This Week in Startups - Why some VCs won't invest in first-time founders + $369B carve-out for climate/energy | E1528

Episode Date: August 7, 2022

First up on VC Sunday School, J+M cover the stigma around investing in first-time founders: Is it a myth? What are the pros and cons? What really matters when evaluating a founder? (3:01) Then, Molly interviews Jay Koh of The Lightsmith Group to break down the Inflation Reduction Act's $369B climate/energy allocation. (29:08) (0:00) Jason and Molly tee up today's segments! (3:01) why is there a bias against investing in first-time founders? (15:04) OpenPhone - Get an extra 20% off any plan for your first 6 months at https://openphone.com/twist  (16:21) Most important factors to startup success (21:42 Jason and Molly tee up Molly's climate interview which is focused on the Inflation Reduction Act's $369B climate/energy carve-out (27:53) MasterClass - Get 15% off an annual membership at https://masterclass.com/startups  (29:08) Jay Koh of The Lightsmith Group joins to break down the $369B earmarked for climate/energy in the Inflation Reduction Act (36:39) Odoo - Get your first app free and a $1000 credit at https://odoo.com/twist (37:58) What will the $369B do for the climate VC industry? (48:48) What will this investment do for America's standing as a global climate tech leader?

All right, everybody, welcome to the Sunday edition of this weekend startups, the show that never leaves you hanging over the weekend. And Molly has a great question for me for VC Sunday School. She had a friend who wouldn't invest in first-time founders. They'd like to have seasoned founders. And she asked me this very important question about, hey, is that a thing? Should you only invest in second, third-time founders or first-time founders? It led to a wonderful discussion that's very candid and that most VCs will not have publicly.

That's exactly the beauty of this show. And then because in the news right now is this inflation reduction bill that nobody saw come and Joe Manchin surprised the world by signing on to a bill that includes $369 billion for climate. I called my good friend J. Coe of the Lightsmith group to say, hey, that seems like it's going to be good for us climate tech investors, right? Yeah. And we have a nice newsy conversation about that. This is exactly the discussion I've been waiting to hear because I've been trying to take apart this bill. And congratulations to President Mansion on getting this through getting this to the finish line or apparently close to the finish line. We hope. We hope. It feels like it's going there.

Hopefully Vice President Cinema won't screw it up for all of us. But yeah. Well, she might also save us on the hired interest. She probably will. We talk about that too. We talk about the built-in sacrifice. I like it. I like it. It's no sacrifice for me. Or you, Molly. Win-win for me. It's a win-win-win-win for me. for you. Molly, you're winning so much.

I mean, right? This is a great year. But we break down the important work in this bill to give credits for EVs and how that works and how that simulates the adoption of these great technologies. And Molly and I obviously have strong feelings about this. It's going to be a great show. Stick with us.

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Get 15% off an annual membership to Masterclass at Masterclass.com slash startups. And Odo is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business. Your first app is free forever and right now Odo is offering $1,000 off your first implementation pack at Odo.com slash twist. That's O-D-O-O-O-com slash twist. All right, everybody, it is Sunday. It's time for me to get my learning on. BC Sunday School. What's on your mind? So this was super interesting.

I was talking to a friend connecting who is an angel and a scout and, you know, so we were comparing notes. What do you want to talk to doing that like networking thing? And he made this really interesting comment. Like he was talking about his kind of filter. and he said that a filter of his as a former founder is that he never invest in first-time founders because he says he was one and he thought he was too stupid to make it work. And so now he just really optimizes as an angel for founders with some experience.

And we have some stats on this. Like apparently according to a Harvard business school study, first-time entrepreneurs have an only 18% chance of succeeding. whereas entrepreneurs who previously failed have a 20% chance of succeeding, which doesn't seem that different, I guess, 18 to 20. Feels like statistically insignificant, potentially,

but maybe not. And then a VC backed entrepreneur who starts a company that goes public has a 30% chance of succeeding in their next venture. So I just wondered what you thought. So this comes up a lot. Yeah. it

there are a lot of biases and one of them is survivorship biases right and when people see Zuckerberg and Gates and Steve Jobs knock it out of their part with the first company

they assume first time founders because we have these outrageous examples are what you should bet in and the thinking there again this is people with confirmation bias saying okay we saw this what was it oh they have a fresh mind they don't know how hard it's going to be, they have a disruptive worldview, whatever it is. They come up with all these

reasons to explain the success. What they don't see is the other, you know, 10,000 companies that had no success, modest success for every Bill Gates. Right. And so the truth is, after each successive failure, I would say you get 50% better at running a company at the very least. Yeah. At the very least. And this makes a ton of sense. Now, the problem is, if you've done a company in your 20s, then you do one in your 30s, and now you're in your 40s, maybe you got one more in you, but you got kids, you got a family, you got a mortgage, you don't have the energy level, you get more tired. Also, you know what you're in for. And so you dread it slash pullback on certain parts of it that you know are going to be really hard as opposed to when you're young and dumb and strong.

exactly so the the young and dumb and strong and energy again this is age bias i understand is what most investors would say behind closed doors um now but the truth is you get kind of like old man old lady strength a different you know you get mama strength you get you know dad strength you become a master multitasker yeah so this is like a different level of of uh sophistication which is you know you're not good at something. You know you don't want to do something. So you just hire somebody amazing. You know how to lead people.

You know how to hire people. You know when to sell. And you may not have that cutthroat insanity of youth and that just never-ending supply of energy, but you also don't have the spastic nature of young people. Now, also, young people maybe will bend the rules a little more. They'll not be like, oh, there's copyright law. Oh, there's Airbnb.

be Uber, local regulations, Coinbase, Theranos, you know, you can make a long list of people who have just, you know, not really paid attention to that. But the truth is the optimal age is probably somewhere in the 30s into your 40s because you still have energy,

but you got some experience. That's what most people believe. So I'm putting aside my thoughts on it. I'm telling you what the industry has experienced and what people say behind closed doors, which is kind of what this segment is about. Totally fine to invest in first-time founders. You know, you may If you lose, you were their first backer, so they may come back to you for the next one.

