Episode 133: Amy Francetic, Buoyant Ventures
Today's guest is Amy Francetic, Managing Director of Buoyant Ventures.
Buoyant Ventures is an early stage fund investing in digital solutions to climate risk based in Chicago, IL.
Amy is a long time entrepreneur and business executive. She has 25 years of experience in the energy and high technologies sectors. After graduating from Stanford, Amy started her career in the children's software and computer games. She co-founded Zowie Interactive, an interactive toy company that leveraged RF sensing technology and software to create an entertaining interface for the PC. In 2000, the company sold to Lego. After having two kids and surviving cancer, Amy wanted to dedicate her career to leaving a lasting impact on the world. She refocused towards climate investing. She co-founded and assumed the role of CEO of the Clean Energy Trust. Clean Energy Trust funds and grows new cleantech businesses in the Midwest. In 2016, Amy left Clean Energy Trust as CEO while still retaining a seat on the board. She came on as Managing Director of Energize Ventures which focused on high growth tech companies, before starting Buoyant Ventures.
Amy and I have a lively discussion where she tells me about her origin story and how she first got involved in the climate fight. We talk about how climate has evolved since she started working in this space and the future of climate investing. Amy also tells me about Buoyant Ventures and digital climate solutions.
You can find me on Twitter @jjacobs22 (me), @mcjpod (podcast) or @mcjcollective (company). You can reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded November 16th, 2020.
In Today's episode, we cover:
Amy’s climate journey and how her background influenced where she is today
What motivated Amy to leave toy production and work in the climate tech sector
How CleanTech came to be
What she looks for in companies to invest in
Her biggest take away about the climate crisis
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Jason Jacobs: Hey, everyone, Jason here. Before we get going, I just wanted to take a moment to give a quick shout out to the new paid membership option that we recently rolled out. This option is meant for people that have been getting value from the podcast and want to enable us to keep producing it in a more sustained way. It's also for people that want extra stuff, such as bonus content, a Slack room that's vibrant and filled with people tackling climate change from a wide range of backgrounds and perspectives, as well as a host of programming and events that get organized in the Slack room. We also have a virtual town hall once a month, where you can get a preview of what's to come and provide feedback and input on our direction. We'll be adding more membership benefits over time. If you wanna learn more, just go to the website, myclimatejourney.co. And if you're already a member, thank you so much for your support. 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, today's guest is Amy Francetic, managing director at Buoyant Ventures, a new venture fund focused on digital climate solutions. Previously, she founded and led Energize Ventures, $165 million venture fund that invests in digital technologies that optimize energy equipment and infrastructure. Prior to Energize, Amy was co-founder and CEO of Technology Accelerator Clean Energy Trust in Chicago, which has invested in dozens of early-stage clean energy companies across the Midwestern United States. Amy has a lot of experience in clean energy, including on the nonprofit side as an operator and for the last several years, as an investor.
We have a great discussion in this episode about how the climate movement has evolved from the time that Amy started in it to today, some of the reasons that led Amy down this path in the first place, we talk about the role of innovation, and the role of the different types of investment capital, concessionary capital, market-based capital, et cetera, we talk about some of the areas that are most ripe for investment, and, of course, the things that A- Amy is excited about with her new fund, Buoyant Ventures, and what some of the areas are that she is looking at most closely. Amy Francetic, welcome to the show.
Amy Francetic: Thanks so much, Jason, for having me. I'm a big fan of the show and I'm very humble to be here.
Jason Jacobs: Well, it's a huge honor to have you. And I may have had a wide range of guests over the years, but, I mean, you're someone who's worked in this area for a long time and from many different angles on the, on the nonprofit side, on the for-profit side, on the investing side, on the, on the operating side, and as a newcomer to the space in the last couple of years, trying to learn, it'd be hard to feel like my journey was being thorough if I didn't talk to you.
Amy Francetic: Thank you. Well, I love the fact that you've come to it having been a successful entrepreneur, because you're an operator and you know how to build businesses. And I think bringing that expertise to the cause is super important. Really, really excited that you're part of this and you're expanding the universe of folks that are gonna join us in this fight.
Jason Jacobs: Well, thanks. Well, maybe for starters, I mean, there's so many different ways that we could start this discussion, but maybe the best way is just to talk about what you're doing currently with Buoyant.
Amy Francetic: So like you, I started my career early as an entrepreneur and started a high-tech company that we sold to Lego, the Danish toy company. This was back in the year 2000. And after that, I started Clean Energy Trust, which is a technology accelerator, a nonprofit technology accelerator in Chicago that covers the Midwest, and you were so gracious to do one of your podcasts for our annual event last month. But then after that, raised a fund called Energize Ventures and then, most recently, I'm raising this new fund called Buoyant Ventures. And this is my... what I consider to be my fourth startup, the third one in the climate area. And so for Buoyant, we are investing... we're a venture fund that's investing in digital climate solutions. And so what we mean by digital climate solutions is mostly software and some low cost hardware that can accelerate the deployment of climate mitigation solutions as well as adaptation solutions.
