Speaker 1: Hey, it's sucksha. Each week you lend me your ears,
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Speaker 1: Welcome to Zero I am Akshatrati. This week inside the
Speaker 1: Mind of a Climate BC. Climate tech is not the
Speaker 1: hot investor thesis it was just a few years ago.
Speaker 1: After several record breaking years and billions of dollars being
Speaker 1: poured into climate startups, venture capital investments are way down
Speaker 1: lower than they were in twenty nineteen. According to PwC.
Speaker 1: Much of the hot money has now moved to AI.
Speaker 1: In all that time, though, the importance of investing in
Speaker 1: climate solutions has only grown, and so has the number
Speaker 1: of people working on them, bringing in skills and expertise,
Speaker 1: often from other industries, into the climate solution space. Mike
Speaker 1: Shrepfer is one of them.
Speaker 2: Energy access has become a boardroom conversation in a way
Speaker 2: that wasn't true, like literally four years ago. If I
Speaker 2: don't have access to energy, I can't build the compute
Speaker 2: power I need. I can't build the data services, the
Speaker 2: AI models, and I may lose out to my competition.
Speaker 1: From twenty thirteen to twenty twenty two, Mike Shrepfer was
Speaker 1: the chief technology officer at Meta, the company behind Facebook, Instagram, WhatsApp,
Speaker 1: and Oculus. There he helped build out Meta's data centers
Speaker 1: globally and led the integration of manufacturing the Oculus virtual
Speaker 1: reality headset. After leaving Meta in twenty twenty three, he
Speaker 1: founded Gigascale Capital, a VC firm specializing in climate tech.
Speaker 1: Gigascale has invested in a wide range of companies, from
Speaker 1: those trying to create green steel and crackt nuclear fusion
Speaker 1: to ones trying to vaccinate cattle to reduce methane verbs.
Speaker 1: Mike also founded Additional Mentors, a philanthropy that focuses on
Speaker 1: early stage research in biomedical and climate science. So I
Speaker 1: wanted to ask Mike how does he see the climate
Speaker 1: tech landscape in twenty twenty five, What are the challenges
Speaker 1: of manufacturing in the US versus China, And how does
Speaker 1: data center demand lead to innovation in energy? Mike Welcome
Speaker 1: to the show.
Speaker 2: Thank you, glad to be here.
Speaker 1: So you've come to investing in climate from a different
Speaker 1: background than most people coming to investing in climate have.
Speaker 1: You've come from scaling companies in the software sector, working
Speaker 1: at large software companies, but now you're doing something that
Speaker 1: is much more hardware focused. Most of climate tech solutions
Speaker 1: tend to be building things in the real world. What
Speaker 1: have you found that's different thinking about companies that do
Speaker 1: hardware rather than software.
Speaker 2: Well, I want to correct one thing, which is most
Speaker 2: people think of Facebook as a software company. But three
Speaker 2: years into the job, in twenty eleven, I started building
Speaker 2: data centers. So I built ten million plus square feet
Speaker 2: of data centers and seventeen regions all around the world,
Speaker 2: you know, over a decade or something. And then a
Speaker 2: few years after that, we bought this little company called Oculus,
Speaker 2: which I ran the integration of, and we started shipping
Speaker 2: consumer hardware. So if you've ever used an Oculus Quest
Speaker 2: or Rayman Meta smart glasses, you've used one of our products.
Speaker 2: And so I've you know, I've had all the joys
Speaker 2: and pains of building enterprise hardware and industrial scale and
Speaker 2: the double challenges of scaling consumer hardware, all the fun
Speaker 2: and pain of doing that, and trying to make margin
Speaker 2: on a product that consumers can return to the store
Speaker 2: if they don't like a wider scale of things. I
Speaker 2: think than most people when they think of Facebook, think
Speaker 2: about so the jump to climateech, which part of the
Speaker 2: appeal of it was actually taking those learnings. You know,
Speaker 2: I've shipped millions of devices and a built scale from
Speaker 2: scratch that very few people have, and so I think
Speaker 2: all of those apply. If you look at a portfolio.
Speaker 2: We have consumer hardware products, we have consumer software products,
Speaker 2: we have enterprise hardware products, and I think it's all
Speaker 2: stuff I've worked on before.
Speaker 1: But in terms of what you need to do in
Speaker 1: climate it tends to be products that are either just
Speaker 1: greener versions of existing things, or they are in going
Speaker 1: into a market where the margin is not that high,
Speaker 1: whereas tech hardware products tend to have the capacity, at
Speaker 1: least not initially, but when they're scale to have a
Speaker 1: large margin. So it's still a harder challenge or a
Speaker 1: different challenge.
Speaker 2: Right, Well, everything is different, every market is different, and
Speaker 2: I'd say that generally I'm looking for products to begin
Speaker 2: with that have some sort of massive advantage the right
Speaker 2: to win as a startup means you're coming in with
Speaker 2: a five x or more. Why is this product uniquely
Speaker 2: good or uniquely different?
Speaker 1: You know.
Speaker 2: I'll just give you the example of Mill, which is
Speaker 2: a one of our investments. It's a home composting device.
Speaker 2: So it looks like a trash can, but you throw
Speaker 2: your food waste into it, and then overnight it grinds
Speaker 2: it and dehydrates it and sort of shrinks it down.
