Climb By VSC: Episode 18

Doug Patterson: Welcome to today's climb podcast. I'm Doug Patterson with VSC. Joining me today is Laurie Menoud with At One Ventures. Laurie is a partner At One, it's VC firm that is focused on investing in a world where humanity becomes a net positive to nature. And you can say that's the positive spin. But as always, you're supposed to be positive and in marketing, but we also like to say that you're going to destroy the businesses that are destroying our planet. So I love the attitude of the firm you've got there. Laurie is a bio technologist by training. She's played roles in the chemical industry. She's built dozens of ventures out of DOD research programs. And she's currently focused on finding funding and growing teams that catalyze planet positive industries. Some of the companies that At One Ventures has funded, for example, you've got the robotic indoor farming company called Iron Ox. They're investing in earth digestible foam packaging with cruise foam. And then there's also zero water, textile dyeing company alchemy technology, lots of cool stuff. I always love learning about the companies that At One is investing in because it always feels very sci-fi, it's very sort of futuristic and exciting to sort of hear about what's going on. So thank you so much for joining us today, Laurie and excited to dig into some of these topics with you.

Laurie Menoud: Thanks for the invitation.

DP: Awesome, well, let's get started. You know, I'd love to know a little bit about your background in science and as a microbiologist and research, biochemistry, all of these things. How has that made you a better investor? How did those kinds of skills that you developed translate over into the world of VC?

LM: Yeah, and I guess maybe this background sounds a bit unusual because when you look at the venture capital industry, typically people have worked in finance or have been getting executives at software companies, which is fine when you invest in consumer or enterprise software, but my background is very different. I spent my day in research, launching deep tech companies and the CMV industry. And I think that to me, by working in the lab, it really helped me understand and comprehend how things work at a fundamental level. And it's something I use today every day to really understand new technologies and assess the technical feasibility, which is critical when you make tech investments. And I think in addition to that, you know, understanding also the timing for the technologies is critical. I spent several years at SRI International, it was the birthplace of world changing innovation like internet teleoperated robotic surgery or CV which is all of the fun. It was also the place where the computer mouse was invented, So that is sensitive to Xerox to Apple and a few other customers. But personal computers ended up being valuable and commercial in the 80s. And so basically, they didn't make much money out of it. So really understanding what the right timing on innovation of technology is also critical. And I've learned about that the hard way. It's something that makes me a better investor for technology.

DP: Timing is everything right and people talk a lot about climate tech, but I think they're excited to kind of see what it leads to. Do you think now is an exciting time in climate tech in particular?

LM: We need to find solutions right now. And I think the technologies are material. So it's not the first time we are kind of looking at Cloud. I think 10 years ago, technologies were less mature. People were also not thinking so much about unit economics. I think things are different today. Technologies have matured. And if you do the right investment and you think about the unit economics and when I say you need to go that mix, it's really focusing on technologies that are going to be economically viable, new technologies that are going to be a case that cost parity with zeros of solutions that are on the market. I think there is a path to find and invest in climate tech solutions that are going to have a big positive impact on the world. What we are doing is completely resetting the industries. If I take the example of steelmaking, everybody knows that steelmaking is responsible for 7% of the global carbon emissions annually. We found a company called Helios developing a completely novel chemistry for ion reduction. And fully eliminating carbon from the carbon emissions from the process. So we are going from 7% emissions to 0% emissions while having a process which is cheaper than current blast furnaces processes, and that's typically the type of investments and companies we are looking for.

DP: That's awesome. You know, it's so funny to think about how, you know, I'm sure like the big steel manufacturers are really excited that everyone's kind of focused on plastic. You know, plastic is kind of like the go to thing that people who want to get into sustainability or start changing their own kind of lifestyle. Plastic is kind of the go to thing. No one really talks about the steel industry. So I'm sure the big steel manufacturers are really excited about that. But now they've got people like you've come in for him.

