Episode 199: Sean O’Sullivan, SOSV
Today's guest is Sean O'Sullivan, Managing Partner & Founder of SOSV.
SOSV is a venture capital firm with more than $1.2B in assets under management. SOSV pioneers & runs world-leading startup development programs.
Sean O'Sullivan is Managing Partner & Founder of SOSV, a venture capital firm with over $1 Billion in assets under management. SOSV specializes in programs for very early stage, deep-tech startups and is one of the most active venture investors in the world, with more than 1,000 companies in its portfolio. O'Sullivan's first company, MapInfo, popularized street mapping on computers. Credited with co-creating the term "cloud computing," Sean's first internet company, NetCentric, developed many concepts in internet computing. In addition, he founded JumpStart International, a leading humanitarian organization in conflict zones. Sean received his Bachelors of Science in Electrical Engineering from Rensselaer Polytechnic Institute and a Masters of Fine Arts in Film Production from University of Southern California. He is on the board of Khan Academy, Sun Genomics, the Tyndall Institute, the Autism Impact Fund, the Brain Foundation, and several private companies.
I was looking forward to this discussion with Sean and taking a deeper dive into SOSV. Sean explains the company's founding story, his transition from cloud and internet technology to deep tech, bio, and hardware, and what makes a meaningful climate investment to SOSV. We also discuss the commonalities across the development programs, why SOSV doesn't have a specific climate pillar, and advice Sean has for investors interested in focusing on climate. Sean is a seasoned investor and a fantastic guest.
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 February 15th, 2022
In Today's episode, we cover:
An overview of SOSV and the founding story of the company
A review of Sean's illustrious career from MapInfo to NetCentric to SOSV
What motivated Sean to refocus on deep tech, bio, frontier, and hardware after working on software
Commonalities and differences across the development programs at SOSV
Why SOSV doesn't have a dedicated climate pillar and how that decision was made
The pros and cons of a generalist model of investing rather than sector expertise
What makes a meaningful climate investment to SOSV
Profit in service of impact v profit in service of profit
Why SOSV doesn't need to talk about impact but does anyways
How SOSV is helping reimagine our global economy and the impact the firm has
Advice Sean has for investors who want to make a climate impact
Bottlenecks in climate innovation that Sean would like to see fixed
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Jason Jacobs: Hey everyone, Jason here. I am the My Climate Journey Show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey or MCJ as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren't just looking for education, but they were longing for a peer group as well. So we set up a Slack Community for those people that's now mushroomed into more than 1300 members. There is an application to become a member. It's not an exclusive thing. There's four criteria we screen for. Determination to tackle the problem of climate change, ambition to work on the most impactful solution 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 nonprofits that have been established, a bunch of hiring that's been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members and some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you wanna learn more, you can go to myclimatejourney.co, the website and click the Become A Member tab at the top. Enjoy the show.
Hello everyone, this is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help. Today's guest is Sean O'Sullivan, managing general partner and founder at SOSV. SOSV is a venture capital firm with more than a billion in assets under management. They pioneer and run world leading startup development programs and help fund at the seed stage about 130 new companies per year across these programs, including HAX, IndieBio, China Accelerator, dlab, and more.
I was excited for this one because Sean grew up as an entrepreneur building more traditional software companies, but after multiple exits decided to transition to something more purposeful, took on deep tech and these other domains that are pretty hard and thorny, especially coming from a more traditional software background and also took on this deep sense of purpose that he integrated into everything that they're doing in SOSV across the different accelerators across these different domains and across geographies.
They also happen to be pretty active in climate tech. So I was interested to learn more, not only about SOSV but about the type of climate and investing they do, their criteria for investment, their stage, their value proposition, and Sean's view in general on how to marry impact and profit, and whether you need to concede on either one of those as you go. Great discussion, and I hope you enjoy it. Sean, welcome to the show.
Sean O'Sullivan: Thank you, Jason. It's a great pleasure to be here.
Jason Jacobs: Great to have you. And I'm psyched. SOSV is so interesting and so different than any organization that I've come across before. And it's just such an honor, and a thrill to carve out some time and get to ask you a bunch of questions and, and learn more about it. I've got tons.
Sean O'Sullivan: Awesome. I'm looking forward to it. And as you know, we are a very active investor in, in climate. We're I guess according to many lists, the most active investor in climate. That's mostly cause it's a, a very concentrated area for us, but also just because we do a lot of investing. Period.
Jason Jacobs: Well, maybe for starters, what is SOSV? How do you... I mean, you do a lot of different things. So how do you describe it?
Sean O'Sullivan: Well, we invest in about 135 new startups every year. And that is primarily in a few of our concentrated areas where in life sciences, where the most active investor in the world and in hardware devices, physical devices, things you could drop on your foot and it would hurt kind of thing. We have those two areas where we have dedicated facilities, where we've spent 10s of millions of dollars building out, uh, physical capability that can really help in terms of labs and manufacturing equipment and, and lines and various other resources. Of course, including the people, PhDs and deep tech focused people in industrial design or supply chain work or all the different areas that we concentrate on. We have a lot of talent as well. We have about 140 staff globally that help our startups thrive.
