Episode 172: Amy Duffuor, Prime Impact Fund
Today's guest is Amy Duffuor, Principal at Prime Impact Fund.
Prime Impact Fund, an investment initiative of Prime Coalition, is an early-stage VC fund dedicated to investing in technology companies with the potential for gigaton-scale climate impact.
Prior to Prime Impact Fund, Amy was a renewables and power investment banker at Bank of America. There, she worked with CEOs of public and private companies to raise investment capital, including the IPO of Sunnova, a residential solar company initially valued at approximately $1 billion. Before her stint on Wall Street, Amy ran early-stage social venture accelerators around Southeast Asia for a Singapore-headquartered impact investing firm called Impact Investment Exchange. Earlier in her career, Amy was a management consultant at State of Flux, a London-based consulting firm specializing in supply chain and procurement. In addition, she serves as a board member for Prime Impact Fund portfolio companies Clean Crop Technologies and Noon Energy and is on the Northeast Clean Energy Council (NECEC) board.
I was looking forward to catching up with Amy because I've interviewed some of her colleagues early on in the My Climate Journey days. It was exciting to hear how Prime Impact Fund has grown since 2018 and learn about Amy's role at the company. She walks me through her climate journey, what led her to work at Prime Impact Fund, and the firm's investment strategy. We also talk about the differences between catalytic capital and concessionary capital and the importance of climate impact-aligned investing.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@mcjcollective.com, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded August 4th, 2021
In Today's episode we cover:
Summary of Prime Impact Fund and the many pillars under the prime umbrella
Prime Impact Fund's sources of capital
How Amy started focusing on climate investing and her path the Prime
Why the Prime model spoke to Amy and what motivated her to join the firm
A conversation about additionality, what it means to Prime, and how it works
Prime Impact Fund's north star and the verticals the firm focuses on
The timeline process for Prime Impact Fund
How Prime determines its sweet spot for investments
Key differences between concessionary capital and catalytic capital
The support Prime Impact Fund provides for companies they invest in
What Prime Impact Fund would do if the climate impact and commercial success were at odds
Links to topics discussed in this episode:
Prime Impact Fund: https://www.primeimpactfund.com/
Prime Coalition: https://primecoalition.org/
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Jason Jacobs: Hey everyone, Jason here. I am the My Climate Journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey, or MCJ, as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well, so we set up a Slack community for those people that's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria we screen for: determination to tackle the problem of climate change, ambition to work on the most impactful solution there is, optimism that we can make a dent and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity, the better.
There's a bunch of great things that have come out of that community, a number of founding teams that have mete in there, a number of nonprofits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members, and some open-source projects that are getting actively worked on that hatched in there as well. At any rate, if you wanna learn more, you can go to myclimatejourney.co, the website, and click the Become A Member tab at the top. Enjoy the show. Hello everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Today's guest is Amy Duffuor, a principal at Prime Impact Fund. Prime Impact Fund invests in transformative technology companies with the potential for gigaton-scale climate impact. They call their capital catalytic capital with a long-term lens. The fund is purpose-built to support high risk, high reward ventures at the earliest stages. Now, Prime Impact Fund is not totally new to me. I did have Sarah Kearney from Prime Coalition on the show very early on. Prime Impact Fund sits underneath Prime Coalition. And I also had Matthew Nordan on the show, who is one of Amy's partners in Prime Impact Fund.
But a while has transpired since then, I think a couple of years and during that time, a lot's changed with Prime, a lot's changed with climate tech and a lot's changed in the world, so I thought it'd make sense to bring Amy on and give us an update on what's going on with Prime and what's going on in climate tech. We have a great discussion in this episode about Prime Impact Fund's thesis, what it means to be catalytic capital, their criteria for making investments, some of the recent investment's that they've done, some of the lessons learned along the way and how their approach has evolved from when they first started out. And then we have a great discussion about the climate tech marketplace in general, where the gaps and white space are, where the biggest blockers are that are inhibiting the ecosystem from growing, how Prime can help, but also what some other opportunities are where others could be similarly impactful doing other things adjacent to where Prime sits. I enjoyed this one and I'm excited for you to hear it. Amy, welcome on the show.
Amy Duffuor: Thanks for having me, Jason. I'm really excited to be here.
Jason Jacobs: I was teasing you before we hit record, but you've definitely been out on the podcast circuit lately. You're, you're on a global tour it seems.
Amy Duffuor: I know. I, I wonder if people are sick of hearing from me yet, but apparently not since [laughs] I'm on this show. [laughs]
Jason Jacobs: No. I'm, I'm super excited, in fact, just as, as a testament to how excited I am, I mean, I've done one with Sarah Kearney, your colleague, Sarah Kearney, and then one with your colleague Matthew Nordan and, and yet here we are for round three. So I think you bring a different and unique perspective, and also it's been probably a couple years and I feel like a lot's changed in the market and probably a lot's changed with Prime since I sat down with them as well.
Amy Duffuor: It has definitely changed over the past couple of years. I mean, the climate tech landscape is insane right now, in a good way, in terms of there's a lot of attention and interest and capital pouring in, which is a very different environment than Prime was born in.
Jason Jacobs: Well, taking things from the top, for people that haven't benefited from recording two episodes with two of your colleagues, what is Prime and what are the different legs of the stool that are underneath the Prime umbrella?
Amy Duffuor: Sure. It's a great question and it's good to clarify. So I work for Prime Impact Fund, which is an invesment initiative of Prime Coalition, which is a 501[c][3] nonprofit, and Prime Coalition's mission is to partner with philanthropists to use catalytic capital to drive climate innovation. So you had Sarah on the show, so Prime Coalition was founded by Sarah, who saw that at the time, in 2013, 2014, there were very little venture dollars that were flowing in to the climate space. And so, I mean, we can probably guess why that is. Cleantech 1.0 happened, people were a lot more reticent about making more investments and she thought, "Okay, instead of us focusing on why venture isn't stepping up to the plate, why don't we look at US family foundations and offices," which at that time, the asset class was about three or four times larger than the venture asset class, "... and partner with those individuals to really drive climate innovation."
