June 26, 2025 • 35 mins
Climate tech is not the hot investor thesis it once was a couple of years ago. After several record breaking years, and billions of dollars being poured into climate startups, venture capital investments are way down. This week on Zero, Akshat Rathi speaks with Mike Schroepfer, who runs Gigascale Capital, a venture firm focusing on climate investments, and used to be Meta’s chief technology officer. Schroepfer shares his views on the current investment climate, the danger of funding cuts to US research, and why demand for AI will prompt a new wave of energy innovation.
Explore further:
- Gigascale Capital
- Investors Rushed to AI as Climate Tech Funding Fell 40% in 2024 - Bloomberg
- New Venture Capital Firms Are Facing a Disastrous Fundraising Climate - Bloomberg
Zero is a production of Bloomberg Green. Our producer is Oscar Boyd. Special thanks to: Jess Beck, Eleanor Harrison-Dengate, Sommer Saadi, Mohsis Andam and Siobhan Wagner. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to zero. I am Akshatrati this week inside the
Mind of a Climate BC. Climate tech is not the
(00:21):
hot investor thesis it was just a few years ago.
After several record breaking years and billions of dollars being
poured into climate startups, venture capital investments are way down
lower than they were in twenty nineteen. According to PwC.
Much of the hot money has now moved to AI.
In all that time, though, the importance of investing in
(00:44):
climate solutions has only grown, and so has the number
of people working on them, bringing in skills and expertise,
often from other industries into the climate solution space. Mike
Strepfer is one of them.
Speaker 2 (00:58):
Energy access has become a boardroom conversation in a way
that wasn't true like literally four years ago. If I
don't have access to energy, I can't build the compute
power I need. I can't build the data services, the
AI models, and I may lose out to my competition.
Speaker 1 (01:14):
From twenty thirteen to twenty twenty two, Mike Schrepfer was
the Chief technology officer at Meta, the company behind Facebook, Instagram, WhatsApp,
and Oculus. There he helped build out Meta's data centers
globally and led the integration of manufacturing the Oculus virtual
reality headset. After leaving Meta in twenty twenty three, he
(01:35):
founded Gigascale Capital, a VC firm specializing in climate tech.
Gigascale has invested in a wide range of companies, from
those trying to create green steel and crack nuclear fusion
to ones trying to vaccinate cattle to reduce methane verbs.
Mike also founded Additional Mentors, a philanthropy that focuses on
(01:56):
early stage research in biomedical and climate science. So I
wanted to ask Mike how does he see the climate
tech landscape in twenty twenty five, What are the challenges
of manufacturing in the US versus China? And how does
data center demand lead to innovation in energy? Mike, Welcome
(02:16):
to the show.
Speaker 3 (02:17):
Thank you glad to be here.
Speaker 1 (02:18):
So you've come to investing in climate from a different
background than most people coming to investing in climate have
You've come from scaling companies in the software sector, working
at large software companies, but now you're doing something that
is much more hardware focused. Most of climate tech solutions
(02:41):
tend to be building things in the real world. What
have you found that's different thinking about companies that do
hardware rather than software.
Speaker 2 (02:50):
Well, I want to correct one thing, which is most
people think of Facebook as a software company. But three
years into the job, in twenty eleven, I started building
data centers. So I built ten million plugs square feet
of data centers and seventeen regions all around the world,
you know, over a decade or something. And then a
few years after that, we bought this little company called Oculus,
which I ran the integration of, and we started shipping
consumer hardware. So if you've ever used an Oculus Quest
(03:13):
or Rayvan Meta smart glasses, you've used one of our products.
And so I've you know, I've had all the joys
and pains of building enterprise hardware and industrial scale and
the double challenges of scaling consumer hardware, all the fun
and pain of doing that and trying to make margin
on a product that consumers can return to the store
if they don't like. It's a wider scale of things
(03:34):
I think than most people when they think of Facebook
think about so the jump to climate tech, which part
of the appeal of it was actually taking those learnings.
You know, I've shipped millions of devices, and I built
scale from scratch that very few people have, and so
I think.
Speaker 3 (03:48):
All of those apply. If you look at our portfolio, we.
Speaker 2 (03:50):
Have consumer hardware products, we have consumer software products, we
have enterprise hardware products, and I think it's all stuff
I've worked on before.
Speaker 1 (03:57):
But in terms of what you need to do in climate,
it tends to be products that are either just greener
versions of existing things, or they are in going into
a market where the margin is not that high, whereas
tech hardware products tend to have the capacity, at least
not initially, but when they're scale to have a large margin.
So it's still a harder challenge or a different challenge.
Speaker 2 (04:19):
Right, Well, everything is different, Every market is different, and
I'd say that generally I'm looking for products to begin
with that have some sort of massive advantage. The right
to win as a startup means you're coming in with
a five x or more.
Speaker 3 (04:33):
You why is this product uniquely good or uniquely different?
Speaker 2 (04:36):
You know. I'll just give you the example of mill,
which is a one of our investments. It's a home
composting device. So it looks like a trash can, but
you throw your food waste into it and then overnight
it grinds it dehydrates it and sort of shrinks it down.
So a normal family, after a month's worth of food waste,
gets something about the size of a shoe box that
looks like coffee grounds and doesn't smell. You know, the
(04:56):
pitch consumers is pretty simple. It's like, do you enjoy
taking your trash? Do you like it when your trash smells?
The answer to most people know, it's like, great, your
trash doesn't smell. You have to take it out a
lot less. Oh and by the way, we're massively reducing
methane emissions from food waste. And this is the sort
of product that once someone gets one, you'll know about
it because they will tell you multiple times how awesome
(05:19):
the mill is. They have a what's called a net
promoter score higher than having shipped consumer products, and know
how hard it is to get those, higher than most
I've seen. And so that that was the first unlock,
was like, Wow, this is something people really like. The
very next question said how much does this thing cost
to make? So they showed me the bill of materials,
said like, okay, to make this profitable, we have to
get the bomb from X to Y. And I just
went through the thing and said like, yep, we can
(05:39):
do that. And in between the investing window of when
I invested in now they've made massive progress. It's going
to be a great business, going to be profitable. They've
done twenty million in revenue in the last twelve months.
And then there's opportunities to do bigger commercial engagements, you know,
with offices and other people who have massive food waste problems. So,
you know, I think that's an example of like trying
to take some of those skills and learnings and apply
(06:01):
them in these spaces.
Speaker 1 (06:03):
Well, most of the tech products that you've shipped that
are being shipped today tend to be made in China,
whereas mill made.
Speaker 3 (06:10):
It's got a diverse supply base.
Speaker 2 (06:11):
You know, I think they haven't disclosed exactly where it's made,
but it's a diverse supply base, and they're doing just
fine with the tariffs.
Speaker 3 (06:17):
So I'll just say that much.
Speaker 1 (06:18):
If you think about the moment that we are in,
is there anything about policy changes, the directions tariffs that
have made you rethink your own climate investing, not just principles,
but areas that you would like to invest in going forward.
Speaker 2 (06:34):
Yeah, I mean I think that I sort of got
to investing almost by accident. I didn't start out saying
I want to be an investor, or, I want to
be a climate investor. Start out saying like, I want
to start dedicating my time, expertise, and resources towards the
climate crisis. And you know, I started on the filanthropic
side with funding science and funding policy, and then realized that, like,
(06:54):
you know, the way a lot of these markets get.
Speaker 3 (06:56):
Transformed is through businesses.
Speaker 2 (06:57):
You know, if you think about like where would we
be in the electric car with Tesla, where would we
be in space without SpaceX, where it would be of
the vaccines without Maderna on others, and looking at that
and thinking about investing coming from this angle made from
the very beginning say look you can call it climate,
you can do. These are companies. They need to make money.
(07:17):
That's the definition of a company. They need to sell
a product that people want for you know, less than
what it costs for more than what it costs them
to make It is the basics.
Speaker 3 (07:25):
Of a business.
Speaker 2 (07:26):
Having not gone to business school, that's my one to
one for business. And so it caused us to really
focus on areas where that was possible, and there were
some technological edge, some change in the market sort of
opened a window. And having been in tech a long time,
what I like is exponential trends in your favor. So
what's been powering AI, for example, is like increase in
data and increase in compute power, and those are things
(07:48):
that happen, you know, whether I go to work every
day or not.
Speaker 3 (07:51):
So that's awesome.
Speaker 2 (07:52):
I think you see the same trends at the same
scale for battery prices, for example, battery pack, battery sell prices.
