June 26, 2025 • 36 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 (00:02):
Hey, it's sucksha. Each week you lend me your ears,
and now I'd like to hear from you. Do you
have a burning question about climate, green tech or the
future of the planet. Please send your questions to us
in writing or as a voice memo to zero pod
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Please do include your name and where you're based. Thank you.
(00:27):
Welcome to Zero I am Akshatrati. This week inside the
Mind of a Climate BC. Climate tech is not the
(00:48):
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
(01:11):
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
Shrepfer is one of them.
Speaker 2 (01:25):
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 (01:41):
From twenty thirteen to twenty twenty two, Mike Shrepfer 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
(02:01):
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 crackt nuclear fusion
to ones trying to vaccinate cattle to reduce methane verbs.
Mike also founded Additional Mentors, a philanthropy that focuses on
(02:22):
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
(02:43):
to the show.
Speaker 2 (02:43):
Thank you, glad to be here.
Speaker 1 (02:45):
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
(03:08):
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 (03:17):
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 plus 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
(03:40):
or Rayman 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 a wider scale of things. I
(04:01):
think than most people when they think of Facebook, think
about so the jump to climateech, which part of the
appeal of it was actually taking those learnings. You know,
I've shipped millions of devices and a built scale from
scratch that very few people have, and so I think
all of those apply. If you look at a portfolio.
We have consumer hardware products, we have consumer software products,
we have enterprise hardware products, and I think it's all
(04:22):
stuff I've worked on before.
Speaker 1 (04:24):
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
(04:45):
different challenge.
Speaker 2 (04:46):
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. Why is this product uniquely
good or uniquely different?
Speaker 1 (05:02):
You know.
Speaker 2 (05:02):
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 and 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.
Speaker 1 (05:23):
You know.
Speaker 2 (05:23):
The pitch consumers is pretty simple. It's like, do you
enjoy taking out 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
(05:45):
awesome 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 material,
so 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
(06:06):
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 it's an example of like trying
to take some of those skills and learnings and apply
(06:28):
them in these spaces.
Speaker 1 (06:29):
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 2 (06:36):
It's got a diverse supply base. 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.
So I'll just say that much.
Speaker 1 (06:45):
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 (07:01):
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, I want to be
a climate investor. I start out saying, like, I want
to start dedicating my time, expertise, and resources towards the
climate crisis. And I you know, I started on the
filanthropic side with with funding science and funding policy, and
then realized that, like, you know, the way a lot
(07:22):
of these markets get transformed is through businesses. You know,
if you think about like where would we be in
the electric car without Tesla, Where would we be in
space without SpaceX, Where it would be of the vaccines
without Madarna on others? And looking at that and thinking
about investing coming from this angle made me from the
very beginning say, look, you can call it climate. You
can do these are companies. They need to make money.
(07:44):
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 cost them
to make It is the basics of a business. Having
not gone to business school, that's my one a 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 a tech a long time,
(08:06):
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
that happen, you know, whether I go to work every
day or not. So that's awesome. 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,
(08:27):
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 a cost advantage,
or some technological leap that gets you there, or you're
breaking into some massive market for which you know if
(08:48):
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 (08:54):
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
(09:16):
example like Tesla, but it could never crack a thirty
thousand dollars ev as Elon Muskett 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
(09:38):
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 (09:54):
Yeah, I mean, I think globalization brings efficiency and deglobalization
is going to increase cost of everything going around the world.
So I think that's just true. 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 missed that one.
(10:15):
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. They're not really relying that
much on overseas supply chain for what they're building, and
they've built an 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
(10:36):
you have a relatively low production, high cost product that
you can do in sort of series production. And we're
seeing an incredible disporora of companies literally in El Segundo, 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. You know in
(10:57):
today's world. You know, there's a company called Arcbo 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. 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
(11:18):
there called Lightship that's doing this for RVs, recreational vehicles.
It's a massive market. 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 in nature, which sucks. And then you go
into big technological leaps like fusion, Commala Fusion and Devn's
Massachusetts sets the world record for magnet strength. They've got
(11:42):
a magnet that, as Bob likes to say, the founder
CEO can lift an aircraft carrier. It's that powerful. And
so really that is dependent on like a massive technical
leap innovativeness, which I would argue the United States as
historically been the leader in and if we can make
fusion work. I mean, just to put this in perspective
to power or here in London, London's about call it
(12:03):
four gigawatts of consistent power about one hundred gig abot
hours a day. So we kind of did some rough
math on the way here to like 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 dance than coal.
