Sophie Purdom co-writes a climate and innovation newsletter read by tens of thousands, ClimateTech VC.  Sophie has worked in start ups as an operator. She is a venture capitalist investor. She has written widely on sustainable investing. 

We speak on how Sophie came to climate tech investing, the importance of knocking on doors and being helpful.

What Sophie learned working for local government (Providence) and how climate has always been her through line into investing.

We discuss what areas of climate tech are over-invested in and under-invested in, and why she’s interested in the climate-industrial-tech area.

We chat about investment philosophy, the VC geography and gender lens and how she seeds the landscape on access to capital at the seed and pre-seed stage.

Sophie explains the concept of “brown spinning” and the pros/cons of taking assets private or selling brown assets to less responsible entities.

“This concept is what we would call brown spinning. So taking publicly held brown or underperforming - from a climate perspective -  assets private in order to hypothetically avoid rigorous accounting and operate with capital providers that are less ESG inclined. Fascinating topic. One of the many downsides to divestment: if there's a will then money will often find a way to finance these things. 

One positive example in the case of reversing brown spinning s is AGL in Australia. One of the largest energy giants out there and billionaire, Atlassian co-founder Mike Cannon-Brookes playing the activist investor role as an individual, coming in and buying up more and more percentage ownership in this business in an effort to strongly nudge activists, push them towards greener practices and he succeeded in getting that board vote and changing the outcomes of that business. So that's one very rare splashed all over the front page of the media example of how there's a way of green spinning these private brown assets potentially back to good. But to be fair, the majority of the stories that should be told unfortunately go in the other direction.

One that caught my eye …Another billionaire, Harold Hamm is trying to take the shale (gas) Company that he founded - Continental Resources - private. He owns (already) about 83% of this oil and gas US based company. The idea is take the company private because the public market investors are skeptical of plowing money into a non-ESG aligned (strategy).  He thinks he can get a better return or cheaper capital in the private market - the quintessential brown spinning concept. I'm concerned about it. I'm not exactly sure what you do here other than you can't go too hard or too fast on ESG reporting requirements without bringing folks along on the management train and leave them out because the worst case scenario is they hop off of the reporting requirements and go operate in the dark.”

We play over-rated, under-rated on: Lifting Weights, Carbon tax, Green New Deal,Tesla

Carbon offsets, Nuclear Power, Carbon removal and the woolly mammoth.

We finish on Sophie’s current projects and her career and life advice.

Check out Sophie’s newsletter here. And her Linkedin is here.

Available wherever you get podcasts, or below. Video with captions on YouTube, or above. Transcript below.

PODCAST INFO

• Apple Podcasts: https://apple.co/3gJTSuo

• Spotify: https://sptfy.com/benyeoh

• Anchor: https://anchor.fm/benjamin-yeoh

Transcript (only lightly edited)

Hey everybody. I'm super excited to be speaking to Sophie Purdom. Sophie co-writes the climate and innovation newsletter read by tens of thousands of people; Climate Tech VC. You should subscribe. She is a venture capitalist investor. She worked in startups as an operator. I first met Sophie in person as she was showing me around her Agtech startup near Boston. She's all around brilliant. Sophie, welcome.

Sophie (01:04):

Such a kind introduction. Thank you. I feel the same.

Ben (01:09):

Great. So how do you think you view your origin story? You are currently in VC, you've come into climate impact investing, but how did you get there and what attracted you to this area rather than any other part of the climate ecosystem?

Sophie (01:26):

Great question. I think for me it has always been climate through and through as opposed to maybe some functional specific areas of expertise like investing, or consulting, or being an entrepreneur. It has been this theme that has cut through all of the different threads I've been lucky enough to be a part of and explore. So to make that tactical and practical, I feel as if I've been rewarded every time I've helped others succeed within climate; whether that's saving enough money to hire new teachers through an energy reduction program, or making the Rhode Island government look good from a resiliency type of piece of legislation, to helping set up an ESG fund at endowment, and now to helping support climate founders at the earliest stages of their company formation. I am lucky to get the impact itch and be able to scratch that, but really it's also self-reinforcing in some ways.

I'm receiving praise, I'm granted opportunity, and I'm given a bigger stage to work on over and over again. So to me, climate's been a career accelerant at the same time as being an impact lover for me that I care about personally. I don't feel like people necessarily talk about that as much. We're all people and all of these external factors and signals really do very much play into our day to day decision making. I think it's only fair to say that I've benefited in large part because people reward me for also working on climate. So I'm hardly an entirely do goody savior. It's been self-reinforcing as well.

Ben (03:31):

Importance of incentives. Do you think growing up in Acton, Massachusetts kind of particularly teach you anything? I guess you helped out with your family business to some extent so you had the sustainability thread and climate thread. But you also had a little bit of business experience and I guess being in Massachusetts is something which is kind of helpful as well.

