Canada – Corporate and Company Law

Damien Steel, CEO, Deep Sky.

Montréal-based Deep Sky is making big moves to address the
climate crisis and attracting significant investment as it works to
develop infrastructure in Canada to capture carbon from the
atmospheres and bury it underground.

For the company’s CEO, Damien Steel, the size and complexity
of the challenge is the reason he left a top leadership role at
OMERS Ventures and jumped into the world of cleantech.

“One of the reasons I joined this company was because it is
the single greatest opportunity that I’ve ever come across even
though the size of the opportunity mirrors the size of the problem.
One company is not going to solve the problem — the problem
warrants many successful companies. We need to create a
multi-trillion-dollar industry and we need to do it fast. We need
to create an industry that is multiple times the size of the oil
and gas industry.”

Deep Sky was founded by Frederic Lalonde and Joost Ouwerkerk,
the co-founders of travel booking marketplace Hopper, one of
Canada’s largest private tech companies, and Laurence Tosi, the
former CFO of Airbnb. The company was created when Frederic Lalonde
decided he wanted to do more to offset the carbon emissions from
the flights sold by Hopper.

Deep Sky is well on its way to rolling out its plans for
building infrastructure. In November 2023, the company secured
CAD$57.5 million in Series A funding from Brightspark Ventures and
Whitecap Venture Partners, which included a $25 million investment
from Investissement Québec, as well as investments from BDC
Capital’s Climate Tech Fund and OMERS Ventures. In addition,
the company secured a $17.7 million seed note earlier last year,
bringing the total funding to CAD$75 million.

“We were able to raise a significant amount of capital last
year. We have the support from some incredible investors who
realize the size and scale of the climate crisis. We’re
grateful that in a very tough fundraising environment, we were able
to gather so much support,” says Damien.

He attributes Deep Sky’s ability to raise capital thus far
to the level of concern by investors about climate change and the
strength of the company’s founders.

“It’s no longer a secret that we have a really
challenging situation on our hands. One of the things that’s
been a pleasant surprise since joining the team six months ago is
that I’ve yet to have a conversation with anyone of
significance, whether it’s an individual, an organization or
government official, where the meeting doesn’t end with someone
saying: ‘This is one of the most important things we talk about
and it’s on our priority list as an organization. We are all
in, how can we help?’ I’ve never experienced that in my
entire life.”

Damien got involved with Deep Sky during the Series A round of
funding in 2023. He acknowledges that due to the nature of this
business, he will be “fundraising every day of my career as
long as I am at Deep Sky.”

“This is a unique business that requires a large amount of
capital. Hopefully we will start transitioning from traditional
equity financing to more project financing,” he says. “We
are essentially using venture capital dollars to build an
infrastructure company and that’s not an obvious thing to do.
But given our situation, we are able to do that.”

Working with Osler

Hopper’s leadership team had previously worked with
Osler’s Shahir Guindi, a partner in the Corporate group of the
Montréal office, and so in establishing Deep Sky, reached
out to Shahir again.

“As someone who has been in venture and understands
early-stage companies, Osler does a good job of acknowledging the
investment that’s required if you’re going to work with
startups. You have to approach it with an investment mindset so
that when they become big companies, they become your big clients.
[EHG Practice Co-Chair] Chad Bayne has done an amazing job of that
in Toronto and Shahir has done a fantastic job in
Montréal,” says Damien.

Focus for 2024: building Deep Sky Labs

The top project for this year is well underway and expected to
be up and running by the summer — the construction of Deep
Sky Labs, the world’s first carbon removal, innovation and
commercialization center in Canada. As an IP-agnostic project
developer, Deep Sky doesn’t build its own technology, which is
unique — especially at the early stages of an industry such
as this one. To source the best available technology in a market
that is expected to evolve rapidly, Deep Sky is hoping to attract
the best technologies on the planet and continue to do so over
time.

“If a new direct air capture company is developing a new
technology, the first thing I want them to think of is ‘How do
I get a slot at Deep Sky Labs?’ We provide them access to
renewable power, and we store the CO2 underground,” says
Damien.

Deep Sky is also developing software that will track, measure
and benchmark each of the companies that joins against the
best-in-class technology. With that information, the companies that
participate in the lab will learn faster, evolve quicker and
ultimately produce at scale faster.

The second major project for this year is to build the
company’s first commercial facility. As part of the planning
for that project, Deep Sky is currently conducting underground
geology studies to determine the best location for carbon
storage.

It is estimated that each commercial facility will remove
300,000-500,000 tonnes of CO2 a year and require about $1 billion
in capital to build, whilst generating 1,000 jobs per facility.
Deep Sky wants to build about 100 such facilities.

Damien notes that any technology companies that approach Deep
Sky about working with them will get the benefit of working with a
leadership team that has extensive experience raising capital.

“I’ve told the companies that are interested in working
with us at Deep Sky Labs that I’m highly motivated to make sure
they raise money for their ventures because I want them to be
successful so they can provide equipment to Deep Sky. I’m
coaching some of them on their pitch decks since I’m invested
in their success,” he adds. “It’s a very
partner-first approach.”

Deep Sky monetizes its infrastructure through the sales and
distribution of low risk, high quality carbon dioxide removal
credits to compliance markets, voluntary markets, and government
procurement. The carbon removal infrastructure allows for the
highest standards of durability, additionality, and carbon
traceability, providing buyers of the removal credits the lowest
risk and highest quality removal credits for their carbon removal
portfolios.

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