Entrepreneurs for Impact (EFI) Podcast: Transcripts
#81:
Investing in European Climate Tech Startups — Yoann Berno, General Partner at Climentum Capital
Chris Wedding:
So, Yoann, the place where I normally start is like, look, give us the elevator pitch on what you're doing right now. Now, I think that's part of the podcast, but really, it's Climentum Capital, I think. So, what's the story? Why should folks keep listening to hear from Yoann? I know the answer, but they don't.
Yoann Berno:
Well, thanks, Chris, to have me on your show. First of all, I'm a General Partner at Climentum Capital. It's a Berlin based, 150-million-euro fund. We're launching very soon, so stay tuned. There's going to be a lot of exciting news coming up. And on the other side, I'm also running Climate Insiders, which is my podcast, which invites the top founders and investors in Europe to collect as many insights we can from them.
I just found that there's a lot of great content coming from the US, Chris's podcast included, but not so much coming from Europe. And being a French citizen, but having worked in Silicon Valley, I've collected so much information that I'm trying to reimport back in the fabrics of the European ecosystem. I find that storytelling, marketing, but also sharing insights from each other is definitely a little bit of a missing brick in that wall.
So, that's my attempt to try to contribute to the community by sharing the top minds insights from everything they've learned, executing beautifully their own businesses, but also raising their own funds, raising their own startups. There's so much to share out there. You can stay tuned and it's going to come every Tuesday, but main focus on European players.
Chris Wedding:
I think a lesson for folks listening is you're aware of the ecosystem as an investor, as a founder for a long time and you said, “Well, where's there a gap? Let's not just do the same thing others are doing. Let's fill a hole.” Let's fill a hole partly as a give back to build the ecosystem. And partly let's fill a hole because, frankly, this is a way for you, I mean, for me, but in this case, I'm talking about you, be a thought leader.
That translates later to, “Well, I heard the Climate Insiders podcast, I'm a founder. Oh, guess what? Now, Climentum has 150 million euros. I think Yoann’s the kind of guy that I want to be on my board or whatnot, to be both the personality and the sector insights.” So, I think what that means for an entrepreneur to be learning from your decisions there, I guess.
Yoann Berno:
Yeah, that's a good point. There are multiple ways to tackle that. Number one, it looks like the podcast space is saturated. There are so many podcasts being launched, but the audience will probably join me there is you typically find there’s two or three that you listen to on a regular basis and you develop your own curriculum with that. The gap was just too enormous in Europe, so we had to build a curriculum, so that's number one.
04:18
Number two is I've been a founder before, an entrepreneur, and I definitely felt connected to that podcast host that might be just five or 10 years ahead in their own journey, and they’re distilling a lot of insights to me as a listener. That has been the biggest mentorship in my career. I realized that everyone is chasing a great mentor and we don't really find that in a corporate setting.
A company is not designed to provide mentorship. It's designed to exploit certain skill set, to put you to work 40 hours and to optimize every hour they can. It's not really designed to help you grow. You have to find growth yourself. Typically, it's nights and weekends. It's a bit sad to say, but that's the truth. I found that the podcast host but also the guest, the biggest mentors in my own career and definitely also helpful.
So, I guess point number three, as we are launching Climentum Capital, we hope to build a successful franchise, not for one fund, but for multiple funds in the next decade, because this climate fight will keep us busy for the rest of our days. It requires building an audience.
An audience of trusted founders, an audience of like-minded peers and investors, but also people that are outside of that circumference. The people that are in governments, that are doing reforms, that are trying to reshape our society, but it's also the ecosystem players that are just artists, creators, music producers, just a lot of ripple effects with that that is very hard to quantify. But those people might just be plugging in, listening to that, getting some insight, and then tuning it to their own tone to provide value to their own ecosystem.
Audio is definitely a format that is making bigger and bigger waves. Video as well, it just takes us so much time to produce video content. I think you need to reach a certain scale to get there. So, let's start with audio first to build audience and provide maximum value to the ecosystem and see where it goes.
