The Power Law vs. the Planet

Hi ,

Let’s start with the law that underpins venture capital — the one that explains why some investors happily back 100 startups knowing most will fail.

It’s called the power law, and it looks like this:

One startup delivers a 1000x return.
The other 99 deliver little to nothing.
The fund still wins.

It’s not about batting average. It’s about home runs.
If you hit one, nothing else matters.

This logic fuels the way most VC funds are structured. It explains why “grow fast or die” is such common advice. And why the pitch deck that wins often paints the biggest possible market — even if the pathway there is vague.

But here’s the question:
Can that logic survive the climate era?
Or put more bluntly:
Can exponential growth models thrive on a planet with boundaries?

The Power Law, Explained

Let’s unpack it.

In venture capital, returns are not normally distributed. They follow a power law distribution: a small number of companies drive the vast majority of returns.

That’s why the most successful VCs aren’t those who avoid failure — they’re those who bet on the wildest winners.

9 portfolio companies fail.
1 returns 500x.
That’s a win.

This model works beautifully when you're investing in sectors where products scale fast, margins are high, and capital can fuel exponential growth. The upside is massive. Scale is cheap. Distribution is global. Fast wins are possible.

But what about the startups building coral nurseries?
Or low-carbon concrete?
Or soil carbon MRV?
Or seaweed protein supply chains?

These don’t scale like software.
They’re capital intensive. Regulation-heavy. Long-cycle. Planet-bound.

They can succeed — but they don’t follow the rules of exponential return.

Climate Doesn’t Obey the Power Law

Climate and nature startups face a contradiction at the heart of the current funding system.

They’re building solutions to planetary-scale problems.
But the system backing them demands venture-scale returns.

That pressure bends how solutions are shaped:

• Building what’s fundable instead of what’s needed

• Chasing blitzscale growth instead of sustainable traction

• Prioritising software wrappers over hard science or natural infrastructure

• Pitching billion-dollar exits while tackling deeply local, long-term issues

The result?
Too many essential solutions get passed over — not because they don’t work, but because they don’t fit.

The Bigger Issue: Linear Inputs vs. Exponential Expectations

The climate crisis is a systems problem. It requires collaboration, infrastructure, patient capital, and regenerative business models. Many of the best solutions will be non-linear in growth and non-extractive by design.

But the power law favours speed, scale, and dominance.
It’s built on the assumption that outsized growth is always the goal — and that more is always better.

That’s not just a mismatch.
It may be a fundamental incompatibility with the kind of economy we need to build now.

Because we don’t live in an exponential system.
We live on a finite planet. With finite resources. Facing a rapidly closing window for action.

So What Do We Do?

We’re not saying the power law is broken. It’s still the right model for some technologies — especially AI-native businesses, hyper-scalable SaaS, and some advanced energy plays.

But it shouldn’t be the only model.

We need a portfolio of funding systems, just like we need a portfolio of climate solutions.

That means:

• Blended capital models combining venture, philanthropy, catalytic, and public funding

• Revised fund structures with longer time horizons and more flexible return expectations

• New definitions of success — not just exits, but restoration, resilience, and regeneration

• Narratives that reward durability, not just velocity

The biggest winners of the next decade will be the ones who can design for scale within planetary boundaries — not by ignoring them.

AI: The Exception That Proves the Rule?

One category that does perfectly fit the power law playbook is AI.

Founders building foundational models or AI-native infrastructure are exactly the kind of outlier bets most VC funds are optimised for. These businesses scale fast, dominate markets, and generate enormous returns — if they hit.

But here’s the tension: AI also comes with massive energy demands. The compute power required for training and running large models is growing fast — and with it, emissions.

So while the power law still applies to AI investments, it’s at odds with planetary boundaries. The real opportunity? Investing in the critical infrastructure that will power this AI future sustainably — energy storage, grid management, green compute, and renewables. These may not always follow the classic 100x trajectory, but they’re foundational to a future that works.

Not every pro-planet venture will be a unicorn. But they may be the reason the unicorns of tomorrow are even possible.

Final Thought: Rethinking What We Fund — and Why

The power law has shaped innovation for decades. But we’re entering a new era — one where climate resilience, natural systems, and equity matter as much as growth.

This isn’t about rejecting VC.
It’s about expanding the toolkit.

Because the next generation of pro-planet founders isn’t building for exits alone.
They’re building for impact that lasts.

If we want to back the best of them, our funding models need to evolve.

Raaise exists to help founders — and funders — navigate that shift.

Want to raise capital in a system that sees the whole picture? Start here

Here’s to raising capital on your terms.

Amy and the Team @ Raaise

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