This Week in Startups - Side investing (VC School) + Stripe's Nan Ransohoff: Frontier carbon removal | 1454

Episode Date: May 8, 2022

Sunday double-header. First, Jason discusses why some VC firms allow side investing and others explicitly forbid it (01:50). Then, in a This Week in Climate Startups segment Molly interviews Nan Ransohoff, Head of Climate at Stripe (12:27) about their $900M+ plan to fund carbon sequestration (31:18). 00:00 Jason and Molly introduce today’s show 01:50 VC Sunday School: What’s the deal with side investing? 09:42 Thorne - Personalized, scientific wellness. Go to https://Thorne.com/u/TWIST 10:55 Intro This Week in Climate Startups 12:27 TWiCS: Molly interviews Nan Ransohoff, Head of Climate at Stripe 20:14 Wealthfront - Get your first $5,000 managed for free, for life at https://wealthfront.com/TWIST 21:30 The market for carbon removal: paying to re-sequester carbon 29:57 OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist 31:18 Discussing how Frontier functions as a non-profit within Stripe & how to make something like Frontier mainstream Check out Frontier: https://frontierclimate.com FOLLOW Nan Ransohoff: https://twitter.com/nanransohoff FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

All right, everybody, it is another Sunday edition, our favorite two for including this week in climate startups. And of course, we do VC Sunday school where we talk about investors in a fund doing side investments. Can you do side investments if you're working at a venture? On the answer, it may surprise them. We got a lot of stuff. We got stuff about how large tech companies are helping in areas of innovation, how much it actually costs you to be a GP. I love our blended Sunday show because there is someone for everyone, and this is going to be a great one. A little something for everyone, yes. It's going to be a great show.

Stick with us. This Week in Startups is brought to you by Thorne. Thorne empowers people to take control of their long-term well-being with a proactive, science-based approach to health. Through a variety of at-home tests, Thorne teaches you about what your body needs and provides the right, high-quality, certified nutritional supplements for you. To get started and take 10% off your first order, head to thorn.com slash you slash twist. Wealthfront. Wealthfront makes it easy to invest and easy to grow your savings with a diversified portfolio that balances your other riskier bets. To start building your wealth and get your first $5,000 managed for free, go to wealthfront.com slash twist and open phone.

As a startup founder, a lot of mistakes are easy to roll back, but using your personal cell phone number as your company number isn't one of them. Openphone makes it easy to get business phone numbers for you and your team right on top of your existing devices. Visit openphone.com slash twist to get 20% off your first six months. Hey, everybody, it's Sunday. Time for Sunday school. Molly has got a couple of investments under her belt. She's loving her job. Here we are. It's May. She's been here making a great impact on the pod for a great months. And I'm putting up some numbers in the investment category. So what's your question this week, Molly, about being a venture capitalist?

Well, this is so interesting because this is a question I had already had. And then, Justin, producer Justin, read this interesting article in Bloomberg about how Yuri Milner's DST Global actually encourages personal investments from partners into early stage companies. I had previously had a question about like, should we be in the syndicate? Do we do that? And then also someone, a friend was asking me like, do you have to be an investor? Do you have to be an LP in your own fund?

Okay. And I think in venture deals, they talk about how some GPs do in fact have a personal capital responsibility. So there's a bunch of questions in there, but the first one, let's start with the very first one, which is what's the deal with side investing? Okay. It's a great question.

This is really about communication. and outcomes. Okay, let's start with communication. Do your LPs, your limited partners who are backing your fund, understand that you're doing this. In the case of Yuri Milner and DST Global, I think he's largely investing his own money. I don't know that for certain. And so he can make the rules if it was like a family office situation and somebody invest 25K or 50K and Uber or Airbnb in the seed round, he would look at it like the Sequoia Scouts program. And then maybe they bring the next deal to them. The only problem with this is, if this was a regular fund, like let's say ours, and I went and did a rogue investment,

and it turns into another Uber situation, a Robin Hood or Com. Right. And then the LPs missed out on that. I now, as the general part and the GP have to explain to them, you know, you gave me your money to invest, you trusted that my deal flow was awesome. I met Robin Hood at a bar. I gave them money, and you weren't included in it.