Sophie (03:56):

I mean, certainly. I moved from rural England through to great school systems in suburban Massachusetts and was lucky to go through that system from day zero with amazing public school teachers and a bunch of resources as a kid. It also allowed for more interaction with nature and maybe silly little things. For example, one day a teacher was devastated because they had hit an animal on the road and didn't know what to do with it and probably should have left it there for the highway people to clean up. But instead, they chucked it in the back of their pickup truck and brought it to the school where I was doing some overtime stuff with our amazing environmental science teacher. We jumped into action and we were like, "Wouldn't this be so interesting if we preserved the skeleton of this-- I think it was a raccoon or something-- using dermestid beetles?"

So we rigged it up, dealt with the animal, then put the beetles in this container and put it under an air hood and left it for a couple of weeks. Came back and low and behold there was a perfect skeleton of this raccoon. I definitely didn't tell any of my friends that I was doing this in a back room until the project was done and then somehow made it a cool thing. We ended up preserving a whole bunch of different animals that way, including our largest one, a deer, which we had to get police approval for so that we weren't seen as preparing to be serial killers or whatnot. Silly little story of like find different ways where your environment impacts you. I just feel very grateful that there were folks around me that were encouraging me to do bets like using dermestid beetles to preserve roadkill. There are manifold examples like that.

Ben (06:05):

I've heard crazier, but maybe not that much crazier in terms of high school projects. You were at the Providence office doing sustainability stuff so I guess that's kind of local state government. Did that also teach you something about sort of that part regulators what the state can do or anything, or was that more passing?

Sophie (06:28):

Yeah, no doubt. So I was lucky to have this experience with finding folks in my hometown ecosystem that were encouraging of my environmental pursuits. Sure, the dermestid beetle thing, but then it actually became more serious when we did this large energy reduction program and we saved enough money to hire two new teachers. That meant we were then able to hire an energy czar for the school district and then help pass some legislation to allow for that hiring line item budget across the Massachusetts school system. So I had a taste going right into college of how legislation and policy impacts climate at home or in schools and knew I wanted to do more. So instead of kind of sticking with campus things, I went straight downtown. Providence is a tiny place. It turns out if you just show up enough and knock on the door and make yourself helpful then you can get through the door most of the time. That was my experience with the office of sustainability and another amazing woman that was game and was open for a climate go getter to hustle. She's now in charge of large parts of the Nature Conservancy and has a really inspirational career.

So we got started working on things like recycling programs, municipal waste management, collection of different light bulbs, and the dirty behind the scenes impactful things from the municipal perspective. That allowed me to be involved in the conversation when the resilient Rhode Island act was set up many years ago at this point, which is the first time that there was really business intersecting with climate legislation. Rhode Island being the ocean state, that meant mostly related to sea level rise and resiliency planning and what that meant for small and mid-size business owners. My job was to go communicate some of this to the businesses. Maybe case in point of over and over again, I keep circling back to this piece about communicating climate from a business and bottom line perspective. So it's cool to retrospectively look back and find that thread running through everything.

Ben (08:52):

That sounds great. Great advice as well. “Just knock on doors and be helpful.” It seems like quite a good thing to do. So fast forward slightly to today. You're doing investment now; venture capital investment and commenting about it. Where do you think we might be underinvested, apart from obviously all of climate tech, but any other particular where we are underinvested? And maybe relatively, is there anywhere that you think conversely we might be a bit overinvested as in actually we think we should focus a little bit more there, or this is where you think innovation's really needed?

Sophie (09:25):

Yeah. Spot on. So we track all of this in quite some detail at Climate tech VC. So at Climate Tech VC which folks see as a newsletter, but on the back end is really a data and insights platform, we track all of the deal activity mostly in the venture capital. So early equity space and do it very bottoms up. So look at the companies and categorize those as what industry or space-- We have 200 or so subindustry verticals-- and where's the capital flowing. And so then we can compare that against where are the greenhouse gases are coming from? To me, that's the way that you would calculate the gap. I'm curious if this resonates with you, Ben. Quite definitively, there's an abundance of capital flowing into Electric Vehicle Original Equipment Manufacturer; EVOEMs. That spike probably happened 18 to 12 months ago kind of beginning of pandemic times when there was a Russian of ESG capital looking for places to park it.

