Entrepreneurs for Impact (EFI) Podcast: Transcripts
#109:
Dear Startup Founder – Here are 6 Questions from a $1.1B Climate Tech VC Firm
Chris Wedding:
Howdy folks, Happy Holidays. Hopefully the extra time allows you to rest, recharge, et cetera, and maybe learn some cool other stuff in the process outside of all the good family and friend QT. This is another solo episode where I turn parts of our newsletter from Entrepreneurs for Impact into the spoken version so you can enjoy it while you're on the go.
I'm going to go through two issues, if you will, today on the show. The first from December 6th and so let's start it off with $64 billion of new cash for climate in 2022. So, look, clearly a mouthwatering number. Climate tech VC, lots of fans out there, I'm sure. Great data they produce. I highlighted two graphs that stood out to me from this recent summary they put together so you can see those in the newsletter itself. It's over at Substack or through our website at entrepreneursforimpact.com. But in addition, there are four statistics that stood out that I'm going to run through really quickly here.
Just 4% of new private climate capital is managed by less than 125 million sized funds. 14% is managed by mid-sized funds, call it 125-500 million dollars and 82% of the assets under management is concentrated in mega funds managing over $500 million. And next one here, 2,000 unique funds have participated in at least one climate tech deal. I think this is in the last two years or so, so definitely a long tail here.
The third stat here, 80% of the investment firms that have participated in at least one deal in food and land use infrequently join other climate deals. However, 55% of investors in carbon deals frequently join other climate specific rounds. And finally, and maybe most importantly, there's an estimated 37, $38 billion of dry powder in VC and growth capital yet to be deployed into climate tech startups.
So, I guess the color commentary there, if you're out raising capital, it’s a pain, it’s a grind, certain macro-economic conditions are affecting private markets. They shouldn't, but they do a lot of sentiment and psychology there. So, lots of investors are still waiting for the proverbial knife to drop and to not catch the falling knife as they or we say, but that's going to stop here and lots of capital that has to get to work. These managers are mandated to put the capital to work.
Let's go to the next one. New carbon removal buyer's guide. So, my question here is, do you want a reason to have nightmares tonight? Well, here you go. Globally, we've only removed 10,000 tons of carbon dioxide from the atmosphere. Importantly, that's caveated by removals that are highly permanent, thousands of years, but we’d remove at least 165 billion tons by 2050 to hit our 1.5 degrees Celsius goal. That is limiting average temperature increase by that amount. Or, dot, dot, dot, on second thought, maybe instead of nightmares, you'll have dreams of bad ass companies you'll build to suck this stuff out of the air.
Look, are these tech-based carbon removals more expensive than nature-based solutions? I think you know the answer. Heck yeah, they are, but solar power used to cost a lot more than conventional power decades ago. By the way, helpful analogy, up to this point, we clearly still need a nature-based solution to cheaper version, lower cost version. We need these also the long-term, a portfolio play for carbon removal.
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To help companies buy these more permanent carbon removals and catalyze the growth of this much needed new industry, CDR that is, Shopify has just released a super practical report full of actionable intel documents they're sharing, et cetera. It's called Buying Carbon Removal Explained, easy for me to say. I've got the table of contents here in the newsletter, but I encourage you to click or just google and find it if you are thinking about, “How do I purchase carbon removal and why?”
Next story, this is the third of the climate started finance focus stories in this issue then we’ll go to two other non-business topics for a second. TPG invests $300 million into carbon credit platforms. So first, who is TPG? Oh, they're just a private equity manager with $135 billion of assets. Yeah, that’s sarcasm. The point is, they're not just drinking the green Kool-Aid, this is not just greenwashing or whatnot, pretty serious firm with pretty serious commitments.
Why does this matter? Look, man, because haters are going to hate on carbon credits, that is. Many of you listening have seen the John Oliver piece, which, entertaining, partially true, but also likely results in the proverbial baby being thrown out with the bathwater. Are offsets or removals perfect? No, they're not, obviously. Are they needed? For sure. So, TPG's investment is going into a company called Rubicon Carbon and their real stated goal is not just 300 million, but more likely a billion dollars in the near term. Maybe that sounds small relative to, I guess who they are perhaps, but relative to the 2-billion-dollar voluntary carbon markets, it's quite a bit.
One more piece here, what will Rubicon do exactly? In their words, “Simplify the process of buying and managing carbon credits which has been daunting for all but the biggest businesses.” I continue, “We can become the good housekeeping seal of approval on their behalf.” This is their chairwoman speaking. Their choice of CEO, a quote unquote, Wall Street power broker and former COO at Bank of America, Tom Montag is also likely a sign of the mainstreaming of this carbon market for decades to come. We’ve got two links to Wall Street Journal and a Fortune article in here as well with more if you want to dig in further.
