Capital Series: Temple Fennell, Clean Energy Ventures
This episode is part of our new Capital Series hosted by MCJ partner, Jason Jacobs. This series explores a diverse range of capital sources and the individuals who drive them. From family offices and institutional LPs to private equity, government funding, and more, we take a deep dive into the world of capital and its critical role in driving innovation and progress.
Temple Fennell is the Co-founder and Managing Partner at Clean Energy Ventures, an early-stage venture firm that funds disruptive capital-light technologies and business model innovations that can reshape how we produce and consume energy.
Temple has been investing in climate tech (or "Cleantech" as it used to be called) for a long time, and has the learnings to show for it. This episode covers the origin story of Clean Energy Ventures, their approach, the mix of limited partners that back their fund, and their criteria for investment from an impact standpoint and a financial standpoint. A broader discussion follows about the climate tech capital stack, some of the learnings from Cleantech 1.0, why Temple believes this time is different, the state of institutional capital as it relates to climate tech fund investing, as well as what it will take to get more capital flowing in this direction.
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Temple Fennell Twitter / LinkedIn
Jason Jacobs
MCJ Podcast / Collective
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Episode recorded on May 26, 2023 (released on June 28, 2023)
In this episode, we cover:
[02:56]: Origins and overview of Clean Energy Ventures
[04:50]: Distinction between Clean Energy Venture Group (CEVG) and Clean Energy Venture Fund
[07:20]: Temple's background, family investments, and the clean energy space in Charlottesville, VA
[11:11]: Overview of CREO (Clean Energy Renewable Environment Opportunities) syndicate
[13:25]: Key learnings from Cleantech 1.0
[18:15]: CEVG check sizes, portfolio, and support for entrepreneurs
[20:01]: History of CEVG's fund one and their use of SPVs (special purpose vehicles)
[22:12]: Current investment focus and fund status
[25:59]: Approach to impact measurement
[30:20]: Approach to financial returns and causal link to impact
[31:19]: Approach to selecting LPs
[34:15]: Pension fund hesitance due to previous losses in Cleantech 1.0
[38:18]: Why Cleantech 1.0 failed and how this time is different
[41:02]: How limited DPI (distributed paid-in capital) poses challenges in attracting institutional investors
[43:23]: Pricing, exit analysis, and the need for top decile returns
[46:17]: State of the broader market vs. climate tech market, risk assessments, and team dynamics
[48:56]: Gaps and opportunities in the capital stack, preference for capital-light companies, and importance of milestones
[52:21]: Who Temple wants to hear from
[54:58]: Closing thoughts on the differences between "Tech-tech" and Cleantech
Resources mentioned:
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Jason Jacobs (00:00):
Today on the MCJ Capital Series, our guest is Temple Fennell, Co-Founder and Managing Partner at Clean Energy Ventures. Clean Energy Ventures is an early-stage venture firm that funds disruptive capital-light technologies and business model innovations that can reshape how we produce and consume energy.
(00:20):
I was excited for this one because Temple has been investing in climate tech, or clean tech as it used to be called, for a long time and has the scars and the learnings to show for it. We cover a lot in this episode including the origin story of Clean Energy Ventures, their approach, the mix of limited partners that back their fund both at the beginning and how that's evolved to today. Their criteria for investment from an impact standpoint and a financial standpoint, and we have a broader discussion about the climate tech capital stack in general, some of the learnings from Clean Tech 1.0, why Temple believes that this time is different, and also just the state of institutional capital as it relates to climate tech fund investing and what it will take to get more capital flowing in this direction. But before we start...
Cody Simms (01:15):
I'm Cody Simms.
Yin Lu (01:16):
I'm Yin Lu.
Jason Jacobs (01:18):
I'm Jason Jacobs. Welcome to My Climate Journey.
Yin Lu (01:24):
This show is a growing body of knowledge focused on climate change and potential solutions.
Cody Simms (01:29):
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 (01:42):
With that, Temple Fennell. Welcome to the show.
Temple Fennell (01:46):
Thanks Jason.
Jason Jacobs (01:46):
Well, I'm so psyched for this discussion. I mean, we're both in Boston. You are a clean energy grizzles veteran. Coming up on my five-year mark soon, I'm still a wet-behind-the-ears newbie. As I told you a little bit before we started recording, we've been out pulling our first fund together. As part of that, we've been talking to a lot of people, learning from some of the best GPs in the space and obviously out pitching a number of LPs, and it just felt inauthentic doing so kind of in the shadows one-to-one given how public we've been about our learning journey and everything else we do. It's like, "Well, wait a minute, why don't we just have a capital series when we can give these people a platform and learn from them?" Clean Energy Ventures is as well-placed as anybody. We haven't yet had anyone on the show. So thank you for making the time, and I'm psyched to have you on and to learn from you.
Temple Fennell (02:36):
Great. Well, my pleasure. Well, it's been great watching all that you've built so successfully. Congratulations. I remember you coming into the Clean Energy Venture Group pre-pandemic for one of our meetings.
Jason Jacobs (02:47):
Gosh, a lot of life has happened between then and now.
Temple Fennell (02:49):
It really has. I guess you've just gotten out of RunKeeper and were looking at the space.
Jason Jacobs (02:56):
Exactly. Well, maybe for the benefit of listeners, just give an overview of Clean Energy Ventures and how it came about.
Temple Fennell (03:01):
Sure. So we're an early-stage venture fund, and it was launched out of the Clean Energy Venture Group and I'll talk a little bit about that. We are very explicitly focused on decarburization. So we only invest in technologies that at scale can reduce at least two and a half gigatons of greenhouse gases between now and 2050. So very much about the production, distribution, use of fuel and power. We're very deep technically. We've got close to 20 people on the team. Former Energy Secretary Bernie Moniz runs our strategic advisory board with Dr. Williams, who was BP's Chief Scientist [inaudible 00:03:37], Mike McQuade.
(03:39):
We like to go into companies where we are okay taking engineering risk as long as we feel like the exploratory experimental phases of the R&D has essentially retired any sort of fundamental first principle risks. We won't take all engineering risks. There's certain engineering risks we don't like. We don't volumetric scale risks. We don't like it when the incumbents have to completely retool to adopt the technology. We haven't invested in any little pesty bugs and microbes that are very difficult to grow and keep alive. But we do like to sort of roll up our sleeves and really help build companies around these brilliant founders.