Jason Jacobs: And what's the origin story for the company? How did this all come about? When and why?
Sean O'Sullivan: Yeah, so, well, I guess, I, [laughs] I could go a-all the way back in history. So I, I, myself started SOSV and we manage o-over a billion and two in assets under management and make a couple, a 100 million, 150 million or so new investments every year. We originated from... I guess, I own interest in deep tech. I, I started a company d-directly out of college. The company was a company called MapInfo. We invented this thing where you type an address into a computer or like onto your smartphone or whatever, and you see a street map and that became a w-wildly successful idea. Billions of people have now used that technology in various forms now to-
Jason Jacobs: I was a customer.
Sean O'Sullivan: Oh, were you really? Of MapInfo?
Jason Jacobs: Oh, for sure. Yeah.
Sean O'Sullivan: Wow. Wow. That's awesome.
Jason Jacobs: Yeah, no, I used to type directions to where I was going and print 'em out and take 'em with me in the car. [laughs]
Sean O'Sullivan: Yeah. Yep. So we sold directly in, in the form of software to consumers. We had online systems and we had about a thousand different software vendors that incorporated our products companies like Oracle and Microsoft and oth- many, many other companies that incorporated our products in their products that they shipped to consumers, et cetera. And yeah, so it is still a thing. There's still about, I don't know, 1200 people that work for MapInfo globally. Although, it's in a new corporate entity. I've been wrapped up and bought out many years ago. But it became a public company.
And from the proceeds of that public company, I left, you know, after about seven years and did some other things. And one of the things I did was investing in other startups. And I found that the place I had enjoyed investing the most was at the very earliest stages in the foundation of a company. And that's how SOSV invests these days through our startup development programs called HAX, which is the hardware focused area. And then through IndieBio, which is the life sciences area. And we also have other programs in the blockchain space called dlab and in the frontier, you know, cross-border space called China Accelerator and MOX.
Jason Jacobs: And given that MapInfo was a digital business, what is it when you left there that led you to move in the direction of doing things like hardware, bio, deep tech, frontier? I mean, is, can you trace that back to something in your past or was it just following your intellectual curiosity? How did that come about?
Sean O'Sullivan: Well, I, I went to Rensselaer Polytechnic Institute. I studied Electrical Engineering. I did work for IBM in my college days when I was a co-op student and whatnot, working on hardware systems. So I've always had a, a deep interest in the hardware area. The life sciences has really been an area that has been increasingly important to me as I have, you know, just recognized how important it is to everyone's life. You know, just understanding human health and planetary health and trying to make changes in those two areas.
Life sciences is an incredibly important area. My mom died of, of Alzheimer's, my son faces many challenges with a deep and profound autism, and these are areas that face everyone in their lives, all the, the health challenges that we have. And I thought that the best way to make changes in that is to become and to develop a great acceleration program initially. And now we don't call 'em accelerators anymore, but a startup development program for life science companies.
So those are the reasons why we're in those two different, very real world, physical world products. I know I came from it from the software side initially, and I think the high days of, of the software industry are, are still in front of us. There's lots of opportunities in software and the-they're always will be, but I think the greatest challenges for humanity are in the phy-physical, in the physical world, in our physical bodies and our physical environment. And that's why SOSV concentrates in those deep tech areas.
Jason Jacobs: And what were the core tenets of SOSV when you started and were those a natural evolution from w-where you were spending your time and your capital with your angel investing or, or was it a bit of a jagged transition?
Sean O'Sullivan: Yeah, well, initially it was just me with a checkbook. And so that's how SOSV started. SOSV originally was Sean O'Sullivan Ventures. Now it's just some initials cause there's a lot of people involved and it's much more than I. I'm still the managing general partner, but we have, you know, around 30 partners globally including eight general partners and a wide staff of experts and people who are very hands on in growth hacking and various other areas, you know, mechanical engineering or biomass engineering or, or any other molecular biology or whatever else. So we got this way through a roundabout path.
I won't say it was all designed up front. I love working with startups. And so I was starting it, initially just as a guy with a checkbook, y-you know, backing startups of people that I knew or doing interesting things. And I write checks of, you know, a couple 100 thousands up to a half million dollars in the early days, which was big for an angel back in the day and still is sort of a super angel style check. SOSV does write bigger checks than like the traditional accelerator programs. For a while now we've been writing sort of half a million dollar check sizes, quarter million, half million dollar check sizes at our IndieBio and HAX programs in particular.
So, and, and now some other programs. I think YC just recently announced that they're starting to write half million dollar checks. And so others are taking after us in that front and will continue to keep innovating and continue to back startups and keep backing them after they go through the, our programs. But in terms of, you know, how we got here, like it was initially just writing individual checks and then just trying to figure out, you know, what is the best way to have the greatest impact on the world? I was lucky enough to have some of the companies turn out to, that I backed come and go public.