Now, remember, Travis, Uber was his third. I interviewed him when he did scourer. We had been friends when he was doing Red Sooosh and, you know, on the margins. You know, we had hung out and jammed on different ideas and talked about stuff. And so my relationship with him for the third led to that. I was an investor in Reportive. And then his second company, Raul, was superhuman, right? So the first company sold for maybe 20, 30 million.

You know, superhuman's worth a lot more than that. I won't say exactly what the valuations because I'm not sure if it's public. But I secured my position in superhuman by I think being one of his best investors in Reportive. So there is that benefit of backing a first-time founder. Right, is that you know the relationship. And if you think that founder is great, even if their first company is a dog, their second one might be great and you still want to know them.

Yes. And there was a study, again, back to Harvard Business Review, HBO, which does a great job, by the way. They had done some research and they found the average age. which is successful founder started the company was 45. This is what it's about. If you look at somebody like Mark Pinkett,

he started a bunch of different companies and then just continued to have great success into his 40s or 50s. Elon falls into this category. Tesla came after Zip2 in PayPal. And PayPal was obviously a unicorn too, so it was very successful. So you just have a greater chance.

And then also what happens is there is a personality consideration here. Some people love working with young founders. Other people find them annoying. And they don't want to deal with people who don't know how to run a board meeting or don't know how to hire people.

And they don't want to mentor. Sacks started Yammer when he was 58, you know, 10 years ago. I'm sorry, 38. He just looks 58. He's not that old. He's younger than I am, in fact. I mean, which is crazy when you think about it. I look so spry and young and he's...

Would you ever guess Sacks is older? Young than me by a year? Crazy, right? Weird. Yeah, it's kind of crazy. Um, you know, it's that hard Republican living. You should stop now. It's clearly aging to become a billionaire.

It is. It's the GOP lifestyle. You know what it is when you. It is that GOP lifestyle. It is. It's kind of like dark crystal. You're just so filled with hate. You absorb that dark crystal energy.

I was about to say it's like the skexies. Sex skexies. Sex skexies. Yeah. I mean, uh, you know. So anyway, that that's, that's as much as I can tell you about this topic. Well, it sounds like, but it sounds like what you're saying is like, don't worry about it, right?

I don't worry about it. There are some metrics that could guide you, but it sounds like what you're really saying is like, there's no reason to have that. If you're an angel and it's your money and you are trying to be as like, you know, I mean, and I'm not saying we're not trying to return the most we possibly care.

You want to reduce downside. But you want to reduce downside. And so you could imagine that if you were trying to reduce downside, that might be a useful filter. Of course. So what your friend is probably doing is they want to have a simple life. They probably want to invest in serial founders because they don't want zeros. And they don't want people calling them when they run out of money.

They just don't want to deal with the shenanigans of youth. The folly of youth. I kind of like the folly of youth. I like hanging out with young people. It keeps me young. I tell people I'm 51. They're like, no. And I'm like, well, hang out with a bunch of kids.

I'm like, oh, is that why you act like a child? I'm like, sometimes, yeah. So it's just personality is more fun. Or it's personal. I don't want to grow up. And so I do think if you wanted to reduce the number of zeros in your portfolio, I talk about this at Angel University, which has raised over $200,000 for charities, angel.com, university to see the list of charities that we've donated to. That course I teach, I tell people, hey, for your first 20 investments, invest as little as you can,

one, two, three, four, five K per deal, if you're an accredited investor, and invest in companies that already have their products in market with 10 customers. You've got diversification. You're diversified. And number two, you're not betting on product market fit. You're betting on going from product market fit to strong product market fit and scaling an organization. So you just eliminate a lot of zeros. I like zeros because I know how much I can lose.

Like in the accelerator, we lose 100K. We lose 100K. Okay, I'm okay with that. Let's take a lot of chances. Now, if it was a million dollars each bet, okay, wait a second. I've got to really think this through. So bet sizing matters. This is why in poker, which we've got to start a poker game for folks who want to learn,

in a poker game, if nobody raises before the flop, and you've got any two cards, and you're in position, you can pay, you know, if you're playing $1, $2, and it costs you $2 to see a flop, why wouldn't you see it? It doesn't cost you a lot. Now, if it's raised to $20 or $50, you're like, well, I don't think these are really good cards. I think I'm behind. I'll wait for better cards. I can muck these cards and wait for better ones.

So, you know, that's what you're trying to do here is wait for a good hand that you can make a good bet on. And we see this now in our organization because we have so much inbound. We were calculating it on Tuesday's investment call. You know, just I gave people the idea of the funnel. It's like, well, we're kind of sorting through 15,000 companies and meeting with, you know, this many thousand companies to make, you know, 100 bets. And, you know, it's less than 1% we bet on, you know. And that's really, the more companies you can meet with, the more you can qualify, the more you can check in on, you're going to be selecting from the best of great options. And that's really what you want to do.

You want to be picking from, you know, 10 really great opportunities this week to make an investment. Not picking, you know, the best of 10 OK opportunities. Really, that's why process matters so much. That's why you and I are talking every Sunday on VC Sunday school about the process of becoming a world-class investor. And I'm learning that in the public market. People get to see me with J-trading, learn that process. It really is about thinking about thinking. Your cognitive biases, all of these different modalities of thinking, building the architecture and a framework for the company and the model, the business model, the market, the founders.

When you can construct that in your head and you've got in your head, hey, serial founder, great, they're not going to make as many, mistakes. Oh, but they're going after a tiny market or, oh, they're going after a vanity virtue signaling play. Oh, okay. You know, you start to build these models. Oh, there's a young founder, but look at the execution. Oh, they have great energy. Oh, they've made a couple mistakes. Oh, they learned from the mistakes. And so that's what I look for in young founders, just to, you know, wrap up here. When I work with a young founder, coachability and ability to ask great questions and listen, some of the, you know, most extraordinary founders I've met will ask me questions constantly.

