Capital Series: Amy Francetic, Buoyant Ventures
This episode is part of our new Capital Series hosted by MCJ partner, Jason Jacobs. This series explores a diverse range of capital sources and the individuals who drive them. From family offices and institutional LPs to private equity, government funding, and more, we take a deep dive into the world of capital and its critical role in driving innovation and progress.
Amy Francetic is Managing General Partner and co-founder of Buoyant Ventures. Buoyant Ventures partners with early stage companies that can rapidly deploy and scale bold solutions, homing in on software and simple hardware. They invest for financial results with a commitment to measure climate impact across their portfolio.
Amy and Jason have a great discussion in this episode about Amy's journey to becoming a venture capitalist, the origin story of Buoyant Ventures, why it came about, how it came about, and some of the behind the scenes details of the process of raising their first fund. They also talk about their strategy for deployment, some examples of investments they've made to date, and how their work fits into the broader climate tech capital stack.
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Episode recorded on May 11, 2023.
In this episode, we cover:
[01:28]: Updates since Amy was on the pod in 2020
[03:54]: An overview of Buoyant Ventures
[07:06]: Amy’s transition from consumer tech to climate
[08:20]: Founding Evergreen Climate Innovations and Energized Ventures
[10:48]: Challenges with fundraising for “deep tech” vs. software
[12:33]: Amy’s views on sectors in climate and her focus on digital
[15:44]: Measuring diversity, impact, and returns
[23:31]: Young climate entrepreneurs
[24:43]: Seeking investors who share Buoyant’s vision
[30:40]: The role of supportive advisors, including placement agents
[32:02]: Using sidecar investments and special purpose vehicles (SPVs) to balance fund size
[34:15]: Evaluating investment opportunities based on deep dive research and market map
[42:52]: Amy's collaboration with generalist venture firms, especially in software and AI
[46:04]: Evaluating reserves, product-market fit, and long-term commitment
[49:12]: Buoyant's key differentiators and "in the trenches" expertise
[53:44]: Amy's vision for the future of Buoyant and ESG in general
[57:06]: Who Amy wants to hear from and job opportunities at Buoyant’s portfolio companies
[58:44]: Jason's updates on MCJ 2023
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Jason Jacobs (00:00:00):
Today on the MCJ Capital series, our guest is Amy Francetic. Amy is Managing General Partner and Co-founder of Buoyant Ventures, who partners with early stage companies that can rapidly deploy and scale bold solutions, homing in on software and simple hardware. They invest for financial results with a commitment to measure climate impact across their portfolio.
(00:00:25):
We have a great discussion in this episode about Amy's journey to becoming a venture capitalist, the origin story of Buoyant Ventures, why it came about, how it came about, and some of the gory details of the process of raising their first fund. And we also talk about their strategy for deployment, some examples of investments they've made to date, and how their work fits into the broader climate tech capital stack. But before we start...
Cody Simms (00:00:54):
I'm Cody Simms.
Yin Lu (00:00:55):
I'm Yin Lu.
Jason Jacobs (00:00:57):
And I'm Jason Jacobs and welcome to My Climate Journey.
Yin Lu (00:01:03):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:01:08):
In this podcast, we traverse disciplines, industries, and opinions to better understand and make sense of the formidable problem of climate change and all the ways people like you and I can help.
Jason Jacobs (00:01:21):
And with that, Amy Francetic, welcome to the show.
Amy Francetic (00:01:25):
Thank you, Jason. It's so great to be back.
Jason Jacobs (00:01:28):
Welcome back to the show, I should say. I don't remember the exact timeline, maybe it was... got to have been two years ago, three years ago that you were on?
Amy Francetic (00:01:37):
I think it was early 2020, just as we were launching Bouyant and just as COVID was disrupting the world and overtaking us all. I think that was about the time.
Jason Jacobs (00:01:50):
Yeah, I was a young man. I feel like a lot of life has happened in those few years.
Amy Francetic (00:01:57):
Seriously. Oh my God, the last three years have been, what, 30 years, so I totally agree.
Jason Jacobs (00:02:02):
Well, as I was explaining a little bit before we started recording, the first time you came on the show, it was more of a general episode on the firm and also you were in a quiet period of sorts just given where you were with timing. And now we've got this capital series, which has corresponded with our own fund that we're putting together the first time we're including institutions, meaning that I'm essentially learning a new sport and we're a few months in and it took us a few months to figure out how to do this the MCJ way.
(00:02:32):
And the MCJ way is to learn from the best people doing it, whether it be general partners from firms deploying this capital or from limited partners, institutions, strategics, family offices, et cetera, that are investing in these funds. We just want to bring them on the show, give them a platform, learn from them, help foster more visibility and make connections and get to know everybody in the process. So that's why you're back.
Amy Francetic (00:02:56):
Thank you. I'm a giant fan and since you've started, I've been a giant fan and I think you've done a great service actually to the whole climate community with your educational series and the community you've built and just sharing so openly as you guys have been making investments. So thank you for that.
Jason Jacobs (00:03:12):
Thanks. I know no other way. And selfishly I'm a big efficiency nut. And if you just put it all out there, then people have a lot more information, which makes for more efficient discussions when you do actually sit down one-on-one and your people will self-select in. And people that would be allergic to me in real life, maybe they'll already be allergic to me and save everybody the trouble so.
Amy Francetic (00:03:34):
Exactly. Speed up that selection process. Yes.
Jason Jacobs (00:03:39):
Yeah, I should have done a podcast back before I was married. No.
Amy Francetic (00:03:44):
Well, isn't that what the dating apps are for now? Yes.
Jason Jacobs (00:03:47):
For anyone that wasn't part of the first episode or might not be familiar with the firm, maybe talk a bit about Buoyant Ventures and what you do.
Amy Francetic (00:03:54):
So we are super excited to be investing in early stage digital climate solutions. So with that $81 million under management, we did our final close in December.
Jason Jacobs (00:04:06):
Congrats.
Amy Francetic (00:04:07):
Thank you. And I'm in Chicago and my partner, Allison Myers is in Denver. We're 100% female owned, which will be something I'll comment on during the fundraising process, how that was reflected by some of the LPs. And we're looking for early stage businesses that are primarily software companies and some simple hardware. By that we mean off the shelf hardware sensors, hardware that's really in service of the software.
(00:04:32):
And we're looking for solutions that can help us decarbonize as well as help us adapt to climate change. So that's one of our differentiations is that we're equally focused on mitigation as well as adaptation. And by adaptation we mean ways to address the loss of life and livelihoods related to climate change, ways to measure and price and expose risk, ways to make infrastructure more resilient.
(00:04:56):
And we have nine portfolio companies. So we have been investing well. We've been fundraising and we called our early investors capital really hard actually to build the beginnings of a portfolio that LPs could diligence to help de-risk us as a Fund 1.
(00:05:14):
And so that's a big recommendation I have, and I'm sure we'll get to this in the conversation, but I think was very, very helpful for us. And then there's six of us on the team and we're just super excited to be... it's never been a better time I think to be investing in climate technologies and I've been in this space for 18 years, so it makes me really pleased to see so many folks coming in with fresh capital and so many amazing ideas and so many new people coming to the climate industry from other sectors. So we're quite optimistic.
