Startup Series: Terraformation
Today's guest is Yishan Wong, Founder & CEO of Terraformation.
Before founding Terraformation, Yishan served as CEO at Reddit and was an engineer at Pay Pal and Facebook. After exiting Reddit, Yishan learned that native forest restoration outperformed any other known method of carbon capture by nearly an order of magnitude. However, he also found three significant bottlenecks to large-scale forest restoration: land availability, freshwater, and seed. So, in 2017, Yishan founded Terraformation to restore forests and reduce global emissions. Terraformation believes that reforestation is one of the fastest, most efficient, and immediately scalable solutions to address climate change. Its low-risk, politically feasible carbon drawdown solution aims to restore forests at a global scale. In June of this year, Terraformation announced a $30M raise.
In this episode, Yishan explains his motivations for founding a climate startup, the ambitious mission Terraformation has set for itself, and why reforestation is essential in addressing climate change. We also discuss Terraformation's solution, its most recent raise, and scaling global forest restoration. This is an excellent episode for those interested in reforestation as a climate solution.
Enjoy the show!
You can find me on Twitter @jjacobs22 or @mcjpod and email at info@myclimatejourney.co, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded July 1, 2021
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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 are 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 non-profits that have been established. A bunch of hiring that's been done, a bunch of companies that have raised capital in there. A bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members, and some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you want to 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 Yishan Wong, founder and CEO of Terraformation. Terraformation scales natural carbon capture by solving the biggest bottlenecks to forest restoration, accelerating global progress towards this climate solution. Yishan was an engineer at PayPal and Facebook, and the former CEO of Reddit. In his own quest to have the biggest impact on climate that he could, he found that global native forest restoration is the lowest cost, lowest risk and most politically feasible carbon dry down solution available, and it's shovel ready.
We have a great discussion in this episode about Yishan's journey, the different things he looked at before landing on reforestation, the vision with Terraformation, where they are to date, what's coming next, and of course where they need help. Yishan, welcome to the show.
Yishan Wong: Thank you.
Jason Jacobs: I'm psyched to have you. You guys have certainly been generating quite a bit of buzz and reforestation is a topic that's near and dear to my heart, so I'm really excited and honored that you made the time to come on our little show.
Yishan Wong: Ah, thanks for having me.
Jason Jacobs: Well to kick things off, what is Terraformation? Let's just take it from the top.
Yishan Wong: We have identified that mass reforestation is probably the fastest and most efficient and most immediately scalable solution to climate change. So what we're trying to do is we're trying to bring that about globally as quickly as possible.
Jason Jacobs: And how did you come to that conclusion?
Yishan Wong: Well, actually if you look at all of the geo-engineering and climate proposals, and you look at them with a sort of like ultra-practical view of what can be done, and whether it can be done now, with climate there's this interesting thing where it's not just opportunity cost for climate solutions. It's actually an active accumulation of debt, with a lot of solving big problems you're sort of deciding whether or not you want to do one thing or another, and you know, the opportunity cost if you pursue one. But with climate, merely waiting accumulates debt because the planet is actively trapping heat. And so that changes the time variable so that a solution that may be better, but is a few years behind, is actually much worse than a solution that can be implemented immediately.
So if you look at all the solutions that way, there are very few that can be immediately applied, that can immediately begin drawing CO2 molecules out of the air. Which is the primary I guess like physical thing around climate change. Climate change is often conflated with a number of unrelated issues like social and cultural ones, but it actually is a physical problem. So if you define it strictly... if you were to ask yourself, hey, is there a physical configuration of the world where if you were able to change this particular physical configuration, climate scientists would say, "Okay, there's no more problem with climate change"? And the answer's yes, it's actually just that the concentration of CO2 molecules in the atmosphere is 415. It's actually like 419 as of like the last report, and it should be something around 280 parts per million. So if you were able to change that concentration of CO2 molecules, you would in fact solve most or all of the problem.
And so if you take like a very I guess strict view of that, and you focus on what is the most direct way to get there, reforestation is the cheapest and safest and also the most immediately available solution that we have.
Jason Jacobs: And Yishan, maybe just talk a bit about your roots. I know you've obviously had some other chapters of your career before heading down the climate path, but when and how and why did you first start caring about this issue, and maybe walk us through how the transition occurred from caring about it to actually devoting your livelihood to it.
Yishan Wong: So my transition to climate is probably a little unusual. I did not come to it from a, what you call like a traditional environmental angle, or even one where you had like worked in it in science for like a long period or anything like that. I was actually just on vacation on the beach, and it was way too hot. It's like Hawaii, right? Hawaii is hot. But I asked the locals, and the locals were like, "No, no, no, this is like historically atypical weather. It's like never been this hot. I live in the mountains, and it should be cooler there, but it's like 88 at night and no one can sleep." So [laughs] I was just like, okay, this climate change problem has got to stop. And that's actually when I started evaluating the solutions, and so I evaluated those from the point of view of like an engineer who just wants to solve the problem so that it will go away, so that he can go back to doing whatever he was doing before.
That's actually why I looked at the solutions from that point of view. It's like, what is the fastest and most efficient way to get this problem solved? And so that was like the beginning of the a- academic exploration of the problem, and then I did a bunch of math around what all the possible solutions were and which ones would be most efficient. And the math showed that reforestation was simply just by an order of magnitude more effective.