I already have this issue where somebody's like, I was in Launch Fund 1 and Launch Fund 3. And where was this investment? I'm like, that was Launch Fund 2. you skipped it. You didn't get back to us and get us to paperwork in time. And then it's not my fault. It's theirs. But they're just like, oh, how did I miss it? Why did you let me miss it? You know, so you have this like regrets. Yeah. So the overwhelming rule is you do not invest outside of your fund. Because on a hygiene basis, you will have problems. And that's where the outcome, right? So the

communication is one thing. And then the outcome, what if you actually hit a home run? But this also does for people who are working at a venture firm is it makes it very easy to say no to their friends. We're like, hey, can you give me 25K? Can you give me 10K? It's like, I'm not allowed to invest outside of my fund. And my fund is not allowed to invest in movies, albums, pizzerias, retail stores, direct consumer.

So for me, when people email me, can you invest in my movie? I said, well, I'm not allowed to invest outside of my fund. And I don't like to lose money. So I don't invest in movies or some joke like that. But you can, there can be exceptions. There's something called an LPAC. limited, what is it, Stanford again?

Right. There's a group of people who are like your board of a venture firm, sorry, I'm a little tired today. I'm a little tired today. The LPAC will then can give you an exception.

So if you did want to invest in your brother's pizzeria, you could just go to them and say, hey, this is outside of our mandate. Do you mind if I invest? I don't like to do all that. Now, with a syndicate and a de minimis amount,

you could say anybody in the company is allowed to invest under $5,000 in a private company. We just asked that you let us know, right? So you inform us. So we at least can track it. No, you have that conflict.

So if you went and you invested in something that's a calm competitor and then the com founders find out about it, they're upset, oh, you let Molly invest in, you know, what's the really bad meditation app that everybody hates and unsubscribes from, Headspace. You know, like if they were, you would invest in that. I'm joking. Don't come out of the headspace people.

You know, I'm team calm. I'm just joking. I'm trolling y'all. What do you want for me? What do you want for me? This is also why you don't decide investments you're invested. How competitive and deranged must you be to actually go off on meditation just because they're competing.

That's deranged, J-Cal. Well, and then what about this question of like, we're as, you know, as a managing director, I'm invested in all of our investments. what about this question of like should we also and and we have the syndicate model so it's a little bit different right but like what about this question of I guess the double dip like well yeah no GPs are expected collectively in a fund so we're a solo GP fund but at places where like you know there's six people at benchmark who win the fund they're expected to be 1% 2% of the fund 200 million dollar fund they're supposed to be 2 to 4 million there's six of them you know whatever it is, 500K, 750K, a million dollars each. What that shows to the GPs, to the LPs is that the GPs have skin in the game. Okay. And the more skin you have in the game, the easier it is to put money in. So there are places like Sequoia or Andreessen Horowitz or Chimov, where I think Chimov has been public about this many times. I think at some point he was 25 or 35 percent of his fund. Somebody like

Sacks might have a significant amount of money in their fund. So, you know, you come into that fund, you're some endowment. It's like, yeah, the principal, the GP who started the fund has $10 million in this. As an example, when we had our $10 million funds, I think I had somewhere between 2 and 5% of them of those. I put $200,000 to $500,000 in there, you know, which is or isn't a lot of money depending on, you know, who's looking at it. But it's definitely skin in the game, right? And I got to, when the capital call goes out, I got to put money in, right? So it's a very cool thing for the GPs there. Generally, I just advise people

to not create conflicts of the appearance of impropriety and all that stuff. This is my general thing. It's very useful to have been a journalist who became a VC because even just hearing that, I'm like, you can't do that. It's not cool.

What's that? Like side investing or, you know, I mean, it just sort of seems so obvious or even when I'm like, you can't be talking to a company that does the same thing as a other company. Like, you've got to keep that stuff separate. Yeah, I mean, these are useful rules

and a lot of VCs who are very, and to be honest, I know VCs are a lucid. goosey about this. Because they're successful and they're like, yeah, I just did a little bit on the side. My firm said no, so I put in 50. So let's say your firm, you have five, six partners and the, you know, five partners overall, one partner, they're not going to invest in Uber. And they don't like the business model. Right. Now what happens? Right. The person then goes invest in Uber or Airbnb and then it becomes a huge hit. Now you got this animosity in the partnership,

possible animus with the LPs. But that partner who, said, hey, listen, y'all fooded me down. I was hella right, though. And I was hell right. Hey, look at my cash bag. You know, and it's like, yeah, come in with the, you know,

$3,000 or whatever, $20,000 burkin bag. The burkin bag. What was the bag from the week? Burkin, I think, yeah. Yeah, you're coming with your burkin and you're like, how'd you get the burton? It's like, well, secure the bag.