And it's, it's really applied more broadly than energy. So it includes energy, but also encapsulates transportation, agriculture, and the built environment. So we're looking for digital solutions that can really facilitate climate mitigation and adaptation across those four main industry segments. We'd like to invest in Series A as sort of our sweet spot, plus or minus, and we've got one deal that we've done, which is the company in your neck of the woods called Raptor Maps that spun out of MIT. And they're a solar software company that is analyzing the performance of utility and commercial scale solar systems using drone footage, and they're also creating a system of record to create sort of, uh, an independent source of truth on the performance characteristics of those assets.
So that's what I'm doing. I'm super excited about it. We launched during COVID, we're still alive, you know, we're... it's a crazy time to be in business and start something new as I'm sure you're hearing about from many of the companies you're talking to but... because of COVID, but in other ways it's a really great time to be working on climate because there's some, there's some major shifts in the last few years that are making it a little bit more possible to create real solutions as well as to, hopefully, create some real wealth for investors and entrepreneurs over the next decade.
Jason Jacobs: And, well, I have a bunch of questions about Buoyant Ventures, but before we go down that path, what is it that first got you heading down the direction of working on climate professionally? And, you know, when was that and what was the first entry point to the category?
Amy Francetic: Sure, sure, sure. So I had been working in the high-tech industry in... I went to Stanford, I'm in the Chicago area now, I live in Lake Forest where I'm talking to you from today, and spent 20 years in California, including my time at Stanford. So I'll tell you a little bit of my personal story because that's sort of the why, you know, the why I'm doing this. My husband and I were trying to start a family and we were having trouble, and learned along the way that I had cancer and that was why we were not getting pregnant. And so I had to deal with the cancer. It was a very rare form of cancer, and dealt with that first. And soon afterwards, I was fortunate that I was able to get cured of that and then we got pregnant right away. And so then I had two kids, one after the other, two girls. Right now, they're... one is a sophomore and one is a senior in high school.
And I tell you that because when I went back to work, I determined to be working on something that had purpose and that had some lasting impact, you know, beyond my life. That just... I just had this different lens on the world, you know? Both cancer and the kids sort of turned me to that. And the other thing, when I thought about what I wanted to do that had purpose, I had always worked and loved... sorry, I had always loved the natural environment, had always been an outdoors person, was a runner my whole life. And so I felt like I wanted to do something that would preserve the natural environment for my kids, for their kids, and, you know, that would have some lasting impact. So that's why I decided to turn my attention to climate change and spend the rest of my career working on solutions. And then that led to Clean Energy Trust and then, you know, the Energize and then now Buoyant.
So it's really a personal motivation. God willing, I'll be doing this for a long time still to come, and I think we're making a big impact. I think we have made a big impact with Clean Energy Trust and Energize, and I think we'll make an even bigger impact with Buoyant.
Jason Jacobs: And so on the Clean Energy Trust side, tell us a bit about Clean Energy Trust and what it is and why you made the decision that that was the right entry point into doing something more purposeful as you described.
Amy Francetic: Clean Energy Trust is 10 years old now. We started... actually, initially started in 2009, but it was incorporated in 2010. Nick Pritzker, Michael Polsky, and I, and then a number of the founding board members launched it. And we actually launched as a nonprofit because 10 years ago, the purpose of starting Clean Energy Trust was to support early-stage businesses in the Midwestern United States that had clean tech solutions. And there was very, very little early-stage capital for these kinds of businesses, you know, in general, but especially in the, in the Midwest. And we had this amazing group of research institutions and universities that had very compelling solutions, but has really no path to creating a company. And this was long before all the universities had seed funds that they have now, okay? This was long before Breakthrough Energy Ventures and any of these other funding vehicles. They just didn't exist. There were very few clean tech, even venture funds, that were being formed then.
And so we did it as a nonprofit because, A, we knew it was gonna take a long time to deploy the capital, to find the right solutions, and then, B, we knew that we needed to wrap these companies with services and other kinds of support, program support, and that that program support would not be fundable with just feeds off of a venture fund. And so we raised money into a nonprofit and then we deployed capital out as convertible debt or investments into these companies, and then we determined to recycle the capital when we could get the money back, whether it was through an exit of the company or someone buying out our position. And so 10 years later, it's starting to recycle.
So it's starting to work, and we've funded over 35 companies in that timeframe with not that much money due to the small checks we're writing. You know, $100,000, a couple of $100,000 to these businesses. The... we put, uh, out about $6 million and those companies have raised about 150 million in follow-on funding. And so it's starting to work, but it took 10 years. And so that was why we did it as a nonprofit. And we are really just trying to start the businesses. So in, in a few cases, we've done follow-on funding, but again, it was mostly to get all these businesses started and then the staff at Clean Energy Trust really helps to raise additional capital and support and mentor those businesses. So I'm now on the board and I'm chairwoman of the board, and the organization is run by someone who's very capable named Erik Birkerts, and the team there is incredible and they're doing great.
Jason Jacobs: And when you first made the decision to start working in, call it climate or clean energy or, or whatever the term of the day, but did you assume that you would need to sacrifice wealth for purpose, or how did you think about that initial entry into the space?