Speaker 2: So a normal family, after a month's worth of food waste,
Speaker 2: gets something about the size of a shoe box that
Speaker 2: looks like coffee grounds and doesn't smell.
Speaker 1: You know.
Speaker 2: The pitch consumers is pretty simple. It's like, do you
Speaker 2: enjoy taking out your trash? Do you like it when
Speaker 2: your trash smells? The answer to most people know it's like, great,
Speaker 2: your trash doesn't smell. You have to take it out
Speaker 2: a lot less. Oh and by the way, we're massively
Speaker 2: reducing methane emissions from food waste. And this is the
Speaker 2: sort of product that once someone gets one, you'll know
Speaker 2: about it because they will tell you multiple times how
Speaker 2: awesome the mill is. They have a what's called a
Speaker 2: net promoter score higher than having shipped consumer products and
Speaker 2: know how hard it is to get those higher than
Speaker 2: most I've seen, and so that that was the first unlock,
Speaker 2: was like, wow, this is something people really like. The
Speaker 2: very next question said how much does this thing cost
Speaker 2: to make? So they showed me the bill of material,
Speaker 2: so like, okay, to make this profitable, we have to
Speaker 2: get the bomb from X to Y, and I just
Speaker 2: went through the thing and said, like, yep, we can
Speaker 2: do that. And in between the investing window of when
Speaker 2: I invested in now they've made massive progress. It's going
Speaker 2: to be a great business, going to be profitable. They've
Speaker 2: done twenty million in revenue in the last twelve months.
Speaker 2: And then there's opportunities to do bigger commercial engagements, you know,
Speaker 2: with offices and other people who have massive food waste problems. So,
Speaker 2: you know, I think it's an example of like trying
Speaker 2: to take some of those skills and learnings and apply
Speaker 2: them in these spaces.
Speaker 1: Well, most of the tech products that you've shipped that
Speaker 1: are being shipped today tend to be made in China,
Speaker 1: whereas mill made.
Speaker 2: It's got a diverse supply base. You know, I think
Speaker 2: they haven't disclosed exactly where it's made. But it's a
Speaker 2: diverse supply base and they're doing just fine with the tariffs.
Speaker 2: So I'll just say that much.
Speaker 1: If you think about the moment that we are in,
Speaker 1: is there anything about policy changes, the directions tariffs that
Speaker 1: have made you rethink your own climate investing, not just principles,
Speaker 1: but areas that you would like to invest in going forward.
Speaker 2: Yeah, I mean I think that I sort of got
Speaker 2: to investing almost by accident. I didn't start out saying
Speaker 2: I want to be an investor, I want to be
Speaker 2: a climate investor. I start out saying, like, I want
Speaker 2: to start dedicating my time, expertise, and resources towards the
Speaker 2: climate crisis. And I you know, I started on the
Speaker 2: filanthropic side with with funding science and funding policy, and
Speaker 2: then realized that, like, you know, the way a lot
Speaker 2: of these markets get transformed is through businesses. You know,
Speaker 2: if you think about like where would we be in
Speaker 2: the electric car without Tesla, Where would we be in
Speaker 2: space without SpaceX, Where it would be of the vaccines
Speaker 2: without Madarna on others? And looking at that and thinking
Speaker 2: about investing coming from this angle made me from the
Speaker 2: very beginning say, look, you can call it climate. You
Speaker 2: can do these are companies. They need to make money.
Speaker 2: That's the definition of a company. They need to sell
Speaker 2: a product that people want for you know, less than
Speaker 2: what it costs for more than what it cost them
Speaker 2: to make It is the basics of a business. Having
Speaker 2: not gone to business school, that's my one a one
Speaker 2: for business and so it caused us to really focus
Speaker 2: on areas where that was possible, and there were some
Speaker 2: technological edge, some change in the market sort of opened
Speaker 2: a window. And having been a tech a long time,
Speaker 2: what I like is exponential trends in your favor. So
Speaker 2: what's been powering AI, for example, is like increase in
Speaker 2: data and increase in compute power, and those are things
Speaker 2: that happen, you know, whether I go to work every
Speaker 2: day or not. So that's awesome. I think you see
Speaker 2: the same trends at the same scale for battery prices,
Speaker 2: for example, battery pack, battery sell prices. So if I'm
Speaker 2: trying to build a new business that's based on batteries,
Speaker 2: like my input costs are going down without me doing
Speaker 2: any work, and that's amazing. That means that I'm getting
Speaker 2: more and more competitive, you know, day by day, and
Speaker 2: so we look for businesses like that where you have
Speaker 2: some tailwind that's like driving you into a cost advantage,
Speaker 2: or some technological leap that gets you there, or you're
Speaker 2: breaking into some massive market for which you know if
Speaker 2: it may be a high risk, but once you get there,
Speaker 2: it's it's just incredible how much sort of you can
Speaker 2: drive in terms of revenue.
Speaker 1: But if you look at the mega trends in climate
Speaker 1: tech that have enabled that kind of cost reduction, whether
Speaker 1: that's solar wind batteries, those have happened because manufacturing has
Speaker 1: scaled somewhere else, mostly in China, Whereas if you look
Speaker 1: at what has America contributed in terms of bringing down
Speaker 1: the cost of climate tech, you could bring up an
Speaker 1: example like Tesla, but it could never crack a thirty
Speaker 1: thousand dollars ev as Elon Muskett promised. So if we
Speaker 1: go into this world as we have in the past
Speaker 1: six months, where we start to disintegrate relationships with China,
Speaker 1: move supply chains back to America, things will become more expensive.