And so she really made it her mission to partner with philanthropists to drive climate innovation. That happens in a number of different ways, and one of those ways is through catalytic investments. So Prime Impact Fund is an investment initiative of Prime Coalition, which sole focus is as an early stage VC fund is to invest in technology companies with the potential for gigaton-scale climate impact. So that's kinda the relationship between the two organizations, although we all think of ourselves as one team.
Jason Jacobs: So does that mean that the capital from limited partners for the fund, does that come solely from foundations and philanthropists?
Amy Duffuor: Yeah, that's an important distinction. So the innovation in the Prime Impact Fund model is that all of the capital that's coming into the fund is what we call catalytic capital, so it is from high net worth individuals, family offices, foundations. And as a refresher on what catalytic capital is, it's much more structurally patient and flexible capital, and so we want to use that to de-risk early stage climate technologies for follow-on investors.
So MacArthur Foundation has played a really important role in shaping and defining this term, so it's essentially capital that accepts disproportionate risk to generate positive impact and help enable sort of third-party investment that wouldn't have been possible otherwise. So this can come of lots of different forms, whether it's recoverable grants, program-related investments, which are typically used by US foundations, or mission-related investments, which are equity subscriptions. But the whole idea is that these primarily tax exempt investments, as long as they can show that they've got a burden of proof of additionality, they can be used to support for-profit companies. So that's just a recap of kinda the special color of capital that we have and why we're using that color of capital to support early stage climate technology companies.
Jason Jacobs: Yeah, I don't know too many others, or really any other organization, that is structured quite like Prime, and I have a lot of questions down that path. But before we get too far, maybe we should hit the pause button and talk a little bit about your story and journey and how and when and why you came to be doing the work that you're doing now.
Amy Duffuor: Wow. My climate journey. Okay. So... [laughs] yeah, it's an interesting one because it's non-linear. I have a very non-linear path into climate. I mean, right now I'm a principal at Prime Impact Fund, so I'm leading investments and sitting on company boards, but I really think of my background as more hybrid business finance and impact, so if I start from the beginning-
Jason Jacobs: You were an investment banker for a time, right?
Amy Duffuor: I was an investment banker, an operations-focused management consultant. Also worked for an impact investing firm in Southeast Asia and have got a bunch of random degrees that people usually don't think of [laughs], so sometimes I like to start from the beginning because... and then when I kinda think about what brought me to this point, there have been a lot of disparate experiences, which didn't at the time seem connected, but they're all really connected to me, so you know, I grew up in the Philadelphia area in a small town called Doylestown, and I was the child of immigrants from Ghana, and so when I talked about the kind of random things that I studied, I mean, you know, I ended up, after high school in New York, where I studied urban studies at Columbia University, graduated during the financial crisis, so there were no jobs at all, and then ended up in the UK at Oxford University doing a master's in migration studies. So I really started out my career focusing on marginalized West African migrants and how they integrated into their host countries.
Honestly, after I graduated with my degree, it was pretty difficult to get a job in the UK with kinda that focus area. I like to say it was just a couple of years before the, the refugee crisis. So I ended up in operations-focused management consulting at a company in London, so kind of a random transition to that point. And I'd been working there for a couple of years and had a terrible, terrible consulting client, and so as penance, they sent me to Singapore to work for Barclay Investment Bank and, frankly, that was supposed to be a three-month project, Jason, and it turned into a year project, and I absolutely fell in love with Southeast Asia. It's an area I never thought I would end up in, and while the first year that I worked there was really in a legislation financial institution, I started to have this moment where I really wanted to work in an industry that combined the business acumen that I had gained when I was in operations-focused management consulting with my passion for impact.
I mean, I started out my career really focusing on social impact with that migration work, and when I worked with operations-focused management consulting, it was much more kind of working with FMCG companies, legislation healthcare companies, legislation finance companies, and impact investing started to gain a lot of kind of notoriety and traction, particularly after the financial crisis, where people were saying, "Hey, we believe that we can invest in companies that can generate social and environmental impact." And so that was a transition for me where I really thought, "Okay, I wanna not only be doing a job that's really on one lens, I really wanna find a job that allows me to do both." And that's when I made a transition from a very legislation financial institution to a local impact investing firm called Impact Investment Exchange. And at IIX, for short, I used to run their early stage social venture accelerator programs around Southeast Asia, so I was kinda on the ground with entrepreneurs in the Philippines and Malaysia and Singapore, really helping them think through the pain points in their businesses.
And I, I loved it. I thought it was super exciting, and it wasn't only focused on sort of clean energy or climate. I mean, we were supporting companies that were health tech companies, fintech companies, agtech companies, but at the time, I was really starting to think a lot more about climate change, and it didn't speak to me, if I'm being honest, the whole climate movement didn't speak to me at that time. I think everyone kinda has their own vantage point, but for me, the people who are disproportionately impacted by the terrible effects of climate change are low-income communities and communities of color, especially in the global south. And I saw a lot of people focusing on the natural environment, which is super important in the climate crisis, but for me, the focus really was about people and the fact that climate change wasn't happening in 50 years, but it kind of happening today. And so when you think about how climate change is really critical for low-income populations who may not have the privilege about things about something that's gonna happen in 50 years and are really looking at hat day to day.
I started to get much more committed and focused on the climate crisis when I sort of reframed it, that it's not this kind of far-reaching thing, it's this omnipresent threat that is impacting people's day-to-day lives. And that was actually a much more compelling narrative for me to want to transition my career into this space.
Jason Jacobs: So what did you do?
Amy Duffuor: So I realized first that if I wanna be in the climate space, there are lots of different entry points. I wanted to be an investor. When I was working at Impact Investment Exchange, you know, we weren't investors ourselves, we were more intermediaries. And so I thought, okay, I wanna be an investor, but I have this urban studies undergrad and migration studies and have worked kind of in operations, and then in impact investing, but recognized that there was a gap in my skillset in terms of having a hard sort of finance background. So, you know, news flash [laughs], it's really hard to make transitions in your career without school, so I decided, all right, even though I'm a little bit older than some of the other business school students, I went back to school, finally came back to the US after eight years abroad, and went to the Wharton School at UPenn, which was actually really nice because it was very close to where I grew up, and I was finally able to see my family more frequently and really focus my efforts on getting a really solid grounding in finance and entrepreneurial management.