Should have listened to me, dumb, dum. Well, that happened, actually. I think it was more David Dow, was the famous firm that somebody who will fact check me on this. you know, some founder, some partner was just adamant to not do the 13th search engine, the Google thing because the founders weren't serious. And it was like a firm defining slash killing moment. Yeah.

If it was them. So, wow. That's what somebody told me. I should be put that in context. Somebody told me that was more David. I don't know if it was. Listen, dealing with your personal health and wellness can be daunting. You can feel like you're being bombarded by apps and ads when you have no idea.

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Slightly abbreviated V.C. Sunday school because we have Nan Ronsahoff who leads climate at Stripe, which is already a pretty cool sounding job. But what Stripe has then done is create this new thing that Nanlead is called Frontier, which is a carbon removal marketplace. Basically, a bunch of companies, including Stripe, have come in and said, we've got a billion dollar fund. And if you are a carbon removal startup, we have a customer for you. We're your billion dollars worth of customer for this technology.

Super, super interesting. So instead of just going out and searching for carbon offsets, they said, hey, we will have a lot of these that will need. Come to us with your carbon project. And we might invest in it, give you money and take shares in it, or we just might be a customer or both. They're a customer and sort of like a grant, it is not a for-profit.

It is not an investment arm. It's a really interesting, yeah, it's a really interesting sort of new type of way to incentivize this marketplace for these companies that don't actually have a ton of skin in the game other than maybe ending up with a really good. great carbon removal strategy, which could benefit them and us all. Plus, Nan is just a really interesting person.

It's a good get. Good job, producer Rachel. It's a great get. Oh, producer Rachel. Securing a great guess. Well, Donna, I like to see that from producer Rachel. All right, stick with us. It's going to be a great, great interview.

I can't wait to hear it. We're back with this week in climate startups. I am so excited to be talking to Nan Rantahop, who is, who leads. I'll ask you what your actual title is, leads climate at Stripe, which has just announced an almost billion dollar fund, $925 million fund to invest in carbon removal technology. This is a great day at this weekend climate startups. Nan, welcome to the show.

Thanks so much for having me, Molly. I have so many questions. I'm going to try to sort of like go in order, I guess, of your experience. What does it mean to lead climate at Stripe and when did that start? And how did you get there? That's a lot of questions in one I know. but we'll start with the origin story. Yeah, a lot of questions in one.

Well, a little bit of background on me. I've spent most of my career in the climate space, always in a for-profit context. So I was at O-Power and Ness, which are kind of some of the first generation climate companies back in 2010, 2011. I worked at Uber on Uber pool, trying to get more people in fewer cars.

And what led me to Stripe was essentially trying to re-educate myself on some of the climate math by reading the 2018 IPCC report, the sort of previous version of the big report that just recently came out, which told us, you know, in addition to a huge amount of emissions reduction, we are also going to have to do a huge amount of carbon removal. Because we've done such a bad job with the emissions reduction piece, we now needed to make the math work. And I sort of became obsessed with this question of how do you build a market for carbon removal in the absence of policy? Because I am not a policymaker. I'm also not a scientist. But that was sort of the top-down thinking that

kind of led me to Stripe, who at the same time had just posted this 2019 million dollar negative emissions commitment. And the idea behind that was also grounded in the climate science, which says we're going to need to do a huge amount of removal. We have some of the solutions we need to get there today, like planting trees and soil carbon sequestration, but we won't get all the way there. How do we start filling the gap? Well, the companies that are trying to fill that gap are really early and they're really expensive. So the idea behind their initial million dollars was to say, you know, could we essentially buy the Tesla roadsters of these companies to help them get started and get down the cost curve more quickly? I started talking to the company because I was interested in the topic. One thing led to another. And I ended up, you know, as you said, leading climate stripe, which has since evolved to mean a number of different things. But essentially, we're trying to at a very, very high level, do what we can to get climate on its best possible track and specifically how.