So if I'm trying to build a new business that's
based on batteries, like my input costs are going down
without me doing any work, and that's amazing. That means
that I'm getting more and more competitive, you know, day
by day. And so we look for businesses like that
where you have some tailwind that's like driving you into
(08:14):
a cost advantage or some technological leap that gets you there,
or you're breaking into some massive market for which you
know if it may be a high risk, but once
you get there, it's it's just incredible how much sort
of you can drive in terms of revenue.
Speaker 1 (08:27):
But if you look at the mega trends in climate
tech that have enabled that kind of cost reduction, whether
that's solar wind batteries, those have happened because manufacturing has
scaled somewhere else, mostly in China, Whereas if you look
at what has America contributed in terms of bringing down
the cost of climate tech, you could bring up an
(08:49):
example like Tesla, but it could never crack a thirty
thousand dollars ev as Elon Musk had promised. So if
we go into this world, as we have in the
past six months, where we start to disintegrate relationships with China,
move supply chains back to America, things will become more expensive.
They won't have the same mega trends that have continued
(09:12):
over the past two decades. They will come later if
the manufacturing setup sticks around for that period, But in
the intervening period, things are going to get more expensive,
harder to build. How are you thinking about operating as
an investor in that environment?
Speaker 2 (09:28):
Yeah, I mean, I think globalization brings efficiency and deglobalization
is going to increase costs of everything going around the world.
Speaker 3 (09:34):
So I think that's just true.
Speaker 2 (09:35):
You know, I equible with one point, which is you know,
first of all, particularly the US is often the source
of many of the actual innovations. So LFP batteries invented
in the United States, commercialized and scaled in China. Yep,
we like miss that one. And there are places where,
in particular, and I'll call out SpaceX has a very
local supply chain and has built most of their stuff.
(09:57):
They're not really relying that much on overseas supply chain
for what they're building. And they built a expertise and talent.
Now they have a low production, high cost product, so
that works better for that. There are other businesses that
look like that too, where you have a relatively low production,
high cost product that you can do in sort of
series production. And we're seeing an incredible dispora of companies
(10:18):
literally in El Sugundo, California, mostly with SpaceX alumni. We're
sort of taking the same playbook of a vertically integrated
supply chain exceptional engineering to attack a premium product that
can compete in today's world. You know, there's a company
called Arc Boats that's building electrified started with a pleasure
boat and then a surfboat, and now they're working on
fishing boats and now they're moving to their electrifying tugboats.
(10:41):
They make hundreds or thousands of them a year. It's
not fifty thousand, but they're able to do so at
reasonable costs. In Los Angeles, they're manufacturing the vehicles there.
You have another company out there called Lightship that's doing
this for RVs recreational vehicles.
Speaker 3 (10:54):
It's a massive market.
Speaker 2 (10:55):
Turns out a lot of people in the United States
have an RV and they can build one that is
electrified and better. You're not running a generator when you're
sitting there trying to camp and be out.
Speaker 3 (11:04):
In nature, which sucks.
Speaker 2 (11:06):
And then you go into big technological leaps like fusion,
you know, commal effusion and Devn's Massachusetts sets the world
record for magnet strength. They've got a magnet that, as
Bob likes to say, the founder CEO can lift an
aircraft carrier.
Speaker 3 (11:19):
It's that powerful.
Speaker 2 (11:21):
And so really that is dependent on like a massive
technical leap and innovativeness, which I would argue the United
States as historically Betten the leader in and if we
can make fusion work. I mean, just just to you know,
put this in perspective to power or here in London,
London's about call it four gigawatts of consistent power, about
one hundred gigabot hours a day. So I kind of
did some rough math on the way here to like
(11:42):
power this with fusion, you need a couple of kilograms
of fuel a day, so like two MacBooks, I could
fuel the plant and carry it my backpack each day.
You know, it's about a million plus maybe ten million
more energy dense than coal. So like if we can
crack that, Yes, energy is a commodity, but I'm like
showing up with a totally different solution to that commodity,
(12:04):
which is this like super energy dance process that really
relies on massive innovation. And that's a place where I
think betting on startups, betting on the West is tractable.
Speaker 1 (12:12):
Yeah, I mean, there is no doubt there's a whole
bunch of innovation that has happened in the US that
is now climate tech for the rest of the world.
You didn't go all the way back to the nineteen
fifties with the silicon photogel take cell was invented in
Bell Labs in America. You didn't go to the nineteen
seventies when the lithium and battery itself. Even before we
come to a cathered that does specific things. The first
(12:37):
setup of a lithium man battery was invented in the
next on mobile labe. So there is not saying America
can't innovate. And we'll come to what's happening with science
funding and how that might affect climate in tech investing,
But it is true there is an ecosystem to innovate.
There is the brain power to bring these ideas into
(12:58):
commercial opportunity, but then grabbing that opportunity and actually scaling
companies has been rare. So you brought up an example,
which is SpaceX, really good example in the space arena.
A lot of that has been possible because it had
government contracts big ones initially, which required it to have
(13:18):
a local domestic supply chain because that's the requirement from
NASA to be able to put on American astronauts into
the space station. But then it's been able to use
that tailwind to actually become a commercial entity that does
work for everybody and anybody. You know, there are Indian
satellites that get launched by SpaceX, but you needed that
(13:40):
initial support from the US government to bring the company
to a point where it is commercially now the leader
America is not doing that for any other sector. So
LFP is a very good story of that. Right. LFP
was invented in America. A one to three was the
company that was going to scale up the battery chemistry,
(14:00):
and then it got bought by China, and we know
the story. This gets repeated multiple times. So, as a
climate tech investor going into an early stage company, how
do you think about scale when it comes to becoming
a SpaceX.
Speaker 2 (14:13):
Yeah, this is where I like, I actually don't describe
myself as a climate tech investor because I think that
that is a ill posed frame of what this is. Like,
these are hardware companies typically, and so if you zoom
out a little bit and talk about hardware and say, like,
all right, what are the big interesting new hardware companies
that's shown up in the last twenty or thirty years.
Just talked about how I went to a company that
(14:34):
went from zero to tens of millions of square foot
of operating facilities all around the world in a decade.
You've seen similar things happen at Microsoft at Amazon in
both data centers and in their case and warehouses and
fleets of planes and trucks and other things. So you
just look at the largest companies in the world. They
are predominantly American companies, and so I think there is
an opportunity to grow and scale these things. It requires
(14:56):
having a business model. You know, in Video's case, they
have Silicon and chips are the most extreme example of
the companies that I think have a chance, which is
you concentrate a tremendous amount of human R and D
into a product that I can put in the palm
of my hand and I can sell by the millions.
Speaker 3 (15:11):
We had very hard margins. That is an incredible.
Speaker 2 (15:14):
Business, right that is as good as it gets, and like,
look at everyone in the world chasing out you know,
for five years it's been obvious this is this amazing business.
Everyone's throwing money at it, and they can't catch Jensen, right,
And so once you get scale, it's like really hard
to catch. And so I think there are very few
businesses like that are like Silicon. But I think that
you know, on the other extreme, you have just baseline
(15:36):
commodities that are very hard things like steel, concrete, cement
and those sorts of things, and there's like a big
space of stuff in the middle there that I think
is really really quite interesting. As a very specific example,
so i'times just talking in generality, is you know a
bunch of big, boring equipment that you talked about in
a show two weeks ago as transformers. You know, these
things that take one voltage to another voltage, and they're
(15:58):
been built the same way, roughly speaking, for the last
one hundred years or right now on a cost curve
down on solid state transformers, and you know they are
getting down cost down at ten to fifteen percent every year.
They're increasing sort of in their efficiency, and so I
think we're just at the cycle now where you know,
I'm going to be able to build a transformer at
a tenth the size of an existing transformer. There's immense
(16:18):
demand for these things, so we're going to sell everyone.
There's a company we just funded called Heron, with an
exceptional founder from eighteen years of Tesla, Drubeglino. I think
that's an amazing market. They are not going to be
able to make enough of their product to meet demand
in the early days, and they're going to build a
hugely differentiated product thanks to an innovation which is sort
of power electronics and solid state, which is relatively new.
Speaker 1 (16:39):
There's one way to think about why energy innovation in
America hasn't quite scaled, which is, for the past thirty years,
energy demand has been roughly flat. And that is true
of all energy demand. That's true of electricity demand specifically,
which is now starting to change. Yeah, the demand especially
in the best with Europe and North America looking to
(17:03):
build data centers but also electrifying their fleet, adding heat pumps.