Jason Jacobs (00:05:44):
Well, it's kind of ironic because it feels like the best time to have a Fund one and the hardest time to get a Fund one.
Amy Francetic (00:05:49):
Oh my god, it's so true. It's so ironic. We launched in January of 2020, so we faced COVID, so then there was COVID lockdown. So when COVID hit, we'd stop fundraising because even though all the LPs were stuck at home, all of us and willing to take calls, nobody was deploying capital into new funds then. So we went and we did a deal and we invested in Raptor Maps, which is in your backyard in Boston, it's a solar software company.
(00:06:16):
And then we used that as a deal that we could show LPs to help again, give an example of what we meant by digital climate solutions. And then we went back to market in the fall and we did our first close in May of 2021 and it was a friends and family round, a rather small first close, but it gave us some foundation to begin and then also gave us some capital that we could call to continue to invest and to make progress so that we could attract more institutional investors towards the end.
Jason Jacobs (00:06:45):
Two different vectors, I'd love to take a look in the way back machine. One is just how you came to be working in clean tech or the clean energy transition or whatever words you want to use to describe it. And then the same question just about how you came to the focus of Buoyant with the early stage digital solutions across mitigation and adaptation.
Amy Francetic (00:07:06):
I came to climate after spending 20 years in the consumer technology industry. So I was an entrepreneur early in my career, built and sold a consumer technology company. It was actually a high-tech toy company. We were putting sensors and toys and connecting them to the computer and using the toys to control an educational experience for kids. And we sold that company to Lego and they put it into the robotics line.
(00:07:29):
And then I was working in the wireless industry and then
(00:07:54):
So I want to direct my energy into something that can make a difference. And as a mom, I felt what I had to do needed to benefit my kids. And so turn my attention to climate and I've been a runner my whole life. And to me nature is healing and therapy and medicine. So it was a very natural thing for me to focus on. And then leapt in with both feet and started to understand and dissect energy markets and clean technologies and started the Clean Energy Trust, which is at early stage technology accelerator here in Chicago.
(00:08:24):
And in 2021 we rebranded to be Evergreen Climate Innovations, and we funded 42 companies in the last 12 years and we put First capital into early stage clean tech companies. Most of them are deep tech, hard science companies that spin out a labs and universities. And that's an important factor because I saw from doing that how hard it was to fund those businesses, how long it took for them to commercialize their intellectual property, what capital was needed to help them make that transition from the research lab into the market and how much money that required.
(00:08:59):
And so after I'd launched that and got that into a good place and handed off to Erik Birkerts, who's now the CEO. I joined Michael Polsky who was one of the co-founders of the Clean Energy Trust with me and started Energized Ventures. And our focus there was on digital energy and so it's digital energy and industrial automation.
(00:09:18):
And so we had a focus on software and more of this application layer, which not only was that something that I understood from all my early time in my career and what it took to build software, but it reflected the fact that these deep tech companies were, I thought a bit of a mismatch for venture capital because they took so long to mature and they took so much money that if you had a fund that was a typical 10-year fund and you were shooting for a venture return, you had to invest in companies that couldn't be sold or you could exit within five year time period, plus or minus.
(00:09:49):
And so that I knew from the Clean Energy Trust was hard to do, was really hard to do with venture capital. So that was energized and then I parted ways with Michael at the end of 2019 and started Buoyant with Alison and wanted to focus wholeheartedly on climate and things that we thought would really benefit the climate, but also that would be poised to make money in this amazing transition that's happening now and this movement that fortunately globally we seem to have some consensus around.
(00:10:17):
So we got a long way to go, but there's much more capital than there was when we started back in and started the Clean Energy Trust and lived through Clean Tech 1.0. So it's exciting to see how many more investors there are, how many more people like you have come into the space, how many young people are starting companies, how many governments around the world are setting rules and regulations to support this transition. So it's a good time to be doing this and glad that the expertise that I've spent the last 18 years creating is well-timed.
Jason Jacobs (00:10:47):
And when it came to making the transition from the work you were doing at Clean Energy Trust to your now focus with Buoyant, it sounds like you shifted from deep tech to software. Did you wrestle with that at all given how important, I guess, physical stuff is to the transition?
Amy Francetic (00:11:08):
So I applaud all the inventors and scientists and investors that are working on some of these really ambitious decarbonization technologies. I just felt very strongly that I wanted to make money for my investors, wanted to make money for myself and my team. And I felt like the way that I knew how to do that, my expertise from my career was in digital technologies.
(00:11:33):
And I understood those technologies best and the scientific expertise needed to scale up battery chemistry or heavy manufacturing technology. I think I felt like I could see from Clean Energy Trust, we had this enormous advisory board and mentor board that would help our companies and they were from all walks of life. And I knew what it took to help those companies and give them the advice. And I just felt with our fund, I wanted to be very, very focused on things that I felt more innately capable of, diligencing and where me and my team could help the companies the most.
(00:12:07):
So we're in the trenches. So I think once you're an entrepreneur, you're always an entrepreneur and I tend to be very sympathetic to the CEOs and our team feels really strongly that we want to be very hands on and in the trenches with them. And I think it'd be hard to be in the trenches with a team that I didn't really understand their technology or maybe also I had very little I could add to that solution. So in the spirit of trying to help grow these businesses and be a trusted partner, I wanted to play to my strengths.
Jason Jacobs (00:12:33):
And given how broad climate is as a category, it kind of isn't a category because it's every category, which also means that it's no category. So how do you think about sectors when you're determining what's in scope for investment?
Amy Francetic (00:12:51):
Well, climate really touches every industry and because of this digital angle, we're looking for opportunities where there may be some really important benefits to that digital technology to that industry. And so that's usually approaching more... So we're focused across energy mobility, the built environment, aquaculture water, and circular economy.
(00:13:13):
But a lot of these industries have been rather slow to approach digital. And so there are a lot of benefits right away that you can deliver to these industries and to these business customers. For the most part, our companies are selling to other businesses and they're promising some business value, some improved productivity, profitability, cost reduction, safety improvement, whatever it is for a business customer.
(00:13:38):
We have one company that is consumer focused called Beni, which is in the secondhand clothing space. But otherwise, our companies are selling to energy developers, utilities, commercial real estate owners to municipalities, to managers of land-based aquacultures. You can see the theme is helping businesses do more.
(00:13:57):
And that's a really important theme where digital technologies can be very beneficial because they're in many cases automating processes that are labor-intensive. They're optimizing some infrastructure and improving the production or output from that infrastructure. They're giving some level of insight to that customer that they may not have. So that's really, sensors may come into play with software and they're creating some visibility to a problem that exists for them.
(00:14:25):
And broadly speaking, many of our companies are data companies. They're ingesting large amounts of data. And so this is where AI is very much in vogue right now, but we already have half of the companies in our portfolio are using artificial intelligence in some way. But this is where all the algorithms that are trained on big data sets are coming into play and helping to provide some benefit to these folks that are maybe drowning in data or there's data sets that they're trying to get access to that they can't get access to.
