Stead. “[It’s] customizable in terms of shape, and application. And prices will vary depending on what the application and the criteria from customers is.”
In all, MycoWorks has raised $62 million and the company’s new financing announcement coincides with the opening of a new Emeryville, California production plant that takes its capacity up to its current tens-of-thousands of feet of fungal leather replacement capacity.
Behind all of this push to find replacements for animal skins is a growing awareness of the problems associated with traditional methods for manufacturing leather for clothes and shoes. It’s a terribly toxic and polluting process, both in the tanning and dyeing and in the waste and landfilling associated with both animal leather and its plastic replacements.
“The process of growing the mycelium is carbon negative. Customers will look at [our product] versus an animal hide and say why wouldn’t I choose [that],” said Sculin. “In addition you have the non-animal aspects and the plastic-free aspects that are driving so many decisions right now… what we really are to our brand partners is an advanced manufacturing company. We are motivated by sustainability. We represent a way for them to change their supply chains.”
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DroneBase nabs $7.5 million in a slight down round to double down on its work in renewable energy
DroneBase, a Los Angeles-based provider of drone pilots for industrial services companies, has raised $7.5 million during the pandemic to double down on its work with renewable energy companies.
While chief executive Dan Burton acknowledged that the company was fundraising prior to the pandemic, the industrial lockdown actually accelerated demand for the company’s services.
Even with the increased demand, the company had to make some changes. It laid off six employees and refocused its business.
“In the past three months it’s become clear that this is a moment for drones as an industry,” Burton said. “We were really pushing hard as a company, certainly on revenue growth and harvesting all the investments we made in technology and having a clear, near-term view to profitability.”
The new round, which closed in May, was a slight down round, according to people familiar with the company’s business.
“We see raising a growth round later this year,” Burton said.
New investors in the company included Valor Equity Partners and Razi Ventures, who joined Union Square Ventures, Upfront Ventures, Hearst Ventures, Pritzker Group Venture Capital and DJI.
In all, DroneBase has raised nearly $32 million in financing, according to a company statement.
The new round will enable the company to focus on its data and analytics services that it has been developing around its core drone pilot provisioning technology — and gives DroneBase more financial wherewithal to expand its European operations under DroneBase Europe, which operates out of Germany.
“DroneBase’s expansion into renewable energy reflects our belief in the growth potential of wind and solar energy industries,” said Burton in a statement. “Since many energy companies have both wind and solar assets, we are well positioned to leverage our DroneBase Insights platform to grow our global market share in renewable energy.”
The key application for DroneBase has been allowing wind power companies to monitor and manage their turbines, improving uptimes and spotting problems before they effect operations, the company said.
For solar power companies, DroneBase offers a network of pilots trained in infrared imaging to detect anomalies like defects or hot spots on solar panels, the company said.
“DroneBase has established themselves as the drone leader in the commercial market, and its new work in renewables will have a lasting impact on the future of energy by keeping infrastructure operational for generations,” says Sam Teller, partner at Valor Equity Partners, in a statement. “We believe DroneBase will continue to be a valuable partner in drone operations and data analysis across a multitude of industries globally.”
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Cybersecurity insurance startup Coalition raises $90M Series C
This morning, Coalition announced that it has closed a $90 million Series C. The funding comes around a year after the cybersecurity insurance startup raised a $40 million Series B that TechCrunch covered at time.
The startup’s new, larger funding round was led by Valor Equity Partners and included participation from Greyhound Capital and Felicis, along with “existing investors,” per the company. Coalition told TechCrunch that its Series C was raised at an $800 million pre-money valuation, making the firm worth $890 million today.
Coalition noted in a release that it has raised $125 million in equity capital in its life. Given that the company’s Series B was generally reported as $40 million, the math didn’t add up. TechCrunch spoke with the company, learning that its Series B was $25 million in primary, and $15 million in secondary. So, the company’s $10 million Series A, $25 million primary Series B, and its $90 million Series C do add up to $125 million, as they should.
The San Francisco-based cybersecurity insurance startup raised its new capital, and nearly reached a unicorn valuation (the $1 billion threshold means less than it once did, of course), on the back of rapid customer growth. Let’s dig into the numbers.
Customers
Coalition’s funding round stood out not only because it represented an outsized Series C, but also because the firm reported an impressive customer growth figure. The startup told TechCrunch that had grown its customer base to 25,000, a figure that was up 600% from “the prior year.”
Landing that many new customers in a year, more or less, made us sit up and take notice; there is a strong connection between customer growth and revenue growth, implying that Coalition’s business was rapidly scaling.
TechCrunch wanted to know more, so we corresponded with Joshua Motta, the company’s co-founder and CEO.
First, we wanted to know if Coalition had juiced its sales and marketing spend in the last year, perhaps pushing its customer number through brute force and heavy spend. According to Motta, the answer appears to be not really:
Coalition’s insurance products are sold by insurance brokers across the country. While we’ve grown our internal sales and marketing team from 5 to 13 people [year-over-year], we’ve appointed over 1,000 new brokers in the same period, each of whom was driven by an interest to help their clients manage growing cyber risks.
Accreting brokers is not the same sort of cost as, say, spending gobs of money on advertising.
As TechCrunch noted at the time of the company’s Series B, “an ongoing threat of breaches and data exposures” has made cyber insurance attractive, so there may be secular tailwinds that are pushing Coalition along, helping boost its customer count.
Motta agrees, telling TechCrunch in an email that “data breaches and cyberattacks are now so commonplace that organizations can no longer afford to ignore them, and there is a growing awareness that insurance is often the only protection from catastrophic financial loss.”
Back to customer growth, TechCrunch was curious if the company had changed its pricing in the last year, perhaps lowering it and thus attracting more customers. Answer from its CEO: No.
But what is changing at Coalition is its size. According to Motta, the company has “made 20 new hires since the outset of March, and anticipates making an additional 100 hires over the next twelve months.”
The staffing-up makes sense, as the company plans to enter the Canadian market. TechCrunch asked what markets are coming next. According to the company: The UK, Europe and Australia.
Now we have to wait until we get another growth metric from the firm. Perhaps next time we’ll get a revenue figure, instead of merely a customer result. But hey, better some data than no data.
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