And so I had some great returns and then I had to build a, a bigger team around myself and o-other investors to keep the growth going and then thought of the accelerator model, you know, a-after I didn't th-think of it, I was looking around for a model that I, that I admired in terms of how people can invest capital and how to work with ea-early stage teams at scale. And I had seen what Bill Gross had done out at Idealab out in Pasadena. I liked what he was doing there, but it didn't seem that scalable. And then I saw what Techstars did with the cohort model and the physical location, you know, 10 teams in a cohort. And I really respected what they had done. I had co-invested with Brad Hel- Feld on a number of investments who he was a co-founder of Techstars, and we actually backed one of Techstars as... They started in Boulder, but when they expanded, they went into Boston.
I became a backer of their Boston program and other, you know, funds there as well as 500 Startups. And so I was an initial backer of, of those programs. And, and actually, I guess before 500 Startups started, we started China Accelerator in Shanghai, originally in Dalian in China. And that was what led us to this, you know, one accelerator after another. And then now we've sort of left the original accelerator model behind. But we have these things that we call startup development programs, which have a lot more resources and a lot more follow on capital and a lot more physical assets than a traditional accelerator program would have.
Jason Jacobs: And given that your well, I was gonna call them accelerator, so what words should I use to talk about-
Sean O'Sullivan: We call 'em startup development programs or programs.
Jason Jacobs: Okay.
Sean O'Sullivan: You could just call 'em programs.
Jason Jacobs: Okay. So the, the different programs that you have, I would imagine that there's some needs that are very specific to those vertical areas, but they're also are some areas of commonality that stretch across these programs. So given that, how do you think about resourcing and how much of those 135 people, for example, that you mentioned are siloed on specific programs versus shared across?
Sean O'Sullivan: Yeah, actually that's interesting. Normally our program would have, you know, maybe six or 10 people on site and maybe as much as 30 people on site. We have these facilities which range up to, you know, from 15,000 square feet, you know, where you could have maybe a 100 people working to around 60,000 square feet where you could have 300, 400 people working. So we, we generally are trying to make space for, you know, 20 startups to 60 or so startups operating as they're still in our physical area.
That's helpful for startups, especially because what we're doing is we're enabling the startups to take the capital equipment off the table, especially in these deep tech areas where you could be spending millions of dollars getting your lab outfitted and, you know, trying to get a BSL-2 Certification for your lab, Biosafety Level 2 Certification and all those other things. We take that off the table so that startups can just do the science, get traction on the science side and get traction on the physical build side so that their products are more ready for market.
The other thing that we do by having all of this talent on site is we extend a team from maybe a two or three or four person founding team to add the other staff that they, they don't need to hire initially, or, you know, if they need to get some power supply, you know, technology being done, or if they need to, you know, incorporate some telecommunications capability in their medical device or, or whatever, we can help them extend their team effectively by using our team to help do some of that work. And those are ways to help a startup punch above its weight effectively and therefore be able to attract that next level of funding, you know, more quickly.
So helping startups go faster and go further is the whole point of these accelerators. The reason I actually think I identified with this is when I started my first startup, I did not know anything [laughing] about cap tables. I did not know how to sell to a Fortune 500 company. I did not know anything about really running a company. I was a 21-year-old kid graduating from u-university with some really good technical skills. I was great at engineering. But, you know, what I needed is some business mentoring and, and advice. And I got it from people in the community that actually a senior vice president, general electric and another guy who's running a, a $60 million physical products, you know, Stirling engine company.
And they helped me and they hooked me up with an investment banker type person. And I, they helped me raise some funding and they helped me, you know, they really just s-spent time working with me. And I feel that SOSV is a exercise at giving back at scale. You know, we are trying to help the next generation go further and faster. And I've benefited usually from the generosity of spirit of those people who backed me. You know, they did well, you know, they all made 10 or a 100 times their money or 500 times their money sometimes in backing me. And I'm happy that they did well, you know, but I would not have gotten where I am today without their advice and wisdom. And that's what SOSV is trying to recreate for the next generation of entrepreneurs.
Jason Jacobs: And so if I'm hearing right, is most of that resource concentrated on a per program basis?
Sean O'Sullivan: Yeah. So when people go through the programs they're being helped. You did ask the question, how much of that is [laughs] at the program level and how much of it is across the programs? So we do have global resources as well. That would include some of our incredibly highly talented folks, like, you know, our senior operating partner, Ned Desmond, who runs the climate tech events and all of our global events and all our of global m-marketing.
Jason Jacobs: Longtime TechCrunch COO, right?
Sean O'Sullivan: Yes. Longtime TechCrunch COO.
Jason Jacobs: [laughs]
Sean O'Sullivan: He was a war correspondent for Time Magazine and he ran a whole bunch of stuff for in the old days, AOL et cetera, and an entrepreneur himself. But yeah, so he's a great global resource for our, our staff. And we have a s, other PR focused global staff. We have fundraising global staff that are all helpful in helping all the teams, you know, regardless of whatever program they were coming out of. And that would be about maybe say 20% of our resources are at the global level and, and 80% are at the program level.
Jason Jacobs: Makes sense. And I heard you say that you're one of the most active, if not, if not the most active climate investor by a number of investments. So, but I don't see a, a dedicated climate program. So is, is that just s-spread across all the different programs that you do? Is that accidental? Is there some intentionality to it? Maybe talk a little bit about how that's played out and, and how you think about climate as a pillar, if at all.