Speaker 1: They won't have the same mega trends that have continued
Speaker 1: over the past two decades. They will come later if
Speaker 1: the manufacturing setup sticks around for that period. But in
Speaker 1: the intervening period, things are going to get more expensive,
Speaker 1: harder to build. How are you thinking about operating as
Speaker 1: an investor in that environment?
Speaker 2: Yeah, I mean, I think globalization brings efficiency and deglobalization
Speaker 2: is going to increase cost of everything going around the world.
Speaker 2: So I think that's just true. You know, I equible
Speaker 2: with one point, which is you know, first of all,
Speaker 2: particularly the US is often the source of many of
Speaker 2: the actual innovations. So LFP batteries invented in the United States,
Speaker 2: commercialized and scaled in China. Yep, we like missed that one.
Speaker 2: And there are places where, in particular, and I'll call
Speaker 2: out SpaceX has a very local supply chain and has
Speaker 2: built most of their stuff. They're not really relying that
Speaker 2: much on overseas supply chain for what they're building, and
Speaker 2: they've built an expertise and talent. Now they have a
Speaker 2: low production, high cost product, so that works better for that.
Speaker 2: There are other businesses that look like that too, where
Speaker 2: you have a relatively low production, high cost product that
Speaker 2: you can do in sort of series production. And we're
Speaker 2: seeing an incredible disporora of companies literally in El Segundo, California,
Speaker 2: mostly with SpaceX alumni. We're sort of taking the same
Speaker 2: playbook of a vertically integrated supply chain exceptional engineering to
Speaker 2: attack a premium product that can compete. You know in
Speaker 2: today's world. You know, there's a company called Arcbo that's
Speaker 2: building electrified started with a pleasure boat and then a surfboat,
Speaker 2: and now they're working on fishing boats, and now they're
Speaker 2: moving to their electrifying tugboats. They make hundreds or thousands
Speaker 2: of them a year. It's not fifty thousand, but they're
Speaker 2: able to do so at reasonable costs. In Los Angeles,
Speaker 2: they're manufacturing the vehicles there. You have another company out
Speaker 2: there called Lightship that's doing this for RVs, recreational vehicles.
Speaker 2: It's a massive market. Turns out a lot of people
Speaker 2: in the United States have an RV, and they can
Speaker 2: build one that is electrified and better. You're not running
Speaker 2: a generator when you're sitting there trying to camp and
Speaker 2: be out in nature, which sucks. And then you go
Speaker 2: into big technological leaps like fusion, Commala Fusion and Devn's
Speaker 2: Massachusetts sets the world record for magnet strength. They've got
Speaker 2: a magnet that, as Bob likes to say, the founder
Speaker 2: CEO can lift an aircraft carrier. It's that powerful. And
Speaker 2: so really that is dependent on like a massive technical
Speaker 2: leap innovativeness, which I would argue the United States as
Speaker 2: historically been the leader in and if we can make
Speaker 2: fusion work. I mean, just to put this in perspective
Speaker 2: to power or here in London, London's about call it
Speaker 2: four gigawatts of consistent power about one hundred gig abot
Speaker 2: hours a day. So we kind of did some rough
Speaker 2: math on the way here to like power this with fusion,
Speaker 2: you need a couple of kilograms of fuel a day,
Speaker 2: so like two MacBooks, I could fuel the plant and
Speaker 2: carry it my backpack each day. You know, it's about
Speaker 2: a million plus maybe ten million more energy dance than coal.
Speaker 2: So like if we can crack that, Yes, energy is
Speaker 2: a commodity, but I'm like showing up with a totally
Speaker 2: different solution to that commodity, which is this like super
Speaker 2: energy dance process that really relies on massive innovation. And
Speaker 2: that's a place where I think betting on startups, betting
Speaker 2: on the West is tractable.
Speaker 1: Yeah, I mean, there is no doubt there's a whole
Speaker 1: bunch of innovation that has happened in the US that
Speaker 1: is now climate tech for the rest of the world.
Speaker 1: You didn't go all the way back to the nineteen
Speaker 1: fifties with the silicon Footobell take cell was invented in
Speaker 1: Bell Labs in America. You didn't go to the nineteen
Speaker 1: seventies when the lithium and pattery itself. Even before we
Speaker 1: come to up cathered that does specific things. The first
Speaker 1: setup of Aliti mand matterio is invented in the next
Speaker 1: on mobile lab. So there is not saying America can't innovate,
Speaker 1: and we'll come to what's happening with science funding and
Speaker 1: how that might affect climate in tech investing. But it
Speaker 1: is true there is an ecosystem to innovate. There is
Speaker 1: the brain power to bring these ideas into commercial opportunity,
Speaker 1: but then grabbing that opportunity and actually scaling companies has
Speaker 1: been rare. So you brought up an example, which is
Speaker 1: SpaceX really good example in the Space Arena. A lot
Speaker 1: of that has been possible because it had government contracts
Speaker 1: big ones initially, which required it to have a local
Speaker 1: domestic supply chain because that's the requirement from NASA to
Speaker 1: be able to put on American astronauts into the space station.
