Episode 160: Jim Kapsis, The Ad Hoc Group
Today's guest is Jim Kapsis, Founder & CEO of The Ad Hoc Group.
The Ad Hoc Group is a focused consultancy working to help startups succeed in complex regulated markets, such as energy, mobility, and smart cities.
Jim founded The Ad Hoc Group to help startups and investors scale innovative businesses to solve our most pressing climate and sustainability challenges. Jim has been a Senior Advisor to Sidewalk Labs, Alphabet's urban venture, and spent six years building and leading the global regulatory team at Opower. Before entering the private sector, Jim was a climate negotiator in the Obama Administration, where he helped broker the Copenhagen Climate Accord in 2009. He has experience working across governmental agencies at the State Department, Defense Department, and Congress. Jim is also the co-host of CityLab's podcast, Technopolis, about how technology disrupts, remakes, and sometimes overruns our cities.
In this episode, Jim walks me through his work in the public and private climate sectors and what motivated him to found The Ad Hoc Group. We dive into the company's mission and the bridge it's creating in the climate space. Jim also explains why policy is critical for early-stage climatetech and sustainability startups. Jim is a fantastic guest and has a wealth of knowledge for those interested in regulation, policy, and climatetech startups.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at info@mcjcollective.com, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded May 18th, 2021
In Today's episode we cover:
The Ad Hoc Group's mission and the company's scope of work
Jim's career path from the public sector to the private one, and what led him to found The Ad Hoc Group
Key learnings from the Waxman-Markey era
Whether climatetech startups should wait for policies to be put in place or try and predict the future
When startups should be thinking about policy as they scale and if the timing is consistent across climate sectors
How startups can be part of creating and steering policies and regulations
The criteria that make a "unicorn" candidate when hiring for policy roles at early-stage startups
The Ad Hoc Group's role in the large climate regulation landscape and what gap the company is filling
Why electrification is one of the most fertile policy areas startups can be working on
A discussion on which climate sectors are complicated when it comes to policy and why
The skillsets needed to advise on policy across vastly different climate spaces
The differences between local, state, federal, and international regulations on early-stage climatetech and sustainability startups
How The Ad Hoc Group determines what to focus on and how they define climatetech
The most important piece of policy that would foster a clean energy transition
Links to topics discussed in this episode:
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Jason Jacobs: Hey, everyone. Jason, here. I am the My Climate Journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey or MCJ, as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but there were longing for a peer group as well. So we set up a Slack community for those people that's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria we screen for; determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent and we're not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity, the better. There's a bunch of great things that have come out of that community.
A number of founding teams that have met in there, a number of non-profits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there. As well as a bunch of events and programming by members and for members, and some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you wanna learn more, you can go to myclimatejourney.co, the website, and click to Become A Member tab at the top. Enjoy the show.
Hello, everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Jim Kapsis, founder of The Ad Hoc Group, an advisory firm that helps startups build successful businesses in complex regulated markets with a focus on energy, mobility, and sustainable cities. Jim's been a senior advisor to Sidewalk Labs, Alphabet’s urban venture, and spent six years building and leading the global regulatory team at Opower, from startup, to IPO, to acquisition by Oracle in 2016. Before entering the private sector, Jim was a climate negotiator in the Obama administration where he helped broker the Copenhagen Climate Accord in 2009. He also worked in the U.S Treasury, State and Defense departments, and in Congress.
I was excited for this one because the policy and regulatory landscape is so important for climate tech startups across a wide range of sectors. Jim comes from that world and works with climate tech startups and big corporates. We have a great discussion in this episode about the policy and regulatory landscape, how to think about it as a startup or a larger corporate, how to resource to it, the different steps and tactics to get stuff done, as well as some of the gotchas and lessons learned that Jim's seen in his years of working in this area. Jim, welcome to the show.
Jim Kapsis: Jason, thanks for having me. Really great to be here.
Jason Jacobs: Well, thanks for coming. And gosh, you are so deep in an area that is becoming so near and dear to my heart, which is with a growing portfolio of startups that we work with in climate tech across industries and segments. There's a common theme, which is that policy matters a lot to a lot of those companies. That's what you do, right?
Jim Kapsis: That's what we're here for, for sure. You can't ignore policy if you're in the climate space. It's just, it's part of the landscape, a big part of it, depending on where you are. It's a really big part.
Jason Jacobs: That's why I might need to go back to building fitness apps again.
Jim Kapsis: [laughs]
Jason Jacobs: [laughs]
Jim Kapsis: It does seem maybe ... Not that it's easy to win and compete in any market, but you probably don't have to worry about the policy environment in quite the same way.
Jason Jacobs: Nor do you need your PhD in material science.
Jim Kapsis: Also true, which neither of us has.
Jason Jacobs: [laughs]
Jim Kapsis: So we both fail on that front.
Jason Jacobs: Well, what is The Ad Hoc Group? We can just take it from the top.