LM: When people think about climate change and climate cases, plastic is one. It's changing your lighting with LED lighting. It's putting a solar panel on yogi who it's buying an electric car, but I mean carbon emissions today it's much more than just that it's your heating system in your in your building, which is producing lots of carbon is a cement we use for buildings similar to the student used to it's responsible for 7% of the carbon emissions. And it's the food we eat and the way we produce proteins, animal farming, also big meat and emitter. And so when we look at climate Tech with that one, we really look at this old scope and we look at targeting heavy industries as well.

DP: Let's dig in and talk about deep Tech because deep tech is something that you've been focused a lot on in your career. It's kind of one of those buzzy terms that maybe people read about and you kind of like yeah, deep tech. I know what that is. But maybe you don't really know. What would you say deep tech actually is and why is it important to invest in these types of technologies?

LM: Yeah, for deep tech think about emerging technologies that rely on some kind of engineering innovation or scientific advances. For example robotics, artificial intelligence, synthetic biology, advanced materials, those are deep technologies, and critical because again, if you think of a climate crisis we are not going to solve it with software. We need kind of innovation in chemistry, making new chemistry is to produce still without producing co2. Same for cement, we need new processes to address those issues. And I think also, we can start scaling massively activities like ecosystem isolation. We have a company in the portfolio that has systems that use drones to plant trees. And again, plant 120 trees per minute. So with just $6, you can plant 1 million trees in a day. And just to give you a sense of the scale with 1 trillion trees, this would have a presence of the total carbon that we have on the planet and basically with less than a billion dollars. You could plan those trees. So I think using the depths to both kind of resets the industries we have today, in addition to upscaling ecosystem restoration activities are essential.

DP: What would you say is kind of the most difficult part about sourcing deep tech investments? Is there like a key to the due diligence process or some sort of secret sauce that you guys have developed with that one?

LM: Yeah. And again, take the example of software again, because I mean, when you think about software companies, it's very easy. If you have an excellent idea of the concept of the software company and quite a few lines of codes, maybe launch this app. Maybe it gets some first customers and then you can raise money. With deep tech, it's much harder, because the tech relies on engineering, innovation and scientific advances. It really comes from labs. It comes from national labs, from research institutes, from universities, from incubators. So in order to source opportunities you need to be connected to these ecosystems and to those labs. And you need to be patient. Just to give you an example, Avello is a company I invested in last year. A company which has developed a novel machine learning algorithm to accelerate gene discovery with a focus on developing climate resilient crops. I met the company it was not even a company of two founders three years ago when they were at Duke University in the lab, and started to think about maybe building a company on these technologies they had developed. So of course it was too early for me, but I kept in touch with them for two years. We were chatting on a quarterly basis. I was hearing about their kind of technical progress. I was providing candle advice and when they were ready to raise their Seed Round I was ready as well to invest. So just yeah, it takes time to build this ecosystem with the research labs and to be patient with it.

DP: It also goes to show that you never know what relationships may pay off down the line. You know, like you may meet someone really early on and you know, it doesn't make sense to work together at that point. But if you stay in touch and you know you keep at what you're doing then somewhere down the line those kinds of relationships are meeting people in that sense can really pay off. It really is kind of a marathon. Exactly. What advice do you have for entrepreneurs who are seeking deep tech investments? You know, what advice would you give to other investors who want to get into deep tech firms or people that are kind of new to the space? What's your top advice for them?

LM: Yeah, it's two ways of funding when you are a tech company because many investors out there don't have this tech background. So my number one recommendation would be to find this lead investor who is going to deeply understand your work and your technology, and is going to make the other investors form, communicate much more confidently about the technology and perhaps they'll be able to share their technical due diligence with them. Think that's the first part. The second part is also make sure to look at the profile of the investor you're going to talk to and if this person is not technical, make sure you are going to provide a bit of a digestible presentation of the of the technology that's for entrepreneurs and maybe for investors that want to go into into deep tech. Don't invest in tech just for the sake of deep tech. I mean, as you said earlier, it sometimes looks like science fiction, so it's very cool. But at the same time, I mean, customers are not going to buy Texas Tech. So unit economics once again, is very critical. You've probably heard about plenty of these companies that are sucking co2 directly out of the atmosphere. The issue with some of these is that it's not economically viable. I want to share the name but I've read an article from one of them, in which I've set up a system to get your co2 from the atmosphere. The cost of this plant is $15 million and if you just do the calculation, though, is 1.4 billion cows on the planet. So just to offset and capture the co2 emissions from all of these cows is going to cost us 20 quadrillion dollars per year, not billion, not trillion, quadrillion and I will let you do the math. It's only 5% of the global carbon emissions. So this doesn't make sense. So I think for investors, three important things to focus on are the white sheet economics process solutions.