Amy Francetic: Well, I think, yeah. So initially, we just thought it was gonna be so hard. After doing some work to assess the kinds of solutions, we just knew that the pressure on returns for that capital would be really hard for the kinds of things that were necessary in the Midwest. That's what I would say. I... impact investing didn't really exist back then, that wasn't really a thing. So this idea of concessionary returns wasn't really a thing. We had considered, over the years, creating a for-profit vehicle, so that's alongside Clean Energy Trust, and we had looked at that. And we may still do that at some point in the future, but what we decided to do was just to refill the coffers of the organization to keep doing these really early-stage funding events because it's working, and we've had like four exits. We did annual measure returns for Clean Energy Trust, and actually the returns are not terrible for something that is, uh, a 10 year life on it and is doing very risky stuff. So the returns are sort of single digit IRRs.
So if we had tried to get some money back, that's what the portfolio is valued at, now there's a lot of unrealized returns in that portfolio. And, and the really the big thing that's depressing the IRRs is the time, you know? It just takes so long to get... to build and grow these companies because so many of them are hard tech companies, that it just takes a long time. And so that's really the thing that's putting pressure on the returns there as well, because we think we're trying to pick companies that are financially sustainable or that can go on to raise more money. We don't wanna fund a business that's going to fizzle out after our capital. That's not gonna help anybody. So our goal is just help, get them started, and then catalyze other investors.
Jason Jacobs: And when you think about the kind of innovation that is needed to address climate change, and you think about the... so concessionary capital, as you described, coming from someplace like a Clean Energy Trust versus what I'm assuming is more market-based capital coming from an Energize or a, a Buoyant Ventures, how do you think about the best sources of capital for the most impactful climate innovation?
Amy Francetic: Huh. Well, you know, define most impactful, I guess. So I would say... [laughs].
Jason Jacobs: Well, so that's right there. What is the most impactful climate innovation, and how do you define?
Amy Francetic: All right. So here's how I think about it. I think there is a spectrum of impact there from, say, things that could have as some of the funders like Breakthrough Energy Ventures evaluates the total carbon reduction, um, potential of the companies that they fund. You have that on the one hand. On the other hand, you might have a company that can have meaningful impact that is not measured in carbon reductions as much as it is. Could be measured in clean energy deploy, or it could be measured in capital allocated towards solutions that are gonna have more climate benefits.
And so there's a range, there's a spectrum of impact. And I, personally, think that the more successful veteran investors are in the space financially, the better it is for everybody. So the more successful that climate investors are financial aid, that that is going to mobilize more capital and it's also, from my perspective, going to mobilize solutions that have more near-term benefits. And I think that we... you know, we definitely still need to think about the long-term, like we definitely need folks like Clean Energy Trust and Breakthrough Energy Ventures and others working on things that are very hard to commercialize and that could be fundamentally major improvements over existing technology solutions, but I feel like the urgency requires us to put into market a number of these solutions that can be deployed and commercially scaled up immediately, and that can be built upon today's infrastructure and that can deliver, you know, liquidity for investors in a sho- in a venture timeframe, in a shorter amount of time, a typical venture timeframe.
So I wanna be playing in that space because, again, I feel like the... uh, from an urgency standpoint, but also I think the more successful we are at this, the more capital we'll bring into the next, and I think we're starting to see that. You know, one thing I would say with Buoyant and our thesis, there's two main things that we saw in the last few years that have motivated us on our thesis. One is that institutionally, there's been billions and billions of dollars created in new investment vehicles with large institutional investors, PE firms, banks, and other institutional investors, and that's because pressure that they've gotten from their investors for an appetite around these kinds of vehicles, like... and they're... and these are vehicles that are either looking for investments in clean energy infrastructure, or are measuring their investments for ESG impact.
So that's coming from those big institutional investors, from... pressure from them. It could be a, you know, even an endowment that's getting pressure from the students at a university. It could be a pension fund that's getting pressure from its... the folks that are paying into the pensions. So that's one major shift that has happened.
And the second major shift is all the corporations that are making commitments to decarbonize their business. And that, too, has started from either customers calling for that or from employees eng- calling for that as well as shareholders. So shareholders looking for that adjustment. Whether you're a big oil, a super major that's making a commitment to lower or decarbonize, or you're even someone on the retail and/or consumer end of things, there's, there's this pressure.
In both cases, with the institutional investors and the corporation, I think what we're starting to see now and what we will see over the next few years is that those are gonna be more successful companies and investments, and that's gonna draw even more capital into the space. And so that's part of what we're trying to invest in, are technologies that will facilitate that transition and get us to the point where the folks that have the ESG fund or the index, the sustainable index, is going to outperform the non-sustainable index or the non-sustainable, but you know, the fossil fuel heavy investment vehicle.