Jim Kapsis: Ad Hoc Group, we're a focused consultancy that's really working exclusively with climate tech and sustainability focused startups, some larger corporates. And our mission really is to support their growth and their scale and helping them with everything that relates to their go-to-market. But as you sort of indicate in the lead in, I think what differentiates us and the reason that I started the company a little more than four years ago, was that a lot of startups fundamentally, the startup founders, maybe they're engineers, or maybe they're business folks, they tend not to be policy experts and former government people. They might be, but that tends to be rare. And in climate tech and sustainability, broadly, if you don't understand policy and regulation to a certain extent, you don't understand your market.
And so you may have a great technology and a great solution to a problem, but you just will not be able to bring it to market and commercialize it if you don't really understand how policy regulation affect that market. I like kinda view us as the Sherpas for startups and startup founders that are trying to figure out how does policy and regulation impact our business and how can we use our understanding of it to either get to market at the right place at the right time faster and avoid mistakes, or shape the market so that we can have a lot of white space to grow in?
Jason Jacobs: How did you get into doing policy work for climate tech startups and cooperates?
Jim Kapsis: I'm a recovering government guy. I mean, that with the greatest compliment to government service, which I loved my time in government. But I spent about 10 years in the beginning of my career, first on Capitol Hill. I actually worked for a member of Congress who has since retired. His bumper sticker said, my Congressman is a rocket scientist, because he was one of the very few PhDs in congress and used to run the Princeton Plasma Physics Lab, which is basically a fusion lab up at Princeton. So he was a very unusual member. But I started my career on the Hill and then was in the executive branch for a number of years. Really started in the national security realm. Which is a little bit story I can tell you a bit about if you're interested. My last job though was at the US treasury department as a climate negotiator in the early Obama administration. And I left sort of after Copenhagen. The climate summit didn't deliver what Paris eventually did.
And after sort of the big cap and trade bill of the time, the Waxman-Markey Bill failed, I jumped ship to, at the time what we called the clean tech sector, to join a company called Opower. Which I think you've talked about on the show and I think you interviewed the founder, Dan Yates, early in your tenure running this great podcast. And I was hired to grow and scale the regulatory and market development team at Opower, which was a large part of the, I think, special sauce of the company that helped us succeed. And then took that playbook after we went public and got acquired by Oracle and said, "What I loved the most about Opower was building the startup." That was the fun part for me. And I wanted to go and kind of bring that playbook to other startups that were trying to do important things and solve problems we needed to solve to actually address climate. And so that's how I started the business.
Jason Jacobs: And coming out of the Waxman-Markey era, what were some key learnings and lessons learned there? And then maybe talk a little bit about the decision to transition and what led you down the early stage startup path.
Jim Kapsis: Yeah, well, it's interesting. I mean, going back a little bit. I got into climate a little bit by accident. I mean, I know you've had your own meandering path to get here. And I think a lot of folks probably in the MCJ network feel the same way, where like they had an awakening and at a certain point were like, "Wow, like what can I do? I wanna get involved?" And I was really a product, from a career perspective in government, of 9/11. When I went and worked on the Hill, it was literally two months after the towers got hit. And so everything I did for many years was really about national security. And for those of us who recall, in '08, right before the financial crisis, we had an, almost an energy crisis. We had $140 a barrel oil, and I was trying to get smart on energy and everywhere I was, wherever I worked on in the government. I worked on NATO expansion. I worked on Iraq-Middle East Policy. Someone's dependence on fossil fuel was totally messing with what the US wanted to do overseas from a policy perspective.
And so I was like, "I gotta get into energy." And that's really kind of the backwards way I got into climate, was I didn't like the fact that we were all so dependent on fossil fuel. Then of course, these huge environmental, right, issues that it's caused. That's why I ended up in the treasury department. With Waxman-Markey, getting to that point, the reason that I decided to leave is I'm a big believer of whether it's in business or politics, that it's all about timing and opportunity. And if you're a founder or if you're frankly a politician and you pick the wrong moment to do the big thing, to launch the new idea or to run the campaign, it's just not gonna work. And in early Obama administration, when Copenhagen didn't really fully deliver, and when Waxman-Markey died, Obama, he had used up all his political capital on really healthcare and didn't have enough left to get over the hump on climate. And so where were the opportunities? Going back to your question, like why the early stage startups?
And I jumped to Opower, into startup world, because to me what was really happening at that time was that the innovation in the policy world was all happening at the state level, not the federal level. I mean, in the late '90s, early 2000s, you had renewable portfolio standards and energy efficiency standards getting implemented in a number of states across the country. Which really is what was the fuel for a lot of startups early on, whether the solar companies or the energy efficiency companies like Opower. And to me, like it was the startups that were actually because of those policies beginning to bring real solutions to the market. And that's where I wanted to be. And that's why I jumped to Opower. And in terms of The Ad Hoc Group and why I started that company, it was I just can't get enough. I'm the kid in the candy store, like you I think in terms of wanting to get engaged in all these different verticals and help startups succeed.