(04:13):
We usually find these companies at the seed stage have one or two brilliant founders that have a product that's ready to be commercialized, teams probably have never really built a commercially scalable business in many cases. And so that's really what we do. I've started two technology businesses, actually three businesses. One was a project finance, fintech business. And pretty much everybody on our group, the Clean Energy Venture Group is coming from industry. Either they've started and built companies on their own or they're coming from existing businesses. So we see ourselves really as the Clean Energy Venture Group and our team. It's really engineers and operators as much as we do investors.
Jason Jacobs (04:50):
What's the difference between Clean Energy Venture Group and Clean Energy Venture Fund?
Temple Fennell (04:55):
So Clean Energy Venture Group is really a private investor syndicate, and it was started by my partners Dan Goldman and Dave Miller back in 2005, so back in the very early days, with a number of others like Jamie Rosenthal and Ralph Earl. And it was really to do what we do today, which is to help these young or these relatively new entrepreneurs build companies. And Dan comes from the oil and gas space. He's been in energy his entire career. He actually with Scott Brown created New Energy Capital, which is really sort of the first renewable project finance company. Dave is a three-degree MIT graduate. His PhD was actually in clean energy, and he's created a systems dynamic model. It's basically a simulator for clean energy startups. It's still taught at MIT. They've been in this space almost 20 years, and they gradually started building out the group.
(05:49):
It's different than an angel group in that this group are technical, they have a lot of operating experience, they're very involved in sourcing, diligencing, and then ultimately investing personally out of their own pockets into these companies alongside Clean Energy Ventures. And so we work really hand in glove, CEVG and the Clean Energy Venture Fund. So Clean Energy Venture Group and the Clean Energy Venture Fund, we're very much sister organizations.
(06:12):
I was asked to join the Clean Energy Venture Group when I came up here to Boston, Cambridge. I came up in 2013 to be a Sloan Fellow. And it's where I really became aware of what was going on at Clean Energy Venture Group and then was invited to join the group. I think I was the 18th member. So this is 2015, 10 years after the group was formed and it was still a relatively small group. I think now we're only around 30 or 35 people, so it's a very curated group. You have to be very active, very committed to our mission of investing in clean energy technologies that can decarbonize the world.
(06:47):
And then when I joined them, what's really remarkable about this group is how successful they had actually been throughout the financial crisis. They had, at that point I guess, Dan and Dave, between them and invested in about 30 companies. What really struck me was they had this incredible low loss ratio. So they had written off or written down less than about 15% of the businesses. And they were investing in tough tech, they're investing in hardware, they're investing in chemistry. And even though it was tough tech, they had this incredible low loss ratio.
(07:17):
And why that was so important to me is I was, back up and give you a little bit of my origin story as well. So I started really in Charlottesville, Virginia, and Charlottesville is oddly this really vibrant, clean energy ecosystem. There are a number of companies that have been formed out of there, a number of investors. Charlottesville is mostly known for UVA and maybe just some is where Dave Matthews band came from.
Jason Jacobs (07:42):
I'm one of those people that knows it for that.
Temple Fennell (07:46):
Okay.
Jason Jacobs (07:46):
I was in late 90s college grad, so Dave Matthews, that was a big part of my formative years.
Temple Fennell (07:51):
Honestly, David was really the first person that I knew that was investing in this space. So he and his wife Ashley back in really in the 90s right after he really began to break out, some of his early commitments were to energy and ag. They were investing in farms and basically turning them to sustainable, responsible farming and using sustainable farming practices. They were early investors in MissionPoint, which was sort of like the PayPal of clean energy where a lot of the people that are now sort of formative in the industry really sort of came out of the MissionPoint. And David was an LP in that.
(08:25):
And then also coming out of Charlottesville, to sort of stay on that point is Sandy Reisky, who created Apex Clean Energy, which is really the largest independent wind developer, I went to grade school with Sandy. Sandy's actual sister, he was a little bit younger than me, but his sister and I were boyfriend and girlfriend in fifth grade. So it's a very tight community.
(08:44):
And in fact our family, to give you a little bit more history, I started a couple of different technology businesses back in the 90s. They were mostly internet. They were funded by groups like NEA and Oak Investment Partners. Then I started a third one with David actually, Dave Matthews. It was more of a project finance company financing films primarily. And Sandy was the CFO of one of my businesses. And Sandy resigned in 1999 to be a wind developer. And I was like, Sandy, what in the world is a wind developer? Explain this to me. And he did and he was really quite successful rolling up a bunch of projects under a banner called Greenlight. And then when he launched Apex, our family was really the first investor in helping Sandy stand up Apex my wife, about 20 years ago, in fact 20 years ago, this past Wednesday, I married into this oil and gas family.
(09:33):
My wife's grandmother was one of the founders of Murphy Oil, which she and her siblings, which is a global exploration production company in Murphy, USA. It's a remarkable family. And when I joined the family very soon afterwards, family really committed to investing in really AgTech and Cleantech. We have a large farm and really wanted to make a very strong commitment to that. What was interesting about how sort of dedicated and hardworking that family was, one of the things they did back in, I think it was around 2007, the family actually measured the bio activities of the soil in Louisiana, which on this farm and realized it was zero. And this is about the time of Omnivore dilemma. Joel Salatin of Polyface was getting pretty well known and reached out to Joel. And Joel really helped us sort of understand how do we take this 3,500 acres and turned it into an organic sustainable farm.
(10:25):
Took about half of it and basically turned it back to wilding, turned it back into its nature and let it grow and have the wildlife come back in. And the other, they turned into an organic sustainable operation, which is someone sold me, I think Kimbal Musk actually said it was the largest organic regenerative farm in the southeast. And so that was really how we began to invest. And we just plunged in as a family in AgTech and then plunged into Cleantech. And what was interesting, we were doing it by ourself. We really didn't have any domain expertise in this and it was just learning by doing and baptism by fire, whatever metaphor you want to use. While we were investing, we kept running across the same names of the same families. We kept running into the Waltons and S2G, which is Lucas Waltons fund, and then [inaudible 00:11:09], and then Tara fit us there.
(11:11):
There were about five or six funds and they all became our friends back in the day looking at sort of how do you really grow the AgTech food tech space? And then the same thing on the Cleantech space. We kept running into Prelude and Capricorn. We all came together really around 2012, they formed a CREO syndicate, which you may be familiar with.
Jason Jacobs (11:32):
I am.
Temple Fennell (11:33):
And for those who are not CREO stands for Clean Renewable Environment Opportunities. That was the original, the origin of the name CREO. And so we became a member of that group. It was a relatively small group of about 15 to 20 families, initially. It's grown significantly now. When I came up to Cambridge, I had these sort of two separate syndicates. One was the CREO syndicate, which were these very wealthy, very committed families. Some had good technical depth and operating experience, particularly prelude in Capricorn, but most did not.