And I'm amazed by them taking notes and their follow-up questions. It's like talking to a great journalist or a great interviewer. I'm like, well, this person really wants to learn. They're asking me a series of questions and they're writing down the answer. And then they're asking me who else they can talk to about the same topic. Okay, they're collecting a lot of information because they haven't made this decision. And a founder who doesn't, that's where I get concerned. You know, I've had founders who are like, you know, they just unilaterally make a decision to do something.

And it turns out it's risky. I'm like, well, do you want to talk to something? I was right here, man. Well, not even me. Sometimes I'll just, I like to play it humble. Like I learned having Roloff Both on my board from Sequoia. You know, he would ask me probing questions, but he would kind of lay back and say, oh, do you want to talk to somebody about this topic? We might know somebody in our portfolio or on our team who's actually addressed that issue when I had crazy ideas of things I wanted to do in my youth.

And so I think that's one of the The things I like to look for With the young founder On the program today is DeRina Kulia She is the founder of Open Phone Welcome to the show, Dorena Thank you so much Jason Great to be here

Now what mistakes do most founders make With phone numbers in their startups Really delegation, right? Because what ends up happening Is that as a founder When you're starting You do everything You are the salesperson

The support person You make the coffee You do HR marketing, sales, recruiting, everything. But then eventually you have people joining the team. And what ends up happening is if as a founder, your phone number, let's forget about the privacy, the spam, all that problem. Let's say it doesn't exist.

But you're not going to want a year into your company, two years into your company to have all the support calls or all the questions come to you because now you've just hired your support team. Why did you hire them? So that's another reason why having that separate number makes so much sense because you can always delegate those calls to your team as you grow. All right, everybody, here's your CTA, the old call to action. Twist listeners, 20% off any plan for your first six months.

Just sign up at openphone.com slash twist. And if you got an existing number, no problem. They'll put it right over. Openphone.com slash twist. O-P-E-H-O-P-H-O-N-E dot com slash twist today for 20% off. It's not necessarily disqualifying to be a first-time founder. There are probably, it's not, and it's interesting. It just clearly is like it's about looking for those other signals that suggest that this person may be a first-time founder, but they're also a really competent executor, you know, very technical, whatever it is on top of that.

And then also, depending on your personal circumstance, we have the power law on our side. So more failures can be tolerated. If you're an angel, it sounds like it's just a different calculation in some ways. See, now we're getting into like not just rules, but the subtleties. It's a lot of subtlety here. The strata. And a lot of people have different strategies for winning. Multiple strategies can win.

In the stock market, I'm learning. Some people like to buy options and put, and some people like to short stocks. Some people like to trade stocks daily. Some people like to hold them for just over a year and, you know, make their decision so they hit short-term capital gains and are taking taxes into account. Other people like to buy and hold. Some people like to buy index funds. All of these people can have different levels of return for different levels of effort. Yeah.

Right? Yeah. What I'm trying to do is just really understand all of those, as many of those as we can. If you really understand investing and what you're doing in investing is, you're finding a team that's building a product. And then that product is, this is why I always focus on team product customer, TPC, you know, the team, the product, the customer. That will never change in my mind. And you're always going to have that discussion, no matter what company under what circumstances we're talking. We were talking about, you know, Warner Brothers and HBO this week on this week in startups,

and we were talking about Amazon the week before and Disney the week before that. We were making J-Trade, talking about Stitch Fix. Okay, tell me about the team. Oh, Zazlov? Okay. Really good. Oh, tell me about the product. HBO Max.

Kind of kicking ass. Tell me about the customers. People like to pay for streaming. Okay. Great. I'm building this model. Yep. Win, win, win, win.

Yeah. And you don't really have to overthink those three things. Those are these three things. You can believe what you're experiencing, you know? That's what I like about them. Because a lot of the people I meet are, they're drawing lines on a chart, or they're building, you know, models or projections.

And I'm kind of like, well, this is in the ether, you know, it's abstract. It's, okay, great. I guess it's valuable. But the product and the customers and the team, Like, that's real reality for me. Yeah. And that's what I just keep leaning into.

And the public market now is making me think about that even more. Okay, there's a new CEO at Disney. There's a new CEO at Amazon. What decisions are they making? Oh, there's a new person running HBO. What decisions are they making? What have they done in their careers? Oh, this person ran parks?

Oh, this person grew discovery into a juggernaut. Oh, this person was, you know, Bezos's right hand. Okay. you know, I'm starting to feel confident in those leaders, you know, wartime CEOs, perhaps, in some cases, you know, cutthroat, you know, not afraid to make hard decisions. So then when you're meeting entrepreneurs, when you're meeting a young entrepreneur, what do you mean? Hard to tell, right? So you're getting this unbounded energy. You're really squinting.

Like when you meet a 15-year-old or something and you're like, I wonder what this person's going to be like as an adult, you know? And we all do that with our kids, right? Like, oh, yeah, it's 12. Are they going to be a fashion designer or the president of the United States or are they going to be a parista? Give me the Snapchat filter that shows what you're going to look like as a future founder. Exactly, exactly. So I love this question. I love this question.

I love this observation. I think it leads to a really good discussion. And the truth is, you're going to see great success from both groups, but you will have, you'll contend with different things in the investment. The investment. And ultimately, what we do as capital allocators is we're finding the best companies we and then we're placing a bet on them. And you can't lose sight of that

because you're placing that bet at a certain valuation to get a certain return. You could find a company you love at too high of a valuation. There's no chance for a return. You can find a company that you have, you know, concerns about.

You're kind of in the middle, but it's a great price and they're starting to execute. It might be a good bet to see, you know, if they actually, it's a long shot, but, you know, if it does hit, it could be great and you got it at the right price.

So maybe it's a risk worth taking, right? And you have to just evaluate, at each one of those, but never forget it's an investment. That's the problem. We're sitting here talking about personalities, Molly. Right. We're talking about who is this person and what are they going to be when they grow up? And what have they done if it's a seasoned entrepreneur?