Sean O'Sullivan: Yeah, no, a-absolutely. So when I look at the core of what SOSV does, we think of it as human health planetary health, and to the extent and the concentration and on HAX is on the reindustrialization and the reinvention of industrialization for the world. Those areas mostly cover our 70, 80% of our investing that happens in the IndieBio and HAX areas. The other programs that we have very successful programs in the blockchain and in the China Accelerator and MOX areas are less about those, that core, but climate has been a area that we've been investing in for probably around 18 years or at least 15 years, but it has just been coming more and more clearer how pressing the need is.
And we're responding to what we think our humanity's most pressing needs. You know, I'm lucky enough myself that I, my first company went public when I was 28 years old. I never needed to work a day in my life. I work a 100 hours a week since then, and I don't know why I'm motivated [laughs] to do so. But like the truth is my primary goal is yes, we do very well financially as a firm and we grow very well but the real thing is what kind of lasting impact can we have as human beings and how do we leave a purposeful and meaningful life? And I think if you focus on the problems that really need solving, rather than just trying to make money, you can make money along the way. It's a side effect of doing things that really matter.
And so the things that I believe really matter are the things that the people around us at SOSV the people that come to SOSV and work as partners care about these core areas that we've just talked about, human planetary health in particular. And so these are existential questions for our survival. And so planetary health probably was, I'd say 10% of our investing 10 years ago. It is at this point 30% of our investing globally and I could see it being even more in the years ahead. It is a pressing problem that is not going away. And there are other problems that we need to solve for humanity and for justice and equality. And for other areas that we think technology as a role to play. But climate is an extraordinarily important and pressing problem that is obvious to all of us today. And we are working on it heavily in, across the board in dozens of industries.
Jason Jacobs: When you think about the success criteria for an investor, can a generalist model be successful when it comes to domains or is it important to develop sector expertise and then stay in your lane as it relates to investing in areas that you deeply understand?
Sean O'Sullivan: Well, we're deep tech investors. We deeply go after problem sets that we think are primarily technical challenges that we're going to solve deeply. That said, we're not like climate specialists. What we are is industry specialists. We can, you know, and efficiency experts, and we're looking at these problems and seeing how we can apply technology to solve these problems at scale. And when you look at a book like Bill Gates had a nice little sort of summer of in his How to Solve a Climate Disaster book of the various industries that need to be tackled if you're gonna solve climate change.
So, you know, number one is manufacturing. Number two is energy production. Number three, I believe was agriculture around 19%. Number four was at around 16% was transportation. And number five, I think was heating and cooling or buildings, I think he grouped it as. And we're going after, you know, in manufacturing, dozens of targets, we're going after agriculture in dozens of ways with our various food companies and food production techniques, food efficiency, manufacturing areas. We're going after transportation in a variety of ways. Some which are more sort of software focused and others, which are, you know, battery related and, uh, everything else.
And we're going after heating and cooling and all the areas. We, we're less active in the energy production areas space, but we are more active and we will be more active in that as we see opportunities, but we are active in the, you know, grid systems, energy systems, batteries, and things like that. So, you know, if you look at the SOSV Climate Tech 100, you will see, uh, dozen industries, you know, being targeted by the companies that we're backing. We back perhaps around 40 new climate tech companies every year 30 to 40 new climate tech companies a year. And we're trying to spin in a lot more new investors into this space and the Climate Tech Summit, which was last October, and we're doing it again this year is about drawing more investors.
And there were, there were several, there was a couple thousand attendees, 2000 attendees at that conference. And thank you, Jason, for being a moderator at that conference. And there were probably 800 different investors, many of which, who haven't done that much in climate tech investing previously. So we're trying to make the water safe for more companies to come, more VCs to get involved and more corporates to get involved in investing and the recreation of a manufacturing and, and a global economy that will be a sustainable world where planetary health is prioritized.
Jason Jacobs: And I, I have no succinct way to ask this next question. So I'll give you a little bit of context as my, my hacky way to, to get through it. But it's, it's something we struggle with. And that's, how do you know if something passes your climate threshold? So Breakthrough Energy Ventures, for example, I think they have a half a gigaton threshold in order to call it a climate investment. We wrestle with that because for example, if you are re-skilling and helping create jobs and improve people's lives that are sorely needed jobs to build the infrastructure to power the clean energy transition, for example, that's harder to attribute directly to emissions removed or reduced.
But it matters for the climate. If you're winning over millions or 10s of millions or 100s of millions of hearts and minds with storytelling, that matters for climate. It's harder to attribute directly to emissions reduction or, or removal. And we, and we think those are impactful for, for climate too. How do you in SOSV think about what makes a meaningful climate investment?
Sean O'Sullivan: Sure, absolutely. And I have no problem with a VC saying, "Hey, this is the, this is our approach to how we're gonna, you know, slice it and dice it." We know the deals that come through SOSV that we wanna take to Breakthrough Energy just because we know, you know, and they've been backing several o-of our companies along the way. And we like working with them a lot. I mean, they're very committed and I, and I appreciate their approach, you know, with the Total Life-Cycle or.