And so I sort of like sat on that for a while, and at the same time I happened to be running this project where we were building a solar desalination facility. And surprisingly, that held one of the keys to overcoming one of the key bottlenecks to actually scaling reforestation to be a full scale solution. Because the problem is, the sort of like widely, I don't know what you'd call it. The widely considered limit to reforestation is that there's not enough land. Like it works very well on a unit basis. I think the latest scientific consensus was that it could solve about one third of the problem, but there's a limit to the amount of land that we can plant trees on. However, there's much more land than that, it's just not popularly considered areas that you get enough natural rainfall. However, if you could produce enough fresh water using a low carbon method, then you could reforest deserts and you could get access to much more land, and in particular you would get access to land that is the least valuable land. It's like considered the most useless, nobody wants it.
And the sort of technologies that I've been working with turned out to hold the key to that. Because it wasn't just the fact that it was solar or desalination, it was the fact that solar power and desalination had come down so far in cost that if you totaled up the entire cost of doing that, you could in fact afford to irrigate that much land and restore that much forest. And the nice thing about solution is that it's extremely parallelizable. You can like restore it, the first acre of land at the same time as you're restoring like the two billionth acre of land.
And so that makes it potentially possible for mankind to do this much reforestation in a decentralized, parallel manner in the timeframe that we have left. And so having done all of that math, you pencil it all out and you think like, okay, here's the potential solution [laughs] to climate change. Like a full scale solution, because most of the time when people talk about climate change, they talk about it in terms of like how can we ameliorate it? How can we just like keep warming below two degrees, or 1.5 degrees? [inaudible 00:09:35] like can we just keep from dying as badly? And here, you do the math and you say, "Oh okay, this would potentially remove all or most of the excess CO2, or offset all or most of our current emissions." There's actually a full scale solution that can potentially tackle the venture scale of the problem. And because I didn't have an environmental science background, I just sort of sat on that solution for like a year, and I talked about it in like various online climate forums, just to get people's feedback and stuff, and just sort of refine the math and science.
But it turns out a lot of online forums about climate are actually like really really unhealthy. So I sat on that for a year [laughs], until the Crowther Lab paper came out, where they sort of boldly also claimed that like mass reforestation is the best solution to climate change that we have. Which was an incredibly bold claim for any scientists to make. Scientists just don't make bold claims, they usually say this could be a possible maybe 11% correlation or whatever. But they made this claim, and it like pissed people off. People don't like it when other scientists make bold claims. But it put the conversation on the table, and suddenly everyone was talking about it. And what I did was I read their paper, and the math behind how they had done their calculations actually matched up with my math. And so I thought, oh okay, maybe [laughs] this is not totally bullshit. And that was what sort of prompted me to go forward along with the fact that I'd been talking about this with like friends and family and [inaudible 00:11:06] people cared about this problem, because actually like everybody cares about climate, everyone knows, but nobody really has any solutions.
And so I'd been talking about this for about a year, and people were like, "Okay, you really need to like actually go do this." So I think there were these like little tipping points that sort of pushed me to actually doing it. And so around the end of 2019, I began putting together a team of people that I... mostly people that I'd already been talking to, and sort of working on this solar desal project and the sort of small scale reforestation that we've been starting to do around it, and decided to just like push forward. Also somebody said like, "I'll be the first to invest." [laughs] So our first investor simply just gave me $100,000 and like kicked off the investment round. So at that point you just like have to do it.
Jason Jacobs: Well, there's a bunch of places that I could go and I want to go next, but I'm just going to choose one, which is just kind of a quick detour. You mentioned that many online climate communities are unhealthy. What is unhealthy about them?
Yishan Wong: In general I would say that they're extremely pessimistic, and technically illiterate. I guess that's going to be like a statement that's gonna piss off a lot of people. But okay, so first of all, they're not like filled with climate deniers. Like if you're a climate denier, you're not gonna be in a climate discussion forum. And generally, I think most people aren't into math, and so, just like people in general aren't into math. And analyzing climate and evaluating solutions relative to each other requires some proficiency with math, or just like a tendency towards like analyzing things mathematically. Certain solutions are good, certain solutions are bad. But most solutions are good under certain circumstances and bad under other ones. And in order to determine those, you have to be mathematically inclined. So most people in climate forums are not that way. Because there is in media a huge amount of disinformation from all areas, most people are also just like kind of grossly informed about everything. And so the combination of all that, and a general sort of negative pessimism, in general all of our news says like, "Oh, we're going to die. The climate's terrible, we're not going to be able to solve this."
There's this general attitude of pessimism and technical illiteracy, and the attitude revolves almost entirely around shooting down ideas. Even people who purport to care about climate, if you advance an idea of any type, not just like the ideas I would advance, like other people would say like, "Well, how 'bout this? Or how 'bout this?" The primary thing that people do in online climate forums is shoot down other people's ideas. And they don't shoot them down in like a useful way. This thing doesn't quite work, but if you change this variable by 30% then it would work. Like that would be like constructive criticism. It's always largely an uninformed criticism, because every single climate idea has criticisms that get bandied about in popular culture. Either because they're actually real, or because there's a lot of powerful interests that don't want various [laughs] climate solutions implemented.