Speaker 1: But then it's been able to use that tailwind to
Speaker 1: actually become a commercial entity that does work for everybody
Speaker 1: and anybody. You know, there are Indian satellites that get
Speaker 1: launched by SpaceX, but you needed that initial support from
Speaker 1: the US government to bring the company to a point
Speaker 1: where it is commercially now the leader America is not
Speaker 1: doing that for any other sector. So LFP is a
Speaker 1: very good story of that. Right. LFP was invented in America.
Speaker 1: A one to three was the company that was going
Speaker 1: to scale up the battery chemistry, and then it got
Speaker 1: bought by China. And we know the story. This gets
Speaker 1: repeated multiple times. So as a climate tech investor going
Speaker 1: into an early stage company, how do you think about
Speaker 1: scale when it comes to becoming a SpaceX.
Speaker 2: Yeah, this is where I like, I actually don't describe
Speaker 2: myself as a climate tech investor because I think that
Speaker 2: that is a ill posed frame of what this is. Like,
Speaker 2: these are hardware companies typically, and so if you zoom
Speaker 2: out a little bit and talk about hardware and say, like,
Speaker 2: all right, what are the big interesting new hardware companies
Speaker 2: that's shown up in the last twenty or thirty years.
Speaker 2: Just talked about how I I went to a company
Speaker 2: that went from zero to tens of millions of square
Speaker 2: foot of operating facilities all around the world in a decade.
Speaker 2: You've seen similar things happen at Microsoft at Amazon in
Speaker 2: both with data centers and in their case and warehouses
Speaker 2: and fleets of planes and trucks and other things. So
Speaker 2: you just look at the largest companies in the world,
Speaker 2: they are predominantly American companies, and so I think there
Speaker 2: is an opportunity to grow and scale these things. It
Speaker 2: requires having a business model. You know, in Videa's case,
Speaker 2: they have Silicon and Chips are the most extreme example
Speaker 2: of the companies that I think have a chance, which
Speaker 2: is you concentrate a tremendous amount of human R and
Speaker 2: D into a product that I can put in the
Speaker 2: palm of my hand and I can sell by the millions.
Speaker 2: We had very hard margins. That is an incredible business, right,
Speaker 2: that is as good as it gets. And like, look
Speaker 2: at everyone in the world chasing out you know, for
Speaker 2: five years it's been obvious this is this amazing business.
Speaker 2: Everyone's throwing money at it and they can't catch Jensen, right,
Speaker 2: And so once you get scale it's like really hard
Speaker 2: to catch, and so I think there are very few
Speaker 2: businesses that are like silicon think that you know, on
Speaker 2: the other extreme, you have just baseline commodities that are
Speaker 2: very hard, things like steel, concrete, cement, and those sorts
Speaker 2: of things. And there's like a big space of stuff
Speaker 2: in the middle there that I think is really really
Speaker 2: quite interesting. As a very specific example, so I'm not
Speaker 2: just talking in generality, is you know a bunch of big,
Speaker 2: boring equipment that you talked about in a show two
Speaker 2: weeks ago as transformers. You know, these things that take
Speaker 2: one voltage to another voltage, and they're been built the
Speaker 2: same way, roughly speaking, for the last hundred years or
Speaker 2: right now on a cost curve down on solid state transformers,
Speaker 2: and you know, they are getting down cost down about
Speaker 2: ten to fifteen percent every year. They're increasing sort of
Speaker 2: in their efficiency, and so I think we're just at
Speaker 2: the cycle now where you know, I'm going to be
Speaker 2: able to build a transformer at a tenth the size
Speaker 2: of an existing transformer. There's immense demand for these things,
Speaker 2: so we're going to like sell everyone. There's a company
Speaker 2: we just funded called Heron, with an exceptional founder from
Speaker 2: eighteen years of Tesla DRUBEGL. You know, I think that's
Speaker 2: an amazing market. They are not going to be able
Speaker 2: to make enough of their product to meet demand in
Speaker 2: the early days, and they're going to build a hugely
Speaker 2: differentiated product thanks to an innovation which is sort of
Speaker 2: power electronics and solid state, which is relatively new.
Speaker 1: There's one way to think about why energy innovation in
Speaker 1: America hasn't quite scaled, which is, for the past thirty years,
Speaker 1: energy demand has been roughly flat. And that is true
Speaker 1: of all energy demand. That's true of electricity demand specifically,
Speaker 1: which is now starting to change the demand, especially in
Speaker 1: the West with Europe and North America looking to build
Speaker 1: data centers but also electrifying their fleet, adding heat pumps.
Speaker 1: And there is something that growth does to the need
Speaker 1: for innovation and the need for market developments that steady
Speaker 1: or a declining market does not do. Right.
Speaker 2: Yeah, I think that's a really great point. And the
Speaker 2: way I would actually plus one that and say it
Speaker 2: even stronger, which is energy access has become a boardroom
Speaker 2: conversation in a way that wasn't true like literally four
Speaker 2: years ago. So it is a top ordering conversation because
Speaker 2: if I don't have access to energy. I can't build
Speaker 2: the compute power I need. I can't build the data services,
Speaker 2: the AI models, and I may lose out to my competition.