Jason Jacobs: I forget the words, but it's all around the gigaton. Yeah. I know that.
Sean O'Sullivan: [laughs] Its TLSTLA whatever it is, I forget what the three letter acronym is that describes it. Lifecycle Analysis, LCA. Okay. Thank you.
Jason Jacobs: Gigatons rule everything around me. [laughs]
Sean O'Sullivan: Yeah. So we like that approach. You know, we think that's, it's clear, you know, as to what they're going for. We are definitely looking at what the entrepreneur brings to us, right? So we get around 8,000 applications a year to get into one of the SOSV programs. We select about 2% of them, or a little less than that. And we look at the ideas that come to us and we say, "Okay, this fits nicely into our climate focus. This fits nicely into our planetary health." It does not need to be a half a gigaton of impact.
If it's gonna improve our ability to feed the planet, you know, in a more sustainable way, it could be something which, you know, hypothetically, a lot of companies get to where they end up being through multiple pivots, you know, before they get there. You know, if you're planning to save the world's, you know, three gigatons of carbon, you know, dioxide em-emissions equivalent, you know, the likelihood is you've probably not gonna end up doing what you think you're gonna do anyway. So there's the expression about how many times it, it takes for a company to succeed, how many pivots they need to take.
Because if you don't pivot at all and you start your business and you're not listening to the customers, and you're like, "This is what we're gonna do," and you're likely to fail, because the marketplace is not necessarily where you think it's going to be. You actually have to start at one place, bringing the product forward, pivot as necessary, attract a new market, et cetera. The average company that succeeds pivots between two to three times by the time they succeed. If they pivot more than three times, they probably are gonna fail because they just run out of pivots. They run a ru-runway. They, they're changing their minds too quickly. They don't give themselves enough time to succeed.
And if they don't change at all, then they're just fixed in their mindset and they're just not listening to the marketplace, or they're not listening to the changes in technology, or they're not listening to their customers. And so we're looking at the team with the idea that they take to us, the core, their North Star. Why are they there? What matters to them? And we're looking at people that really care about improving life on the planet and have a, perhaps a little bit... You know, there has to be a business model, but there also needs to be a reason why people really care about that business. From an impact perspective, we're not a 100% impact investor.
Probably 60, 70% of what we do, 70% probably is impact investing and then other stuff is probably more financially driven, but we do very well on the impact, investment side anyway, you know, in terms of re-returns, et cetera, because people who really care about these fundamental changes that are, you know, are necessary, you know, they're gonna stay with the business. There's gonna be greater investor interest. There's gonna be greater consumer demand or pickup by the customers who really care about the mission that the, that the company has. So we like investing in, in this space for a lot of reasons. I hope that answered the question, partially at least.
Jason Jacobs: It does. And I wanna jump back to something you talked about earlier, which is, it, it almost sounded like, and, and correct me if I, if I didn't hear correctly. But that you think of it as profit in service of, of impact versus profit in service of profit.
Sean O'Sullivan: Don't tell our LPs that. [laughs] They're happy with their 30% net IR returns.
Jason Jacobs: And that's what I wanna talk about, right? Is, is given that, that's what drives you is impact? And if, if that's really true, which you said it was earlier in the discussion, then, then what are the implications of that? Like, what do you do that's different than if it was profit in search of profit with no impact driver at all?
Sean O'Sullivan: Yeah. You know, I have made the mistake. I remember after my, my first company went public, so super successful, right? So I thought I could do anything. I thought I was God. I was over confident. My next company was... You know, somebody came to me who had been involved with the first company and he, and he asked me to come and, and be the CEO of this, something in the internet space when the internet was super hot, it was very early days. And I said, yes. And I said, it partly outta pride and partly outta greed.
And I found out that greed is a terrible North Star, and it is just fickle as anything, including all the people that you attract to that mission. You know, a greed mission is just a disaster. It's just, the moment anything starts going wrong everybody jumps ship, you know? The whole thing was a, I just found it from my heart to be a waste of time and it felt it to be so destroying. And the minute I could ethically get out of it and hand it along to somebody else to run that company, which did do 10 million in revenue and did op you know, but it was a failure. And it felt to me like a, a terrible outcome. And it was a bad outcome even financially in the end.
So I just don't want to have a meaningless life chasing the a-almighty dollar, you know? And I do think that many other people feel the same way that, you know, you can create great and lasting value by doing important things and attach a business model to it. And the business model is necessary in order for you to have the greatest level of impact, right? So if you build a profitable company, you can continue to expand and you can continue to play, and you can continue to deliver more value to the end customer.
There's two ways to make money in this world. One is to do it by creating value at the core. The other way is to do it by extracting value by getting yourself into the middle of some business that, where you can pull money out, you know, like a FinTech business or not to say all FinTech businesses are bad or anything. But, you know, like where you're just sort of inserting yourself into the equation and extracting money, you know, a broker or something like that.
