Capital Series: Sarah Hinkfuss, Bain Capital Ventures

Financial Services

May 5

This episode is part of our new Capital Series hosted by MCJ partner, Jason Jacobs. This series will explore 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'll take a deep dive into the world of capital and its critical role in driving innovation and progress.

Today’s guest is Sarah Hinkfuss, a partner at Bain Capital Ventures.

Bain Capital Ventures is a multi-stage VC firm investing across four core domains, fintech, application software, infrastructure, and commerce tech.

Leveraging the unique resources of Bain Capital, they deploy targeted support at every stage of company building. For over 20 years, they've helped launch and commercialize more than 400 companies, and they also recently announced $1.9 billion in new funds.

This is an insightful conversation as Bain Capital Ventures has not historically been a climate-focused investor, but they're increasingly paying attention to and getting active in this area, and Sarah's leading the charge.

Get connected:
Jason Jacobs
Sarah Hinkfuss / Bain Capital Ventures
MCJ Podcast / Collective

*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.

Episode recorded on April 19, 2023.

In this episode, we cover:

[3:23] An overview of Bain Capital Ventures and Sarah's focus in the firm
[5:35] BCV's exploration of climate tech and the firm's motivations
[12:04] How the allocation of resources is influenced by time horizons
[15:22] BCV's areas of focus through a climate lens
[17:04] Sarah's climate journey from environmental justice and public service to early-stage startups and investing
[23:07] Her experience leading the effort and formalizing BCV's climate approach
[28:07] An example of the evolution of BCV's funds
[31:37] The relevant types of expertise needed to make confident investments
[35:45] BCV's insights into the role software plays in solving the climate problem
[38:18] The firm's 6 areas of focus
[44:48] Founder market fit and the importance of deep market strategy and commercial experience
[50:00] How climate-focused investors should approach a company's more profitable opportunities in other markets
[53:31] BCV's climate investments to date and other related efforts across its portfolio
[57:12] The role of a changing climate in a company's evolution and BCV's approach
[1:05:05] The value of authentic experiences and deep expertise
[1:08:44] Founders BCV wants to hear from

Jason Jacobs (00:00:00):
Today on the My Climate Journey Capital Series, our guest is Sarah Hinkfuss, a partner at Bain Capital Ventures. Bain Capital Ventures is a multi-stage VC firm investing across four core domains, fintech, application software, infrastructure, and commerce tech.
(00:00:18):
Leveraging the unique resources of Bain Capital, they deploy targeted support at every stage of company building. For over 20 years, they've helped launch and commercialize more than 400 companies, and they also recently announced 1.9 billion in new funds.
(00:00:35):
I was excited for this one because Bain Capital Ventures has not historically been a climate-focused investor, but they're increasingly paying attention to and getting active in this area, and Sarah's leading the charge. Before we get started...
Cody Simms (00:00:52):
I'm Cody Simms.
Yin Lu (00:00:53):
I'm Yin Lu.
Jason Jacobs (00:00:54):
And I'm Jason Jacobs. And welcome to My Climate Journey.
Yin Lu (00:01:01):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (00:01:06):
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 (00:01:19):
Okay. Sarah Hinkfuss, welcome to the show.
Sarah Hinkfuss (00:01:22):
Thanks, Jason. Appreciate you having me on.
Jason Jacobs (00:01:25):
Well, I'm psyched that you agreed to come on. And, as we were just talking about a little bit, we recently met, and it was very exciting for us to hear that a big, notable, reputable firm like a Bain Capital Ventures is turning more attention to climate tech.
(00:01:46):
I know you're a bit earlier on the journey than some, but actually, this show isn't just about talking to people that have been doing it through three bubbles and 15 fund cycles. Actually talking to the big, reputable firms who are maybe just starting to head down the path or thinking about it is equally as valuable. So thanks for being brave and for making the time to educate me and to educate our listeners as well.
Sarah Hinkfuss (00:02:16):
Yeah, absolutely. I really appreciate it. I think we can play an important role in the ecosystem. And exactly as you said, we're still early in the journey, so very humble around what we know and don't know and excited to use this as many networks to connect with people who have been there before us.
Jason Jacobs (00:02:31):
Yeah. And I can kind of preempt... I can picture the pitchforks from the peanut gallery like, "What are you doing, giving them a platform? I've been at this for..." And it's like, look, we're not trying to misrepresent Bain Capital Ventures as, like, "The climate hero who's carried us on," but you're a big, reputable firm with a lot of expertise and assets.
(00:02:59):
And if you're thinking about it, what's holding you back, and what can we sort through that can maybe help accelerate the progress for you and a lot of other people who are in similar shoes? And that's kind of why MCJ exists, to help undo those knots. So I will stand by having people earlier in their journey on the show all day long. Pitchforks, be damned.
Sarah Hinkfuss (00:03:21):
Sounds good.
Jason Jacobs (00:03:23):
Well, for starters, maybe just talk a little bit about Bain Capital Ventures. I'm sure most people at least have some idea of what you do, but it'd be great to hear it straight from the inside.
Sarah Hinkfuss (00:03:33):
Yeah, absolutely. So Bain Capital is a global investment management firm that's been around for many decades, and we have a number of different strategies across the firm. That includes private equity. That's really the flagship, been around for the longest. Also, credit strategies, real estate. We have a life sciences fund. We have a double impact fund.
(00:03:54):
And then Ventures is the venture asset class, and that's been around for 20 years. And so we're investing out of Fund X. We are located between San Francisco and New York. Fund X is a $1.9 billion vehicle that invests across the venture lifecycle from pre-seed through pre-IPO companies.
(00:04:15):
And generally speaking, we focus on four different domains. Those include application software, so vertical and horizontal apps, infrastructure and security, commerce tech, and fintech.
Jason Jacobs (00:04:28):
And out of all of that, how is it broken down in terms of, are partners focused on stages or sectors? And also, you specifically, what's your area of focus within the firm?
Sarah Hinkfuss (00:04:39):
Yeah, totally. So we have, generally speaking, an early-stage team which focuses on seed and series A, and then our growth team, which focuses on series B and beyond opportunities. And I sit out of San Francisco, and I focus at the intersection of fintech and application software on the growth side, so series B plus.
Jason Jacobs (00:04:57):
And talk to me a little bit, just to frame the discussion, about where Bain Capital Ventures is in the exploration of climate tech, how far down the path you are, and also just what led you to even start down the path, to begin with.
Sarah Hinkfuss (00:05:12):
Totally, yeah. So why don't I talk from the institutional perspective first as BCV in the way that you asked the question? And then, there's also the other side, which is also the personal of why it's something that I'm so excited about.
Jason Jacobs (00:05:24):
Yeah. Like, what led you to raise your hand to be the person-
Sarah Hinkfuss (00:05:26):
Exactly. Yeah.
Jason Jacobs (00:05:27):
So that's another whole discussion as well.