Speaker 2: And you're seeing large companies. You know, Meta just announced
Speaker 2: yesterday a deal for geothermal XGS. It was the second
Speaker 2: geo thermal deal after Sage. Obviously Google has been doing
Speaker 2: the same with Fervo. You've got most of the hyperscalers
Speaker 2: being contracts for, you know, fission plants. It is categorically
Speaker 2: different to say I need more of it or I
Speaker 2: can offer it a better price. And like, getting access
Speaker 2: to this thing is the difference between my business succeeding
Speaker 2: or not. And so I'm willing to pay more. I'm
Speaker 2: willing to take risks on new innovative technology and that
Speaker 2: is a pull through, particularly on the energy side, that
Speaker 2: like didn't exist even a few years ago, that I'm
Speaker 2: incredibly excited about and I think it's enabling a lot
Speaker 2: of new innovation.
Speaker 1: After the break, are funding cuts in the US breaking
Speaker 1: the innovation pipeline. And Hey, if you're enjoying this episode,
Speaker 1: please take a moment to rate and review the show
Speaker 1: on Apple Podcasts and Spotify. Your feedback really matters and
Speaker 1: helps new listeners discover the show. Thank you. So a
Speaker 1: lot of your investments are at early stage companies, and
Speaker 1: the pipeline of innovation that is America that creates these
Speaker 1: early stage companies is really strong. But we are going
Speaker 1: to see, and we are starting to see already heavy
Speaker 1: cuts to science funding, to health funding, to energy technology funding.
Speaker 1: How do you think that changes your ability to think
Speaker 1: about investing not next year, not in two years, but
Speaker 1: in five or ten years. Yeah.
Speaker 2: I mean, I'm a deep believer in the power of
Speaker 2: you know, science and research to sort of accelerate our
Speaker 2: ability to build interesting things and solve problems. So, you know,
Speaker 2: I don't really know how this is all going to
Speaker 2: shake out, but if it does, you know, if we're
Speaker 2: doing less of that, then it is slowing down the
Speaker 2: pipeline of things. You know, I would say five plus
Speaker 2: years out. You know, there's a I was talking yesterday
Speaker 2: and you know, someone was sharing some research they had
Speaker 2: done which you know, said that most things to go
Speaker 2: from a lab discovery to say one hundred million dollar
Speaker 2: commercial deployment, you know, it's on the order of ten
Speaker 2: to twenty years, and so it's probably not a five
Speaker 2: year problem. It's more like a ten or twenty year problem,
Speaker 2: but it's still a problem we do as a society,
Speaker 2: as humanity, need to be investing sort of at all
Speaker 2: stages of innovation.
Speaker 1: You know.
Speaker 2: My part of why I you know, I've been working
Speaker 2: in technology in some form for twenty five plus years,
Speaker 2: and I sort of asked myself sometimes like why am
Speaker 2: I keep doing this? And you know, whenever I'm having
Speaker 2: a bad day or bad week, you know, I just
Speaker 2: sort of like try to look back and one hundred
Speaker 2: plus years ago or a little a little more, like
Speaker 2: it wasn't safe to drink the water in London because
Speaker 2: we didn't really understand and how to disinfect it. Technology
Speaker 2: has fundamentally improved the human condition, and it is the
Speaker 2: vehicle by which we take difficult zero sum problems. Can
Speaker 2: we fund this or can we fund that? And we
Speaker 2: come up with a solution that's half the price, and
Speaker 2: we say, guess what we can do both? And that
Speaker 2: is sort of where I have dedicated my life, and
Speaker 2: I'm hopeful. I'm concerned about this, and I'm hopeful we
Speaker 2: can find ways to sort of get back to funding
Speaker 2: the basic research that is the sort of early fuel
Speaker 2: in this pipeline of incredible technologies to advance human prosperity.
Speaker 1: So I've been covering venture capital investing in climate tech
Speaker 1: for a while now, and a lot of the money
Speaker 1: that goes into these companies tends to be American. A
Speaker 1: lot of the companies that are in this space tend
Speaker 1: to be American. What's happening on science funding? We are
Speaker 1: seeing places like Europe but also China, Japan, even India
Speaker 1: looking to boost science funding, looking to either attract some
Speaker 1: of the scientists who left those parts to come back
Speaker 1: home or to just give I mean, these are words
Speaker 1: that politicians have used refuse to American scientists who want
Speaker 1: to do work. Would you start to see opportunities to
Speaker 1: invest more in those regions as climate tech investor? Because
Speaker 1: are you tied to wanting an American company or are
Speaker 1: you agnostic?
Speaker 2: I will go where the great innovation happens. My current
Speaker 2: thesis and continues to be that, you know, and it's
Speaker 2: not exclude one of our companies as a French based company,
Speaker 2: dic Cycle, and I think they're amazing producing clean chemicals
Speaker 2: using electro chemistry, and so I'm not dogmatic about it.
Speaker 2: I do think having built teams internationally all over the world,
Speaker 2: built things all over the world. That America still is
Speaker 2: particularly and particularly the West Coast and Boston, you know,
Speaker 2: is particularly unique in its ecosystem and ability to start things.
