This Week in Startups - How much money is too much? (VC Sunday School) + Climate: Andrew Beebe of Obvious Ventures | E1401

Episode Date: March 6, 2022

Another Sunday double-header edition! First Jason leads a VC Sunday School session on how to react when companies try and skip steps and raise larger rounds (2:51). Plus, how Pegasus (or Alicorn) companies can end up being much better investments than traditional Unicorns. Then, for This Week in Climate Startups, Molly chats with Andrew Beebe of Obvious Ventures (18:47). You will learn: 1. Andrew's focus within climate tech (electric mobility, carbon and carbon markets) 2. How Andrew's first startup exit set him up to join the solar industry 3. How contrarian bets make careers 4. The key criteria for climate investments to be good venture bets 5. How Obvious Ventures puts its "world positive" mission into practice 6. The way carbon disclosure requirements will reshape industry 7. Why Andrew recommends reading Kim Stanley Robinson's "The Ministry for the Future" (00:00) Jason and Molly intro today’s show: VC Sunday School, TWiCS with Andrew Beebe (02:51) VCSS: companies raising big rounds before they’re ready (11:20) Coda - The All-in-one doc for teams, get a $1,000 credit at https://coda.io/twist (12:38) Pegasus (alicorn) companies: flying over rounds of funding (18:47) This Week in Climate Startups w/ Andrew Beebe of Obvious Ventures (23:02) Wealthfront - Get your first $5,000 managed for free, for life at https://wealthfront.com/TWIST (24:32) The first clean tech boom in the solar industry (33:21) Embroker - Get an extra 10% off insurance for your business at https://Embroker.com/twist (34:44) Obvious and Andrew Beebe’s investment thesis: “World Positive” (56:54) SaaS Syndicate, Open Scouting, Remote Demo Day, angel.university Check out Obvious Ventures: https://obvious.com FOLLOW Andrew: https://twitter.com/andrewbeebe FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Okay, everybody, it's Sunday. So that means two things. One, two things. One, Molly and I are going to do VC Sunday school. And of course, this week in climate startups, what do you have on Dick? So today I'm asking Jason about companies that try to skip steps early on and raise large rounds maybe before they're ready. And also companies that end up skipping rounds later when they're ready to do that too. It's super useful and helpful.

As always, I love these. Sunday school. Then I sit down with Andrew Beebe of obvious ventures for an awesome this week in climate startups interview. It's a good Sunday show. And it's Sunday, which means tomorrow's Monday if you're listening to this and we've got a big week. I just wanted to highlight how crazy things are getting over here. We're inviting a ton of people on the show, Molly. Everybody's saying yes, you and I are dividing and conquering. I had Sequoic Capital's legendary investor Doug Leone on the program. One of the best guest who's ever been on the program. He'll be on the show this week. And I sat down again with Kyle Vote, uh, who just retook the position of CEO at Cruise. I cannot wait to hear this

one. I couldn't hear it because I was literally cruising back from Redwood City after my cana field trip. I can't stop with the puns I want to stop, but I can't. Um, and then I have an amazing interview coming up a week from today with Taj Eldridge of Include Ventures, which is a fund of funds and fund. There's a lot going on there. But just an absolutely remarkable founder and fundraiser who is focused on climate tech and clean tech and environmental justice and, you know, racial equity and investing. It is such a good, powerful conversation. And we address a thing that is very controversial on my Twitter, unlike the things that are controversial on your Twitter, which is what value VCs can really bring in the climate tech space. It's going to be a great episode today,

but it's also going to be a great week. So stick with us. This week in startups is brought to by Coda. Cota is the all-in-one dock for teams. If you've got a stack of niche workflow tools or you're buried in docs and spreadsheets, Cota is the dock that brings it all together. Startups can get a $1,000 credit at coda.io slash twist.

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All right, Molly, it's Sunday. Happy Sunday, everybody. Hope you're having a restful weekend. And everybody loves Sundays because you do a great climate interview. But before that, we always do. VC Sunday school. VC. Sunday school. I do.

I look. So great. It's like a thing happens. All of my questions in the first month or so were purely theoretical based on books that I had read. Now they are starting to be related to things I am seeing and answers that you are giving me when I am bringing you startups who are not ready. Not ready, not yet.

Which happens. So this, you raised a really interesting point earlier this week, I think, about companies that want to skip steps, basically, that want to, in some cases, raise big rounds before they're ready. And I have to say, I'm not trying to brag here, but I felt a little validated because I was like, I know, I talked to a company and I just, my gut says they're raising too much money. But I don't know why I think that. And then you were like, they are. And here's why. And I felt super validated. So, you know, one of the things that's great about the venture capital ecosystem, you know, in 2022 is it's existed and evolved over a long period of time to basically create a milestone-based system where people can get small amounts of money, build up their credibility, prove some points in their startup, and then qualify for more funding. And what this does is it creates a little bit of efficiency.

You raise a friends and family round. You try to talk to friends and family. You get them to give you 25, 50K, 75K, enough to get your mockup done, maybe get a customer to try the product. And maybe you get into an accelerator or you can do either of those two things. Sometimes people do both. Graduate from the accelerator, meet a bunch of angels, meet a bunch of seed funds. Maybe you raise $500,000 or $3 million, and you give up 10%

of your company, 15% typically in that round. You work for another 18 months. You get to 250K, a million dollars in revenue. You qualify for a Series A. Some great firm joins your board, gives you $5 million for 15% of the company, whatever it is. And you're off to the races. And those milestones allow different groups of investors to validate, to check in with

the founder, to do diligence and put a new value on the company. And that creates great hygiene. because these private companies are based on trust. Remember, they're not regulated. They're not like there's any rules here. People can go rogue. People can jump the fence. People can really lose their minds in startups and do all kinds of crazy things.