Sarah Hinkfuss (00:05:29):
So if you could-
Jason Jacobs (00:05:31):
Yeah, I'm glad you kind of preempted. We like both of those angles. They're both equally as important.
Sarah Hinkfuss (00:05:35):
Yeah. I could put on my institutional hat first, though. And so, on the institutional side, so I would first say that what is shared by us with many other funds is the desire that many LPs have to really think about ESG more generally.
(00:05:50):
And so, even before, it was something that we really put forward to LPs. We have demands, really, across the institutional investors who care about investing across Bain Capital to really take consideration of different ESG components. And so, of course, environmental is a big piece of it. And so we were being asked to report on a number of those components across our companies and, increasingly, saw that across LPs.
Jason Jacobs (00:06:17):
One clarifying question, and I don't know how much insight you have into this, or if you're at liberty to talk about it, but what do you think is driving them to put pressure on you, to begin with, about that?
Sarah Hinkfuss (00:06:28):
Yeah, I think there's more awareness than there's ever been before around... And some of the same reasons why we're seeing founders come into climate tech as well, which we can talk about. But I think there's an awareness that if you believe that this world is driven by capital, and so, if your theory of change requires that you're addressing capital, then the capital allocators, starting at the top, really need to take a stand in terms of what matters. The LPs are a part of it. The GPs are a part of it. The companies are a part of it. But we're really seeing people across the capital stack become more aware.
Jason Jacobs (00:07:00):
Okay. Well, sorry to cut you off. So you've been seeing that from the capital allocators, and then...
Sarah Hinkfuss (00:07:07):
So I think that really whet the appetite, so to speak. And we have now, within Bain Capital, more generally, a team that's specifically focused on ESG, and they're working across all of our different funds. And we're a signatory to a number... Like the UN PRI, for example, as well, Bain Capital is.
(00:07:26):
So then, what does that mean for the way that we actually invest? Because that is a different conversation. And there were a few key drivers as to why Bain Capital Ventures actually has pivoted to think more explicitly about climate as an area of focus and maybe just running through a few of those.
(00:07:42):
So, first of all, I would say that we're seeing an incredible draw of talent. Amazing founders who have backgrounds that we think position them very well to start great companies that'll be generational companies are tending toward climate. And so, they're leaving more traditional tech companies, and they're saying, "I want to build something in this space that is mission-aligned and will produce a huge outcome."
(00:08:06):
And so, in some ways, we're just following where the best talent is. And that's also true of operators as well. And so, especially in this market environment, when you see a lot of people leaving some of the largest tech companies, when they come to our talent team and say that they're looking for a new role, one of the criteria, often, is working for a climate company because people want that alignment. So this first area is just we're following where everyone's going, and that's part of our job as venture investors, is to follow where the best talent is.
(00:08:36):
The second thing I'd say are some of these major shifts that we're seeing that are enabling the creation of generational companies. And so, starting with just the facts of what's happening on the ground, the climate is changing. The climate is shifting. And it doesn't matter if you understand the science or not. It's happening. And that implies changes that are needed for mitigation and adaptation. And both of those are basically opportunities to create companies to address those needs.
(00:09:06):
And so, on the mitigation side, obviously, you have the Paris Agreement, which many different governments have signed onto, and that has created national and local regulation, which has become a catalyst for tech changes happening in our economies.
(00:09:21):
But also, on the adaptation side, just as an example, one area that I think a lot about is climate insurance. And so, whether or not companies care about the science behind climate change, the fact that there is an increasing pattern of weather implies risk to their actual property, which has costs that are associated with insurance. And so, climate insurance is an example that has been created because of the adaptation that's needed around the changing climate that is happening, whether or not you understand that it's happening.
(00:09:55):
And then, second, I would say, as a part of this, is there's new demand as well. And something we'll talk about in my personal journey is that earlier in what we see in the climate movement, there was this disconnect between choosing mission or choosing your economic or financial best interest.
(00:10:13):
And I think now we're actually seeing a lot more alignment there, and that's been enabled by a lot of cost curves coming down and, really, the expense of the other alternatives becoming more. And so the opportunity to actually have demand that's catalyzed by this mission but also by financial self-interest, I think, is really important right now as well.
(00:10:34):
And then the third piece is how the technological cost curves have come down. Battery costs have come down. Solar panel costs have come down. And all of that means that it has laid bare the opportunity, then, for software to really play a role in organizing the atoms that are existing in our world for these climate solutions.
(00:10:57):
And so, those three pieces are like why we're seeing generational companies actually come together now. And so, all of it, which is to say our job as venture investors is to follow where the best talent's going and where there are major technological changes that are creating huge companies, and we're seeing that now happen in climate.
Jason Jacobs (00:11:15):
One question I have is... When it comes to climate risk, it seems like the further you stretch out time, the more acutely that risk affects your own selfish interests, but the more narrowly, then maybe the opposite is true. For example, if I am a lender, and I'm in the term of my loan, in a period below which would hit the threshold where water risk... Where the weather would change enough to put that loan at risk, then strictly through the financial standpoint, I don't necessarily care about climate.
(00:12:04):
So the question is... I'm assuming these are 10-year funds. And in these different sectors, historically, you could just focus on the sector without necessarily looking at like, "Whoa, carbon and the atmosphere, and systemic risk," and stuff like that. How much does time horizon matter when you are determining how to allocate your resources that are not concessionary or for the collective good in any way as far as their charter? I don't think. Yeah.
Sarah Hinkfuss (00:12:37):
Okay. So I'm going to challenge and disagree with the premise of your question, and then I will also answer it. So the premise of your question, I think, assumes that more time is more risk, like there's a relationship between those, or more time is more cost. And I actually think that is not true.
(00:12:57):
Let's say I have a loan that's outstanding, just to use your example, for just a year or even just six months. If there is an event, if there's a major weather event that is severe enough that happens during that period of time, it doesn't matter if it was six months or a day. But if there's a wildfire that totally destroys my property, that's... I'm done. I have no more collateral for my loan. And so I actually think it's the wrong dimension of time to think about.
(00:13:24):
And instead, it's severity. It's severity and frequency, which is... That's what time is considered within. And so, I actually don't think that's relevant in so many of the climate conversations that we're having now. But to answer your question, nonetheless, on timeframe of fund... So for many climate funds, they're thinking about, "What are the largest sources of carbon, and how do I address my investments in order to mitigate specifically those sources? Or how do I have a rank order not just of funds invested but also of carbon mitigated as one of my trackers for looking at the success of my fund?"
(00:14:11):
So a ton of respect for that. But exactly to your point, that's not the focus of our fund. It's not concessionary. It's also not focused on the dual impact of reducing carbon. So, rather, we're thinking about, "What are the largest markets that are addressable within the climate tech ecosystem?" And one of the components of that is the scale of carbon that you can mitigate through these different channels, but that is not the only one, and it's often not the most important one.