(12:23):
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, 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 (12:39):
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 Footobell take cell was invented in
Bell Labs in America. You didn't go to the nineteen
seventies when the lithium and pattery itself. Even before we
come to up cathered that does specific things. The first
(13:04):
setup of Aliti mand matterio is invented in the next
on mobile lab. 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 commercial opportunity,
(13:27):
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 a local
domestic supply chain because that's the requirement from NASA to
(13:50):
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 initial support from
the US government to bring the company to a point
(14:11):
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, and then it got
bought by China. And we know the story. This gets
repeated multiple times. So as a climate tech investor going
(14:34):
into an early stage company, how do you think about
scale when it comes to becoming a SpaceX.
Speaker 2 (14:40):
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 I went to a company
(15:01):
that 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 with 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
(15:23):
requires having a business model. You know, in Videa'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.
We had very hard margins. That is an incredible business, right,
that is as good as it gets. And like, look
(15:43):
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 that are like silicon think that you know, on
the other extreme, you have just baseline commodities that are
very hard, things like steel, concrete, cement, and those sorts
(16:06):
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'm not
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 been built the
same way, roughly speaking, for the last hundred years or
(16:28):
right now on a cost curve down on solid state transformers,
and you know, they are getting down cost down about
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 demand for these things,
so we're going to like sell everyone. There's a company
we just funded called Heron, with an exceptional founder from
(16:51):
eighteen years of Tesla DRUBEGL. You know, 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 (17:06):
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 the demand, especially in
(17:26):
the West with Europe and North America looking to build
data centers but also electrifying their fleet, adding heat pumps.
And there is something that growth does to the need
for innovation and the need for market developments that steady
(17:47):
or a declining market does not do. Right.
Speaker 2 (17:50):
Yeah, I think that's a really great point. And the
way 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 ordering 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,
(18:12):
the AI models, and I may lose out to my competition.
And you're seeing large companies. You know, Meta just announced
yesterday a deal for geothermal XGS. It was the second
geo thermal deal after Sage. Obviously Google has been doing
the same with Fervo. You've got most of the hyperscalers
being contracts for, you know, fission plants. It is categorically
different to say I need more of it or I
(18:32):
can offer it a better price. And like, 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
like didn't exist even a few years ago, that I'm
incredibly excited about and I think it's enabling a lot
of new innovation.
Speaker 1 (18:56):
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 rate and review the show
on Apple Podcasts and Spotify. Your feedback really matters and
helps new listeners discover the show. Thank you. So a
(19:21):
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 to science funding, to health funding, to energy technology funding.
(19:42):
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 (19:52):
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. You know, there's a I was talking yesterday
(20:17):
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 dollar
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 sort of at all
(20:39):
stages of innovation.
Speaker 1 (20:40):
You know.
Speaker 2 (20:40):
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 asked 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 a little more, like
it wasn't safe to drink the water in London because
we didn't really understand and how to disinfect it. Technology
(21:03):
has fundamentally improved 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 can do both? 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
(21:25):
the basic research that is the sort of early fuel
in this pipeline of incredible technologies to advance human prosperity.
Speaker 1 (21:33):
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. What's happening on science funding? We are
seeing places like Europe but also China, Japan, even India
(21:54):
looking to boost science funding, looking to either attract some
of the scientists who left those parts to come back
home or to just give I mean, these are words
that politicians have used refuse 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
(22:16):
are you tied to wanting an American company or are
you agnostic?
Speaker 2 (22:20):
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 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,
built things all over the world. That America still is
(22:43):
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 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 the Bay Area, in particular
(23:06):
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 it may be. And it's just hard
because you're recreating an entire ecosystem. Now you can screw
(23:27):
that up. You can you can mess it up over time.
And you know, I really hope America doesn't because I
think it's 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.
Speaker 1 (23:40):
Place to do it.