Speaker 2: I mean, I'll tell you when I started doing this work,
Speaker 2: I live in the Bay Area in San Francisco area,
Speaker 2: and I had a question of like, am I on
Speaker 2: the wrong spot? Should I be in Houston, Should I
Speaker 2: be in Boston? Should I be somewhere else? And so
Speaker 2: I had sort of a point of reflection, maybe I
Speaker 2: need to move to be where the action is. And
Speaker 2: it just turns out that the Bay Area, in particular
Speaker 2: in Los Angeles are still the epicenter of startups. You
Speaker 2: can walk down the street and find someone who understands AI.
Speaker 2: You can find an IP lawyer, you know, you can
Speaker 2: find a CFO. It just like has the density of
Speaker 2: talent you need. And that people have been trying to
Speaker 2: recreate Silicon Valley and we call them, you know, Silicon
Speaker 2: Alley or whatever it may be. And it's just hard
Speaker 2: because you're recreating an entire ecosystem. Now you can screw
Speaker 2: that up. You can you can mess it up over time.
Speaker 2: And you know, I really hope America doesn't because I
Speaker 2: think it's it's a huge engine of innovation and productivity
Speaker 2: for the world, but it will, you know, for now,
Speaker 2: I think it is the pre eminent.
Speaker 1: Place to do it.
Speaker 2: But again I'm not dogmatic. We see a great company
Speaker 2: somewhere else in the world. I think there are a
Speaker 2: billion people all over the world. I think India in
Speaker 2: particular is investing a lot, as is China and others. So,
Speaker 2: you know, I hope we see a lot of innovation
Speaker 2: all over the world.
Speaker 1: Looking over the next three to four years. What are
Speaker 1: the things that you are seeking companies to bring solutions
Speaker 1: in the climate text space that you would like your
Speaker 1: capital to go towards.
Speaker 2: So we invest in everything, industrials, you know, land use,
Speaker 2: car removal, all the rest of it. We have a
Speaker 2: pretty balanced portfolio of those things. But I would say,
Speaker 2: if you, if you like, made me be focused. The
Speaker 2: two things I'm obsessed with are very simple. It's energy
Speaker 2: and it's AI for acceleration of atoms and so energy
Speaker 2: is pretty straightforward. As you know, are there new ways
Speaker 2: to produce slow carbon energy cheaply distributed store it? I
Speaker 2: think there's just a tremendous amount of innovation, whether it's fusion,
Speaker 2: advanced geothermal, battery storage. I think there's a ton of ways,
Speaker 2: a ton of places where we can put batteries and
Speaker 2: things because it's you know, cheaper, better, faster. You can
Speaker 2: you can do it in induction stoves, you can do it,
Speaker 2: lawn care equipment, you can do it in r v's.
Speaker 2: Like we're just kind of getting started replacing all the
Speaker 2: gas stuff, all the diesel generators with batteries. In fact,
Speaker 2: we just recently did an investment in a fishing company
Speaker 2: that's building a microreactor called Radiant, and their target market
Speaker 2: is diesel generators. It's a small reactor, it's one megawatt,
Speaker 2: but you know in regions where it's hard to get
Speaker 2: to to ship diesel fuel there and it's incredibly expensive
Speaker 2: to do so, so you can actually build a cost
Speaker 2: competitive product, you know, by shipping a container that just
Speaker 2: produces energy for five years straight. That's that's exciting. So
Speaker 2: I think energy broadly is super exciting. And then you know,
Speaker 2: we've been seeing a lot of really interesting applications of
Speaker 2: advances and AI for I would say accelerating the scale
Speaker 2: out the first wave of these companies. We're trying to
Speaker 2: accelerate discovery, so trying to use materials discovery or you know,
Speaker 2: chemistry discoveries. And I was honestly like struggling with those companies,
Speaker 2: mostly because I think, as you rightly pointed out, it's
Speaker 2: the scale out that's the really hard part of this.
Speaker 2: And like is I think ninety plus percent of the
Speaker 2: work and energy, and so it's like you got to
Speaker 2: go attack that problem. So we started poking on that problem,
Speaker 2: and we're just seeing a really interesting crop of companies
Speaker 2: whose thesis is how do we get from sort of
Speaker 2: like idea to production faster and get through iteration, reduce
Speaker 2: testing cycles. We need to build a lot of stuff anyway,
Speaker 2: you can it five x the grid in the United States.
Speaker 2: How do we just do that faster? And I think
Speaker 2: that that's actually a really really interesting problem to solve.
Speaker 1: We have seen a decline in climate tech investments broadly
Speaker 1: over the past three years. Now this is before Trump.
Speaker 1: Even a lot of those investors came in because climate
Speaker 1: tech investing was hot, and now many of those have
Speaker 1: gone to AI because AI is hot. When you're thinking
Speaker 1: about investing in companies, you always invest with other investors.
Speaker 1: How have you seen this decline play out. Is it
Speaker 1: going to be catastrophic because there are companies that are
Speaker 1: going to go bankrupt? Or is it a good thing
Speaker 1: because people who really weren't very serious about climate are
Speaker 1: now not there. Yeah.
Speaker 2: I mean, i'd say, first of all, the data I've
Speaker 2: seen at least is that overall funding in VC is down,
Speaker 2: and so if you like look at climate tech related
Speaker 2: to overall VC, it's actually down less than over all VC.