And don't forget, it's a bet. It's a financial bet. Made in comparison to other opportunities you have. Or the ability to not place a bet this week. Right? There's no gun to your head that says we have to make a bet this week. If we wait, we have no bets this month and we make twice a bet. as many bets next month. We're okay with that. We're not in a rush year. Let's find the

great opportunities because these things take 10 years. Man, I can tell you, I've had two or three instances where I made bets on the wrong people. And it didn't take years off my life, but it was weeks of months of like, yeah, sucking my time, which is all we have at the end of the day. Yeah. Great, great, great episode, I think. Well, speaking of investment on this week in climate startups, actually, I've got a great investor, just long time. I've been interviewing this guy forever, Jay Co, who is the co-founder and managing director of the Lightsmith Group, which is an investment firm that focuses specifically, maybe the first, so focus specifically on adaptation and resilience. But we're on the news on this weekend climate startups because he came on, he works with the UN also. And so he came on to break down the details of the Inflation Reduction Act, the parts of it that would be a huge tailwind for climate investing should it pass.

So it's like super tactical, super. superhugia. He's just a really, really knowledgeable guy. He has all the numbers. And again, you know, it's like when you combine, like private industry

can get a lot done, no doubt about it. But if you get a big policy safety net and the government has a huge buyer behind you and incentives, it's like tailwind galore for this investment category. I was delighted to see in this

fight inflation act, which seems like the wrong name. I don't know why they name these things the opposite of what they are. This is an energy climate act, right? This is mostly climate. It's a lot of climate. $369 billion worth of climate.

Okay, so maybe it's not mostly, but it's a big chunk of climate. But it's a huge. It would be the single largest investment the U.S. has ever made in climate. Yes, which is great. And I really liked, I know Freiburg was like,

let the free market decide on all in last week. I disagreed with him. Yeah. I like these subsidies specifically for EVs. Yeah. You guys did talk about that, I assume. I asked him specifically, I was like, what about this idea from some people

that we don't need any government an invention and it just perverts the incentives. Yeah. Interesting. I want to hear that answer. You know, the truth is like, no, it creates, not only does it create stability, but Jay makes the point that, you know, it's government's role. A big part of what this does is make sure that these solutions are available to people who are disadvantaged, who are feeling the effects of climate specifically. Private and that's not our job, right? But that is the job of government, is to help the people who need the help the most.

Absolutely. Because our solutions are going to start expensive and get cheaper over time. And this, what I was delighted to see was, you and I are not getting the $7,500 credit for our cars because we make too much money. You have to make under, I hate to reveal your salary, but you have to make under $100,000 or $75,000, I think, to qualify for this $7,500. So if you're making more than $100,000 in your household, I don't think you qualify for this, which is great. I don't want to qualify for it.

When I got my EV credits previously, I mean, I think I collected them two out of three times or whatever. And one time I was just like, whatever, you know, I'm not even fill out the paperwork for $2,500. bucks. But I really liked the fact that, hey, yeah, it's not for $150,000 supercars. It's only, I think it was $75,000 or cheaper. And you had to make under $100,000 in your household. So, this is going after the middle class or below in terms of maybe giving them a chance to buy an EV. And to make these solutions that are so valuable, affordable to people. Jay also made the point

that, you know, we have somebody in the chat saying it's the government picking winners and losers when Tesla is clearly the winner. He made the point that the last time we made it a climate investment that was a fraction of this size, $500 million of that money went to Tesla. Exactly.

Yes. That's what I forgot. Get started. If they hadn't done those, because there was Cylindra, I think was the big dog in that. I think Fisker, I think Fisker and Cilindra,

they lost all this money. But the 500 did go to Tesla. This was Obama's, you know, bet on energy. Yeah. And Tesla paid it back early with interest. Yep. So again, if it's loan, it's not a knock on Tesla.

It is a good thing that kick-started something that created an EV market in America. That's what government investment can do when it's done well. So what can this do? This can push down, hey, not everybody can avoid a Plaid Model S. Not everybody can afford a Model Y for 70K or a Model 3 for 50K. But now, hey, if these 50 to 75K cars can be $7,500 cheaper and 10% or 15% cheaper, hey, that could be the difference, right? That could push some people to give it a shot, right?

It could get some people into some showrooms, and that's what we want. And if it makes, you know, other, because now we have Lucid and Rivian and BMW, which one did you get? Polestar. Polestar. What did the poll star go for? Was it under 75 or over somebody? It's just under, yeah.

I think you could probably, you could. get it up to 75, but 60, 60-ish. A lot of them sit in that 50 to 60 range right now, which is not that affordable for a long range, right? You know, for people, the bolt is more affordable, but you're going to start to, again, this is how prices come down. And this is how prices come down for solar and batteries and all the things that actually make the grid operable

when it gets super freaking hot, like now. Like, it's a game changer if it passes. And I also think that they're presenting these. things, they don't do a great job with the marketing and PR on these things. The other thing you can think about this is energy independence. Yeah. And so we do need to take into account energy independence and climate. And if you look at energy independence, do we really want, you know, countries to be dependent on Russia, Venezuela, you know, Saudi Arabia, whatever country it is that has oil. Afghanistan for lithium. I mean, it's not even just oil, right? Like, yes, it's energy

independence, but we need to be extracting lithium. We fully freaking do and other rare earths and all of those opportunities are available to us. And yeah, energy independence is a huge part of this. And grid resiliency, like creating an energy system that can work. Yeah, look at Texas. I mean, Texas keeps going down. I mean, Texas, it's, you know, I was thinking about moving to Austin. I looked at the monthly chart.

It was over 100 degrees every day this month. I was like 108 degrees. I've got to rethink this Austin plan. And it is just going to keep going up. Like we've got natural air conditioning right out the window, bro. Exactly, exactly. Big old bay. Cannot wait for this.

Great job, by the way. These climate interviews are just really piling up and it's really becoming a nice collection. It's really well done. It's great. Listen, Masterclass is the best way to learn from world class instructors at the top of their fields. I love this product. We use it in our household. We've got a yearly subscription.