Jason Jacobs: One of the things you hear again and again as a founder or as an investor for that matter, is that you shouldn't build things that depend on future policy to be successful. At the same time, stuff takes years to build. And so if policy changes and you're just starting from square one at that time, you're probably too late. So, I mean, I said that as a statement, but really it's a question. How should one navigate that as a founder or as an investor. Do you try to skate to where the puck is going, or do you really need to wait until that policy is in place before you choose your path?
Jim Kapsis: Let me throw that back at you first, Jason. I mean, you're an investor. How do you think about it?
Jason Jacobs: Oh man. Well, I mean, prior to working in climate, well, I'd never really been a professional investor nor had I done anything that was so heavily intertwined with the policy landscape. So I'm very much building the plane as I'm flying the plane. But how I think about it is that, you wanna bet on things that can stand on their own two feet, absence of policy. But to the extent that policy can be an accelerant, then even better. But relying on it is hard. There are some exceptions though. I mean, carbon removal is one that comes to mind.
Where, I mean, if you look at the models, no matter how you do the math, we're gonna need it. And so you can say, "Well, but there'll never be a market for it." And it's like, "Well, there'll never be a market for it unless the government steps in." And then it's like, "Well, you can't rely on the government to step in." It's like, "Well, how can they not?"
Jim Kapsis: They can not. [laughs] But I think that's a pretty good way of thinking about it. I think the challenge on the investor side is there's no doubt you are taking a bigger swing at the bat when you're investing in a company where the market's not yet really there and relies on policy. This is the challenge of climate tech. And it's the reason why traditional VC has kind of come and gone, because they get scared when stuff doesn't happen the way that they want it to. Which I understand because they're trying to earn returns for their LPs. And hopefully we're at a different moment right now. But the reality is that there is gonna be a big policy component. And that is part of the go-to-market strategy of these companies and needs to be. I guess that's part of my mantra, which is, if you are a founder or an investor in this space, you better get smart on the policy and regulatory environment as it stands and figure out what you need it to be in order to grow the business.
And then make a reasonable assessment of like, how do we get it there, and can we get it there in a reasonable timeframe? Whether we are an investor or whether you're a startup. And then make sure you're allotting enough resources in that area. But you need to be realistic because no single startup is going to move the federal government, or even a state government for that matter.
Jason Jacobs: So in terms of stages, how early is too early to think about policy as a young company, and how early is too early to act and resource towards policy? And is that consistent if you look across companies and sectors, or does it vary on a case by case basis?
Jim Kapsis: Well, first of all, I think most founders and investors should be thinking about it from day zero. When you're thinking about your TAM, your total addressable market and your serviceable addressable market and all of that, the regulatory and policy landscape, it should be integrated into that analysis both as the way the world is today and what you think that growth trajectory will actually be and how that market will grow. And what assumptions. What do you have to believe to believe that the market's gonna get to where you think it's gonna get because of policy and regulation? Now whether you invest and how much, I think is totally variable based on the company and where exactly you are. I mean, if you're in a fairly mature market, if you're s- a company in the solar space, well, there's a lot of policy already there. But you need to understand it, but there are lots of folks who can help you sort of navigate it.
So your level of investment, while it needs to exist, you might be able to rely on others a lot more than if you were sort of in a fresher, newer space. So like carbon removal or I would say technologies that are, companies that are trying to figure out carbon accounting and all the schema, and what is that gonna look like over time? Which is like right now is largely a voluntary market. So there is a market, but how do you ensure that that market actually evolves so it's not just a voluntary market, but it's actually a robust, mandatory market of some variety. So that's the beginning of an answer, Jason.
Jason Jacobs: Well, and it sounds like, so there's understanding the policy landscape. And then you said in mature markets, there's probably policy in place. But in less mature markets, you actually wanna kind of try to steer what does get in place. What about tactically? So in those markets where you do actually wanna try to play a role in steering, what would one even do? And I wanna start there before then the follow-up, which is, how to think about what things to do in house and what things to outsource. But just first of all, just no matter who does it, what would one even do as a company that cares about what policy gets put in place to try to steer that ship?
Jim Kapsis: Thing one is to really understand the market as it is today. And so studying, whether that's doing it internally, or whether it's working with an outside firm. Let's say you're in the energy market in some way, and sort of utility regulation matters to you, something we spend a lot of time on. Well, you better have a pretty good sense of the regulatory constructs in the states and you better learn that first. If your business is either selling to utilities or if it's selling next to utilities, adjacent, but to consumers, but that's dependent upon in some way, shape or form, either incentives that come from state regulation that are delivered via utilities, or that come from market rules, that might be both shaped at the public utility commission level or at the wholesale market level to get really wonky on folks. But that's where you'd start. Is just understand the landscape is like thing one. It's hard to know what to go shape and how to go shape it if you don't just have the foundation.