And so people hear those, and they absorb them, and so the primary motivation in climate groups is just you hear an idea, okay, here are all the things that are wrong with that. And that's like what the entire conversation is about. And then there's a lot of just like hate against whoever they feel is like the villain of climate change, big companies or whatever you want. So they're just very, very negative and not solutions oriented. They're primarily like solutions shooting down oriented. And I thought that would be really helpful, like I thought, oh, there's all these people who care about it. I'm going to be able to get a lot of data, and like figure out all this. [laughs] Then it turned out it was just like, everyone was less informed than me. I was like, I don't know anything, I'm going to learn a lot. But it turns out like I was many times the least uninformed person, and I just like didn't get much help there.
Jason Jacobs: And so we've talked a little bit about the impact of the idea versus maybe other types of solutions, but maybe talk a little bit about what you were doing before, and how you thought about your skills and fit versus just impact and fit when assessing where to anchor.
Yishan Wong: How [inaudible 00:15:22] about impacting fit, we're assessing how to anchor, like anchoring to what? I just want to make sure I understand.
Jason Jacobs: Oh, anchor in terms of what you do for a living. So you want to have the biggest impact on climate, you talked about the reasons to focus here from a solutions standpoint, but how important is it for anyone, so I'm asking how important for you, but really for listeners they're going to want to know how important it is for them to pay attention to what they're good at and what they enjoy in terms of day to day, and how much did that factor in?
Yishan Wong: That's actually kind of interesting. I often don't think about whether or not my skills are a fit to the job at hand. [laughs] I have this, I don't know if it's like a foolish way of thinking or not, I sort of just like identify whatever problem or goal I'm trying to solve, and then I sort of break it down in terms of like, okay, do I need to learn a bunch of different skills to do this? Like what skills do I need? I just think of myself as like this robot that you sort of like stack skills onto. I don't know, character creation sheet. For climate, I actually had to learn like a ton of science and engineering, and I spent something like two years just reading papers and doing a whole bunch of math to do that. And I would not say that approaching this I had the background to do it. If I were to give advice to anyone, it would be like you should be good at math or practice math. Because that's sort of the basis for doing a lot of it. But I don't think that my background particularly prepared me for this.
There may be only a couple of attributes of my personality that sort of fit well with this, which is just sort of this solutions oriented way of thinking, but that's more like... then that caused me to look at it from this angle. But I guess the thing I would say for listeners is, if you want to solve a problem and there's a bunch of things that you need to be able to do, and you don't know how to do them, you can just learn them. And if you really, really focus on learning them, you'll be surprised at how quickly you learn.
I think like a lot of people after they leave school, they stop learning, they forget that like learning is a very plastic part of you. You can just pick up skills. They go through school, they pick up skills, and maybe get a job based on those skills. I had to learn like a whole different set of skills. And you just learn them. It's like through willpower, you just decide that, okay, I'm going to learn them, and you learn a little bit every day. Because in the two years before I started the company, in 2017 was where I roughly did my earliest calculations around reforestation, or showing that reforestation was the most promising solution. And then between then and 2019, I just did like a ton of math, and had to like learn all this climate science, and all this engineering about the limits and capabilities of solar and desalination and related technologies.
Like I learned a lot about energy in general, and that was just like day by day learning a little bit of something. And then the next day learning some more, and then eventually at one point I realized I knew all this stuff, and things started falling into place. [laughs] So it's mostly just like, you can learn new skills if you need to learn new skills to do something, and that's just like what you have to do.
Jason Jacobs: And so coming back around to Terraformation, so I mean it sounds like you thought that reforestation at massive scale was the most compelling climate solution we've got, given the timelines and that you thought specifically that the [inaudible 00:18:36] concerns could be addressed by reforesting in areas that have previously not thought of as being possible to be reforested, like deserts, and that you found a way using technology, I think, although I guess there's a question baked in there, to produce fresh water in these places to make it possible to plant trees there and have them grow and thrive. First of all, did I get that right so far? And then second of all, maybe just kind of fill in some gaps in terms of what you're actually doing as a company in terms of the mission and also just technically in terms of the role that you're playing to make it so.
Yishan Wong: Actually that was a really good summary, so thank you for doing your homework. That was really awesome. [laughs].
Jason Jacobs: Oh, I'm trying. Yeah, mostly just active listening, to be honest, but [crosstalk 00:19:25] explained it well.
Yishan Wong: I appreciate it. A lot of people focus on the fact that like, oh, it's massive reforestation. But the truth is that any actual climate solution is gonna be massive whatever it is. I think almost every single other proposed solution has not actually even confronted that issue. Almost every solution is still focused on the one, or the zero to one problem, I should [inaudible 00:19:51] common concept now is the zero to one thing. Like zero to one, one to N, and then where N is a billion. It was like a third stage. So zero to one is have we figured out a thing in the lab that turns out to be carbon negative? Like some sort of thing like direct air capture, or a new type of algae bioreactor, or something like that. People figured out a thing under limited lab or experimental conditions that is carbon negative, like zero to one.
And then one to N is can we make it into a commercial product? And usually you think, okay, once we've got it into a commercial product, capitalism will take care of the rest. Okay, that's kind of true, but going from one to N to N equals a billion is a materially different step that I think most people don't think about. Mostly because like very, very few people just have any direct experience with that, or even know that it exists. A market going from, okay, now you're selling some units, to now there's global penetration of this product, is a rare concept in people's minds.