Not saying all business brokers are bad or, or a whatever. But I think there's enough opportunities to create 10X improvements in how economies work or five X improvements in how economies work so that we can continue to advance the state of human existence. And if you make money along the way, you can continue to i-improve your, you know, your ability to continue to back more and more of those companies and have more impact on people. So that's where our focus is.
Jason Jacobs: This next question is a r, is a related question and that's about LP composition. And I bring it up because let's say you're an institutional LP and let's say you represent a bunch of pension holders, retirees, and their precious capital that they worked their whole lives to accumulate that they're relying on for their retirements. And they have a choice of investing in fund with a mission focus and, and maybe that fund's gonna two X it's money.
Or a fund that's more about profit in the quest of profit without any mission focus at all and it's gonna five X their money. If they are doing their jobs and being good fiduciaries, I mean, can they invest in the impact focused one in that scenario with a clear conscience or are they, uh, breaching their responsibilities?
Sean O'Sullivan: Yeah. I would argue that they could be breaching their responsibility and they should just search harder. I mean, we're an impact investor for the most part and we get six to seven X returns. So they should leave that five X F-FinTech fund behind and put it into a [laughs] impact investor that's gonna get 6% [inaudible 00:33:00]
Jason Jacobs: But if that true, then why, why do you even need to talk about impact? I forget which discussion it was [crosstalk 00:33:05]
Sean O'Sullivan: It's true. You don't to talk about impact.
Jason Jacobs: Yeah.
Sean O'Sullivan: Uh, we don't need to talk about impact. We put our deck, our decks, don't go out saying we're impact investor. We just talk about our returns. We're mostly going to financial institutions and things like that and they're just looking for the returns. And, you know, I think they can feel good about selecting us, you know, and there are, i-increasingly, there are, there is a whole range of people that are in-investing with an impact, uh, focus thinking that they could be going after concessionary returns. You don't need to go after concessionary returns.
It sickens me sometimes to see people taking advantage of these financial models. You know, in Wall Street, there's statistics, which indicate that 10% of the people on Wall Street are psychopaths [laughs] sociopaths or psychopaths that they would sell their mother. Now looking that at that number, that means there's 90% of people that are not sociopaths in Wall Street. But even so that's a very high representation of the sociopaths. And in the general society it's around two or 3% sociopaths that who would, who don't care about the impact to other human beings.
And so it, sometimes you look at some of these businesses and you're like, "Wow, they really just don't care what the impact of these payday loans or, or how they're making poor people go bankrupt or driving people into homelessness or anything else. And that would drive me freaking nuts. And I, I think that most of the people listening to this audience, 97% of the people listening to this would be sickened by people that don't have some ethical basis for their investment.
I'd say that most VCs are the most proud about the investments that they're making that have an ethical, you know, value. And I think if you're early in your career, if you're in your 20s and you think it's all about chasing the a-almighty dollar and getting the highest return, you know, you have some growing up to do. And if you're in your 50s and you haven't grown up yet, well then, you know, sorry, you missed the boat.
Jason Jacobs: Now, I guess looking at the bigger picture here, the more macro picture, our whole global economy was built without factoring the actionalities of pollution that we're dumping up into the atmosphere. We need to rebuild the global economy in a way that is more in harmony with the planet we rely on and with each other.
Sean O'Sullivan: Dito, baby. Amen.
Jason Jacobs: Okay. So that's great. In terms of how, how, right? And what I mean is, do we need the impact sector to grow? Do we need the general tech sector to evolve its purview? Is that a structural change? Is it like, you know, injecting conscience into, in, into-
Sean O'Sullivan: Yes. [laughs]
Jason Jacobs: ... more people? Does the government play a role? Like what, what's your world view on, on how to make this a reality? And, and I know, look SOSV is gonna do what SOSV can do and, and you're doing a lot, but, but SO-SOSV aside, like how do we get there?
Sean O'Sullivan: You know, the one thing I'm encouraged by is like, we're not a very big player. We have a billion and two in assets under management, but for every a 100 million that we invest, there's about two billion that follows on into our companies. So like I feel great about that. And so we are seeing a huge amount of leverage from later stage VCs that are coming and backing the companies that are coming out of our programs. And I wanna feel very proud about that. And I think, but that's still just, it's just a drop in the bucket.
But you're right. We have to inject more ethics into our public discourse and our responsibility and we're not seeing great leadership. You know, we're not certainly from a political standpoint you're seeing, you've seen a tremendous disregard for reality for a very long time and then ethics sort of went out the window. Sorry to offend anyone who's, you know, a big supporter of Trump, but he was a big liar, cheater, misogynist, you know, in his daily business life even before he was a president.
This is a problem to laud these people as being successful when they're not successful. They're actually, you know, almost evil incarnate in that they're creating a model for people to say, "Oh, that's what success looks like." That is not what success looks like. If you're impoverishing others, whether you're running a casino and driving all your suppliers and, and, and whatnot out of business before you, you know, bankrupt the casino and bankrupt the state that backed it, you know, these are not people we can be proud of.