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Jaycoe, welcome back to the show. I'm excited to talk to you about this bill that I think we all hope passes. I'm excited to talk to you too. Thank you, Molly, for having me. So now I understand you have recently been in D.C. What is the, what's like the scuttle butt? What are, what are you hearing?

Well, there's two things going on. There's a lot of sort of surprise for sure. And then a lot of fingers that are crossed because, you know, we haven't landed the plane yet, as they say. So there's still a bunch of work to be done. But, you know, obviously having something to talk about rather than not is a big deal on the size and scale and a number of things that are in the bill is really pretty exciting. So I think people are really cautiously excited and optimistic about it. Not to put you on the spot too much in terms of, you know, reciting the contents of the bill back to us, but what are the headlines for you?

Like, what are the things that you saw in there that you were, you know, thrilled to see, a little disappointed in? I'd say that if you wanted to unpack it, there's probably three components that are really interesting that are ways to kind of get your arms around what's going on here. The first is it's really big, like very big. You know, $369 billion, that's like four and a half times the size of the $80 billion. stimulus that went through the Department of Energy in the last financial crisis. So if you remember back then, if you go back in the way back machine to then, you know, among the things that were funded during that time period was a $490 million loan to Tesla. And if you went back and talked to yourself at that time, you would have said, oh, electric vehicles is so speculative,

who knows what will happen. And now you think this is an inevitability and the trend line is going to be really strong. So imagine four and a half times the amount of funding that created very different long-term trend lines now being applied at scale in this particular piece of legislation. And then beyond that, I think there's, you know, two kind of nuanced new areas that are really interesting as a matter of focus. And then, you know, several different components of what the federal government is doing here in terms of unlocking what I think will be a much, much longer and clearer trajectory for where these things are going. What are those? Wait, you said there are kind of like two other big trend lines in here?

Yeah, so this is not your father's like renewable energy bill. There is plenty of renewable energy in Kintech. I don't know. Well, somebody did. But I think the two things that are really interesting that are a bit different this time around are one, it is, you know, very squarely focused in part on the users of the technology, on consumers and particularly disadvantaged populations in the United States. There's a very strong equity and justice component here, both in terms of getting. clean technology access to poor communities and disadvantaged communities and also getting access to these types of technologies in a way that actually just genuinely does reduce the cost of them

adopting these technologies among different sets of consumers today. So it's not just a broad program. It's one that's really looking at how is the distribution of the benefit of these types of technologies going to occur. And the second piece is there is what we would describe as sort of a climate 2.0 awareness in the bill, where there is real resilience and adaptation and new categories like, you know, $20 billion for climate smart agriculture. That's a totally new category. Five billion dollars for forestry, $2.6 billion for coastal communities. And then woven through the rest of what's in the bill are considerations about the effects on the environment and on people of the impact that we're now unfortunately seeing continue to unfold because

of climate change. So those two kind of different flavors are I think something that's new and novel and very important about how this bill is being put together. Right. So it's a little more sophisticated. It's not just a blunt instrument to say we're going to incentivize as much solar as possible or we're going to incentivize as many electric cars as possible. It's a slightly more targeted intervention. It sounds like of the type that is appropriate for government to do rather than maybe private industry. Yeah, and I think the way that I think about it in part is this is almost the second half of a dialogue or a conversation between government and industry, right?

So if you think about the infrastructure bill that got done last year, which is law and has components of building resilient infrastructure and communities in it, it has other components that support parts of the clean energy transition. You know, in the space since we've been talking about this in last year and a half, one of the responses to the new administration, I think, to date, I think the count is something like $50 billion now of private equity and venture capital focused on climate and a much broader set of commitments that were made in November in Glasgow by financial institutions, companies, global stakeholders to really thinking about the net zero transition. And then this,

if it passes, represents kind of the other step back by the government saying, look, this is going to be a scaled, supported, much more long-term, much more comprehensive pathway to responding. How important do you think it is to have these two things acting together? Because I think, you know, when we all thought this was dead, which was not very long ago, there was, you know, this moment of like, okay, well, it's going to fall on us. Like, here we go. Everybody, like, try to innovate our way out of this.

But that was never going to provide kind of immediate, broad-based. results, right? It's not our job to invest in things that are accessible and easily affordable to disadvantaged communities. It's maybe our job to invest in things that might be, you know, and I'm generalizing here, but some things that might be expensive at first and we'll hopefully get cheaper over time as technology does, but that's not the only basket of solutions that's needed. I think that's right. And I think, you know, when you look at the tools that the government has now put in play here, they come in kind of three flavors. One is there's direct now funding and support, $2 billion for breakthrough technologies and clean technologies out of the national labs.

But then multiple ways that they are trying to basically leverage or incentivize everyone else to adopt and accelerate the pathways that we have in various parts of the clean economy, whether it's investment tax credits, production tax credits to accelerate the adoption of products or to build more manufacturing. It sort of follows on thematically what would happen in the semiconductor industry. But then finally, the government itself as a market actor, I mean, the government buys a lot of stuff. Right. So $3 billion to buy zero emission postal vehicles out of $9 billion of overall allocated procurement. I mean, that's a big amount of stuff that the government itself is going to buy to pull through demand. So it's pushing on the technology side that will get picked up, I think, by innovators and entrepreneurs and investors in early stage investing, venture capital, growth capital, and so on.

It's incentivizing folks in the market, broadly. to pick up the products and services that are being generated by that technology and entrepreneurship. And then the government itself is moving the market because it buys stuff all the time. And if it's buying stuff that helps with the trajectory, it's at least not buying stuff that's going to slow the trajectory. Yep, totally. Before we get to the ad, it makes our team so happy to see our partners celebrate big wins. And I was so thrilled to hear about this huge funding round for our partner, O'Doo.

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Odo.com slash twist. O-D-O-O-O-com slash twist. How big a deal is this for our industry? I mean, we've seen, just like you said, $50 billion in private investment. There have been questions about whether this might be impacted by the recession. I personally am I have the opinion that it's not an optional investing class, but you never know.