So we are basing things on trust. And the milestone-based system limits the amount of damage that can be done from a company, running out of money, people losing their jobs, etc. And so we have this nice milestone-based system. in a hot market, sometimes to win a deal, somebody might say, I'm going to go back two phases, take the company that's just an idea with a mockup, they spent 25K, they've incorporated,

I'm going to give them the series A. All right, fine. You know, if the founder does that and they can pull it off, more power to them. But sometimes skipping the steps means you don't add the skills. You don't check the boxes. There's not good hygiene. You haven't set up insurance.

You're not incorporated. You don't have an employee stock option plan. And that's what a lot of this early setup is about. Or maybe you don't even understand who your customer is and maybe you don't have product market fit. Even worse. That's the real killer. And so in a hot market, we see people skipping steps.

And then you have to decide what to do as an investor. Do you want to participate in somebody skipping one or two steps, getting ahead of their skis, going too fast down the mountain before they know how to stop? Skiing is a great analogy. You know, once you learn how to ski, you know, basically you're done a green. Now you go up to a diamond. I'm going to skip the blue. It's going to write to the diamond from the green.

And everything's going great. You're just bombing it. You're going 40 miles an hour. Hey, hit a mogul and you got a turn. You hit a ice patch. And you're not prepared for that. And then boom, next thing you know, you're waking up in a hospital with a broken line. So first of all, I would say, what makes a founder want to do this?

Is it a misunderstanding of how the market works? Is it overconfidence? Is it, you know, the sense that like, I mean, I suppose it would be easier, right? If you could just leap right ahead from your great idea and a proof of concept to, okay, now I hired a team. And it's not just me and my buddy living on our couches and, you know, bootstrapping this. Yeah, I would say if the opportunity is there, it can be alluring, right? Skip a couple steps, go a little faster. You know, if you're an aggressive CEO who wants to win and somebody says, hey, listen, you can skip college, go right into the majors.

Yeah. great. Or you can go from high school into the majors. That was a big debate in the NBA, right? Should they do one year of college at least or two years? Do they develop? That's why the NBA came up with the development league. So that if a player wasn't getting minutes in the league and they needed to learn some things, they could go mature in the developmental league. And we see that with two-way players going up and down from the developmental league into the actual NBA. So that would be the reason is there's an opportunity. And I understand people wanting to go faster. And sometimes it does work out. Sometimes the person, the person person is amazing, they thread the needle, everything goes great. But we'll typically see people go, I don't want to go to an accelerator. Okay, well, there's people who are further along than you, who did go to the accelerator and who did raise money from a great fund. That same company will come back to us sometimes six months or 12 months later and say, hey, you know, we didn't clear market. And we say, great, do you want to come to the cellar? Yeah, we'd like to come to the accelerator. Okay, great. You know, we don't have an ego about it. If you want to try,

and I always, my, you know, when I interface with founder, say, hey, give it a shot. When I was doing Mahalo, which became inside, I raised my series B right before we launched. And people thought it was crazy because I raised that $100 million. And the reason was I had spoken to Rupert Murdoch and he loved my idea. Sequoia had invested in the A at $12 million. And then I closed with Rupert Murdoch at $100 million before launching. So here's an example of a founder. Wow.

And this was done and I did this in 2008 or nine. Like, I did this before Web 3 and before these crazy evaluations. And it was big news that I had closed the Series B before the product had launched. Then the product launched and it got to $10 million in revenue in the, like, third year. It was cranking. We were making thousands of dollars a day. So there, you know, but I did go a little bit fast. And there were things I could have learned if I had gone slower.

Yeah. So, you know, do I regret it? No. But was it super aggressive? And would the other path have worked better? Maybe. maybe it would have. Well, and I guess that gets to the flip side question,

which is when do you as a VC say, yeah, I'm willing to skip that step? And is it, I would imagine that the answer is it's about the founder. Yeah, it would be situational. You think this is the only chance you have to get in. Let's take another example. Clubhouse. It's a really hot product.

There's 3,000 people doing it. The two or 3,000 people in the venture community are doing it are like, this is kind of magical. And it was Bill Gurley and Mark and Driesen get into a big fight. I think the founders had been entrepreneurs and residents that benchmark. And sure enough, they go with Andreas and Harwitz. They put money in at $100 million evaluation. Then they do it at $1 billion. Then they do it at $4 billion. They get an offer supposedly from Twitter or Facebook for $4 billion. They don't take it. Is that company worth $100 million now,

$250 million? I would be shocked if somebody bought it for more than $100 or $200 million. I'm not saying that to Dog the founder, but that is the ultimate example in the last couple of years. of people just going really fast. Now, those were serial founders. They're really good. They built a brilliant product. They know viral loops, and it was growing fast.

But I don't know how they build into a $4 billion valuation from here. That seems, I don't want to say impossible, because nothing's impossible, but it seems really hard. They got a big challenge. I didn't know they had a $4 billion offer on the table. That's brutal.

That's when Microsoft made that offer for Yahoo, and they didn't take it. And I did a little video where I was like, girl, come into the bathroom with me. you need to take the ring. Yeah, it was 44. Was that 44 billion? The Yahoo offer?