(12:03):
And then I was also a member of the Clean Energy Venture Group, which is this different private syndicate that didn't have the depth of wealth of this other family, but the depth, technical depth and operating experience. They were similar to myself engineers. I have an engineering degree from UVA distance engineering, and this group had started multiple businesses, so I really related to these sort of in the trenches engineers and operators that were entrepreneurs. And it was sort of a natural thing to kind of bring the two groups together. Dan and Dave at the time in 2015 were looking to raise a fund. And so I started really kind of socializing within the CREO syndicate, the incredible track record of Dan and Dave and this low loss ratio really allowed them to generate significant returns during that whole period when unfortunately Kleiner and Coastal and these guys were not faring well, Dan and Dave in the clean energy venture portfolio was not only surviving, it was thriving.
(12:56):
And these guys, we went in there and started looking at all the rounds and ran the returns, realized that they had more than a 35% IRR and their personal portfolios over that 10 year period, which was really unheard of at the time. Between the combination of their deep technical experience and operating experience, plus their track record, plus the need for the families in the CREO syndicate to have access to their deal flow and their expertise, it was sort of natural for me to introduce these families to the group and to launch a fund.
Jason Jacobs (13:24):
Got it. Well, I have some questions there, but I want to quickly hit pause and go back to something that you said. So the 35% plus IRR from CEVG or Dan and Dave's personal wallet, it's during the time that the Kleiners and the Coastals and Cleantech 1.0, generally infamously struggled. What do you think the difference was? What are the key learnings from that period overall, and what do you think was different about Dan and Dave's approach?
Temple Fennell (13:48):
So then that was something I really focused on. I was like, okay, what are the attributions? How did these guys survive and thrive after going really deep in it, they were really kind of three main attributes that I know allowed them to do this. The first is they were extremely hands on. I would talk to the CEOs of the business, whether it was Pike Energy or Surety or whatever it was. It was clear that these guys were rolling up their sleeves and really helping build these companies. It was not a passive investment. I think each one of us that are sitting on boards, I'd speak to my CEOs usually three or four times a week. And so it's very active. And the group, because of the depth and breadth of the experience and expertise, we're coming in and sometimes rewriting the IP, sometimes helping them sort of with their technology, actually invention in the multi-generational technology plans.
(14:35):
We're introducing them oftentimes to the first strategic customer bringing in strategic investors. We are laying out the growth plan. One of the key things that we do, even though we're coming in early stage, we do a lot of team assessments of the individuals. It's not like a Myers-Briggs kind of thing. They were certainly not assessing their technical depth because that's fairly obvious. What we're really doing is really figuring out what makes these guys tick, what makes everybody tick? How do they operate in the world, how do they think of themselves? And we use a person, Bill Isaac and his group called Generative Capital and Dia-logos prior to investing. We go through each of the entrepreneurs and their team go through three very deep and extensive sort of assessments. We're trying to figure out, again, not so much about sort of the Myers-Brigg aspect.
Jason Jacobs (15:21):
Were they doing this at this time when they were writing angel checks?
Temple Fennell (15:24):
No. Well, they were a little bit, they had just started to do that. It is fairly expensive. So to fully utilize all of Dia-logos, we really needed to have more capital, management capital.
Jason Jacobs (15:36):
But when they were doing those early checks, I guess was it about picking, was it about their hands-on approach? Why do you think they fared so much better than the aggregate venture market at the time?
Temple Fennell (15:45):
Well, with regards to the hands-on investing, I think it was picking, and it was actually the active development, honestly, the losses that they had were primarily ones where they were no longer active on the board. It was a remarkable, whether you call it correlation or causality, but when they were no longer able to maintain their pro rata, which is another reason why we were going to raise money is so that they could continue to be active, those were the companies that they ended up ultimately losing. And those companies often shifted strategy or had issues with the CEO. So I do think it was very active. Dia-logo really raises us up to the next level. Not everybody is perfect and every team is perfect. What we like to do is when we're going into these teams, we're really looking at what gives you energy, what is your superpower?
(16:29):
What are you really good at? And on a reciprocal, it's like what are the things that steal energy from you that you may not necessarily be good at? Because the reality is once we can sort of really understand that, understand all the pieces and dynamics of the team, then we can really figure out, okay, who do we need to bring in? Because if there's something that you're doing that's stealing energy that you're not necessarily very good at, we're going to likely be able to find somebody that gets energy from that exact same activity. And that's really how we build teach teams. And one of the things that we are very sensitive to is you often time can run into two founders that there's a little bit of tension it feels like between them. They may be interrupting each other during the presentation, they may be sort of stepping on each other's lines.
(17:12):
And the reality is when you really start digging into it, you may find a situation where you've got Sally, who's this brilliant scientist that coming up with an idea a minute every time the phone rings and somebody comes to her with a new idea, she's sort of running after it and she's brilliant. And then there's Joe who's Mr process and make sure that the trains are running on the tracks and there could be some tension between them. Sally may feel constrained by all these processes that Joe's figured out. And Joe's annoyed that Sally keeps breaking process and keeps sort of running off after what seems like shiny objects to him.
(17:43):
And when we sit down in this assessment, they really start understanding why they are like that and how important they are. And once you can get a team to that level, not just in spite of the differences, but they actually see strengths in their differences, and they then start respecting each other and not only respecting each other, protecting each other. And if you can find that in that core team, then you can start building all the other team members around that. So that's sort of team building piece is absolutely critical for us. And I'm not saying that others don't do that, but that's really one key attribute I think that continues.
Jason Jacobs (18:15):
So when they were writing these angel checks as part of CEVG, the broader group as a founder, how should I have thought of CEVG at that time? Was it one group with one pool of discretionary capital? Was it, come talk to this group and then we'll pass a hat around and who's ever interested will participate? What size checks were Dan and Dave writing at the time? How many positions, generally, how did you think about portfolio construction and then how did that shift when you set out to raise fund one?
Temple Fennell (18:42):
I don't really know exactly what size of the checks or what sort of portfolio construction. I think people did look at CEVG. It's one single source and particularly because they had a dozen or more. And sometimes as I said, up to 18 that were writing checks even though there would be individual checks that would come in as sort of one lump amount. I mean, first of all, one reason is entrepreneurs came in, so weren't really many other options, right? On the private side, they weren't really funds. Breakthrough was only founded in 2015. I guess Prime was founded in 2014. I mean there was Prelude and Capricorn, but not a lot of options out there for the entrepreneurs.