I like to say the Tesla elevator effect or escalator effect. Tesla's kind of the one and golden breakout child of ESG/ climate and big financial returns. So everyone's like, "All right, let's go find the next Tesla." And so then you have Rivian being heavily financed and then it's like, "All right, what's the next Rivian?" Then you go down and down the stack. Anyway, can help quantify some of that. But definitely abundance there versus the other side where massive amount of global emissions come from with lots of really complex chemical and physical infrastructural changes that need to happen, which to me screams of great way of making money, but is underinvested and would be the industrial category kind of like writ large. That's everything from novel chemical processes, to manufacturing, to cement, steel; you name it. We see that as the biggest gap relative to emissions.

I'll also toss one other segment out there which doesn't quite show up on that emissions comparison graph, but that's because it should be in the negative emissions category which is all things CDR or carbon dioxide removal. It has been a hot investing space for about the past six months or so, but before that it was trivial and really underweighted. It's still seen as relatively catalytic. So we have lots of semi philanthropic organizations that are helping to see this and novel mechanisms like advanced market commitments coming in by the likes of Stripe and the Frontier fund. So I'd point that one out as well. And then of course, many thoughts on, "Where are the Frontier next most interesting areas to invest?"

Ben (12:27):

Sure. Yeah, I agree. I think that Tesla effect has put a lot of capital in that as in fast followers, or maybe not even that fast followers. I also agree in the places that you think are underinvested. Obviously, you had that Stripe led in fact very well covered by Climate Tech VC with Nan's work. I think I agree with that too. I would maybe put a little extra category on the land use clump which obviously is not so directly VC relatable, which is maybe one of the reasons why it's perhaps a little bit under in terms of that. But I think I broadly agree. 

Then within that industrial complex, are there any particular areas you are also most excited about or maybe some companies on things that you've seen? Because like you say, there's hydrogen power this, or steel and cement. There are circular ways of thinking about concrete. There's heating and cooling, industrial gases. I know you've covered some of them. I don't need all of it. But is there anything where you go, "That seems super exciting?" Even if it might not be the kind of 80% win, it's the 1 or 2% there that you really favor.

Sophie (13:42):

Yeah. In the industrial category to kind of tighten the definition that I said previously that would be stuff like process heat and fuels, iron and steel, cement chemicals, even robotics manufacturing, and then importantly metals and mining. So many companies to tip a hat to. But maybe one would be for example, Solugen, which if folks are interested we did a really fun profile with the founders of that. As we like to say, Gigacorn Company, meaning they have reached a private billion dollar plus valuation and have giant climate impact; hence the giga unicorn piece.  Just kind of like unlimited applications and impact potential there to entirely decarbonize and often make it into a carbon negative process what would otherwise be splitting a lot of dirty fossil fuel based chemical processes. So that's a fun one. 

There's a lot of decarbonizing cement place that’s out there. There's a couple in the steel space. I think what we're seeing is these are capital intensive businesses to get off of the ground. They have a lot of enthusiasm often out of the gates where super smart founders, super smart team will kind of cruise to pilot scale altitude and then recognize that venture and often private equity is not the right way to finance these first of a kind massive pilots; which are on the order of sometimes like half a billion or up to a billion dollars’ worth of steel in the ground to create a new forge or a new cement refinery.

This is an observation. The department of energy loan program office, for example, Stateside has been hyperactive over the past few years behind the scenes because things take a long time to run through; getting the pools of capital necessary at the LPO through to running the diligence processes. We're now starting to see some of these kind of key stone loans deploy out into climate tech companies. For example, monolith materials which makes a kind of carbon negative carbon black product which goes into everything from tires to inks and historically is coming straight out of petrochemicals. They're able to make that with renewable hydrogen and they just received a billion dollar loan from LPO. So ample opportunity from the tech novel technologies perspective. Good space for VCs to deploy into early with the recognition that the capital stack will be made up with different players. Some of whom, at least Stateside, seem to be leaning more towards government players.

Ben (16:50):

Sure. And I guess that's because a lot of VC in the mini half generation before-- going back 10 years, was kind of capital light software type ideas and climate tech, deep tech is perhaps a little bit different in capital structure and everything. I wondered whether you wanted to maybe highlight how you see your kind of primary capital impact investing that you do now and differentiate it from how you see so-called ESG working now. I think ESG has become a somewhat overused word. Perhaps even slightly meaningless because it's become politicized and it's entered the culture, work wars as I like to call them, which maybe thankfully the terms impact or VC investing hasn't done. But arguably, impact investing albeit with small amounts of capital has always been trying to be more impactful or make more of a real world difference.

Sophie (17:48):

Yeah. I get asked this quite a lot these days with Musk putting ESG into the news.

Ben (17:58):

Yeah. Peter Thiel as well. I think maybe even more from a libertarian political perspective, at least.