Speaker 2 (23:40):
But again I'm not dogmatic. We see a great company
somewhere else in the world. I think there are a
billion people all over the world. I think India in
particular is investing a lot, as is China and others. So,
you know, I hope we see a lot of innovation
all over the world.
Speaker 1 (23:52):
Looking over the next three to four years. What are
the things that you are seeking companies to bring solutions
in the climate text space that you would like your
capital to go towards.
Speaker 2 (24:05):
So we invest in everything, industrials, you know, land use,
car removal, all the rest of it. 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 I'm obsessed with are very simple. It's energy
and it's AI for acceleration of atoms and so energy
is pretty straightforward. As you know, are there new ways
to produce slow carbon energy cheaply distributed store it? I
(24:26):
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 r v's.
Like we're just kind of getting started replacing all the
gas stuff, all the diesel generators with batteries. In fact,
(24:49):
we just recently did an investment in a fishing company
that's building a microreactor called Radiant, and their target market
is diesel generators. It's a small reactor, it's one megawatt,
but you know in regions where it's hard to get
to to ship diesel fuel there and it's incredibly expensive
to do so, so you can actually build a cost
competitive product, you know, by shipping a container that just
produces energy for five years straight. That's that's exciting. So
(25:11):
I think energy broadly is super exciting. And then you know,
we've been seeing a lot of really interesting applications of
advances and AI for I would say accelerating the scale
out the first wave of these companies. We're trying to
accelerate discovery, so trying to use materials discovery or you know,
chemistry discoveries. And I was honestly like struggling with those companies,
(25:34):
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
whose thesis is how do we get from sort of
like idea to production faster and get through iteration, reduce
(25:56):
testing cycles. We need to build a lot of stuff anyway,
you can 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 (26:07):
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.
(26:28):
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 (26:43):
I mean, i'd say, first of all, the data I've
seen at least is that overall funding in VC is down,
and so if you like look at climate tech related
to overall VC, it's actually down less than over all 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 two on twenty twenty one where
we were like seeing deals come through with like very
(27:03):
fast markups, 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 subscribed grounds,
meaning that they have more investor interest than they need.
(27:26):
And I 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 their 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
(27:48):
it's a kind of tale of two companies. In many cases,
I'm sure there's founders listening to this struggling to fundraise.
And look, I started my first company in two thousand. I
remember what that like. It sucks, so I like, my
heart goes out to you. But I think there is
there is still appetite and capability to fund companies out there.
Speaker 1 (28:04):
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're
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
(28:26):
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
(28:48):
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,
(29:10):
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 So
with policy going away in the US, what do you
stop investing in?
Speaker 2 (29:31):
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
(29:51):
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 on others in a way
that didn't happen before. So I think it's quite simple
as 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 tail when we just do an
analysis on like how stable is that right and how
(30:14):
how likely 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?
Speaker 1 (30:28):
You know?
Speaker 2 (30:28):
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 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
(30:51):
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. It's usually one company that transforms
an industr, 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
(31:12):
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 that without Intel, Like,
and you're just like, what would it look like? 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
(31:33):
financial returns for our investors.
Speaker 1 (31:34):
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 2 (31:49):
That's a great question. 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 the 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
(32:11):
carbon removal pathways, one called ocean acclinity 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 be the cheapest, most
(32:32):
scalable form of government removal. 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 whether're go 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
(32:56):
like I think 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 that's where I think industry
works really really well.
Speaker 1 (33:14):
And you've also given money to ideas in 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 will 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
(33:36):
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
(33:59):
investing in right.
Speaker 2 (34:00):
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. Seventy five years. Models say somewhere between point
(34:24):
two to two meters of sea level rise. That's really
problematic 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?
(34:44):
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 about impacts these things have on people in
our lifetime. And the question is how do we better
(35:05):
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 1 (35:13):
Thank you, Mike, Yeah, 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
(35:35):
hair brushed. Burbs produce the vast majority of methane emissions
from cow rearing and are one of the many sources
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you like this episode, please take a moment to rate
and review the show on Apple Podcasts or Spotify. Share
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(35:55):
This episode was produced by Oscar Boyd and Eleanor Harrison.