So when I thought about it, I had, when I was in Singapore, really had understood and worked with very early stage companies, but I, frankly, wanted to have more exposure to companies that were on the other end of the spectrum, so for companies that were much more mature. And so that plus my interest in focus on the climate space actually propelled me to join an investment bank after graduation. So I joined Bank of America. I was a renewables investment banker, so I was helping CEOs raise capital, worked on a lot of different things, but the most important and meaningful thing to me was the IPO of Sunnova, it's a residential solar company, now worth around $4 billion. And traveling around the world for their IPO road show and being there when John Berger, the CEO who built this company from the ground up, rang the bell on the New York Stock Exchange. It was such an incredible privilege to see an entrepreneur's dream of going public become a reality.
So while I had that really special experience, I recognized that, ultimately, I wanted to be an investor. I wanted to be an investor for a climate fund, which was really kinda deepening the renewables banking work that was thinking about things and... differently and doing things differently. I really wanted to work at an organization that was thinking about how different colors of capital could support different stages of a company's life cycle, and Matthew and Sarah, what they built at Prime, was really inspiring and I feel pretty grateful that I was able to join that team. So that's my, my journey into climate. [laughs]
Jason Jacobs: And what was it about the Prime model that spoke to you?
Amy Duffuor: So when I first met Sarah and Matthew, they talked a lot about how there could be a different way, in terms of how we can support climate tech companies, that they're often companies that are really beyond government grants but are too risky for mainstream VCs, and that we can use this special color of capital, catalytic capital, which I've already every explained, but that the ultimate vision was a blended type investment vehicle that could really bring together catalytic capital and more sort of conventional venture capital, that not only catalyzes and de-risks early stage climate technologies, but helps them scale. I thought hat was a really bold vision, particularly in the climate space because I hadn't seen that around as something longer term that they were in... aspiring to and that was one of the key reasons, alongside the use of additionality, which I think is really unique in the model, that really sealed the deal for me.
Jason Jacobs: Can you talk a little bit about that use of additionality and what that means and how it works?
Amy Duffuor: Yeah, so additionality is interesting because it's actually, it's a bit of a shifting definition, but ultimately, the basic idea is that an investment wouldn't have come together, sort of but for our intervention, and this can manifest in a lot of ways. It could mean that, you know, a company is too early for mainstream funders, so we're not afraid of going into university labs. It could mean that there isn't a kind of a deep climate investor around the table that can help prioritize optimal climate impact, or the terms that are being offered aren't favorable to a founder or the timelines, mean that other investors can't participate. There are lots of different ways that additionality manifests, but ultimately, it means that we're not chasing hot deals. So if there is a round whereby it's 3X oversubscribed and you've got Andreessen Horowitz and Breakthrough Energy Ventures and USV around the table, you know, we're likely not to participate, just because it's not the best use of our catalytic capital, which we wanna, again, use to de-risk early stage climate technologies for follow-on investors.
When Prime started, frankly, additionality was as simple as no one else is willing to fund this company, so we are so we can move forward. Literally in 2013 and 2014, when Prime first operated in deal by deal syndication mode, that was the case. Now, there's a ton of money pouring into climate, so additionality is shifting in the sense that it's less about a round not coming together for one explicit reason, but more about us focusing our efforts in more overlooked kind of areas, or verticals within the climate space. And now we've seen that sometimes our involvement in a company can actually spur other investors off the sidelines to participate, which we think is... we think is really great and an important field-building aspect to additionality and just Prime's approach to climate investing in general.
Jason Jacobs: Now, given how broad climate investing is, I mean, it essentially touches every sector of every geography of our global economy, which verticals do you focus on, if you even think about it that way, how broad and, and across what areas?
Amy Duffuor: So I think the first thing to note is that our North Star of investment criteria is gigaton-scale climate impact, so a company has to have the potential to reduce at least half a gigaton of greenhouse gas emissions by 2050. So when we think about verticals or sub sectors, it's ones that can really achieve that, so when you think about transportation or buildings or agriculture, you know, there are lots of different areas, but then there are nuances within that. So in agriculture, for example, a lot of money has been flowing into agtech, but it's primarily down streamed towards the end consumer, think of all the alternative protein companies, think of Instacart. There's less money that's going more midstream and upstream closer to the producer, and so that can be an area where there's more white space for catalytic capital to play, you know, I guess no pun intended, a more catalytic role.
Other overlooked areas, too, you know, when we think about places we wanna focus on, I mean, energy storage, long-duration energy storage is a place that we've recently made an investment. I think it's funny, we invested in a direct air carbon capture company called Verdox. This is about two years ago. We actually see so many DAC companies that are coming to us now, so when I talk about additionality being shifting, maybe in a year or two years, there's gonna be a lot of conventional venture money that's pouring into those companies, which I totally wouldn't have thought. And that may not be the most appropriate place for us to play in terms of catalytic capital. Actually, you know, another good example is electric aviation. So when we were in deal by deal syndication mode, we backed a company called Weight Electric. Now we see a ton of money that's been pouring into electric aviation companies, whether it's ZeroAvia or Universal Hydrogen. So when we think about kind of additionality in overlooked areas, that really shifts over time.
Jason Jacobs: But given that you're looking for areas that are neglected, but it sounds like there's a broad range of areas that you would go, because any area that is neglected and has that potential for half a gigaton by 2050 sounds like it's open game, given that you're not following and it seems like oftentimes, you're the first one to put a stake in the ground and, and commit, how do you get there just from a diligence standpoint, wh-where does that conviction come from? What does your process look like? What expertise are you leaning on and how do you not feel like you're being a reckless fiduciary, given how wildly different these areas are to understand?
Amy Duffuor: Yeah, there were a couple of questions in there, so let me take it [crosstalk 00:22:51].
