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Watershed’s $70 Million Fund Raising Confirms Investor Enthusiasm For Digital Net Zero Solutions

San Francisco-based carbon management software provider Watershed announced on February 8th that it had raised $70 million in a Series B investment round. The deal was co-led by storied Silicon Valley investors Sequoia and Kleiner Perkins who valued Watershed at a cool $1 billion putting a unicorn-sized marker down in the booming carbon management software market. This is very impressive progress for a firm with fewer than 100 employees which was founded in 2019. Reflecting the war for talent in the sustainability world, Watershed has also added Mark Carney and Christiana Figueres as advisors.

Watershed’s strategy is to focus on forward-thinking firms with mature sustainability strategies rather than industrials or financial institutions. The customer base reflects its Californian-tech sector roots: Airbnb, Expensify, Imperfect Foods, Monzo, ServiceNOW and Stripe. The product covers the basics of carbon data aggregation, emissions calculations, reporting, dashboards and reduction goal setting which would appear in an RFP for carbon management software. But Watershed is also delivering a broader value proposition than core carbon management software capabilities which differentiates it from other software vendors. The firm helps customers to source renewable energy supplies, provides access to carbon removal solution providers and a variety of carbon offset projects. This reflects corporate demand for integrated net zero solution providers that can support investor-grade data in anticipation of disclosure rules such as the EU’s corporate sustainability reporting directive, mandatory TCFD reporting and SEC action on climate disclosures.

Heavy investment in multiple carbon management software vendors and net zero digital solution providers is essential to establish the buying concept in the minds of thousands of executives who have blocked funding of carbon and sustainability software for years. The Watershed $70m Series B round is good news for the market as a whole. What’s more, Verdantix analysis of buyer requirements indicates that recently-launched carbon management software products still have significant functionality gaps to fill before they can support decarbonization programmes. Focus areas include applying internal carbon prices, project portfolio management and going beyond GHG Protocol methodologies for Scope 3 analysis. With $70 million in their bank account, Watershed are primed to expand the product breadth and depth – assuming they can hire increasingly scarce software development talent.

ESG Watersheds 70 Million Fund Raising Confirms Investor Enthusiasm For Digital Net Zero Solutions

David Metcalfe

CEO, Verdantix
Verdantix
Verdantix

David is the CEO of Verdantix and co-founded the firm in 2008. Based on his 20 years of experience in technology strategy and research roles he provides guidance on digital strategies to C-level executives at technology providers, partners at private equity firms and function heads at large corporations. His current focus is on helping clients understand their market opportunity tied to ESG investment trends and their impact on corporate sustainability strategies. During his 12 years running Verdantix – including 4 leading the New York office – he has helped dozens of clients grow their businesses through fund raising, acquisitions and international growth. David was previously SVP Research at Forrester and Head of Analysis & Forecasting at BT. He holds a PhD from Cambridge University and also worked as a Research Associate at the Harvard Business School.