Speaker 2: But in practice, what I'm seeing in the market is
Speaker 2: the more interesting question. And what I'd say is there
Speaker 2: was a time twenty two on twenty twenty one where
Speaker 2: we were like seeing deals come through with like very
Speaker 2: fast markups, very short diligence, what i'd call sort of
Speaker 2: non ideal sort of conditions to do a rigorous diligence
Speaker 2: for an investing process that I didn't like. We're now
Speaker 2: seeing sort of more ractionality. We have more time to
Speaker 2: look at deals and understand them, really get to know
Speaker 2: the founders, you know, understand the economics and the technology.
Speaker 2: But we're seeing many many companies getting over subscribed grounds,
Speaker 2: meaning that they have more investor interest than they need.
Speaker 2: And I think it's almost a bifurcation where you see
Speaker 2: companies in the market struggling to raise because they maybe
Speaker 2: had too high evaluation or maybe the economics weren't as
Speaker 2: favorable as they thought for their business. And I think
Speaker 2: the ones you're seeing do really well are you know,
Speaker 2: exceptional founders with a product that has an entitlement of
Speaker 2: a better, faster, cheaper and people just want it, and
Speaker 2: those those rounds are going real fast. So it's a
Speaker 2: it's a kind of tale of two companies. In many cases,
Speaker 2: I'm sure there's founders listening to this struggling to fundraise.
Speaker 2: And look, I started my first company in two thousand. I
Speaker 2: remember what that like. It sucks, so I like, my
Speaker 2: heart goes out to you. But I think there is
Speaker 2: there is still appetite and capability to fund companies out there.
Speaker 1: And then the other thing that venture capitalists tend to
Speaker 1: say most of the time is that, look, we invest
Speaker 1: in companies because they're great ideas and not because they're
Speaker 1: getting policy support or government incentives. And so, you know,
Speaker 1: whatever happens with the government, we're trying to not be
Speaker 1: affected by it. But that is only half true because
Speaker 1: a lot of the markets that need to be created
Speaker 1: with climate tech products need to be created by producing
Speaker 1: stuff that is initially expensive has to become cheaper by
Speaker 1: giving people incentives in the form of government subsidies to
Speaker 1: make that product cheaper so that people can use it.
Speaker 1: That policy is certainly in the US going away. And
Speaker 1: so you've got these two tracks, I would say, in
Speaker 1: climate tech, where there's mature industries. We talked about solar
Speaker 1: wind batteries, electric cars that will continue to grow because
Speaker 1: they're mature, because the price point is where it is
Speaker 1: and companies are going to make profits making them. And
Speaker 1: then there are a whole bunch of immature technologies we
Speaker 1: talked about fusion, but also you know hydrogen or carbon capture,
Speaker 1: point source carbon capture or carbon removal, which requires companies
Speaker 1: to actually buy offsets, which you know, at a voluntary
Speaker 1: scale they can buy somewhat, but like if you have
Speaker 1: a regulatory market like here in Europe, then you actually
Speaker 1: have scale and you have actually a market. Poll So
Speaker 1: with policy going away in the US, what do you
Speaker 1: stop investing in?
Speaker 2: Well, it's not I think going away, as I would say,
Speaker 2: is too big a statement. It's changing and aspects of
Speaker 2: it are going away. And I think you know, what
Speaker 2: we had was a fairly broad set of programs like
Speaker 2: investing in a lot of stuff across the board, and
Speaker 2: what you have from the government's perspective, and what you
Speaker 2: have is a much more tailored, targeted set of things. So, yes,
Speaker 2: hydrogen is challenged. I think carbon removal is challenged. I
Speaker 2: think if you look at the fission market, it's actually
Speaker 2: turbo charged at this point that the administration is like
Speaker 2: making room for regulatory approval on others in a way
Speaker 2: that didn't happen before. So I think it's quite simple
Speaker 2: as that. You know, we've got to do our homework
Speaker 2: in terms of the conditions of the market, and if
Speaker 2: the market is being supported by some sort of policy
Speaker 2: or regulatory sort of tail when we just do an
Speaker 2: analysis on like how stable is that right and how
Speaker 2: how likely is that going to be to continue, we don't,
Speaker 2: you know, typically invest in anything that's dependent on legislation
Speaker 2: that hasn't already passed. So you're really only just looking at, okay,
Speaker 2: are you depending on things that are on the books today,
Speaker 2: how stable are those?
Speaker 1: You know?
Speaker 2: I tend to be skeptical of, for example, even things
Speaker 2: that are on the books where we haven't really felt
Speaker 2: the impacts like it's going to create an economic burden
Speaker 2: on people, because those things tend to get pushed out
Speaker 2: when you get real close to them because people, you know,
Speaker 2: people don't want to pay and so so I still think,
Speaker 2: you know, it's a much more nuanced sort of analysis,
Speaker 2: you know, of all of these things. But fundamentally, if
Speaker 2: I'm you know, back to our you know, there's massive
Speaker 2: energy demand. If I'm producing electrons faster or cheaper, I've
Speaker 2: got a great business. It's usually one company that transforms
Speaker 2: an industr, Like I think fusion is going to happen
Speaker 2: because one or two companies, you know, I think I
Speaker 2: think Hearen's going to transform you know, power electronics. I
Speaker 2: think mill is going to solve more food waste problems
Speaker 2: than any company ever in history. Like, I think you
Speaker 2: got the shot that like when it works, you like
Speaker 2: kind of replay history without Nvidia, right, or that without Intel, Like,
Speaker 2: and you're just like, what would it look like? We
Speaker 2: don't have to get them all, right, We just have
Speaker 2: to get a couple of the ones that are sort
Speaker 2: of world changing and that I'm hoping will be the
Speaker 2: co alignment of like massive climate impact and some interesting
Speaker 2: financial returns for our investors.