Jason Jacobs: I do that. That's a bad habit. I, like, lump the questions in with each other. I should really stop, but it's... you know, habits are hard to break.
Amy Duffuor: No, it's, it's great. So let me first start by talking through the overarching criteria when we're doing diligence and then, also, our process as well, because that is quite unique. So when we think about the kinda key things that we're looking for in diligence, you know, the first and foremost is climate impact. I mean, I mentioned our North Star of half a gigaton by 2050, and we have an emissions reduction potential assessment that we do, even if I as the investment team member love the team and the tech and the unit economics, if our independent consultant does this assessment and it doesn't have the potential for at least half a gigaton by 2050, we can't move forward. So that's a really important part of our diligence process.
Team is also super critical. I mean, people have often said that early stage venture investors are talent scouts with a checkbook, and so we spend a lot of time with and on the team. I know that can be quite hairy, because there's a lot of discussion right now, particularly within the venture space about what makes a good team, who's getting funded, that at least for me, that's somebody who is adaptable and coachable and has a vision, and you can only get those data points by spending time with the team during diligence.
Outside of team, I mean, tech is also crazy critical. I mean, there needs to be a fundamental innovation, as well as an entitlement on a particular figure of merit, so they're gonna change between different climate technologies, but if you think about energy storage, I mean, cost is really important and energy density. I mean, is a company that we're looking at 5X better, 10X better, 1X better? I mean, those are kinda the things that we take into account.
And then, I guess it's the former banker in me, but the [inaudible 00:24:46] economics are also really critical. I mean, are they sound? Can they withstand shocks? I mean, a lot of the financials that these companies give us at the early age are [inaudible 00:24:56], so we really wanna drill down to make sure that we understand what are the key building blocks. And then, I think maybe the last piece of diligence... now, there are many things, but last one to highlight is really around the market. Many of the companies that we support have technical founders and so they're really strong in terms of that technical development, but you wanna make sure that as that technical development is ongoing that you have sight of who your customers are and what they want and the m- what the market is saying, because that can change. And so that's also a really critical part of diligence, which is does the team really have an understanding of the market and a thoughtful approach to their go-to-market strategy, knowing that could very well change?
So those are some of the building blocks how we do diligence. I mean, look, I already said upfront, hybrid business finance and impact background, so you know, I don't, you know, have a PhD in chemistry or physics, although, many of my team members do, so we've got a, a lot of kind of in-house technical talent. We also reach out to a number of subject matter experts in our network. We've really built them up over the years and key verticals. So I know who to call, whether it's an SME, a VC, a perspective customer or acquirer, to get a sense of whether the milestones that a company has outlined to us when we're doing diligence makes sense. Those are all key parts of the process.
And then I think the last thing, which is pretty unique about Prime is that we utilize an investment advisory committee, which comprises probably 18 or 19 of the most active investors in the clean tech and climate tech space, so all managing partners, so think Nancy Pfund from DBL, think Gabriel Kra from Prelude, think Dave Danielson from Breakthrough Energy Ventures. And they don't make investment decisions, the investment committee sits with myself and Matthew, and our other partner, Johanna, but they really provide an important data point on additionality.
So I'm grossly oversimplifying this, but we convene a subset of them once a quarter and we present to them a couple of companies. If the company that we present to them, they say, "Hey, do you feel like this is likely to get funded by conventional venture," and everyone says 'yes', okay, great. They should go and fund that company. On the flip side, we also ask a question of is... if this company was de-risked on Prime's level of catalytic capital, do you believe it could secure follow-on funding, because we don't want our capital to be a bridge to nowhere. If the answer is 'no', that's also a really important data point.
So that serves as a pulse check throughout our diligence process, and it really is the kind of initial piece before we kick off deep diligence, 'cause again, we wanna make sure that we are channeling our catalytic capital in areas that have often been overlooked by other conventional venture or strategic investors.
Jason Jacobs: What are the typical process timelines?
Amy Duffuor: Varies. We have done diligence in as short as, maybe three weeks, and some things can take, you know, two or three months. It just... it really depends. What we try to do is be very attuned to what the company needs. So for example, one of the companies that we supported had a really tight matching grant deadline, so we really, well, for a very substantial amount of money, so we worked really hard and hustled to make sure that we had completed our diligence within that timeframe, because we didn't wanna be a bottleneck, whether or not we were going to move forward with an investment decision. So that's just an example of how the circumstances can play a role in some of the timelines.
Jason Jacobs: Well, I have a bunch of questions that I need to think a little bit about how to structure this, but I can, I can give it a shot here. One question is you talked about how it's kinda like, you didn't use this word, but it's like Goldilocks, where if it's too much access to capital, then not a fit for Prime. And if it's too un-fundable, then not a fit for Prime. I guess my question is, what are some reasons why a company would not have access to capital in this frothy market that you think are a good fit for Prime? And then what are some reasons why a company would not have access to capital in this frothy market that you think would either be a flag or would make them less in your sweet spot?
Amy Duffuor: I think that there's a lot of capital that's flowing in this space. What we found is that companies whereby there is more capital that's required to achieve those additional proof points, I mean, one of the areas that we play within Prime is primarily in hardware based companies in the climate space. I mean, they require more capital oftentimes and they have a longer investing horizon, so kind of in the s- the spirit of that, people that are focusing on, you know, different blue tech solutions, the ocean is very unknown when you're trying to do any sorts of pilots, or there's a lot of concern now around the ecological impacts and, frankly, impacts of coastal communities. That may mean people are really shying away in those pre-seed, seed and series A rounds, which are the rounds that we typically tend to participate in.
So things like ocean sequestration or ocean farming, or wave energy, I think all areas that people have tried shy away from, or even decarbonizing Maritime shipping. So I think those are places that Prime could play a really helpful role, so while there's money coming into the space, you know, a lot of that capital is either coming in at a point in time, even if it's early stage, where certain things have been de-risked, or you know, could have more of a software bent.
