Blue Bear Capital Raises $160M to Prove Software, Not Hardware, Will Lead the Climate Tech Revolution

For decades, the climate tech industry has been largely centered around hardware—large-scale infrastructure such as solar panels, wind turbines, and cement factories. These physical assets are undeniably critical in the fight against climate change. However, as technology evolves, there’s growing recognition that hardware alone isn’t enough to tackle the climate crisis. Increasingly, software and artificial intelligence (AI) are stepping into the spotlight, offering scalable solutions that can improve efficiency and sustainability across industries.

This shift in focus is exactly why Blue Bear Capital is taking a bold approach to climate tech investing. While many funds continue to focus on hardware or a blend of hardware and software, Blue Bear is pushing forward with a software-centric model. The firm recently closed its third fund, raising $160 million to back AI and data-driven solutions that can have a widespread impact on industries from energy to manufacturing.

Vaughn Blake, a partner at Blue Bear, explained the rationale behind their strategy: “Hardware is important, but it’s just one piece of the puzzle. In almost every case, hardware is going to be developed with software in mind.” Blue Bear sees software as a powerful tool that can maximize the potential of physical assets, enhancing their performance and making them more sustainable. As Blake puts it, “We think the impact potential of digital solutions and applied AI is tremendous.”

Ernst Sack, also a partner at Blue Bear, expanded on this vision, pointing to the universal applicability of AI in sectors beyond traditional climate tech. “The applicability of AI is so universal,” Sack said, referencing areas like wind, water treatment, and even logistics. With AI, he argues, businesses in virtually every industry can become more energy-efficient and better equipped to tackle climate challenges.

One of the firm’s portfolio companies, Raptor Maps, exemplifies this approach. The company provides solar farm operators with software to monitor and improve solar panel performance. As Sack explained, even a modest improvement in efficiency can lead to significant impact. “Take 10% just as a round number,” he said. “A company like Raptor Maps is deployed across over 100 gigawatts of solar generation capacity, and a 10% performance improvement is 10 gigawatts. That’s roughly equivalent to 10 billion of cap-ex and something like three to five coal-fired power plants or nuclear plants.”

Blue Bear’s vision is not confined to energy alone. The firm sees AI and software-driven solutions as keys to solving some of the world’s most pressing problems. From optimizing factory efficiency to advancing AI-powered solutions in water treatment, refrigeration, and chemicals production, Blue Bear believes the potential for digital innovation is vast and transformative.

To support this thesis, Blue Bear raised $160 million for its third fund, which will be used to back 15 companies. The firm plans to invest in a select group of startups that are developing technologies where software or data is the main revenue driver. Blue Bear’s previous funds have already supported high-profile companies like Mira, a maker of augmented-reality headsets acquired by Apple last year, and Urbint, a risk management service for the energy sector.

The strategy is a bit unconventional in the world of venture capital, where the tendency is to reserve only $1 for every $1 invested in a startup. Blue Bear, however, is taking a different approach, reserving $2 for every $1 invested. This strategy allows the firm to support companies during later stages and weather the volatility of the market. “We reserve $2 for every $1 we invest to support the business and defend our position,” Blake said, acknowledging the challenges of navigating the “climate waters” in a turbulent market.

As Blue Bear moves forward with its new fund, the firm is positioning itself as a leader in the transition toward a more software-driven, AI-powered climate tech landscape. While the fund’s focus on software and data-driven solutions might seem counterintuitive to some, Blue Bear is confident that this approach will unlock far-reaching impact across industries—transforming the way companies tackle climate change while generating strong financial returns for its investors.

Blake summed up the firm’s vision: “With our third fund, we’re continuing to champion the data revolution across energy and industry. By investing in the intelligence behind the transition, companies have the opportunity to achieve excellent financial returns and meaningful impact on the climate. Together, we’re building a cleaner, smarter energy future.”