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there's so many great ideas there and they know they can be helpful with their software. So go to Coda.comi-o slash twist to get that $1,000 credit. So then as a founder, I also recently met with a founder actually who was like, you know, I think we're doing fine and we're not going to raise the opposite of skipping the step, which I feel like I also respect, you know, and and what he was saying was like, I mean, I guess, you know, people on the other hand are saying money is basically free, stockpile. Like, I could understand the temptation as a founder to say, I'm going to take all the money I can and have a giant war chest. Yep. But we call that, uh, you know, we call that in the biz? I actually gave a name for that. I call it a Pegasus.

not a unicorn, which my daughter then told me, it's actually an alicorn, because it's a unicorn with wings, which is called an alicorn. So, and I called, exactly. So I was like, okay, there's a new term, alicorn. And it was because of com.com. We had invested in Com.

We thought we had a certain percentage ownership. Then they hit $250 million valuation, but they had never raised money. And then we had more ownership than we thought we did. Went through the calculation. It was like, oh, we had a note with a little bit of interest on it. The interest kept growing. they never raised. Then we finally converted the note and that gave us, you know, that interest gets

converted into equity. So we got a little bit more equity than we actually anticipated and they skipped around to financing because they were doing so good. They were profitable. They were printing money. People were subscribing. They had low cost. No burn rate. They were profitable. So as they kept throwing money into the tank and then we had FitBod, another company where investors in, I would consider in this sort of Alicorn slash Pegasus category, they just fly over rounds of funding. with profitability on the wings profitability. If you can do that as a founder, if each round is 15 to 20% dilution,

if you skip one or two, this could meaningfully increase your ownership percent. Right. So skipping rounds is not inherently a bad thing, right? Like sometimes it's super baller, sometimes it's a red flag when they're super early. If you can skip around to funding on and not dilute, it's baller.

That is super ball. So that's why anytime, if I was ever going to do another company again, I would fund it myself. I would get it to $5 or $10 million in revenue. And then I would raise that, you know, $200 million, $20 million up and, you know, take the 10% dilution. But I wouldn't do the multiple dilution steps because I already have a chip stack to do it. And a lot of my friends, whether it's Mark Pinkis or Evan Williams when he did Medium or Mark Pinkis did other companies. They were already established.

I'm not speaking out of school here. This is pretty much public knowledge in the venture community. They funded those projects themselves before raising money. So that, as one of them told me, I didn't want to waste anybody's time. If it didn't get product market fit, I don't want to waste anybody's time. I don't want to.

These are all my friends. I was going to let my friends invest in it. I'll just do it myself. I was like, no, no, no, no, no, no, no. I want to take the risk. Please take my money. To like, if it works, then I'll let you come in. Yeah.

I kind of want that juicy bite of the apple, but no, you'll get a little sliver of apple later. So it really is something to be very cautious and aware of as a founder. Now, if you can raise that a great valuation, give it a shot. I always tell founders, they're like, hey, do you think I can get this done? And I'm like, I am uncertain. And if you want to try, you have my full support.

The market will tell you very quickly. So what is your plan to get that answer quickly from the market? And they're like, I'm going to do a fundraising process. I'm like, why don't you pick three firms? We introduced you to the three firms. And you tell them you're raising a Series A and you tell them what you're looking for and ask them if they're interested, yes or no, and that you would like a quick answer

because you have a seed funding bridge round you can do. And sometimes they're like, okay, let's do it. And then other times they're like, yeah, no, I think you should do the bridge funding. And so you kind of give them the easy out by letting them know you have other funding and do they want to do it. So it kind of puts a little pressure on them,

but also lets them know it's easy to, it's an easy to say no, right? Yep. So be careful out there, folks. If you skip milestones, that's okay. But there's a reason why certain things have been codified, like going to an accelerator or raising a seed round or friends and family. You know, you don't have to do every step, but there's a reason why these things become

norms. It's because they're probably the most effective. And I'm not just saying that because we get equity in companies and, you know, after we've invested, we'd love to see you, you know, be profitable. It doesn't always happen. Yeah. A lot of times it doesn't happen. You need to do more work.

You need to put more fuel in the tank. I saw a tweet on my VC. Twitter a couple of weeks ago that said if there was anything that I could tell other founders and I apologize that I can't remember who said it and didn't save it. But I remember the message, which was if there was anything I learned as a founder, it was bootstrap as long as you can. Like do all the work that you possibly can to get as far as you possibly can before you try to raise and bring on a team. And I can imagine that in a world where you feel like money is falling out of the sky, you'd be like, I'm just going to go ahead and raise. It'll be so nice to

have that money and have the help. The money is no longer falling out of the sky. So this is a moot point. Everybody's getting a kind of a rude awakening to their last round. Anybody who raised in the last two years, the next two years in four out of five cases is going to be a much harder fundraising process. Even if you did everything right. It's nothing to do with you.

It was really hot for the last two or three years. The next two or three years with a war going on with, you know, reopening. with interest rates, with market uncertainty, with the market correction slash crash in growth stocks. It's just going to be a different world. And I would tell everybody, expect fundraising to take twice as long to raise half as much. If you go into without expectation,

you're going to take twice as long to raise half as much. Just keep that in mind. That's the probable scenario. I don't wish that. I just think that's realistically what you could expect in terms of headwinds. Prepare accordingly. prepare a cordling everybody.