So I think the first thing to do is just understand the market and how it relates to your business in some sort of sophisticated way. And then you can kinda look at, okay, where are things moving? I think you said this before, where's the puck going? And then when it comes to trying to figure out what to shape, the easiest things to get involved in, when you're, let's say at the early to mid stage, so let's just say Series A type company ish, is when the train is already moving. Getting on and steering it just a little bit in a direction that you want to go. Like you're not gonna be the entity that gets the train out of the station to begin with, but know what the processes are and where the discussions are happening and then get involved in some way to just move them with others out and build allies to then move things in the direction that it's gonna create more opportunity for you.
Jason Jacobs: In terms of ... I was jotting some notes as you were talking there. And one vector I'm curious about is seniority level at the different stages of company. And if you do want policy help, whether it's junior or senior. Another one is domain expertise versus generalist, and how to think about which capabilities carry over from sector to sector and when you might want sector specific expertise. And I guess a third that I didn't write down, but then I'm thinking about as we're talking here is, hire or a consultant that's kind of integrated with the team versus an outside firm, like The Ad Hoc Group.
Jim Kapsis: When it's time to hire someone full-time at the startup level, generally speaking, I think it's good to hire someone who's sort of in the middle. That's like not super junior, but also not super senior. Because like with startups in general, you want someone who can sprint. And who's like, in some regards, like we talk about in the industry, like an athlete, so to speak. Because the environment that you're in is dynamic. Just as it's dynamic in sort of the "market" it's also dynamic on the policy and regulatory front. So I think you want a hard charger, but someone who's gonna have credibility with the policy and regulatory and stakeholder community. And who may have come from that world, but ideally has spent some time ideally in the private sector or ideally has worked, let's say in multiple sectors, if that's non-profit and government. I think it is very difficult, and I did it. And so it's certainly not impossible, but it's particularly difficult, I think.
Jason Jacobs: So it takes a unicorn like yourself, Jim?
Jim Kapsis: Well, we used to call this in Opower-
Jason Jacobs: [laughs]
Jim Kapsis: ... we were hiring unicorns, I mean, on the team. In Ad Hoc Group, we do a lot of hiring for companies for that reason, that there are people coming out of government that can be trained and can be effective. But I had a steep learning curve. First of all, I had no idea what a public utility commission was when I first started at Opower. I pretended that I did to get the job. Then I really did, I did my homework. I faked it until I made it. But just like the business brain and sort of understanding what matters to a business is typically not something that is innate or it's not something that you've learned if your career has been in government. So it does have to be learned. And there's some people I think that ... I would say someone who's spent time in politics versus policy is almost more likely, I think, to understand the transition to the business. Because the first time I showed up at Opower in 2010, I walked in and there were pizza boxes everywhere, and everyone was like 25 years old.
And I was like, "Oh, I know what this looks like. This is a political campaign." And so anyone who's worked on a political campaign, that's what it is. It's like young people and pizza boxes everywhere. And that's what a startup is. And so I do think someone who's had that like experience of sprinting in a campaign environment, which is by the way you believe ... I believe in this idea and this person who's running and they need to get elected. That's what it's like to work for a startup in the climate world that's like mission-driven. We have a solution, we have to bring it to the world. We wanna make a business that makes money, yeah, but there's a thing we have to solve. That's the kind of person that you want, I think, in a role as a first hire for one of these at the startup level. And then I don't know, Jason, we can talk about when do you outsource and all of that.
In my experience, a lot of companies aren't ready to hire that person off the bat because they wanna build the foundation themselves in the sort of C-suite to understand the landscape and the market. And so often where we've come in is that we're often brought in by a founder or by the founding team to help them kind of really get smarter on how to think about the market and how to integrate policy regulation into their go-to-market strategy and into their sales strategy. And then to sort of be the part-time outsource team. In the trenches with them, I mean, on a part-time basis, but largely doing that outbound work on their behalf with them when it makes sense. But also not with them on our own to advance their interests. And when they get to the point where they need the full-time hire, we will help them hire that person, onboard them.
And then our role ends up becoming less and less over time, and we ended up kind of being the coach and mentor to that person who's come in that we helped hire. And then either we disappear, which is sort of the natural progression in terms of the evolution of these startups, or we're just sort of there for advice over time.
Jason Jacobs: What are some examples of types of companies and policy areas that might be fertile ground and high ROI for companies to try to invest resources towards? And then what are some examples of maybe quicksand or areas that might be more of a black hole from a resource standpoint? And it'd be great as a followup to talk about some of the tactics to actually move the needle in some of those fertile areas.