(19:17):
But I think what was happening back then, and it still happens today, is entrepreneurs are coming us because of our deep technical expertise and because of our operating experience, they know that we're going to roll up our sleeves and really help them build the businesses. Quite frankly, when the prices of these deals were just started going through the roof beyond what we considered were rational, the entry points in 2020 and 2021, we were actually getting into deals that were at lower valuations than other term sheets that were being offered because the entrepreneurs and the boards of those companies really wanted us to be at the table with them and help them build the company. And that still happens today. That team building and the hands-on rolling up for sleeves in the trenches is one attribute that's been consistent since 2005.
Jason Jacobs (20:01):
And at what point did you head out for fund one and then how did that intersect? Did you come in and drive that process? Did the fund already exist before you became part of the team? It sounded like your entry point was through the CEVG. So when did your role switch to the fund side and how did that correspond with the fun timelines?
Temple Fennell (20:21):
So around 2014, there were a number of families and family offices, mostly local, seeing the success of what was going on at CEVG and said, how can we invest with you guys? And so Dan and Dave started setting up special purpose vehicles and they set up six SPVs and really sort of executing on the strategy that is the strategy of CEV today, which is being able to have enough capital at the table to actually lead the deals in set terms, have a board position, be the first sort of collective industrial sort of institutional amount of money to invest, but most importantly have enough money to maintain the pro rata so you maintain the board position so you can maintain your active management. That's really kind of considered fund one. They were operating as a fundless sponsor, and that is done quite well.
(21:06):
They made actually six investments. Four have exited. One is a little bit under in terms of its TBPI or its MOIC. They've had three very successful exits and two that are growing incredibly well, [inaudible 00:21:18]. I joined Dan and Dave in 2015. We started talking about this fund and then launched fund one in 2017. And then initially we were going to be raising 75 million, looking to do a target close of around 30. We ended up at the close of first close, we had 70 million in commitments at the table, which was really a bit of a surprise for us, honestly.
(21:46):
And one of our LPs asked us to raise the total AUM to a hundred million, which we agreed to do. We actually stopped raising money for a little while because we realized, okay, this is really is going to be successful. And at that point, I really fully committed to being a managing partner of the fund, which required me actually to resign from the family office board and the investment committee of our family. And we ended up opening it up again and ended up stopped taking money at 110 million. So we blew through the hundred million hard cap.
Jason Jacobs (22:12):
Are you still investing out of that vehicle today?
Temple Fennell (22:15):
We're not new investments. We've got some other capital that we're deploying at the moment, but we're mostly just doing following investments in that portfolio of 20 companies and they're all available for people to see on their website.
Jason Jacobs (22:27):
Got it. And so what fund are you investing out of today? Just in terms of Roman numeral?
Temple Fennell (22:31):
It will be officially when it is formal, it'll be fund two.
Jason Jacobs (22:34):
And so for that fund one, I'm not asking for names, but what types of LPs comprise that? And were those people that were co-investing on the CEVG side or were they new relationships? And similarly, what expectations were set in regards to impact and profit, I guess, for each of those and of course how they interrelate.
Temple Fennell (22:58):
Great question. So this is something that I'm really sort of quite striking about, particularly with impact funds. One of the things that I do, I'll to go in a little sidebar here. In 2015, I also helped found a program called Impact Investing for the next generation under the Harvard Kennedy School with [inaudible 00:23:15], James Gifford and David Wood. And we basically trained NextGen's from around the world how to look at these impact focused funds and how do you make a full due diligence and make a legitimate case for your family office to invest. One of the things that I've grown to believe in, I don't mean to disparage others, but I don't believe in the generalist funds. I know this because when we at a family office, we were investing in ag tech and clean tech and even looking at water tech, and the reality is they're wildly different sectors with completely different strategic relationships.
(23:48):
You need to have different acquirers, different adoption cycles. I was very close and I am very close to S2G, the Seed Two Growth Fund and [inaudible 00:23:56] and Middleland, and just seeing how they operate and who their relationships are, including not just the Syngentas of the world and the Cargills of the world, but the Kelloggs of the world and the General Mills of the world. I just realized you can't have those relationships and also have the relationships with total energies and Schneider Electric, and it's just a completely different model. So I'm very much around specialized funds, and so this is why for Clean Energy Ventures, why we picked this mandate of two and a half gigatons now rather than sort of having to retroactively sort of assess the and measure that impact, it's actually built into our underwriting criteria to underwrite our company. The company has to share the potential to be able to reduce at least two and a half gigatons of greenhouse gases. Now, if it's below that underwriting criteria, we have to get approval from the ELPACK.
Jason Jacobs (24:43):
Given that two and a half gigatons could come from several different categories, isn't that still a generalist approach?
Temple Fennell (24:51):
Well, I'd say it's a generalist approach within clean tech for sure, but we're actually not doing AgTech right now, so if it's a carbon soil sequestration play, we're also investing in companies that we consider capital light when we're looking at deals. And this is where sort of the second attribution that I was going to get to is that probably 80, 90% of our companies have at least one or more strategics on the cap table.
Jason Jacobs (25:13):
At entry point?
Temple Fennell (25:14):
Yes, generally at entry point, sometimes later.
Jason Jacobs (25:17):
What stage is your typical entry point?
Temple Fennell (25:19):
Usually seed or series A.
Jason Jacobs (25:20):
And what type of checks are you typically writing and how often are you leading versus following and what's your preference?
Temple Fennell (25:27):
In every case, we've always led or co-led, so we haven't really followed any deals. That's not a hard and fast rule, but that's typically the case. Initial checks, if it's in the seed stage, there's usually somewhere between a million to 3 million. And then series A, it could certainly be 5 million plus or minus two, sort of three to 7 million in series A. And at that point, even if we are the only investor in the series C and this with CEVG, we're typically, if the strategic is not on the cap table in the seed, they almost always are about the series A.
Jason Jacobs (25:59):
Two questions separate but related. One is on the impact side with this two and a half gigatons, at what point in the process do you do that work? And then how do you do that work? There's a bunch of different templates out there. There's like Crane and some folks do it themselves internally and other folks are working with consortiums. What's the Clean Energy Ventures approach to understanding whether a company has that potential for the two and a half gigatons? And then separately, how do you think about financial returns?