DP: So how do you ensure the investments in the deep tech space are gonna pay off in a financial sense that you're gonna have positive outcomes as an investor?

LM: It's always back to all kinds of key investment criteria. It's looking at disruptive effects. So technologies that are completely novel that have higher performances, that also have superior unit and environmental economics. Because ultimately, again, if you find technologies that are going to solve critical needs for the customers with a large total addressable market, being at goodbye to cheaper is going to be a no brainer, focused enough to adopt the solutions. And of course, if the environmental impact is big, the environmental impact is going to be much bigger. So from my perspective, we are not an Impact Fund. We are looking at companies that are going to be financially successful and we believe that because the impact on the environment is going to be much bigger.

DP: What about measuring the outcomes in terms of building a more planet positive industry and in kind of building and making these companies build us get us more net positive nature? Are you tracking that in some way? How do you kind of keep that in mind as you're going along and growing with these companies?

LM: Yeah, we are tracking that and what's so awesome about this investment is again, it's not some kind of ESG where we're talking about how much paper you use this year. I mean, how many times did you take a flight because the inherent nature of these companies is to be planet positive. So again, I look at these steelmaking companies which are completely eliminating carbon as soon as I start selling iron, that's going to have a huge impact on the planet. And so that's what we are tracking. We're tracking the number of products that they sell. We have another company called Ascend Elements, which is focused on lithium ion battery recycling and manufacturing for electric vehicles. They've just built the largest lithium ion battery recycling facility in North America. And so this year we're starting to sell and so just tracking how much batteries are being recycled and how many cathodes are going to sell is a way to understand the impact of those companies.

DP: Is there anything else that you look for or any kind of indicators that a deep tech investment could be a potentially successful one?

LM: So again, looking at the novelty of the IP sort of freedom to operate, for example, for the technology's abilities is really important. Unit economics, as you said, is one critical aspect of it. But it's not only about again, deep tech for the sake of deep tech. I mean, we took risk customers with industry experience to understand okay, are these technologies really solving a critical need. and is this big enough? Because with venture capital, we are looking at bigger returns. So we want this total addressable market to be at least worth a billion dollars. And so if we see that it's kind of novelty in terms of the technology, some freedom to operate, strong addressable markets, that the unit economics are good, it's something very enticing price and then use the team is amazing with deep industry expertise, typically checking all of our boxes, and that's when we start doing due diligence on the .

DP: Is there a particular area of deep tech that you personally are most excited about or focused on as an investor?

LM: So biotech because it's close to my heart because I mean, novel fermentation techniques for example, can help with certain issues of producing proteins while reducing methane emissions. Microbiology for example, for agriculture invested in a company called Printer Bio using extremophile bacteria in high salinity lakes and high altitude lakes, to help plants go into the polluted zone and resist climate change. Very excited about this one. And beyond the biotech industries, I'm so close to our health because I spent several years in the chemical industry and that chemistry can solve lots of issues related to energy and education. We invested in a company called noon energy, co2. And basically co2 is abundant. It's extremely cheap so their battery can be 10x cheaper compared to lithium ion batteries, and can store energy for long duration, meaning one hundred hours and more. And with this type of technology, that's when you can start unlocking 24 hours, seven days a week, 365 days a year energy.

DP: It's amazing. I always love hearing about the companies you're investing in because it is technology to get really excited about and I think that people in general are kind of like, waiting for the new innovations that are going to solve climate change, just waiting and waiting and kind of getting more and more anxious. So it's always exciting to hear that there are companies out there that do have solutions. And you know, it makes you hopeful that it may just be a matter of time until you know things start to click and we do start to kind of send things back in the right direction. So I love to hear about those kinds of companies. What would you say is the most important piece of advice that you've ever received, either maybe in your early career as a scientist or now in your career as an investor?