Sophie (18:05):

No doubt. They're doing a masterful job unfortunately for the ESG space. Although in some ways it kind of deserves it with allowing the ESG myth to continue for so long that there is a narrative disconnect for the Mosque of the world to angrily tweet out against. We can dig into that in a minute. I'd say my one sentence response to all of this is ESG is not impact. We should talk about this because you might have a different perspective here, but from the point of view of what I invest in which is high growth technology businesses that have a climate positive impact because that then drives superior returns and opens up novel markets. What we would be measuring or pushed to measure would be the future carbon impact of these nascent technologies coming to scale.

That's usually in terms of greenhouse gases avoided, or produced, or straight up removed which is very different from ESG reporting, which to my understanding is much more closer to corporate governance and improving the performance of the company through decision making, hiring, pricing, and all sorts of things like that. My concern with the ESG downturn or myth perpetuating is that it will knock out right from the start this new space of climate impact reporting which looks a lot more like forecasting the impacts of these novel technologies on greenhouse gases. That's really just getting started and it's super tricky space. It's getting tied up unfortunately at the moment with ESG reporting.

Ben (20:10):

That's quite interesting. I agree ESG is not impact, and maybe we can talk about divestment or engagement. Also the difference between public and private markets which is an intersectional problem. But that's quite interesting about how you've noted. So for listeners, I guess in US or US SEC has got climate reporting regulations coming out and some people are saying, "Well, that's overstepping the mark because it's not environmental." Other people are saying, "This is material for investors." And actually because it is a physical thing or at least part of it is, let's concentrate on the carbon emissions piece that could fall under an impact idea as to what you're saying, as opposed to purely either a policy led or an extra financial led thing from an ESG idea. Therefore as you point, it's actually at this convergence of all of these both ideological and policy debates.

So I agree that it is getting caught up. To your point, it's also quite early. There isn't a consensus quite for instance on how to do some aspects of carbon accounting or yet alone, natural capital and all of these things. It would be a shame if that was slowed down because it got caught up in politics. However, I do wonder whether it was inevitably going to get caught up in politics because there are such big stakes involved; both from corporates and policy makers and people, as well as large amounts of money. So I think that is interesting. 

If you had one policy choice that you could implement, what would you go for? Maybe you’re a SEC or even better, you're sort of some benign dictator of the United States. You could be the benign dictator of the world if you want this to be a global policy, but maybe we could start with the US. Is there anything that you would do from a policy perspective that you think would really help?

Sophie (22:20):

I mean, is putting a global price on carbon on the table? If so, that's probably where I would shake my magic wand. That's the low hanging fruit kind of answer here. I don't think this would necessarily be at the top of my stack ramp ranked genie in a bottle opportunities. But one that I've been thinking a lot about is what's the role of whether it's governments or other players in getting pretty heavily involved in the carbon markets in more force? Whether that's like standard setting or verification or maybe even certification. I go back and forth on whether that would be helpful or not, but it's pretty evident that it really should not be like a for profit type of player that's managing all of this. There's room for improvement particularly in terms of speed of bringing new standards on board, helping manage the integration of the voluntary and the compliance market; like supply and demand in some ways, helping pull countries into these markets alongside the corporates and individuals that have been leading the way for some time. So those are more topics about an area that it would be interesting to pull national or global policy into in more force and more specificity.

Ben (23:56):

Do you worry about private companies going public and being subject to more tick box ESG, or the other way around where you have maybe brown companies or brown companies going light brown but there's a lot of pressure? So they actually go private, but to owners who you would argue are less responsible owners. I guess the other way we see this is you sometimes get public companies who sell assets privately; brown assets. You can see the players that they've sold them to and now we've actually got a track record of some of them. They've sold them to less responsible players. You either get methane flaring things, or they're run less badly, or obviously there's the kind of the S and ESG. So workers are treated badly as well as all of that. Or do you think that's a kind of overstated risk or not?

Sophie (24:48):

No. Very much not. I think it's understated. This concept is what we would call brown spinning. So taking publicly held brown or underperforming from a climate perspective assets private in order to hypothetically avoid rigorous accounting and operate with capital providers that are less ESG inclined. Fascinating topic. One of the many downsides I suppose to divestment in case in point that like, if there's a will then money will often find a way to finance these things. Maybe one positive example in the case of reversing brown spinning in some ways is AGL in Australia. One of the largest energy giants out there and billionaire, Atlassian co-founder Mike Cannon-Brookes playing the activist investor role as an individual, coming in and buying up more and more percentage ownership in this business in an effort to strongly nudge activists, push them towards greener practices and he succeeded in getting that board vote and changing the outcomes of that business. So that's one very rare splashed all over the front page of the media example of how there's a way of green spinning these private brown assets potentially back to good. But to be fair, the majority of the stories that should be told unfortunately go in the other direction.