DNGATEX podcast is Saige Bauman and head of Talk is
Brendan yunim Our. Theme music is composed by Wonderly Special
thanks to Jessica beck Soamersadi Moses andm and Schawan Wagner
I am Akshatrati bak Soon
Hey, it's sucksha. Each week you lend me your ears,
and now I'd like to hear from you. Do you
have a burning question about climate, green tech or the
future of the planet. Please send your questions to us
in writing or as a voice memo to zero pod
ad Bloomberg dot net and we'll make an episode answering them.
Please do include your name and where you're based. Thank you.
(00:27):
Welcome to Zero I am Akshatrati. This week inside the
Mind of a Climate BC. Climate tech is not the
(00:48):
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
(01:11):
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
Shrepfer is one of them.
Speaker 2 (01:25):
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 (01:41):
From twenty thirteen to twenty twenty two, Mike Shrepfer 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
(02:01):
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 crackt nuclear fusion
to ones trying to vaccinate cattle to reduce methane verbs.
Mike also founded Additional Mentors, a philanthropy that focuses on
(02:22):
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
(02:43):
to the show.
Speaker 2 (02:43):
Thank you, glad to be here.
Speaker 1 (02:45):
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
(03:08):
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 (03:17):
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 plus 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
(03:40):
or Rayman 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 a wider scale of things. I
(04:01):
think than most people when they think of Facebook, think
about so the jump to climateech, which part of the
appeal of it was actually taking those learnings. You know,
I've shipped millions of devices and a built scale from
scratch that very few people have, and so I think
all of those apply. If you look at a portfolio.
We have consumer hardware products, we have consumer software products,
we have enterprise hardware products, and I think it's all
(04:22):
stuff I've worked on before.
Speaker 1 (04:24):
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
(04:45):
different challenge.
Speaker 2 (04:46):
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. Why is this product uniquely
good or uniquely different?
Speaker 1 (05:02):
You know.
Speaker 2 (05:02):
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 and 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.
Speaker 1 (05:23):
You know.
Speaker 2 (05:23):
The pitch consumers is pretty simple. It's like, do you
enjoy taking out 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
(05:45):
awesome 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 material,
so 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
(06:06):
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 it's an example of like trying
to take some of those skills and learnings and apply
(06:28):
them in these spaces.
Speaker 1 (06:29):
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 2 (06:36):
It's got a diverse supply base. 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.
So I'll just say that much.
Speaker 1 (06:45):
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 (07:01):
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, I want to be
a climate investor. I start out saying, like, I want
to start dedicating my time, expertise, and resources towards the
climate crisis. And I you know, I started on the
filanthropic side with with funding science and funding policy, and
then realized that, like, you know, the way a lot
(07:22):
of these markets get transformed is through businesses. You know,
if you think about like where would we be in
the electric car without Tesla, Where would we be in
space without SpaceX, Where it would be of the vaccines
without Madarna on others? And looking at that and thinking
about investing coming from this angle made me from the
very beginning say, look, you can call it climate. You
can do these are companies. They need to make money.
(07:44):
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 cost them
to make It is the basics of a business. Having
not gone to business school, that's my one a 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 a tech a long time,
(08:06):
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
that happen, you know, whether I go to work every
day or not. So that's awesome. 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,
(08:27):
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 a cost advantage,
or some technological leap that gets you there, or you're
breaking into some massive market for which you know if
(08:48):
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 (08:54):
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
(09:16):
example like Tesla, but it could never crack a thirty
thousand dollars ev as Elon Muskett 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
(09:38):
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 (09:54):
Yeah, I mean, I think globalization brings efficiency and deglobalization
is going to increase cost of everything going around the world.
So I think that's just true. 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 missed that one.
(10:15):
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. They're not really relying that
much on overseas supply chain for what they're building, and
they've built an 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
(10:36):
you have a relatively low production, high cost product that
you can do in sort of series production. And we're
seeing an incredible disporora of companies literally in El Segundo, 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. You know in
(10:57):
today's world. You know, there's a company called Arcbo 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. 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
(11:18):
there called Lightship that's doing this for RVs, recreational vehicles.