I don't know how to fix it because it seems like people are getting away with stuff, right? You know, Trump is still not in prison for what he did in New Jersey, you know, with the casino system, you know not to mention all the other suppliers he stiffed along the way or, or, or anything else. This is nothing to do with his presidency. Is everything to do with the fact that he was a bad businessman for many years and lies and you know, all the new things came out about his accounting firm.
Now no longer standing behi-hind his accounts for the last 20 years. Mazars just announced yesterday. Like we have to have a greater and higher standard for life, you know, and ethics and I don't know how that happens. Uh, [laughing] I don't know how that happens. [laughs] And now this has become a very philosophical talk, but I can tell you it's at the root of it.
People have to take responsibility for the decisions that they make and they need to take those responsibilities about the pollution that they're adding to the environment, through the processes that aren't good enough. And I have to say that most individuals are in favor of taking those steps towards taking responsibility. And I just wish we had better leadership in general that would follow through on that, on those responsibilities and not let people get away with it when they don't take responsibility.
Jason Jacobs: Now, if we just do some, some quick role playing here. So if I'm, let's say a product manager in traditional tech, and I'm really anxious about the systems problem of climate change and feel like it's a great problem and needs attention and I don't know how to help. What advice do you have for me?
Sean O'Sullivan: Well, you know, every industry is being reinvented right now. And if you're a, you're saying, if you're at a mid stage sort of Fortune 500 style company, and, you know, you're trying to make a decision-
Jason Jacobs: I'm on Facebook, I'm at Google, I'm at Microsoft.
Sean O'Sullivan: Yeah.
Jason Jacobs: I'm, I'm somewhere-
Sean O'Sullivan: Yeah.
Jason Jacobs: ... but I haven't touched climate. I don't know anything about those domains. I just know that like, you know, I live in the woods and I'm worried that my house is gonna burn down and I'm worried about droughts and I'm worried about sea level rise. And I'm worried about pandemics and worried about a lot of things that have nothing to do with my job. And increasing, I'm having trouble focusing at my job because I'm so worried about all this other stuff like that person.
Sean O'Sullivan: Right.
Jason Jacobs: Yeah.
Sean O'Sullivan: Yeah. Well, if you have something to offer [laughs] there's like 100s of jobs available, uh, you know, there's over thousands of jobs available on the SOSV jobs boards for our climate tech companies. [laughs] Go work directly on the problem if you wanna work directly on the problem. I think people need to make decisions around their life-lifestyles, you know, which is compatible with living a more sustainable life. And for some of us that includes making choices around our food supplies. So we're being less reliant on animal agriculture.
You know, for some of us, it means, you know, making sure that our, that we're not, you know, contributing to the problem with the way that we're commuting to work or how long of a commutes we're willing to take. You know, just trying to live in a more sustainable way individually. But if, you know, ultimately if you wanna have the greatest impact, you work directly on the problem that's causing you grief. And that pain point could be recognizing, hey, there's something in my work right now, which is not very sustainable.
Why aren't we using sustainable energy at, at work? Why don't we put in some solar panels? Solar el-electricity now is the cheapest form of electricity ever made in mankind's history and it's, it's available now. Yes, we have some battery issues and things like that still, but it's still incredibly... You know, people can make individual spot decisions to improve the global sustainability issue in planetary health. You know, right now take some ownership is what I would say.
Jason Jacobs: And is that, is that answer the same, if I'm, let's say a founder who, you know, just sold my company and it was an ad tech company, and now I wanna pivot into climate, but I don't know anything about these domains? Like should I be doing something at the intersection of what I understand and the problem I care about? Or, or should I give myself permission to go into the brave new world of exploring domains that I don't know anything about?
Sean O'Sullivan: You know what I have always [laughs] I have always aired by throwing myself into situations I know very little about, and then having a new and fresh perspective and I found that, that often helps, you know? Yes, it's great to cross those markets and cross those, that, that expertise that you have from the past and bring that into a problem that needs to be solved and sometimes that'll work. I'd say, people have to have the freedom to be able to... A lot of people don't like being a fish totally out of water. I find it to be quite refreshing myself.
I find that, you know, there's an expression about living in the same town your whole life is like reading one page out of a book. And if you travel, if you go to overseas, if you see how people live in Europe or in Asia or in Africa or, or whatever, that's like reading all the pages in the book, and you get to understand how different people solve different problems in completely different ways. And when you, you apply it back to your hometown, you can actually think of, you know, more efficient ways and more sustainable ways of how to take these innovations, which could be innovations from 100s of years ago and apply them to our problems that we're facing today.
Jason Jacobs: And we've talked a lot about what you've accomplished with SOSV and how the machine is the operating today. If you wanted the machine to operate at bigger and more impactful scale, what are some bottlenecks that are frustrating you? And, and if you could change anything outside of the scope of your control to help you, you know, swing a bigger bat, go faster, go bigger, have a bigger impact, what would you change and how would you change it?
Sean O'Sullivan: Well, I think we're growing about as fast as we can sustainably do right now. And we for, we're fortunate to have the support of lots of LPs that believe in our mission. And institutional LPs were slow to the game, you know, coming to us. I mean, we have some great institutional investors now. But it's mostly more family offices and high net worth individuals and people that had worked with us, or even our founders themselves after they had exit. We've made a couple of founders who are, you know, billionaire founders, and so they've put money back into the fund and things like that.