how do we get carbon removal on its best possible trajectory as part of a broader speed of climate solutions? So just to clarify, when you started at Stripe, the intention always was to create a path to invest in these technologies. It wasn't like, come on and fix our recycling problem and our food waste problem. The mandate was, again, it started as a sort of experiment. Yeah. And the idea was, I mean, tech companies are so great. That way it's so great. Yeah. Right. They're like, I don't know. Let's build something. Let's try something. And it was this, again, started as this like corporate commitment, but has since become not only just Stripe contributing, but we then launched Stripe climate, which makes it easy for the two million businesses on Stripe to choose to give some of their revenue

to carbon removal, which we then pool together with ours and use it to buy even more carbon removal. And that was like, okay, great, that's another good step in the right direction, but we're still super far behind. So what's the next thing that we can do, which really is what let us to this latest announcement with Frontier. But as you said, everything is kind of about, you know, the adjacent possibilities. If you do something and other doors open and then you do something else and other doors open and we've, you know, it sort of has spiraled into a continued and a continued journey in carbon removal.

And I think one we maybe didn't totally anticipate when we started. Yeah. This feels like it might be a good time for us to level set and talk about what we mean when we say carbon removal, which is going to lead us to Frontier much. like your path through Stripe did, what did you mean when you said it then versus maybe what we mean now? We spent a lot of time at the outset

with our first million dollars trying to wrap our arms around this space. We spent a lot of time with experts and scientists trying to understand the answer to that question. And essentially where we landed was our focus at Stripe is really on filling the gap that exists today in solution. So if you take a big step back, there are essentially two things that we can do to get to

global net zero by 2050. We can stop emitting or we can pull CO2 out of the atmosphere and ocean and store it somewhere permanently. If you double click into the pulling it out lever, there are some solutions like planting trees and soil carbon sequestration that are quote unquote, mature today. We know how to grow a tree. The problem is, we will run out of arable land long before we can hit this crazy volume of removal that we need to do. So our focus was not on the mature stuff that exists today, but on how can we fill the gap? And we, in spending time with these

experts, we were really trying to characterize that gap in a set of criteria. And for us, it means a couple things. One, we're looking for solutions that will store carbon permanently. So more than a thousand years is the number that we put on that. We want solutions that don't compete with other sources of arable land. Three, we want solutions that have the potential to be $700 a ton in the coming decades and four solutions that have the potential to be more than half a gigatone a year by in the coming decades as well. So can it be big enough? Can it be cheap enough? Is it going to store the CO2 permanently? And are we still going to have acres to plant food on, essentially, is what we're looking for?

And this is where we should say that right now, virtually none of what you're describing exists. Like there are some nascent companies who want to turn carbon into other things, maybe repurpose it and turn into a different type of concrete, for example. But at scale, there is no existing carbon removal technology. I would imagine that that is what got you to, oh, crap, we're going to need a billion dollars. It is a huge part of it. Exactly like you said, in as of 2020, as at the end of last year, less than 10,000 tons by at least what we are aware of,

had been actually delivered. I mean, that is crazy. We need roughly 6 billion tons every single year by 2050. We are functionally, you know, haven't started. And that's from two companies, one of which was charm industrial, which was Stripe was its first customer. So, like, these are really new efforts. A huge supply shortage was exactly one of the,

impetus for frontier. And part of the reason that there is a supply shortage right now is because it hasn't really been a very attractive business proposition to start a carbon removal company. Why would you start a company

if you aren't sure anybody is going to buy the product that you're selling? Why would you invest in a company if you're not sure that company is going to have a revenue stream? This has really paralyzed the field up until very recently. And a million dollars and $15 million, which is what Stripe had given to date, is a great start.

But like, $15 million is not a market make. And candidly, a billion dollars does not a market make. Like, these are still steps in the right direction, but at least it's a big step in the right direction. Right. Listen, Wealthfront is an investment platform that allows you to open up low-fee IRAs, 401Ks, and more. But here is the amazing innovation they created. They call itself driving money. What does it mean?