(00:14:52):
So they're either sort of making sense of all the data they have or they're providing them some insights from big data sets, proprietary data sets, or public data sets, and they're saying, here's what you should know and here's what we can tell you about your business and the world and your customers and risk and climate and help you guys make better decisions.
(00:15:09):
So we're very disciplined from a thematic standpoint, even though we have all these different industries, we tend to be very disciplined and focused on this digital angle. And there's a ton of companies, boy, I mean it's just since we started, we've got 1400 companies in our CRM. We've screened about half of those at some early stage. We've done diligence on a hundred of them to get to nine investment. You can kind of see the traditional venture, big top of the funnel getting down to just a few investments, and we'll probably have a portfolio of about 18 to 20 companies with this 80 million.
Jason Jacobs (00:15:44):
What stage are you typically investing? What's your typical check size?
Amy Francetic (00:15:49):
Seed and Series A, anywhere from say half a million to 5 million and happy to lead around or happy to join around. So we actually like to lead. We always take a board seat, so either a voting seat or an observer seat. And we're mostly investing in North America, although we have a company in London and we're seeing tremendous innovation coming out of Europe. So we're looking at actually a number of companies in Europe, but where we look to draw the line as if it's a company outside of North America, we want the US to be the primary market.
(00:16:18):
Because again, in the spirit of trying to help them, that's where we have the most relationships that we can bring to bear and where we know the most about the way the energy markets work here, the way the commercial markets work is in the US. So we've got two companies in Canada, one in London, and the rest in the US.
Jason Jacobs (00:16:35):
And when it comes to impact and returns, how do you think about each of those relative to how a generalist software venture firm might think about those?
Amy Francetic (00:16:47):
We care a lot about that actually. So at the top of our funnel, we're screening for climate impact. So at the very top, if we can't determine that this company could have measurable climate impact either mitigation or adaptation impact, then it doesn't make it through to the next level where we're starting to analyze the financial return of that technology. And then when we make an investment, we have a side letter that all of our companies have signed that asks them to commit to implementing a diversity and inclusion policy.
(00:17:16):
So as a female led fund, we care a lot about diverse voices and diverse seats at the table. And so we ask them to commit to implementing this de and i policy and then to measuring diversity across their company from top to bottom, from their board down to their lowest level employee and also across their candidate pool. And then we measure that the diversity elements as well as the climate elements on a quarterly basis from the companies and we publish an annual report. So we're working on our annual impact report and that'll be out this summer.
Jason Jacobs (00:17:47):
I'd love to just double click on the measurable impact that you mentioned. How do you measure it and is there any standard that you can aggregate across the portfolio or do you really look at it distinctly on a company by company and industry by industry basis?
Amy Francetic (00:18:06):
We do, do it distinctly on a company by company basis because we're working on both mitigation and adaptation. So on the mitigation side, we're obviously looking for some way to reduce emissions and to measure that, but on the adaptation side, we might be looking at risk or dollars covered or lives covered or protected.
(00:18:24):
And so we're measuring slightly different things based upon the company. And sometimes we're also on the adaptation side looking at demographic information, populations that are affected by that technology. So two adaptation examples. We have a flood insurance company called Flood Flash, and so we can measure what is the value of the risk that they're covering in their policies, what amount of payments have been made by the company to policy holders when there's been some event, and then what are some of the demographics of those populations that are covered by their policies, their flood insurance policies.
(00:18:54):
And the same thing for Storm Sensor, they're a stormwater management company, so you can see some of the same elements there, but it tends to be pretty bespoke to the company. And we get agreement from the company on those metrics upfront before we invest.
Jason Jacobs (00:19:07):
I've heard some people describe some fund managers that have been through the process. There's a fair bit of impact capital on the LP side that is looking to deploy in climate, which is great. What we've found with some very initial learnings is that there seems to be quite a bit of overhead with some of the requests that these firms expect that these young funds adhere to.
(00:19:32):
And it starts to feel like a compliance effort that might be too heavy a burden for what's essentially a startup. How do you think about impact capital and how do you think about impact reporting and is it compliance for you or is it something different than that? And I guess correspondingly how much did you lean into chasing that type of capital for this Fund 1?
Amy Francetic (00:19:55):
I would say at least half of our LPs care about impact. So quite a few. And I would say nobody had what I would call particularly burdensome requirements. I think when we told them what we were measuring and we showed them up... we published our first impact report last summer. So when we showed them an example, they said, "Oh, that's great, that's sufficient."
(00:20:19):
And we are working with a firm called UP Metrics to help collect the information from the companies and then to help aggregate it, which we think will be useful instead of us trying to chase down all the individual pieces from all the companies. And part of the reason we chose them is their experience doing this, but also what they claimed to be is an efficiency that they have for that collection. So hopefully it is a relatively easy process. And first of all, that's why we do what we do.
(00:20:47):
That's part of the purpose of Buoyant is we want to make sure that we're picking companies that are delivering this benefit to our LPs but also to the world. That's why we're doing this. The other piece of it is we think that that impact story is beneficial for the companies to tell. So in a competitive job market, having a diversity inclusion policy, casting a widest possible net for talent, being able to measure and talk about your climate impact we think is really appealing to the employees of the company.
(00:21:18):
And we haven't really had any pushback. I guess it is a level of compliance and oversight that we require, but I don't think it's really that hard to do. And again, it's not a hundred things that we're asking them for. It's three or four or five things. So it's not a hundred data points that we're trying to collect.
(00:21:35):
We're trying to come up with a handful of metrics that are core to the company's business that in the case of Raptor Maps, the solar software company whose software helps improve the production of solar equipment. So they can easily measure how many megawatts of solar have been used or processed by their customers. And then they have the historical production history that they keep.
(00:21:58):
They keep a digital historian on the equipment so they can see what production improvements there have been since they've been working with that customer on the management of those assets. And they can compute an improvement in production. And so to us, these are metrics that are operational metrics that are a little bit more core to their business. So they shouldn't be something they have to spend a lot of time going to find to tell us about.
Jason Jacobs (00:22:21):
How important is impact as a core motivator for the teams that you back?
Amy Francetic (00:22:27):
Number one, I think the biggest thing for us in terms of winning investments is expertise. The fact that we understand their space, we have something valuable to add, they can talk to our CEOs and see that we've been helpful to them. That's all very, I think persuasive, but the other piece of it is if they're mission oriented that we get their mission and we're mission aligned, I think that that means something to them.
(00:22:50):
Because I think probably a lot of entrepreneurs are nervous when they take capital. Who are they getting into bed with? How sharky are these folks going to be? Are they just going to force them to have growth at all costs? Are they going to understand their culture? Are they going to be supportive of their culture? And I think we do care a lot about culture and translating that impact into culture for these businesses so that there's reasons why people want to work at that company.
(00:23:16):
There's reasons why customers want to do business with that company in addition to the obvious business advantages that they provide or the paycheck that they can offer these employees, that there's some additional reason or purpose that is meaningful and personal and connects with folks. And I think that's one of the great things about climate is all these young people, from my perspective, having been in this space for 18 years, I always say young people are going to save us because they care so much about this and they're going to school and getting degrees and sustainability and energy policy and earth science, and they're looking for jobs in this space.