Jason Jacobs: It's implied in there, are you saying that because you worked in some consumer internet companies like Facebook that had massive scale, that it opened your eyes to what scale means, and then could be applied in a very different setting in the physical world?
Yishan Wong: Yes, although [laughs] in my case, in my sort of dour engineering mindset, it was let about seeing those opportunities and more about seeing that there are problems that people don't even know exist, when you have to do something at massive, massive scale.
One of the things that people said, you'd hear this a lot when I was working at Facebook. People would be like, "What's the big deal with Facebook? It's just a homepage. It's like your picture and like this list of your friends. That's easy, an engineer could like churn that out in a day. Why do they need 100 engineers working on this?" And the truth about scale that very few people don't understand, is that you can have like a very simple unit of something, but if you need to produce and run and maintain a billion of those units, it's more than just that times a billion. Which by itself would be very, very huge. There are like scale and variant issues that crop up as you're just multiplying things into huge numbers.
Most people just don't even understand like how large a billion actually is. They think it's like a double of like one million. A billion, they think a billion is roughly like two million, but it's not. It's like a thousand times bigger. And so there are just these huge scaling issues that are materially different, organizationally, technically, logistically, and so you need an entire area of concentration focused on that. The massive part of every solution. You're going to do this solution and you're going to do it massively across a global scale in order for it to have an impact.
Jason Jacobs: But to get there, you need to first have product market fit. And so I guess what I'm trying to get at is what is the thing that Terraformation wants to scale? I know ultimately you want billions of trillions of trees planted, but what's your role on that?
Yishan Wong: Here's the nice thing. There's lots and lots of groups that already believe in reforestation as the solution. Reforestation groups and just forestry groups in general have known that tree planting, or growing forests, is a solution, and they've known it for like decades. Nobody listens to them, and so they just don't get any press, they're under-resourced. But there's thousands of them around the world. They already know the solution, they know that when you restore a native forest, it's not just a bunch of trees. I think like non-nature type [inaudible 00:23:25], like tech people think of forests as just like it's a bunch of trees. Like trees times N. It's not. It actually restores an entire ecosystem, it improves biodiversity. There's an entire ecological network that returns, that is itself the actual carbon sync.
And if you're directly involved in restoration of forests, you see this first hand. It happens in front of you, it happens like... actually faster than you expect. I'm a tech person, I did not expect how fast these things would happen. You remove the water bottleneck and like nature just like takes over. There are all these groups that already know this, and the thing that they want is they want to go faster. Tech people think of themselves as the only people in the world who like move at hyper speed, or want to go faster. It turns out that restoration groups want to figure out how to scale. They wish they could do things five times faster. Do way more this year. And so the product market fit that we are in is in fact helping people learn scalability techniques. I don't think that ultimately in the end tech's contribution to climate change is going to be some new gadget or new magical technology. It actually is going to be spreading the understanding of the practice of scalability. Like how to think about that.
How to think about and anticipate the organizational and logistical changes needed to scale an existing, successful operation. Because there are many existing successful reforestation and restoration organizations out there, and what they're looking for is how do I scale? How do I do more? How do I remove rate limiting bottlenecks? And so the unique I guess like special sauce or the thing that Terraformation is bringing is in fact the understanding of how to take a thing that works and do a lot more of that thing very quickly without losing coherence, without compromising on quality.
It's kind of a fussy product market fit. Like if you think of that scalability is our product, it's like, it's weird, it's not easy to understand. But the reality is, that's actually the thing that we offer to all the partners, all of the existing reforestation groups that we're working with. We say we sell this product and we provide this, we're like reforestation in a box, or forest as a service. That's how you sort of articulate this product, because you can't say we're like scalability consultants. That's like boring. But that is the reality of what we're bringing to this.
Every climate solution, after it gets to the point where it's commercializable, where you know, okay, people want this, you can make this, you have to scale it to gigaton scale, hundreds of gigatons scale very quickly in the next decade. And that's like a materially different problem that's actually the thing that we're bringing to forestry or forests as a solution.
Jason Jacobs: So who's the customer?
Yishan Wong: It is in fact everyone who wants to work on climate, most of them are people who work in existing reforestation groups, but it is also anyone who wants to solve climate change right now in a practical way. So we connect various key entities. There are people who want to work on climate or help climate and have money. The surprising thing is that there's actually a lot of money that is sitting on the sidelines and wants to be directed towards climate, but they don't know where to go. There's a lot of forestry groups who are able to do this but have rate limiting factors. Some of them are logistical, others are financial. And so we can connect those groups. In some cases we act as a connector between various groups who want to work on or help the climate problem, and don't have the complimentary other party to work with. So in fact we work with everybody.
Jason Jacobs: What is the product?
Yishan Wong: Well, okay. Sometimes people ask me, "What's the biggest thing holding back mass reforestation from moving faster and scaling?" And sometimes we say, "Okay, well we were able to move the land and water hurdle," but that's not actually the hurdle that's right in front of us right now. Like if we wanted to do 10 times more or 100 times more reforestation right now, that's not the thing that's standing in front of us. The thing that's actually the rate limiting factor right now is getting people off their ass and doing this. [laughs] There isn't enough forward movement just trying to do more of it. Right now if you wanted to, you could plant a tree. There isn't any other rate limiting factor keeping you from doing that. The only thing that's keeping you from doing that is the fact that you're not doing that right now. And so our product right now is always oriented towards removing the current rate limiting factor.