All right, we're going to mix it up. The next two pieces from the newsletter go towards the living a good life slash productivity side of who we all are by building these businesses in climate tech. It says, “Pain plus reflection equals progress.” Again, “Pain plus reflection equals progress.” I wish I could claim ownership of this formula, but I can't, of course. Instead, I say, “I lay out the metaphorical red carpet made obviously from recycled fabric for Ray Dalio.” I would love to say a friend of the pod. I can't quite say that. Is he a friend of me? No. Do I want him to be? I don’t know. I think the other climate CEO members of these peer groups that I get to run, a lot of us thinking of work, such as the book Principles, which we'll talk about here in a minute.
So, who is Ray? That's what I call him, Ray. The billionaire hedge fund manager who swears by the benefits of TM, aka transcendental meditation, another reason we love old Ray. In his book Principles, he further elaborates on this formula of pain plus reflection equals progress.
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He says, “If you're not failing, you're not pushing your limits and if you're not pushing your limits,” you’re a loser. Just kidding. He says, “You're not maximizing your potential. Go to the pain rather than avoid it. Embrace tough love.” I guess I'll quote my 17-year-old here, “Pain is just weakness leaving the body,” so he loves to say when his siblings are crying.
Anyway, I go on, after you do all those things that Ray just suggested, then you get out the notepad or paper and pen and decide what you learned from getting punched in the face. Such is the path, the undulating path of entrepreneurship.
Next one here is titled 75 Hard vs. 60 Medium. And no, I'm not talking about gems or rocks or porn. Sorry. 75 hard is a mental toughness challenge in quotes that was started in 2020 by Andy Frisella. I'm going to go over the rules here for this 75-day period as part of this challenge.
Number one, no alcohol. In parentheses, have I lost you already? And number two, drink a gallon of water per day and I suppose get your steps in, and this is in parentheses, get your steps in by going to the bathroom like 10 times per day by drinking that much water. That's not part of the program, just so we’re clear and this is not Andy's comment. This is the pitiful attempt at humor by yours truly. Number three, do two 45-minute workouts per day where one of those workouts must be done outside even if it's cold and rainy. That's right, toughen up buttercup. Picture Rocky in the snow in Russia. I forget which show that was, anyway.
Number four, read 10 pages per day of a nonfiction book, ideally about personal development. Number five, take a progress photo every day. Oh yeah, that's right. Just you, the mirror and your phone. Hopefully no one walks in while you do that. Number six, no cheat meals outside of a healthy diet of your choice. He doesn't tell you what to eat and seven, if you skip a day, you got to start over. 75 number starts all over again. That's a pretty fun part of the program, but what if you don't want to take a picture of yourself every day, kind of weird, or if you don't have 90 minutes to work out every single day? Or if you think reading 10 pages a day is child's play, how about 50? You get the idea.
There are lots of ways to create variations of this. Maybe you just commit for 30 days or 60 days. Again, referencing back to the title here or maybe you're not as hardcore as the list above. That is not a reference to porn, just to be clear and that's okay, right? The goal is to get in control of your choices, not to look like a model. I have not created the 60 Medium program yet, but the holiday break is upon us. Plenty of time for planning. All right, that's this issue from December 6th. Hopefully I haven't lost you here with references to sketchy topics.
Let's go to December 13th and the first one here, it's a list basically of six questions from Mia Diawara. Boy, I hope I'm pronouncing that last name right. Diawara, one of those two, great last name, Mia, of Lowercarbon Capital. Why should you listen to Mia to talk through in this Fast Company article? Well, part of the reason is she knows what she's talking about. The other is Lowercarbon Capital, a name also we love here at the podcast and newsletter and yes, I'm also supporting the winter flannel in true Chris Sacca style. Anyway, they're managing at least 1.1 billion bucks to invest in climate tech and carbon removal startups that quote unquote, “make real money slashing CO2 emissions, sucking carbon out of the sky and buying us time to un- beep! the planet.” You know what I'm thinking there.
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The questions, “What are these questions? Get to the point, Wedding. What are the questions?” Number one question they ask startup founders, why now? What's changed in the past few years that makes your technology and business possible now? Number two, what is your unfair advantage? If the answer is me slash our team, why are you one of 10 people in the world who could build what you're building? Number three, if you succeed, how will that affect concentrations of greenhouse gases in the atmosphere?
Number four, what are your superpowers? How might they shape the type of company you're best positioned to build? Number five, what are the biggest gaps in the landscape that need more attention and innovation and the largest categories of emissions going unaddressed? And finally, number six, are you ready to devote the next decade of your life to living and breathing this? Does it bring you joy and get you fired up? Is it just about all you can think about?