(00:23:52):
And if they can't find jobs, they're starting companies. And I think they're getting vocal about this. And we have this weird mismatch between young people, the Gen Zs and the millennials, the boomers that are making all the rules and the energy policy, they're not in sync.
(00:24:07):
So I think that that needs to get more in sync. People are really concerned... this is the number one thing, climate is a number one concern for Gen Z and climate anxiety is real. The anxiety that young people feel about what's happening in the world and how our environment is getting harmed and destroyed and worried about what kind of world they're going to live in, that's very real and tangible. So I think they're motivated. They have that youthful optimism that I think is hard for all of us as we get older to maintain. And you have to really harness that and I think have some hope that they're going to have a real impact. I think it's just a core value.
Jason Jacobs (00:24:43):
When you set out to pull the fund together, how did you think about what types of LPs you would target and then how does that align with the mix of LPs that you ended up with now that you've done the final close?
Amy Francetic (00:24:54):
We were very clear that our impact is going to be a byproduct of our climate focus, but we are here to make money. And so I think we felt that financial sustainability, investing in businesses that had commercial opportunity and success would attract more capital and would create returns for investors and they would therefore put more money into these businesses.
(00:25:16):
We saw that financial sustainability as really key to our overall success. But I think when we were talking to investors, we were looking for investors who shared our vision of what world we wanted to live in and what we were trying to accomplish from an impact standpoint. But we were really looking to invest in businesses that were going to return capital to investors. Think about institutional investors, we don't have many institutional investors, but we definitely have some.
(00:25:40):
And we're really proud to be working with some really wonderful institutions like the State of Illinois, Bank of America and others that came in and gave us a vote of confidence with Fund 1 Fiduciary Trust and a few other banks that came in.
(00:25:54):
And I'd say their motivation was because of our thematic focus, maybe their own sustainability mandates that they have, some of the feedback they were getting from their own customers and their desire to invest with somebody that if it was just only returns that they were looking for, then they had other managers. They had other GPs that they were investing in for that, but if they wanted to get something in addition to the returns that we were able to provide that for them.
(00:26:20):
And what's funny, talking to some of these institutions is that because we were focused on digital solutions, sometimes we fell through the cracks because they had real asset team that was doing energy in the infrastructure group where they're doing the returns associated with real assets, which are lower returns and a lot of debt and much less risky. And then they had the PE and venture group, which was all tech and all general tech.
(00:26:42):
I think we belong in that bucket over there, which is the return oriented tech group. But thematically, we're working on this stuff over here and so we don't know which bucket to put you guys in. So sometimes we fell through the cracks with those investors. But I think that our hope is with others, they had a clear mandate where they were looking for some of this climate angle.
(00:26:59):
And I will also say that some of them still had a hangover from Cleantech 1.0 because we did hear that. And I don't know if you've heard that Jason and you're fundraising with, oh man, we did Cleantech and did we lose so much money. And I can't get my CIO to take a look at that, even though it was 14 years ago, they got burned so badly that they're just worried that this is going to be the same. So I think that those kinds of folks, it was hard to convince and we probably didn't get them into Earth One.
Yin Lu (00:27:26):
Hey everyone, I'm Yin, a partner at MCJ Collective here to take a quick minute to tell you about our MCJ membership community, which was born out of a collective thirst for peer-to-peer learning and doing that goes beyond just listening to the podcast.
(00:27:38):
We started in 2019 and have grown to thousands of members globally. Each week, we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community.
(00:27:55):
A number of founding teams have met, several nonprofits have been established and a bunch of hiring has been done. Many early stage investments have been made as well as ongoing events and programming like monthly women climate meetups, idea jam sessions for early stage founders, climate book club, art workshops and more.
(00:28:12):
Whether you've been in the climate space for a while or just embarking on your journey, having a community to support you is important. If you want to learn more, head over to mcjcollective.com and click on the members tab at the top. Thanks and enjoy the rest of the show.
Jason Jacobs (00:28:26):
And as you were going through the process, you mentioned I think before we started recording that it was a slog. Look, it's a slog for all fund ones regardless of the macro, but how did you figure out as you're going through the process... When people say, for example, we don't do Fund 1s or things like that, there's just factors outside of your control that no matter what you do, it's square peg and round hole at least for a Fund 1, but it's a good relationship to have for the future.
(00:28:50):
Directionally, how did you figure out when to control the controllable versus when to not let the stuff that's uncontrollable get in your head? How did you parse through which is which basically?
Amy Francetic (00:29:02):
Honestly, take a call with anybody. Okay, so I would take at least one call with anybody and try to beyond just pitching them, I would try to get information from them and I would ask them question... First, I would say, "Do you do venture? Do you do Fund 1s? Do you do climate?"
(00:29:17):
Okay, if they couldn't say yes to those or they said no to any of those, it was a, "Nice to meet you. I'll tell you a little bit about Boeing, but it was a short call." The other thing was a lot of them would say yes to those questions, but then the next question was, "So tell me some of the funds you've invested in." And sometimes there were none. So then you could tell that they're just kicking the tires.
(00:29:38):
And so if they hadn't invested in anybody yet, they're thinking about it. And so it's still valuable to talk to them because what you're then doing is setting up the file on you and they're tracking your progress for fund two.
(00:29:51):
So I saw that it's still really valuable to talk to them. And then invest was if they said, "Okay, we've done this fund, this fund, this fund, and we're looking for two or three more." And so then we're like now, "Okay, let's go. This is the right connection." And in some cases what we heard a lot at the end of the fundraise the second half of last year, and what I'm sure is still a factor is this idea that with the interest rates rising with the public equities market starting to drop, they were all overweight a venture.
(00:30:20):
They had a lot of capital tied up in venture. And so they would say, "We're not doing any more venture." We had a few LPs we were developing for a long period of time and I thought I was close to getting them over the finish line. And they said, "We're not doing any more venture right now."
(00:30:32):
So that's the macro piece that you can't really fight that. So I think then it's still if everything else was a good fit, but because of what was happening in the market, honestly you can't force it. So then you just as a friend of mine said, who was great at sales, "every no is one step closer to a yes." So you had to let it roll off your back, just keep going, keep going down your list because fundraising is a sales process and you're turning over all these rocks and sort of trying to figure out who's a fit. And you have to do research, you have to listen and talk to people and go, oh, here's somebody who's deploying capital. Hone in on that and talk to folks that... We worked with, a placement agent with Big Path Capital, they helped us.
(00:31:09):
And so they were very good at finding out for us. They would make an introduction and then I would say, okay, how real is this LP? Have they done other investments? And they would tell us yes or no. And because they could go and get that information and maybe it would be a little rude for me to probe that further. But that placement agent can tell you, yes, they did. They did fund some other folks and we think that they have a little bit of capital left and that you're a good fit for them.
(00:31:33):
So having somebody in your corner, and honestly, that to me was even so much of a mental game that the fact that I had somebody else who was helping me and else and of course helped and my team helped, but somebody on the outside that when I had a bad day or there was an LP that told me no, that I was really hoping was going to tell me yes, that there was somebody else who was just shake it off, let's keep going. So it's good to have a coach or a cheerleader in your corner to help you. And I think that they were fantastic. They were really fantastic to work with, Big Path was.