So you know, there's a lot of money that's now pouring into some of these carbon marketplaces. You know, think, you know, Puro.earth or, or Nori, and so we don't necessarily believe that they're bad investment at all. We just... we wanna make sure that we're trying to fill a capital gap, and think the last thing I'll say on that is us trying to fill a capital gap with catalytic capital and kind of focusing on these areas doesn't mean actually that conventional venture investors or strategics don't invest alongside of us. I think sometimes that's a nuance that gets lost because we've only invested solo once. We think it's hazardous to your health, building syndicates are really important, and oftentimes, those syndicates have people that have very complementary skillsets and may have other conventional venture investors. And so it's really kind of a nuanced space, Jason, that's also evolving too. If you do another one of these in two years with someone from Prime [laughs] and you ask about kind of additionality in overlooked areas, the answer may be different because it's always shifting.
Jason Jacobs: Well, I know if I try to call you a capital concessionary, you'll take issue with that and say it's not concessionary. So I guess a natural question is, what is the difference between the definition of concessionary and the definition of catalytic?
Amy Duffuor: I would say that we are not concessionary at all, I think because the key thing when you think about concessionary, I think that's both in terms of risk, but then also in terms of return. And I would say that, if anything, we... concessionary and risk, we take a disproportionate amount of risk. I wouldn't necessarily say in our mindset that it h- links to return, understanding that the North Star is the gigaton-scale climate impact piece. And the reason we take issue with it is because just because we use a special color of capital doesn't mean that companies can't advance to become very large-scale, self-sustaining enterprises or do it relatively quickly.
I mean a good example of this is out of Prime Impact Fund, our first investment company called Lilac Solutions, it's a lithium extraction startup, lithium is very critical for the exponential growth in the electric vehicle market. We invested, you know, late in 2018. Earlier last year, so February 2020, they had raised a $20 million series A round that was co-led by Breakthrough Energy Ventures and The Engine, MIT's tough tech fund, about 16 months after our investment, and they're going on to do amazing, amazing things, understanding the critical gap that they're playing within the lithium supply chain.
So yeah, I guess I'd just say that just because we use that, this type of capital, again, it's not concessionary necessarily on any sort of return perspective, but it's really on risk. We're taking more risks, it's high risk, potentially high reward ventures. That's part of the thesis that really underpins what Prime is trying to do.
Jason Jacobs: I just wanna push on that for a minute, because isn't that what a traditional VC with digital say that their business is as well?
Amy Duffuor: That's possible, but I think our very important investment criteria of additionality keeps us honest, because that's something that we document, that's something that if the IRS ever wanted to audit us to make sure that we are using the investment capital that we've received for charitable purposes, we have that documentation. We've done it in such a way that we're not trying to kinda skirt things around. Even when I talk about our teams at Prime, you know, we have an investment team and a nonprofit team, the person that does the additionality assessment, which again is, is a key determinant of whether or not we can use catalytic capital is not the investment team. That's not me. That is, you know, somebody from our nonprofit team. And so we've tried to put in a lot of these checks and balances and structures to actually keep us accountable to the LPs in our fund, but frankly, to the broader space, in terms of we are doing what we say we're doing. And that's why additionality can be shifting, because I don't think it's fair to say what we've invested in five years ago would still be additional today.
Jason Jacobs: So if I were a potential LP that was evaluating participating in the Prime Impact Fund, what is the pitch to me in terms of how I should think about that investment versus other places I might allocate that capital, such as another venture firm that does not have this catalytic thesis?
Amy Duffuor: Well, first of all, I would say it depends on what your goals are. We are very collaborative in nature because we know that we need all hands on deck to solve this climate crisis. We need all different types of capital, we need all different types of investors. So if I was speaking to an LP, I would try and ask, the first thing would be to get an understanding of what your objectives are, because if you, for a, are interested in using a different mechanism of capital that's more structurally patient and flexible to support some of these really critical, potentially large-scale impact companies, even before they've been de-risked, I would say we are a good fit for you. That's a great place to put catalytic capital or capital that is, you know, primarily categorized as, you know, philanthropic or charitable. Like, we're a great mechanism for you to try that.
If you do not have a high risk appetite, if you said to me, "Jason, hey, I don't wan to invest in, you know, potential high risk, high reward investors," or, "I'll feel more comfortable after a certain period of time or certain proof points," we might say... we might not be the beset fit for you because we're pretty unapologetic that we are an impact first fund and that we are investing in potentially perceived high risk, high reward companies.
Jason Jacobs: So should I benchmark your returns against other traditional venture firms?
Amy Duffuor: That's an interesting question. I mean, it's going to be hard in some ways to do that, because often, other traditional venture firms aren't using catalytic capital, and the whole reason that we're using this is because we believe that hard tech solutions, especially in the climate space, need to be brought to market. And in the past, you know, venture, the venture asset class has shied away from supporting those companies, so ultimately, we're making it easier for downstream investors, or our hope is that we're making it easier for downstream investors to participate, especially ones with deep pockets who can then continue to support and scale these companies to, hopefully, an outcome.
So I'm not trying to skirt the question. I just think that it's not really, like, an apple for apples comparison and for us, we care about the companies becoming large-scale, self-sustaining enterprise. We don't think they can do that and achieve large-scale climate impact. They really need to go hand in hand. So yeah, I think that would be the way that I answer that, that piece. People always wanna dive into kinda the return elements, but we're trying to also reframe the conversation because it doesn't necessarily need to be either or. And it's more about figuring out what are the right colors of capital to support different stages of a company's life cycle.
Jason Jacobs: In these foundations, and I-I'm still learning how all this, like, professional investor stuff works, but from my understanding, these foundations can be LPs in traditional venture funds. When they're an LP in Prime, is it coming out of that same pull of capital, or is it coming out of a different arm of what they do?
Amy Duffuor: Yeah. It could depend. So probably most venture funds are using a general sort of Corpus Capital individual investment dollars. We can have foundations' program dollars that, that are supporting us, which probably wouldn't be going into a typical venture fund because if they need to be able to prove that they're can be used for charitable causes, you can use donor advised funds, so there are lots of different ways that a foundation can participate. What's important, though, about the way that Prime Impact Fund interacts with the LPs is that it's no different, in many ways, to a typical kind of venture fund. We have standard reporting that comes out, what's in, a key difference in that reporting is we don't not only have financial reporting, but we have impact reporting because that is our guiding light.