One that caught my eye just yesterday and I'm sure we'll probably be hearing more about or maybe we won't. That's a story in and of itself. Another billionaire, Harold Hamm is trying to take the Shale Company that he founded. So Continental Resources private own about 83% of this oil and gas US based company. The idea is take the company private because the public market investors are so skeptical of plowing money into non ESG aligned means that he thinks he can get a better return or cheaper capital in the private market. So just like quintessential brown spinning concept. I'm concerned about it. I'm not exactly sure what you do here other than you can't go too hard or too fast on ESG reporting requirements without bringing folks along on the management train and leave them out because the worst case scenario is they hop off of the reporting requirements and go operate in the dark.

Ben (27:52):

Yeah, that's a really good point. You've just made me reflect that what they both have in common is to do with the owner. Obviously in public markets you'll tend to be more atomized, smaller holdings, then you've got large owners and it depends what the owner wants to do. So you have an activist owner; whether you're going to call it impact activist or ESG activist. But the owner has a view of where those assets should go and therefore that's one of the lenses. Obviously, it's kind of neutral is the thing, but you can obviously do more or different things in private markets than public and then it depends what the owner wants to do. So I think that's quite interesting reflection.

So do you think you have now an investment philosophy that holds together what you've done after reporting on this so much and what would it be? Maybe you can or I can add onto that. Do you have already a kind of biggest investment mistake or opposite side biggest investment learning that you'd already have which has shaped or come out of your investment philosophy?

Sophie (28:55):

This is all emergent and I think that makes it really fun. But I'm game to share where I'm coming from. There's no grant thesis other than it's always been performing well when it comes to climate consideration. So mostly on like greenhouse gas performance, if you have to really drill down into, it will drive out performance. That's always been the nut that I'm going off for years and years at this point, and now happen to be doing that at the earliest stages of these private high growth tech company startups. For me, I think we oddly under weighted the value that can be driven from just very clever distribution models and just go to market strategies for these climate technology businesses which feels anti-climactic in some ways and counterintuitive because that's how all good businesses are built as was beat into my head at Bain.

But I think in climate, we've been looking for a silver bullet type of solution of the technology will lead the way, or win all, or drive home all of the returns. The counter side to that is the team is so wonderful and great. It is kind of the easy pre-seed venture cop out answer. I've increasingly been looking more and more at distribution models which means practically, "What manufacturing partners are you working with and how do you think intensely about your supply chain being resilient and often short and often near short? How do you think about the full life cycle of all of your inputs?" So basically being efficient and not getting caught up in needing to spend more for the end of life use of your product or how do you put the manufacturing as close to the point of use as possible.

So maybe to make this a little bit more concrete, I helped start a company called Kula Bio. That's how we first connected or got closer. Kula is a quintessential deep tech business in that it's got a magical microbe and this microbe can live for a long time because we energize it and therefore make a lot of ammonia, which is of course a beneficial fertilizer major input in most of Ag. Ammonia fertilizer alternatively is traditionally made through the Haber Bosch process which is really fossil fuel intensive and polluting. They have to make it in these mega factories and then ship it all over the world. It has long lag times and that supply chain can get severely disrupted. We're seeing that now with massive spikes in fertilizer prices. 

So I think investors and folks got excited about Kula because of the magical microbe, if you will. Whereas my experience was the magic of Kula which was the fact that we could distribute efficiently. We could do it in small batches. We could do it in real time and get it in the hands of farmers right away on the farms. We could stabilize our prices. We had a better go-to market strategy working often hand in hand with some of the existing suppliers but at better prices with better margins. The magic seems to be the go-to market hinged on the breakthrough technology. So that's my little tiny hill that I'm standing on for the month. But come back next month. I'm sure it'll be another one.

Ben (32:50):

Well, that sounds great. I think that sounds like you are a great investor and going to continue to be one. I was interested in this VC in the US. Maybe a couple of slightly adjacent questions. I'm kind of interested in the gender lens through the whole VC industry because it strikes me as being very boy heavy, not necessarily in a healthy way. It's kind of interesting I'm picking up because I'm not really that close to it. Either in the UK, there's a much smaller UK scene, but particularly in the US. I'd be interested in your reflections on how much of a challenge this is; whether it's overstated, understated and how it is. And maybe slightly intersectional with that is traditionally there has been a very strong West Coast scene and now more recently, perhaps more diffuse in climate I've picked up there's a kind of Miami scene which might be a bit more crypto. There's a kind of New York scene and there's a New York to Boston one. 

Is there anything geographic there or they're kind of two things but they may be separate. So I'm interested in your geographic reflections because you are more of an East Coast gal that grew up there and actually your hub for your VC is New York. And then whether my reflection's just being on the outside for the fact that there seem to be fewer female VCs, although coming through your cohorts doing great things and is that an issue?

