Blue Bear Capital is taking a contrarian approach to climate tech investing, focusing on software-centric solutions rather than hardware. The venture capital firm has raised a $160 million third fund to invest in digital solutions and applied AI that can drive significant impact in reducing carbon pollution.

According to partners Vaughn Blake and Ernst Sack, the fund's software-centric approach is designed to address the limitations of hardware-focused investments, which often serve only one narrow vertical. In contrast, software solutions can be universally applicable across various industries, including wind, water treatment, refrigeration, steel, cement, and more.

The fund has already invested in companies like Raptor Maps, a monitoring service that helps solar farms minimize losses and improve performance. With its new fund, Blue Bear Capital plans to invest in around 15 companies, reserving twice as much money for follow-on investments as initial checks. The firm's strategy is designed to help more companies achieve successful exits, even if they may be smaller in size.