So right now what we're trying to do is we're getting more people to support this and do it. There's people who have money who want to support climate change. Okay, you can direct this money towards reforestation groups. Reforestation groups who are ready to work, we are helping them move forward, and the major, immediate effect that we need to have right now on the world is getting more people to understand that this is the best solution forward right now. And the next two orders of magnitude involve just getting more people to support this.
I can probably [inaudible 00:28:32] to say get more people to support reforestation, which I know is very abstract, it's not like this is the thing that's- we sell, like we sell all these other products. But the actual output right now is getting more people involved.
Jason Jacobs: Well you said you sell all these other products, so what types of products do you sell?
Yishan Wong: We sell various hardware and software, so we have containerized working seed banks, containerized nurseries, apps for tracking actually just like tree growth at a high granularity level. The attendant dashboards. We're working on a couple of other things that we haven't announced. All of these things are just intended to be things to accelerate reforestation operations.
Jason Jacobs: So who buys those things?
Yishan Wong: Groups that are working on reforestation.
Jason Jacobs: And is that the business is selling those things?
Yishan Wong: That's the first stage of the business. So we can sell a product that is essentially forest as a service. If you want to grow a forest now, and you are either a land owner or a reforestation group that's missing some resources, or wants to accelerate, we can give you the package of all of the things you need to get the project moving.
Jason Jacobs: Did you consider when you were launching being a non-profit, and if not, why not? And if so, why did you choose to go not just the for-profit route, but the raise a [inaudible 00:29:55] round at a big valuation, and commit yourself to needing to have a serious venture scale financial outcome in order to be considered a financial success?
Yishan Wong: When we were putting together the company, I realize that the primary constraint was time. The most scarce constraint was time, and that therefore the highest priority was speed. So I chose the legal vehicle that was the most conducive thing to rapid collective action. And so like normally for like a sort of mission oriented thing like this, it would make sense to be a non-profit from many perspectives. However, non-profits are slow, and we don't have much time. And if you are an exec at a non-profit, you spend like 80% of your time raising funds, and I can't do that. I spend 80% of my time like getting trees in the ground.
So the fastest vehicle for collective action is just a basic Delaware Sea Corp. People think of that as like it's a for-profit entity, but that's like kind of this misleading statement. Because a for-profit is like, okay, well under what timeframe? And depending on your shareholders, you don't have to maximize profit or anything like that within some small timeframe. It's just a corporation that's not a non-profit. So you can sort of think of us as a non-non-profit. And so a Delaware Sea Corp that is able to take venture financing is the fastest vehicle to collect money that people want to invest in solving climate change and then deploying it to that mission.
So that's why we created that vehicle. In terms of financial outcome, there's like a good history now over the last 20 years of investors who are patient even with commercial sort of venture backed funds. And so our thesis is, okay, solving climate change is highly speculative and very risky anyways. However, if it were solved, or even if a significant fraction of it were solved, that would be tremendously valuable. And it turns out there is a significant fraction of investors, impact investors, who want that to happen. All of our investors are oriented around the idea, like they invested in us not because they thought it would be tremendously profitable. They invested in us because we were a plausible hypothesis for solving climate change, and they wanted to see that happen.
It was like, okay, if you have a quarter million dollars, and you can do something, and the chance of this massive reforestation plan coming true is increased, then to a large number of investors that's a rational thing to do.
Jason Jacobs: Would you say that it was primarily viewed as philanthropic capital then? Even though it was technically a financial investment?
Yishan Wong: Not really. It seems that there's kind of three big groups of investors/money, and so on one end are philanthropic investors, on the other end are like mercinarial IRR focused investors. And sort of in the middle there's just impact investors. And those are investors who want to see a particular thing happen in the world, but they're not giving away money to have that happen. They consider a business that can have an impact good, because if the business can be self sustaining, they can continue to have that impact. And there's a material difference from that, because philanthropic investors are kind of... once you donate the money, and the money is used, it ends. It didn't make any money to continue the next round. So you get like one round of impact. Whereas I think impact investors want to cause a company to come into existence that will have a certain impact, and for it to continue having that impact on a continual basis. So it's that second middle group that comprises most of our investors. Like they want this to happen.
Jason Jacobs: So you're starting it to achieve this thing, and I'm with you on the long term of if we can achieve this thing it'll be a big deal. What I'd love to understand is, how do you envision phasing and staging and then what are the key milestones for phase one and the use of proceeds from the 10 million dollar round that you recently raised? First, maybe just talk about the key phases, and then we can come back around to talk about the next one, or the one that you're in now.
Yishan Wong: The phases are more based on just the rapidity which we need to expand our footprint. So looking at this from like a top down perspective, in order for reforestation to make an impact fast enough, we need to complete the out planting of about three billion acres of land within a decade. There is one plausible path to get there, which is to manage to get 10X the amount of land coverage every year for a decade. So there's eight orders of magnitude between 30 acres and three billion. And so every year we have to do 10 times as much.
So it's mostly just an expansion of how many acres of land can we cause to be reforested? One way of looking at the phases is there's two phases. There's the first few years, where you do like 300, 3000, 30,000, even up to 300,000 acres of reforestation. And those are projects which have been undertaken by a single organization. It's a sort of like current scale projects that we know are feasible. Once you move beyond that, we have to be working in partnership with other organizations. We need to have caused the beginnings of a worldwide, decentralized campaign of multiple actors. We're one of the few startups that wants like a thousand copycats.