Sophie (34:14):

You're totally right. Representationally, there are too few women and there's too much kind of waiting of venture dollars and people on traditionally the West Coast-- now both coasts. You can cut these diversity or geographic or representation kind of metrics in all sorts of ways. The story unfortunately isn't a surprising one. It's often the older white guys from San Francisco that own the dollars. If you click further into that, often they own the decision rights at the major firms from which new firms tend to spin out of. So there's more women in VC year over year, a couple quarters kind of notwithstanding that trend. But important things to look at are who the general partners are and who are starting new firms, and therefore get to set cultural decisions and parameters and recruiting at the new shop.

So I'm inspired to be amongst a cohort of emerging managers that are increasingly diverse in representation and thought. But we have a massive way to go. Not to make this a pity party, because I think I've actually had... I don't tend to spend too much time worrying or overthinking this because it kind of is what it is. Also, I've been really lucky to have a bunch of inspirational figures that have certainly tucked me under their wings and they're male and female alike. They represent all sorts of different perspectives. The main thing for me has been anchor in excellence and be additive always to the ecosystem. So don't assume that just because I'm here I should get to play. I'm still a little uncomfortable with the title of venture capitalists.

It sounds like a really privileged position to be in. I want to make sure that everything that I do is additional and necessary and really high quality. I'm here to support the founders who are making a climate impact for all of us. I was one of those people not too long ago myself, and I thought really hard about why don't I go do that again? For me, the way my brain works and the way that I enjoy spending my time, I like to connect a lot of the dots together and project where we're going and advise and help rather than being the owner of a single data point on the board. I have tried to earn that position for the past two and a half years with my team at Climate Tech VC. Add and just pour a ton of resources and everything we can back into the ecosystem in the form of all of this data and insights and perspective and kind of interconnected nature of spreading the conversations that we're lucky enough to get to have with folks to the public.

One other thought on how this is changing and how I'm lucky to be in this particular market environment. When we started CTVC, it was the start and the height of the stress of the pandemic and that meant everybody was at home for the first time. Calendars had kind of been thrown out of the window for the first time in a long time. It wasn't expected that you showed up in the geography of the person that you were hoping to chat with and that's just straight up luck for us. We were writing a newsletter, people were spending more time in their inbox, they were curious, they were thinking different thoughts, and were open to different perspectives. We could just holler on the phone at these amazing change makers. So we made the most of that and we accelerated really quickly as a result of that particular point in time in the market.

And now of course, that's changing again and maybe folks are retrenching geographically or standing out their inbox or going back to some old ways of working. I'm very conscious that I got a chance to springboard from that point in time to the perspective I'm in now. It's not even like paying it forward kind of thing. It's understanding that I will always take really seriously the perspective of folks that maybe are-- from an age perspective, in a cohort a couple years after me. So I spend a ton of my time chatting with and putting in and connecting with these folks. They're an integral part of CTVC; the newsletter. I'm one of the oldest people on the team actually. We just don't remind anybody of that. I think they think we're all like 65 and sitting in our mansions writing this on a typewriter or something. But diversity, distribution, point in time, I'm grateful and lucky and all of this stuff really impacts my perspective.

Ben (39:23):

You could definitely see it in your newsletter as a public good or the roots as a kind of public good is like let's spread this out, which I think comes across as very genuine and authentic and really valuable. Do I take even 2% credit because I'm sure I suggested, "Hey, have you tried this newsletter thing in pandemic?" It's kind of more offhand, obviously. It's actually all you guys. But did that just come about because it was more time in the inbox you're having speaking to these people and you thought, "Yeah, let's put it together. Everyone's going on to Substack. Let's do it?"

Sophie (39:57):

You're right. You're an inspiration. It wasn't even my idea. Entirely, the first couple posts were done by my co-founder, Kimberly Zou who was fresh out of undergrad working at a bank and wanted to do something about climate. So she set up the website Climate Tech VC, wrote a couple posts with I think five deals of the week that she had just found online. Then our mutual friend, Cary Krosinsky who's a complete prolific polymath ESG teacher, writer, professor, connected guy, who I happen to have the privilege of writing a book with. Cary loves to connect up and coming students with people in the field and he had connected me with Kim and we hit it off. She was told that she wasn't able to publish under her name because that would be a conflict of interest with the bank that she was at. So we popped my name on there, which if you know anything about me, I take that seriously and I like to do things well when my name is involved.

So low and behold, off to the races. It was just a marriage from Cary introducing me to Kim completely blind. What a delight and pretty insane to think that a random connection would then become kind of my closest business collaborator. We've gone way further than Cary could have ever imagined, although he does like to take credit on LinkedIn appropriately for being the matchmaker here.