Jim Kapsis: I mean, I think one fertile area, and just because of the moment we're in, is building electrification. There is just this acknowledgement in the market and in the policy world at the state level, at the federal level that we've got to electrify our transportation system largely, we need to electrify our buildings and we needed begin moving off of dirty thermal energy, like oil and propane and natural gas. And I will say, and we do some of this work for a couple of companies, Dandelion being one, which is a residential geothermal business. And when we go and we talk to policy makers, they're excited to see us. They're happy we reached out. They wanna know what the companies are doing in this space because they're really hungry for the solutions and they wanna know, what can we do to make it easier for companies like yours, not you specifically, but companies like yours to enter our market and help us make the switch?
And that is just not the way that sometimes these kinds of conversations go. Or in the early days of Opower, going down to the Texas PUC and trying to explain to the regulators what behavioral energy efficiency is and why they should care, it was an uphill battle. Like they didn't care. But I think building electrification is a big one. I think anything related to transportation electrification right now, certainly, I mean, at the state level and at the federal level, there's just a lot of interest from the policy community in what can we do? What should we be doing to accelerate this transition? So those are like both examples where I would say the train is definitely leaving the station and there's opportunity to influence where it goes. And there are folks who really wanna hear from startups and what they're building, but also what policies and regulatory constructs would help them get into the market faster. So those are, I think, a couple of maybe really positive areas. What's quicksand? That's a great question.
I think generally speaking, if you require a federal mandate to operate as a business, although we are in a unique moment, it might be quicksand. I'd struggle to think about a particular technology or category that falls into that, I guess, potential trap. But I would just put it out there as a thought experiment. But if you're looking at a company where there is no voluntary market of any significant size and it would require massive change in national policy for things to take off, that's probably quicksand. That's of bank shot. Like it's just, it's not a good bet. I will say, until recently, I would have put carbon removal on that category. I'm not sure it's there anymore. And part of that is because a voluntary market has emerged. I mean, because of what Stripe has done and other companies, there is now at least a voluntary market. There's discussions again, at the federal level. There's discussions in Congress about how to incentivize into the tax code through 45Q and are keying parts of the tax code like that.
And so I do think it's not as deep and dangerous quicksand as it was, let's say, maybe three or four years ago. What about you? What, are you seeing anything like that, that you think of ... Any companies come to you recently looking for your investment, and you're just like, "No way, because that's too far away, too hard."
Jason Jacobs: Not for regulatory reasons specifically. If you take, say building electrification, for example, which you mentioned is a fertile area. If, I'm a startup that's working in that area, what are some examples of what types of levers I could influence on the policy landscape? And then how would I influence them and what would my objectives be such that it would help further my business interests and the mission, of course?
Jim Kapsis: Of course. So there are these processes that happen at the state level where utilities are investing dollars in incentives and rebates to install stuff in buildings basically. And it's on a cycle. So those plans literally get filed to the regulators, generally speaking, once every three years. And so, and this is where we need to do a lot of this work, figuring out what's the timing of when that next filing is gonna be, backwards plan to figure out, "Okay, when do I start to either have conversations with not just the regulators, but all the stakeholders that they talk to, the environmental groups, the consumer advocates, maybe some of the other companies that care about where the market is going?" And then engage at that right time and figure out what do you wanna see differently in that next plan? And to make sure you're talking to the utilities too 'cause they're the ones filing the plan. It's kind of like RFPs.
Any startup or any business person knows that if you get the RFP at the back end, after it's come out already, and you never talked to anyone who was writing it beforehand, your chances of winning that RFP aren't, it's not impossible, but probably not very high. It's kind of like the regulatory world. If you didn't get in it at the right time and start having those conversations early with the people who are both writing the plans, but also who are going to approve them on the regulatory side or influence them from the stakeholder side, you'll get in too late and it will be a fait accompli. And maybe you'll get lucky and it will look okay for you. Or the details will be such that the market maybe is shut out for you, or there's a problem that it's too late to solve and you have to wait another three years before you can actually engage in a meaningful way.
Jason Jacobs: If you look across areas and I'll just say, hypothetically, but let's say building electrification is one fertile area, let's say food and ag or more specifically, let's say, protein, maybe that's another one or carbon removal or grid storage. If you start mapping out these areas that are all climate related, but really different sports as it relates to the sectors themselves, how much crossover is there? So if you take on these clients, for example, within The Ad Hoc Group, is it the same people that are doing the work across sectors or does it require more sector specific expertise? And also is that just a philosophical thing? Like in venture, there are generalist venture investors and there's ones that only do AI and machine learning, or that only do SaaS. How does it work in the policy world?
Jim Kapsis: We're trying to do all things in sort of climate and sustainability realm. That's big, as you said, and it is broad. I think that there is a functional skillset, which is an approach and a playbook that applies across the board. Which is just, how do I build my business in a particular way, taking into consideration regulatory and policy? How do I sell effectively or more effectively into a market based off of understanding of policy and regulation? And I think that applies across the board. When it comes to subject matter expertise, I think we come with a lot of it based on the folks that are on the team. And then we also learn along the way by working with companies in new spaces and getting smarter, I guess, faster. And that is part of what we do. And frankly that's part of what's fun about working in the space, is that there's a lot to learn and it's like almost infinite capacity to like learn about new parts of the market. I do think there's a lot of overlap though.