And so there's two things that we do right now. Right now, in the next few years, we execute reforestation campaigns of increasing size and scale ourselves, both to show that scalability techniques work, you have to show that you can do something before you tell everyone else, "Hey, you can do it too and we'll teach you how to do it." At the same time, we have an active PR and outreach program to begin drawing attention to this. Because when we get to that scale about like four or five years in, making the jump to millions of acres or 10s of millions of acres requires already having many other groups ready to jump in in partnerships.
We're not going to do that like instantly at that point, we have to begin laying the groundwork for that now. And so it's very similar to other change the world strategies, where if you need to get everyone to do something, you need to be the champion yourself. You need to be doing it yourself.
So the first few years are we are doing it ourselves, and we're scaling. At the same time, just saying over and over this is the solution and we all need to be working on this, and in those first years as people look over at us and say, "Oh, we do what?" And we say, "Look, we're doing it. We are scaling. You can do it too, here's how you do it." And so we're building up those two things in parallel. We're just like talking about it a lot, explaining how we're doing it, and then actually executing it.
This is a little bit similar to what Tesla did, in order to cause a worldwide revolution in electric vehicles. They weren't gonna produce every electric vehicle in the world. Tesla has like one percent market share. But that's enough to cause everyone to make this shift. But before they could do that, for many years they had to be the primary and only producer of significant electric vehicles. So they had to be the champion. They said, "Look, we're doing it, this is how we're doing it, look at us, it can be done." And now other manufacturers are forced to follow suit. They're doing it also. So we're [crosstalk 00:37:28] this sort of like champion [crosstalk 00:37:29]-
Jason Jacobs: But the core of what Tesla did was not evangelizing other auto makers, the core of what Tesla did is they built a great car and they sold it to customers and- who then got happy about driving it, and told their friends, and then they sold more cars. So I guess what is that core economic engine for you?
Yishan Wong: In our case, it's more about showing that forests can be grown directly. It's actually not showing that forests are profitable. They do, they generate forest products, they have revenue streams. But the main inspirational thing here is that people want a solution to climate change. They want to know that there's something that can scale, that can potentially actually have a meaningful impact on the problem. So the metric is actually different. The way people are inspired is by seeing a solution that is working, and showing, hey, we can restore forests quickly and then the next year we can restore 10 times as many acres of forest. And it's showing that it can be done. That is the impact that people see. Oh, it's working, it can be done. Why don't we do more of it?
Jason Jacobs: What is the case for a strictly financial investor to invest in this company?
Yishan Wong: I'll give you the most abstract, high level argument, which is this. If I were to give you a choice between an acre of barren land and an acre of thriving forest, which one would you pick?
Jason Jacobs: Thriving land, of course.
Yishan Wong: You'd pick the forest, because you know it has more value.
Jason Jacobs: The forest.
Yishan Wong: So like, we know that a conversion from the former into the latter is a value creating act. And so you can actually think of this as a global real estate play. Now, the reason why that acre is valuable differs depending on the particular species and location and local community and local economy. Every piece of forest is valuable in different ways. However, we all know that that is more valuable. So you can think of this as a global real estate play, where we are in fact taking up to three billion acres of degraded, largely worthless land that people don't value, and converting into a thing that almost everyone understands is more valuable. That's the creation of value and you should be able to monetize that.
One obvious way is that like when you increase the value of a piece of land, the land around it goes up in value as well. So if you have a lot of worthless and degraded land, doing this just increases its value. People talk about like, oh, they're not making any more land. Real estate is a limited resource. This is essentially making more land, or taking land that was previously considered worthless, and turning it into something that is much more valuable.
We specifically do it because of the carbon sequestration reason, because it can draw CO2 out of the air. But at the same time, it does this thing that like everyone has always known was valuable. Inherent in the valuing of your land is, is there stuff growing on it? Is it thriving land? Is there water, is there green? Or is it just like a bunch of like sand? The most abstract way of thinking about like how is it financial feasible is that the conversion of all this land is an act of value creation.
Jason Jacobs: So give me one or a handful of, I know we're speaking hypotheticals, but just different scenarios where Terraformation might capture some of that value.
Yishan Wong: So it turns out that, you know I said like the land nearby goes up in value? So you don't actually have to, for example, buy up land near reforestation project. So if you are a large land owner, you can do the following thing, which is very simple. You take your land, and you sub-divide it so that there's a narrow strip around the outside, and then a large interior. We can enter into an agreement with the land owner or whatever, there's like various structures. Or like we are the land owner, or... and you reforest the large tract on the inside. Now, all of the land around the outside has increased in value, and now you can lease that for residential or commercial purposes. Before it was just in the middle of nowhere and there was nothing, now it's next to a thriving forest.
So now you have all this land, and we can participate in the monetization of the increase of that value in any number of ways.
Jason Jacobs: So you mentioned that it was hard to do reforestation in areas like deserts for- for example, so does this require like some type of robotic watering and producing fresh water in order to make this possible, or what do you need to do different from reforesting in regions that are conducive to thriving forests?