Ben (41:37):

Yeah. He should have taken a commission. That's probably what he's thinking. "Oh damn it. The planet's going to be great but I'm not going to see those billions." Well, maybe we do a short section on a kind of underrated, overrated. So I just flash some things out, you can make a comment, or you can pass, or be neutral. It's not meant to catch you out or anything.
So underrated, overrated, lifting weights?

Sophie (42:11):

Underrated for sure. Huge part of my lifestyle actually. I used to be a cardio queen. Now very much into weights. It has helped my scoliosis and it's a very fun way to hang out with my life partner who is also busy all day on Zoom. We go to the gym together and we lift weights and talk about our day between sets. Too much detail, most likely, but massively underrated.

Ben (42:37):

Great. A carbon tax or maybe a carbon price; tax or price?

Sophie (42:45):

To me, underrated. But it means so many different things to different people. So probably reasonably rated though it should be done.

Ben (43:00):

That's fair enough. The concept of a green new deal, although I guess this does mean different things to different people as well. But overall green new deal?

Sophie (43:08):

Same point as the carbon tax. It has to be done. Taxes and green new deal, all weird wording for stuff that just makes and saves a ton of money and is a clever and necessary policy implementation.

Ben (43:24):

Tesla as a company?

Sophie (43:28):

Probably overrated at this point.

Ben (43:31):

Yeah. Carbon offsets?

Sophie (43:35):

Overrated. I think it's all about carbon removals.

Ben (43:40):

Very good. Ideas of de-growth?

Sophie (43:46):

Underrated. I wouldn't even know where to begin with that one.

Ben (43:50):

Well, I guess de-growth is the idea that we are doing too much over consumption. But I guess some of the economists or thinkers associated with that how quite draconian, or at least for people not on the de-growth side of thinking about that. It's still in debate.

Sophie (44:10):

Interesting. I do not think that we need to turn down the thermostat and put on a bunch of sweaters and mittens at home in order to solve climate change. I think I'm much more of a techno optimist in that regard. So, do more with less I can get behind so long as that's stuff that the consumer doesn't see or touch. It's more implemented upstream.

Ben (44:33):

Yeah. Nuclear power?

Sophie (44:36):

Underrated.

Ben (44:37):

Is this all nuclear power, or mini nukes, or advancing nukes or just the concept in general?

Sophie (44:44):

I guess I mostly just mean fusion as a concept. There probably are no silver bullets, but if there's one or two I would load that up in my climate gun.

Ben (44:58):

Very good. You already commented on this which was carbon removal. That was my next one. So that's underrated for you, right?

Sophie (45:05):

Underrated for me for sure. In terms of literal pricing, I think it's literally underpriced at the moment. Then massive area of innovation and research and talent flowing into it. We haven't even touched stuff like ocean carbon removal or all sorts of other ones like heat. The list goes on and on. Why on earth would you purchase an offset when you could purchase a removal? It's just like we're talking on entirely different permanence timelines here.

Ben (45:38):

You didn't call it Pete tech, did you? You called it bog tech. That was the thinking I picked up. That has to be an industry, right? We have to make that industry. That has to be multibillion industry.

Sophie (45:49):

Indeed. We love a good pun. I think we said something like Peaky blinders because I was deep in the Peaky blinders Rabbit Hole on Netflix at that point. So yeah, there are lots of good pun to go around

Ben (46:00):

The SEC thing, was there something about them dropping something? That was another good one.

Sophie (46:05):

Drops it like it's hot?

Ben (46:07):

Yeah. Hot potato. Something like that.

Sophie (46:09):

Like MACCing on the Marginal Abatement Cost Curves. I write these titles at 2:00 AM on a Sunday night so that's the vibe.

Ben (46:19):

Very good. The last one on this, the woolly Mammoth?

Sophie (46:24):

Overrated. I know where he's going with that. This is like George Church's new CRISPR type of play. Underrated would be the elephants that exist today and basically do the same thing that the woolly mammoths do, just in Africa instead of up in Russia.

Ben (46:43):

So you're not all the way as a crazy techno optimist on that. I watched a documentary with him actually and Stewart Brand. I hadn't appreciated the complexities and the to and fro from it which were kind of quite interesting. But I can see woolly mammoth overrated. Would you like to sketch out some current projects and things you are thinking about? I guess you are mostly at seed and pre-seed for what you are looking at because if you read on social media or even the news today, there's a lot of talk about a lot of venture capital being mostly frozen but particularly slightly higher up the chains. So called series A B C D, and obviously IPOs and public markets you can see as far as that. But it's interesting on what you look at, whether you feel the same at seed or pre-seed either in terms of what you're seeing, or maybe how you think about valuation and just current thoughts for this year and into the future.