And there is something that growth does do, the need
for innovation and the need for market developments that steady
or a declining market does not do. Right.
Speaker 3 (17:24):
Yeah, I think that's a really great point.
Speaker 2 (17:25):
And the way I would I would actually plus one
that and say it even stronger, which is energy access
has become a boardroom conversation in a way that wasn't
true like literally four years ago. So it is a
top boardroom conversation because if I don't have access to energy,
I can't build the compute power I need. I can't
build the data services, the AI models, and I may
(17:47):
lose out to my competition. And you're seeing large companies.
Meta just announced yesterday a deal for Geothermal XGS. It
was the second geo thermal deal after Sage. I would
say Google has been doing the same with fervo. You've
got most of the hyperscalers bring contracts for fission plants.
It is categorically different to say I need more of
it or I can offer it a better price. And like,
(18:08):
getting access to this thing is the difference between my
business succeeding or not. And so I'm willing to pay more.
I'm willing to take risks on new innovative technology and
that is a pull through, particularly on the energy side,
that that didn't exist even a few years ago, that
I'm incredibly excited about and I think is enabling a
lot of new innovation.
Speaker 1 (18:29):
After the break, are funding cuts in the US breaking
the innovation pipeline. And Hey, if you're enjoying this episode,
please take a moment to reate and review the show
on Apple Podcasts and Spotify. Your feedback really matters and
helps new listeners discover the show. Thank you. So. A
(18:54):
lot of your investments are at early stage companies, and
the pipeline of innovation that is America that creates these
early stage companies is really strong. But we are going
to see and we are starting to see already heavy cuts.
Do science funding to health funding, do energy technology funding?
(19:15):
How do you think that changes your ability to think
about investing not next year, not in two years, but
in five or ten years. Yeah.
Speaker 2 (19:26):
I mean, I'm a deep believer in the power of
you know, science and research to sort of accelerate our
ability to build interesting things and solve problems. So, you know,
I don't really know how this is all going to
shake out, but if it does, you know, if we're
doing less of that, then it is slowing down the
pipeline of things. You know, I would say five plus
years out.
Speaker 3 (19:47):
You know, there's a.
Speaker 2 (19:49):
I was talking yesterday and you know, someone was sharing
some research they had done which you know, said that
most things to go from a lab discovery to say
one hundred million commercial deployment. You know, it's on the
order of ten to twenty years, and so it's probably
not a five year problem. It's more like a ten
or twenty year problem. But it's still a problem we
do as a society, as humanity, need to be investing
(20:11):
sort of at all stages of innovation.
Speaker 1 (20:13):
You know.
Speaker 2 (20:14):
My part of why I you know, I've been working
in technology in some form for twenty five plus years
and I sort of ask myself sometimes like why am
I keep doing this? And you know, whenever I'm having
a bad day or bad week, you know, I just
sort of like try to look back and one hundred
plus years ago or a little more, like it wasn't
safe to drink the water in London because we didn't
really understand how to disinfect it. Technology has fundamentally improved
(20:38):
the human condition, and it is the vehicle by which
we take difficult zero sum problems. Can we fund this
or can we fund that? And we come up with
a solution that's half the price, and we say, guess
what we.
Speaker 3 (20:48):
Can do both?
Speaker 2 (20:49):
And that is sort of where I have dedicated my life.
And I'm hopeful, I'm concerned about this, and I'm hopeful
we can find ways to sort of get back to
funding the basic research that is the sort of early
fuel in this pipeline of incredible technologies to advance human prosperity.
Speaker 1 (21:06):
So I've been covering venture capital investing in climate tech
for a while now, and a lot of the money
that goes into these companies tends to be American. A
lot of the companies that are in this space tend
to be American. With what's happening on science funding, we
are seeing places like Europe, but also China, Japan, even India,
(21:27):
looking to boost science funding, looking to either attract some
of the scientists who've left those parts to come back
home or to just give I mean, these are words
that politicians have used refuge to American scientists who want
to do work. Would you start to see opportunities to
invest more in those regions as climate tech investor, because
(21:49):
are you tied to wanting an American company or are
you agnostic?
Speaker 2 (21:54):
I will go where the great innovation happens. My current
thesis and continues to be that, you know, and it's
not exclude one of our companies as a French based company,
dic Cycle, and I think they're they're amazing producing clean
chemicals using electro chemistry, and so I'm not dogmatic about it.
I do think, having built teams internationally all over the
world and built things all over the world, that America
(22:16):
still is particularly and particularly the West Coast and Boston,
you know, is particularly unique in its ecosystem and ability
to start things. I mean, I'll tell you when I
started doing this work, I live in the Bay Area,
in San Francisco, b Area, and I had a question
of like, am I on the wrong spot. Should I
be in Houston, Should I be in Boston? Should I
be somewhere else? And so I had sort of a
point of reflection, maybe I need to move to be
where the action is. And it just turns out that
(22:38):
the Bay Area, in particular in Los Angeles are still
the epicenter of startups. You can walk down the street
and find someone who understands AI. You can find an
IP lawyer, you know, you can find a CFO. It
just like has the density of talent you need. And
that people have been trying to recreate Silicon Valley and
we call them, you know, Silicon Alley or whatever.
Speaker 3 (22:57):
It may be.
Speaker 2 (22:57):
And it's just hard because you're recreating an entire equist
Now you can screw that up.
Speaker 3 (23:01):
You can.
Speaker 2 (23:02):
You can mess it up over time, and you know,
I really hope America doesn't because I think it's a
it's a huge engine of innovation and productivity for the world.
But it will, you know, for now, I think it
is the pre eminent place to do it. But again
I'm not dogmatic. We see a great company somewhere else
in the world. I think there are billion people all
over the world. I think India in particular is investing
a lot, as is China and others. So, you know,
(23:23):
I hope we see a lot of innovation all over
the world looking.
Speaker 1 (23:26):
Over the next three to four years. What are the
things that you are seeking companies to bring solutions in
the climate tech space that you would like your capital
to go towards.
Speaker 2 (23:38):
So we invest in everything, industrials, you know, land used,
car removal, all the.
Speaker 3 (23:41):
Rest of it.
Speaker 2 (23:42):
We have a pretty balanced portfolio of those things. But
I would say, if you, if you like, made me
be focused. The two things that I'm obsessed with are
very simple. It's energy and it's AI for acceleration of
atoms and so energy is pretty straightforward.
Speaker 3 (23:55):
As you know.
Speaker 2 (23:55):
Are there new ways to produce slow carbon energy cheaply
distributed store it. I think there's just a tremendous amount
of innovation, whether it's fusion, advanced geothermal, battery storage. I
think there's a ton of ways, a ton of places
where we can put batteries and things because it's you know, cheaper, better, faster.
You can you can do it in induction stoves, you
can do it, lawn care equipment, you can do it
in RVs. Like we're just kind of getting started replacing
(24:17):
all the gas stuff, all the diesel generators with batteries.
In fact, we just recently did an investment in a
fishing company that's building a microreactor called Radiant, and there
their target market is diesel generators. It's a small reactor,
it's one mega lot, but you know, in regions where
it's hard to get to, you have to ship diesel
fuel there, and it's incredibly expensive to do so. So
(24:37):
you can actually build a cost competitive product, you know,
by by shipping a container that just produces energy for
five years straight. That's that's exciting. So I think energy
broadly is super exciting. And then you know, we've been
seeing a lot of really interesting applications of advances in
AI for I would say accelerating the scale out the
first wave of these companies, we're trying to accelerate discovery,
(25:00):
trying to use materials discovery or you know, chemistry discoveries.
And I was honestly like struggling with those companies mostly
because I think, as you rightly pointed out, it's the
scale out that's the really hard part of this. And
like is I think ninety plus percent of the work
and energy and so it's like you got to go
attack that problem. So we started poking on that problem,
and we're just seeing a really interesting crop of companies
(25:21):
whose thesis is, how do I get from sort of
like idea to production faster and get through iteration, reduce
testing cycles. We need to build a lot of stuff
any way you cut it five x the grid in
the United States? How do we just do that faster?
And I think that that's actually a really really interesting
problem to solve.
Speaker 1 (25:40):
We have seen a decline in climate tech investments broadly
over the past three years. Now this is before Trump.
Even a lot of those investors came in because climate
tech investing was hot, and now many of those have
gone to AI because AI is hot. When you're thinking
about investing in companies, you always invest with other investors.