But I wonder, like, how big of a tailwind is this all of a sudden? Well, again, you know, fingers crossed on this, but I think it is pretty pretty, pretty, I should say, could it be pretty substantial. And I think, you know, I would sort of divide, divide that impact into, you know, two major components. One is the direct effect, right? So you have this push on research and development that will then yield different types of technologies that will be commercialized in a few years. There's a direct impact from the government buying stuff right now that is going to create a more stable view. of what the market opportunity really is. And then there's all these other programmatic activities that are going to incentivize industry and communities and individuals and other parts of the government really to accelerate that transition. So we're, you know, we had some of the initial down payment in the infrastructure area last year and capital being raised to think about

how quickly this transition is going to happen. I think the direct effect is, you know, much clearer programmatic support for different parts of renewable energy. but also the creation of these new areas like agriculture, like forestry, like coastal regions, and this emphasis on really how this is going to happen. I think the indirect effect might be even larger, which is what this does is create a sense of stability and sustainability that is very different than the situation was, you know, a month and a half ago, right? Where you start to think, okay, well, again, you know, take yourself back to your gut check. in January 2009, like, did you think electric vehicles was an inevitability? And the answer is no.

Now I think there's a much higher probability that people think that that's the case. And this really, really cements that. And the question is, what other things become really clear or really start to feel inevitable get to that critical mass as a result of this type of spending, right? So agriculture really making a transition and focusing on the effects of climate change and the resiliency sense and the environmental impacts on people, right, the human element emerging in the bill itself, I think all of those things create, you know, just a more clear, forecastable future in which you can make these investments and follow on. It's a de-risking.

I think it's a stabilization of the environment and an acceleration of that environment, right? I mean, $369 billion is a lot of money. And, you know, the question that I think we poked around in our last conversation, which is, okay, all this stuff goes into early stage tech investing, this last wave of capital that's been raised, or very late stage investing. What happens two or three years from now when all those early stage companies, like get into junior high school? Like, who's going to fund that? And will they really, you know, is there really a pathway for them to continue? I think this creates. Their awkward teenage phase.

Oh. Exactly. through middle school and all that shyness at the school dance. Now, I think you have a clearer view that this is going to continue to roll up for some period of time with some heft to it. And the signals that are being put into the market, the support in the pushing of technology with the national labs that pull through and actually buying stuff. And then all the leverage in the middle at this scale, I think, creates a very different environment in which you're going to actually move these technologies and the opportunity set forward. I mean, we've been talking for a long time, and you sound a little more positive. I mean, again, fingers crossed.

Fingers crossed. We're not across the finish line yet. I don't want to get ahead of ourselves here, but. Yeah, I would say, I am cautiously optimistic, and I'm more optimistic certainly than I was a few weeks ago. And that is because the shape of what has emerged is a kind of evolution. of where we've thought about where this could have possibly gone. So, you know, if we went back to the early days of discussion about where we were in the clean tech space or in climate tech or broadly saying like where we were in the transition,

you know, I had said before, look, there's three things to think about. One is prioritization. You know, the third thing that President Biden did was, you know, reaccede the United States to the Paris Agreement. The second thing was people, the number of people in the government and the administration that actually know how different programs. work and how to make the machinery government oriented in this direction was really gave grounds for a lot of optimism.

And the third piece is the policy. Like, what are they going to do? So you got part of that last year. And now you have a, you know, much different scale of actual activity if it, if it happens. The qualitative stuff that makes me more excited than I might have guessed I would have been, you know, had I not seen this, is I do think that there is a genuine, you know, money where your mouth is aspect to the resilience components, to the adaptation components, to really focusing it on populations that are really taking it on the chin, and then broadening the scope of

what we think about in the transition to agriculture, to forestry, to coastal regions, to environmental impacts, and to this idea that we are going to now plan in a more serious way, not just for to start the beginning of a low-carbon transition, but one that really takes a kind of the fact that we're going to look at a very different, more climate-affected, you know, adapted and more resilient world if we build it that way. Right. I want to ask you about that in a minute, since, of course, that's what you specifically do. But before that, like, what do you say to the idea that markets would have gotten this done anyway? Markets would have led us in this direction no matter what, because it is the natural way

of economics to seek maximum efficiency and that, you know, when government comes in with these incentives you get like perverse outcomes sometimes or that you can have the rug pulled out like happened in the first clean tech investing boom. So I think I would take a little bit of issue with the premise of the question that the rug was pulled out of us in the first clean tech boom. There's certainly things that didn't work for sure. So I'm not saying that that didn't happen. But I'd also say that, you know, the economy is not a perfectly self-managed machine, right? Like we have you know, our flashback to the 1980s. We have a top gun movie. There's a war with the Russians and we have inflation, right? And then questions about, you know, economic stability going forward,

right? So it's not a, you know, self-oiled machine in that sense. And the activity that led to the last stimulus was, you know, the global collapse of the economy almost. And we're in a situation where, again, you have inflation issues, you have, you know, choppiness in all kinds of parts to the economy and there's a time for the government to intervene. The other side of it is the government does stuff all the time. Like, we got to buy trucks for the postal system. So we're going to buy ones that are going to drag the economy in a particular direction or accelerate it in a different direction.

Are we going to support other parts of our foreign policy or economic engagement with the rest of the world in a way that actually supports our ability to build relationships and lead on climate and build technology in the United States, or are we going to sit back on our hands and sort of watch the rest of the world, you know, go forward and get to it? So I think the idea that this is all going to happen at the right efficient pace and there's no other distortions in the economy, whether it's, you know, subsidies for the fossil fuel industry or ways that we're actually buying and selling things in the government itself as an actor, I think is not entirely correct.

So I would say that the difference is, you know, the rest of the world wasn't standing still either. You know, $50 billion was raised to deploy capital in these areas. This creates a different part of the conversation that can continue now. And even though the federal government was sort of offside during the Trump administration, in the climate context, probably speaking, you know, New York State and other states and municipalities were deploying utility scale, solar and wind. and we're really moving forward with innovation and driving a lot of activity forward. Some of that, you know, catalyzed or facilitated at really critical points in time by the last thing, for example, but, you know, parts of the world are moving.