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5,000, then you pay a tiny little fraction of what those big name advisors charge. I want you to go get that $5,000 managed free at wealthfront.com slash twist. Once again, W-E-A-L-T-F-R-O-N-T-T-com slash twist. Start building your wealth today. Let's dig into that concept a little bit of the market for carbon removal because there has been this sort of idea, I guess, that like who would pay for that? Would it be governments? Should it be governments? Which governments? Is it fair to make governments, you know, of countries that don't do as much polluting pay for that? And it sounds like a big unlock that you have had at Stripe is, hey, what if companies, instead of buying offsets, and I want to dig into your feelings about offsets, which I share, instead of buying offset so that we can say our operations are carbon neutral because we paid for a wind farm over here or some solar or like some tree planting, let's specifically

pay to resequestor carbon. Is anybody else doing that or wanting to do it? You know, obviously supply being the big constraint here, but that feels like a big leap and a big innovation for you guys to have had. I think that there is a, like, you can kind of think about the, there is a market for paying for some version of an offset. And unfortunately, everyone's expectations have been set that we can solve, you know, offset our operations and solve the climate crisis for $10 a ton, which, you know, if we were going to do that by now, we would have done it. Yeah. It's this gap between the fact that the market for CO2, wherever it exists. That market is not as big as it needs to be, but that market has a very

low price. And these technologies are just getting started. And when technologies are at the very beginning, they are expensive. We saw this with solar panels. We saw it with TVs and phones and Tesla's, right? We have to start early and over time with scale, the cost will come down. And so our focus has really been on creating a market for early technologies so that they are confident enough that, you know, they're going to be early customers and that they can get a bit further on that cost curve. As for who should pay for it, it is an open question. And I think that voluntary buyers, like private companies and individuals, can help get this field to first base. And it can help bias time to get policy in place. But this is going to be

a hundred billion to a trillion dollar market a year. In the cost, coming decades, like every single year. And it's, you know, it's very difficult to imagine that happening without government as a purchaser and also governments, you know, creating a compliance market and forcing companies and other players to do something substantive with remaining emissions. Right. Well, before we jump to the end, let's start with the beginning, because first they will need something to buy, which leads us to Frontier Fund. Tell me, about the structure of this fund. It is not in any way a venture capital fund exactly, right?

It is an advanced market commitment fund. Tell me more about this. Exactly. It's an advanced market commitment fund. At a very high level, the dollars, these $925 million are customer dollars. You can think of frontier like a customer. We're not taking equity stakes in these companies. We're not getting a return.

It's money in tons out. and the concept of an advanced market commitment, the goal of an advanced market commitment is really to guarantee a viable market for a product that hasn't yet been developed. And it's a concept that's borrowed from vaccine development where pretend you want a malaria vaccine and Pfizer and Glaxo don't want to invest the resources in developing the vaccine and deploying that vaccine because they're not sure that anybody from these poor countries

is actually going to be able to pay for it. In 2007, this idea came out of, from a number of economists at the University of Chicago basically said, hey, what if we could solve this by pulling money from philanthropists and governments into a pot and using that to guarantee market for pharmaceutical companies to develop that vaccine? They did this on the new McCaukel vaccine for low-income countries,

and it worked. We want to take that same concept, of saying, hey, if you build something, there's going to be a market and apply it to carbon removal, which faces a number of the same market failure problems. So whose money is it? Whose money is in this $925 million fund? The funds come from Stripe, Google, Shopify, Meta, and McKinsey. And the way that we have, you know, we care. There's so many big dollar number commitments flying around these days. every single company has committed to a demand schedule

that every single year here's the here's the sort of maximum amount that you can spend because unlike philanthropies and governments that might be able to pull those funds immediately, companies have other fiduciary stakeholders. They can't have like a $100 million expense randomly in one year, right? So we have a demand schedule that we've created with every company and some of this will shift a little bit,

but it's a rough demand schedule, which means that every single company has talked to their you know, they're CFO about this. You know, they really know what they've signed up for here. And our hope is that in the future, more companies are going to sign up. Like, we'd love to get this to $10 billion. Let's add a zero to it. But that's, you know, it's companies in the future, maybe it's governments, potentially

individuals. So there's a lot of different potential future contributors for now, it's private companies. So is it like to oversimplify? Is it kind of like an escrow fund? Like, when these technologies mature, this money will be there? Or are you also investing some of that money in helping to develop those technologies? Yeah, that's a good question about some of like the mechanics of how it actually works. So the money never flows directly through Frontier.