(26:02):
How have you seen this decline play out? Is it
going to be catastrophic because there are companies that are
going to go bankrupt? Or is it a good thing
because people who really weren't very serious about climate are
now not there? Yeah?
Speaker 2 (26:16):
I mean, I'd say, first of all, the data I've
seen at least is that overall funding and VC is down.
And so if you like look at climateech related to
overall VC, it's actually down less than overall VC. But
in practice, what I'm seeing in the market is the
more interesting question. And what I'd say is, there was
a time twenty twenty twenty twenty one where we were
like seeing deals come through with like very fast markups,
(26:38):
very short diligence, what i'd call sort of non ideal
sort of conditions to do a rigorous diligence for an
investing process that I didn't like. We're now seeing sort
of more ractionality. We have more time to look at
deals and understand them, really get to know the founders,
you know, understand the economics and the technology. But we're
seeing many many companies getting over subscribe rounds, meaning that
they have more investor interest than they need. And I
(27:00):
think it's almost a bifurcation where you see companies in
the market struggling to raise because they maybe had too
high evaluation, or maybe the economics weren't as favorable as
they thought for the business. And I think the ones
you're seeing do really well. Are you know, exceptional founders
with a product that has an entitlement of a better, faster,
cheaper and people just want it. And those those rounds
are going real fast. So it's a kind of tale
(27:22):
of two companies. In many cases, I'm sure there's founders
listening to this struggling to fundraise. And look, I started
my first coming in two thousand. I remember that, like
it sucks, so I like, my heart goes out to you.
But I think there is still appetite and capability to
fund companies out there.
Speaker 1 (27:37):
And then the other thing that venture capitalists tend to
say most of the time is that, look, we invest
in companies because they're great ideas and not because they
are getting policy support or government incentives. And so you know,
whatever happens with the government, we're trying to not be
affected by it. But that is only half true, because
(28:00):
a lot of the markets that need to be created
with climate tech products need to be created by producing
stuff that is initially expensive has to become cheaper by
giving people incentives in the form of government subsidies to
make that product cheaper so that people can use it.
That policy is certainly in the US going away. And
so you've got these two tracks. I would say in
(28:21):
climate tech, where there's mature industries, we talked about solar
wind batteries, electric cars that will continue to grow because
they're mature, because the price point is where it is,
and companies are going to make profits making them. And
then there are a whole bunch of immature technologies. We
talked about fusion, but also you know hydrogen or carbon capture,
(28:43):
point source carbon capture, or carbon removal, which requires companies
to actually buy offsets, which you know, at a voluntary
scale they can buy somewhat. But like if you have
a regulatory market like here in Europe, then you actually
have scale and you have actually a market poll with
policy going away in the US, what do you stop
(29:03):
investing in?
Speaker 2 (29:04):
Well, it's not I think going away, as I would say,
is too big a statement. It's changing and aspects of
it are going away. And I think you know, what
we had was a fairly broad set of programs like
investing in a lot of stuff across the board, and
what you have from the government's perspective, and what you
have is a much more tailored, targeted set of things. So, yes,
hydrogen is challenged. I think carbon removal is challenged. I
(29:25):
think if you look at the fission market, it's actually
turbo charged at this point that the administration is like
making room for regulatory approval and others in a way
that didn't happen before. So I think it's quite simple,
is that, you know, we've got to do our homework
in terms of the conditions of the market, and if
the market is being supported by some sort of policy
or regulatory sort of tailwind, we just do an analysis
on like how stable is that right and how likely
(29:48):
is that going to be to continue. We don't you know,
typically invest in anything that's dependent on legislation that hasn't
already passed, So you're really only just looking at okay,
are you depending on things that are on the books today,
how stable are those? You know, I tend to be
skeptical of, for example, even things that are on the
books where we haven't really felt the impacts, like it's
(30:08):
going to create an economic burden on people, because those
things tend to get pushed out when you get real
close to them because people, you know, people don't want
to pay, and so so I still think, you know,
it's a much more nuanced sort of analysis, you know,
of all of these things. But fundamentally, if i'm you know,
back to our you know, there's massive energy demand. If
I'm producing electrons faster or cheaper, I've got a great business.
(30:31):
It's usually one company that transforms an industry, Like I
think fusion is going to happen because one or two companies,
you know, I think I think Hearen's going to transform
you know, power electronics. I think mill is going to
solve more food waste problems than any company ever in history. Like,
I think you got the shot that like when it works,
you like kind of replay history without Nvidia, right, or
(30:53):
that without Intel.
Speaker 3 (30:54):
Like, and you're just like, what would it look like?
Speaker 2 (30:56):
We don't have to get them all, right, We just
have to get a couple of the ones that are
sort of world changing and that I'm hoping will be
the co alignment of like massive climate impact and some
interesting financial returns for our investors.
Speaker 1 (31:08):
So we talked a bunch about climate investing, but you
started with climate philanthropy, Yeah, and you continue to do that.
Where do you see the difference between investing in an
idea that'll make money versus investing in an idea because
it needs to exist?
Speaker 3 (31:23):
That's a great question.
Speaker 2 (31:23):
I mean, I think there's a fairly clear line, at
least in my mind, and the way I think of
it as quite simple. I think philanthropy, at least for me,
is really effective at early stage science. You know, we
talked about this early innovation and sort of policy work.
It's a place where you don't even know if it's
going to work, you don't know how to make money
on it. You're just trying to increase our understanding of
different things. So there's some really promising carbon removal pathways,
(31:46):
one called ocean accalinity enhancement, which is a way to
sort of supercharge something that happens naturally in the ocean chemistry.
And the first question is like is it safe, is
it effective? And how much does it cost? And the
answers to that are like frustratingly broad, But in that
broad range, if you hit some parts of the target,
it may actually.
Speaker 3 (32:05):
Be the cheapest, most scalable form of government removal.
Speaker 2 (32:08):
I think it's a great place for us to go
do science and say like, well, let's go try to
answer those questions and like let's answer them with rigorous
and inteligence without trying to worry about what they're going
to make money on it, and let's like try to
write some papers. That's a good use of philanthropy. I
think for a lot of things we're talking about where
it's like, you know, solid state transformer, solid state electronics,
that's just at the point now where like I think
(32:29):
it is crossing the commercially competitive line. It was too
expensive and not reliable enough, and I think we're like
just getting at the point. So we're about a year
or two out from I think major commercial deployments. That's
a great place for a company because you're like trying
to scale something out and trying to make money doing it.
That's where I think industry works really really well.
Speaker 1 (32:47):
And you've also given money to ideas and philanthropy to
try and deal with impacts that are coming our way.
So we're going to see sea level rise, you're looking
to give money to ideas that would help us deal
with a problem that is kind of baked in. You know,
the models are quite uncertain, but we do know even
if we meet our climate goals, sea levels will continue
(33:09):
to keep rising for hundreds of years to come. Why
is that a problem that you are putting money in
as a philanthropy rather than stuff that governments are supposed
to do. This is basic research, This is good for society.
This is good for all countries, not just for one
specific country. So every government should really be keen and
(33:32):
investing in this right.
Speaker 2 (33:33):
The honest answers, I don't know why other people aren't
doing it. I think one of the things I'm pretty
good at is finding the white space. And so why
ended up here is like for whatever reason people weren't.
And you know, as you start kind of peeling the
onion on it, it gets worse, not better, which is
our models for sea level rise are pretty pretty rough.
You're talking hundreds of years. Let's talk in the lifetime
of our children. That's twenty one hundred. It's not that
far away, you know, seventy five years. Models say somewhere
(33:56):
between point two to two meters of sea level rise.
That's really for Mimi in New York. And so first
question is can we like better answer that question? And
that's again a place for science, so has to do work,
and it's not actually that expensive to go go do
that work. And then the next question is like, if
it's as bad as we think, besides building sea walls,
is there anything we can do just like slow this down?
(34:17):
And I think that again it's that's a good scientific
question ask, And I think it's worth just framing this again,
is all this climate stuff can feel really abstract, and
we talk about models and one see and this, Like,
I think about this in terms of people. We're talking
about islands underwater, we're talking about people being displaced, So like,
I care about impacts these things have on people in
our lifetime, and the question is how do we better
(34:38):
understand them and better prepare for them and hopefully prevent
or mitigate them, And like that that is the thing
that sort of underlies everything I'm doing.
Speaker 3 (34:46):
Thank you, Mike, Yeah.