And I think you're gonna see this outperformance starting to happen, and I wanna be sitting in the middle of that because I think that we're right at... in the beginning of that, and it's gonna start to happen very, very quickly. We're tracking what some of the groups like the Task Force on Climate-related Financial Disclosures is doing, what the Fed just, uh, you know, called out last week, looking for there to be more clear climate risk assessment and base portfolios, seeing what New Zealand and the UK have done calling for this, this is gonna start to snowball really, really fast.
That's what we think, and we wanna be sitting right in the middle of this and, and looking for companies that can help facilitate that. And that does not take an invention of a new solar cell, that does not take an invention of a new battery chemistry, it doesn't take a carbon sequestration technology to faci- facilitate that, that's all gonna start to happen with what we know and have available today.
Jason Jacobs: And with the benefit of hindsight, how do you think about the key lessons around the f- first wave of clean tech investment in innovation?
Amy Francetic: We are big fans of the accelerator. So I think all these different incubators and accelerators are doing tremendous work. And I love what Greentown Labs is doing and Elemental Excelerator and the folks at RNX and Lacey and other groups, I think they're doing tremendous work to incubate these businesses. So we still need them to keep doing that, right? We, we can't take their-
Jason Jacobs: Sorry, were those missing in the f- in the first wave or I guess they-
Amy Francetic: They were.
Jason Jacobs: Okay.
Amy Francetic: They were. Okay, yes, they were. Number two, the other thing is, the first wave of investing, so going back to sort of like circa 2010 or so when Clean Energy Trust was getting started and when we had started to see some of the losses in the big... okay, so you're referring to that? So, okay. So a few things. And you guy, I think you've talked about this a lot on your show, right? It's not any new revelations. I think we understand some of what happened there, but I think, A, the kinds of investments that were being funded were really hard to fit into the timeframe and risk appetite of venture capital. It was a mismatch of capital for companies. Second was the investors had some blind spots around energy markets, energy... clean energy regulations, the role of policy and politics. I think they had some major blind spots there.
And then, I would say, this stuff is not for tourists. You know what I mean? Like you have to be super committed to this. It does not perform... the broad range of clean energy technologies do not perform the way that IT or, or consumer technology investments do perform. So if you're looking for, um, companies that are... like the ones that we're looking for, they're primarily software companies, you can draw more from that, from, uh, how you grow an enterprise software business and how you grow some of these climate technology solutions that are more digital in nature. There's definitely more you can learn from that. But capital-intensive, manufacturing-intensive investments are just kind of a mismatch for traditional venture capital.
So that's why you need some of these other ki- other forms of capital that have greater risk tolerance, have longer horizons for returns, you know, are maybe layered on with some amount of philanthropic capital, that's why that's necessary for some of the hard science and hard to find clean energy solutions.
Jason Jacobs: Sitting where we are today, where you have certain firms that were around since well before the last wave and stuck it out and they're not tourists and they're gearing up for the next wave and then increasingly there's people from Silicon Valley, from traditional tech, that are picking heads up and heading this way, I'm imagining much like they did back at the outset of the first wave, how do you feel about that Silicon Valley blood starting to head in this direction? Is that a good thing? Why is it... is that a concern for you? Why?
Amy Francetic: I think more capital is a good thing, absolutely. I think if the folks that are doing this are... have learned from what it... if you don't understand history, you're doomed to repeat history, okay? So like, [laughs] if, if they understand what happened historically, then they will be aware and there'll be prepared. But I think for sure more capital is a good thing. We don't want people to lose money, so we want them to pick wisely. And I think, for instance, Buoyant is finding itself in... looking at more and more companies where there is a more general tech investor. And, uh, we think that that's, that's a good thing. Especially, what's needed to scale up these businesses, the expertise there, is really deep in some of these firms. And so we really want that expertise as well.
We just also want to make sure that folks take a l- a look back historically to understand how to do things a little bit differently. It's not so different from biotech that has a very long ramp, it has a lot of regulatory hurdles in it, is rather capital-intensive, and that's why you have specialists in those categories. So I think that we welcome the capital, but I think that I talked to a couple of those, um, investors and some of them are maybe cognizant of what needs to happen to have different performance outcomes and some are less cognizant of it. We will try our best. I know a bunch of the other investors that are doing a lot of investing in this space will, hopefully, do what we can to sort of share our perspective and bring more of that capital into the good deal so that everybody has a better outcome this time.
Jason Jacobs: Since you've chosen, with the new firm, to have a digital focus, would you say that the non-digital focus areas, call it deep tech or hard tech or more breakthrough technologies or whatever buzz words to describe some of the, you know, the Moving Adam's companies. Are there any of those that are a good fit for traditional venture capital or should the traditional... the LPs that are used to investing in traditional venture capital, for example, should they just stay away from funds that do that kind of investing?
Amy Francetic: I think it's a matter of when, you know what I mean? I think that looking, again, at how long it's gonna take for some of these technologies to mature and when the venture comes in. I think to be a seed investor in a company that's a hard tech company, a battery chemistry or a fusion company, I don't know when you're gonna get your money out of that. So I think that that is.... that's hard. That's really hard. I think coming in later when there's been some proof points or where there's really clear traction so that a lot of the technology risks has been addressed and it's more about, you know, knocking down more commercial partners, that can still be a great place for venture, and there's a lot of big funds that do later stage investing, right? They're sort looking at series Z.