Temple Fennell (26:29):
And they're related. So I'll tell you how they're related. So we used something that was developed by Dave Miller and Shambo Gupta, which is the simple emission reduction calculator. It's actually publicly available on our website. It's actually being used by hundreds of companies and even funds around the world. And the approach is quite simple. We're involved in Crane and Frame. There was the original mentions of Iris. And the way we look at it is we look at what is the product that the company's delivering on a unit basis or what is the unit of service delivered? And once you can look at that single unit, you figure out, okay, how much carbon is that company or that unit of service is going to actually take out of the global economy, whether through avoidance or reduction or mitigation, whatever it may be, how much carbon is going to be removed for every unit that's actually sold?
(27:15):
And then once you can figure out that it's really not that difficult to do, then you simply look at their adoption curve and their S-curve. What is going to be the adoption trajectory for this company? What sort of penetration are they going to get? And then ultimately, how much will this scale if it is able to actually get onto the x-curve and hit that inflection point when the parallel sort of kicks in, how many units will be sold and you simply multiply that carbon reduction of the unit times the proforma at that point. So it's a relatively simple model and it's a relatively easy model for us to measure on a year to year basis. So we report on this every year, and sometimes, first order, it could be a second order. So there's a company, for instance, Boston Materials.
(27:55):
Boston materials, what it does is it takes a standard piece of carbon fiber and during the what's called the pre-preg process, when you're laying down the resin or whatever it is, they actually align carbon vertically in the carbon fiber. So carbon fiber is very strong in the XY plane, but it has no Z directional strength. And this puts Z directional strength into the carbon fiber. In fact, a good way to think about it's like putting two shoe brushes together and how difficult it's to pull the shoe brushes together. You can do that with carbon fiber. It does remarkable things to its characteristics.
(28:26):
First of all, prior to that pre-preg, the company boss materials able to make that carbon fiber thermally conductive or electrically conductive. And with that, you can do all sorts of things and they're actually making heat exchangers. Now out of carbon fiber, there's a company that's making airline breaks, a complete set of airline breaks made out of the Boston material carbon fiber, what it does to carbon fibers. If you've ever been on a bike that's blown apart, it catastrophically fails, it laminates, any kind of puncture can completely compromise the integrity of the structure. This carbon fiber is actually flexor, it actually bends and you can actually punch it with an impact and it won't shatter. So it's got all sorts of properties now where second order if you could build. And there are conversations going on with very large airline manufacturers about building an entire equivalent of a 787 made out of carbon fiber, even the engine parts, and that would reduce the weight significantly.
Yin Lu (29:20):
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. We started in 2019 and have grown to thousands of members globally each week we're inspired by people who join with different backgrounds and points of view. What we all share is a deep curiosity to learn and a bias to action around ways to accelerate solutions to climate change. Some awesome initiatives have come out of the community. A number of founding teams I've met, several nonprofits have been established and a bunch of hiring has been done.
(29:54):
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. 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 (30:20):
Temple, gigatons aside, how do you think about financial returns and risk when you're evaluating investments?
Temple Fennell (30:27):
Well, let's talk about financial returns first. So for us, the impact return and the financial returns, they're not just correlated. There's actual causality. So as that company becomes more successful and sells more products in the market, that's going to generate higher returns for the company, higher returns for our fund and the LPs. And that's also going to drive greater impact because the impact is embedded into the underwriting criteria. Even at an acquisition when a company acquires it, they're acquiring it because this company, not necessarily for the carbon reduction, but the fact that it's being globally adopted. So we're looking at companies that are essentially better, cheaper, cleaner than the existing status quo technology or service. So that's really kind of how the two are tied together. We are not in any way sort of concessionary and our returns. We are shooting for top decile, venture returns and structured as a venture capital fund with a feena carry.
Jason Jacobs (31:19):
And so when it came time for selecting LPs of that 110 million, just what was the profile for fund one? How much of that was, let's say, family office versus more traditional institutional LPs or strategics? And how important was mission alignment when selecting LPs and for those LPs and selecting Clean Energy Ventures as a fund to back?
Temple Fennell (31:46):
So first of all, large sum of the LPs were CEVG members, as you can imagine in terms of just the numbers. But the majority of the capital actually came from strategic investors. There's for instance [inaudible 00:31:57] or very large family offices. So it was a combination of strategics and large family offices. So Tennessee Valley Authority, the retirement trusts in LP, it was also a global base. So we have significant amount of LPs from Southeast Asia. We have a number that are in the GCC region. We have others that are in India, Europe, the US geographically it's quite diverse, but it was primarily the strategics and relatively and actually very large family offices or families that had very large operating businesses in Europe and India in particular. There weren't a lot of institutional, in fact, I would say besides Missi Valley Authority and the Grantham Foundation really, and also the Children's Investment Fund Foundation, there were a few foundations, but there was no endowment on pension money.
(32:44):
And in fact, the reality is that the endowments in particular in the US are really still sitting on the sidelines for the most part. They are not investing in early stage clean energy venture funds with rare exception. University of California Regent is one of the exceptions. And the pension funds too have been sitting on the sidelines, although they're beginning to really make serious moves. If you look at people like Nick Abel CalSTRS, he really is significantly leaning in hard on this as is groups in Canada like CDPQ, Ontario's Teachers Pension Fund, the others in Northern Europe like PGGM that are beginning to move in. But when we were raising the fund, there were really no pensions that were looking to put money in early stage venture. In fact, we did a research project at Harvard about four years ago where we looked at all the pensions, endowments, and foundations that were members of either the series investor network, DERES, or they were members of the Intentional Endowment Network.
(33:40):
They were 99 in total. Even though that they were sitting on the UN Summits, that series had put together breathlessly talking about what we have to do to save the climate of these 99, they managed about $3 trillion, about 700 billion was dedicated to PE and DC only nine had made a single LP commitment to any venture fund or even PE fund. And again, this is four or five years ago before TPG Rise and others, even the total commitment was less than a hundred million dollars. Now, that's certainly improved, but I can't say that they are major funders of the space. They really are not.
Jason Jacobs (34:15):
It seems clear that one way or another, there's kind of, for lack of a better word, tailwinds of doom since a lot of the symptoms, if you will, looking forwards, are locked in based on stuff that we've already put up into the atmosphere which stays up there for a long time. And so given that directionally, it seems inevitable that this will become a more important area over time, and we're seeing that with the regulatory landscape and with increasing net-zero commitments and increasing activism from employee basis and activism from rising graduates when they're selecting employers to work for and things like that. Why do you think that hasn't penetrated through to deploying capital in alternative assets in this category? And what do you think it will take to unlock that in a meaningful way?
Temple Fennell (35:07):
[inaudible 00:35:06] you specifically asking why are the endowments and pensions, for instance, not leaning in more to funding this?