Chris Wedding:
I'm intrigued by what you said around podcast host being like a quasi-mentor to listeners. I feel that too. I suddenly feel more pressure with this podcast being better. Let's go to the next one. We got a sense for your work. Let's rise above your work for a second. You've both been a founder and an investor and now you will be investing in many more companies. Can you talk about a common mistake you see founders making or have made yourself and maybe ways to not do that?
Yoann Berno:
Yeah, so the number one mistake, I started my career as a software engineer, worked in Silicon Valley for a number of startups. One has done great, the other one poorly, so I learned from both sides as an engineer. Then I started my first company. I thought I was prepared, equipped that I learned already from the best. I was in my late 20s, so I really thought it was the time to shine. The biggest mistake I did in hindsight, it's only really readable in hindsight is the place of the ego.
A lot of people start a company because they want to be at the center of that frame, they want the spotlight, but they also want to succeed and to have the status attached to it. I'm saying that with a bit of shame. You only start feeling shame afterwards, but I realized that I was maybe chasing that a little too much, but also, I was too attached to my baby. As you start a company, you put your own money. This is also not spoken enough is the fact that there's an enormous barrier to entry to become a startup founder and a lot of that is just money. It’s just having enough runway sitting around in your bank account so that you can survive two years, maybe more, without any income.
08:06
I often advise founders to stick to their own full-time job as long as they can, because if you can have one more year, extend your runway by an additional year, it might be just the difference. If you're six feet from gold, a lot of time, the founders quit because they just run out of money and they've been hitting up their savings for way too long.
So, the number one advice is, it is normal that you feel like it's your baby, but don't fall in love too much with that baby because you might have to kill it. Or you might have to completely change it, or you might have to just let that part of that baby go and pivot into something that is very different. There's just so many steps along in that process that require you to step back and get away from it that is hard to fully comprehend the first time you do it.
Chris Wedding:
Yeah, I like a lot of that. The one change, or the way I say it is, you've got to be able to hear that your baby's ugly. So, maybe you don’t kill the baby, but your baby may be ugly. Give your baby a bath or whatever. Put new clothes on the baby. Yeah, I wrote down two things here.
One is that along the lines of your baby, feedback is just data. It doesn't have to be as emotional as we typically make it, although I have done this for certain years past. Feedback is just data. Learn from it. The other thing I wrote down around ego, there's a good book by Ryan Holiday called Ego is the Enemy.
Yoann Berno:
Ego is the Enemy, absolutely. Massive slap in the face the first time I read that book. It was my best friend, actually, that handed me that book saying, “Yoann, I think this is the time for you to read that book.” I was like, “Wow.” I took that as a bit of an insult. The title was a bit misleading, by the way. It's not just the enemy, there's so many lessons to derive from that book and I find that it has to find you at the right time.
Before you making that jump to become a founder is probably a little too early. When you're in that journey, definitely is the right time and in a post-mortem analysis, if your startup fails or if you enable growth and fundraising more, this is probably the sweet spot.
Chris Wedding:
Yeah, I think being a meditation practitioner for a few decades, I'm not perfect at it. I still have an ego for sure, but I hope I'm a little better at recognizing, “Oh yeah, that's about me. What about the team or the mission or the customers or the members or others?” Yeah. All right, that's great advice, good reminder.
Yoann Berno:
There's another part of the ego that I wanted to touch on that.
Chris Wedding:
Please, yeah.
Yoann Berno:
It’s part of the world that we live in and that you see that firsthand, you and I had a bit of a conversation on this is the fact that you need to present on social media. So, you need to start building up a web personality that might not fit your own values and personality at all time. The decoupling is getting bigger and bigger as we put more and more emphasis on social media. So, it's vital for a podcast, but also for fun, and even more for a startup these days to develop a web presence and it's the world of egos.