Speaker 1 (34:53):
And thank you for listening to zero now for the
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Highland cow burping while having its hair brushed. Burps produced
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(35:14):
are one of the many sources of greenhouse gases that
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(35:35):
Brendan nunim Our. Theme music is composed by Wonderly Special
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I am Akshatrati Back soon
Welcome to zero. I am Akshatrati this week inside the
Mind of a Climate BC. Climate tech is not the
(00:21):
hot investor thesis it was just a few years ago.
After several record breaking years and billions of dollars being
poured into climate startups, venture capital investments are way down
lower than they were in twenty nineteen. According to PwC.
Much of the hot money has now moved to AI.
In all that time, though, the importance of investing in
(00:44):
climate solutions has only grown, and so has the number
of people working on them, bringing in skills and expertise,
often from other industries into the climate solution space. Mike
Strepfer is one of them.
Speaker 2 (00:58):
Energy access has become a boardroom conversation in a way
that wasn't true like literally four years ago. If I
don't have access to energy, I can't build the compute
power I need. I can't build the data services, the
AI models, and I may lose out to my competition.
Speaker 1 (01:14):
From twenty thirteen to twenty twenty two, Mike Schrepfer was
the Chief technology officer at Meta, the company behind Facebook, Instagram, WhatsApp,
and Oculus. There he helped build out Meta's data centers
globally and led the integration of manufacturing the Oculus virtual
reality headset. After leaving Meta in twenty twenty three, he
(01:35):
founded Gigascale Capital, a VC firm specializing in climate tech.
Gigascale has invested in a wide range of companies, from
those trying to create green steel and crack nuclear fusion
to ones trying to vaccinate cattle to reduce methane verbs.
Mike also founded Additional Mentors, a philanthropy that focuses on
(01:56):
early stage research in biomedical and climate science. So I
wanted to ask Mike how does he see the climate
tech landscape in twenty twenty five, What are the challenges
of manufacturing in the US versus China? And how does
data center demand lead to innovation in energy? Mike, Welcome
(02:16):
to the show.
Speaker 3 (02:17):
Thank you glad to be here.
Speaker 1 (02:18):
So you've come to investing in climate from a different
background than most people coming to investing in climate have
You've come from scaling companies in the software sector, working
at large software companies, but now you're doing something that
is much more hardware focused. Most of climate tech solutions
(02:41):
tend to be building things in the real world. What
have you found that's different thinking about companies that do
hardware rather than software.
Speaker 2 (02:50):
Well, I want to correct one thing, which is most
people think of Facebook as a software company. But three
years into the job, in twenty eleven, I started building
data centers. So I built ten million plugs square feet
of data centers and seventeen regions all around the world,
you know, over a decade or something. And then a
few years after that, we bought this little company called Oculus,
which I ran the integration of, and we started shipping
consumer hardware. So if you've ever used an Oculus Quest
(03:13):
or Rayvan Meta smart glasses, you've used one of our products.
And so I've you know, I've had all the joys
and pains of building enterprise hardware and industrial scale and
the double challenges of scaling consumer hardware, all the fun
and pain of doing that and trying to make margin
on a product that consumers can return to the store
if they don't like. It's a wider scale of things
(03:34):
I think than most people when they think of Facebook
think about so the jump to climate tech, which part
of the appeal of it was actually taking those learnings.
You know, I've shipped millions of devices, and I built
scale from scratch that very few people have, and so
I think.
Speaker 3 (03:48):
All of those apply. If you look at our portfolio, we.
Speaker 2 (03:50):
Have consumer hardware products, we have consumer software products, we
have enterprise hardware products, and I think it's all stuff
I've worked on before.
Speaker 1 (03:57):
But in terms of what you need to do in climate,
it tends to be products that are either just greener
versions of existing things, or they are in going into
a market where the margin is not that high, whereas
tech hardware products tend to have the capacity, at least
not initially, but when they're scale to have a large margin.
So it's still a harder challenge or a different challenge.
Speaker 2 (04:19):
Right, Well, everything is different, Every market is different, and
I'd say that generally I'm looking for products to begin
with that have some sort of massive advantage. The right
to win as a startup means you're coming in with
a five x or more.
Speaker 3 (04:33):
You why is this product uniquely good or uniquely different?
Speaker 2 (04:36):
You know. I'll just give you the example of mill,
which is a one of our investments. It's a home
composting device. So it looks like a trash can, but
you throw your food waste into it and then overnight
it grinds it dehydrates it and sort of shrinks it down.
So a normal family, after a month's worth of food waste,
gets something about the size of a shoe box that
looks like coffee grounds and doesn't smell. You know, the
(04:56):
pitch consumers is pretty simple. It's like, do you enjoy
taking your trash? Do you like it when your trash smells?
The answer to most people know, it's like, great, your
trash doesn't smell. You have to take it out a
lot less. Oh and by the way, we're massively reducing
methane emissions from food waste. And this is the sort
of product that once someone gets one, you'll know about
it because they will tell you multiple times how awesome
(05:19):
the mill is. They have a what's called a net
promoter score higher than having shipped consumer products, and know
how hard it is to get those, higher than most
I've seen. And so that that was the first unlock,
was like, Wow, this is something people really like. The
very next question said how much does this thing cost
to make? So they showed me the bill of materials,
said like, okay, to make this profitable, we have to
get the bomb from X to Y. And I just
went through the thing and said like, yep, we can
(05:39):
do that. And in between the investing window of when
I invested in now they've made massive progress. It's going
to be a great business, going to be profitable. They've
done twenty million in revenue in the last twelve months.
And then there's opportunities to do bigger commercial engagements, you know,
with offices and other people who have massive food waste problems. So,
you know, I think that's an example of like trying
to take some of those skills and learnings and apply
(06:01):
them in these spaces.
Speaker 1 (06:03):
Well, most of the tech products that you've shipped that
are being shipped today tend to be made in China,
whereas mill made.
Speaker 3 (06:10):
It's got a diverse supply base.
Speaker 2 (06:11):
You know, I think they haven't disclosed exactly where it's made,
but it's a diverse supply base, and they're doing just
fine with the tariffs.
Speaker 3 (06:17):
So I'll just say that much.
Speaker 1 (06:18):
If you think about the moment that we are in,
is there anything about policy changes, the directions tariffs that
have made you rethink your own climate investing, not just principles,
but areas that you would like to invest in going forward.
Speaker 2 (06:34):
Yeah, I mean I think that I sort of got
to investing almost by accident. I didn't start out saying
I want to be an investor, or, I want to
be a climate investor. Start out saying like, I want
to start dedicating my time, expertise, and resources towards the
climate crisis. And you know, I started on the filanthropic
side with funding science and funding policy, and then realized that, like,
(06:54):
you know, the way a lot of these markets get.
Speaker 3 (06:56):
Transformed is through businesses.
Speaker 2 (06:57):
You know, if you think about like where would we
be in the electric car with Tesla, where would we
be in space without SpaceX, where it would be of
the vaccines without Maderna on others, and looking at that
and thinking about investing coming from this angle made from
the very beginning say look you can call it climate,
you can do. These are companies. They need to make money.
(07:17):
That's the definition of a company. They need to sell
a product that people want for you know, less than
what it costs for more than what it costs them
to make It is the basics.
Speaker 3 (07:25):
Of a business.
Speaker 2 (07:26):
Having not gone to business school, that's my one to
one for business. And so it caused us to really
focus on areas where that was possible, and there were
some technological edge, some change in the market sort of
opened a window. And having been in tech a long time,
what I like is exponential trends in your favor. So
what's been powering AI, for example, is like increase in
data and increase in compute power, and those are things
(07:48):
that happen, you know, whether I go to work every
day or not.
Speaker 3 (07:51):
So that's awesome.
Speaker 2 (07:52):
I think you see the same trends at the same
scale for battery prices, for example, battery pack, battery sell prices.
So if I'm trying to build a new business that's
based on batteries, like my input costs are going down
without me doing any work, and that's amazing. That means
that I'm getting more and more competitive, you know, day
by day. And so we look for businesses like that
where you have some tailwind that's like driving you into
(08:14):
a cost advantage or some technological leap that gets you there,
or you're breaking into some massive market for which you
know if it may be a high risk, but once
you get there, it's it's just incredible how much sort
of you can drive in terms of revenue.