Sophie (47:45):

This is all shifting day to day, week to week right now. What I see at this mid-June point in time is not a slowdown in the pre-seed and seed markets particularly for the top 50% or so founders and ideas. It's basically no difference. There are fewer individual angels in the market because people are looking at their personal portfolios and kind of tightening the belt. However, I think that the lack of slowdown in climate at the earliest stages is coming from just the enormous amount of dry powder that's been piled up over the last 18 months or so of new and maybe second time climate funds that have been raised. We also track this at the newsletter and there are some cool graphics that we're going to update with our new mid-year report coming out in a couple of weeks.

But last year we tracked 64 new climate funds that were raised. Over half of which are just entirely new institutions. That trend continued. There has been more new institutions coming into market. It's billions and billions of dollars’ worth of climate dry powder that has not been deployed yet and has a really specific mandate to go after some of these new innovations. So I think that's the delay that we're seeing right now in the climate early market still being quite strong. Valuations have re-corrected at least 30% or so. I think that's frankly healthy. Maybe folks can come and poke me after or something if they hear that and they disagree. But it was getting pretty frothy. I think there has been a bit of a sigh of relief in that regard. It's kind of loony to do a super short diligence timeline on the order of like 24 or 48 hours when it comes to these deep tech companies. You simply cannot know everything material that you would need to know in that time period. Founders should be looking for long-term partners to understand their business.

So I think it's good and healthy for everybody. I'm not suggesting we cool off all the way to put all of the power in the hands of investors, but a bit of a re-correction there is good. If you visualize a snake or something that eats a mouse and then it goes through the body of the snake and there's kind of a lump-- I see climate in terms of like there was a small mouse that was eaten at some point and those companies are in a cohort that are now at the kind of like series ‘B’ plus stage. There's not that many of them, but they're relatively large and they're performing relatively well. Then there's like a capybara that was eaten. That's a giant lump that came a little bit shortly thereafter. That's like this main cohort of climate companies that are now around the series ‘A’ type of stage. Bigger, really diversified, and frankly not all of them are performing particularly well. And so the reckoning is going to come for those folks when they're trying to raise series ‘A’ capital on limited progress.

Unfortunately, we're seeing that play out already in terms of layoffs of 30 plus percent of some of these companies staff; the non-technical folks. It's a tough time to be a generalist out there and a lot of bridge rounds are happening. I think that talent will be fine because they're going to get snapped up from these earlier stage companies that maybe have a better story to tell and are getting backed by stronger investors. Lots of thoughts. It's all re-correcting and happening, but I don't think it's time to run away. I actually think it's as good a time as ever to be a climate investor and to be a strong founder. You're still in a good spot.

Ben (51:55):

Great. And current projects, obviously newsletter and being a VC. Anything else you wanted to add to that?

Sophie (52:01):

Those are the two main things and hopefully always will be. We're also starting a new business off the side of CTVC the newsletter which is an insights platform. CB Insights crossed with a PitchBook selling market level information into governments and big asset owners. So stay tuned for more there. Then besides the insights business, the newsletter, the fund, have to round it all out with playing a lot of handball or wall ball on the streets of New York. It's summertime and that's my absolute favorite thing to do.

Ben (52:33):

Great. So between weights and handball I'm feeling really unfit. Last question. Do you have any advice and thoughts for people? Either life, career advice, being someone in their twenties, or maybe people who want to make an impact in climate? Any thinking about that or any final thoughts you have for us?

Sophie (52:56):

A hundred percent. There's a space for everybody in climate and that can't really be overstated. So whether it's a functional area that you're an expert in, or if you're coming new into the market and you're excited about any particular topics or themes or approaches or mission driven concepts that get you excited, just find the thing that works for you and run with that because odds are that will change and that's totally okay. I found the biggest solve for climate burn would be guess just getting started, working, contributing, and being a part of the community. That can be part-time, that can be remotely, and that can be digitally across all of these amazing slack communities that are increasingly moving IRL.

I think the best possible one is to jump in with both feet and start working on climate full time. So tons of startups that are still hiring, tons of later stage companies, lots of funds, research entities, you name it. If there's nothing out there, then go create it, and turns out starting a newsletter can help you get there. Very happy to chat with folks and beyond thrilled for this new cohort of climate first folks that maybe are coming out of studies at the moment who have always known that climate is a topic that's going to impact them for the rest of their lives. Looking forward to building this industry together.

Ben (54:30):

That sounds excellent. Brings me around to your original thought which is knock on doors and be helpful. You can do something.

Sophie (54:37):

Indeed. Everyone has something to bring to the table. So help them help you, and then we all help the planet together.

Ben (54:44):

Sophie, thank you very much.

Sophie (54:47):

Thank you. Total pleasure. Very much fun. Looking forward to more.

Ben (54:52):

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