Yeah. And that's it for VC Sunday school. I'm happy to see the Notties talking about how it's the best part of the week. So great. But it's not over yet. Not over yet. The Sunday show. Sunday show is not over yet this week in climate startups.

Another investor, I'm still, we're booking startups. Don't worry. We're getting startup founders on here in the climate space. They do exist. But first, I have to get through my roster of super impressive and well-known and legendary climate investors. And actually, Andrew Beebe of obvious ventures, which of course is the firm that at Williams helped found, came from a solar background leading large teams at Next Era and SunTech. And he leads obvious as investments in renewable energy and electrifying transportation. And he is one of the

people who has been doing this for a while, like longer than, you know, if there's a million new, if a new climate tech investor is minted every day, they are probably patterning themselves in some way. after Andrew. And what I like about what obvious has done is that they have picked a lot of non-obvious bets. Ah, I assume you know.

No pun intended. Um, pun intended. I lied. And they, you know, they bet on things like beyond meats. And made it clear to everyone

that like meat replacement is a climate play in ways that you hadn't thought of. You know, and they invested in pro terra, the electric bus company that of course had a huge IPO because they were like, you can electrify cars all you want, but mass.

transit is really valuable. So it's just a super interesting thesis. He's been added a long time, comes from the energy industry, and we sort of talked about the big tent that can encompass climate investments. Super great conversation. Let's go to the interview. It is this week in climate startups. And this week, I'm super excited to have Andrew B.B. managing director at Obvious Ventures, where his investment pillars, which we're going to dig more into, the investment pillars at obvious are sustainable systems, healthy, living, and people power. Andrew, welcome to the show. Thanks so much for having me, Molly. So do you do all of those pillars? Because I know you have essentially dedicated the past two decades of your life to clean tech and climate tech, right?

That's a great question. Yeah, I mean, those pillars really represent core portions of the global economy. So I don't pretend to be able to take them on all myself. I have some great partners along with me. I focus mainly on climate tech and specifically on electric mobility and carbon and markets. How did you, before I ask you about some of those investments, how did you come to this? You were in solar for a long time before VC, right? That's right. Yeah. In fact, I was an internet entrepreneur in the late 90s, venture-backed here in Silicon Valley, born and bred in a lot of ways. And in 2002, when I sold that company called Big Step, I decided, like I think a lot of founders do, that my next act would really find a way to marry profit and purpose. And I did a lot of research, and, you know, Gore's movie hadn't come out yet.

Climate change was like a thermostat setting. You know, it was not a thing. And I saw some similar trends in the solar industry that I had seen in the internet industry. When we thought about broadband and internet access and all these things, we knew that. a lot of markets were going to change. And Jason and others were pioneers in making sure that that happened. And once that was underway, I was sort of jonesing for the next kind of wave. And I looked at what was happening with the cost of renewables and the cost of the planet and to humanity of fossil fuels. And I just felt like those benefits were going to cross at a certain point. And we would

be able to radically transform humanity through low-cost access to renewable energy. And And that's when I got into solar. And I spent really the next 15, well, 12 years probably in a couple of different solar startups that I started down in Los Angeles with Bill Gross at Idealab and got backed from more David Alventures. And then I sold that company to a big multinational and stayed in the solar industry for a while after that. And it was only after really building a lot of different types of businesses within the

renewable space that my partners at obvious came to me. and said, you know, we're getting the band together, and we have this great opportunity around sustainable systems, and that's when I jumped in. Listen, we all have regrets in life, some of us more than others. But if you ask anyone my age, something they regret, I bet a bunch of them are going to say they wish they had started their financial planning and they're saving for retirement just a little bit earlier. When you get started building your wealth early, well, you get to capitalize on compound

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So it's interesting because a lot of VCs will talk about that kind of first climate, that first clean tech boom, right, where there was a lot of investment in solar and then not all of it paid off or didn't pay off immediately. You know, I think John Doer points out that some of those investments that were seen to be Flops have now returned, I don't know, a billion or two billion dollars. But you were on the other side of that investment boom at that time. Like, tell me about that period in the solar industry and all that it went through. And then how did that, you know, now being on the other side of maybe a new boom?

Yeah, look, I mean, I think timing is everything. And I also think that as entrepreneurs and maybe as investors, too, we need to find contrarian opportunities. When you're doing something that everyone else is doing, you're probably a little bit too late. And I remember in 1998 going up and down Sand Hill Road with my internet idea, helping small businesses get up and running on the internet. And people venture capitalists, smart from storied firms, would ask me, are people really going to put their credit cards on the internet? You know, and they had really sort of basic questions. And obviously, they just hadn't

seen around the corner, like a lot of other, you know, a lot of founders had at the time. and when I started going out in 2002 and asking those sort of presenting this idea of a clean energy future, I got a lot of the same answers. People would say like, Andrew, we loved you from your last thing, but could you do like a mobile gaming thing? Because that's what everybody is doing. And when I realized that I was really presenting a contrarian view of the future, that's when I felt like, okay, I'm on to something. This is where I should be spending my time. It took a long time for that future to manifest itself. But we were talking at the time, you know, solar, just to put it in context, was.

$10 a watt for a solar panel. And we were pitching that we were going to get it down to a dollar a watt. And that was like a magical number. If we could do that, the world would change. And in fact, we did that. A lot of people came together to do that. And now it's 25 cents a watt. You know, it's just extraordinary how much reduction we've seen.