There are two tracks for different stages of companies. For really early companies that are just getting started and just removing their very first tons, we have track one, which is pre-purchases. This is very similar to what Stripe has been doing for the last year and a half where we give companies a, say, $500,000 purchase for a certain number of tons at a certain price. And we give that money to them up front. So if they go out of business or if they fail, we lost the money and we have no recourse. That's fine for really early stage companies because we're doing it at pretty small volumes and it's a good way to help give them, you know, a boost to get it off the ground. Right.

When companies are scaling and they're getting bigger, faster, that's a lot of risk for the buyer because you're putting your money into something that, like, you're not sure you're going to get anything back from. And the way that we're structuring that second, the second track, is offtake agreements. This is a concept that is borrowed from the energy sector as well, formerly known or sometimes known as PPAs or Power Purchase Agreements. Or VPPAs. God help us. It's like the most complicated universe in the world. So many acronyms. Yep. And you can imagine... Right. So you can imagine, you know, a solar company back in the day that wanted to build their next solar facility.

And they go to a bank and the bank is like, why would I give you money for this? You sell energy at, you know, 2X, the, you know, this natural gas plant down the road. The solar company would go to, say, Google. And Google would say, you know, we're going to sign an offtake, which functionally means we promise to buy the energy. that comes off your plant at a price, which is a premium over the traditional energy markets. Then the solar company can take that back to a bank and say, here, look, I have customer. Can I have the financing now? We're going to do the same thing with these, with the second track.

And functionally, every single buyer, in this case, Stripe, Alphabet, Meta, Shopify, etc. Are going to be entering into those off-take agreements directly with the suppliers, but all facilitated by Frontier. Gotcha. So they'll be entering into a contract that Frontier does all the work and draws up and probably, I assume, sets the price of the tons.

Okay. That's right. So they're like, I'm on the hook for this many tons no matter what. Listen, lots of founders are Lucy Goosey with their personal phone numbers. They put them on company documents. They use them for sales calls.

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But Twist listers can get an extra 20% off any plan for your first six months by signing up at openphone.co slash twist. And if you have an existing phone number with other services, well, Open Phone can port them over for free. So I want you to head over to O-P-E-P-E-H-O-N-E. Dot Co-S-T-T-T-T-A. And then Frontier itself is set up as a nonprofit. Is that right?

I suppose because all the money is going out, basically. Right. So Strait makes no money off of this. It's set up as a public benefit LLC that is within Strait. It's a wholly owned subsidiary of Stripe. But, yeah, we're not profiting from any of this. We're not making any money from it. and it's kind of partitioned off as its own entity that has a, you know, that has a separate

mission, right, from Stripe's core private companies, separate mission. And then, so the idea just to like break it down even more is if you're super early, you have a customer, you have a paying customer and you can take that to your investors, you can take that to BCs like me and be like, listen, we've got guaranteed revenue for some period of time, this is a safe bet to pour money into and hopefully make us bigger. And then for companies that exist and are scaling, same thing, right? They can attract more investment. They can be more stable and continue to develop.

That's right. It's the same goal. The mechanisms are just adapted to the phase effectively. How are you vetting? How are you deciding which companies put money into? We've done this three times with Stripe, climate. We've run three rounds of purchases. We have 14 companies currently in our portfolio, and Stripe was the first customer for 11 of them, just to give you a sense of kind of how

early we are and how early we've been purchasing. It's very hard to evaluate these companies. So even though we have the set of criteria, you know, one company you need a chemist to help you with, and another one you need a biologist and a, you know, a soil expert. They're sort of all over the map in terms of the kinds of expertise that are needed. And we're, we have developed a pretty broad set of technical and commercial experts that we rely on to help us with the evaluation. And so for every single application, we have two, at least two scientific reviewers, one governance reviewer.

They fill out kind of their comments in a form that we've created, send them back to us, we synthesize them, and ultimately are the ones that are kind of weighing and making the decisions because spending a billion dollars is different than spending $15 million, we're also beefing up our internal team. So we have a really excited, exciting science lead that we'll be announcing that's joining soon or bringing in a number, you know, Zeech House father joined the Stripe Climate team. Recently, Jane Flagell just announced that she's joining to help on the policy side of things. So there's a, there's quite a lot of expertise that it's involved in getting this right. And that's also why we think it's kind of unreasonable that every single

company that wants to buy carbon removal would have to set up a team like this. So our hope is that with Frontier, we can make it a lot easier for other companies that want to do something here to put that money to really, really good use. Yeah. What are the incentives for other companies to put their money into this fund? I mean, I would imagine we're all, I mean, we're all, all waiting on SEC and federal requirements to kickstart this market even more. But I wonder how, you know, how meta and alphabet and everybody got it through their shareholders and their board. I mean, Mark does whatever he wants, but you know what I mean.