Jason Jacobs (00:14:41):
Got it. And that kind of answers what I was planning to ask next, which is, when you are thinking about climate, how much of it is about, "How do we find solutions within my areas of focus that fit our criteria that we would've done from an investment standpoint without caring about the problem?" Versus factoring in the changing weather and increasing frequency and severity of events and risks associated as you evaluate stuff like supply chain, material costs, stuff like that? Is it both or...
Sarah Hinkfuss (00:15:20):
Yeah. Yeah.
Jason Jacobs (00:15:21):
Yeah.
Sarah Hinkfuss (00:15:22):
So the way that we're thinking about it more generally... So I was talking about how there are four areas of focus for us or four domains, infrastructure and security, commerce tech, fintech, application software.
(00:15:32):
So if I take each of those, I can apply different lenses to them. So another lens today that's often talked about is generative AI. And so, AI as a lens can be applied across infrastructure and security, application software, fintech, and commerce tech. Same is true with climate.
(00:15:49):
And so, I can say, "What are companies that are building within the climate space that are fintech companies," for example? And so how does financial services enable the traction of new climate solutions? So, for example, for financing for residential energy transition, or we've already talked about climate insurance. So what are new forms of insurance, like parametric, or what's new data sources that have to become available in order to enable the current insurance players within the value chain to participate and understand how climate risk impacts their books?
(00:16:23):
And so, there are ways that climate as a lens is directly relevant to the core places where we've invested. And our approach is that it's incredibly important to have specialists around companies that can help them, within the climate ecosystem, really understand how their companies should take shape and the science and the ecosystem around them.
(00:16:45):
But at the same time, there are a lot of lessons that we can bring from having invested in these domains and spaces over decades that are relevant for companies thinking about how do they take that next step and really become generational companies. And so, I'm happy to talk through examples of that in conversations I've had with different climate companies.
Jason Jacobs (00:17:04):
That would be great. But before we do, just a little bit on the personal journey because I don't want to skip that aspect of it. So what led you to the firm and to become a venture capitalist, to begin with? And then, within the firm, what led you to raise your hand to lead the charge on the climate exploitation for Bain Capital Ventures?
Sarah Hinkfuss (00:17:27):
Two big questions. So taking them in turn, on how I got into this all in the first place... So I never intended to work in investing or in finance. I come from a very politically-active public service-oriented family in Wisconsin. I grew up right on the shores of Lake Michigan, which, obviously, is the largest source of freshwater in the world. So I had a very strong understanding of environmental justice and public service that really was from my family and the way that I was raised.
(00:18:08):
And I went to Harvard to study the intersection of economics and environmental engineering and really focused on water pricing. And so I understood how special the Great Lakes was within the world. And when I traveled, I saw how rare that was. And so I thought water was this really interesting resource where it comes from the sky, but it has to be cleaned and distributed. And so it's a public good, but there's a lot of social impacts of it as well.
(00:18:38):
And it was just this really interesting nexus and systems-level thinking around how you address water. And so I actually spent every summer in the Middle East working with the World Bank and different national governments on water pricing. I thought I would do that for my life. I thought I'd go on for my econ PhD and then work in the World Bank.
(00:18:55):
And I got pretty disillusioned with the distance between evidence and actual policy. And so, for the first time after I graduated, I looked to the private sector and ended up joining an early-stage startup in the tech space that was applying the same methodology that I used in my thesis research to business, and so it was all applied experimentation.
(00:19:19):
So it was helping large companies, large consumer-facing firms, retailers, restaurants, hotel companies, insurance companies, design experiments to understand the impact of their programs in market, so their new products, their marketing programs, operational changes, whatever. That was exciting because it was leveraging the same work that I was doing. It was also very far away from the environmental work that I had always done and was very core to my belief system.
(00:19:46):
After my company... So I was there for six years. It was an amazing ride. We were acquired by Mastercard. That was in 2015. And then, during that last year that I was there post-acquisition, really took a step back and did internal reflection on what I love doing, what I was really good at doing, and what I wanted to do going forward.
(00:20:06):
And one organizing principle that I realized in my own theory of change in the world is the role of capital allocators. And again, whether I want it to be true or not, it's the case that people who have access to the capital are often in positions of power in the world that we live in today. And so I thought about how can I get closer to that and how does my specific set of experiences and background... How can that serve the people who are creating change on the ground, which are really the amazing founders that we have the opportunity to support?
(00:20:38):
And so I came out to California. I went west, young lad, and went to Stanford for business school. And that was my moment of really testing out the theory of whether or not I'd enjoy investing or if I'd really miss building.
(00:20:52):
And so, came to Stanford, had the amazing opportunity to work with Cowboy Ventures, so Aileen Lee, who's an early-stage venture capitalist, former Kleiner partner, coined the term unicorn. She started All Raise, the largest women's network in venture, an incredible mentor, an incredible investor. And so, I had the chance to work with her and the team for the first year. Loved investing but realized I missed some of the data and heft that comes along with later-stage investing. And really, from my economics and engineering background, I just see the world in that way.
(00:21:25):
And so, I ended up having the opportunity to move into private equity with a growth fund at KKR for a couple of years in order to really learn how to be an investor. And that was a super humbling experience for me because, as you can hear, I'm not someone cut from the finance cloth. No one in my family understands anything about private equity or finance, and I had no investment banking background. So I had a ton to learn, and it was an amazing place to do that because it really stretched me intellectually to learn that, and then had the chance to come over to Bain Capital three years ago.
(00:22:01):
And I think on this personal journey of, when do you put your hand up and lead and when you get a chance to come back to the things that really matter to you, it is sometimes scary politically to have trade-offs in what we do, especially in large organizations like Bain Capital, but many other finance organizations.
(00:22:19):
And so, for me, it was this twin opportunity of realizing that for myself, having... I had my son two years ago, and I couldn't... There's a part of always being able to think about taking a step along a path, knowing that there's an eventual outcome.
(00:22:40):
It's the marshmallow test with little kids. It's like, how many marshmallows can you put in front of a little kid and let them know that they'll have more if they wait, but if they eat them, then they'll only get the one? And so, I think, as a little kid, I was always very good at waiting. I understood that the longer... The more that I developed my skills, the opportunity I would have to be in a position of leadership to really be able to fulfill the dreams or theory of change that I had.
(00:23:07):
But at the same time, I think having my son two years ago was this moment of reckoning personally of just realizing that we're not... Climate is not going in the direction that we need to. We all have a role to play. And at some point, the time is now. I could always imagine that I could be more established or more able, but I had to do what I could do.
(00:23:32):
And then, at the same time, I think there was a lot of interest among the partners at Bain Capital Ventures to really engage in this space for all the reasons that I was saying. It rationally and theoretically makes sense. But it does take someone to raise their hand and be willing to put in the groundwork, really, of... Exactly as you were saying in the beginning of this podcast as well, that we're not of the space. We haven't grown up in it.