Jason Jacobs: Is that consistent from company to company, in terms of the way that that's reported, or do you have unique metrics and KPIs on a per investment basis?
Amy Duffuor: So the methodology is the same. So at the beginning of an investment that we've made, when a company becomes part of our portfolio, we set what we call climate impact milestones. And so the theory of change really for that is when you think about the emissions reduction patient assessment that's done, so that's the, you know, the numerical calculation of what the GHG emissions reduction is. You know, if that the kind of end goal, then the middle piece is really around the products or services that are deployed and then the, the starting piece is around kind of what are the kind of operational elements. So the key operational metrics are gonna vary for each company, because each company has different type of climate technology, but we employ that methodology for every initial investment that comes into our portfolio, and then we track them every year and we report them out to investors.
So they can see what the status is across each of these key climate impact milestones, both in terms of, you know, operations, then in terms of products deploy, which hopefully, again, will translate into emissions reductions actually realized versus what the potential is.
Jason Jacobs: And i-it's interesting too because, I mean, at MCJ, as you know, we have a fund and we like to consider our capital catalytic too, but very differently in that the companies that we're getting involved with typically, they are oversubscribed and not always, but in a lot of cases, they are oversubscribed and they don't need our capital. And we have little checks anyways, but what's catalytic about us is the help that they get post-investment, so I guess bringing that back around to Prime, you're different in that your capital in itself is catalytic by definition, for all the reasons that you just explained. Is there anything else about what you do that's catalytic post-investment as well, or is really the focus to build a bridge with the capital at these critical junctures?
Amy Duffuor: I like the way that you framed that. I would say that the traditional way that we thought about it is that first piece of bridging that capital, but we are also, in many ways, catalytic in order to the way that we like to support companies. Although, I don't even... I don't wanna put too much on that because it's really the incredible founders themselves and all of the hard work that they've done not only to conceptualize an idea, but you know, bring it to fruition. But we are, we are hands-on partners, you know, we help teams with story telling, you need to tell stories to your customers, partners, to staff. We help them with team building. We've helped with pilots and, you know, negotiating commercial agreements, helping them lay out technical and non-technical milestones, or you know, even... I don't call it founder therapy, but so much of being a founder is... it can be very lonely and having someone to talk to and bounce ideas off of.
I think something that's also very special about the way that... kind of bringing it back to your earlier question around diligence is that when we are doing diligence, we are speaking to downstream investors as part of that to understand what are the key metrics and value inflection milestones that would en able or excite them to participate in a subsequent financing round. We do something similar when we're speaking to perspective customers or partners, because when we're supporting a company and really thinking about that development timeline, whether it's technical or non-technical, we wanna keep in mind what the market, whether it's from an investor perspective or from a customer perspective, what the market, what is important to the market and making sure that we feed that so somebody isn't developing technology in a vacuum. And because we have this investment advisory committee, which represents, you know, a majority, probably of the most active investors in the clean tech and climate tech space. It's an amazing resource for us to be able to call on.
Jason Jacobs: So what I was going to ask you was, I know in, in our case, for example, oftentimes, we find that we're needing to earn our way onto a cap table so we need to articulate clearly to the founders why they should make room for us. So I was gonna ask you what your pitch is in a world where a founder has multiple options, but I guess there's a more foundational question, which is would you even pitch? Or if they have multiple options, is your job already done and do you move on to the next one?
Amy Duffuor: So first, I'll answer your second question, which is if there are multiple options, you know, we would still pitch because it also depends on what the type of options that are on the table. Mean, we consider ourself pretty pro-entrepreneur because we do have this structurally more patient and flexible capital, so if there are options on the table and the terms aren't great for a founder, I mean, not all money is created equal and sometimes when people are pretty focused on just bringing capital in, the longer term thinking about who's attached to that capital and what the different terms or requirements can somewhat be lost, so there's a terms element.
There could also be a syndicate of people put together, which don't have expertise in deep climate impact. You know, we would see that as an, a really catalytic role that we could play to make sure that a company is still on the path towards gigaton-scale climate impact. So there's nuance there and there are different layers and we kind of look at the circumstances of the round before it would, it would... like a hard and fast 'no', just because there are 10 people there doesn't necessarily mean that we wouldn't participate, but it's the nature of what that looks like, which is really important, at least from an additionality perspective.
Okay, so your first question was, what's the pitch to...
Jason Jacobs: Would you pitch? Well, I guess, yeah, first question was "What's the pitch?" The second question was well, before you answer that, would you even pitch?
Amy Duffuor: Yes.
Jason Jacobs: [laughs] You would. We've determined you would.
Amy Duffuor: We've determined we would. So you know, the pitch for us is really the fact that if you are looking for investors that have a long-term orientation, whose capital will allow you to be more flexible and are purpose-built to really focus on impact and be a patient long-term investor, particularly early on when there are so many unknowns. You know, you should look for an organization like prime. We would be happy to fill that role. I think what we also do is with every send them to our portfolio companies. We've now invested in 14 companies, we did our 14th yesterday, to date. So you know, our portfolio companies can really speak to the role that we play and what we hope [laughs] is kind of the additive role, whether it's across those different elements that I had mentioned before. But one of the key things is really these portfolio company references, like when you are going through the process of trying to figure out who's the right investor, like, you should speak to people's portfolio companies, they'll give you the realest [inaudible 00:46:56].
I also think that when you look at people that have either kind of co-invested or followed on, that can also be an indication of what catalytic capital can, you know, really do to help support and de-risk companies for, for follow-on investors. I also think that that's you know, another important piece. And maybe the last thing I'll say [laughs] is part of a personal pitch, I wouldn't necessarily say this is across the team, but I'd say is unique to me is that many of the founders that we support, as I mentioned before, come from a pretty technical bent, which is very important. Oftentimes, the skillset gaps are really around business or operations more generally, and so we also wanna be thoughtful about making sure we have people with complementary skillsets that are coming to the table, because there's a bunch of stuff that you also need to do when you have a startup in addition to technical development, which may be your, the core, but are part of professionalization of a company or doing deeper customer discovery, or figuring out your financials are really getting them to the next stage with your sort of tech know or even economics. So that's part of my personal pitch as well, which is sometimes you, you want somebody who's different to you and you wanna complement.