Jason Jacobs (35:12):
Yeah, because what I heard from you was, "hey, we've got a formula that we can compete with anybody, whether they're impact or not from a return profile, and we have a track record to prove it", yet they're still largely on the sidelines and not just for you guys for most of what's out there in the space. And why do you think that is?
Temple Fennell (35:30):
Well, there are a number of reasons, and we actually researched this as part of this woman, Michelle Chang is really brilliant at this, really got to the root cause of why they're sitting on the sideline. A lot of it is still hangover of all the capital that was lost in Cleantech 1.0. And quite frankly, the ICs don't want to take the reputational risk. They're very reticent to do that still. So that's one clear reason. One thing that's happened now that's causing a drag is what's called the denominator effect. So when you look at the total amount of investment into VC, there's a relative weighting to their private equity. And as the private equity portfolios decreased in value, the VC weighting actually became overweighted. So they're not really willing to put more capital in. That'll correct itself at some point. There's a third thing that we discovered too, which was really quite surprising.
(36:17):
One is when they were looking at an early stage venture fund, most of these large groups, they basically layer J curves. So they invest in every year and every vintage of every company because they know that as they're getting capital calls for one fund, you're going to be getting distributions from another. You can't predict what year and what vintage is actually going to be successful. So you have to be disciplined about sort of layering in your venture, these venture investments in Sequoia, Andreessen Horowitz. And these guys, when they would talk about clean energy, they talked about as if they were starting from a blank sheet of paper where there really were no J curves, they weren't willing to think about it, sort of [inaudible 00:36:54] overall venture portfolio. And that still persists today for whatever reason. It's sort of considered, it's separate completely. It's considered almost like a separate asset class that they're just starting to invest in.
(37:06):
So that's kind of a track. The other thing that we ran into is these misaligned timelines. So if you look at most endowments and pensions, they have some sort of benchmark that they need to exceed. Could be 6%, it could be 7%. And what they often are doing is they're getting measured every 12 months. So they're chasing after this alpha. And for them to invest in a fund like ours that is a 10-year lockup plus potential extensions, that reduces the liquidity that they have to actually generate alpha at the end of the year. And their bonuses are based on alpha. So to ask them to make a long-term investment and the climate can actually reduce their compensation at the end of the year. And then if you're talking to a relatively young member of the investment team, let's say they're in their twenties and thirties, they're looking at these investments, say, well, I'm going to invest in your fund and they're probably not going to see returns for seven to 10 years.
(38:00):
I'm not going to be here then I'm probably only going to be here for four or five years before I'm moving on to another institutional investor. So all I'm going to see is a bunch of capital calls and cashflow going out. I'm not going to see any cashflow coming in. And that's related to the fact that it's layer J curve for climate is sort of considered a de novo strategy.
Jason Jacobs (38:18):
You talked about the reputational risk of ICs given all the money that was lost in the last wave. You also talked about how Dan and Dave didn't see those losses in the last wave with their approach. I want to come back to the broader market and what happened then, and why do you think so much money was lost? And then why is this time different? If you're talking to one of these ICs who's worried about reputational risk, hit them between the eyes, I mean they might be listening to this episode, what would you say to them about why this time is different and why they shouldn't worry about that reputational risk?
Temple Fennell (38:52):
That's a great question. And what I'd refer them to is actually, there's a great paper that came out of MIT energy initiatives. It said Cleantech and VC: The Wrong Model for Energy Innovation. And it laid out really five or six reasons why it failed so badly. And if you look at it, most of those reasons have been corrected. So I'll just kind of go back to my own origin story. When we were looking to put money from our family as an LP into [inaudible 00:39:16], and these folks, I really frankly didn't understand their model at all. I just feel like I, gosh, I am just not smart enough to really understand how these guys are going to make money. Because you look at these technologies and like, wow, this is a really cool, amazing, more efficient way to generate power or to move power.
(39:33):
I'd asks like, well, who's the customer for this? So they would say, well, utilities. And it's like, guys, utilities are going to invest in this. If they do, they're going to put it on the shelf. They don't make money by making their assets more efficient. They make money by building more assets or it's for the oil and gas space. And it's like, guys, algae biofuel play is a good press release for Shell, but I know Murphy Oil's not going to be buying this anytime soon. So there really was no demand for this technology. And now if you look at it, and what I tell these large pensions is if you look at the demand, it's as we know, it's global. And one of the great tailwinds right now, of course we've got the IRA tailwind that's still hasn't materializes revenue. It's probably not going to really be coming online until sometime in 2024.
(40:16):
We have Europeans fit for 55, although the regulations haven't really been written by that. But I honestly think the biggest tailwind is the SBTI targets, the science, the net-zero commitments that are coming from the SBTs and they're now more than 2,600 companies that have made those commitments. And they are explicitly saying, we need new technologies. We have to buy new technologies and build them into our operations. That did not exist in clean Tech 1.0. So when I'm talking to some of these large investors, I still think we're maybe two to three years away from that revenue really materializing in a significant way. But if anybody's interested in Cleantech, this is the time to get in because it's going to take us three years to develop those technologies for these SBT focus companies. And a lot of people understand that.
(41:02):
I'm always reticent to bring this point up because it's a little bit of the elephant in the room. One reason it's very difficult to raise money from endowments and pensions is most of our funds don't have much DPI in a distributed paid in capital. We don't have many assets. Most are looking at what happened in 2021 and the SPAC market and the direct listing, they're really not sort of counting those as legitimate, sustainable, repeatable exits, but they're really just not a lot of exits. So all the portfolios are still just marks. They're unrealized gains for the most part in the pension funds they need to see. And they're used to seeing DPI distributed paid in capital, which is the exit value. That's kind of an argument to make, although it doesn't have a lot of grounding until we start seeing more exits.
Jason Jacobs (41:46):
And when you do think about liquidity within the portfolio, I mean I'm sure you've gotten asked this as you've talked to institutional LPs. Here's another opportunity. Hit them between the eyes. Anyone that's listening, hey, there's not a lot of DPI, what's the response? Sounds like you don't worry about it as much. Why don't you worry about it? And where's that liquidity ultimately going to come from? Will it be IPOs, will it be exits? Who are the likely acquirers?
Temple Fennell (42:08):
No, I actually am worried about it. I don't want to tell you that I'm not worried about the lack of DPI in our sector globally. We've dug deep into the SBTIs and we do think that these corporations are going to start buying these technologies. The other thing that people don't like to talk about in our sector is, what are the exit values right now? And they're pretty well tightly banded between one and 300 million. And people ask me, well, why is that? And the reality is that these companies, until they start getting more revenue, if you are the CFO of a Schneider Electric or any of these acquirers to interact, they look at this technology or the company and say, I need to have some [inaudible 00:42:46] of four to seven year payback at most. And in order for them to have that payback, they have to believe that there's going to be enough revenue from where the company is now to them bringing into the business units to actually generate that payback.