Jason Jacobs (00:32:02):
You mentioned that getting out ahead and backing some companies as you were going through the fundraising was important to build a track record that you could then show to the prospective LPs that you were in discussions with. How did you balance how aggressively to go out and also check size when it was unclear? Portfolio construction is based off of a certain fund size and it was unknown at least early in the process where the fund size would ultimately end up.
Amy Francetic (00:32:34):
You have to be really careful. And we had restrictions in our LPA, our legal docs that we couldn't have more than a certain percentage holding in any particular company. So when you're small and you're fundraising, you have to be careful. And so what we did was we did a lot of sidecar investments. We would go onto the cap table of a company with the Buoyant Fund and then the Buoyant SPV.
(00:32:54):
We would take a diligence, an investment for the fund, and then we would offer that to our LPs, many of whom wanted to do co-investments with us, and then they would put their capital into that SPV for reduced economics to us and we would manage both our fund and then their capital. And we would have that aggregated as percentage ownership of that business based upon the two capital lines.
(00:33:17):
When we saw a company that we're excited about, maybe we wanted to lead, but it'd be hard to lead with just the funds check, we could go in with ours and then the SPV check and together have a little bit more capital to have a lead position in that business. So they were supportive and they were really critical to us getting the fundraise because they allowed us to probably make more investments than we could have if we hadn't offered them co-investments.
(00:33:38):
And they were always optional and they were all, for the most part, they were all oversubscribed. So they like to do this. And we shared our diligence with our LPs and some of them, they're building their own portfolios and a lot of people invest in funds so they can also learn the space too. So that's a really good way to learn. I'm sure that's the case for you too, that a lot of LPs have invested with you because they want to learn along with you.
(00:33:59):
And so we offered those co-investments only to our LPs and we share all our diligence and we share all our research. And so I view that as an opportunity to help educate them about the space so that they can make informed decisions apart from us as well.
Jason Jacobs (00:34:15):
How much of the investing that you do is thesis driven versus more opportunistic? And a similar question since I tend to ask them in twos for whatever reason, is just when it does come time to evaluate an opportunity, how do you wait outsider versus insider? When you look at the team construct of the founding team?
Amy Francetic (00:34:37):
What do you mean by outsider versus insider?
Jason Jacobs (00:34:39):
Someone that comes from the industry that they're looking to disrupt versus someone that comes from Stripe, Facebook, Uber, wherever, who really know software but might be a newcomer to that industry.
Amy Francetic (00:34:52):
I think with the exception of one, all of our CEOs are first time CEOs. And most of them, for the most part, they all had some relevant experience at either another company, a big company or a startup. In some cases they were pivoting over and learning climate for the first time, but we felt competent that their focus of their company was something they could do. We were convinced that they could do it. So that's addressing your outsider versus insider. What was your question before that? And I forgot the first one.
Jason Jacobs (00:35:25):
To thesis versus opportunistic?
Amy Francetic (00:35:27):
Inbound versus outbound. Okay, yeah.
Jason Jacobs (00:35:29):
Do you publish an RFP? Here's the 12 areas that we want to see founders doing stuff in or is it really just could be anywhere?
Amy Francetic (00:35:37):
We are getting a tremendous amount of imbalance since we publicly launched the fund. And so we have a form that they can fill out on the website. Jacob on our team helped build a connector from the website to Affinity that will turn that information and put it into Affinity. And we screen all those investments for fit with our stage and our focus. And sometimes they're not digital companies or sometimes they're too early or they're too late or whatever.
(00:36:02):
So it's easy to screen them out and we try to really take a good look at all the ones that come inbound and screen them for suitability. One of the things that we do that has helped them cover some really awesome investments is we do this deep dive research on certain themes or questions we have within our thesis. So we've done a body of work on climate risk intelligence that led to two investments in our portfolio.
(00:36:25):
We just finished some hydrogen research and looking at the hydrogen market through a digital lens, and we're in the process of diligence in a few companies that have resulted from that work. We did some research on carbon markets on Ag Tech. We just finished food waste. We're looking at Fleet EV Management right now. And so we do this with MBA fellows.
(00:36:46):
So how does a little team with six people, how do we do all this research? We work with really talented MBAs from some of the best schools across the country. So Stanford, Michigan, Columbia, Northwestern, and they work with us part-time and do the research in partnership with us. We open up our network so they can do primary interviews with our experts that we know and then we collaborate with them, but then they produce a set of slides and then they do a blog post that summarizes the research for us.
(00:37:15):
But the goal is always a detailed market map so we can see what is some of the investible opportunities potentially in this category. And then we talk to all those companies, we go reach out to them to learn about them, and then in the course of talking to the experts, they're really helping us refine our thesis within that deep dive that we've done. But the hope is that it will lead to some investible opportunities or in some cases it may tell us.
(00:37:37):
We did a whole study of work out ocean data and we were looking for data companies that could have the climate theme within the oceans, and we determined that it was a very interesting opportunity. It was really greenfield, but it was too early. That a lot of the companies that we were finding were just very, very early. Let's watch this category, but let's maybe invest in a little bit more time when they've had a little bit more market traction when some of the technology could be improved.
(00:38:03):
And so we actually didn't invest in that space. That's also the point. Sometimes you're doing that work to determine maybe we should wait on that. We did a whole bunch of work on carbon markets. It caused us to be very cautious about carbon markets, so it helped us understand what low quality supply we have for carbon credits, and it exposed some of the early rumblings of fraud in the industry.
(00:38:30):
And so it caused us to be very, very cautious. And so we haven't made any investments right yet in that space. And even though we found a couple of companies that we really, really liked and we thought, boy, if we're going to invest in anybody, let's invest in this one because they have a very rigorous process or they have a very unique approach. We then decided we're still a little nervous because even if that's a great company, if there's going to be some big disruption to the market, how are they going to survive that?
(00:38:55):
Sometimes the research informed us not to invest. And I think that that's the beauty of research. You have to be open to whatever the results are and listen to the smart people that you're talking to about that. But I would say maybe about equal amount of companies in our CRM that have come either inbound from co-investors that referred them to us for our website as well as companies we just either read about or found through our research and then we started looking out when to go talk to them and say, "Hey, we'd like food waste. We really think there's a great opportunity to reduce the carbon emissions in the food industry. 30% of the food we produce is wasted. Let's look for a digital technology." So that led to a few companies that we found. We went and talked to them all. So that's the cool part of it. We think that that's really a critical part of our approach.
Jason Jacobs (00:39:42):
And given how early you invest, and especially in digital, how relatively easy it is to pivot relative to some areas where there's, I guess more switching costs because you're actually putting stuff on the ground. How much do you weigh the initial entry point from a solution standpoint versus just the team in the market?
Amy Francetic (00:40:01):
Even at the seed stage, we like to see some revenue traction and we want to be able to talk to a customer. And if we can't get comfortable with the team, we won't do the deal. So that can be just a complete disqualifier. I think the team isn't going to have what it takes to be successful long term or there's some dissonance in the team that we can detect.