And I think it's got a ways to go. But in the early days, it was tough. There were not a lot of believers. So it was a small group, sort of like the early Internet days. And it was a passionate group. And that was a lot of fun. it's different now. Now I think the challenges are much more acute of climate change. We see them everywhere in everyday life. And that changes everyone's perspective around the resolve. But there are a

couple of other big differences too. One is that the bevy of founders focused on the space is off the charts. I get I just talked to somebody who left a very prominent position at a very well-funded mobility company because it was not climate forward enough. And they, you know, their question to me was how do I jump over? How do I dive in? And that's what a lot of people come to us asking. I'm blown away by the caliber of people ready to start companies. That's a big difference. The other difference is that there's a lot more money and a lot more profit. So both money on the investment side and profit on the outcomes. And I'm sure one follows the other. But it's exciting to see, you know, from massive scale renewable projects that we were only dreaming of 20 years ago,

which is much more of like a yield kind of infrastructure dollar kind of financing to really exciting breakthrough technologies and mobility that are turning into companies like Rivian, which have, you know, market caps much bigger than any of their rivals with barely shipping a vehicle. So there's a lot of capital chasing these opportunities, and that's a big part of it too. Yeah. Well, and in many ways, not only are you a veteran of sort of the solar, the solar wars of the past, but you have been doing climate related and what obvious calls world positive investing for, you know, a relatively very long time considering how many sort of brand new climate tech investors and startups are coming to the space, myself included. What are you seeing like, I know you don't want to give it all the way, but what mistakes do you know? that we're all going to make.

Well, you have managed to successfully avoid. I mean, we could, you know, Venture is a very humbling sport, and I find myself constantly trying to unlearn beliefs that I brought from the past, so I want to be careful here. But I could certainly point to some potential lessons from the past,

and one of them was that there was a period in, you know, 2006 to 2009, probably, where the hype was fairly extraordinary. And at the same time, this is somewhat coincidental, but they relate, there was this wave of large-scale funds getting raised. There was a lot of excitement about venture capital. And perhaps there was an overabundance of capital with a dearth of targets.

And those things combine where people may look for places they could deploy a lot of capital in one fell swoop. And that can turn into people funding infrastructure projects or funding project finance, you know, big factories or big chemical facilities that are not really venture. And I think a lot of people would look at the ethanol movement or bioethanol or biofuels period as potentially that, where we were using the wrong form of capital to build out a lot of those projects. And that's where a lot of money was lost and there were some pretty spectacular failures. Same thing could be true. Could be said about some of the solar manufacturing facilities that were built that maybe didn't need to be built out with venture. So I often look at the capital intensivity of a given pitch. And we've been involved in some of them, you know, Lillium, which is an aerial electric air taxi company that's now public and Potera and electric bus company that's now public. These are capital intensive businesses. But if you can see a pathway where that capital is going to continue to show up and at the

same time, they're actually in business producing revenue, I think you can get there. But we do have to look out for some of those. challenges where you might not have that next wave of capital available right when you need it most. I think that's a really good point and gets to also what seems to be a series of ongoing philosophical questions or splits, which is like how is it best to approach this problem? Is it best to approach it with software and SaaS products and tracking and dashboards? Is it best to approach it with deep tech? and or is it best to approach it with infrastructure?

And I mean, I think what you have just said feels like a way to help crystallize. Like, yeah, we need all of that stuff, but it isn't necessarily the job of venture to do all of those things. That's right. Yeah, for sure. You said it. I mean, it's in all of the above strategy, absolutely.

Luckily, the project, you know, the yield dollars, these later stage dollars, are showing up by literally by the trillions annually in terms of funding infrastructure, knowing that these are highly predictable outcomes and they're great products for certain types of investors. The earlier we get, the higher risk we take. But I do think we have to, you know, everybody has a role to play. You know, when we look at Cold Fusion as an example or other things that are very science,

you know, more research and less development related on the R&D spectrum, I think that that would be a case where a lot of venture money could go into those things, but they can be 15, 20 year journeys. And maybe we need to look more to government money and research labs around the world to help with those kinds of early dollars to de-risk some of the science before we get right into that sort of, you know, that liminal phase, that sort of jump point where you say, okay, this is now officially moving from research to development and scaling. And that's a business. And we can invest in businesses. Whereas it could be easy to think, well, our job is risky capital. I mean, this is true. Our job is risky capital. But governments aren't necessarily going to, and institutions aren't

necessarily going to be good follow-on partners. Right. They might come before very effectively, but, and possibly alongside, right, certain policies do help with factory buildouts and with loan guarantees. I mean, Department of Energy today has tens of billions of dollars of loan guarantees that they can offer as things start to scale. So there are cases where they can be great along the way, but to rely on them swinging from, you know, the vine of early stage and seed capital all the way across the jungle and hoping that when you let go, there's going to be another vine from the federal government loan guarantee program or something, I think is probably a not a great strategy. I'm going to quickly explain one crucial type of insurance that all startups need.

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And while you're there, you're going to get an extra 10% off by using the promo code everybody loves most. TWIST, Twist, this week at startups. Get that 10% off at inbroker.com slash twist. Let's talk about obvious and your investment thesis. obvious writ large has world positive as a thesis. How do you apply that in your sustainability lens?