Jason Jacobs: And you talked about flexibility and patience of the capital, which is great. On that term flexibility, I, I wanna push on that for a minute. You, you talked about the half a gigaton threshold by 2050, is that a point in time snapshot and then once the transactions closed and you're in business together, then the company's free to take it in the direction that the market commands, or are there certain restrictions that come with it that you need to have to ensure that it tracks in the way that your mandate requires?
Amy Duffuor: So if a company that we've invested in which outlined a plan to achieve that gigaton-scale climate impact kind of veers off the road and wants to do something that's climate neutral, or frankly, climate negative, you know, they're... instead of doing, you know, what they said they wanna do and they're gonna be an ice cream company, which is not why we gave them the $2 million, or do something that's very harmful for the environment, that's one of the reasons we like to be hands-on partners, at least early on. I mean, we have a seed fund because having that governance role, whether it's a board director, board observer, can be really critical in helping to have a voice at the table and drive a company towards that climate impact. So that's one way that we, we really think it's important that we revisit these climate impact milestones every year, 'cause we wanna have that pulse check. If something is moving off the reservation, we wanna know because we have a fiduciary duty to our LPs, and they know that this capital, this very special color of capital is used for large-scale climate impact, and if we're not on that trajectory, we wanna do everything in our power as investment managers to help a company see that.
And then, you know, it's probably worth noting, too, that we've really tried to structure Prime Impact Fund so our incentives are in the same direction, so me, as an individual investment manager, you know, our sort of form of carrying interest or management participation is, you know, linked, gated by climate impact. So if a company, you know, has a crazy amazing outcome and they are not on track, actually, you know, they've made whatever climate area that they were focusing in worse, our investors will see the financial return, but I myself as an individual investment manager won't. So that's, again, used to really incentivize all of us towards climate impact.
Jason Jacobs: So I don't know if there's been a situation, or if not, hypothetically if a situation arose where climate impact and commercial success were at odds and not directly aligned at that fork in the road, what have you done or what would you do?
Amy Duffuor: So thankfully, we have not gotten to that fork in the road, but that's also because Prime Impact Fund started making investment in late 2018. It's still pretty early on in the fund's life. I can imagine some of these more challenging decisions will happen later on, but you know, if there is a very lucrative commercial sort of opportunity and it is going to be harmful from a climate impact perspective, we're always going to choose focusing on, on the large-scale climate impact. I think that that's the clear case, but there's obviously a lot of grays and you know, grays and ebbs and flows in between and that will obviously happen on a case by case basis, but we are unapologetically impact first. That is the mission, that is the reason these philanthropist, high net worth individuals, family offices and foundations have interested us with this special color of capital, and we're gonna stay true to that.
Jason Jacobs: So it sounds like, actually, so there's a lot that the founders gain from working with Prime in terms of flexibility and patience. There's also some loss of flexibility as well, so if you were counseling a founder upfront and making sure that they were the right fit for Prime and vice versa, what would you say to them in that regard and how would you frame it to make sure that expectations were aligned.
Amy Duffuor: Yeah, I think that knowing that we are a large-scale climate impact-focused fund, if you are not interested in having a company that can address climate impact or drive climate impact at large scales, like if you're kind of lukewarm about that or you're not really sure, we may not be the right investor for you, because there are also things that we ask of these founders, which is, you know, we ask you to put these climate impact milestones and set them in, you know, the first year and then we revisit them. So there's, there are things that we operationally do, and frankly, it doesn't happen... it happens less now, but pre all this hullabaloo and hoopla around kinda the climate tech landscape, sometimes we'd have startups pitch us and they didn't mention a word about kinda greenhouse gas emissions or anything climate related. And I used to think, "Wow, that's so lazy because you should be trying to shape your pitch based on the types of investors." That happens much less frequently now because climate is everywhere, but I think that's something that's really important to keep in mind.
I also think, and you didn't ask me this, but it's just coming to the top of my head is, we're generally hands-on partners, not dictators. We are advisors. You heard the founder and you know your company best and you're able to run it, but you know, we are hands-on partners. We wanna be really helpful, and so there are also some instances where somebody is like, "Look, I just want, you know, X amount of money and I want someone to not talk to me for two years while I'm doing, you know, what I'm trying to do." And that's just not the type of capital that we provide, so that could be another reason whereby it's not the right fit.
Jason Jacobs: Actually, I did ask you that. That was part of the question. Not trying to be critical or anything like that, it's just more trying to understand what kind of partner you are, and I think that color was super helpful in filling in that picture. Couple more questions. I know we're starting to run up on time here. One is just you mentioned that oftentimes you look to bring in more market-based capital that can have complementary skillsets, what is the best fit, typically, for that complementary market-based capital? What do you look for and what skillsets are most complementary to your efforts, and I guess, is that deal-specific, or are there consistent ones that kinda stay true from opportunity to op?
Amy Duffuor: Yeah, I think the... probably the high level i- it is pretty deal-specific, but for example, if there is a startup that we're interested in investing in that really requires deep sort of sector kind of expertise, that would be an area that we would look to fill. So one example of this is the first agtech investment that we made. It's a company called Clean Crop Technologies. They're... mean, you know them, they're developing cold plasma technology to degrade pathogens, toxins, and pests responsible for food waste. We are not agtech specialists, so as part of the syndicate, you know, we brought in Innova Memphis and also Bread and Butter Ventures, who had very deep agtech experience. The company also has sort of future plans to expand outside of the United States. Another member of the syndicate is an organization called Factory Ventures, which is a venture development arm that has expertise, primarily plays in emerging and frontier markets. So it just... it gives you a sense of how we're trying to, you know, bring complementary and multiple heads around the table that can help support a company through their life cycle.
