Climate Tech Investor: Sustainability Tech — Paul Straub, Co-founder of Wireframe Ventures
Led by Co-founder and Managing Partner Paul Straub, Wireframe Ventures is a pre-seed and seed-stage investor focused on technology benefiting people and planet, including impact ventures focused on climate change, synthetic biology, AI, automation, and zero-emission transportation.
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Could you tell us about yourself and the story behind Wireframe Ventures?
We're a pre-seed and seed-stage fund focused on investing in founders with a mission to improve the health of people and the planet. Most of my work is focused on climate, which is what I've been investing in for 15 years. We like to be a first check in the business and work closely with founders during those early years until they're at the point where there's strong demand from Series A, and they've got a business that is starting to work.
Could you talk more about your climate investment activity?
For many years my area of focus was renewables, the built environment, and other traditional cleantech investments. What's great about Wireframe is that in terms of decarbonization, we are agnostic about whether you're working in agriculture, transportation, manufacturing, or carbon removal and sequestration. There's an entirely open playing field from our point of view. We will invest in synthetic biology, computational biology, hardware, software, and business model innovations. We want to know what the capability and expertise of a founding team are to put those tools to work towards the mission around climate. The health of the planet or climate is our primary objective.
Would you be able to give two or three examples of representative portfolio companies that have some benefit to the climate?
One example of a portfolio company is Electriphi, a software platform to help the operations and management of fleet electrification. We led a seed round there, and they ended up being acquired by Ford way earlier than we expected. It was a great outcome for everyone involved and a great signal for electrification. What Ford is doing with their F-150 and their transit vans has the potential to change the game. They're going all-in on electrification and Electriphi is the backbone from a software standpoint for that effort, which is incredibly exciting for us.
Another company in the portfolio is called Span, which developed a modernized electric panel to make it easier for homeowners to control their energy and to adopt renewable energy.
A third company is MycoWorks, which is designing a mycelium-based, high-quality material that can substitute for leather. This new material does not sacrifice in terms of performance or image, and it can replace leather in any place from vehicles to luxury fashion.
One final company is called Recurrent, which has built a network of drivers nationwide across different topographies and climates to track battery health. This information will enable consumers who are purchasing used EVs to have confidence in the transaction. This should boost pricing and demand for those EVs and help the EV market grow.
Can you comment on what you look for in founders and what gives you confidence when investing?
Since we're investing in the pre-seed or seed stage, it's always pre-revenue, and it's often pre-product. One of the things we're looking at is what is the unique insight of the founder. What is it about the problem they're trying to solve that makes them different? Do they have clarity about the product that they want to build? We look for a person's ability to adjust and iterate on a product to make it fit the market. We look for the potential for a good mutual working relationship and compatibility. We want to be a natural extension and a resource to teams. We also look for charisma that will help them recruit co-founders, strong first employees, future investors, and customers. If you look at someone who is constantly learning and using that to develop their company, that's a very powerful thing. Where that shows up strongly we get really excited.
Which climate sectors seem too hot, or alternatively, less crowded?
The most prominent ones right now are those that combine climate and SaaS. We see a lot of high valuations for SaaS businesses, and then with climate, it's explosive in terms of the valuations and the expectations that are set for these companies. We've got a lot of software businesses that we’re backing. There's also a lot of interest in carbon removal technologies, which is terrific because it is certainly needed. One hesitancy I have is that there's an enormous amount of capital flowing into technologies that still have a lot of technical risks. We need some great solutions to remove carbon from the air, but it’s still an early market. I think there's a little bit of a boom happening, and we're going to have to see how it shakes out.
Can you share some insights about your investment approach at Wireframe?
It’s important to be thoughtful about the type of risks we are taking. If you think about what you're targeting long-term, does it look like a venture-scale business? Earlier in my career, my firm was named “cleantech investor of the year.” It was great to get good press, but ultimately, a lot of the investments in our portfolio ended up not working. I think that it's important to be attuned to some ground truths and not get too distracted by whether you're getting a lot of press or you're getting a lot of funding, because those things don't necessarily correlate to the long-term success the founders are trying to build.
What is your ideal check size, and how do you think about valuation in the early stages?