(00:23:57):
And so there's a lot of work to be done to build bridges and really establish ourselves as partners that people can trust and want to work with instead of partners that people want to stay away from. And so a lot of bridge building, a lot of getting to know people, a lot of, frankly, reconnecting with old friends of mine.
(00:24:17):
And so, in many ways, it's felt like a coming home to the community rather than building a whole new thing. And being willing to put in the time as well to bring the intellectual approach and framework that we have for all of the spaces where we invest to the climate space.
(00:24:37):
And so, really, the brass tacks of mapping out where the experiences that we've had are directly relevant so that we're not going in and investing in areas where we don't have the expertise and we are not the best partners, but we're doing it specifically at the intersection where the work that we've done is highly additive to climate founders and we think we can help them actually build the company to be larger and more successful than they could without our participation on the cap table.
Jason Jacobs (00:25:08):
And so, at this point, is it a totally informal exploration that you're expected to do just nights and weekends on your own time, or how is the firm thinking about this and formalizing it, and how are you thinking about it and formalizing it in terms of how you allocate your time professionally?
Sarah Hinkfuss (00:25:28):
Yeah, so it's a very... In general, time allocation is such a... As you know, as you guys have gotten into the investing space as well. It's a very amorphous and undefined thing. So, practically speaking, over the summer, I had the opportunity to bring two individuals in who were really helpful to really map the framework, so to speak, within the climate tech space.
(00:25:52):
So had an intern who is a former solar developer himself who was an incoming GSP student who is Ukrainian. And so he worked with us for a number of weeks this summer. And then also had a fellow who was jointly working on her own climate startup as well as, again, helping with the investing side. And so that was really helpful over the summer to really lay the groundwork. Alex and Dilly.
(00:26:17):
And then there are a team of people internally who are very interested in climate. And so, as I said, I'm a partner on the growth side. RF is one of my partners on the early-stage side. He also has his own personal journey and interest in climate. He's originally from Pakistan. And so, the two of us are co-leading the effort within BCV. And then, there are a number of associates on the team who are very interested in it.
(00:26:41):
And so we have a number of companies that we're getting to know over time, a number of climate specialist funds that we have standing relationships with and have the opportunity to chat with around themes or specific companies, and they'll bring us in when their companies are looking to raise, and they think we'd be a good fit. And then, just practically speaking, there's an internal Slack channel for Team Climate, as we call it, in the same way that we have one for Team Fintech or Team Application Software.
Jason Jacobs (00:27:10):
And is this a time-boxed project in terms of duration, or is it just an ongoing thing, and it evolves how it evolves?
Sarah Hinkfuss (00:27:23):
So it's not time-boxed, to directly answer your question. And if anything, I would say we're still... There was an investment this summer that I was describing to get us to really understand the spaces of focus, and I can go through the six areas that we've identified from that. And then, I think, right now, we're really building... It's like we're building the foundation, still, of the house.
(00:27:45):
And again, it comes with humility that we have so much to learn, and we have so much to contribute to the ecosystem before it makes sense for us to really take a leadership role in the ecosystem. But I would expect it to grow a lot over time. And so, I think we're still below the surface, and then you're going to see us come out toward the back half of this year and going forward.
Jason Jacobs (00:28:07):
So here's a question. Are there corollaries within the firm historically of new areas that you had not been active in, that aspired to, that you're looking to as a playbook, if you will? Or do you feel like you're feeling your way in the dark and inventing?
Sarah Hinkfuss (00:28:29):
Yeah. Between those two experiences, there's definitely one I'm supposed to choose, Jason. So, to respond to that, there are many examples of other issue areas that have come in and have gone different directions. And so, maybe to put one that I don't think will represent climate but just to give you a sense of it.
(00:28:48):
So we started doing crypto investing out of the BCV Fund V 10 years ago. Similar to climate, the way I'm talking about it, it included investments that were at the intersection of crypto and the spaces or domains where we were focused. And then, we made the decision, a few years ago now, through working with our LPs, that the risk that is inherent in crypto was distinct enough from the core venture fund that we wanted LPs to be able to choose, "Do I want exposure to crypto risk, do I want exposure to venture risk, or do I want both?"
(00:29:26):
So we wanted them to be able to choose. In addition to the fact that the skillset that was needed for investors within the generalist venture fund was very different than the skillset in the crypto fund, and that the crypto fund felt like they could recruit better investors and invest in better founders if they had their own brand and identity versus if they're a part of the general BCV fund.
(00:29:48):
And so, for that reason, the crypto fund, the BCV Crypto, launched, I think, about a year and a half ago now. And so, it's its own separate fund, still very integrated into BCV, and we work together on a lot of things, but that enables... For all those reasons, it being a separate fund makes sense.
(00:30:06):
I would contrast that with fintech, which is, obviously, another space. Matt Harris, a partner that I work with very closely, he's in our New York office. He started at Bain Capital, I think, in '95, and then he left and ran his own fund in fintech in what was one of the first fintech-dedicated venture funds. And then he came back to Bain Capital Ventures to really lead our fintech efforts.
(00:30:32):
And so that's an example where we felt like there was enough overlap between what fintech wasn't represented and the rest of what BCV was that it made sense to be part of the same generalist fund versus having fintech as its own pocket of capital where LPs would choose to participate. And practically speaking as well, so often there are companies that we're looking at... It's like, "Is it a software company? Is it a payments company? Is it insurance company? Is it a marketplace? Is that commerce?"
(00:31:01):
And so, all of this becomes very interrelated, and so it doesn't make sense to separate it. I think that climate is going to go that second journey, where I can call a company... If I wanted to, I could call so many companies climate companies today. And I could actually argue that, going forward in the future, every company will be a climate company because they'll have to consider climate as a part of the product that they're producing and the way that they distribute that product. And so it is nonsensical to think that we would be able to separate that from overall what we're doing as a venture fund.
Jason Jacobs (00:31:37):
I think that makes sense. So given that, what type of expertise do you think that you need as a firm to be able to invest more deeply in climate confidently, given that, as we were just discussing, climate isn't a vertical and it doesn't have a set type of risk because it depends on what the type of solution is and what type of category?
Sarah Hinkfuss (00:32:05):
Totally. So climate is one word that disguises a lot of complexity. That's true in general in life. And I think that's especially true in this area. And so, one of the first sets of questions that we had to ask is, "Where is our expertise relevant within the climate ecosystem, and where do we not have the expertise to participate and be able to make bets as a venture fund within the climate ecosystem?"
(00:32:38):
One question is on the type of risk itself. We are not taking scientific risk. We are not taking engineering risk. We are taking commercial risk. These are technologies that are proven. And the question is, "Can this team with this approach be the ones to scale and then create a moat in differentiation around what they're building?"
(00:33:04):
Second of all, thinking around, what's the core IP? There are a number of climate companies, amazing climate companies, that are building a core IP that's hardware. It's a widget, it is a system, but what it is is something that exists in the real world.