Yeah, for us, I mean, world positive is just our way of stating very clearly. We go after purpose-driven founders trying to transform the biggest industries in the world. So that can mean healthcare, that can mean financial empowerment technology. and it of course means sustainable technologies around mobility, industrials, any kind of carbon reduction or carbon trading, etc. These are massive markets, and we look for a couple of different things. Are they building a company that's going to be critical to that global economy 10 and 15, 20 years hence? So we tend to avoid things that we call pothole fillers, which maybe are impressive in the short term, but aren't long-term, likely icons of the global economy,

and instead look for those things that are going exactly where we all wish the world went. So that's one, but world positive is also about the founders. We're looking for people who have real values alignment with us, and we wear our values on our sleeve very clearly. You know, we talk a lot about it on our website and our credo, and that allows us to mutually select one another. And when we offer our world positive term sheet to founders, which is really just a non-binding appendix or extra piece of paper that they can add with our term sheet that says, look, here's our intention. These are the things we care about. Here's our commitment to the planet.

Here's our commitment to diversity in our teams. Here's our commitment to the types of follow-on investors that we want. All of those things, we let them sort of enumerate them because we spend all this time negotiating these term sheets with legalese. that contemplate all of these legal sort of dead ends that are likely not going to happen and don't spend as much time thinking about how do we want to be together. So that has helped us really find values align founders and teams and has served us well because so many of them go through pivots along the way, especially when we invest at the very early stage and things are going to change, but the people ideally don't.

And that's what we want to invest in. So world positive is definitely about the mission of the businesses, but it's also about the values of the people. And then this is where I should be clear, because I asked this question the first time I met your team years back. You're not concessionary, however, right? It's world positive, but it's still capitalism. Yeah. I mean, I don't. Our dream is that there's no double or triple or whatever bottom line.

There's just one bottom line. But that bottom line cares about the long term viability of the business. businesses. And businesses that really care about the long term can only do that if they care about the long term viability of the planet and humanity and their customers and stakeholders. And if you really take a holistic view like that, we should be able to get back to one simple unified view of what makes a built to last business. I realize, you know, a lot of great work has been done by people who have used concepts like concessionary investing or ESG or impact or these other labels. And we stand on their shoulders. They've really helped move the ball forward. But we also hope that

profit and purpose are not something that you trade off. It's really profit because of purpose, because of the intentionality of those founders. They should be outperforming their competitors and outperforming the market. And that's really what we're trying to do with world positive venture capital. Let's talk about some of your investments because one thing I've always thought was interesting about obvious is that the world positive lens let you potentially be, this is an accidental pun, I swear, non-obvious in terms of deployment. Like, I think of obvious as one of the early firms, at least to me, to see that meat replacement is actually a climate investment and to make that case into the world. Yeah, I mean, you know, somebody called us

OGESG the other day. And, you know, whatever it is that we've been doing, we've been doing it from day One, Beyond Meat was one of our earliest investments. People ask us sort of which category do we put climate in. And climate to me is like fintech. It's very horizontal. It just shows up, and increasingly, it shows up in everything. So diamond foundry is another great example. Diamond foundry is an incredible company that is growing consumer grade, you know, six, seven, eight-carat diamonds in chemical vapor deposition chambers that are all green powered by hydro and solar. So these are green. So these are green real diamonds that are not mined, but grown above ground. And the company has had explosive growth. It's an incredible story. And it's a climate story, but it's also a social good story.

And it's also really a planetary health story, not just CO2, but not having to mine for things that aren't really necessarily mine needed. And that's been exciting to watch them grow. So we can see that across the board. Verda Health is obviously very focused on. on planetary health, but the health of people by reversing type 2 diabetes without the use of medication. And the list goes on and on. And that's the kind of stuff that we think of as world positive. And oftentimes, many of them touch the climate piece as well.

Yeah. Mobility, obviously, big in climate. But again, sort of coming at things from, I think, I would say, sort of cleverly the side, right? like transitioning combustion engines to electric with foreign mobility or usage based charging service to fleets that are transitioning to EBs or obviously

pro terra. Yeah, I mean, early on look, I came from the renewable energy space where we were decarbonizing the most important or carbon intensive portion of the global economy around energy generation and the way that we get our power.

If we could deep carbonize every electron that goes into anything on the planet, we're, you know, at least 40% of the way there. If we could decarbonize mobility, we're about another 30% of the way there. And then if we can decarbonize agriculture and industry, we're done. Like, we are then actually able to start reversing the effects of climate change. So we're going to have to do that given the next couple of decades ahead. So for us, it was a pretty logical migration, decarbonize energy generation.

but that alone was not venture worthy in a lot of categories because we had done so much work from 2000 to 2015. So we decided to focus our energy more on mobility where there's an incredible opportunity to upgrade every internal combustion engine. I think we will no longer see things. I think our kids and grandkids will look at our use of fossil fuel and say, I can't believe you used to burn that stuff. You know, it's so incredible what we can do with petrochemicals. I think we will find much, much better uses for it. So in 2015, we set out a position around the electrification of everything, and that meant

maritime, flight, vehicles. And even then, it was not considered obvious. And to your earlier point, you know, part of the naming of the firm is that eventually all these things are obvious. And in fact, today, my kids, when I tell them, yeah, we were really early in investing in electric mobility, they say, well, come on, Dad. Like, everybody knew that. You knew that, you know, we weren't going to have electric, we weren't going to have combustion buses or combustion taxis or whatever.