For a pre-seed check, we are investing anywhere up to $500,000. We're largely betting on the business and the founders. For a seed round, we're typically investing between $500,000 to $1.5 million. We're happy to lead rounds like we did with Span IO or Electrify, with those total check sizes around $3.5 million. The nice thing about our fund size is we've intentionally set it knowing that we want to syndicate and build a collaborative group around a company. If someone else is leading, we can come in with a slightly smaller check and still be a very valuable part of the group. Once a company gets beyond the seed stage, we refocus our time back on the next cohort of founders who are getting going. As companies move toward Series A, Series B, Series C, we can begin to pull in our LPs as a funding source.
Is there any guidance you give to entrepreneurs that have a certain number in mind for valuation?
I think the way we look at valuation is parallel to the round size and stage of development. The founder should go out and put together the best round they can, realizing that this is a single point in time, and what they're trying to do is build a line that is hyper linear in terms of the value and the performance of their business. If you take a valuation that is out of step with what you can grow into and deliver, it's a challenge for everyone. We have a conversation with companies very early on to figure out what is best for them and how much money they should be raising. I know there are some groups that are writing $20 million seed checks right now, but I don't think that's the norm. One of the biggest risks is going to be whether you have a strong set of investors interested in the next round of capital.
Do you have any insights you can share from your experience starting Wireframe?
I think starting Wireframe with my co-founder felt very natural. We had both been on similar career trajectories, we had a shared set of personal values, and we wanted to focus our energy at the same stage and type of company. It took us 18 months to put our first fund together, which I think we were both a little bit surprised by because we had been in venture capital, but you have to realize you're doing something new. It takes time to tune your narrative for investors to really understand how you aim to put that into action. We had to be persistent, and we got hundreds of no’s in the process.
Do you have any personal habits and routines that help you?
Personally, I'm a cyclist so getting on my bike is the best way to take a break. We also have a daughter who's in school, so I try to create spaces in the day for family and for her. I also make sure to block portions of the day where I can do more deep, thoughtful work and where I am not driven by what emails are showing up or what Zoom meetings are scheduled.
What potential impacts do you take into account when deciding which companies to invest in, and are you seeing any pressure from LPs to quantify the impact of your investments?
We strongly believe that the impact that we're seeking is embedded in the product or service of the companies we're backing. The way we have an impact is to give those companies the best chance of scaling and being successful. We don't put specific impact metrics around our companies. We want to back people who, as they get to the right point in their business, have the intention of tracking different dimensions of their business, but we don’t impose a third-party framework on anyone. What we've done in the past is conduct a survey of our companies to understand what they're measuring and where they are on their journey.
Are your investment memos shareable?
Unfortunately, some of the more sensitive information is not disclosed, but we have started to publish “Why we invested” articles on our website. Here are some examples:
https://www.wireframevc.com/community/why-we-invested-in-mycoworks
https://www.wireframevc.com/community/why-we-invested-in-recurrent
https://www.wireframevc.com/community/why-we-invested-in-enveda
What's your take on emerging markets?
It's not an area that we've spent a lot of time focusing on because we don't have the expertise in those markets. I think the market structures and the incentives can be very different. When investing in a non-European or North American market, it can be very difficult to know enough about that market to make a good decision and to be a good partner for the founding team.
Are you doing anything on the policy front since many of these technologies have to be operationalized in highly regulated environments?
I think it's very difficult for startups or small venture firms to independently influence policy. We try to partner with others where we can. Advanced Energy Economy is such a trade consortium that can do this. With them, we signed a letter that was run as a full-page endorsement in The Washington Post recently supporting the Build Back Better Plan as it relates to some of the climate investments. Certain policies can be a good catalyst for the companies we invest in, but we don't want to rely on that for our path to market because it's too difficult to forecast policy changes.
Who would you like to hear from?
We spend most of our time meeting with people who have a shared interest in the things that we're committed to, so if anyone has an idea, it's never too early to have a conversation. We can offer a perspective and help you think through if there are other co-investors or other people in the industry. The thing that I love about being in this space for 15 years is that it’s incredibly collaborative. At the end of the day, I still root for founders where we didn't end up getting into a deal. We're always happy to meet folks who have that same kind of passion and interest.
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THE TORCH is an interview series from Entrepreneurs for Impact. We profile CEOs and investors mitigating climate change. Our goal is to highlight their work and inspire others. As we deal with multiple crisis, from Covid and racial injustice to climate change and economic recession, we need some of this positive light in what seem like dark times. Onward and upward.