The Development Simple Agreement for Future
Equity (D-SAFE) Aims to Catalyze Investments in High-Impact
Climate Solutions
HONOLULU and SAN
FRANCISCO, June 18, 2024 /PRNewswire/
-- Elemental Excelerator, a nonprofit investor focused on
scaling climate technology for deep community impact, recently
launched the Development Simple Agreement for Future Equity
(D-SAFE), a new mechanism for streamlined funding of development
for climate projects.
Created in partnership with law firm Wilson Sonsini, the D-SAFE
underscores Elemental's commitment to bridging the "Scale Gap"
faced by companies transitioning from early-stage VC funding to
later-stage growth capital. A whitepaper published by Elemental and
Boston Consulting Group (BCG) identified this Scale Gap as
$150 billion. Read the full report
here.
Many climate projects, often needing less than $100 million, possess tremendous potential for
community impact but struggle to secure the necessary development
capital. The D-SAFE is modeled after Y Combinator's Simple
Agreement for Future Equity (SAFE), providing a familiar yet
innovative solution to this funding challenge. The D-SAFE aims to
support companies through the critical early stages of project
development, including securing permits, project design, budgeting,
contracting, community engagement and more, with the ultimate goal
of getting climate projects developed, derisked and deployed as
quickly as possible.
"Before a climate project can take off, entrepreneurs face
numerous pre-project tasks that require substantial upfront
investment," said Elemental Excelerator COO, Avra van der Zee. "To tackle the Scale Gap, we
need innovation in all forms – including financial innovation like
the D-SAFE, which works to address this gap in development
funding with the goal of accelerating the implementation of
essential climate projects."
Over the past year, Elemental has provided funding into eight
scale up projects that used the D-SAFE and DSA structure. For
example, Elemental made an investment into Dimensional Energy, a
global leader in carbon-to-value technology, for a new facility
designed to convert captured carbon dioxide and water into
sustainable aviation fuel (SAF) intermediaries. In order to secure
financing from Seneca Holdings, Dimensional needed to achieve
certain pre-development milestones. Elemental's $500,000 D-SAFE, paired with customized project
financing and community engagement coaching, mobilized 20x as much
private capital, which will enable Dimensional to begin
construction in 2025.
"It may seem like a small piece of the puzzle, but Elemental's
D-SAFE provided a quick, nimble source of funding for our early
development work that was key to unlocking financing from Seneca
Holdings," said Dimensional Energy CEO, Jason Salfi. "This project will not only
accelerate our work to scale a drop-in replacement for aviation
fuel – it will fulfill the mission of Seneca Holdings to diversify
their portfolio and to generate wealth in Seneca Nation communities for years to
come."
The D-SAFE can operate either as a loan, to be repaid at the
company's discretion, or as convertible equity like a traditional
SAFE, if the investor so chooses. This dual functionality offers
startups a flexible and cost-effective source of funding, while
allowing investors to share in the potential rewards. By directing
funding to the parent company rather than a single project, the
D-SAFE mitigates individual project risks and allows investors to
evaluate the strength of the management team, its track record, and
whether its project portfolio will lead to success overall.
"We are thrilled to partner with Elemental on this innovative
financing mechanism for catalytic climate projects. As a corporate
lawyer working at the intersection of climate innovation and
finance for over two decades, I am all too familiar with the
funding gap highlighted in the BCG and Elemental paper, and we see
the D-SAFE as an innovative way to help climate entrepreneurs and
investors navigate that gap. In a catalytic funding context,
D-SAFE's likeness to the popular SAFE has the potential to deliver
an efficient funding mechanism to the market for startups,
investors and legal teams who require capital at a phase of
deployment that is so often underfunded," said Bob O'Connor, Partner at Wilson Sonsini, who
co-founded the firm's energy and climate solutions practice and who
has advised hundreds of entrepreneurs and investors to mobilize
billions of dollars of capital toward the development and
deployment of climate solutions.
When paired with the accompanying Development Support Agreement
(DSA), funders and companies can align early on how the funding
will be used and establish milestones to set clear expectations
upfront.
About Elemental Excelerator
Elemental is a nonprofit investor in climate technologies with
deep community impact. Elemental has a 14-year track record of
investing in companies scaling essential climate solutions that
make neighborhoods and homes cleaner, healthier, safer, and more
affordable. Elemental, which has successfully stewarded
$180 million in government and
philanthropic resources, de-risks technologies for additional
investment and centers social equity and community impact in
project deployment.
About Wilson Sonsini
For more than 60 years, Wilson Sonsini's services and legal
disciplines have focused on addressing the principal challenges
faced by the management and boards of directors of business
enterprises. The firm is nationally recognized as a leading
provider to growing and established clients seeking legal counsel
in connection with sophisticated corporate and technology
transactions; managing governance and enterprise-scale matters;
assisting with intellectual property development, protection, and
IP-driven transactions; representation in contested disputes;
and/or advising on antitrust or other regulatory matters. With deep
roots in Silicon Valley, Wilson Sonsini has more than 1,000
attorneys and 19 offices in 17 technology, business, and regulatory
markets across the United States,
China, and Europe. For more information, please visit
www.wsgr.com.
Media Contact
comms@elementalexcelerator.com
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SOURCE Elemental Excelerator