Jason Jacobs (00:40:20):
But if there's a longtime proven founder who had a market they were interested in and initial idea, but they're on day zero, that's too early?
Amy Francetic (00:40:28):
Yeah, that would be too early for us. And that's the beauty of digital. We could get an MVP, a minimally viable product and get it in the hands of people to use to give you some feedback, and you have to do that and it's not very costly to do that. Yes, it's just an idea. We would want to stay close to somebody who's really smart and really good and we liked, hey, I'll never say never. Maybe there is somebody that we'd say, wow, you amazing person who came from the payments industry, now you're going to do this in the climate space and you're just doing a different flavor of what you did there.
(00:40:58):
We'll help you figure out all the climate stuff. We know you know how to build this amazing payment system. Let's go. I'm not saying we wouldn't do that, but I think we have generally at the seed stage, if we're going to put million plus into a seed company, I think we'd like to be able to talk to somebody who is their target customer.
(00:41:15):
We want to see that they're very customer focused and that they understand what the customer needs are. We don't want to be building even software without having been informed about how people are going to use it, what processes you're going to be plugging into. Even thinking about pricing, where does the budget come for this solution?
(00:41:33):
Is this a new budget item or is it tapping into an existing budget item? Good entrepreneurs in this space should have all that information. They should know their market really, really well. We just talked to somebody right now who's building a transportation solution and it's for the truck yards, and he's the entrepreneur and he was in the trucking industry for years. He knows a lot about truck yards and he found somebody who is a software guy to build this solution because this is the pain point. I worked in this industry for years.
(00:42:02):
My CTO knows how to build these solutions. They collaborate. So that's a great collaboration. Somebody who's got that non-digital relevant industry experience partnering with somebody that is digital. And a lot of young people will say, "Oh, I'm not technical. How can I get into the climate space?"
(00:42:18):
Well, you can be a business person and you can go join one of these companies. You can be on the sales team. I always say get close to the revenue, get on the team that's generating revenue. That's the important place to be for a startup. So whether you're on the sales team or the product side, helping to find what goes into the solution, if you don't have those technical skills, you could still be a product person and that product person is really deciphering what the customer wants. So the customer focused piece is really critical for us.
Jason Jacobs (00:42:44):
When you think about the syndicates for these rounds, I know you mentioned that you like to lead and that sometimes you'll gladly participate if there's another lead. How do you think about generalist venture firms and when you would be excited that they're on the cat table and when you might have the opposite reaction? And then same question as it relates to climate funds.
Amy Francetic (00:43:04):
A lot of generalist funds are starting to create some allocation for climate. And in our space, if they know how to build software, we want to know, we want them to join us, we want them to come. You know how to build software, you know how to build SaaS businesses. You know what enterprises are requiring from these software companies. You know what are the best tools.
(00:43:21):
And now, especially in AI, anybody that has some AI experience that is an investor in that category, we would really welcome collaborating with them and say, listen, we'll take care of the climate angle and the climate piece. You help us with the software. Conversely, we're in a company right now, a land-based aquaculture company called Real Data and they're using cameras and technology to optimize the production of farm-based fish on land, indoor pens. And our partner is S2G Ventures and they have Larsen Mettler is my co-investor there, and he's got very deep aquaculture experience.
(00:43:54):
So I'm not going to teach this company, Real Data anything about the aquaculture business, but I definitely know how to help them build their software. I definitely know how to help them build their solution and maybe what some of the use case environments are like for what they're doing and spent my whole career in this category. And so that's what we could bring to the table. But in that case, we wanted really to be investing with S2G because of their deep experience with aquaculture and ocean.
(00:44:19):
So a lot of times it's a collaboration. You're looking for different folks to do different things, but we totally welcome the generalists. And I think what's good is I think some of those folks are coming in and bidding up these companies the last few years. So some of the goofy valuations that are starting to be corrected is getting back down to more the statistical average I think is really, really good. So some of the generalists were maybe a little naive about how long it took or how to build these businesses. And so I think that their expectations were not in line with ours, but we're seeing a lot of that as being corrected now.
Jason Jacobs (00:44:53):
If I'm a generalist software firm and I'm just chasing the best software opportunities, why do I need a specific allocation for climate to do a climate deal? Is there some difference about a climate investment that requires it? And I guess I'll ask that both in terms of what you think, but also clearly there's some people that think that. And so is there validity to that thinking?
Amy Francetic (00:45:16):
I think that it's probably a matter of getting comfortable with the market. Let's say it's a company that's using satellite data for a very specific use case. And so I think that specificity of the application space or the market, if the investor isn't comfortable with that, it's probably just a deterrent for them. They just don't know how to help them or it seems limited. I guess that's the other angle.
(00:45:37):
You could be working on an HR software, you could be rippling and you're selling to everybody, but if now you're rippling and you're only selling to climate, well that's a much smaller market. So I think it's probably a perception of how big that market can be. And we see tremendous economic opportunity happening now in this energy transition. But if you're not bought into that, then I think that as a generalist software investor, you'll probably view that as too limiting, not a big enough, wide enough opportunity.
Jason Jacobs (00:46:04):
How do you think about reserves and follow-ons and how do you think about bridges and down round?
Amy Francetic (00:46:10):
We've done three follow-ons so far in our portfolio. Actually four, if you count Raptor Maps because we did their B. And as everyone is saying, a flat is up right now, so a flat round is up. I think that's relatively true. We have been reserving about 70 cents on the dollar for our first check. And our model take us through, if we're at Cedar A, take us through the B, maybe we can get to a C. But then after that we're tapped out.
(00:46:36):
So wanting to make sure that we can feed the winners, not all the companies in our portfolio will get a reserve check. So that's part of the hard decision you have to make. Which ones do you want to double down on? It's just so early to tell because our portfolio is so young, it's not fair to try to judge them. It's hard to judge them after only six months time.
(00:46:54):
You really just need to give them more time to realize their vision. All of our companies are planning to double, triple in size once they raise their round and they never hire as fast as they hope to. So a lot of the execution dependent upon how quickly they can hire and get folks in, and then even once you hire folks in, you've got to get them spun up on your business and integrated to the company.
(00:47:13):
So I think that just takes time. And certainly in this market, when the businesses have been cutting back their spends, it means that they're not getting as much on the revenue side and so they're going to need more money. So we're definitely supporting our businesses through this market. Anybody we're funding now, we're looking for them to have a minimum 18 months runway, love to see them get through 2024, so they don't have to raise next year. I hope it's going to be better than it's this year for fundraising, but it'd be nice to see them make it into 2025.
Jason Jacobs (00:47:42):
So after that first check, if the company does end up needing more time before they get through the milestones for the next stage, how do you make that go or no go decision on continuing to support them? Is it an automatic at least for one round or are there certain criteria that you use internally to decide?
Amy Francetic (00:47:59):
I think it's not automatic. I wouldn't say that it's automatic. It's probably expected, but it's not automatic because we want to see what... are they getting, product markets fit. That's really the big thing at our stage. Do they have product market fit for their solution? What are the customers telling them they have to pivot? How long is it going to take them to get evidence of that?