So we're not really heavily constrained at this point, other than, you know, we're building out new facilities in New, New Jersey or HAX USA for their new manufacturing center for the United States as, as we reinvent, uh, the reindustrialization of the US and the Western world. We are building out those new facilities in New York as well for IndieBio in New York. Those are big projects that we're working on this year, and those are costing 10s of millions of dollars to build centers for entrepreneurs as they grow. But we're, we're well funded for that and we've gotten some nice support from some sponsors and, and backers on that as well.
So I think we're okay. But I, you know, we're an open shop. We'll invest with 100s of other investors every year, and that's why we are doing things like the SOSV Climate Tech Summit is to just sort of help spread the news and help others on their journey to invest in these challenging deep tech areas. You know, if there was anything that would free it up, it would be for more C capital to be coming into these companies. There's a, huge amounts of money pouring into these companies at the later stages at the series B and series C, huge amounts. But more capital coming at the seed level would be good by other investors and they can contact me or, or other investors at SOSV. If they're interested in doing that, we'll get them hooked up with some companies to look at.
Jason Jacobs: And I know you talked about 100 hour week. So it sounds like you're going strong and will be for as far as the, I can see. What does SOSV look like in its final form? Or say it another way, like looking back one day, when you do hang up the cleats, if that day ever comes, what do you hope that you and SOSV will have achieved at that time?
Sean O'Sullivan: Well, I mean, I think, you know, we're in, in the process of having at least 10 Fortune 500 companies come out of SOSVs portfolio. You know, a lot of those, we have a lot of companies that are also being acquired as, as they're going forward, et cetera. But I'd say that in the end game, there are so many urgent problems that need to be solved that really, really matter. I have a son who's gonna have lifelong challenges with autism, and that is a solvable problem.
I don't know how to solve it. I don't know that it can be completely solved, but I know that we could prevent the next generation from suffering as much as they are today. And I would say that, you know, cancers, we, we have huge numbers of point applications, you know, in the human health area where we are solving these problems. And I just wanna feel good about the work that we're doing and the lives that are being saved and the sustainability of a planet that can get to Carbon Zero as quickly as we can. I think we can beat 2050.
I think that's, you know, with all the food technology companies that we have, I think that animal agriculture will be a thing. It'll be a luxury market. Maybe 10% of people will be using animal agriculture in a 20 year time frame. And we have a, a... And then the other 90% are gonna have converted over these new forms of cellular agriculture to precision fermentation products like milk made from cow milk, but just made in bio reactors and things like that. All the stuff that we're doing in the food area, all the things that are being done in the manufacturing area.
I just, I think that we cannot solve the problem. We will have 500 unicorns in the area of the reinvention of our whole infrastructure, so that we have a safe and sustainable planetary climate. And that will create lots of opportunities. We want to have a lot of those companies being helped by SOSV along the way. But, you know, it's an endless mission and it doesn't need to have one or two highlights. There's gonna be 100s of highlights.
We already have a 100 companies in each of our funds that are doing extremely well with an average of at least a 10 X return. So we know that there's gonna be limitless opportunities for a lot of founders to make a huge difference in the world. And that's, it's a game of process we're in that process to try to continue to keep that process moving forward because every day that we can keep fighting, there are better solutions for consumers and for the plan that, that are coming up.
Jason Jacobs: Sean, uh, how can listeners be helpful for you? Who do you want to hear from, if anybody?
Sean O'Sullivan: Actually, there's an area that HAX USA is just beginning up. We are looking for senior talents, people that have built multimillion dollar multinational companies to be either mentors in that space, or, you know, we have an opening for partners and a partner, a leading partner and partners in that space as we grow that operation. So that, that's a specific need.
And we're continuing to look for, you know, diverse partners at, at SOSV in the, in the, both the female and, and people of color side that have that sort of entrepreneurial background and experience that can be useful to our new entrepreneurs, our next generation entrepreneurs as they go through the programs. That's, those are areas that will be of particular need and, uh, interest. Thank you for asking, Jason.
Jason Jacobs: Of course, and anything I didn't ask that I should have, or any parting words for listeners?
Sean O'Sullivan: Keep fighting the good fight. I know the people that are listening to your channel are [laughs] are already converts. But just the same, it's so important to recognize how much can be done across the board, and that this is not gonna be a fight one with a single bullet, but instead it's gonna require a hail of [laughs] a hail of solutions. Let's not use bullets, so we're not violent here. So, you know, it's gonna require an ever increasing range of solutions and there are huge opportunities to provide those solutions. So, you know, thank you for the opportunity to speak to your audience, Jason.
Jason Jacobs: Amazing. Thanks so much for coming on the show. I learned a lot. This was awesome, and you're doing incredible work. So best of luck to you and the whole SOSV team.
Sean O'Sullivan: Thank you, Jason. Talk to you soon.
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 it's .co not .com. Someday we'll get the .com, but right now .co. You can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.