LM: So this one again, not sure we should keep it because I've never really had a mentor. I mean, being a woman in this industry is not always easy. And I've received advice actually, that was not very productive. People always talk about mentors and you have to find a mentor to kind of evolve your career and I think you don't necessarily have to have a mentor. I mean, you work with people that can be very helpful to you and give you advice and you can learn from that experience from the perspective of the world. And I think you can also trust your intuition. And that's what I've done. My entire career trusting my intuition. I had a vision to be in the VC industry. Many people told me “you will never manage to get there. It takes a very long time to become a partner in the VC industry.” And I was like, “Okay, I'm still going to try, let's try, there is nothing to lose.” And so I think you can still succeed and have a successful career by trusting you and trusting your own intuition.

DP: That's awesome. I love that answer because I think it's totally true. You're not everyone has the inherent connections in their life, or the ability to get in the room with the people that would be their ideal mentors. And so it's awesome to hear a success story and I think sticking to your intuition has worked out really well for you. So that sounds awesome. And, you know, I also kind of want to double back a little bit to the last question, sort of talking about your transition into becoming a VC. How did you make that transition from working in research to becoming a VC? What was that like? Or you know, how did you flip the switch from researcher to investor?

LM: From pure technology to business? It happened gradually. The first time I heard about VC was in my job in a startup company in the UK where I was a microbiologist working on this new biological water treatment system. And of course, the startup was raising money. And that's when I realized, okay, this is actually an excellent tool to build these companies to bring those deep technologies to the market much faster. And so that's why I started getting interested in it. After that I got a business degree, joined the chemical industry, started getting involved with m&a while still being in research. And I started kind of working on the creation of deep tech companies. And of course when you create a deep tech company, you need to raise money. So I started raising money for those companies. And at some point I kind of caused the bridge and went on the other side of the table and started investing in companies. So it was just something kind of gradually happened during my career.

DP: What advice would you have for young women out there who might want to get involved in VC? Obviously, it's a very male dominated industry. And I'm sure you face some challenges in that regard. What do you guys do? You have two young women who want to get into investing but maybe intimidated by the male dominated nature of it.

LM: We need more women in the VC industry, funds that are very diverse with diverse teams. At One is one of them, we have two women on the team. So find those VCs that focus on and have diversity in mind when they hire people. And I think more and more people are talking about it. So even traditional VCs where most of the partners are asking males and start to understand that we need more women, we need more diversity, because diversity is helping people make better investments and helping funds invest in diverse companies. So we'll say find those investors who care about diversity. And just try it again. As I was saying earlier, nothing to lose by reaching out to those VCs and by getting into interviews. Worst case you will have learnt something and you'd have built your network and maybe these investors are going to connect you to another VC and at some point be able to go into the industry.

DP: And what about working with deep tech companies gives you optimism about the future. Obviously you have a lot of insight into the state of the world and the state of industries. Are there things that take away from your optimism and then how do you maintain that optimism in your day to day?

LM: Yeah, because I mean, when you hear the news, it's pretty depressing. You have the impression that by the end of the centuries, we will have destroyed the planet or biased diversity will be lost. And just this could happen. This could happen at the same time. I'm very optimistic about the future because of the entrepreneurs that are working on fighting climate change. Working on feeding the planet. We launched At One, that was back in February 2020. So almost three years ago. In just three years, we sourced over 4000 companies. And look, we have a very small team. Initially it was only the three of us. We moved to five now we have six people on the deal making team. So 4000 companies, that's a lot. And every day I'm just more and more optimistic. I get to see all of these entrepreneurs, young people that want to make a difference, that are passionate about nature and well brilliant minds developing those incredible technologies. So we have to speak about the future. I know it's pretty scary when we hear the news, but there is hope and we need to act now and a lot of people are acting now and want to make a big difference.

DP: Really appreciate your attitude about that and really appreciate you joining us on the podcast and look forward to chatting more with you sometime soon.

LM: Thank you.