I won't speak for all the other companies, but I think that, you know, in a sense, this is kind of an academic philanthropy effort in some sense. Like, it's, they, companies are getting, will get back tons from Frontier. They can use to count to count towards, say, a net zero commitment. But it's certainly not the cheapest way to quote unquote check that box, right? Everybody is overpaying for tons in the hope that it's going to be cheaper for everybody else in the future. And I think that my observation has been that the companies that wanted to join this, you know, have leaders that care a lot about climate that realize that we are not moving fast enough to

solve this problem and tend to also understand, you know, technology learning curves and the dynamics that are plaguing this field right now and have a sense of how, you know, an early customer can be, early customers can be catalytic for kind of unsticking this or sort of fixing this chicken and egg problem. But nobody is making any money off of it. So, you know, anything, it's not a giveaway, but a little bit of a giveaway. Totally. That is closer to that than anything else. Yes. Who would you, I mean, I assume you said you want to get to 10 million or more. Like, who would you love to see come in? You don't have to name names if you want to, but I would assume you are wooing other companies as you do this. So I am, I'm excited to see more companies

from other industries and other geographies join in. I think in order to get, in order to make something like this more mainstream, I think we need to have a conversation about, you know, what we are, what we mean by net zero, right? These organizations have been very clear that we need to measure as much as possible, measure our missions, reduce as much as possible, which is very clear and we could not agree more with, but what do you do with the rest is still very fuzzy. And right now a lot of money in the what do you do with the rest bucket is going into stuff that is not moving the needle at all.

And how do we create the right mechanisms to make sure that more of that bucket is going into solutions that will move the needle? And so I think that's sort of the structural thing that needs to happen on the private company side. I would love to see, I personally think there's a huge opportunity for public-private partnership to get this to the 10 billion and the 100 billion that we need, how can we leverage public capital to pull more private capital in here? What if there was some version of a cost share where the government said, we're going to subsidize 50% of every 10? Well, the company that wasn't willing to pay $400 a ton, but is willing to pay $200 a ton is now motivated to direct some of their funds there.

So there's a real, in my opinion, opportunity to do something creative and kind of also show how governments and companies can work really effectively together to solve problems rather than, you know, just navigate each other's throats. Well, yeah, I mean, because one obvious comment that comes to mind when you hear a frontier friend is like, wow, it feels like the government should have done this. It feels like this should have been an R&D initiative that could have come from a forward-thinking government instead of a collection of forward-thinking companies who are like, look, we're sinking.

We have to do this. I think in climate change, that's sort of climate change is the canonical collective action problem. It is the canonical like tragedy of the commons problem. And we rely really heavily on coordinating bodies to help us solve those problems. And I agree there's a lot of pieces of the climate puzzle that, you know, governments, global governments have failed us on. And we failed in that, in that sense. I think that, you know, we are, you know, we are where we are.

And at this point, I think governments taking bigger strides and private companies taking bigger strides is what we want to see more of. Yeah. Well, and not to sort of take credit away from government, but give credit to you. This is a really innovative mechanism that you could imagine consortiums of companies all over the world or governments really adopting. I would love that. Yeah.

Can we also just back up and talk about like, that is so great that Stripe pursued this? I mean, do you have a sense of what made this company in particular, which nobody necessarily thinks of as a climate action company? Exactly. Like, what is it about fintech that made them go, you know, we also need to sincerely invest in this and pay this person to build effectively a whole other company insider company? At the end of the day, I think Stripe, like, Stripe is very much in the business. business of economic enablement. And when you think long-term about what are the threats to that, and we do think long-term because we are an infrastructure company, climate change is one of the biggest threats. And if you take the long view, I think that the efforts that we're doing,

at least to me, make a lot more sense because this is very mission-aligned with stripe in the long run. In the short term, it might feel a little orthogonal to the business, but I think in the long run, it is aligned. I also just think, you know, in my opinion, like, we are very fortunate to have leaders of Stripe who genuinely care about the long-term progress and, like, want to make the world better in a number of different ways. I think that's really genuine. And the support for this that I've experience has just been pretty remarkable. It is remarkable. It really is. How, okay, so as we apply our sort of startup and investor lens to this,

