• Blue Bear Capital has closed its $160 million third fund, emphasizing software-driven solutions to tackle climate and energy challenges across industries.
• The firm plans to invest in 15 companies, focusing on applied AI and digital tools to improve efficiency, with exits anticipated through mergers and acquisitions.

Blue Bear Capital has announced the close of its $160 million third fund, with a focus on software-led solutions for climate and energy challenges. The firm, known for its emphasis on digital tools and applied artificial intelligence (AI), is diverging from the industry’s predominant focus on hardware or hardware-software hybrids.

“In almost every case, hardware is going to be developed with software in mind,” said Vaughn Blake, partner at Blue Bear Capital.

The firm believes that software offers a scalable and universal solution for improving efficiency across sectors like renewable energy, industrial processes, and logistics.

One example of this strategy is Blue Bear’s investment in Raptor Maps, a solar monitoring software company. According to partner Ernst Sack, the software has helped operators minimize equipment-related power losses, boosting solar farm efficiency.

“Take 10% just as a round number,” Sack said. “A company like Raptor Maps is deployed across over 100 gigawatts of solar generation capacity, and a 10% of performance improvement is 10 gigawatts. That’s roughly equivalent to 10 billion of cap-ex and something like three to five coal-fired power plants or nuclear plants.”

The new fund’s limited partners include organizations like the McKnight Foundation, Rockefeller Brothers Fund, UBS, Woven Earth Ventures, and Zoma Capital. Blue Bear plans to invest in about 15 companies, prioritizing smaller portfolios to ensure successful exits.

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The firm’s strategy includes reserving double the initial investment amount for follow-on funding. For a typical $5 million investment, an additional $10 million is set aside to maintain ownership and support portfolio companies through growth stages.

Rather than focusing on IPOs, Blue Bear anticipates most exits will occur through mergers and acquisitions. “The model through which we invest understands and presupposes that IPOs are going to be less likely in the markets in which we invest,” Blake noted.