Speaker 1 (08:27):
But if you look at the mega trends in climate
tech that have enabled that kind of cost reduction, whether
that's solar wind batteries, those have happened because manufacturing has
scaled somewhere else, mostly in China, Whereas if you look
at what has America contributed in terms of bringing down
the cost of climate tech, you could bring up an
(08:49):
example like Tesla, but it could never crack a thirty
thousand dollars ev as Elon Musk had promised. So if
we go into this world, as we have in the
past six months, where we start to disintegrate relationships with China,
move supply chains back to America, things will become more expensive.
They won't have the same mega trends that have continued
(09:12):
over the past two decades. They will come later if
the manufacturing setup sticks around for that period, But in
the intervening period, things are going to get more expensive,
harder to build. How are you thinking about operating as
an investor in that environment?
Speaker 2 (09:28):
Yeah, I mean, I think globalization brings efficiency and deglobalization
is going to increase costs of everything going around the world.
Speaker 3 (09:34):
So I think that's just true.
Speaker 2 (09:35):
You know, I equible with one point, which is you know,
first of all, particularly the US is often the source
of many of the actual innovations. So LFP batteries invented
in the United States, commercialized and scaled in China. Yep,
we like miss that one. And there are places where,
in particular, and I'll call out SpaceX has a very
local supply chain and has built most of their stuff.
(09:57):
They're not really relying that much on overseas supply chain
for what they're building. And they built a expertise and talent.
Now they have a low production, high cost product, so
that works better for that. There are other businesses that
look like that too, where you have a relatively low production,
high cost product that you can do in sort of
series production. And we're seeing an incredible dispora of companies
(10:18):
literally in El Sugundo, California, mostly with SpaceX alumni. We're
sort of taking the same playbook of a vertically integrated
supply chain exceptional engineering to attack a premium product that
can compete in today's world. You know, there's a company
called Arc Boats that's building electrified started with a pleasure
boat and then a surfboat, and now they're working on
fishing boats and now they're moving to their electrifying tugboats.
(10:41):
They make hundreds or thousands of them a year. It's
not fifty thousand, but they're able to do so at
reasonable costs. In Los Angeles, they're manufacturing the vehicles there.
You have another company out there called Lightship that's doing
this for RVs recreational vehicles.
Speaker 3 (10:54):
It's a massive market.
Speaker 2 (10:55):
Turns out a lot of people in the United States
have an RV and they can build one that is
electrified and better. You're not running a generator when you're
sitting there trying to camp and be out.
Speaker 3 (11:04):
In nature, which sucks.
Speaker 2 (11:06):
And then you go into big technological leaps like fusion,
you know, commal effusion and Devn's Massachusetts sets the world
record for magnet strength. They've got a magnet that, as
Bob likes to say, the founder CEO can lift an
aircraft carrier.
Speaker 3 (11:19):
It's that powerful.
Speaker 2 (11:21):
And so really that is dependent on like a massive
technical leap and innovativeness, which I would argue the United
States as historically Betten the leader in and if we
can make fusion work. I mean, just just to you know,
put this in perspective to power or here in London,
London's about call it four gigawatts of consistent power, about
one hundred gigabot hours a day. So I kind of
did some rough math on the way here to like
(11:42):
power this with fusion, you need a couple of kilograms
of fuel a day, so like two MacBooks, I could
fuel the plant and carry it my backpack each day.
You know, it's about a million plus maybe ten million
more energy dense than coal. So like if we can
crack that, Yes, energy is a commodity, but I'm like
showing up with a totally different solution to that commodity,
(12:04):
which is this like super energy dance process that really
relies on massive innovation. And that's a place where I
think betting on startups, betting on the West is tractable.
Speaker 1 (12:12):
Yeah, I mean, there is no doubt there's a whole
bunch of innovation that has happened in the US that
is now climate tech for the rest of the world.
You didn't go all the way back to the nineteen
fifties with the silicon photogel take cell was invented in
Bell Labs in America. You didn't go to the nineteen
seventies when the lithium and battery itself. Even before we
come to a cathered that does specific things. The first
(12:37):
setup of a lithium man battery was invented in the
next on mobile labe. So there is not saying America
can't innovate. And we'll come to what's happening with science
funding and how that might affect climate in tech investing,
But it is true there is an ecosystem to innovate.
There is the brain power to bring these ideas into
(12:58):
commercial opportunity, but then grabbing that opportunity and actually scaling
companies has been rare. So you brought up an example,
which is SpaceX, really good example in the space arena.
A lot of that has been possible because it had
government contracts big ones initially, which required it to have
(13:18):
a local domestic supply chain because that's the requirement from
NASA to be able to put on American astronauts into
the space station. But then it's been able to use
that tailwind to actually become a commercial entity that does
work for everybody and anybody. You know, there are Indian
satellites that get launched by SpaceX, but you needed that
(13:40):
initial support from the US government to bring the company
to a point where it is commercially now the leader
America is not doing that for any other sector. So
LFP is a very good story of that. Right. LFP
was invented in America. A one to three was the
company that was going to scale up the battery chemistry,
(14:00):
and then it got bought by China, and we know
the story. This gets repeated multiple times. So, as a
climate tech investor going into an early stage company, how
do you think about scale when it comes to becoming
a SpaceX.
Speaker 2 (14:13):
Yeah, this is where I like, I actually don't describe
myself as a climate tech investor because I think that
that is a ill posed frame of what this is. Like,
these are hardware companies typically, and so if you zoom
out a little bit and talk about hardware and say, like,
all right, what are the big interesting new hardware companies
that's shown up in the last twenty or thirty years.
Just talked about how I went to a company that
(14:34):
went from zero to tens of millions of square foot
of operating facilities all around the world in a decade.
You've seen similar things happen at Microsoft at Amazon in
both data centers and in their case and warehouses and
fleets of planes and trucks and other things. So you
just look at the largest companies in the world. They
are predominantly American companies, and so I think there is
an opportunity to grow and scale these things. It requires
(14:56):
having a business model. You know, in Video's case, they
have Silicon and chips are the most extreme example of
the companies that I think have a chance, which is
you concentrate a tremendous amount of human R and D
into a product that I can put in the palm
of my hand and I can sell by the millions.
Speaker 3 (15:11):
We had very hard margins. That is an incredible.
Speaker 2 (15:14):
Business, right that is as good as it gets, and like,
look at everyone in the world chasing out you know,
for five years it's been obvious this is this amazing business.
Everyone's throwing money at it, and they can't catch Jensen, right,
And so once you get scale, it's like really hard
to catch. And so I think there are very few
businesses like that are like Silicon. But I think that
you know, on the other extreme, you have just baseline
(15:36):
commodities that are very hard things like steel, concrete, cement
and those sorts of things, and there's like a big
space of stuff in the middle there that I think
is really really quite interesting. As a very specific example,
so i'times just talking in generality, is you know a
bunch of big, boring equipment that you talked about in
a show two weeks ago as transformers. You know, these
things that take one voltage to another voltage, and they're
(15:58):
been built the same way, roughly speaking, for the last
one hundred years or right now on a cost curve
down on solid state transformers, and you know they are
getting down cost down at ten to fifteen percent every year.
They're increasing sort of in their efficiency, and so I
think we're just at the cycle now where you know,
I'm going to be able to build a transformer at
a tenth the size of an existing transformer. There's immense
(16:18):
demand for these things, so we're going to sell everyone.
There's a company we just funded called Heron, with an
exceptional founder from eighteen years of Tesla, Drubeglino. I think
that's an amazing market. They are not going to be
able to make enough of their product to meet demand
in the early days, and they're going to build a
hugely differentiated product thanks to an innovation which is sort
of power electronics and solid state, which is relatively new.
Speaker 1 (16:39):
There's one way to think about why energy innovation in
America hasn't quite scaled, which is, for the past thirty years,
energy demand has been roughly flat. And that is true
of all energy demand. That's true of electricity demand specifically,
which is now starting to change. Yeah, the demand especially
in the best with Europe and North America looking to
(17:03):
build data centers but also electrifying their fleet, adding heat pumps.
And there is something that growth does do, the need
for innovation and the need for market developments that steady
or a declining market does not do. Right.
Speaker 3 (17:24):
Yeah, I think that's a really great point.
Speaker 2 (17:25):
And the way I would I would actually plus one
that and say it even stronger, which is energy access
has become a boardroom conversation in a way that wasn't
true like literally four years ago. So it is a
top boardroom conversation because if I don't have access to energy,
I can't build the compute power I need. I can't
build the data services, the AI models, and I may
(17:47):
lose out to my competition. And you're seeing large companies.