11:21
There's not been a bigger space or arena for egos than today's world, especially on LinkedIn, where everyone is celebrating. This is where I struggle a little bit, where I'm trying to stay true to my values in the physical world, but I also need to play by the rule, which is putting myself out there and developing a brand and developing an audience. People want to hear from people, not personas and not corporates, not companies. So, the decoupling hurts and I'm still battling with that. I haven't fully figured out how to do both well.
Chris Wedding:
I think it's good self-awareness to think, “I don't identify or resonate with a lot of what's required or expected for a normal social media presence,” except that I know a social media presence. Being authentic, not just putting on a show out there is pretty important for standing out in a crowded marketplace. Look, I have similar thoughts or struggles where I can talk to a tree. I have my extroverted aspects for sure, but I also love hanging out alone in the woods. That's very contrary, of course, to social media.
I wrote down when you were speaking, vanity metrics, where it's easy to become obsessed and I feel it, okay, well how many followers on LinkedIn or Twitter or newsletter or whatever, and on one hand, super annoying. On the other, I think, “Well, why do I want followers?” Well, people are going to consume information from some source. With all of the reading and self-work that I'm doing, I'd like to believe that my voice would be useful--
Yoann Berno:
It is hard. Yeah, absolutely.
Chris Wedding:
…or different. And so, it's like, well, if I'm trying to quote unquote, make a difference at both personal growth and climate finance, then you got to share what you're learning. And so, for me, it's like, well, all right, I care about the metrics because I want more folks to at least be exposed to the kinds of things that I'm learning. Not that they're right necessarily, but there are a lot of other worse things to be reading out there.
Yoann Berno:
I'm fully with you here. There are two sides I look at it and I think a lot about this is number one, we know in the world of noise, it's just a noisy environment, Twitter, LinkedIn, and in order to be seen, to grab the attention, you need to be noisier than the rest. Noisier because you're more on point. You're just crystallizing a thought that people just resonate with so you stand out, but a lot of the times it's just a daily grind and postings so that the algorithms pick up your content and present it to more people.
So, there’s that set up, that rule of the game that you need to abide by if you want to be noticeable and this I struggle with. I struggle with because noise is the antiquation to peace. It's just you need to reduce noise to make peace with yourself and that is the biggest struggle.
Chris Wedding:
One other angle for reaching the folks you want to reach, here's an example. One of the members of our Climate Mastermind peer group is this guy, Jay Lipman. He's the Co-founder, President of a company called Ethic. So, their job is to make ESG investing easier, often for wealth managers or family offices. I think their solution is helping like a couple of billion dollars move more seamlessly into ESG strategies, but he and they are also very good at storytelling especially using video through LinkedIn.
15:05
I saw yesterday one they produced where they were taking on Elon Musk's denigration of ESG simultaneous with Tesla getting some dings around ESG. It’s both a hot take, if you will, but it's also balanced, but it's humorous. I think, well, sometimes it's having a strong opinion on topics where there are other strong opinions as a way to kind of stand out from the noise. As he and I brainstormed, it's like, yes, that is a great idea. It's a great video and it's much needed. But for me, it's like, well, gosh, I'm not really looking to be controversial, not that their particular take was controversial. Anyway, we could go on.
Yoann Berno:
That's right.
Chris Wedding:
Let me come back to Climentum Capital. So, you're nearing the final close on this 150-million-euro fund. I hope the listeners understand both geographic focus. Is it just EU? Is it across the pond in the US, and then stage of company?
Yoann Berno:
So, Climentum Capital has three bases. We have five partners distributed between Copenhagen, Stockholm, and Berlin, so very Nordic oriented. Why the Nordics? It’s because they have a great value system. I feel like the Scandinavians have already been two trains ahead of the rest of the population and there's a lot of government funding. There's a lot of private money awareness and a lot of pockets are looking to contribute to the climate fight.
So, strategically it's been tailored there, both to tap into that, but also to tap into the great founder pool. Sweden has been surfing that Web 2.0 and Web 3.0 wave beautifully. I think it's the country in the world, or the second maybe to Israel that has the highest number of unicorns per capita.