(00:48:19):
And if we like the team and we like everything else, then we'll probably invest more to give them more time to realize that. We want to hear from the customers something's going wrong at the company, how well positioned do we think they are to help navigate those difficulties? Not everybody's cut out to do this, and you think you've got a partner that's really going to be in it for the long run, but they're not always in it for the long run.
(00:48:42):
They don't have the intestinal fortitude to weather the downturn. So I think that that's what you find out during these markets is who can really keep going. And if the original founder CEO can't keep going, then finding somebody else to do it is a real project. So we're generally not investing now to expecting to have to replace the leadership. But yes, it absolutely happens. People get burned out coming out of COVID, we're all burned out. So I think that that is a big factor of trying to make sure that they've still got gas in the tank personally.
Jason Jacobs (00:49:12):
In a world where these companies have multiple term sheets and you're vying to be the lead, pretend I'm a founder and I've got multiple term sheets and yours is one of them, how should I think about Buoyant? And I guess it depends on who else is at the table, but what's different and special about Buoyant? And then same question from an LP standpoint.
Amy Francetic (00:49:32):
I think we can convince them that we want to be in the trenches with them and they can talk to our other CEO. That's probably the biggest factor. Do you want somebody who's really going to roll up their sleeves and help build the business or just someone that's going to turn up at the board meetings and ask you questions? That's the biggest factor. All the venture capitalists say they help. We really do try to help.
(00:49:49):
And so I think we would ask them, and many of them do say, I'd like to talk to your other CEOs. We have a handful of CEOs that we've been referring. Nikhil at Raptor Maps has been great because they were our first investment, they're our longest relationships. So he's been doing a lot of reference calls for us both from other portfolio companies, CEOs, but also LPs. I had him on speed dial for our LPs that wanted to talk to companies and he was very generous with his time.
(00:50:13):
So I think that that's a big thing is just trying to convince them that we're going to be in the trenches with them. That's probably the biggest factor. And then the fact that we understand what they're doing in their market. I remember when we met Flood Flash, we had just finished this research on climate risk intelligence and we were studying parametric insurance as a type of insurance or an insurance innovation that's suitable for climate change.
(00:50:33):
And we almost invested in another company and they didn't yet have their MGA license to sell insurance. They wanted to have that, and they were focusing on a bunch of different markets and perils, flood, drought, fire, rainfall. And that we didn't do that deal, but we learned a lot. And so when we met Flood Flash, what we liked about Flood Flash was they had a solution. So they weren't just ringing the alarm bells or saying, here's the problem that you're going to have.
(00:50:59):
Here's your risk. Here's a way to address your risk. And that they were very focused on flood, and they had this sensor that would help address the basis risk of insurance to give you proper pricing for the insurance. And floods are very local, so you could have a flood in a neighborhood or a community, and one building right next to the other impacted very differently based upon elevations and foundations and landscaping and other things.
(00:51:23):
So we liked the sensor as a way to be very hyper local with the insurance and help with the underwriting. So when we met them, they were, well, okay, it's parametric, do you know what parametric is? Yeah, yeah, we know what parametric is. Tell me about the sensor. So we could go right through. They said to us later on, "Boy, were we relieved? We didn't have to explain what parametric was to you."
(00:51:41):
So sometimes it's the expertise and saying, listen, we've been looking for something like this and this is why we think this is important. This is why we think we can help you guys and gals and why we want to help grow this market. And same thing when we found Beni, secondhand clothing software solution. We've been looking for a way to help decarbonize the fashion and textile industry.
(00:52:01):
And most of the solutions were physical solutions. They were types of fibers, they were types of processes, they were chemicals. And Beni has software, it's a plug-in browser that when you're doing online shopping for apparel, it will identify that item. Let's say it's a Patagonia jacket and it's something you're shopping for new, and they'll say, "Here's where you can get it used and how much it costs." And so they're trying to encourage more people to shop secondhand.
(00:52:25):
Wow, we've been looking for something like this and we know your space and we know your competitors and we've talked to these folks and we really like this. And so that, oh, where have you been all my life moment when you meet somebody, especially for a CEO who's fundraising is the fact that we get them, that's an important thing that helps us connect with the founders.
(00:52:43):
And then a lot of times we're really building relationships with them because we meet them before they're fundraising, which is really ideal. So we might like them and we're just, Hey, wanting to get to know you and be in the queue for when you are fundraising. And in that case, what we'll do sometimes is we'll introduce them to a potential customer and we might listen in on that customer call to learn and see how well they do with that customer.
(00:53:04):
And that's really great because then we learn something about them and also about the customer, and then they get a customer introduction. And so that buys us some goodwill with them for when they are fundraising, but also helps us refine our thesis. And that of course takes time. So that's a matter of finding somebody you really like and it's just they're not fundraising. Maybe they just closed around so they're not going to be raising for another year or two, so we can take our time.
Jason Jacobs (00:53:25):
When you think about the future, some GPs I talk to, it's an evolve or die mindset. We're always thinking about other areas for expansion and growing the team and growing the types of capital or growing the fund size or things like that. And then others really talk about how sticking to your knitting and focus is paramount. How do you think about the future at Buoyant as it relates to the strategy and as it relates to the team?
Amy Francetic (00:53:50):
Well, we just have a ton of deal flows and in so many companies that we've found that are early for us. So my thought is once we've got this portfolio built, we could just keep going, keep doing what we're doing, having been smarter and the benefit of experience. And then maybe having watched some of those businesses mature. I think the thesis has legs. I think we could keep going with the same thesis. It'd be great if we could write bigger checks. So if we had a bigger fund so we could write bigger checks and take more ownership would be great.
Jason Jacobs (00:54:18):
At entry or are you talking about backing up the truck into the winners?
Amy Francetic (00:54:22):
Both, but definitely at entry and both. I think when we have the benefit of hindsight, so many folks in the last few years were so fast to just go back out and get another fund. And I think that I want to learn from our first fund, we should be able to do it better, but do you need time to do that?
(00:54:37):
I'd like to see how well we do with this portfolio to inform what we would do with another fund, how we would change our thesis. And so I think you need time to do that. So we're not in a rush. And of course, the bigger you get, the harder it is to make money. So that's the way the economics work on these funds. The bigger you get, you can't get the same return for your investors, so you don't get the return for your investors and you don't get the return for yourself. So we're not in a rush to get big. We don't want to get big. We want to get really good. We want to get really, really good at what we're doing.
Jason Jacobs (00:55:07):
Do you expect that that percentage of LPs that are considered impact LPs, is that going to remain flat over time? Is that going to go up? Is that going to go down?
Amy Francetic (00:55:18):
So you're hitting on the ESG backlash. So I was just at this event and I heard this gentleman from Aerial Investments talking about this, and the question was, "Look at all these states that are starting to outlaw ESG, and I'm not worried about that." A lot of investors that care about this that we're hearing from, they're not overly political, so I hope he is right.
(00:55:39):
I think that the chasm that we've crossed with climate is real and permanent. I can't imagine going backwards and saying climate's not important because I think there's a global consensus around that and it's going to take us so long to address it. Certainly the types of innovations that are going to be profitable and successful, that's all going to change as we see how this energy transition goes and what technologies pencil out and prove out and which ones don't.