Meta just announced yesterday a deal for Geothermal XGS. It
was the second geo thermal deal after Sage. I would
say Google has been doing the same with fervo. You've
got most of the hyperscalers bring contracts for fission plants.
It is categorically different to say I need more of
it or I can offer it a better price. And like,
(18:08):
getting access to this thing is the difference between my
business succeeding or not. And so I'm willing to pay more.
I'm willing to take risks on new innovative technology and
that is a pull through, particularly on the energy side,
that that didn't exist even a few years ago, that
I'm incredibly excited about and I think is enabling a
lot of new innovation.
Speaker 1 (18:29):
After the break, are funding cuts in the US breaking
the innovation pipeline. And Hey, if you're enjoying this episode,
please take a moment to reate and review the show
on Apple Podcasts and Spotify. Your feedback really matters and
helps new listeners discover the show. Thank you. So. A
(18:54):
lot of your investments are at early stage companies, and
the pipeline of innovation that is America that creates these
early stage companies is really strong. But we are going
to see and we are starting to see already heavy cuts.
Do science funding to health funding, do energy technology funding?
(19:15):
How do you think that changes your ability to think
about investing not next year, not in two years, but
in five or ten years. Yeah.
Speaker 2 (19:26):
I mean, I'm a deep believer in the power of
you know, science and research to sort of accelerate our
ability to build interesting things and solve problems. So, you know,
I don't really know how this is all going to
shake out, but if it does, you know, if we're
doing less of that, then it is slowing down the
pipeline of things. You know, I would say five plus
years out.
Speaker 3 (19:47):
You know, there's a.
Speaker 2 (19:49):
I was talking yesterday and you know, someone was sharing
some research they had done which you know, said that
most things to go from a lab discovery to say
one hundred million commercial deployment. You know, it's on the
order of ten to twenty years, and so it's probably
not a five year problem. It's more like a ten
or twenty year problem. But it's still a problem we
do as a society, as humanity, need to be investing
(20:11):
sort of at all stages of innovation.
Speaker 1 (20:13):
You know.
Speaker 2 (20:14):
My part of why I you know, I've been working
in technology in some form for twenty five plus years
and I sort of ask myself sometimes like why am
I keep doing this? And you know, whenever I'm having
a bad day or bad week, you know, I just
sort of like try to look back and one hundred
plus years ago or a little more, like it wasn't
safe to drink the water in London because we didn't
really understand how to disinfect it. Technology has fundamentally improved
(20:38):
the human condition, and it is the vehicle by which
we take difficult zero sum problems. Can we fund this
or can we fund that? And we come up with
a solution that's half the price, and we say, guess
what we.
Speaker 3 (20:48):
Can do both?
Speaker 2 (20:49):
And that is sort of where I have dedicated my life.
And I'm hopeful, I'm concerned about this, and I'm hopeful
we can find ways to sort of get back to
funding the basic research that is the sort of early
fuel in this pipeline of incredible technologies to advance human prosperity.
Speaker 1 (21:06):
So I've been covering venture capital investing in climate tech
for a while now, and a lot of the money
that goes into these companies tends to be American. A
lot of the companies that are in this space tend
to be American. With what's happening on science funding, we
are seeing places like Europe, but also China, Japan, even India,
(21:27):
looking to boost science funding, looking to either attract some
of the scientists who've left those parts to come back
home or to just give I mean, these are words
that politicians have used refuge to American scientists who want
to do work. Would you start to see opportunities to
invest more in those regions as climate tech investor, because
(21:49):
are you tied to wanting an American company or are
you agnostic?
Speaker 2 (21:54):
I will go where the great innovation happens. My current
thesis and continues to be that, you know, and it's
not exclude one of our companies as a French based company,
dic Cycle, and I think they're they're amazing producing clean
chemicals using electro chemistry, and so I'm not dogmatic about it.
I do think, having built teams internationally all over the
world and built things all over the world, that America
(22:16):
still is particularly and particularly the West Coast and Boston,
you know, is particularly unique in its ecosystem and ability
to start things. I mean, I'll tell you when I
started doing this work, I live in the Bay Area,
in San Francisco, b Area, and I had a question
of like, am I on the wrong spot. Should I
be in Houston, Should I be in Boston? Should I
be somewhere else? And so I had sort of a
point of reflection, maybe I need to move to be
where the action is. And it just turns out that
(22:38):
the Bay Area, in particular in Los Angeles are still
the epicenter of startups. You can walk down the street
and find someone who understands AI. You can find an
IP lawyer, you know, you can find a CFO. It
just like has the density of talent you need. And
that people have been trying to recreate Silicon Valley and
we call them, you know, Silicon Alley or whatever.
Speaker 3 (22:57):
It may be.
Speaker 2 (22:57):
And it's just hard because you're recreating an entire equist
Now you can screw that up.
Speaker 3 (23:01):
You can.
Speaker 2 (23:02):
You can mess it up over time, and you know,
I really hope America doesn't because I think it's a
it's a huge engine of innovation and productivity for the world.
But it will, you know, for now, I think it
is the pre eminent place to do it. But again
I'm not dogmatic. We see a great company somewhere else
in the world. I think there are billion people all
over the world. I think India in particular is investing
a lot, as is China and others. So, you know,
(23:23):
I hope we see a lot of innovation all over
the world looking.
Speaker 1 (23:26):
Over the next three to four years. What are the
things that you are seeking companies to bring solutions in
the climate tech space that you would like your capital
to go towards.
Speaker 2 (23:38):
So we invest in everything, industrials, you know, land used,
car removal, all the.
Speaker 3 (23:41):
Rest of it.
Speaker 2 (23:42):
We have a pretty balanced portfolio of those things. But
I would say, if you, if you like, made me
be focused. The two things that I'm obsessed with are
very simple. It's energy and it's AI for acceleration of
atoms and so energy is pretty straightforward.
Speaker 3 (23:55):
As you know.
Speaker 2 (23:55):
Are there new ways to produce slow carbon energy cheaply
distributed store it. I think there's just a tremendous amount
of innovation, whether it's fusion, advanced geothermal, battery storage. I
think there's a ton of ways, a ton of places
where we can put batteries and things because it's you know, cheaper, better, faster.
You can you can do it in induction stoves, you
can do it, lawn care equipment, you can do it
in RVs. Like we're just kind of getting started replacing
(24:17):
all the gas stuff, all the diesel generators with batteries.
In fact, we just recently did an investment in a
fishing company that's building a microreactor called Radiant, and there
their target market is diesel generators. It's a small reactor,
it's one mega lot, but you know, in regions where
it's hard to get to, you have to ship diesel
fuel there, and it's incredibly expensive to do so. So
(24:37):
you can actually build a cost competitive product, you know,
by by shipping a container that just produces energy for
five years straight. That's that's exciting. So I think energy
broadly is super exciting. And then you know, we've been
seeing a lot of really interesting applications of advances in
AI for I would say accelerating the scale out the
first wave of these companies, we're trying to accelerate discovery,
(25:00):
trying to use materials discovery or you know, chemistry discoveries.
And I was honestly like struggling with those companies mostly
because I think, as you rightly pointed out, it's the
scale out that's the really hard part of this. And
like is I think ninety plus percent of the work
and energy and so it's like you got to go
attack that problem. So we started poking on that problem,
and we're just seeing a really interesting crop of companies
(25:21):
whose thesis is, how do I get from sort of
like idea to production faster and get through iteration, reduce
testing cycles. We need to build a lot of stuff
any way you cut it five x the grid in
the United States? How do we just do that faster?
And I think that that's actually a really really interesting
problem to solve.
Speaker 1 (25:40):
We have seen a decline in climate tech investments broadly
over the past three years. Now this is before Trump.
Even a lot of those investors came in because climate
tech investing was hot, and now many of those have
gone to AI because AI is hot. When you're thinking
about investing in companies, you always invest with other investors.
(26:02):
How have you seen this decline play out? Is it
going to be catastrophic because there are companies that are
going to go bankrupt? Or is it a good thing
because people who really weren't very serious about climate are
now not there? Yeah?
Speaker 2 (26:16):
I mean, I'd say, first of all, the data I've
seen at least is that overall funding and VC is down.