What I think this does is creates momentum and stability around how that trajectory is going to go, as opposed to a lot more uncertainty about whether it's going to be two steps forward, one step back or two steps back. I think this says, okay, we're really going to move in this direction in a reasonably sizable way and do it in a way that's not, that's multifaceted. That's more thoughtful. Right. I mean, it feels to me, it's just an accelerant, right, which is frankly what we need. So if everybody is now rowing in the same direction, it makes our investment seem less like outliers. It, you know, it has this effect of creating a large safety net and like you keep pointing out, a really big market. I don't see a downside, really. I mean, we need government to get in the game here. I agree.

And government to get in the game again, you know, the small pieces, the government's like going to buy a bunch of trucks and, you know, spend money on clean tech as a, because it's going to buy vehicles and, you know, runs a hospital system and runs a transportation system through the, you know, VA system and through the Postal Service anyway. So we're doing that. So why don't we do that in a way that actually is supportive of this? But by creating incentives so that the rest of the economy does, you know, make it efficient and uses those incentives in a way that actually accelerates the transition.

And I think, you know, the recognition that this could be a major competitive advantage for the United States going into the next decade because, you know, the one thing, as we said before, that I have more certainty about than almost anything else is climate change is going to continue. And so what this says is, okay, now we're going to give you a clear picture of what we're doing as we see that environment change and the needs of that environment change about how government policy is going to unfold with real resourcing in support for technology, purchasing of actual activity, and then creating incentives for the rest of the economy to drive forward in this direction.

All right. And now let's talk about adaptation and resilience. That's what you do at your firm. That's how I came to this kind of area, basically, as a journalist back in the day, which was like, how are we going to? survive this, quite literally. So what does it mean? I mean, when I started covering it, and I'm sure when you started investing in it and throughout, it's been this kind of like unloved part of the conversation for a long time or it was. And now there's this realization

that no matter what we do, there are effects of climate change that we are not going to be able to evade anywhere in the world. And we do in fact have to survive them. So like what kinds of technologies do you think are enabled? How exciting is it? that this is such a big part of the bill as proposed. And then what kinds of technologies could it enable that could really do a lot of good? So I think it is pretty exciting, really pretty exciting. And part of it is because, as I said, you know, the two thematic differences are this orientation towards disadvantaged and impacted communities, right, which are the people that are being impacted

really dramatically by the effects of climate change right now. If you look at the heat events, the flooding events, the storm events, the impact of wildfire, pollution, the people that are getting impacted today and will be disproportionately impacted are the people that are going to be the focus of a lot of the activity that's supported by this bill if it was forward. And it's been the focus also at the state local level and in the international context and developing countries. So I think it's great that that is a clear, explicit priority, this idea of environmental justice or climate justice and equity because that is the humanitarian piece and the equity piece of what's going on here. The second piece is

is woven through the energy transition components or clean tech components of it are now much clear considerations about that effects piece. So we're not just going to deploy clean technology or renewable energy. We're going to do that and support storage. We're going to have a smarter grid approach to it that's going to deal with the fact that we might have spikes in demand for air conditioning because of heat events. We're going to think about the impact on environmental pollutants, which get much higher, because of humidity or temperature increases. And so woven into the way that this is moving forward are these considerations of like a 2.0 approach

to impact on climate. And then new categories. I mean, $20 billion of support for climate smart agriculture is a big deal. Support for aforestation and trying to deal with wildfire impacts. Looking at coastal community vulnerabilities in the billions of dollars range is, you know, new activity that is really squarely facing up to the reality that we're all

unfortunately facing right now, which is flooding, storms, fires, heat events, that affects on human health as a result of that. The effects on the economy is a result of that. And I think, you know, this is a big step in that direction. Bugs. Don't forget bugs. There's going to be pestilence. Somebody years ago mentioned to me the fact that like climate change is going to come with a whole lot of insect activity that we were just not prepared for. And I was like, okay. So that was a tangent, though. So where does this put us in the, like on the global stage? You're in a fit you are in addition to being the co-founder and MD of the Lightsmith Group, an official partner of the UN

Secretary General's A2R Climate Resilience Initiative. Are you feeling a little better about showing your face in that crowd? Or will you be when, when this passes? When this passes, and let's So, you know, we're going to manifest it. I think absolutely this, you know, reasserts a U.S., a strong U.S. leadership position in the global context. And I think the two things that are interesting about it are, one, it's not merely saying that the U.S. is really willing to put capital against this or funding or taxpayer dollars against it. It's saying we are going to be very supportive in a set of nuanced ways in transitioning mobile. parts of the economy in this direction. So if you want the opportunity to innovate and to invest and to develop technologies and solutions, then the U.S. is going to be a much clearer destination for

those entrepreneurs and technologists and capital. Right. So, you know, $370 billion of support, you know, direct for technology, pull through by purchasing and then a lot of incentives in the middle for production, for investment, for communities to look at things, means that, that the scale of what the U.S. is offering as a destination for these types of solutions to be created or to be applied is much clearer now if it happens than it was two months ago. And then in the broader context, I think it's very important to be able to deliver on what had been the priority piece at the beginning of the administration and the people in place. So the policy showing up, and we did some of it last year in the infrastructure bill, but really this moving forward, it, I think, enables the United States to assert that it's really putting its money where its mouth is.