(00:33:25):
There are many companies that have hardware but still have software as a part of it, which you'd be interested in, but companies that are primarily hardware, and what you're betting on is really the opportunity for them to manufacture that in a more effective way and the complexity that goes along with implementing that in the real world. That is something that we're not doing.
(00:33:48):
And then, the third piece is on the type of capital. And so, especially in climate, and this is also true in biomedical and other markets as well, there are roles for many different types of capital. Specifically, we are venture equity. We're not any other type of capital. And so we're looking for opportunities where that's the best capital for that founder to take the next step in their business journey.
Yin Lu (00:34:16):
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.
(00:34:28):
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.
(00:34:42):
Some awesome initiatives have come out of the community, 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 in Climate meetups, idea jam sessions for early-stage founders, climate book club, art workshops, and more.
(00:35:02):
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 (00:35:17):
And you mentioned that there were six areas that you've identified. How did you get to the six? What has the process looked like so far? What are the six, and where do you go from here?
Sarah Hinkfuss (00:35:29):
Totally.
Jason Jacobs (00:35:30):
I keep asking these big, kind of multi-pronged questions. Sorry about that.
Sarah Hinkfuss (00:35:35):
I know. I try to give you short answers, but you're not making it easy for me.
Jason Jacobs (00:35:42):
I know. I'm baiting you into doing lots of talking.
Sarah Hinkfuss (00:35:45):
This is great. This is great. So maybe taking a step back even before we get there, so more thematically, what's the role of software? So I just talked about how, especially in climate, I think... Climate is about molecules moving and creating an impact in our world. It is fundamentally a physical problem.
(00:36:09):
And so, why does software have anything to do with it, and why should we even care about the software role that can be played if the problem is just a physical problem? I like starting here because I think it's a framing around what role, more generally, does software play. And this is true in climate but true in other areas as well.
(00:36:30):
And so, we think about four different areas where that's true. So one, it's around enabling collaboration or really organizing demand. So technology is a way to bring people together and make clear what interests are and then how do you organize that.
(00:36:48):
Number two, software is really helpful for workflow. And so, how do you track multiple pieces over time? How do you know what comes next in a process, and how do you make sure that process has been completed as intended? That's workflow.
(00:37:03):
Number three, it's about calculation and analysis. And so, how do I understand what has to happen, and how do I get the right answer in order to maybe create a physical change? Software is the part of the process that makes me know what I need to do.
(00:37:20):
And then fourth, it's on design. And so, what are the ways that I can visualize or imagine before I actually implement it in the physical world using software? So those are the four areas where we think software really matters.
(00:37:36):
So then we take that premise, which, again, is not climate-specific but it's relevant in climate, and then we apply it across the domains where we really care about and where we think we have expertise. And so, what came out of there, then, as I mentioned, are six different areas of focus. Do you have any questions before I go into that?
Jason Jacobs (00:37:55):
No, keep going.
Sarah Hinkfuss (00:37:55):
Okay, awesome.
Jason Jacobs (00:37:56):
I'm actually taking notes, so I'm listening intently.
Sarah Hinkfuss (00:38:01):
Good, good, good. So the six areas of focus-
Jason Jacobs (00:38:02):
Just for evidence, in case this comes up in a court of law.
Sarah Hinkfuss (00:38:05):
Great.
Jason Jacobs (00:38:06):
I'm just kidding.
Sarah Hinkfuss (00:38:07):
Excellent. Yeah, I told you I have a background... My parents are... My family's public servants and lawyers, so I was never supposed to do what I'm doing. I was supposed to go into law school.
(00:38:18):
So area one, supply chain software, and so helping companies today understand, "What are the different sources of where the precedents for my products are coming from, what are the associated qualities of those sources, so the geography, the resource intensity, the labor?" There are all these different components. And then, "How does that roll up for me to understand my entire supply chain?"
(00:38:45):
This is an interesting space because climate is clearly a driver, and there are other really interesting drivers that we see from working across supply chain. So those include the cost, the complexity of what Covid has done, the weather risks. And so the last few years have shown us that when supply chains are all amuck, everything really stands still and gets messed up. And so there's a lot of cost associated with understanding that more transparently.
(00:39:14):
And particularly within climate, we're thinking about the opportunity for bottoms-up measurement here. There are some great companies that are thinking about tops-down, where they're using average scores for the precedents and products, but we think that the bottoms-up piece of this is going to be really important, and that is ultimately an interesting network effect as well to activate from your end suppliers to the next level to the next level to the next level.
(00:39:41):
Number two is re-imagining the grid or the grid modernization. And so recognizing, again, not just within climate or not just within this conversation, but more generally, there are generational changes in terms of upgrading our electric grid and upgrading our power grid. And a lot of that infrastructure today in the US is dated, so that has to be updated regardless.
(00:40:09):
And then, there are new pressures on the system today that are brought about by climate. That could be the good types of pressures, like people adding solar panels or people having EVs. It could also be the bad types of pressures, like the incidence of wildfires in California, which are interrupting grid service.
(00:40:28):
And so we're thinking about the software, again, that is enabling the maintenance and the upgrading of this grid but then also re-imagining. So, "How could we think about smaller systems that are both consuming as well as producing power, that are enabled by the twin opportunity for individual houses or individual units to have solar panels as well as EVs, for example?"
(00:40:57):
Third, we're thinking about the residential energy transition. This is everything from solar panel installation to heat pump installation to EV chargers. So really, "What are the ways that individuals are waking up to the opportunity, both from a mission-alignment perspective as well as from a financial perspective, to participate in the new economy?" And there's a lot of tailwinds there from the IRA as well as other California-specific legislation and other states.
(00:41:30):
Fourth, we're thinking about the built environment. That is for commercial buildings, so for larger-scale buildings, "What's the consumption of resources, so the energy consumption, the water consumption? How are my systems, like my HVAC systems, how are they organized, and how do I better track that, understand it?" And then, "How do I mitigate or reduce that over time, again, for mission, but as well as for financial purposes?"
(00:42:00):
Fifth, we're looking at new energy infrastructure, like vertical SaaS. That could be for new wind farms, "What are the vertical SaaS solutions that are required to actually help those wind farm operators operate more efficiently?" And so we think about this as just... Every market has really robust vertical SaaS, and we have invested in vertical SaaS across different markets, and we see that that will have to come now to these new markets that are growing up in a very rapid way, really accelerated by these tailwinds that we were discussing.
(00:42:37):
And then the sixth and final area is the intersection of fintech and climate tech. Already talked about financing as a really important part of that. Insurance is a space that I, in particular, get really excited. I think it's really interesting. Payments and payment infrastructure and interoperability. So where financial services meets climate, there are a lot of problems that have to be solved in order to enable the transition that we're talking about in the other spaces.