I think that if you talk about the tax code, it's different sections, but it's the same kind of process that's determining the carbon capture and sequestration market on the federal level, as it is the investment tax credits that impact solar and fuel cells and geothermal. I would say that when you start talking about things like ag or, that are divorced from energy and utilities, and we do water related work too, we've done less in that particular space. But once it kinda crosses over, and it does, I think we're well-suited. So like if you're on the investor side where you are, I mean, I have a bias towards generalists who know enough to be dangerous. Who then know how to get ahold of the right specialists to get the thing done that it needs to get done. Unless, if you're pretty sophisticated though, and you're already fairly advanced as a company and you know the thing you have to get done, and it's highly esoteric and specific, I think that's when you hire a specialist to go execute on something.
And I would almost put ... Like lobbyists are a kind of specialist in my mind. I get asked a lot, "How should we think about lobbyists, Jim? When should we use them?" And in my experience, lobbyists need to have somebody at the company who understands enough about the policy and regulatory environment to know what the strategy actually should be. Because a lobbyist isn't gonna tell you the policy that's gonna help your business or the rule. They're gonna tell you how to get the thing done that you think is needed for your business and how to do it. And then they will help you go execute it. And so in that case, when you're hiring like lobbyists, making sure that you're hiring folks that actually can get the thing done that you need to get done, I think is very important.
Jason Jacobs: So we talked about sector generalist or sector expertise versus generalist. What about local versus state versus national versus other countries and other parts of the world?
Jim Kapsis: Internationally, once you start kind of talking about global, I think there is a functional expertise that helps. But with any market, having folks that are in that market that understand the market and have relationships in that market, I think is really important. And so at least from where I'm sitting, almost everything we do is in the US and Canada. Have I had done international work? Sure. In Opower, I ran a global team. But I would most likely, if I knew a company that was trying to go break into Europe, would find them the European counterpart of The Ad Hoc Group to go work with. And I wouldn't be the best fit for a company going in that direction, given like, in at least the way we've built the company.
I've got folks who, whether they're full-time, whether they're part of our advisers that are former regulators, former city officials, or former utility and/or startup or investor type folks who are working with us. And so that helps us, at least in the US. And maybe in Canadian level, we work at both the municipal state and federal level, certainly from a strategic or a business development and market development perspective.
Jason Jacobs: And do you always work with individual companies or do the trade groups, for example, ever engage with a firm like yours?
Jim Kapsis: We have up to this point, worked with companies and has not gone the trade group route very often. I think there's one exception. We've done some work with one of the geothermal associations, partly because it also kind of was a good add on because we were already working in the space with Dandelion, and which is a company in that market. And so it made sense. But generally, at least we try to focus on working with companies. And there are other folks that spend a lot of time, both working with trade groups and/or starting them. There's like a whole cottage industry of firms that will stand up a trade group that's very hyper-specific. What's the one? There's the sort of zero emission one ZEV or ZETA, I forget the name of it, that's relatively new. It started last year. And it was run by a guy Joe Britton, who also runs a firm, and folks do that. Because like [inaudible 00:33:53] Scott, there's a couple of organizations that he has started and he runs a firm too. It's a model. It's not something that we do.
Jason Jacobs: And you mentioned that you work with clean tech or climate tech companies exclusively. Breakthrough Energy ventures, for example, they define their version of climate tech is that it's gotta be a half a gigaton threshold and that's kind of a checkbox upfront. And then they evaluate it like a normal investment. When you're taking on new clients, how do you define whether it's a climate tech company or not? And I'll give you an example, but if let's say an oil and gas company approached you and they wanted your help to enact the wear your sweater campaign, is that a climate tech initiative and where do you draw the line?
Jim Kapsis: We have a checklist internally as a team that we run through them, like what's a good fit. And one of those is, and one of the big ones is climate and mission alignment. We also have a no asshole rule. [laughing] Which is like pretty important when you're working closely with folks, is to make sure there's a good fit from a cultural perspective with the team you're working with. But we will do things in both the mitigation area and in the resilience or adaptation areas. So we do some work, for example, on the sort of wildfires side with a company called Pano, that we're pretty excited about. Certainly we're broader than let's say just mitigation. And we don't only do, let's say pure climate. Again, we're also doing things that are more like, I would say broadly sustainability.
So water, which you could argue is generally resilience oriented, but there are various water startups that we've worked with that may be about helping utilities better manage their water systems so they don't lose water. We've talked to some companies that do things like around drinking water and keeping it safe. So it's not all 100% climate, but it is all in the sustainability realm and largely climate. But yeah, if someone came to us like a big oil company about a wear the sweater campaign, we would not do that.
Jason Jacobs: What if a big oil company came to you about something that was putting impact more front and center?
