The Breeze - Issue #1
USV, YC and Evolve Energy
|Mar 6, 2020||16|
The goal of this newsletter is to show you what’s happening in climate tech investing so that you, too, consider investing in climate tech startups.
As this is the first issue, let me share some context:
My story started in September 2019, when my friend and mentor Gentry Underwood suggested that I read The Uninhabitable Earth by David Wallace-Wells. It’s a compilation of the most alarming climate science and journalism that has come out over the past years. Fun, right?!
It was a red pill moment for me: once I knew about the climate crisis, I had to choose to ignore it or do something about it. I was trained in early-stage investing by Mike Maples and Ann Miura-Ko at Floodgate and Semil Shah at Haystack, so I was naturally curious about what VCs were doing.
At first look, I found nothing. Climate was in the news with Greta, in politics with the Green New Deal, and in our Bay Area backyard with wildfires and blackouts. It can partly be explained by Sand Hill VCs having scars from the cleantech 1.0 bust. But as I looked closer, I discovered new funds started by cleantech 1.0 vets (Sierra Peterson, Abe Yokell, Paul Straub, Shayle Kann) and newer entrants (Emily Kirsch, Ela Madej & Seth Bannon, Clay Dumas) that were moving money. And on the startup side, dozens were popping up, seeking VCs who understood their industries. A small ecosystem was emerging.
I realized that from where I sit in Silicon Valley, the highest lever I could pull was what I do as a super-connector: make info and intros flow. I spent the last 5 months learning about climate through communities like My Climate Journey, meeting founders across industries in transition (e.g. energy, transportation & mobility, food & ag), and sharing what I was learning 1 on 1 with VCs in my network.
My goal is to help investors learn about and become comfortable with investing in climate tech startups, so they would start funding them. With more capital moving into climate tech startups, we’ll have more shots on goal to solve climate problems at scale.
This newsletter is a chance to scale up my info and intro sharing. Thanks for being one of the first 670 to subscribe. Let’s get started.
Fred Wilson and Albert Wenger talk about climate investing at Upfront Summit
Albert Wenger was one of the first VCs I found talking about the climate crisis. In his MCJ podcast in October 2019, he said that to solve the climate crisis we need investing and activism. Investing helps solutions get to scale, and activism drives policy changes. This motivated me to figure out how I might invest in climate tech startups and to participate in a local Youth vs Apocalypse climate strike in SF. Here’s a nifty tweetstorm about it.
In January 2020, USV made two announcements. Fred Wilson predicted that climate will be the #1 issue of our century (!!). Albert announced investments into two climate-focused startups: Leap (no relation) and Wren. I was especially excited to see that they open-sourced their climate investing research deck. Here’s another nifty tweetstorm.
A few weeks ago, Erin Griffith interviewed Fred and Albert at the Upfront Summit in LA. Fred reiterated, “The climate crisis is the thing of this century.” He elaborated, “We built the modern economy on carbon, and we have to stop. We know how to stop, and we just have to do it… It’s also a fantastic investment opportunity.”
I appreciate that USV recognizes the scope of the problem and the opportunity. How will they approach the opportunity? By investing in what they’re best at. Fred says, “Most of what we do in climate will be in software-based business.” He gives a deserved shout-out to DCVC and Lux Capital for their work investing in deep climate tech. Albert adds, “It’s all about taking the things that already work and scaling them up. That’s where digital technology can play a big role.”
Climate tech investing is about playing to one’s strengths. If you’re a scientist, politician, engineer, growth hacker, designer, or just have an interest, there’s a role for you in helping move solutions forward. Albert leaves us with this call to action: “There’s no excuse for someone who says, ‘I don’t know how to invest in this.’ If you are an investor and put your mind to it, you will find interesting things to invest in.”
YC’s Gustaf Alströmer talks climate investing with James Beshara and Pachama founder Diego Saez-Gil
One of the first things I got pointed to in my search for climate investors last Fall was YC’s Request for Carbon Removal Startups. It’s been up since 2018, which is ahead of the recent climate investing curve. They’ve invested in a dozen or so startups ranging from plant-based food and materials to carbon removal and offsets to electric airplanes.
Gustaf at YC was one of the first to emphasize to me that we need to not only decarbonize every industry to zero emissions, but we must also remove carbon from the atmosphere. They’re both necessary conditions. We have our work cut out for us.
In a conversation with Below the Line podcast host James Beshara and Pachama Founder & CEO Diego Saez-Gil, Gustaf reminds us how technology has a history of getting us out of situations like the climate crisis. When the ozone hole was discovered in the 80s, we didn’t stop using fridges and freezers; we innovated and replaced ozone-depleting substances with new tech.
We’re already responding to the climate crisis. Gustaf said, “Many cities around the world [have] an end date for combustion engine cars. That’s a signal to the economic world that the wave is coming."
This transition opens the financial opportunity, which he says, “is enormous.” We’ll see changes in transportation, fuel, construction, materials, smart homes, food production. “When we know there’s a large amount of innovation needed, investors tend to get excited." To look for opportunities, he suggests looking at the biggest sources of emissions.
Diego adds that it’s not just a transition, but a transformation:
We are realizing that we are going to need a transformation of the economy — the way that we do everything, at a scale similar to or bigger than the industrial revolution. We have to change the way that we do transportation, the way that we do agriculture, the way that we produce food, the way that we move everything around the economy — shipping, manufacturing, energy production — everything we do. When you’re facing such a transformation, it’s full of opportunities for creation. Creation is value. That’s what the first billionaires of America — the Vanderbilts, the JP Morgans, the Henry Fords — did to build the infrastructure of the new economy. Here we’re talking about building the infrastructure of a new civilization. Either we completely redesign civilization as we know it for the 22nd century, or we probably perish.
Let’s go with the redesign option.
Interview with Michael Lee of Evolve Energy
Michael explains how incentives are misaligned in residential energy today. The more energy you use at home, the more the energy provider earns, so they have no incentive to help you reduce consumption or save money.
Evolve changes the model by passing on wholesale rates to consumers and charging a monthly membership fee. Since they don’t make money on the energy consumers use, they can help consumers reduce energy and find more ways to save.
The cool thing is that they do this by connecting with the smart devices like thermostats in your home (and soon with the millions of EVs that consumers will plug in) and optimizing the entire system with AI according to customers’ preferences for cost, comfort and carbon impact. With more renewable energy on the grid, that often translates to free electricity to consumers. Evolve has the smart software layer and aligned business model to take advantage of it.
I’ve found that I learn the most by talking with founders, so I want to surface some of those conversations with you. I recorded the conversation with Talkshow, a new app that lets you listen in live or after the fact like a podcast. As a sneak peek, I’ll do the next one on Tuesday at 10am pacific with Maria Fujihara, cofounder & CEO of SINAI Technologies, which is in the current YC batch. Follow me on twitter (@leepnet) for the live link on Tuesday morning.
Thanks for reading! You can reach me at firstname.lastname@example.org.