Jason Jacobs (00:43:07):
That's awesome. And what I really like about your approach, and again, this is going to drive some of the purists crazy, is you don't come in and say, "What are the most impactful areas for climate? And then how do we pivot as a firm to do those areas instead of what we do?" You say, "No, here are the areas that matter in climate, and here are the areas where we have superpowers. And then, what is the area of intersection, and how can we carve out a thesis at the areas of this intersection such that it can have a real impact on the problem and stay true to who we are and what we're good at?"
Sarah Hinkfuss (00:43:48):
Yeah, exactly. I mean, it's a... Venture is an extremely competitive asset class. And the best founders have a number of different opportunities and amazing funds that they can take capital from. That is true in climate, and that's true in the venture ecosystem. And so we know that the only way that we are going to invest in the best people is if we're also extremely humble around sticking to our knitting and only picking the spaces where we think we can be differentiated and value-added investors.
Jason Jacobs (00:44:20):
So here's a question that comes racing to mind as I'm listening to you talk about this, which is that you mentioned that one of the things that was driving you as a firm to get interested in this area was the flood of talent in terms of founders and operators from people, and I think to use your words, who were operating very successfully in traditional tech who are looking to pivot and do something that has a generational impact in this area, which is awesome.
(00:44:48):
I guess my question is, in the same lens that you were talking about the intersection of what's impactful for climate and what you're good at, what are the kinds of pivots from general tech to climate that you think are natural and pull you in and get you more interested? And then, what are the ones that give you pause just in terms of whether there is founder market fit?
Sarah Hinkfuss (00:45:13):
Yeah. So I think it all comes down to founder market fit, first of all. And so, as we think about what gets us excited to make an investment more generally, and then also sharing climate, it really starts from a non-obvious, non-consensus insight that the founder has about the future.
(00:45:34):
And where that often comes from is some deep experience, some, as you talked about it, founder market fit, this authentic experience that they've had and seeing a problem play out, wondering why something that should exist in the world doesn't exist. And they finally get so fed up, and they're like, "I'm going to build it."
(00:45:54):
And so I don't think there's one way for that moment to happen. There's not one place to stand where the apple should fall down from the tree and hit someone in the head. I actually think there are many different pathways for that to be true.
(00:46:11):
That said, I think what is sometimes hard is that someone... It's both having a deep understanding and rigorous approach, a very strategic approach, but also being very commercial. And I think that twin part is the hardest sometimes because... For example, if someone's coming from deep research in academia, they're going to be on the cutting edge of understanding theoretically where markets are moving, right, or where there's a technological change that they could build a product to take advantage of because it's currently in research, but maybe it'll be commercialized in two years, and so they can get ahead of that.
(00:46:55):
But that same person who's grown up in research labs in academia may not have the orientation to put something in the market, like an MVP, to put the product out there, to test it, iterate quickly, to fail quickly, to pivot, and figure out how to make something that is commercially viable and will be sold.
(00:47:16):
So, to answer your question, I think the place that people come from is very varied, and that is intentional, and that's part of the magic of being an entrepreneur. However, I think what is more common, or the piece that's more common, is having some twin understanding of both commerciality as well as the strategy.
Jason Jacobs (00:47:39):
And along similar lines, so you can identify a problem and wish someone would solve and get frustrated and go solve it yourself. When it comes to doing something that's impactful for climate, where does mission fit into all of this? Does climate need to be a core driver of the motivation of that founder to tackle that problem, or is it case-dependent?
Sarah Hinkfuss (00:48:08):
So last night, I was at a happy hour at... And it was hosted by a climate company. And walking in, on the whiteboard, there were all of these quotes around changing the future of the world. I just walked in and saw that and just felt inspired and just smiled. And I was talking to another investor, and she was like, "Yeah, welcome to a mission-aligned company. How cool is that? It's pretty amazing, isn't it?"
(00:48:34):
And so, back to what I was saying at the beginning, our talent team is seeing an influx of people who want to work for mission-driven companies. And so, it's becoming a differentiator in the market to actually attract the best talent as well. And so, am I holding as a litmus test to a founder? Do I really believe you're mission-aligned? I'm going to dig deep and try to put you in a corner and figure out the reasons why you're telling me something, but it's not true?
(00:49:03):
No, that's not something that I'm doing. I am evaluating them on the other aspects of, "Do you have this non-obvious, non-consensus insight that we believe will be true? Is it a huge market? Do you have a business model built to scale? Do I believe you can create differentiation or a moat?" Those are the things I'm looking at.
(00:49:20):
However, I think that the opportunity to lean into the mission is actually a key differentiation that climate companies have today. And so, it's really silly for founders to not take advantage of that. And I think that if they're not authentic in it, it becomes very obvious very quickly to people. So it's not something that I believe that I can project and understand. I don't think I'm almighty and know whether or not people are bullshitting me, but I do think it's something that is a key advantage that climate founders have, and I see many really lean into.
Jason Jacobs (00:50:00):
So here's an example of where I see it play out. So let's say a founder has a non-obvious insight in terms of enabling more effective mineral exploration. And they get down the path, and they're doing the mineral exploration, and the mineral exploration is interesting to big oil majors who are increasingly expanding into electrification. And in the back of their head, they also kind of feel like, "And, oh, by the way, this could be great for a lot more than just mineral exploration."
(00:50:37):
And there are some quote, unquote, "climate..." And I don't mean "quote, unquote," like they're not climate investors, but I mean people that are... Capital that is allocated specifically to address the climate problem. That actually try to put legal guardrails on what companies are and aren't able to pursue in terms of markets if they take their capital.
(00:50:59):
What's your... Because there might be times where it ends up the market focused on the transition doesn't end up being the most lucrative market for that specific company, and there's an actually much more attractive market that might be in an area that looks more like fossil fuels. And how should non-catalytic capital think about that?
Sarah Hinkfuss (00:51:28):
Yeah, I mean, we haven't addressed that directly, and so I definitely have to think more about it, to be honest with you. I think there's a lot of case-by-case basis of having to understand. In this specific case that you bring up, we wouldn't... That's not a type of company that we'd invest in.
(00:51:45):
So for that particular example, I also think what you're talking about is a broader existential question that has come up in ESG investing more generally, where you have public markets investors... And again, this is nothing that we do but just to paint analogy. You have public markets investors who are investing in companies that meet the ESG criteria, but some people are saying, "That is not appropriate. That company is not..." Like the questions around having oil companies be in these ESG baskets of investments.
(00:52:21):
It's interesting because, and just taking a theoretical approach here, you can argue that having a larger shareholding of a company that is not doing great today with the opportunity to create shareholder activism and get them to move on some key climate initiatives can actually create more impact than investing in someone that's already doing well today, but the opportunity is less. The frontier of how much more they can move is relatively less because they're farther up the curve.
(00:52:51):
And so I think that's a super interesting theoretical question and very fraught from a values perspective in this conversation today. But my point is to say I don't think it's just a private market investing thing. I think we're seeing it play out first in the public sphere. And it's something that we personally haven't had to address yet. But to your point, I think we definitely will as we continue on in this journey.