are companies approaching you directly? Are you taking introductions from VCs? Like, how do you imagine this working with this ecosystem specifically? Because these are, a lot of them are tech startups that are in that hard tech space that VCs are nervous about, like, are you going to have dinners and introduce everyone? Great question. We are still figuring a lot of this out, but effectively, you know, formally we will run RFP processes for purchases in the same way that we've done in the past. So we will keep evolving those over time. You know, this is year, was the first year, excuse me, last year was the first year we started doing two cycles a year. We will keep

evolving that over time. Maybe it becomes a rolling thing rather than a batch thing. We'll, we'll see. But to your point, on dinners, there's a lot of ecosystems. building that needs to happen. And there's a lot of conversation between different pieces of the ecosystem, between banks, between, you know, earlier stage equity investors, between policymakers, between buyers, et cetera. And we've, you know, tried to do some of this. We threw a demo day last year where we had all of the companies that we purchased from present for five minutes on what they're working on. We invited, you know, I think a nearly a thousand people came from all different parts of the ecosystem. So we'd love to do, and are planning to do more stuff like that, but don't

have, you know, specific plans right now. I think that work is, you know, sneaky, really important for forwarding the field. I mean, you're still literally staffing up. This announced, we're speaking April 20th. When did this launch? A week ago. So it's been like five minutes and I'm already party planning for you. I appreciate it. We don't have very much time. So we want to move quickly. It is true. Speaking of not very much time, it's a nine-year, just back to the mechanics of this frontier fund, it's a nine-year commitment. Is that right? Up front? That's right. Yep. Because we need to hurry up with these technologies. Yeah. I mean, the thing that's so crazy about climate is 2050 sounds far away, but these are hard tech, their physical infrastructure,

and it takes time to, you know, get down those, down those cost curves and to learn. And to learn and to actually build these facilities. These are not pure software products. And we need to compress 15 years of development into the next three to five. I think the next, for carbon removal and climate generally, the next three to five years are very important. And we have an opportunity that we can use or not. But this is not a future. I always get nervous when I do this too, use the 2050, 2040 language, but the action we need to take is genuinely, you know, the next couple of years. Yeah.

Before I let you go, describe if you would. I mean, I think this is something that people hear a lot about and they're just not that sure about the mechanisms. I am sure that there are like multiple versions of this in development, but for everybody who might be imagining like a giant vacuum cleaner and a corresponding hole in the ground, what does some of this technology entail? It's all over the map, and we are starting to see, you know, even more promising new approach as well. I'll give you the flavor of a couple.

You described one, which will call direct air capture. It's like these giant fans that suck CO2 out of the air while they suck in air. They find the CO2 particles. They take that stream, they mix it into water, and then inject that fizzy water underground into basalt rock where it mineralizes. That's what a company called Climb Works does. There is a company called Charm Industrial that takes. makes waste biomass like corn stover, and they pyrolyze it, which means heats it up really fast, turns into bio oil, and they inject that bio oil back underground from once it came.

So kind of turning plant biomass into oil and then storing that underground. There's another company called Running Tide, which grows kelp on essentially kind of like 100 foot pieces of rope. They float that out into the middle of the ocean, which grows over six months, and when it gets to its kind of full capacity, it sinks to the bottom of the ocean where it then will stay likely forever once it gets below the thermocline. These are three of, you know,

we have 14 companies in our portfolio. We need, you know, 140 companies by this time in the next couple of years. But I think that, you know, if you're out there and you're thinking about starting a carbon removal company, or getting involved in the space, there really has never been a better time to start a company. We have a billion dollars of customer demand for you.

The lower carbon team just announced a $300 million fund for equity investment in carbon removal companies that are doing the exact criteria that Stripe is purchasing from as well. There's a lot of interest from the ecosystem to support. founders and to support promising new ideas so that we can at least, you know, give this our best shot and try to scale up as quickly as we can. Yeah. Let's go, people. Nan Randall Hoff leads climate at Stripe and leads up frontier. I cannot wait to hear more about what you're doing and just call me when you need help planning a dinner. I'm all over there. I'll take you up on that. Thank you, Molly.

Yeah, and thank you so much for the time.