The Funding Model Canada Should Adopt from the United States

Azolla Ventures, a Massachusetts-based firm co-founded by Amy Duffuor, is pioneering a blended finance model aimed at addressing the pressing challenges faced by hard-tech startups in the climate technology sector. This funding approach combines various sources of capital, including grants, philanthropic donations, and equity commitments, to mitigate investment risks and provide the necessary long-term financial support that many promising climate solutions require to develop and scale.

Duffuor emphasizes the urgency of tackling climate change, stating, “If we don’t solve climate change, nothing else matters.” Hard-tech solutions—physical innovations such as new devices, materials, and infrastructure—are vital in reducing global carbon emissions, yet they often entail high capital requirements and extended timelines. Traditional funding models are frequently ill-suited to the unique demands of these projects, leaving many ventures without the resources they need to flourish.

Inspired by innovative financing structures observed during her work in Southeast Asia, Duffuor created Azolla Ventures to blend capital in ways that de-risk investments for early-stage startups. The firm's $240 million fund features generous 15-year terms with possible four-year extensions, providing a patient financial framework that aligns with the long development cycles of hard-tech innovations. While Canada faces a significant funding gap for such companies, Duffuor believes that Azolla’s model could serve as a productive approach to help bridge that divide.

With an unconventional background that includes a master’s degree in migration studies, consulting experience, and investment banking, Duffuor takes a human-centered view when assessing potential investments that tackle climate issues. She prioritizes projects with intersectional benefits, such as Carbon Reform, a company focused on modular carbon capture systems that also improve indoor air quality.

Azolla Ventures was launched in 2021 with the goal of innovating in climate-tech funding. Duffuor describes this venture as an ongoing “experiment,” noting that while challenges exist, the unique blended financing model of combining catalytic and conventional capital creates opportunities for impactful investments that can navigate obstacles effectively. Catalytic capital serves as a flexible and patient funding form well-suited to the needs of hard-tech companies, allowing Azolla to support startups at critical early stages.

The firm’s success hinged on identifying companies that meet specific criteria, such as the potential for substantial greenhouse gas reductions and the ability to attract additional investment. Using extensive networks and partnerships, Azolla engages with various innovation ecosystems to identify promising opportunities, even venturing into academic settings to source new technologies.

While the fund emphasizes impact over immediate financial returns, it integrates developmental milestones tied to greenhouse gas reductions and deployment goals, ensuring alignment with the mission among limited partners. Active engagement with their portfolio companies through governance roles helps instill a culture of impact, reinforcing the firm’s commitment to climate solutions.

In the face of recent economic fluctuations, Duffuor maintains a balanced outlook on climate tech, believing that adversity will breed creativity and opportunity for high-quality firms with solid fundamentals. Azolla Ventures is committed to being at the forefront of helping startups successfully navigate the landscape of climate technology investment.