Jason Jacobs (00:53:14):
And the areas that you mentioned, how active have you been to date with your climate hat on? And similarly, what are some of the barriers that are holding you back from moving as quickly as you might aspire to?
Sarah Hinkfuss (00:53:31):
Two big questions again. Jason, you're just throwing it all in. So on the first, we've made two climate investments to date. RF invested in Lithos Carbon. That's a company that is leveraging basalt as a replacement for fertilizer for farmers and then developing the software on top of that to help farmers understand the carbon sequestration impacts and, therefore, carbon credit potential of that fertilization. And that's a early-stage company, really exciting. Mary is the CEO there and a phenomenal leader.
(00:54:08):
And then we've also invested in Archive, a company in the circular economy space, and this is so more in the software space, so helping retailers actually sell the used goods to really enable better recycling but also brand consistency across the used good landscape for their... Or the secondary landscape for their goods. And that investment was made by my partner, Scott. And so that's an early-stage on the software side.
(00:54:37):
So those are the two investments that we've made. And then, across our portfolio, we're doing a lot of work helping all of our companies think about how to better track carbon. And so we have a number of partnerships in the market for carbon software solutions. And also helping them think about some of the other mitigation or strategies on talent as well associated with that so that they can really lean in and get ahead of the curve there.
(00:55:05):
And then, we're very much in market to think about how we can find companies that are well-positioned across the themes that I was describing where we can lean in and make an investment. So, as I mentioned, we have a brand new fund or two brand new funds of $1.9 billion of capital. We're definitely risk-on from an investing perspective. And so I'm not racing to make investments before it's appropriate.
(00:55:33):
In most cases, we've gotten to know a company over years before we do make an investment. And so, I would say, in most cases, we're still in that relationship-building stage with some of these companies that I'm most excited about that really go across the themes.
(00:55:46):
And so, if I had to answer your question on what's preventing more change, I would say it's just time. It is really being able to be in the market long enough and build those relationships so that we are a trusted partner around the table, and that the unique ways that we can be supportive are understood and it's not perceived to be a threat to other people who are operating in the ecosystem already.
Jason Jacobs (00:56:11):
So this next question, I don't know that I'm going to be able to articulate it in a way that is succinct because it's an area I'm grappling with, which means I can't maybe put it in a package with a bow on it, but I'm going to throw out two phrases. One is, "Know who you are and stay true to it," in the sense that when companies lose focus and stray from their core, they get themselves in trouble.
(00:56:38):
The flip side is, "Evolve or die." And we are slowly, by population standards or human history standards, moving from a global economy and way of living that is based on and requires a stable climate to one where the climate is increasingly but slowly, again by human history standards, destabilizing under our feet.
(00:57:12):
And I guess this is more of an existential question, but how much historically has Bain Capital stuck to its knitting? And then, directionally, as things de-stabilize, is anyone going to actually be able to stick to their knitting? Or how do you balance those two things? And does how you balance them change, given what's happening with the climate, or is that just too abstract to even care about?
Sarah Hinkfuss (00:57:40):
I love your question, first of all, and it's something I think about a lot as well on a personal level in addition to a professional level. And the way that I approach that is, what are you staying true to, or what are you... On your idea of knowing who you are. For me personally, I think about it as the values and theory of change I have in the world. And so the values of how I show up of what it means to be a good person, those are my North Stars, those are my guiding lights.
(00:58:18):
And then I have to recognize that, as life changes, there are... This is where the, "Evolve or die" comes in. As the circumstance or context of my life changes, I have to make adjustments in order to continue to pursue those North Stars.
(00:58:34):
So I'm a big sailor. I grew up sailing on Lake Michigan, and I sail in San Francisco Bay. And so, another way to talk about that is for a sailboat to go forward, when the wind changes, you have to tack, right, so you have to turn a lot in order to move the sails and continue to grow in the direction that you want to go. Because you don't control the wind, you don't control the tides, there's a lot that's out of your control, but you can keep going in the direction that you want to as long as you know what that heading is, and you have the ability to actually evolve or make those changes.
(00:59:07):
And so I think that same thing is very true in every company. If you have your mission, your vision, as the context or circumstances change, you may have to adjust your partnership model or your product. Or maybe your competitors are doing something that your customers are requiring, and so you have to change your roadmap, the product roadmap or what you're prioritizing.
(00:59:29):
And so, I do think there's this ever-present balance between knowing where you're going and then being flexible on the path to get there. And from an investing standpoint as well, I think, our... So our North Star as professional investors is to return capital to our LPs. Most of our LPs are... Or a lot of our LPs. I don't know if it's most. Want to be careful on that.
(00:59:55):
But pension funds, university endowments, there are a lot of people on the receiving end of the capital that we're returning to our LPs. That is the mission of the work that we do. And so, what are the ways that we enable that? What are the processes that we pursue?
(01:00:15):
And this is where, as I was saying, climate wasn't something that, before, BCV had to focus on both because the market has changed but also because the people who could stand up and lead it weren't in the position to do that before. And so I think that's an example of a changing context and the opportunity for us then to contribute into the ecosystem in a way that perhaps players like us before weren't very active.
Jason Jacobs (01:00:41):
And it's another weird, weird question, but does there even need to be a role for duty and collective good, or essentially, just market forces and the Overton window of doom will sort this out?
Sarah Hinkfuss (01:00:56):
I mean, you're now tapping into the existential question that I asked as a 18-year-old. Again, I was raised in a household that believed that social change came about through many people coming together in the interest of the collective good and that what was required to make the world a better place was to activate our community. And so, I did a bunch of get-out-to-vote and door-to-door. My entire upbringing was one of civic engagement.
(01:01:38):
And I, in high school, got to this kind of place of disillusionment, of realizing the role that economic self-interest plays and that not everyone thought about values in the same way, or not everyone was driven by values above and beyond what mattered financially.
(01:02:00):
And so, then I turned to economics as like, "Okay, is this a system that I can leverage in order to help create the context where the collective self good is what people are choosing?" And so, in college and going through all of that and getting disillusioned around how it could be together and I saw them as disparate.
(01:02:17):
What brings me back to this conversation today is that I see for the first time that those twin goals are aligned. They're one on top of each other. That the ability to pursue a better future for all of us is also, in many cases, the best decision from a financial self-interest perspective as well.
(01:02:39):
That's not always going to be true, and not everyone's going to have that particular perspective. For me, it comes from the values that I was raised with, but I know other people are coming out from different ways. But what I like about it now is that I think, regardless of the direction that you started, or regardless of the place that you started, I think a lot of people are coming to the same place now.
Jason Jacobs (01:02:57):
Yeah, this gives me a lot to think about because if I... How many people work at Bain overall, the entire firm?
Sarah Hinkfuss (01:03:05):
Many people.
Jason Jacobs (01:03:06):
Yeah. A lot, right?