Yeah. That's great. I like the idea that we could become a destination for the best and brightest, too, once again. Like, let's do that. Let's go. Let's build. Why do you think this was so secret, just from your perspective? Well, I think that's kind of the surprise to you, is, you know, I don't think, I certainly had no

anticipation of what might have happened. I think it's a very challenging time to get a lot of different things done. It's a very complicated environment. I think, you know, there, I think there will be effects on affordability of energy access of consumers and different populations being able to adopt and be part of the energy transition without having to be impacted as much by all the other increases in inflation we're seeing other places. So I think, you know, crafting this so it meets this moment as opposed to we're just going to fund a lot more of, you know, clean technology and it'll be, it'll be good for everybody. Don't worry. I think what's probably an important part of what made this possible. And then I also think, you know, that there is some,

again, like nuanced and creative elements in this that took some time to think about. In the broad political landscape, you know, things are challenging and complicated. Like I think when And this was discussed, you know, climate action last year as part of, you know, Bullback Better or other strategies and, you know, amounts that were maybe three times as much as we're talking about here were two times as much, you know, was a different set of economic conditions and certainty that's out there. So I can't really speak to the politics of Capital Hill per se, but I think what you have is something that is crafted for this point. moment in time, right, which is, you know, how do we actually have this effect the average person and the populations that are most affected? How do we create an environment where it shows the leadership that the United States can have and supports the places where we have the biggest advantages, like in technology and investment in these other areas?

Do you think, last question, as this moves toward passage, that this also just becomes the kind of economic argument that can get lots of different constituents behind it. Because it clearly we see this as a big, you know, climate is the biggest human story, but also the biggest business story on the planet. And it seems to me that the economic benefit, uh, in terms of, you know, U.S. innovation, entrepreneurship, investment in a future where like most of us make it through this, which is good for keeping our country strong, all of these benefits that are sort of fundamentally pretty mainstream. Everybody would agree that those economic benefits are strong. Does that start to create enough, do you think, pressure to keep this from being like, I mean, yes, I'm dancing around the

issue of like when are Republicans going to realize that this is actually just a good economic argument, but does it make it harder to walk away from a bill like this when it's like, look, it's going to lower prices. It's a great investment. It's going to push a lot of, you know, investment in private equity money. At what point does it just get too hard to say no to? Well, I, um, I, think what's interesting about the way that those two thematic changes have played out in the bill is that I think it makes it more compelling and more relevant, right? So it's one thing to say, oh, you know, solar and wind is really important and electric vehicles are going to be great for everybody and there'll be a better investment climate and we'll have entrepreneurship and

technology development. That's all great. What this is also saying is, okay, we know people are getting hurt right now by fire, by flow. by storms, living in coastal communities, living on farms. And we're going to actually direct meaningful chunks of funding towards those areas because that's part of how climate is really going to be experienced by humans, by people that actually care about these things. And that's a constituency that's beyond, you know, technologists only focused on solar energy or wind energy.

I think the other piece of it is by creating kind of a clear, pathway and momentum over over kind of duration. So it's not like just this year we're going to do this. It's saying what programmatically we're going to deploy, you know, $369 billion over a number of years in the early stage of supporting more technology right now and buying things that actually embed this technology and the middle of like creating these incentives. Well, that also tells you is that if you're, you know, in high school and you want a good job or if you are working in the fossil fuel industry and you're trying to figure out what happens next or you're trying to advise your kids like, hey, this is not something that is a questionable trajectory in the way that it was before.

This is an industry shift that means good jobs can be created in these places. If we deploy a ton of offshore wind, that set of wind farms is going to have to be maintained by people going out on boats for 20, 25 years and making sure that, you know, transmission lines work and that the wind turbines are spinning. Electricity is being generated. And those are great long-term commitments to communities that can provide good jobs, good employment, a pathway that isn't kind of a speculative. Well, maybe that'll happen to me that long. Right.

So, you know, the idea that a good job in the automotive sector could be, you know, being the EV sector was, again, like in 2009, like, really? Maybe. And today seems a lot clear. And I think going forward, other parts of the economy are going to look more clearly along this pathway. So I would say the human focus, right, on people being affected right now and how that's going to happen across many different communities, agriculture, forestry, coastal communities, the disadvantaged populations. And then the fact that now you've created and reinforced, as you said, the trajectory or the acceleration here means that you can, really think about this as a clearer future for people to get good long-term jobs. And I think that is, you know, always a pretty persuasive constituency supportive mechanism is to make people think,

look, this is a real future. It's not a future for a small bunch of people that, you know, would like to do something that's good for the world. It's like this is part of a real reinforced transition that's going forward. Right. Like Joe Manton, you could say a lot about, about Joe Manchin, but was on Fox News the other day saying, like, look, this is a bill for America. It's a red, white, and blue, or red, white, and blue bill. That's good for the country. And if you love the country, why wouldn't you support it? And I was like, I'm going to give you this one, just this one. I think it's good for American entrepreneurs and technologists. I think it's good for investors that are looking to think about what happens next and where the future is going to go.

But I also really think what's great is it's affirmatively good right now for a lot of the people being affected right now, and that'll be increasingly affected right now. And I think, you know, going back to your point about the global context, you know, you can pick, last year we're talking about you could pick your continent to get flooded out of, right? It could be China. It could be New York. It could be, you know, Europe. It could be anywhere.

This year, it's like pick your continent to be lit on, you know, have like fire effect to your future. And unfortunately, I think those things are going to continue by saying, look, we are going to, you know, create much more momentum here. It creates a pathway for, you know, industry and technology and entrepreneurship and investment, I think, here in the U.S., that, you know, really helps all those, all those folks. And then directly is targeting a lot of that benefit at the people that are being impacted right now. which I think is a meaningful change in the way that this is being oriented. Jayco is the co-founder, managing director of the Lightsmith Group, the first private investment firm focused on climate resilience and adaptation. Thanks for coming back.

Thanks for having me, Molly. It's great to be here. And also, let's manifest. Yes. You're your congressperson. Yes. Especially here in Arizona. All right, everybody, thanks for tuning in on a Sunday.

Yes, Molly is out next week, just like I was out for a couple days on the river. Molly's taking a little trip, and I'm sure we'll get some updates from her when she gets back, but we have a ton of great content for you next week and some surprise co-host coming in for what has been a ridiculously active August. I like that. R-A-A-A-radiculously active August. We bank some interviews. I'll still, y'all be peeking into the feed here and there. I won't be like completely absent, but yes, nothing live for me. All right. We'll see you Monday. Adios.