Chris Wedding:
Oh, wow.
Yoann Berno:
The highest VC dollar per capita as well and Germany is obviously a behemoth in Europe, both in terms of economy, but in terms of also climate targets. So, it also makes sense for us to have a presence here. In terms of where we will deploy capital, we have our portfolio construction of 25 companies. We intend to deploy 25 tickets across Europe in the next four years. That's not a lot and we have to be hyper-focused to make the right investments, both in terms of financial returns, but we have a dual carry model, so we're really looking for impact. This is a new breed of fund that is hybrid between a hardcore VC and an impact fund.
So, our LPs are waiting for financial return, but also for impact targets and it functions with a dual hurdle. First is the financial hurdle and then comes the impact hurdle. And so, our goal is also to be vocal about this fund to inspire others. There's certainly a lot of great funds, both in the US and in Europe, looking at this model, but the more we talk about it, the more we talk about the learnings and also the mistakes and the more we are transparent about the actual target setting, the more useful it will be for the community.
18:24
I've been really active in that space for a number of years and I find that the targets have been agitated with enormous numbers. Looking at gigatons of CO2 reduce, but in practice it's so hard to remove a gigaton of CO2 equivalent out of the air. Tesla is far from there and I believe for them to become a gigacorn, so reducing a gigaton of CO2, it might require millions of vehicles switching to electric.
Chris Wedding:
That is a sobering perspective, Yoann. Thanks for that. Also, a fun new vocabulary lesson, gigacorn, in case folks haven't heard that one yet. Okay, so I wrote a few questions down here. So, 25 companies, I think by my math, that's about 6 million bucks a company. How much do you want to start with?
Yoann Berno:
Yeah, roughly.
Chris Wedding:
It’s not going to be six per company. How do you think about first check follow on, largest allocation to a company, smallest allocation to a company?
Yoann Berno:
So, our range is one to five million euro per company. This is for new tickets, so we allocate 50% of the fund for fresh new tickets and then keep 50% in follow on rounds.
Chris Wedding:
Got it.
Yoann Berno:
It depends on the size of the company, but also it depends on our level of conviction on a certain vertical and we intend to lead 50% of our deals.
Chris Wedding:
Okay, that's really important. You want to be the lead investor, set the terms--
Yoann Berno:
We do want to lead.
Chris Wedding:
…on half the deals.
Yoann Berno:
That's right. This is also another trend that we've been monitoring and it's very exciting is the fact that generally it's VCs that have more dry powder, of course. They've been historically present for longer and they're on fund four, five, six, when climate tech funds are typically in fund one or two. But they do want on the cap table and on the board some specialists, the climate tech guys that really understand what a life cycle analysis is, how to measure the impact targets, how to navigate all the government reforms.
So, they do want that and that's why we might take the lead, even though generally it's fun once we invest, but a lot of times we have a critical size where we're large enough to plant the flag, take the lead and then carry on a host of smaller funds with us.
Chris Wedding:
You also mentioned dual hurdle. I think I can describe what that means and why it's pretty darn different, but how about you just describe it for the listeners?
Yoann Berno:
Yeah, a dual hurdle, meaning that there's first hurdle and then a second hurdle. It is hard to put the impact hurdle first. You don't want to sound like a philanthropic fund. It's not just about rainbows and butterflies. It's also about financial returns and it excites a lot more limited partners and government funds, pension funds to have their money back first and then make a 3X, which is a historical return over 10 years. So, it's always been in the conversations, let's return the money first and then let's chase some impact targets.
21:35
The construction and we're going to be very open about it, open source our model and try to be very transparent to inspire others is you have an impact target that is at the total funds scale, so over 10 years plus two. So, 10 plus two, traditional VC fund structuring to reduce X megatons of CO2.