If you're a big fund that isn't climate-focused and you wanna have some activity in that space, then I think it... you know, you're gonna wanna come in a little bit later when that technology risk has been addressed. Otherwise, you're just gonna be waiting a long, long time. So if you're an individual and you don't mind waiting a long time because maybe you've got a portion of your assets that you have a longer return horizon on it, then that's great. I think you just have to have your eyes wide open on how long these solutions take to develop and scale up. So a typical venture fund has this sort of five-year deployment and then five-year harvest and fusion... there's been no fusion scale of... [laughs] that's happened in that amount of time so you're just gonna be waiting a long time to get your money back and maybe making sure that the capital that's coming in is prepared for that longer return cycle.
Jason Jacobs: And you said that with Buoyant, you're doing A round focus on digital climate solutions. How does an A round firm focused on digital climate solutions differ than an A round firm that is doing digital solutions without the word climate in there?
Amy Francetic: Not too different [laughs].
Jason Jacobs: So if I'm a traditional A round digital venture capitalist and I care about climate change and wanna start investing in this area, I mean, is it as simple as just starting to look for digital solutions that focus on climate, or is there anything that I need to do as a firm to enable me to be successful that I did not need to do when I was focused on the more traditional areas that I have focused on for the last decade or two?
Amy Francetic: Well, there's a ton of companies now. You could take a purely digital lens and still find a lot of companies. We've got over 380 of them in our deal pipeline because a couple of things that are different, Jason too, when we... kind of going back to, you know, why there are so many more businesses, is they're not just focused on clean tech. They're looking for climate solutions across all these different industries, and one area that we're super excited about is what we're calling climate risk intelligence. And this is, you know, companies that are using data to drive some kind of insight that they sell to big investors or asset managers or insurance companies, that have a cli- have a climate focus.
And that's a pretty new category of company. It's only really begun and been started like in the last five years, and it's because there has been so much innovation around data analytics and data capture. The, the capturing of data from low cost sensors has become so prolific that there is now an abundance of data to analyze and the analytical tool, the AI and machine learning and other tools, have become so much more sophisticated, I would say table stakes for a lot of these businesses, that that's relatively new innovation. So now you're seeing applications across this very wide assortment of industry segments and which is why one of the other reasons, I didn't mention but we're looking well beyond energy, right? This is sort of climate touching every facet of industry.
And so I think that that is part of the opportunity here, is you've got folks that are, you know, in... and within this climate risk intelligence space, so I'm gonna quickly look at one of our market maps that we've got here, got a brilliant person on our team working in this. So we're looking at they're in the financial services sector, they're in the ag land use and water sectors, they're in disaster management, they're sort of broad-based in sort of corporate as well as broader asset management. So there's a lot of companies that are applying these technologies to a wide set of customers. And in most cases, those are large enterprises that are buying those solutions, in other cases they're communities, but there's been a lot of also M&A activity in the last few years. It's just starting.
We've been really excited as we're watching in the financial services space, you've got folks like Moody's is being acquisitive in this area. Morningstar acquired Sustainalytics, Moody's acquired Four Twenty Seven, S&P, you know, acquired Trucost, we got NASDAQ acquired OneReport. So you're starting to see this acquisition space happen for financial services companies, and that's gonna broaden out to insurance. You're gonna see... starting to see this in, in the insurance sector, you're gonna start to see this in the ag sector, it's really, really happening. And that wasn't even a thing, really, five years ago. So that's why, I think, there's huge opportunities.
And so I think that a number of the... when we look at these companies, a number of those companies are funded. So here, a good example is a company that got funded recently called, in the insurance space, the wildfire insurance space, is a company called Kettle. I don't think it has a climate investor in their first... in their [laughs] A round. So I think it's general tech and it's an InsurTech group of funders there, Accrue, True Ventures, Anthemis. And so that's what we're gonna start to see more and more too. Is a l- is a lot of these sort of general tech investors coming into this space because these businesses, in some cases, are like FinTech companies, but they're gonna scale up with less capital and quickly and become attractive acquisition targets in what I would predict is a more feasible venture timeframe.
Jason Jacobs: And so if you take, let's say, uh, Breakthrough Energy Ventures, they've got their half a gigaton threshold and they'll put a team of people towards doing and engagement to first assess the potential emissions reduction potential of an opportunity before they even evaluate it from a venture standpoint. How do you know, with Buoyant, if a company meets the climate threshold for investment? What's the filter?
Amy Francetic: So we're looking at nine UN sustainable development goals. We did a wide scan of all the different ways to measure impact, and we settled on the IFC impact principles and these nine UN sustainable development goals, because we thought they were very thoughtful and sort of well-supported by other industry players. And so we screen our investments along those metrics, and we require that we can measure impact across our portfolio in accordance with those. Now, that impact may be, sometimes, on the mitigation and the carbon reduction side, it may also be on the adaptation side, which is really the case for a lot of these, these InsurTech companies, right? They're offering an insurance product that is either helping to ensure a segment of the insurance customer base that is not insurable or not insurable at a reasonable rate, or in other cases, they're creating new insurance products that smooth out some of the volatility in the insurance space. And so we think that that's... has more of an adaptation benefit than it does a mitigation benefit, but we're looking at both.