Sarah Hinkfuss (01:03:08):
Yeah, yeah.
Jason Jacobs (01:03:10):
So it's like, what if you took the collective minds of the firm and you did an exercise around, "How could we mobilize these people and expertise in a way that only looks at climate impact?" And then you did the same exercise that only looked at financial impact. And then you brought it back around Bain style to look at the area of intersection, right?
(01:03:33):
I mean, it sounds like that's what you've done, which, honestly, when people come to me for advice, that's what I tell them to do is, "Look at your own area. Your own sphere of influence and expertise matters. What gives you energy? What gets you up every day?" Tactically, that really matters.
(01:03:50):
I can't help but think that if Bain was unshackled from the constraints of where it's historically played, that as a firm with that expertise and war chest and talent base, that it could do a lot more. But is it its place to do a lot more?
(01:04:08):
Back to the, "Stay true to your focus" versus "Evolve or die," I don't actually know the answer. I think about that for MCJ. I don't know the answer. It's something I wrestle with every day. So I'm not here to preach and say, "You should be doing it this way. You should be doing it that way." I'm very glad that you're showing up and trying to do what you can within your sphere of expertise.
(01:04:30):
I can't help but think about how to get you and other firms like you, which are so important to the gears of the global economy, to do more faster. Or, said a different way, what about the areas that desperately need to get built that don't cleanly align with the mercenary asset classes of capital that are out there today? Some of those, I feel like, are the most important for the problem, yet, where does the money come from? And it isn't necessarily your problem to solve.
Sarah Hinkfuss (01:05:02):
No, these are all great.
Jason Jacobs (01:05:04):
Yeah.
Sarah Hinkfuss (01:05:05):
Just to share one example. So one founder that I've spent a lot of time with, she's building in the intersection of climate and fintech. And most of the people that she has around the table today are climate investors, which is awesome because they're helping her think about category creation and the conversation around why this is a necessary product and, really, connections to the ecosystem.
(01:05:35):
And our conversations, she's shared, are so impactful because I can take the approach of a fintech investor and help her think about what she's trying to do in her world, what are analogs to other fintech markets that have come before her that she can then lean on and learn from. And so, cyber insurance is a category that was created based on a deep understanding of data and risk that then was used to catalyze cyber as a core part of the commercial insurance package that every one company has.
(01:06:10):
Or thinking about Buy Now Pay Later as another instantiation of loans that is an embedded transaction and how that relates to her product. And also helping her think about the business model and their revenue, the revenue model, and how that relates to different analogs across fintech.
(01:06:27):
And so I share that because we can't all know everything. No one is an expert in everything. We all have to have authentic experiences and deep expertise. And with time as our most precious resource, there's always a trade-off in terms of what we're learning about and where we're spending it.
(01:06:47):
And this conversation with her is just one of dozens of examples I can share with you around how the opportunity that I have and that my team has to really help enrich and enliven the conversations that climate founders are having today around building their company requires the experiences that come from more of a horizontal perspective within the markets where they're building and not just on a climate perspective.
Jason Jacobs (01:07:19):
Yeah. I mean, it's a weird example, but, as you know, we're out raising a fund and talking to institutional LPs for the first time, and we don't just think about mission-aligned capital, but we think about, "What's the capital that could be a great partner to us and help fill in our blind spots and give us expertise and help package us in a way that speaks the same language as other institutional LPs?"
Sarah Hinkfuss (01:07:42):
Yeah.
Jason Jacobs (01:07:42):
And stuff like that. And there's certainly a role for mission-aligned capital, and we love it, but there's also... There's value in having some... Just capital that's got the mastery of whatever their domain is, whether they're climate-focused or not. And I think that's what I'm hearing from you, too, is just being world-class at fintech can actually have a big impact on a climate fintech company because they don't just need access to people that care about climate. They need access to people that know how to build big, successful, enduring fintech companies.
Sarah Hinkfuss (01:08:13):
Exactly. Well said. Thank you, Jason.
Jason Jacobs (01:08:18):
So a few final questions. One is just, as you think about what kind of companies you want to hear from, what does that look like, too? Talent, maybe there's certain kinds of talent that your companies might want to hear from or that you're looking to hear from as a firm.
(01:08:32):
And then last is just, as you continue on your climate journey individually and as a firm, just who might you want to learn from that might be listening to the show that you might want to show up in your inbox?
Sarah Hinkfuss (01:08:44):
Amazing. So in terms of the founders that we want to hear from... So I laid out the six areas of focus for us, but I would say, even more generally, it's people who are really looking for the complementary perspective of generalist investors with core expertise in infrastructure and security, fintech, commerce tech, and vertical SaaS.
(01:09:09):
I would say there's nothing we love more than having conversations with talented, audacious, visionary founders, and so would definitely encourage people to get in touch. And feel free to reach out to anyone on the team, and we'll find the best place to direct based on where areas of expertise are across the team.
(01:09:29):
And as I mentioned, we work across the growth capital stack as well. And so, I have partners who focus on the earliest stages all the way up through to pre-IPO. And so there's not a right time, and there's not a wrong time consequentially as well.
(01:09:44):
And then, so the single thing that I love most about my job is that I get to learn for my job. And so, I most enjoy conversations where we're really getting to the meat of things, and people are challenging me, and I'm challenging them, and it's non-emotional, and instead, it's really deep and rich.
(01:10:09):
And I found that often that comes through shared experiences and relationships. And so my interest would be in having folks include us in some of the more community-building events and activities that they're doing with the interest of having this other perspective-
Jason Jacobs (01:10:26):
I'll see you next week at one of them. I know that.
Sarah Hinkfuss (01:10:32):
Exactly, yeah. And so, I'm being open to different roles that players can play in the landscape. Hopefully, you hear we come with humility but also great interest in making a difference and being a part of the solution. And so looking for folks who are excited to challenge that and to bring it into their theory of change and what they're doing in the world.
Jason Jacobs (01:10:55):
Yeah. No, I think that's really awesome. And again, I think it's one of the reasons it's so important to bring on folks who are in different places on their journeys because, to your point before about the expertise, I think building those bridges is essential to helping these solutions reach their fullest form efficiently and effectively.
(01:11:19):
So whether the purists like it or not, I think getting some new blood into the mix that does come from more of a mainstream, purely financial background is essential. We need it. And I think this discussion, at least for me, really helps better understand that perspective to then inform how to be a better partner. And I hope listeners will find the same. I'm confident they will, actually.
Sarah Hinkfuss (01:11:52):
Well, thanks so much for the opportunity to share it, Jason. It's really a privilege to be a part of the community and on the Journey, so thank you.
Jason Jacobs (01:12:01):
Thanks again for joining us on the My Climate Journey podcast.
Cody Simms (01:12:05):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem-solving capacity.
Jason Jacobs (01:12:14):
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 @mcjpod.
Yin Lu (01:12:27):
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 (01:12:37):
Thanks, and see you next episode.