Now, the power law that applies to financial returns also applies to impact returns, which means that if you invest in a methane reduction company, it might not as they commercially scale, produce any kind of meaningful impact reduction over the first five to seven years. But then it’s just hockey sticks and becomes an enormous success commercially and then reduces a number of megatons. And so, we're targeting really those companies that have this hockey stick built in for CO2 reduction.
Chris Wedding:
Two follow-ons. How will you measure impact? Is it something that makes sense to roll up similar metrics across all companies or is it very, very company specific?
Yoann Berno:
It really varies per company. If you're looking at a composite material recycling, obviously, it's a completely different set of metrics than an architect, a methane reduction company. But to keep it simple, you do a back-of-the-envelope calculation, you look at all the elements that contribute to the CO2 profile of that vertical. And so, the supply chain, the materials, the input materials, the travels, but also the CO2 production of that end product.
So, back of the envelope, you get a profile and then you do the projection over X number of years, how many products will be sold and how much of the polluting equivalent will you take away from market share? So, it's really upfront just to construct an idea before jumping onto due diligence.
During the due diligence with the company, we typically visit the facilities or we try to dig in with some subject matter experts. They confirm the impact profile of the company or not, or invalidate that and it's only at the end of the fund, so when we divest our investments, that we conduct a full life cycle analysis.
Now this is heavy. This involves PhDs. We internalize some of it, but we intend to externalize probably most of it because it requires sometimes months of calculations. It's really heavy, it's costly, and it only makes sense to do it at the end of the fund.
Chris Wedding:
Yeah, I'm with you. So, to do the front-end calculations, will you all use some public tool like Cirque from Green Energy Ventures or CRANE from Prime and others or custom?
Yoann Berno:
Yeah, so at the moment it's custom. We have five partners in our team. One is fully dedicated to the impact, so Stefan in our team is our impact investor, impact partner. He has run LCAs and impact analysis for a number of years for large corps and also for startups. So, we rely on his expertise.
24:54
We wish there was a bit more standards to benchmark everyone's analysis so we're speaking the same language. We hope it's going to happen in the next couple of years. We do intend to use some solutions you mentioned. So, CRANE is a good one. We have some partner funds that use those and we want to create a work group to exchange on the lessons from using solutions versus proprietary calculations.
Chris Wedding:
Well, I think for folks listening, if they're in finance and they want to dig deeper into impact metrics, there's a group called Impact Capital Managers Association, which a couple of friends, SGF and Wireframe and others have co-lead or created or whatnot. Anyway, I think there's 60, 70 GPs now and they're trying to do things like what you're talking about, right?
Yoann Berno:
Absolutely.
Chris Wedding:
Share best practices around things like impact beyond just the financials.
Yoann Berno:
Yeah. So, we don't throw completely unrealistic targets and we also stay true to our -- The worst thing would be to associate VC with greenwashing, especially our new breed of investment because if you start losing trust from the get-go, from the extended community, it's going to create much more damage than it's trying to provide help.
Chris Wedding:
Yep. I heard you say one-to-five-million-euro, so we're talking like seed or Series A, what are you talking?
Yoann Berno:
Late seed to Series A. That's right. So, we're talking European, the evaluations are kept even though they skyrocketed over the last two years, never cooling off a little bit, not as much as in the US, but they've never been as outrageous. So, we do intend to keep with the one to five million ticket 10 to 20% of the company and we invest at late seed to Series A.
Chris Wedding:
Yep, perfect. We have just a few minutes left here. Let's go from Climentum back to Yoann. So, maybe a couple of questions on the personal front and then we'll call it a morning, at least East Coast time. What are some habits or routines that keep you healthy, sane and focused?
Yoann Berno:
Look, you mentioned meditation, being a monk. I want to ask you what that means for you being a monk. I've been doing transcendental meditation ever since I left San Francisco. This is just a 20 minutes morning routine. I've been more or less disciplined on that front. I feel like after a number of years, you start being less disciplined about it, so you need to revive it. Otherwise, green tea, love my sencha, Japanese sencha, and keeping its sport.