Jason Jacobs: One of the things that I've noticed is that on some opportunities, they have a climate focus in that the company can profit from climate change getting worse and from the clean energy transition, but it's harder in my mind to assess if they can actually help with the transition or if they're strictly just patting their wallets and tho- those of their investors along the way. How do you distinguish which is which? Is that something that, that you found that you wrestle with in, in certain cases as well?
Amy Francetic: Definitely, money is gonna be made in this area. I guess the question is, is it hurting? You know, like give me an example of a company that's profiting off of climate change that is making it worse. I can't really think of one that we've seen that's making climate change worse. I think there's folks that are absolutely profiting off of the changing climate, for sure, but I can't think of anybody who is sort of like... you know, would that be a company that is emitting more-
Jason Jacobs: Well, it's a, it's a fund that shorts real estate, you know, mispriced real estate that doesn't properly factor in climate risk-
Amy Francetic: Sure. Sure.
Jason Jacobs: ... in any areas that are-
Amy Francetic: [inaudible 00:32:26].
Jason Jacobs: ... that are most vulnerable to sea level rise.
Amy Francetic: Right.
Jason Jacobs: Is that a climate-focused company?
Amy Francetic: That's a great point. Yeah. So if there's shorting... [laughs] so we were just talking with an investor recently, I won't say who, who has developed a product to... a hedge products that they are shorting. And it's interesting because he also considers himself to be a climate activist and he sees the perversity [laughs] of what he's doing. But that's not what we're looking at investing in. So, yes. You... I think you have to be thoughtful about that for sure.
Here's another example. In this whole ratings and risk assessment space, there's a company in your neck of the woods called risQ, with a Q at the end, and they're creating a measurement or a risk rating for bonds, for municipal bonds, right? And I would say that is very helpful because if you're gonna be investing in useful bonds, you sure as heck should know if that bond is going to be facing severe climate risks, right? So if you're an airport or a school district or a hospital in an area that is prone to hurricanes or flooding, I think that should be disclosed. I don't think that they're making it worse. If they are profiting, they're saying, "Hello, pay attention to this risk. Don't put your money over here. Put it in this other thing."
And, you know, it's kind of the same thing that we've seen here at... in the commercial real estate. We've seen some commercial real estate, but if you were to get a... some kind of rating or disclosure on, say for instance, a c- a climate risk or the energy cost to that property and you want it to mandate that and make that disclosed when that property is changing hands, the people that are fighting that are the real estate agents, right? Because they think that's gonna prevent their sale. If there's somebody who's got a flood risk for this home that wasn't disclosed because the... all the flood plain reports and maps are outdated but this space has been flooded like three times, that should be disclosed, right?
But a lot of the real estate firms don't want that because they don't wanna make it harder, and the seller certainly doesn't want that. But if you're a buyer, you really wanna know that. And that's sort of what we're faced with right now. Like you should be able to be aware of where you're putting your money and there should be some really strong motivation for that risk to be disclosed. And that's what TCFD is trying to do with institutional capital, and I think we're gonna start to see that more and more. But I would say those folks that are calling for that, or, or have solutions around that risk assessment, I don't think they're making climate worse. I think that they're absolutely trying to draw attention to measuring something that previously hasn't been measured.
Jason Jacobs: One of the things that was kind of drilled into my head spending my whole career working in Silicon-Valley-style companies is that innovation is a source for good and that you can, you know, use capitalism as a powerful tool to bring about change. I still believe that, but one of the things that I do wrestle with as I look at a systems problem like climate change is that I feel like... I think I'm concerned that capitalism and unbridled market forces won't take us all the way there, and in some ways, can even be self-reinforcing in terms of inhibiting our ability to properly address the problem in the timeframes that we need. So how do you think about that? I guess, how far can innovation take us, and then how do we get the rest of the way there?
Amy Francetic: It probably doesn't take us all the way there. You remember the... a couple of years ago, a lot of the disagreements around 100% renewables. And could we power the country out of 100% renewables? And I think a lot of more people could get comfortable that we could do in an 80% renewables and by God, if we got... did it on 80% renewables, [laughs] then that was a hell of a lot better than we have today. So like, let's not let perfect be the enemy of good in this instance, and let's just really get these technologies deployed. And I don't think innovation only is the solution. I think, absolutely, you know, some kind of federal leadership or a, a policy lever, like a carbon tax, could absolutely be super beneficial.
And I think that, you know, many of these large corporations are looking for some consistent leader- leadership federally. Some s- price signals to follow that are consistent, and that's, unfortunately, in our democracy that those very, you know... what one administration puts forward can be undone by the next and that kind of, you know, seesawing back and forth is extremely unproductive.