Yishan Wong: Well, you do need to bring water there. So if you don't have existing fresh water supplies, and actually even if you do, sometimes you don't want to use them because at large scale using fresh water could like negatively affect the area's aquifer or something like that. You want to produce incremental new water, and the only other source of that is by desalinating sea water. Which was previously not a feasible, large scale solution because desalination is extremely energy intensive. And the only way it was economical for most applications was with using low cost fossil fuels. Which is why it's like more popular in the Middle East, because they have access to low cost fossil fuels, and water in general is just very scarce and expensive there.
However, and this was like sort of the lucky thing that happened when I was thinking about the solution, doing all these calculations. The per kilowatt hour cost of solar power dropped below that of the marginal cost of fossil fuels, which means that you can now power desalination for less than the cost of fossil fuels, and in an extremely low carbon way. Because if you used fossil fuels, it wouldn't make any sense, you'd be emitting to get water to try to sequester that, it'd just be pointless. But now you can do it without emitting, and produce the water needed to irrigate.
A nice thing about this is that it has the side effect of now allowing people anywhere in a decentralized fashion to take control of their power and water destiny. Water scarcity in general has been the root cause of a lot of inequality in the world, access to clean water is the number one determinant of long term just economic success of a region. If you have access to water, you can sort of build everything on top of that. Water has been so common and ubiquitous, that we've kind of forgotten that. In places where you don't have water scarcity, people forget about how important water is. But it's actually this key determinant.
Now with the falling price of solar, which by the way, so that dominates the cost of the desalination. The desalination equipment itself is not that expensive, it's primarily the energy cost. And with the plummeting cost of solar, and the fact that you can sort of put solar anywhere, at least especially in areas where there's a lot of sun, which is generally where there's water scarcity problems, water can produce in a decentralized way in all sorts of places. And this is what allows us to like bring water to places that previously did not have water and irrigate all this land and restore the forests there.
Jason Jacobs: And all the details in terms of who owns the land, and what the business model will be and things like that, are you essentially just punting and saying, "We'll figure that out later, right now we're just trying to get good at growing forests in this way at scale, and helping others to do so, and we'll figure out the rest later?"
Yishan Wong: Half and half, it's more like this. There's a really nice attribute to our solution which is we have a lot of places where we can do this. For example, if your solution is something like direct air capture, there's only a few places where you can build that. You need a whole bunch of like technological infrastructure and whatever, right? Restoring forests is possible in many, many, many places. And so the land and political issues, the difficulty varies from place to place. But what this allows us to do is we have maximum selection advantage. We can pick the easiest place right now. And a lot of this is momentum based. There are thousands of places where we could do reforestation, and some of them are harder and some of them are easier. Some of the difficulties are due to physical factors, others are due to political factors, or like [inaudible 00:45:37] or whatever.
And so because we're just building momentum, you start projects where they are easiest. And the advantage is a lot of startups, they have like a limited I guess like market or set of customers that they can address. We have an enormous market and set of customers that we can address, and we've picked the easiest one. Where do we find a private landowner who is most amenable to doing this? And we can work with the easiest one, and in each case then we just build momentum by working on the easier one. And as people see it happening more and more, that expands the customer base and lowers those legal and political obstacles. Because people see the momentum building.
Jason Jacobs: And where are you in terms of stage with your own stuff, and where are you in terms of stage with helping anyone else do it?
Yishan Wong: Right now we're going up our first 10X ramp, so we completed our pilot projects that are on the order of 45 acres. And we're moving to the next stage, which is on the order of 450 acres. Because longer deals take more time, we've actually begun to reach forward into future years, and we're actually in discussions with potential partners for thousands or 10s of thousands. And actually up to like 100s of thousands of acres. We get a couple of years before we have to like get that deal nailed down, and begin executing on that. So we're just moving up the 10X ramp like every year.
Jason Jacobs: How capital intensive is it to do it this way?
Yishan Wong: It's a funny question, because [laughs] some things are way more capital intensive and some things are less capital intensive. It turns out that tree planting is less capital intensive than most of the things that I'm used to in tech, and I guess you'd say it's like more labor intensive. You actually want to make it more capital intensive, because that's more scalable. And so the more automation that you can develop, that amplifies the ability of the human labor to do more, the better.
So I would say right now it's not as capital intensive, but we're actually trying to make it more capital intensive, if that makes sense.
Jason Jacobs: You talked about increasing the price of the adjacent real estate. What about credit, offsets, do those play a role at all, and what do you think about those in general philosophically?
Yishan Wong: Philosophically versus practically are like two different things. [laughs] I think that practically speaking, the carbon markets are not yet mature. And so it's different to build any sort of business or do anything with a market that's not mature. And in fact, most recently there's been those articles about how like avoided deforestation offsets weren't like a real thing and there were all these problems with that or whatever.
I actually have a rosier view on that than most people, which is that I think markets emerge as a reflection of demand. And the fact that there's so much demand, means that that market is gonna come into being inevitably and mature no matter what. There's a lot of demand, the demand is growing, even despite these flaws, which are real flaws to these markets. Even despite these flaws, demand grows. When you see demand growing despite flaws in a product, then you know it's a real thing that's gonna come about. So the way I think about current markets is I think they're not yet mature, I think they have problems, but I think they're inevitable. And so what that means is, right now I don't like making them a linchpin of a revenue or business plan or anything like that. But that eventually they're going to be. And there's this nice thing about forest carbon, which is you're actually banking that carbon. For all of our projects, we don't say, "Okay, you'll be able to derive this revenue from carbon credits."