It tends to be an intellectually taxing environment to be an investor. We don't use our hands much. We use our screens a lot. We are on a lot of calls and we have to think fast and for that, you need also to have the off time. So, sports, going in nature, all that stuff is absolutely critical.
27:58
Chris Wedding:
Yeah, right on. I was sharing with my members recently around transcendental meditation and I think when some folks hear about meditation, they're not super keen to try it out. Maybe it's hard or maybe they think sitting down means there's no thoughts in your brain, which is rarely, if ever the case.
Yoann Berno:
No, it's not the case.
Chris Wedding:
Yeah. Then to share the article about Ray Dalio, who's been doing TM for decades and attributed for a lot of his creativity and calm and insights, it helps to shatter misconceptions around meditation as a very passive activity or retreat. But more it can be a fuel really to how to live, work, play better, more intentionally.
Yoann Berno:
But then there's the next level and this is having done 20 minutes ever since 2015, so seven years now, more or less again, there's Naval Ravikant, which he’s inspiring on many, many fronts, but he's like next level. He does 40 minutes or 45 minutes meditation, uninterrupted, where you basically empty your backlog.
Consider that as your email backlog. Every day you have a number of emails and it gets quickly clogged. If you don't answer emails every day, you wake up and you have hundreds of emails and it becomes completely overwhelming. Same goes with your mind, with thoughts, they just stack up and it becomes quickly clogged. So, you have to sit down on a chair, nothing fancy, just 40, 45 minutes to empty that inbox. I've not been able to accomplish that. I typically, after 20 to 22 minutes become a little agitated.
Chris Wedding:
I can relate for sure. It's a constant practice. That's why they call it a meditation practice. You're not good at it, you just keep practicing.
Yoann Berno:
Yeah.
Chris Wedding:
Well, one or two pieces of advice for your younger self. You covered the ego piece, anything else that's set on tactical, strategic that career switchers or emerging professionals could take on?
Yoann Berno:
Yeah, absolutely. So, there's one. I also try to do my job as a community helper and I go to business schools and I talk about my experience. One of the tips that I typically leave students with, but this is valid to anyone at any point in life, is before you want to jump into becoming a founder -- Again, I thought I was ready. I thought I had prepared everything. I read the right books. I felt educated to become a founder. I just jumped into a new vertical that I didn't fully understand.
And so, my biggest tip would be, don't learn from your own mistakes, because you're going to make so many. It's just completely unreal, the amount of mistakes that you do along the way as a founder, so learn from someone else's mistakes. How do you do that effectively? Try to find a founder that is probably two to three years ahead in their journey.
31:06
Do a competitive landscape analysis, find a startup that is two to three years ahead. It sounds a little less sexy at the beginning because you want to be the one bringing the breakthrough and starting with the business and being successful first. But the reality is there's probably the reason why the company that you're trying to start have failed or not fully succeeded.
And so, you might as well just jump and ride that wave for that company that is already in business and that has cleared the path for success so that after one year or two years in that business or even just six months, frankly, you can launch so much in six months, you're ready to spin off and start a success story.
Chris Wedding:
I like it, very practical. Well, Yoann, this has been a great double episode. I think there's lots more to talk about offline and sharing it through our various intentional efforts to open source our learnings or learnings with our founders or CEO members.
Yoann Berno:
Yeah, thanks, Chris.
Chris Wedding:
Anyway, [inaudible – 00:32:09].
Yoann Berno:
I have a lot of respect for what you do as well. I've been following your own episodes, your own journey.
Chris Wedding:
Hear, hear. Back at you.
Yoann Berno:
I think the course that you're doing is absolutely valuable and I wish there would be more a two-way street, a bigger bridge between Europe and the US. We understand each other, but sometimes we don't and I think it's a shame because talking about sharing learnings, there's so many learnings that we should derive from each other.
Chris Wedding:
Let's do it. This is the start right here.
Yoann Berno:
All right. Thanks, Chris. Talk soon.
Chris Wedding:
You got it. Talk soon. Cheers.
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