I think of all the questions, that one plus the why now maybe stand out as the most differentiating. Okay. So, check out the Fast Company article, certainly check out Lowercarbon Capital as well. And it was funny, I had one friend and reader of the newsletter respond and say, “I thought those questions looked familiar.” We're getting close to closing a deal with Lowercarbon Capital. So, I'm not making this stuff up, I promise.
Number two in this issue, news flash, climate is about people not just startup exits. I mean, look, duh, right? I know you all get that, but do we all hope to make a boatload of money by tackling climate change? Heck yeah, sure, right? And then to invest or donate a lot of that dough to solve more environmental and social problems, I sure hope so, that's my plan. But the work we're all doing here is about more than just financial metrics like ROI, IRR, and MOIC, the ever fund Multiple on Invested Capital.
It's also about this, this news as reported from Yale Environment 360, it's the title rather, US Commits $75 Million to Relocate Three Tribes Threatened by Climate Change. They report, “Three tribes will receive $25 million each to relocate homes, schools, and critical infrastructure to more solid ground. Money will help tribes cope with melting permafrost, erosion, floods, drought, wildfires, and other climate risks.” Look, as I imagine the morning news 20 years from now, I think all of us want to hear fewer headlines like this about climate refugees, but lots more work to do for communities, “not just for the climate,” quote unquote.
The third climate related piece from this newsletter issue says, “Do you want a job in climate tech?” Lots of career switchers, lots of emerging professionals coming out of great universities, such as those we might teach at like Duke or UNC Chapel Hill. What I do is I list 29 companies, 29 of the more than that companies whose CEOs and founders are part of the Climate Mastermind peer groups at Entrepreneurs for Impact. Look, cool companies, but also importantly, the kind of leaders I think many folks would like to work for. I've got links to these 29 companies, mostly VC funded and/or post revenue companies, as well as a few investors, as well, so check them out there.
Last two pieces for your hopefully holiday entertainment here on the again, productivity slash living a good life portion of each newsletter, this one is about Price’s Law, the square root of people as I put in the title, it states, “50% of the work in an organization is done by the square root of the total number of people who participate in the work.” So that's a mouthful here. Imagine for a team of 25, just five people will produce 50% of the results. Look, maybe you, dear listener, are one of those five, or maybe it's your job to find these five kinds of people for your next hires.
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This section of the newsletter was inspired by my current Audible read, 12 Rules for Life by Dr. Jordan Peterson with some ridiculous number like 60,000, 4.8 out of five-star reviews on Amazon, but who's counting? I've got a link to a lecture where he explains this, but he also says further, “As your company grows, incompetence grows exponentially, incompetence grows linearly.” So, hopefully you didn't just swerve out of your lane while driving. One more time, “As your company grows and competence grows exponentially and competence grows linearly.”
Look, is that too harsh? I don't know, maybe. The Price's Law, if correct, may actually get worse with different numbers because of how, well, math works. If there were 100 employees, 10 of them would do 50% of the work, with 10,000 employees, 100 of them accomplishing 50% of the goals. There's more background on the origin of this law.
A little snippet I borrowed from Darius Thoreau, a blogger, a lot of great content out there. So, the background on Price's Law, Derek Price, who was a British physicist, historian of science and information scientist discovered something about his peers in academia. He noticed there were always a handful of people who dominated the publications within a subject. So that's the derivation of Price's Law.
All right, finally, a little bit of a tease here. I've got a quote, “Retirement is when you stop sacrificing today for an imaginary tomorrow.” Again, if you're driving, one more time, “Retirement is when you stop sacrificing today for an imaginary tomorrow.” This quote comes from Naval Ravikant, as I say, Silicon Valley gazillionaire entrepreneur turned philosopher.
My wife heard this quote and said, “Well, great, you're already retired.” Lots of exclamation points. I mean, look, do I love what I do? Heck, yeah, for sure, but retired, not quite. Cash for three college tuitions and a mortgage and decades of semi-retirement living are certainly still very real. I know we've all heard similar quotes before, it's the journey, not the destination and before you turn on the cliche vomit machine, just one second here, retirement, maybe it's a little overrated. Love what you do now or make a change as I'm building on the Naval's comment here. Rip off that Band-Aid and bleed for a little bit, you'll heal just fine. Life is short. Do what you love. Easy to say, hard to do, but I guess the time is now.
All right. Hey, look, folks, I hope you got something out of these two audio versions of the newsletters. You'll have more interviews coming early in January. Again, hopefully you don't work too much over the break and get some time to rest, recharge and refresh. Put your mask on before others as they say, that shit's real. All right, folks. Peace.