But we can say, "If there's a point in the future where the carbon markets are mature, and the price of carbon is some sufficiently high number, you've banked all this carbon." You don't have to sell carbon in a particular year that it is sequestered when it comes to a forest. It's all been banked in that forest. So you can sell that later. So I think of that as like a future thing that's going to come about, but not something to rely on today.
Jason Jacobs: I assume, and I mean correct me if I'm wrong that when you raise the 10 million there was some discussion around how far that could take you and what the next round looks like, since I'd imagine it doesn't sound like you're going to get to profitability on this 10 million raise. Although correct me if I'm wrong. So I guess the question is, what are you trying to get done with the 10 million, how far can it take you, and what does that next round look like?
Yishan Wong: Do you mean the 30 million round that we just raised?
Jason Jacobs: 30 million, sorry.
Yishan Wong: We had raised like a five million seed round, and then we just raised the 30 million [inaudible 00:50:05]. There were a few things that we proved out in the five million seed round. One of them was that containerized working seed banks are an essential part of being able to scale reforestation around the world. And I can talk about why like seed banking is actually like critically important. But it turns out there's a lot of demand for that, and so like one of the things is scaling up production and sale and distribution of these seed banks. That by itself is like somewhat capital intensive. It can be somewhat debt financed, but it needs some capital to go there. The other one is supporting more projects. There are a lot of projects that can be accelerated now because of some of the just like I would even say like minor technical support that we're able to offer. A lot of projects are enabled if you have accountability around trees being grown.
One of the problems with tree-planting projects right now is that there isn't great accountability. Like you give money to a group, they plant trees. You don't really know what happens to the trees. So it's actually trivial to develop a system to track trees. If you take a picture of a sapling, you immediately have the [lat long 00:51:12]. Trees don't move, trees don't have privacy issues. If you have the lat long of a tree, then as future remote sensing improves through satellite, LiDAR, drones or even just like pay people a bounty to go and like take a picture of a tree at this location, that tree can now be tracked much more accurately through its lifetime.
Being able to offer that level of accountability, that's one of like the simple apps that we built. Being able to offer that level of accountability enables more projects to get off the ground, more funders to more confidently give money to those projects, or finance them. So we're continuing to develop technology like that, financing or pushing forward more projects, and showing that we can do 10 times as much this year is another thing that we're like using that money for.
Jason Jacobs: And how are you thinking about that next round, and beyond? How do you plan to capitalize the company as you scale?
Yishan Wong: We will have to raise another round, probably a year to 18 months from now. And so the thing that we have to show is that we can in fact continue doing this 10X scaling. We are the key to not just us but the world being able to scale these operations. That we're actually transformational. Because you can say, okay, trees are a solution. We've begun to convince people, and also the conversation actually moved in the right direction, but showing that we're a transformational element and being able to scale that is what we'll need to finance at the next order of magnitude increase.
Jason Jacobs: And, I mean, is that also equity capital, is that an institutional fund? How do you think about the right profile for that round when you get there?
Yishan Wong: I'm open to however it works. We will get to a point where it's definitely not like equity capital, because once we prove out the model in some of these projects, things be debt financed, which are much larger pools of capital and that works that way too.
Jason Jacobs: Great. And for anyone listening that's inspired by what you're doing, where do you need help, who do you want to hear from?
Yishan Wong: Everyone actually. This is interesting because this is a mission where I believe every human on the planet can contribute in some way, whether that is in directly helping to put trees in the ground, helping to coordinate those operations, learning about the actual mechanics of forestry, contributing money to projects, or technology development. Anyone who's interested in this mission, anyone who wants to work on an immediately scalable solution, we're willing to talk to. We're going to find a way actually. We have like hundreds of people just contacting us, who say, "What you're doing is awesome, I want to support it, how can I help?" And it'll just be like a random person. In Atlanta there's a welder who used to be a Navy Seal, and he sent us a message and was like, "How can I help?" We're actually setting up a network so that every human can find the best way to help. So anyone who wants this to happen is welcome to contact us, and we will figure that out together.
Jason Jacobs: Great, and if you could change one thing that's outside of the scope of your or the company's control that would most dramatically accelerate your progress, what would you change and how would you change it?
Yishan Wong: I think it would actually be the attitude around how vital and doable this is as a solution. This solution is unique because it uses existing technology. We don't have to develop anything really new to do it. We just have to decide to do it and it's immediately available to us. I don't think that realization is like truly, truly understood by I guess like critical people who make decisions around where to allocate resources, and what to focus on. I really, really think that if we focused on doing this, we would be able to solve in the shortest timeframe possible most or all of climate change. And that sort of buys us the time to solve the rest of it. But if we hang around waiting for magical new technologies, we're just going to lose time and the planet is going to continue to warm. So really it's like around recognition, that this is the best solution to be working on right now.
Jason Jacobs: Sounds great. Well Yishan, what a fascinating discussion. You've given me a lot to process and marinate on, but it's a big vision, it's an ambitious vision, and it's an important one if you can pull it off. So I'm glad you're working on it, and I wish you and the whole Terraformation team every success.
Yishan Wong: Thank you.
Jason Jacobs: Hey everyone, Jason here. Thanks again for joining me on my climate journey. If you'd like to learn more about the journey, you can visit us at myclimatejourney.co. Note, that is .co, not .com. Some day 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.