And it's humbling, but it's not true, right? Back then, it was a little bit of a contrary point of view. And even today, when we look at electric aviation or electric maritime, I think there are still plenty of non-believers. And I think that's a great setup for investing. Yeah, absolutely. You also, early in the year, made the story. great thread about where you're going to be looking, where climate investors should look

overall, sort of, you know, the top 10. And if you wouldn't mind, I'd like to jump through a few of these of what you call the decarb decade. Love it. I mean, I was thinking of, I was trying to remember what decade was really Atkins heavy. The last decarred decade was Atkins, but this one is going to be much better. So you point out things like, you know, what you just said, actually, the great resignation is going to lead to more world positive founders and there will be this blessing of climate unicorns. But in terms of forcing functions, carbon disclosure, you said, it's going to be a big one for companies big and small, right? This is where policy plays a big role. Yeah. I think, you know, we talked earlier about oftentimes people say the younger generation,

next generation cares a lot about climate. I think increasingly you're seeing it at every single age. This is not a generational. There's no real generational gap here. Everybody cares about this. And I think that that is translating into in the great resignation or maybe the great transformation of the workforce. We are seeing a lot of people and younger generations really saying this is going to be my career choice. But the other piece that is not talked about as much is the political activism, or at least in the valley, we don't talk about it quite as much. The political movements are really driving change now. Certainly around the world, they've been driving change in climate for decades, particularly in Europe, but even in China, you know, there's a lot of top-down work, and that's

political in nature that's pushing into substantial policy change around climate. We're starting to see that in the U.S. certainly at local levels and then to some degree federally. And I'm very optimistic that, you know, this is, there's no reason that climate needs to be a partisan issue. It's going to be a job creator across the board. It's going to touch every single industry. And I think eventually a lot of people, you know, Republicans and Democrats alike are going to come together and realize that they need to actually be battling over who's going to be more climate friendly, not trying to pick an end of that spectrum. Yeah, absolutely. You have as number three on your list. I don't worry, I won't make you go through all of these in depth, just a few. But this one I think is particularly

interesting. Number three on your list is Web3 plus climate. You wrote, more than a billion dollars of venture funding in the U.S. will be allocated to startups on the intersection of climate and crypto slash blockchain. Now, a cynical person such as me would say, how do these things intercept? Right? So far, blockchain and crypto have been environmentally and defensible, in my opinion. So, and yet, I'm seeing pitches that are like, will incentivize energy savings with NFTs. Yeah.

I have questions. I have to say that it feels like I wrote that a long time ago because when I wrote it, I remember thinking, okay, this is definitely, I'm going out on a limb here and I'm definitely going to get all sorts of pushback, which I did. You know, crypto has a really serious carbon footprint of its own. And that's something that has to work out. And that's different than what I was talking about. But moving to proof of stake is really going to give us an opportunity to get away from some of

carbon-intensive nature of building out, of mining, basically. What I'm talking about is something a little bit different. When I look at Web3, it took me a long time to find those very early applications where you could say, this is immediately going to be better on chain, right? People would talk about a distributed Uber or Lyft that was a Dow or just a bunch of smart contracts and you would not have to pay the man somewhere else who was going to take their little slice. And with content creators and others, I think a lot of people are making that case. I have not seen a lot of applications today where we say that is the killer app of the

blockchain other than currencies, right, other than what you might be able to do with a much more global, different kind of currency. What struck me was when we look at carbon offsets, the carbon offset market is a very flawed market. These are assets that are highly unregulated. They're questionable certifications. I might plant a tree in Brazil or plant a forest in Brazil and ask somebody else to pay me some carbon offsets for the work that I've done, verifying that that work has happened, that it's going to be permanent, that it's truly additional, that it wasn't going to happen naturally on its own. All those things are really complex. And then figuring out who owns that carbon offset. Did I just sell it to 12 different people 12 times? Or did I sell it to one person and it's got providence and

proof and it moves through across borders in a trustless way that's highly transparent but also permanent? When you put all those words together, that is literally the definition of the blockchain. So suddenly this very problem to market that is highly critiqued even by those that use it looks a lot more logical and natural in the blockchain world. And so the area where we focus first is finding ways to migrate that carbon offset trading environment onto the blockchain. Some people are doing it already. We're going to invest in some of those folks. And then on top of that, you could build actual structures and systems using smart contracts so that people can trade more efficiently so that people could do things like attach them to things like their mining activity,

attach them to things like their NFTs, attach them to different business transactions. And some of them are fanciful like people in the Metaverse planting a tree and actually paying money and that turns into an offset that gets retired. But if you think about it, I mean, it sounds a little crazy, but those things can be done in a very seamless way on chain. And it's quite different than what we're trying to do in the real world. Yeah. All right. That makes sense. I still have a lot of questions, but they're not really for you. Well, and all I said was there's going to be a lot of money invested. too. There is a, I mean, exactly. Like, at some point, it exists and there is going to be a lot of money invested and we'll probably be part of that. Running through your list quickly, we won't talk about everyone, like I said, but carbon trading. I mean, I think carbon markets writ large and certainly, you know, you have true carbon removal on your list. The closer we get to anything that resembles a carbon tax, the more these businesses will be incentivized. So consider that a government shout out.