Jim Kapsis: I think case by case basis. I mean, we worked with Greenlots for a long period of time. And while we were working with them, Shell bought them. And I actually thought it was a great opportunity for us and for me to spend time inside one of the world's largest oil companies to see how are they thinking about this. Did they make this investment on a lark, bec- for optics, or is this like core strategy? And is there a way from the inside to really help move things forward? And at least in that one example, and of course, I mean, Shell's a big company, but I spent some time in Houston meeting with members of the Shell team soon after the acquisition with the Greenlots team. And as oil companies go, they were thinking about things in a pretty serious way. On the other hand, I think at the time, at least they have 40,000 gas [laughing] stations all over the world. That's not awesome, but we're gonna have to get them off of that somehow.
I guess I would say that there are occasions where I do think it is important to figure out how to work from inside big organizations to move the needle. And we've done work for utilities. Exelon is a long-time client. And I think folks may have mixed feelings sometimes about utilities. I do for sure. They're, not all utilities are the same by any means, but they're not all terrible. And even so, like, we're not gonna solve these big challenges if we can't at least get a large percentage of utilities to go the right direction and transition to renewables and stop blocking different reforms in wholesale markets that make it harder for distributed energy resources to participate. And so knowing what's going on inside and being part of that, I think is important. And I think it's part of the value that our team brings to the industry, is that we sort of work in between the startups, some of the bigger corporates, including the utility sector and the investors. And that gives us a little bit of visibility into how one understands the other.
And I think that's important because it can be some of these big companies, whether it's oil and gas or utilities, or even like big tech, when you're a startup on the outside looking up at the Goliath, it can be like a brick wall trying to understand what's happening on the other side. And frankly, they feel the same way about startups. I don't know if you've had a lot of conversations from these big corporates, but they have a hard time knowing how to like engage startups, which ones are real and which ones are not real. And so we are, we're kind of in that middle space, which I really enjoy.
Jason Jacobs: And if you look at the landscape of the companies that are building the products and services in these areas and the people that are working on policy in these areas, how integrated are they today? So putting The Ad Hoc Group aside, just what's the state of the state? Is it quite siloed? Are they integrated? Is there talent that lives at that intersection? Where are we today, and where do we need to be?
Jim Kapsis: You mean specifically like within the startups, in terms of how they're organizing themselves?
Jason Jacobs: Well, yeah. So the companies that are building the products that rely on this regulatory landscape, how looped in are they generally to what's happening on the policy side? And then the same thing with the people that are advocating and doing the policy work, how looped in are they to the companies that are in the trenches building the product? So where are we today and where do we need to be, and how much talent exists that has one foot in each of those camps, like you do?
Jim Kapsis: I think there's been an awakening in the last couple of years, and particularly in the last year on the importance of policy and regulation to growing in the sector. And I think increasingly companies are making these investments. Generally, I mean, and certainly this is what we advocate, the folks who are doing policy and regulatory, they're part of your go-to-market and sales organization. We often get referred to as like the policy and regulatory folks, but we're helping with go-to-market and we're helping with sales too because it's all intertwined. And frankly, policy and regulation, if you're a founder, you should think about it, it is sales. Fundamentally, it is sales. You are going out and you are trying to explain to someone why they should buy your idea to make a change in the market. That, that is good for your commercial side, of course, but it also is trying to achieve a policy objective, which the policy maker regulator cares about. So it's sales.
And so the teams that do this well, the companies that do this well, I think are the policy and regulation, that team is highly integrated with the sales and marketing organization and also to the strategy organization. Because it has an impact on short-term revenue and certainly it has an impact also on sort of the medium term. Again, there's more happening in that space than I've seen in the past. And less companies putting people on the periphery, which I think big companies historically have. You've got your regulatory or your policy team sitting in D.C. somewhere not integrated centrally with the business. I think companies are beginning to move away, at least at the startup realm, from that model.
Jason Jacobs: And you had mentioned that you think in some cases, politics might make a better transition into innovation than policy in terms of prior experience. What about D.C. versus homegrown? Do you ever see great policy people grown from the outside, within these companies or from other functional areas or sectors? Or do you need to come from working in policy or politics to be an effective functional policy person within a tech company?
Jim Kapsis: I don't think you have to come from government. In fact, sometimes coming from government can be an obstacle and particularly if you were there too long. 'Cause I think the transition, as I said earlier, can be challenging. So I mean, we recently hired a guy, Brian Kooiman, he's fantastic, who was from OhmConnect. And he went straight from policy school at Stanford to OhmConnect and was there, joined them at Series A, was there five years and we were lucky to recruit him away to join us. He's excellent. I don't think you need to have someone who comes out of D.C. And in fact, from a policy perspective, depending on like exactly the problem you're trying to solve as a company, I actually think folks who have some of that state experience are really valuable. Because at least in the US context, so much of policy relating to energy, relating to water, relating to waste, transportation, it's at the state and local level.