(42:58):
And so that's why these prices are not really much above 300 million. In fact, if you look at the 45 exits that happened, and this is PitchBook data, if you looked at the PitchBook data for the 45 exits that happened in 2021, the average valuation was 211 million during the frothy time. I hate to be the one that's being a little bit sort of cautious about this, but we're still in the early endings of clean tech adoption.
Jason Jacobs (43:23):
Now, gosh, I have a few questions. I'm not sure if I have the discipline to ask them one at a time here, but let me give it a shot. I mean, one thing I want to push on is just as there's been the broader venture correction alternatives generally, how much of that has seeped into climate tax? So that's kind of one question to park. Another one is, you talked about in the early days not having any competition and these founders not having other options, what does that landscape look today with so many new funds coming into the space? So that's kind of a second one to park. And then the third one to park is just as you look up and down the capital stack at [inaudible 00:43:55], at Bs, at Cs and Ds and at things like project finance, where are the opportunities and where are the gaps? So three different questions. Take them in any order that you want.
Temple Fennell (44:06):
Let me start with the amount of funds that are coming into the market, which we actually think is terrific because it was lonely there for a long time. It's good to have other capital in the market for sure. One thing that was challenging for us up until this year in really sort of in 2022 was just the pricing. For us as a VC, you were asking about returns. We're shooting for top decile returns. And if you are an early stage VC, you need to be able to hold your hand to your heart and saying, I believe I can get a 10 x return on this investment at the entry point. Now, you can't say that unless you do the full analysis. And the full analysis starts with the exit. Who's going to buy the company? What milestones does the company need to hit before they're bought?
(44:48):
How much are each of those milestones going to cost and how long do you have to fund the company to get through those milestones? And then you can start figuring out who's going to buy the company. And because of our deep relationship with strategics, that is a big part of our diligence process before we're investing. And then so once you figure out the exit value, which as I said, and often if it's a M and A sale, you have to price that M and A at sort of a hundred million to 300 million right now, and then you have to back down each one of the milestones. And if you find out that those milestones are going to cost you 150 million to build whatever you have to build to get to the exit, you're not likely to get a 10 x return. And so once you've got to back the milestones down, how much [inaudible 00:45:28] going to cost, and then you can really assess how much you should be paying.
(45:32):
And we saw a lot of the pricing of these early stage rounds at 30, 40, 50 million sometimes. It was like, guys, there's no way that you can hold your hand to your heart and say that the market as it is today is going to get you a 10 x return. Now we're all hoping the power law is going to kick in and these companies are going to start generating significant revenue from the SBT companies as well as the IRA that ban from a hundred to 300 million will expand because these companies revenue has expanded, but we're still underwriting most of our companies expecting it to be a sale on to a strategic. Now there are other companies we have that we believe are going have the potential to go public and generate hundreds of million dollars in revenue. And that's a different story.
Jason Jacobs (46:17):
And what about the broader venture market versus climate tech specifically? What have you been seeing out there in climate tech and how is it the same or how is it different than the broader correction that's been occurring?
Temple Fennell (46:27):
Depending on whose number you're looking, there was somewhere between 60 to 70 billion that was raised for climate tech venture in the last few years. I think that was a 2022 number actually. There's still a lot of dry powder on the sidelines. So what we're seeing for better or worse is a lot of series extensions. So series A2, A3, A4, B3, B4 where they're trying to continue to fund these companies through their milestones. As I said earlier, in a lot of safes, a lot of convertible notes, you're not seeing nearly the activity in the later stage growth rounds. Now, we had a very successful Q1 where we had eight companies raise capital in later rounds at significantly higher valuations. Several of them were significantly oversubscribed. I personally, without patting ourselves on the back too much, I think it's because we came in at the right entry point. So when we were coming out for the next round, we didn't have to have an inflated next round pre-money valuation. We could still have a significant increase in valuation and multiple increase without having crazy high prices.
Jason Jacobs (47:29):
Relatively, when it does come to those extensions or down rounds or recaps or things like that, how do you make the decision about when to continue versus when to say when?
Temple Fennell (47:42):
Can't say it's a perfect science to figure that out. One of the things that we look at is, has science and physics risks emerged? As I was saying earlier, we're investing in these companies where we believe there's no science or physics risks, but is there sort of first principle violation that's happened that they're still very much in experimental mode? The second is even more important, I would say, than the tech is the team that we feel like they are being transparent, that they are being open to getting help and assistance wherever they can. Are they fully committed to making this happen? Transparency with the team is by far probably the number one criteria and it doesn't always happen.
(48:19):
The third part is additional investor interests. If there's zero investor interests in continuing to fund the company, that's makes it quite challenging. Are you simply funding a company that shouldn't continue to be funded? What point do you call it a day? Not that we would force a company any kind of bankruptcy, but we may end up pairing back when our commitment into that next round. It's hard because the reality is most of these hardware companies, industrial tech, they take twice as much money and twice as long to develop and to commercialize than you expect when you come in. And you have to build that into your underwriting, into your portfolio structuring.
Jason Jacobs (48:56):
Another thing on my mind is when you look up and down the capital stack, where are the opportunities? Where are the gaps? And similarly, I think I heard you say capital light earlier on in the discussion in terms of what you look for. What does that mean in terms of companies that do require things like project finance as an example? How do you think about that For investment?
Temple Fennell (49:15):
We're certainly willing to take on companies at a certain point will need project finance, but capital light, in our view, it's sort of 30 to 50 million. To get to the point that you've got a project finance or a true infrastructure, real asset fund that's willing to step in as project finance to actually have to go out and raise corporate equity in suffer the dilution of that round in order to fund a project is something that we're not keen to step into. You really have to go into a deep assessment of whether it's off-take agreements or structured finance, we want to make sure that they're able to get to that point with the 30 to 50 million or they've hit milestones that one of the strategics is willing to step in and buy the company.
Jason Jacobs (49:55):
And what about that question on the capital stack? I mean, it sounds like there's a gap right now at the growth stage since all the growth firms are on their hands or a lot of them. How do you think about that? Are they smart to be sitting on their hands right now? Should they be more active? Is there an opportunity for someone else to step in whose got the courage or the ignorance or whatever to... I guess this question's a little different now than it would've been say a year ago or two years ago, given the changing market conditions. But where are the gaps? Where are the opportunities?