It's a massive market. 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 in nature, which sucks. And then you go
into big technological leaps like fusion, Commala Fusion and Devn's
Massachusetts sets the world record for magnet strength. They've got
(11:42):
a magnet that, as Bob likes to say, the founder
CEO can lift an aircraft carrier. It's that powerful. And
so really that is dependent on like a massive technical
leap innovativeness, which I would argue the United States as
historically been the leader in and if we can make
fusion work. I mean, just to put this in perspective
to power or here in London, London's about call it
(12:03):
four gigawatts of consistent power about one hundred gig abot
hours a day. So we kind of did some rough
math on the way here to like 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 dance than coal.
(12:23):
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, 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 (12:39):
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 Footobell take cell was invented in
Bell Labs in America. You didn't go to the nineteen
seventies when the lithium and pattery itself. Even before we
come to up cathered that does specific things. The first
(13:04):
setup of Aliti mand matterio is invented in the next
on mobile lab. 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 commercial opportunity,
(13:27):
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 a local
domestic supply chain because that's the requirement from NASA to
(13:50):
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 initial support from
the US government to bring the company to a point
(14:11):
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, and then it got
bought by China. And we know the story. This gets
repeated multiple times. So as a climate tech investor going
(14:34):
into an early stage company, how do you think about
scale when it comes to becoming a SpaceX.
Speaker 2 (14:40):
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 I went to a company
(15:01):
that 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 with 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
(15:23):
requires having a business model. You know, in Videa'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.
We had very hard margins. That is an incredible business, right,
that is as good as it gets. And like, look
(15:43):
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 that are like silicon think that you know, on
the other extreme, you have just baseline commodities that are
very hard, things like steel, concrete, cement, and those sorts
(16:06):
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'm not
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 been built the
same way, roughly speaking, for the last hundred years or
(16:28):
right now on a cost curve down on solid state transformers,
and you know, they are getting down cost down about
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 demand for these things,
so we're going to like sell everyone. There's a company
we just funded called Heron, with an exceptional founder from
(16:51):
eighteen years of Tesla DRUBEGL. You know, 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 (17:06):
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 the demand, especially in
(17:26):
the West with Europe and North America looking to build
data centers but also electrifying their fleet, adding heat pumps.
And there is something that growth does to the need
for innovation and the need for market developments that steady
(17:47):
or a declining market does not do. Right.
Speaker 2 (17:50):
Yeah, I think that's a really great point. And the
way 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 ordering 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,
(18:12):
the AI models, and I may lose out to my competition.
And you're seeing large companies. You know, Meta just announced
yesterday a deal for geothermal XGS. It was the second
geo thermal deal after Sage. Obviously Google has been doing
the same with Fervo. You've got most of the hyperscalers
being contracts for, you know, fission plants. It is categorically
different to say I need more of it or I
(18:32):
can offer it a better price. And like, 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
like didn't exist even a few years ago, that I'm
incredibly excited about and I think it's enabling a lot
of new innovation.
Speaker 1 (18:56):
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 rate and review the show
on Apple Podcasts and Spotify. Your feedback really matters and
helps new listeners discover the show. Thank you. So a
(19:21):
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 to science funding, to health funding, to energy technology funding.
(19:42):
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 (19:52):
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. You know, there's a I was talking yesterday
(20:17):
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 dollar
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 sort of at all
(20:39):
stages of innovation.
Speaker 1 (20:40):
You know.
Speaker 2 (20:40):
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 asked 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 a little more, like
it wasn't safe to drink the water in London because
we didn't really understand and how to disinfect it. Technology
(21:03):
has fundamentally improved 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 can do both? 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
(21:25):
the basic research that is the sort of early fuel
in this pipeline of incredible technologies to advance human prosperity.
Speaker 1 (21:33):
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. What's happening on science funding? We are
seeing places like Europe but also China, Japan, even India
(21:54):
looking to boost science funding, looking to either attract some
of the scientists who left those parts to come back
home or to just give I mean, these are words
that politicians have used refuse 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
(22:16):
are you tied to wanting an American company or are
you agnostic?
Speaker 2 (22:20):
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 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,
built things all over the world. That America still is
(22:43):
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 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 the Bay Area, in particular
(23:06):
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 it may be. And it's just hard
because you're recreating an entire ecosystem. Now you can screw
(23:27):
that up. You can you can mess it up over time.
And you know, I really hope America doesn't because I
think it's 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.
Speaker 1 (23:40):
Place to do it.