clean ag, obviously a massive opportunity. Like you said, once we add in agriculture and industry, we're there. How does venture is, I mean, this can feel like one of those areas where venture shouldn't be playing. How does venture play a role in clean ag? Yeah, I think that's right. I mean, there's a couple of companies could be addressed here, and I mentioned some of them in the tweet, but, you know, Kula bio and Pivot Bio and Nitricity are all companies trying to transform the agriculture fertilizer business, which is a highly, carbon-intensive business. And what's cool about it is it's super concentrated and is really one thing. It's the production of nitrogen that has so much to do with the carbon output. And if we can

transform that, this is true of steel and aluminum and concrete as well, if you can transform those processes, it's sort of a, they have silver bullet-like capabilities. But at the same time, if you are just paying for capital scale for plant development and there's no great licenseable specific IP, you know, there are questions around whether that is a technology application that is venture scalable and can offer venture returns. So we have to proceed with caution, but I think some of those absolutely are going to present venture returns. And we have to figure out, is it, is it going to be a biofuels outcome or is it going to be a Rivian outcome where you had massive capital investment, but it actually paid off because you were truly radically

transforming an entire industry. Yeah. In a couple of places you mentioned, Europe, European consumer demand and the fact that regulation and founder motivations are leading to this sort of, you know, European resurgence when it comes to these investments. I have also talked to other investors who say, look to Indonesia when you want to see climate solutions, right? Because this is a country where the entrepreneurs there know that if all of Indonesia comes online with diesel, we could. Look to Africa. Look to these other countries.

Now, the Silicon Valley venture industry is very U.S. focus. We all want everybody to be, you know, a Delaware C corp. Do we have to broaden our horizons? Again, no pun intended. Yeah. I mean, I think Europe is having a couple of different moments. It's, you know, it's having a moment in venture because we're seeing a lot of unicorns being born there in so many different categories. And so venture is moving there and showing up and providing at least early stages of capital and then some later stages of capital. It's also having a moment on climate leadership. You know, when it comes to technology, when it comes to inventing new industries, the U.S. is often in a leadership position. But I think in climate, we could point to a lot of really

interesting companies and entrepreneurs who are starting up over there and very, very values-driven and world positive in the way that they're doing it. Beyond Europe, for sure, I mean, Asia, China is, you know, a leader now in electric vehicles, in micromobility. Really, much of the micromobility movement came out of China. So we have to respect these different pockets of opportunity. There are also places that are going to be feeling the pain of climate change, faster than Europe and the United States, parts of Africa, definitely parts of Southeast Asia. But we also have to look at the startup ecosystem and the venture ecosystem to make sure the capital is going to be available to support them in those environments. And I haven't seen that

quite as much. I'm very excited about stuff we're seeing in Indonesia and in other areas, but the stages of venture to support them and, you know, in certain places, the rule of law, et cetera, do make it tougher. I think that climate, crypto-based funding or funding, within the Web 3 community could actually start to be more of a leader in some of those developing areas than traditional venture capital, which will be more conservative and a little bit skittish at first. Right. Interesting.

So some crowdfunding potentially. Yeah. You know, to simplify. I want everybody to go and read the rest of this list. I am not even going to start the insurance conversation because I could do that with you for like an hour. I get obsessed on these really boring sounding topics, but insurance and reinsurance. Yeah. Pretty much the whole ballgame here. If we live in an uninsurable world, that's right. Money will start moving. So everybody go check out Andrew's thread. It's pinned

at the top of your Twitter. But also, this is your chance to plug your new project because obvious is doing a climate podcast, yeah? Yeah. So obvious climate is a podcast that's really focused. You guys do a great job of highlighting the startups. We're focused on trying to help people make the transition from traditional tech to climate tech and something that, Molly, I know that you're focused on, which is exciting. And we're going to have all sorts of terrific guests on our podcast to talk about that transition, but also talk about the resources to help people take the plunge. It feels scary at first, but I think when you really look at it, it's a great opportunity. It's amazing. I am delighted to hear that that is the focus because it's not that far removed. And I mean, I can say that when I started covering climate tech and climate solutions, it was literally born out of this, you know, like being here in the valley and saying, wait a second, you guys all told us you were going to save the world.

So what are you doing for the world? And it shouldn't be that big elite technology has saved humanity every time we've been in a big jam before from like fire to the wheel. penicillin. That's right. That's right. Yeah. Also, if I could plug one other thing, I would recommend a great book by Kim Stanley Robinson called Ministry for the Future.

It sounds like you read it, but it's a terrific window into the next 30 years. And after all of the horrific death in the beginning, it's actually quite optimistic. So I think it's a good roadmap. You've done a very good morning there, which is get past the horrific start, which is going to make you go, this is not topable. Because it, and that, so I, in how we survived the series that I did before I came here, one of our episodes was an interview with Kim Stanley Robinson about that book because it became like the muse for everybody working on it because it is the playbook for the boring hard work. That's right. Like some of it's just bureaucracy, financialization,

just putting your head down and getting the details right. And as you probably recall, had a cryptocurrency mapping to carbon pricing called the carbony, which was not his idea, but one that he had researched really, really well and embedded throughout the book. It was exciting. Yeah. There's a lot of great. You're absolutely right. It is fully a manual for how to get yourself invested and maybe for how we actually do it.

Andrew, where else can people find you before I let you go? We're at obvious.com, as you might imagine, and my Twitter's at Andrew Beebe. and my email is just A at obvious.com. Andrew, thanks a lot. I really appreciate you coming on. Thanks so much for having me, more. Hey, everyone. Producer Nick here.

I want to tell you about the SaaS Syndicate. If you're a founder of a SaaS company with a product and market, our investment team wants to talk to you. Head over to the syndicate.com slash SaaS, S-A-A-S, to apply to raise from the SaaS syndicate. And you can join Jason's Syndicate of over 9,000 accredited investors at the syndicate.com.

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