Temple Fennell (50:23):
Well, I think it's going to be interesting to see what happens here in the next year. The fund's going to continue to fund these companies with their either continuation funds or the series A's extensions and the safes and the convertible nodes. Is there a point that the music's going to stop playing and they can't fund? Right. And then there's going to be a huge amount of opportunity. I actually think that the reason that a lot of those smart, and there are some very smart growth investors out there, the reason a lot of the growth investors are sitting on their hands is because, again, as I said earlier, the prices of these growth rounds that are indexed to their entry point that was gotten in the previous rounds are just too high. I mean, they're looking at the exit value and how much capital the company is going to need. They're being much more disciplined now in their pricing and they're looking at these deals and say they're overpriced in the growth stage. And there's still a lot of asphalt that these companies need to cover before they're going to get to an exit.
Jason Jacobs (51:15):
I know that if I'm a company that's trying to make it to be, and I'm not hitting my milestones, that I should worry given the macro. But I heard you say that several of your companies have raised quite oversubscribed growth rounds recently. Are you seeing any companies that are hitting their milestones still struggling at the growth stage? If I'm a founder that's hitting my milestone, should I worry?
Temple Fennell (51:36):
No, I don't think so. I think there's enough capital in the market right now if you are properly priced. It goes back to pricing discipline. If you've raised money at a pre-money where you're not causing a down round in a restructure and you've hit these milestones and the milestones have to lead to revenue, right? People talk about milestones. These milestones aren't leading you to commercialization. That commercialization is not leading into revenue. It's super hard to really value what is the value of those milestones. But if you can show that no, this is actually leading to POs or some other form of revenue, there's a lot of capital out there that's willing to step in and fund those. So if your milestone is simply a tech development milestone and you're still many milestones and many years away from commercialization, that can be a bit challenging.
Jason Jacobs (52:21):
Well, I know we're just about out of time Temple, so who do you want to hear from? For anyone listening that is inspired by the work that you're doing, how can we or they be helpful to you?
Temple Fennell (52:31):
That's a good question. I'm expecting to hear a lot from my peers telling me that they completely disagree with everything I said and how dare I make these sort of somewhat skeptical assertions. But I would love to hear honestly from the institutional investors, I mean, what can we do to make our sector and our stage of the sector acceptable to them? Still a bit opaque, and I'm sure they're not going to be happy with some of the assertions I made about why they're not investing. And if that's not the case, please correct me. I'm looking forward to being wrong.
Jason Jacobs (52:59):
And by the way, that's some good homework for me and for the MCJ team to think about is just what role could we play in learning publicly To start to uncover what you just said, the assertions you laid out. I'm picturing like a panel of strictly financial institutional LPs talking through how they're thinking about the space, what's holding them back. I'd be surprised if we get any of them to talk about it. It's worth a try. That's why we're doing this series is to start to shed some light on what's still largely a black box.
Temple Fennell (53:26):
Jason, that's a good idea. And you should also maybe convene a separate panel, which are the advisors to not only the institutions but the family offices. So what are the things that I do as part of this impact investor for the next generation question? A lot of these families and next gens are looking for new advisors that can advise them on impact related funds. Said, ask your advisor that you're interviewing five questions and they're very simple questions. And the first one is, how many impact sectors have you landscaped? And most of them can say, "well, we, you lay out all 17 STG sectors." Then you pick two and say, okay, I'll pick Cleantech and Act. How many fund managers have you met in Cleantech? The second question is, how many managers do you have in the Cleantech sector? And they'll give you a number.
(54:09):
How many of those managers have you met is the third question. They start hemming and humming at that point because it's remarkable how few advisors actually meet with early stage Cleantech or even growth stage Cleantech, unless you've got TBG or KKR on your name. The fourth question is, how many investment memos have you written on these fund investors? So how many investment memos have you written on the fund managers? And the fifth is how many of your clients have actually invested in a Cleantech fund that's not TBG or KKR, and you pretty much get close to a null set. There are very few that can answer all five of those questions robustly. Cambridge Associates is one. There's a group called Veris is another, and there are a few others that I'm impressed by, but 90% of the impact investing advisors don't actually meet with Clean Tech fund managers.
Jason Jacobs (54:56):
Good Food for Thought Temple. Anything I didn't ask that you wish I did? Or any parting words for listeners?
Temple Fennell (55:02):
One thing I think people would need to understand, it was interesting talking to Mike Kearney and Phoebe at Climate Week and the Amazon Climate Fund, and Anthony at EIP Elevate and also Christina Chang and Laura Carbon Capital. We were preparing for a panel that I was monitoring at the MIT Clean and Engine Conference, the Pension World, the institutional investment world. Don't fully understand why and how what we do is different than what's known as tech typically. The tech industry, as you know, is mostly software and enterprise software, AI, crypto, and they're used to this idea of failing fast of these companies basically being started, you throw a bunch of money, a bunch of bodies, it's often a spray and pray model where you make a whole bunch of investments and you double down on your winners. That dynamic doesn't really work for what we do and the tough-tech world, if it's not software or business model innovation, because there's a natural cycle for this tech development that you just cannot exceed.
(55:59):
You can't throw bodies and break the limits of this tech exploration. So it takes a lot longer to reach the point. In Silicon Valley, they talk about failing fast. Well, our companies unfortunately fail slowly and they take sometimes a lot of capital to do that. I don't know if we want to include that in the podcast. It's a very different sector. It's something that people really need to be cognizant of. Because if they put the expectations of the tech sector that's typically known as the tech-tech sector on Cleantech, they're going to be disappointed. And once they get burnt again, we're probably not coming back to the table.
Jason Jacobs (56:33):
Well, that's a great point to end on Temple. Sorry to keep you over for your next meeting, but thank you so much for having such a long form and thought-provoking discussion and wishing you every success. Looking forward to finding more ways to collaborate with you and with the Clean Energy Venture team as well.
Temple Fennell (56:50):
Great, Jason, we look forward to it as well.
Jason Jacobs (56:53):
Thanks again for joining us on My Climate Journey podcast.
Cody Simms (56:57):
At MCJ Collective, we're all about powering collective innovation for climate solutions by breaking down silos and unleashing problem solving capacity.
Jason Jacobs (57:06):
If you'd like to learn more about MCJ Collective, visit us @mcjcollective.com. And if you have a guest suggestion, let us know that via Twitter at mcjpod.
Yin Lu (57:19):
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 (57:29):
Thanks and see you next episode.