Speaker 1: So we talked a bunch about climate investing, but you
Speaker 1: started with climate philanthropy. Yeah, and you continue to do that.
Speaker 1: Where do you see the difference between investing in an
Speaker 1: idea that'll make money versus investing in an idea because
Speaker 1: it needs to exist.
Speaker 2: That's a great question. I mean, I think there's a
Speaker 2: fairly clear line, at least in my mind, and the
Speaker 2: way I think of it as quite simple. I think philanthropy,
Speaker 2: at least for me, is really effective at early stage science.
Speaker 2: You know, we talked about the early innovation and sort
Speaker 2: of policy work. It's a place where you don't even
Speaker 2: know if it's going to work, you don't know how
Speaker 2: to make money on it. You're just trying to increase
Speaker 2: our understanding of different things. So there's some really promising
Speaker 2: carbon removal pathways, one called ocean acclinity enhancement, which is
Speaker 2: a way to sort of supercharge something that happens naturally
Speaker 2: in the ocean chemistry. And the first question is like
Speaker 2: is it safe, is it effective? And how much does
Speaker 2: it cost? And the answers to that are like frustratingly broad.
Speaker 2: But in that broad range, if you hit some parts
Speaker 2: of the target, it may actually be the cheapest, most
Speaker 2: scalable form of government removal. I think it's a great
Speaker 2: place for us to go do science and say like, well,
Speaker 2: let's go try to answer those questions and like let's
Speaker 2: answer them with rigorous and inteligence without trying to worry
Speaker 2: about whether're go to make money on it, and let's
Speaker 2: like try to write some papers. That's a good use
Speaker 2: of philanthropy, I think for a lot of things we're
Speaker 2: talking about where it's like, you know, solid state transformer,
Speaker 2: solid state electronics, that's just at the point now where
Speaker 2: like I think it is crossing the commercially competitive line.
Speaker 2: It was too expensive and not reliable enough, and I
Speaker 2: think we're like just getting at the point, so we're
Speaker 2: about a year or two out from I think major
Speaker 2: commercial deployments. That's a great place for a company because
Speaker 2: you're like trying to scale something out and trying to
Speaker 2: make money doing it. That's that's where I think industry
Speaker 2: works really really well.
Speaker 1: And you've also given money to ideas in philanthropy to
Speaker 1: try and deal with impacts that are coming our way.
Speaker 1: So we're going to see sea level rise, you're looking
Speaker 1: to give money to ideas that will help us deal
Speaker 1: with a problem that is kind of baked in. You know,
Speaker 1: the models are quite uncertain, but we do know even
Speaker 1: if we meet our climate goals, sea levels will continue
Speaker 1: to keep rising for hundreds of years to come. Why
Speaker 1: is that a problem that you are putting money in
Speaker 1: as a philanthropy rather than stuff that governments are supposed
Speaker 1: to do. This is basic research, This is good for society,
Speaker 1: This is good for all countries, not just for one
Speaker 1: specific country. So every government should really be keen and
Speaker 1: investing in right.
Speaker 2: The honest answers. I don't know why other people aren't
Speaker 2: doing it. I think one of the things I'm pretty
Speaker 2: good at is finding the white space. And so why
Speaker 2: ended up here is like, for whatever reason people weren't
Speaker 2: And you know, as you start kind of peeling the
Speaker 2: onion on it, it gets worse, not better. Which is
Speaker 2: our models for sea level rise are pretty pretty rough.
Speaker 2: You're talking hundreds of years. Let's talk in the lifetime
Speaker 2: of our children. That's twenty one hundred. It's not that
Speaker 2: far away. Seventy five years. Models say somewhere between point
Speaker 2: two to two meters of sea level rise. That's really
Speaker 2: problematic for Mimi in New York and so first question
Speaker 2: is can we like better answer that question? And that's
Speaker 2: again a place for science, so has to do work,
Speaker 2: and it's not actually that expensive to go go do
Speaker 2: that work. And then the next question is, like, if
Speaker 2: it's as bad as we think, besides building sea walls,
Speaker 2: is there anything we can do just like slow this down?
Speaker 2: And I think that again, it's that's a good scientific
Speaker 2: question ask, and I think it's worth just framing this again.
Speaker 2: Is all this climate stuff can feel really abstract, and
Speaker 2: we talk about models and one see and this, like
Speaker 2: I think about this in terms of people. We're talking
Speaker 2: about islands underwater, we're talking about people being displaced, So
Speaker 2: like I about impacts these things have on people in
Speaker 2: our lifetime. And the question is how do we better
Speaker 2: understand them and better prepare for them and hopefully prevent
Speaker 2: or mitigate them, And like that that is the thing
Speaker 2: that sort of underlies everything I'm doing.
Speaker 1: Thank you, Mike, Yeah, and thank you for listening to
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