I also forgot to mention there's another fund called Alchemy Fund, which is sort of based very close to where Clear Crops' headquarters are and they are, you know, have a big focus really in sort of the R&D type stages and spin out. So that's how we like to think about bringing together syndicates, very diverse, because if we believe that an important aspect of helping a company get to the next level doesn't squarely sit within our expertise, we wanna be thoughtful about bringing someone to the table or making room for someone to come to the table who can do that. There's no pride of place here.
Jason Jacobs: And for anyone listening who's inspired by what you're doing, where do you need help and/or who do you wanna hear from?
Amy Duffuor: Where do we need help? That's... that's such a nice question to ask.
Jason Jacobs: I start incorporating that a few months ago and, yeah, guests really seem to like it, so we do more of what works and less of what doesn't. [laughs]
Amy Duffuor: Yeah, that's a really nice question. So I think base would be we are always on the lookout to invest in incredible founders who have game-changing ideas in the climate space who really wanna attack large wedges. That's really important, and I'd love to see those founders come from all walks of life, you know? I want them to come from all different areas as well, and so that would be a call. So I know you have a very wide base of listeners and people part of the MCJ community, so please reach out to me. Go to our website, primeimpactfund.com/contact, which has a button to allow people to apply for investment or just connect, because I think that's great.
So that's really on one, one lens. You know, there's another area as well, which isn't our primary focus, it's like, it's not our primary focus or our area of expertise at all, but policy is becoming such an important lever within the climate tech space, especially given then transition, the presidential transition, and we're still, you know, figuring out what's the kind of right way to be plugged into that so that way we can more effectively support our portfolio companies and would love for anyone in the policy realm who has ideas about potentially partnering with venture funds to reach out to me, because that's an area that we really wanna get smarter on. We've done some kind of initial internals policy and regulatory meetings for our portfolio companies, but wanna have kinda more feedback and more data points. So that's, that's another area that would be, would be great.
Jason Jacobs: Nice. And last question is just if you could wave your magic wand and change one thing outside of the scope of your control that would most accelerate your efforts, what would it be and how would you change it?
Amy Duffuor: Accelerate our efforts... these are such good questions. Okay.
Jason Jacobs: Well, uh, that's the benefit of doing a zillion episodes, I guess, is you get a lot of practice.
Amy Duffuor: So there are gonna be two things I say, one is gonna be a direct answer to your question and second is gonna be a slightly different question that I, I wish people were asking more. So the first is that to help accelerate our efforts when we think about the broader objective of addressing this urgent crisis of climate change and climate change mitigation, I would love to see more stakeholders supporting all different aspects of the financing sort of value chain for different climate tech companies. So you know, there's already an incredible amount of support when you think about non-dilutive funding, you know, earlier stage investors, even ones that are doing pre-seed, seed, love to see more people focusing on catalytic capital. There's been a more entrance, I think more in kind of the broader early stage, like series A, series B, more growth capital. Really, people that are supporting first-of-a-kind plant or project risk, which is another really key critical gap, I mean, we just need more people. So I'd love to see as many people as possible from as many different backgrounds as possible and as many different parts of the world, because what we know is that this is a hard problem and these companies need a lot of capital and they need long-term partners, and so it would be great if we had more people at different parts of a company's life cycle.
The other question, which you did not ask me, but which I think is important and would be helpful for the broader climate space to think about is really making sure that we're taking an intersectional approach when it comes to climate change. You know, our mandate at Prime Impact Fund is greenhouse gas emissions reduction. That's our North Star and that is what we focus on, but even us as an organization, we're starting to incorporate and think about, you know, unintended social and environmental impact because that's also really critical for people to keep in mind as much of as, you know, a really cool technology. And so I would love for founders, investors and other stakeholders to think about climate change in a much more multifaceted way, you know, incorporating GHG emissions reductions, climate justice, alongside what people think of as more typical kind of areas of a good business.
And so yeah, you didn't ask me that, but that is actually one thing I wish, I wish I would see, see more of in the space, and I think we're trending there.
Jason Jacobs: Yeah, no it's s-so important and, uh, gosh, I mean, we could spend a whole episode just on that topic.
Amy Duffuor: We could. Probably with somebody who's... is more well-versed in some of those areas than me particularly around the climate justice piece.
Jason Jacobs: Or me. Yeah, and I'm, I'm learning and I recognize how important it is and, and trying to pick it up as fast as I can, but it's all hard, it's all complicated, it's all nuance and it's been almost three years and I've been drinking from a fire hose the whole time, that's for sure.
Amy Duffuor: But you've created an incredible community of people who are all united against this fight, and are just trying figure out their role and their place to play in it and so, thank you, Jason, for really bringing a bunch of people together all over the world. I... I recently, I got onto the, the Slack community, or I read the emails. I'm like, "This is amazing." It's people really trying to come together and collaborate.
Jason Jacobs: Well, thanks, Amy and same thing for you. I mean, I, I asked you some hard questions over the course of the discussion, but I think that the Prime model is so important and I'm so glad that, that you all exist and I'm excited to work with you more closely as well. We've done a few together, a few companies and be great to do a whole lot more and, and for what it's worth, I mean, I know I was pressing on catalytic and concessionary and all that, but as a purely, I guess another whole discussion, what we are, I was gonna say as a purely financial, but that's not entirely true, but... but as someone who does wanna be measured by market-based returns, I view Prime on a cap table as a real positive and something that helps us get comfortable faster, so just so you know and so that listeners know to.
Amy Duffuor: We really, really appreciate that. We would love to be thought of as a safe pair of hands, whether for other co-investors or follow-on investors or founders or LPs, other stakeholders, I mean, that's, that's definitely underpins our ethos.
Jason Jacobs: Well, this was such a great discussion, Amy. We covered so much ground. Thank you so much for doing it and keep up the good work.
Amy Duffuor: Thank you again for having me. It was a really fun conversation and it was great to nerd out on so many different important topics in the climate space.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note that is dot C-O, not dot com. Someday we'll get the dot communication, but right now dot C-O. You can also find me on Twitter @JJacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guest you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