So I think that, you know, it takes a long time to like look at the carbon emissions of... the vehicle emissions targets, right? So the whole like auto and truck industry got mobilized around these aggressive emissions targets and then President Trump tried to undo those and they were like, "Well, wait a minute. We're just like retooling our whole, you know..." I think that having some kind of consistent policy signals is really, really helpful. And that that is what is needed in conjunction with innovation. Is you've got to have some consistent leadership that, when you have almost every country in the world signing up to be part of the Paris Climate Accord and the United States pulls out, I mean, it... that doesn't make any sense. You know, you really do need global leadership on this. And so I'm relieved that the Biden-Harris administration will, um, bring us back into the Paris Climate Accord and has made commitments to being very progressive on climate. So I'm hopeful that we'll see some really big changes happen, but we need that kind of policy leadership as well.
Jason Jacobs: And one of the things that I've heard repeatedly in the last couple of years as I've tried to get up the learning curve in this area is that if you want to work on impactful things, the impactful things tend to be the harder tech innovation, and if you wanna make a profit, focus on digital, but that a lot of the digital stuff is just, you know, kind of lip service, greenwashing, whatever you want to call it. And I think what I'm hearing from you is that you seem to have identified an area of digital that you believe can be high impact on the problem, financials aside. Like actually looking at like the impact on the problem of climate change. So can you talk a bit more about that and maybe some areas of digital that you believe can be most impactful?
Amy Francetic: I'm really excited about some of the technologies that are really market-making, right? Where they're gonna create a new insurance product. And so you've got a few... whether that's a company that is... okay, so you invested in, in Pachama. And it's an interesting company, right? And they're making a market for this. I would say that's a market-making company. I think that's really intriguing, I like what they're doing, bravo that you're doing that.
Another one that we like is Energetic Insurance, right? So Energetic Insurance is, uh, helping to create measures of risk and help with underwriting of rooftop solar solutions for co- commercial and industrial businesses. That's helping to spur a market to... trying to solve a market problem with technology that could really unlock a lot of capital for rooftop solar. So I think that that's really intriguing. I like some of the folks are doing around community solar. I think that that's helping them really make a new market of customers, getting them comfortable with becoming a customer in a community solar product.
But in that case, it's very dependent upon regulations, so you've gotta be very smart about where you roll that out because you have to have supportive state regulations. Uh, I think, you know, on this climate intelligence space, like I said, we're looking at solutions that could really be applied for what we would say across, really, three main buckets. One are banks, folks that are helping to measure the risk and support compliance for things like TCFD and other regulations that banks are now faced with. We're also looking for folks that can measure risk and look for solutions for asset managers. So those could be, you know, financial asset managers, those could be physical infrastructure asset managers.
And then we're really looking at folks that have solutions for insurance. So if you're able to create a new market, a new insurance product, or you're able to help and create insurance product for somebody that, otherwise, was uninsurable, we think that that's a really exciting opportunity. And that in all those three cases, that's going to be touching trillions of dollars of capital over the next decade, and these little companies have this expertise that does not exist with... inside these companies. So we were really surprised when we talked with a number of insurance companies and you had Barney from Nephila and I think he's brilliant. I think when I read his podcast with you, I reached out to you and I said I thought it was really great.
And so we're friends with Barney and I love what he's doing. Uh, it is the whole new category of catastrophe insurance that hasn't existed. So you've gotta look for these opportunities that I think have potential scale. You're still gonna be... have to be patient because if you're making a new market, that means there's a lot of education that's necessary in these instances, and that they're... the folks are gonna really move. It's really gonna scale once you have some early traction.
So in all the categories that I talked about, we're seeing a lot of entrance. There's maybe a dozen folks that are doing the same kind of thing, and there's not gonna be a dozen winner. So you do wanna choose very carefully, and, and that's probably the reason we're focused on series A. We wanna see those businesses once they've gotten the business model figured out a little bit, and when they've got some customer traction and their staff with the right kind of people that can really scale up those businesses.
One thing that we've seen repeatedly is it's very common to start out in this sort of climate risk intelligence category as a consulting business, and then to try to become a software company or a SaaS business. And it's hard to make that transition. It's okay to do that, there's nothing wrong with it, but the more reliant you are on that consulting income where you're creating these custom or bespoke solutions for your customers, the longer it's gonna take you to create something that's truly scalable that's more of a subscription business or more of a software tool. So we look for businesses that have that perspective from the very beginning, kind of baked into their business model and/or where they've made that transition already and the business model is already starting to see traction. So that's a really important thing to consider as well because typically consulting businesses are not venture fundable.
Jason Jacobs: Another kind of related question that I've been wrestling with is, so if you take a company that, let's say it's digital, let's say high-impact, it, you know, fits into one of the STGs and it sets out, I don't know, to, to focus on, say, geothermal or solar or something that is clean and that helps with the clean energy transition. And then at some point along the way they, uncover that it's got applications for, let's say, oil and gas.
Now, I know there's some concessionary capital that would say from the outset that they're not allowed to venture into some of those areas that might be counter to the impact side of the equation, but I have to imagine, if I'm a market-based fund that you were describing, it does not have a climate focus, then I'm not gonna like those constraints because this is gonna limit how much money this company can ultimately make. How does Buoyant think about that, given that you have this dual focus that you are describing?