And so having folks who understand the state and local side of this ecosystem, I think is really valuable. But we've also over the years, recruited people, trained people who've never worked in government. I do think I'm a big believer in the well-rounded professional folks who, I think are the best of the best. Had, had a mixture of experiences either in, let's say government of some variety, advocacy of some variety and the private sector. If you've worked in at least two of those three, I think you become a lot more dangerous and meaning more effective and just have more empathy and understand the different kind of folks you're trying to work with than if you've been only in startup world or only in government or only in advocacy. Does that make sense?
Jason Jacobs: It does. If someone from the Biden administration called and said, "Jim, you and your firm do such great work in climate tech across such a broad range of sectors. And we wanna know what's the policy that's gonna move the needle the most to foster climate tech innovation and the clean energy transition in general. Where should we focus?" What would you tell them?
Jim Kapsis: [laughs] This is the magic question. This is the magic wand question. I ask this on job interview sometimes. If you could wave a magic wand, what would you change in the market that would be great for your business? And you've just turned the tables on me and I've not prepared the answer for this one, Jason.
Jason Jacobs: Well, and I know 'cause when I'm on the other side and people are interviewing me, this stuff trips me up all the time. So it's easy from my seat. I just get to ask the questions.
Jim Kapsis: The cop out answer is, Jason, there is no single policy because of how complicated this all is that would magically solve it. I mean, that's the problem. I mean, and the things that everyone has historically talked about that are big, are really difficult if not impossible, to get done. Like cap and trade or a carbon tax. And so like let's not even talk about that because I don't wanna waste [laughing] our time debating their merits because I just don't think they're gonna happen. So I don't know. Based on what I'm seeing, is there one big thing? I think we've gotta fix the tax code across the board to align it in a way that incentivizes investment across a whole different range of the technologies that we need both to advance and accelerate electrification, as well as to accelerate carbon capture and sequestration.
And I think that's the place, frankly, over the next several months. Whereas the biggest opportunity in the Biden administration to make the biggest impact on climate, from a changing the market dynamic, it's gonna be, I think, in changing some of that tax code. And then the other one which people talk about, and I think is real, although really hard, I think FERC, the Federal Energy Regulatory Commission under this administration can do a lot of things and is this beginning to try to make renewable integration easier, really bucking up our transmission system. And like we have the most balkanized energy system in this country. Again, magic wand territory, if you could actually have one or two wholesale markets covering the entire country instead of a hodgepodge of markets and then a whole portion of the country where there's no market at all, I think that would be huge.
Are we gonna get there anytime soon? I'm less confident. But I do think a FERC with a mandate can do a lot. And I think Congress, at least for the time being when it comes to the tax code, partly because of the rules around reconciliation and budgets versus actually authorizing legislation again, to get into the weeds, I think that's where you're gonna have big impact potential, at least. How's that?
Jason Jacobs: So I don't know why you gave me the disclaimer that it's not an unanswerable question if you then proceeded to give me a great answer.
Jim Kapsis: [laughs] Well, I was buying myself time.
Jason Jacobs: [laughs]
Jim Kapsis: Come on. You know as a good answerer of questions, you fumble the ball a little bit on purpose to buy yourself time to come up with a decent answer. How's that? [laughs]
Jason Jacobs: I buy it.
Jim Kapsis: You buy it?
Jason Jacobs: So for anyone listening, who's intrigued by the work that you're doing at The Ad Hoc Group, where do you need help? Who do you wanna hear from?
Jim Kapsis: If you're trying to figure out how to grow a climate tech startup and you're looking for some support and some insight, and think that policy or regulation in particular may be something you need to understand to succeed, I would love to hear really from anyone. I always love to learn. And the worst thing we end up having is a new relationship and to get to know each other. And if there's ways that we can help directly, great. And if not, Jason, as you and I have, I think, done offline in conversations, this is an amazing ecosystem, I mean, that you've built at MCJ. And I think a lot of us in this space have this broader ecosystem of mission-driven folks in broader climate land. And I love meeting more folks on the same journey that I'm on, that you're on, and helping them. Whether that's working with them directly or whether it's just making a couple of intros that are gonna help them, if we're not the right to help them directly.
Jason Jacobs: Right. And is there anything I didn't ask you that I should have, or any parting words for listeners?
Jim Kapsis: I just wanna say thank you both for inviting me, but for what you're doing to build this community. From a startup respect perspective, just what you've been able to build. I think you've just recently had your one year anniversary of getting this community up and running. It's impressive. It was a gap in the market and I'm happy to be part of the community.
Jason Jacobs: Awesome. Well, thanks so much, Jim, and thanks for the work that you're doing as well. Awesome discussion and best of luck to you and the whole Ad Hoc team.
Jim Kapsis: Thanks, Jason. I really appreciate it.
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 @jayjacobs22, 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 enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made be say that. Thank you.