Speaker 2 (23:40):
But again I'm not dogmatic. We see a great company
somewhere else in the world. I think there are a
billion people all over the world. I think India in
particular is investing a lot, as is China and others. So,
you know, I hope we see a lot of innovation
all over the world.
Speaker 1 (23:52):
Looking over the next three to four years. What are
the things that you are seeking companies to bring solutions
in the climate text space that you would like your
capital to go towards.
Speaker 2 (24:05):
So we invest in everything, industrials, you know, land use,
car removal, all the rest of it. 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 I'm obsessed with are very simple. It's energy
and it's AI for acceleration of atoms and so energy
is pretty straightforward. As you know, are there new ways
to produce slow carbon energy cheaply distributed store it? I
(24:26):
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 r v's.
Like we're just kind of getting started replacing all the
gas stuff, all the diesel generators with batteries. In fact,
(24:49):
we just recently did an investment in a fishing company
that's building a microreactor called Radiant, and their target market
is diesel generators. It's a small reactor, it's one megawatt,
but you know in regions where it's hard to get
to to ship diesel fuel there and it's incredibly expensive
to do so, so you can actually build a cost
competitive product, you know, by shipping a container that just
produces energy for five years straight. That's that's exciting. So
(25:11):
I think energy broadly is super exciting. And then you know,
we've been seeing a lot of really interesting applications of
advances and AI for I would say accelerating the scale
out the first wave of these companies. We're trying to
accelerate discovery, so trying to use materials discovery or you know,
chemistry discoveries. And I was honestly like struggling with those companies,
(25:34):
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
whose thesis is how do we get from sort of
like idea to production faster and get through iteration, reduce
(25:56):
testing cycles. We need to build a lot of stuff anyway,
you can 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 (26:07):
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.
(26:28):
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 (26:43):
I mean, i'd say, first of all, the data I've
seen at least is that overall funding in VC is down,
and so if you like look at climate tech related
to overall VC, it's actually down less than over all 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 two on twenty twenty one where
we were like seeing deals come through with like very
(27:03):
fast markups, 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 subscribed grounds,
meaning that they have more investor interest than they need.
(27:26):
And I 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 their 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
(27:48):
it's a kind of tale of two companies. In many cases,
I'm sure there's founders listening to this struggling to fundraise.
And look, I started my first company in two thousand. I
remember what that like. It sucks, so I like, my
heart goes out to you. But I think there is
there is still appetite and capability to fund companies out there.
Speaker 1 (28:04):
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're
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
(28:26):
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
(28:48):
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,
(29:10):
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 So
with policy going away in the US, what do you
stop investing in?
Speaker 2 (29:31):
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
(29:51):
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 on others in a way
that didn't happen before. So I think it's quite simple
as 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 tail when we just do an
analysis on like how stable is that right and how
(30:14):
how likely 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?
Speaker 1 (30:28):
You know?
Speaker 2 (30:28):
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 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
(30:51):
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. It's usually one company that transforms
an industr, 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
(31:12):
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 that without Intel, Like,
and you're just like, what would it look like? 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
(31:33):
financial returns for our investors.
Speaker 1 (31:34):
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 2 (31:49):
That's a great question. 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 the 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
(32:11):
carbon removal pathways, one called ocean acclinity 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 be the cheapest, most
(32:32):
scalable form of government removal. 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 whether're go 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
(32:56):
like I think 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 that's where I think industry
works really really well.
Speaker 1 (33:14):
And you've also given money to ideas in 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 will 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
(33:36):
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
(33:59):
investing in right.
Speaker 2 (34:00):
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. Seventy five years. Models say somewhere between point
(34:24):
two to two meters of sea level rise. That's really
problematic 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?
(34:44):
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 about impacts these things have on people in
our lifetime. And the question is how do we better
(35:05):
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 1 (35:13):
Thank you, Mike, Yeah, 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
(35:35):
hair brushed. Burbs produce the vast majority of methane emissions
from cow rearing and 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 steak.
(35:55):
This episode was produced by Oscar Boyd and Eleanor Harrison.
DNGATEX podcast is Saige Bauman and head of Talk is
Brendan yunim Our. Theme music is composed by Wonderly Special
thanks to Jessica beck Soamersadi Moses andm and Schawan Wagner
I am Akshatrati bak Soon
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