Amy Francetic: That happens. That happens a lot, right? I mean, it... I think by a couple of ways. One is, there are some companies that are using digital technologies to reduce emissions for, specifically for, the oil and gas industry. I think that's intriguing. We haven't found any that were in deep diligence on, but there's a few that we're tracking, right? They're using technology to identify leakages in pipelines that, you know, really is being ultimately pursued by the oil and gas industry to sort of improve their profitability, but it's also having an important effect of less environmental hazardous activity.
There's other folks, there's another company that I've seen recently that is creating... they've got sort of a, a ratings or sort of a, a clean kind of rating for natural gas, right? There's gas that is being harvested more sustainably and is being also processed and then deployed with more environmental controls on it, right? So if you're gonna be in the natural gas market, this gas is rated with a super organic rating. And it's full or whatever, and that, that... you could trust that that rating is true. Then if you're gonna purchase that gas and you wanna have that rating on it and you're gonna pay a little bit more for it because it's premium. I think that's intriguing. I think that's an intriguing solution. I don't know that it will, from our perspective, meet our, um, requirements for investment or if we'll get there from an investment standpoint, but I do think it's an important solution. We're gonna be using fossil fuels for decades to come, and if somebody has a technology that can help reduce the impacts during those decades, then I think that that's really an important thing.
I mean, it's kind of the same as carbon capture, right? I mean, if you're used to flying carbon capture to make these, uh, carbon intensive technologies or businesses less carbon intensive, I think we've gotten to the point where you can not be so dogmatic or narrowly focused only on 100% clean solutions. I think we've gotta really also look for technologies that can reduce the emissions of these technologies that exist today.
Jason Jacobs: Well, this was such a f- wide ranging and comprehensive discussion. Is there anything I didn't ask you that I should have, or any parting words for our listeners?
Amy Francetic: Yeah, I do. I wanted to say, one thing we didn't cover was diversity. And I am super excited that, you know, there was some research that was published from Women in VC that you probably saw a couple of weeks ago, that only 5.6% of all US venture funds are run by women. And only 5% of all the partners in US venture funds are women. And we are really excited to see more and more women coming into the game and starting funds in the space, and we are really excited that we are finding... so within Buoyant, two of the three partners are women. So my partner, Allison Myers, and then my partner, Daniel Hullah, who was your first Climate Journey Podcast, uh, participant who I adore in Boston, but the three of us are partners at Buoyant. And we are finding a very diverse group of companies. And almost half of the companies in our pipeline are diverse from a gender or ethnic standpoint.
And that is not because we are actively looking for them, it's because diverse fund managers find that... we have different networks, you know? We have networks that are different from White men. And so we know a lot of these women in the business, we take a harder look at those companies that have diverse folks in them, and then we aim to help those companies diversify. So when we make an investment, we want to see that a company will commit to considering diverse candidates for the hires that they have. You know, we will look to add board members, independent board members that are diverse. That... this isn't that hard to do. It's really not that hard to do, okay?
And so I think that diversity begets diversity in this case, and I would just say that we should all be striving for that. And we're really, really proud of that and we wanna support as many diverse founders and CEOs as we can, but we're also really excited to work with more diverse fund managers. And I think that that's really, really important and I don't think we should ever take our eyes off the ball or bomb our focus off of that as well. I think that we, uh, also have some good data that shows diverse investors perform better as well. So, you know, what that's... we're excited to be a diverse fund manager and excited to work with others in the space. And all of you White men as well, we'll work with you guys too.
Jason Jacobs: [laughs] Well, I'm so glad you brought that up. Diversity is very important to us as well at, at MCJ and we... we're trying, and we've, you know, made some in-roads but we can certainly do better. And it also just seems like with learning any new craft, you know, with each new bit of progress you make, it unlocks more visibility into where you're lacking. And so it's almost like the further we get in, the more behind we feel-
Amy Francetic: Great.
Jason Jacobs: ... but definitely something that's important and, and thank you for flagging that as well for me and for everybody listening.
Amy Francetic: Yeah. Well, I think we're making a slow and steady progress, but we've gotta speed it up, and I think it's really important to support diverse fund managers because I think what the key message there is that diverse fund managers will find, at a higher rate, more diverse portfolio of companies too. So that's important.
Jason Jacobs: Okay. Well, Amy, thanks again for coming on the show, and best of luck to you and to everybody on the Buoyant Ventures team. And, hopefully, we can find more ways to work together over time in, in whatever form that may take.
Amy Francetic: Jason, we love what you're doing, we love the community you're building. Thank you so much for turning your attention to it. Keep doing what you're doing. We love it and we'll be excited to follow you into some of your companies too. So congrats on getting your fund launch.
Jason Jacobs: Okay. Thanks again, Amy.
Amy Francetic: Take care.
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 .co, not .com. Someday, we'll get to .com, but right now, .co. You can also find me on Twitter, @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoy the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
