Why We Invested in Patch

Energize Ventures leads $55M Series B in Patch

Energize Ventures
September 13, 2022

Energize Ventures is proud to lead the $55 million Series B investment in Patch, the API-powered digital backbone for carbon markets and other regulated emissions, marking our second investment in carbon market infrastructure. A16z, Coatue, Version One Ventures and Schneider Electric also joined the round, and Energize partner Tyler Lancaster joins Patch’s board.

Building the software infrastructure for the burgeoning carbon marketplace

Research has consistently shown that negative carbon emissions will be required to cap global warming at the 1.5-degree Celsius target set by the Paris Agreement. Carbon credits enabling reduction, removal and avoidance are an essential tool in fighting climate change, and demand for credits is growing exponentially as corporates chase net-zero goals. Between 2019 and 2020, the amount of carbon credits issued in domestic crediting mechanisms increased by 25 percent, and researchers have estimated that demand for carbon credits could increase by at least 15 times by 2030 – placing the carbon credits market at $50 billion – and by up to 100 times by 2050. At the same time, quality carbon credits have become increasingly constrained due to proliferating net-zero commitments, shifting decarbonization strategies and steep resell markups from brokers. This leads to a fundamental supply and demand mismatch and the need for a centralized, digital carbon marketplace.

Enter Patch, a marketplace innovator building the software infrastructure to enable the sustainable economy. Patch’s API-centric approach provides the digital building blocks to efficiently scale transactions of environmental commodities like voluntary carbon markets (VCMs). Their software platform enables optimized carbon credit supply and demand matching by making it easier for the suppliers and buyers on either side of the market to find each other via Patch’s marketplace.

Patch automates back-office work, helping carbon credit suppliers manage traditionally burdensome tasks such as estimation, payments, inventory management and retirement of credits, while providing a digital storefront where suppliers can access new customers, partnerships and ecommerce tools – similar to how Shopify services online businesses. Their software gives both suppliers and buyers the tools necessary for digital procurement of carbon credits in many different shapes and sizes without requiring in-house software development capabilities.

A simpler approach to carbon marketplace management

We’ve identified a general need for easy-to-use developer tools for the carbon markets ecosystem. The complexity and time required to develop a new project and issue credits to the market constrain developers, and the lack of talent, skills and relationships needed to develop high-caliber projects further exacerbate the supply and demand mismatch. These factors also encourage large emitters to move upstream into project sponsor roles to enhance the security of their own long-term carbon credit supply.

Patch offers a solution that navigates these challenges while maintaining a straightforward user experience. Patch’s API-powered distribution model allows their platform to be embedded in partners' digital products and services, simplifying all the complexity behind the scenes and making it easy for a supplier or carbon accounting firm to embed with businesses where building a “one-to-many” solution would be very difficult. They connect corporates across ecommerce, tech and transportation—such as current customers Afterpay, Persefoni and Route—to trustworthy carbon credit sources, such as Running Tide, NCX, Charm and more.

For example, an ecommerce company can integrate Patch’s API within its app to allow shoppers to offset the emissions stemming from their purchases with a click, effectively enabling carbon-neutral shipping. Carbon accounting firms can also use Patch’s software to streamline the process for their customer base to purchase high quality carbon removal credits to achieve net-zero commitments.

By more effectively matching carbon credits demand to supply, Patch’s API has the potential to accelerate scaling carbon markets, while promoting standardization, better liquidity, trust and safety. The Patch platform also surfaces more accurate emissions estimates, particularly scope 3 activities, through the transaction-level data it collects, allowing companies to better understand their footprint and create targeted reduction plans.

The last mile of decarbonization

As energy and sustainability investors, the Energize team has a front-row seat to the ambitious net-zero commitments that many large corporates have pledged. We believe that most emissions reductions will come from renewable deployment and electrification, but the last mile of achieving complete carbon neutrality will require the use of carbon removal, particularly in the agriculture, ecommerce and industrial markets.

Energize has actively monitored the development of Carbon & Emissions Platforms over the last few years. Through our market analysis, we believe the growth of today's carbon market mirrors the early days of the renewable energy markets, where financial and business model innovation were the cornerstone for unlocking and scaling customer adoption. Patch’s focus on the ecommerce, tech and transportation sectors makes them a perfect fit for Energize as we continue to build bridges at the intersection of innovation and sustainability.

A team ready for marketplace success

Patch founders Brennan Spellacy and Aaron Grunfeld bring a wealth of experience scaling digital marketplaces. Before starting Patch, they worked together as early employees at Sonder – today a publicly listed marketplace company for long-term rentals – growing the company from 50 to 1,500 employees over four years in a highly competitive market.

Patch’s team moves with a shared purpose to meaningfully impact the world by building a climate-positive economy. This latest infusion of capital will enable Patch to scale their product globally and hire more mission-driven talent. We’re thrilled to partner with Brennan, Aaron and the rest of the Patch team to mobilize a cost-efficient path to gigaton-scale carbon removal. Congratulations on this latest funding!