(00:56:06):
But I don't see us going backwards on climate even with the change of administration because of the global support there is for this, but also the business support. I think businesses have long-term views on their businesses. They see the risk that they have in their own supply chains and their own businesses. Even if you have a change of political leadership, I think they're not going to change their businesses because suddenly we have somebody who doesn't want to fund climate.
(00:56:33):
And I think we're all very hopeful. What has happened with the Inflation Reduction Act is not just about that $400 billion that's coming from the feds, but all the private capital that's going to be mobilized in these solutions and so seeing that as super catalytic. I just want to make sure that they can get a lot of that capital out before there might be some change of leadership in Congress or in the White House so that they don't try to undo that or slow it all down so they can defund some of those initiatives if they wanted to. So want to see that get deployed and see have as much impact as possible and as soon as possible.
Jason Jacobs (00:57:06):
Amy, for anyone listening that's inspired by your work, who do you want to hear from?
Amy Francetic (00:57:12):
We're always looking for good deals within our thesis, Seed and Series A Digital Climate Solutions, please come our way. We're happy to always take a look and if we like what you're doing and we can't invest for whatever reason, then we'd love to make referrals or introduce you to other folks looking for talent, OK?
(00:57:28):
So really good people that want to work at these startups, we really care a lot about that. So we're super excited that this amazing woman who came out of the health tech space and was suddenly turning her attention to climate joined one of our companies. And she was very thoughtful and careful as she was figuring out what to do next because she'd had a baby. So she took a little time off and it gave her some time to look around and she's just a rockstar.
(00:57:50):
So anybody who's moving into climate and wants to have a job in the space, a lot of our businesses are hiring aggressively in the sales customer success partnership space, those folks for sure. But even lower level folks that are looking for jobs, just go to our website and look at the jobs there. I always tell people, here's a list of funds, go look at their website and their portfolios, and if you want to work in this space, there's absolutely a company for you to join. So really good talent, sales talent especially. We're looking for great talent in this space.
Jason Jacobs (00:58:22):
Great. And anything I didn't ask that I should have or any parting words for listeners?
Amy Francetic (00:58:26):
Well, I think I would like to hear from you. You've been asking me all these questions, turning the tables on you. Jason, what do you think about the fundraising environment for funds? How's it going for you guys? What are you optimistic about in terms of what you guys are doing? I'd love to hear, give us a little bit on Jason.
Jason Jacobs (00:58:44):
Yeah, well, we were investing out of these rolling funds on Angel List for the last nine quarters, so for a little over two years. And it was going well. I think what we realized during those nine quarters, we really refined our approach. We learned a lot and we got to a place where we were ready to plant some roots and we had all these strategic, well-placed individual LPs that were really important for our flywheel in terms of deal flow, in terms of help with diligence and in terms of help to the portfolio companies post-investment and we wanted to keep that inclusivity.
(00:59:15):
It's really strategic for us and for the companies that we work with. I think we were longing for a longer deployment period so that we can settle in and do our work versus constantly having to figure out our fund size from quarter to quarter. And so a traditional structure made sense, and we also were longing for an underlying layer of just bigger pockets, more sophisticated capital that budgets on a many fund basis versus three months at a time.
(00:59:42):
And so we made the decision at the end of the year, or I guess the end of the year, is when we stopped investing out of these rolling funds. We've been out the last few months raising a proper, call it a Fund 1. Some people tell us not to call it a Fund 1 because we backed over 80 companies in the rolling funds.
(00:59:56):
But it's a Fund 1 in the sense that it's our first larger traditional fund, first time including institutional LPs. We have a different beginning because we had all these LPs that were already backing us, and so we got our first almost $50 million just from that group of all individuals and a really high participation rate, over 80% from that group, which is great because they're the ones that know us the best and it's a huge vote of confidence, especially in a difficult macro.
(01:00:18):
But then we have to go and start these new discussions with these institutional LPs, and it's a different language, it's a different mindset, it's a different rhythm, it's a different pace, it's a different process. And we didn't have these relationships historically, and it's just a difficult macro and we've been getting it done. We're almost at the halfway point on our $125 million target.
(01:00:36):
We did our first capital call. We've made five commitments from the new fund similar to what you were describing. And we also in the last month got our first couple institutional commits with a bunch of others that seem like they're close behind. So we're feeling good, but it's hard. It's a slog. And these relationships take time, and a lot of these institutional LPs don't do Fund 1s and don't have a climate mandate yet, and then we aren't in a box.
(01:01:02):
Our approach is pretty different, which we feel really good about. We'd rather be different than eeking out efficiencies in the same category as everyone else. It is out of the box as a Fund 1. If we're successful by two or three, we'll have to find a new box, which is hugely exciting, but it means that look, we're right in the thick of it. So that's the world I'm living in when I'm not recording these podcasts.
Amy Francetic (01:01:23):
Well, you know what? You've got some hustle. So people like hustle and you've got passion and LPs love, passion, and companies love passion. So you're going to get there. When you have a bad day and you get a no, you kick it off, have a cocktail and start again. So you can do it.
Jason Jacobs (01:01:39):
Well, you had your placement agent, Amy, maybe I'll just have you on the speed dial that can remember Stuart Smalley from Saturday Night Live, You're good enough. You're smart enough."-
Amy Francetic (01:01:47):
"You're good Enough. You're smart enough and you can do it." Yeah. You call me, man. You're feeling bad. You call me. I'll talk you out of it.
Jason Jacobs (01:01:54):
Yeah.
Amy Francetic (01:01:55):
I'll talk you out of it and brush you off and stand you up and say, "Get going. You don't have any time to waste. Stop feeling bad about yourself. What's wrong with you? You can do it."
Jason Jacobs (01:02:03):
Well, thanks so much for making the time. I know I learned a lot from this discussion, and that means that I think there's a lot of other people that will as well, and there might be other emerging managers like me, there might be potential founders trying to figure out what firms to work with or even how VCs think. Or it could be LPs looking at deploy capital in the space and maybe they'll be giving you a call. So hugely grateful for the transparency and for the time and really looking forward to keeping in touch and to doing more work together as well.
Amy Francetic (01:02:31):
It's such a pleasure, Jason. And always happy to compare notes on LPs too. If you want to, we can sit and go through our list, and I can help brainstorm maybe who might be a good fit for you guys, and especially now that we're done, but would love to support you guys. I think you're just an important, you're a jewel in our industry. So thank you for what you're doing and for all the folks that you've inspired, including myself, and thank you for having me on your show.
Jason Jacobs (01:02:55):
Thanks again for joining us on the My Climate Journey Podcast.
Cody Simms (01:02:59):
At MCJ Collective, we're all about power and collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (01:03:08):
If you'd like to learn more about MCJ Collective, visit us at mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter at MCJPod.
Yin Lu (01:03:21):
For weekly climate op-eds, jobs, community events, and investment announcements from our MCJ Venture Funds, be sure to subscribe to our newsletter on our website.
Cody Simms (01:03:31):
Thanks, and see you next episode.
