A Controversial Founder’s Carbon Startup Is Going web3

Former WeWork co-founder and CEO Adam Neumann is back.

The controversial CEO is now the founder of a carbon credit startup called Flowcarbon, in which he is also an investor. The new company raised a $70 million Series A from high-profile VCs such as Andreesen Horowitz (a16z), General Catalyst, and Samsung Next.

Flowcarbon is a blockchain-based company intermediating in the voluntary carbon markets. The company will issue a carbon-backed token called the Goddess Nature Token (GNT), which is “backed by a bundle of certified credits issued over the last five years from nature-based projects.” Its goal is to offer exposure to “corporate-quality credits.” Investors can either buy GNT to retire the credit, use it in DeFi applications, or “redeem” it for an underlying real-world credit. Alternatively, they could hold onto GNT as an investment.

The medium of “carbon credit investing” has been on the rise in recent months as the demand for voluntary carbon markets heat up. Carbon markets are a lesser-known, opaque marketplace where corporates purchase credits from non-profit or non-governmental organizations which are removing carbon from the atmosphere. A single credit is issued each year to the organization representing projects which avert the creation of one metric ton of carbon.

However, there are only so many projects being accredited for their carbon-removing activities. When investors participate in the market by buying these credits, either to retire them or speculate on them, they reduce the supply of them — and that leads to more expensive acquisition costs on the credits for corporations.

On the blockchain, crypto investors have been getting a piece of the action for over a year already — KlimaDAO, Toucan, Universal Carbon (UPCO2), and other carbon credit-based DAOs and protocols have tokenized carbon credits and developed new technology to allow for bridging carbon credits onto the blockchain. We’ll touch on their impacts on-chain in a future edition of The Litepaper.

Carbon credits might not be without their pitfalls, though. There are many issuers of credits, many different styles of credits, little regulation, and very little transparency in the marketplace. They have also been assailed as assigning a profit-motive to resolving climate change, and been described as a license to pollute by left-leaning opponents.

These pitfalls might be best explained by The Nature Conservatory‘s decision to investigate the authenticity of 20 projects which they sold carbon credits for. There have been no additional updates about their investigation, but the organization is known to sell credits to JPMorgan, Disney, and Delta, among others.

The world’s largest carbon issuer might have its own problems, too: it announced today that it would “prohibit the practice of creating instruments or tokens based on retired credits, on the basis that the act of retirement is widely understood to refer to the consumption of the credit’s environmental benefit.” This act is likely to affect existing blockchain-based carbon protocols.

However, it’s unlikely to do much to Neumann and his friends at Flowcarbon. After all, the way their press release reads, they’re going long on carbon as an investment vehicle — and building infrastructure which could realign the balance of power in carbon markets on-chain.

Before Flowcarbon’s big raise, Flowcarbon reportedly made $10 million in sales last year.

Neumann spent a healthy portion of the pandemic amassing a portfolio of apartments. Adam has not elaborated what he plans to do with his billion-dollar portfolio of apartments, but he said that “the opportunity is tremendous,” in an interview with Financial Times.

He also indicated, in the same interview, that he began “buying forests near the equator” and that he bought forestland which was “more than a few times the size of New Jersey.”

Obviously, WeWork made Neumann very wealthy. However, WeWork can’t say about Neumann. The ambitious Softbank-backed startup once towered at a $47 billion valuation. Today, it’s worth less than $5 billion.

VC goliath Andreessen Horowitz (a16z) announced its fourth, and largest, crypto fund today — they hope to capitalize on discounts in the marketplace as the “golden era of web3” ramps up.

a16z’s newest crypto fund is more than double the size of its last one, which it raised last June. At $4.5 billion, it will be not just a16z’s biggest crypto fund, but the biggest one that the world of web3/blockchain/crypto has ever seen. It will take the crown from the Paradigm One Fund, which announced it pooled a total of $2.5 billion in November 2021.

a16z says it will allocate $3 billion to venture investments, which refers to investments in established protocols, blockchains, DAOs, and businesses. The remaining $1.5 billion will be allotted to seed investments, which means new or emerging firms. 

Their criteria for investing? Well, quite broad. It’s everything under the crypto sun:

“We are excited about developments in web3 games, DeFi, decentralized social media, self-sovereign identity, layer 1 and layer 2 infrastructure, bridges, DAOs & governance, NFT communities, privacy, creator monetization, regenerative finance, new applications of ZK proofs, decentralized content & story creation, and many other areas.”

In tandem with their beefy checks, a16z also claims it provides operational resources to protocols and businesses it invests in. That broadly includes engineering, security, talent, regulatory, and marketing resources.

The firm’s latest fundraise comes at a trying time for the broader crypto market, which took a trillion dollar haircut after the collapse of the Terra blockchain and its troubled stablecoin, TerraUSD. However, a16z’s new fund shows that Terra and TerraUSD didn’t kill crypto — it simply offered a new, more desirable, entry point for the wealthy’s billions of dollars.

Turkey’s leading party, the AK Party, is expected to propose bills in parliament in the coming weeks that will regulate crypto in the country. The move comes after months of sky-high inflation and currency debasement, as well as the collapse of several crypto exchanges in the Eastern European country.  

Central to the alleged legislation are capital requirements for local exchanges. Anonymous officials cited by Bloomberg claim that crypto exchanges which want to operate in Turkey would have to have USD$6 million in capital. The country is also expected to weigh methods to secure crypto holdings, presumably within existing banking infrastructure.

The rumored legislation will also mean new taxes for Turkish citizens buying cryptocurrencies, likely at the point of purchase. 

Turkey’s move to regulate the country might be a direct result of the collapse of two crypto exchanges last year — the exchanges Thodex and Vebitcoin collapsed, resulting in billions worth of losses for holders. Thodex’s CEO, as well as members of the exchange’s team, disappeared after halting trading last April. Days later, Vebitcoin halted its trading after “citing deteriorating financial conditions.” They both represented close to a billion dollars worth of volume at the time of their collapse.

However, the weakening of the Turkish Lira could be another indirect reason for the regulation. The Lira is down more than 45% against the U.S. Dollar YoY, in-part because of the country’s president setting out on a campaign of economic independence. His campaign has caused Lira inflation to hit 70% in April. The country’s leadership, in spite of this inflation, has maintained a low interest-rate policy and aligned themselves with “de-dollarization policies”, which have been largely unpopular among investors.