And so if you like look at climateech related to
overall VC, it's actually down less than overall VC. But
in practice, what I'm seeing in the market is the
more interesting question. And what I'd say is, there was
a time twenty twenty twenty twenty one where we were
like seeing deals come through with like very fast markups,
(26:38):
very short diligence, what i'd call sort of non ideal
sort of conditions to do a rigorous diligence for an
investing process that I didn't like. We're now seeing sort
of more ractionality. We have more time to look at
deals and understand them, really get to know the founders,
you know, understand the economics and the technology. But we're
seeing many many companies getting over subscribe rounds, meaning that
they have more investor interest than they need. And I
(27:00):
think it's almost a bifurcation where you see companies in
the market struggling to raise because they maybe had too
high evaluation, or maybe the economics weren't as favorable as
they thought for the business. And I think the ones
you're seeing do really well. Are you know, exceptional founders
with a product that has an entitlement of a better, faster,
cheaper and people just want it. And those those rounds
are going real fast. So it's a kind of tale
(27:22):
of two companies. In many cases, I'm sure there's founders
listening to this struggling to fundraise. And look, I started
my first coming in two thousand. I remember that, like
it sucks, so I like, my heart goes out to you.
But I think there is still appetite and capability to
fund companies out there.
Speaker 1 (27:37):
And then the other thing that venture capitalists tend to
say most of the time is that, look, we invest
in companies because they're great ideas and not because they
are getting policy support or government incentives. And so you know,
whatever happens with the government, we're trying to not be
affected by it. But that is only half true, because
(28:00):
a lot of the markets that need to be created
with climate tech products need to be created by producing
stuff that is initially expensive has to become cheaper by
giving people incentives in the form of government subsidies to
make that product cheaper so that people can use it.
That policy is certainly in the US going away. And
so you've got these two tracks. I would say in
(28:21):
climate tech, where there's mature industries, we talked about solar
wind batteries, electric cars that will continue to grow because
they're mature, because the price point is where it is,
and companies are going to make profits making them. And
then there are a whole bunch of immature technologies. We
talked about fusion, but also you know hydrogen or carbon capture,
(28:43):
point source carbon capture, or carbon removal, which requires companies
to actually buy offsets, which you know, at a voluntary
scale they can buy somewhat. But like if you have
a regulatory market like here in Europe, then you actually
have scale and you have actually a market poll with
policy going away in the US, what do you stop
(29:03):
investing in?
Speaker 2 (29:04):
Well, it's not I think going away, as I would say,
is too big a statement. It's changing and aspects of
it are going away. And I think you know, what
we had was a fairly broad set of programs like
investing in a lot of stuff across the board, and
what you have from the government's perspective, and what you
have is a much more tailored, targeted set of things. So, yes,
hydrogen is challenged. I think carbon removal is challenged. I
(29:25):
think if you look at the fission market, it's actually
turbo charged at this point that the administration is like
making room for regulatory approval and others in a way
that didn't happen before. So I think it's quite simple,
is that, you know, we've got to do our homework
in terms of the conditions of the market, and if
the market is being supported by some sort of policy
or regulatory sort of tailwind, we just do an analysis
on like how stable is that right and how likely
(29:48):
is that going to be to continue. We don't you know,
typically invest in anything that's dependent on legislation that hasn't
already passed, So you're really only just looking at okay,
are you depending on things that are on the books today,
how stable are those? You know, I tend to be
skeptical of, for example, even things that are on the
books where we haven't really felt the impacts, like it's
(30:08):
going to create an economic burden on people, because those
things tend to get pushed out when you get real
close to them because people, you know, people don't want
to pay, and so so I still think, you know,
it's a much more nuanced sort of analysis, you know,
of all of these things. But fundamentally, if i'm you know,
back to our you know, there's massive energy demand. If
I'm producing electrons faster or cheaper, I've got a great business.
(30:31):
It's usually one company that transforms an industry, Like I
think fusion is going to happen because one or two companies,
you know, I think I think Hearen's going to transform
you know, power electronics. I think mill is going to
solve more food waste problems than any company ever in history. Like,
I think you got the shot that like when it works,
you like kind of replay history without Nvidia, right, or
(30:53):
that without Intel.
Speaker 3 (30:54):
Like, and you're just like, what would it look like?
Speaker 2 (30:56):
We don't have to get them all, right, We just
have to get a couple of the ones that are
sort of world changing and that I'm hoping will be
the co alignment of like massive climate impact and some
interesting financial returns for our investors.
Speaker 1 (31:08):
So we talked a bunch about climate investing, but you
started with climate philanthropy, Yeah, and you continue to do that.
Where do you see the difference between investing in an
idea that'll make money versus investing in an idea because
it needs to exist?
Speaker 3 (31:23):
That's a great question.
Speaker 2 (31:23):
I mean, I think there's a fairly clear line, at
least in my mind, and the way I think of
it as quite simple. I think philanthropy, at least for me,
is really effective at early stage science. You know, we
talked about this early innovation and sort of policy work.
It's a place where you don't even know if it's
going to work, you don't know how to make money
on it. You're just trying to increase our understanding of
different things. So there's some really promising carbon removal pathways,
(31:46):
one called ocean accalinity enhancement, which is a way to
sort of supercharge something that happens naturally in the ocean chemistry.
And the first question is like is it safe, is
it effective? And how much does it cost? And the
answers to that are like frustratingly broad, But in that
broad range, if you hit some parts of the target,
it may actually.
Speaker 3 (32:05):
Be the cheapest, most scalable form of government removal.
Speaker 2 (32:08):
I think it's a great place for us to go
do science and say like, well, let's go try to
answer those questions and like let's answer them with rigorous
and inteligence without trying to worry about what they're going
to make money on it, and let's like try to
write some papers. That's a good use of philanthropy. I
think for a lot of things we're talking about where
it's like, you know, solid state transformer, solid state electronics,
that's just at the point now where like I think
(32:29):
it is crossing the commercially competitive line. It was too
expensive and not reliable enough, and I think we're like
just getting at the point. So we're about a year
or two out from I think major commercial deployments. That's
a great place for a company because you're like trying
to scale something out and trying to make money doing it.
That's where I think industry works really really well.
Speaker 1 (32:47):
And you've also given money to ideas and philanthropy to
try and deal with impacts that are coming our way.
So we're going to see sea level rise, you're looking
to give money to ideas that would help us deal
with a problem that is kind of baked in. You know,
the models are quite uncertain, but we do know even
if we meet our climate goals, sea levels will continue
(33:09):
to keep rising for hundreds of years to come. Why
is that a problem that you are putting money in
as a philanthropy rather than stuff that governments are supposed
to do. This is basic research, This is good for society.
This is good for all countries, not just for one
specific country. So every government should really be keen and
(33:32):
investing in this right.
Speaker 2 (33:33):
The honest answers, I don't know why other people aren't
doing it. I think one of the things I'm pretty
good at is finding the white space. And so why
ended up here is like for whatever reason people weren't.
And you know, as you start kind of peeling the
onion on it, it gets worse, not better, which is
our models for sea level rise are pretty pretty rough.
You're talking hundreds of years. Let's talk in the lifetime
of our children. That's twenty one hundred. It's not that
far away, you know, seventy five years. Models say somewhere
(33:56):
between point two to two meters of sea level rise.
That's really for Mimi in New York. And so first
question is can we like better answer that question? And
that's again a place for science, so has to do work,
and it's not actually that expensive to go go do
that work. And then the next question is like, if
it's as bad as we think, besides building sea walls,
is there anything we can do just like slow this down?
(34:17):
And I think that again it's that's a good scientific
question ask, And I think it's worth just framing this again,
is all this climate stuff can feel really abstract, and
we talk about models and one see and this, Like,
I think about this in terms of people. We're talking
about islands underwater, we're talking about people being displaced, So like,
I care about impacts these things have on people in
our lifetime, and the question is how do we better
(34:38):
understand them and better prepare for them and hopefully prevent
or mitigate them, And like that that is the thing
that sort of underlies everything I'm doing.
Speaker 3 (34:46):
Thank you, Mike, Yeah.
Speaker 1 (34:53):
And thank you for listening to zero now for the
sound of the week. That was the sound of a
Highland cow burping while having its hair brushed. Burps produced
the vast majority of methane emissions from cow rearing and
(35:14):
are one of the many sources of greenhouse gases that
companies are trying to reduce. If you like this episode,
please take a moment to rate and review the show
on Apple Podcasts or Spotify. Share this episode with a
friend or with someone who loves teak. This episode was
produced by Oscar Boyd and Eleanor Harrison Dengate, Bloomberg's head
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(35:35):
Brendan nunim Our. Theme music is composed by Wonderly Special
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