An Overview of ReFi Investors

Following the launch of our ReFi project database, we are publishing a series of articles that provide an overview of each category in our taxonomy. Next up is investors.

We define investors as private investment firms and funds with a track record of investing in the ReFi space and Web3 climate tech. Funding for ReFi projects has slowed considerably since the 2021-22 peak when tens of millions was directed towards projects addressing problems with the voluntary carbon markets. Today's ReFi investors are much more focused on generating impact with their money.

In this overview, I delve into the different ReFi investor models, examine case studies, identify the challenges investors face, and offer a future outlook.

Investment Instrument Landscape

Aera Force

Aera Force is a VC DAO investing in the collective ReFi future.

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Allegory Labs

Allegory Labs is an investment company that invests and builds at the intersection of Web3 and climate.

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Cerulean Ventures

Cerulean invests in founders building software and asset-light companies for decarbonization, for a nature-positive economy.

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Coral Tribe

Coral Tribe is a community of impact investors powering Web3 climate finance.

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Flori Ventures

Flori Ventures is a seed-stage fund in top entrepreneurs that are using technology to tackle two of the most impactful challenges in emerging markets: Climate change and access to the financial system.

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Mercy Corps Ventures

Mercy Corps Ventures invests in and catalyzes venture-led solutions to increase the resilience of underserved individuals and communities.

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Models

There are currently three core models used by ReFi investors:

• Community funds - Typically operated as decentralised autonomous organisations (DAOs), community funds rely on the crowd to raise capital and make investment decisions. Their communities pool funds, identify potential projects, and vote on which projects to invest in. Returns on these investments are distributed back to the community and allocated according to each individual's contribution.
• Seed capital - A common venture capital model, seed investors provide the initial funding to help ReFi projects cover operational costs, product or service development, and market entry strategies until it can generate revenue. In exchange, seed investors receive either equity or tokens from the project. This model is favourable among ReFi projects because the funding amounts are large and the capital doesn't need to be returned in case of failure.
• Non-profit venture capital - Non-profit venture capital firms support ReFi projects by providing them with the capital to grow with but without the expectation of a return. Unlike traditional venture capital, non-profit venture capital funds are typically supported by philanthropic donors. These donors contribute capital with the understanding that any returns generated from investments will be reinvested back into the fund.

Examples

Let's look at four case studies of ReFi investors:

Coral Tribe

Coral Tribe employs a community fund model in conjunction with membership NFTs, an instrument to pool funds from its community members. Community members purchase Coral NFTs, the funds are deposited into the Coral Tribe community fund, and then invested in impact ventures listed on ReFi Hub. Any return on investment (ROI) is split 50/50, with half returned to the members and half allocated to Coral Tribe's operations.

Cerulean Ventures

Cerulean Ventures is a venture capital firm that uses the seed investor approach to invest in early-stage companies building at the intersection of climate technology, blockchain, and open-source software. They have made seed investments in ReFi startups such as Thallo, Jasmine Energy, Epoch and GreenTrade.

Mercy Corp Ventures

Mercy Corps Ventures (MCV) is the non-profit venture capital arm of Mercy Corps. It invests in early-stage ventures and pilots to enhance the ecological and societal resilience of underserved communities, particularly in fragile and frontier markets like Sub-Saharan Africa. MCV has supported over 50 early-stage ventures and pilots, including DIVA Donate and Atlantis. Any returns are allocated to its operations and future investments rather than profits to liquidity providers.

Flori Ventures

Flori Ventures is a venture capital firm that uses the seed investor model to invest in solutions that use blockchain technology to address the climate crisis and financial accessibility in emerging markets. So far, they have invest US$30+ million in more than 80 startups, including ReFi projects EthicHub, Unergy, Plastiks, and Thallo.

Challenges

Investing in the ReFi space isn't easy, however. I've identified four key challenges these investors face:

• Lack of viable commercial models - Many ReFi projects focus on creating positive externalities (like carbon sequestration or biodiversity preservation) not on generating revenue, let alone returns that even impact investors can live with. Commercial scale is simply not on the radar for most of these projects. This raises the question of whether the ReFi space, in its current form, provides enough viable options for investors.
• No data or independent evaluation - Unlike the wider financial sector, ReFi lacks established metrics and agencies for assessing financial and impact performance. It makes it difficult for investors to measure performance and understand impact.
• Business uncertainty in emerging impact markets - In developing countries, ReFi projects often face problems like political instability, changing attitudes toward foreign investment, the possibility of conflict or social unrest, and endemic corruption. These issues both scare away investors and limit the potential local startup ecosystems.
• Balancing financial and impact goals - ReFi investing presents a conflict between balancing impact with financial returns. In its current form, one typically comes at the expense of the other. Many ecological benefits take time to materialise, while financial markets typically demand short-term results. This timeline mismatch can make it challenging to justify investments that are slower to deliver economic returns.

Outlook

My outlook for ReFi investors is generally neutral. We have a situation where private investors aren't showing much interest in ReFi projects and ReFi projects are showing a lot of interest in private investors. It remains unclear if this is a gap that can be bridged anytime soon.

We know ReFi projects are in need of capital to scale their impact. Problem is the ideal investor, one that prioritises impact over financial returns, is difficult to find. Community funds may be the answer. If scaled, they can establish their own principles by majority vote and strike the necessary impact/returns balance. They can also address the ethical issue of accepting extractive institutional capital into the ReFi space.

At the same time, ReFi needs a straightforward thesis that outlines its value proposition and how projects (and regenerative economies, more specifically) can deliver the kind of financial value that attracts outside investment. But it also needs to articulate the vehicles through which investment can enter the space. The most common vehicles, tokens and equity, may not be right for ReFi.

Ultimately, investor interest will depend on the level of regenerative economic activity ReFi projects are able to generate. Whether at the local, national, or bioregional level, it's up to us to track, demonstrate, and promote that activity.

If you are an investor in the ReFi space and would like to be added to our database, please let us know.

For more information about ReFi investors, please visit:

Investor | CARBON Copy

Private investors who have a track record of investing in the ReFi space and/or Web3 climate tech.

https://carboncopy.news/projects/categories/investor/