Climb By VSC: Episode 45

Jay Kapoor: Hey friends, welcome back to another episode of Climb by VSC. I'm so thrilled that you decided to join us today we're speaking with Valerie Shen, who is the partner and Chief Operating Officer of G2 Venture Partners, where Valerie oversees all operational aspects of the firm and fund including fundraising, LP relations, recruiting, HR, all that fun stuff in terms of building a firm into a real company. And Valerie is an amazing background that's very relevant to what we're going to talk about today is prior to business school, she was an analyst at Kleiner Perkins Green Growth Fund, which I know shares a lot of DNA with G2 Venture Partners and has a ton of experience in environmental science and public policy, which is where she did her bachelor's degree, and then later on went on to do her MBA at Stanford. Valerie, I'm just going to start by saying thank you so much for joining us on Climb today.

Valerie Shen: Thank you so much for having me. I'm looking forward to the conversation.

JK: So for our listeners who are not as familiar with G2 Venture Partners. I know I hinted at the sort of shared DNA with Kleiner. But tell us about the green growth origins, the fund, the stage focus check size, as well as how you came to G2 Venture Partners,

VS: G2 Venture Partners, we're a venture and growth firm investing in technology companies at their inflection point to build a sustainable future. And what that means is we're looking at companies that have a product or service that already works and that has paying customers that love that product, and are looking to build that product to a deployment and scale that can really expand beyond where they currently are. The history of the firm is that the general partners came together at Kleiner Perkins running the Green Growth Fund that name GE to kind of comes from the second generation of green growth and when that fun was first started, it was a billion dollar fine to focus just on clean tech 1.0, early stage clean energy investing, right? And then after a couple of years, we realized that investing in the invention of clean energy technology is not necessarily the best fit for venture capital. And so we expanded to the much broader thesis that we invest against today, looking not just at energy, but also transportation, food and ag logistics, manufacturing, retail and E commerce, the future of work, basically anything that has any amount of impact on climate and the physical world and thinking about how you can take all of the technology that's created often for the consumer digital world, apply it to these old school sectors in ways that make them more efficient and also more sustainable.

JK: How did you come to G2 Venture Partners? Give us that journey a little bit.

VS: It was a little bit random, but I think many routes have involved investing or venture jobs. I reached out when I was still in college to one of my current partners, Dan Orose, because I was actually interested in the Goldman Sachs special situations group where he and our other partner Ben Courtland previously worked. They did some of the most early in innovative, clean energy investing. Through that conversation. I stayed in touch with Dan and he had been a mentor for a couple of years, such that what I was looking for my second job out of college, I reached out to him to just ask if you knew of any good opportunities, turns out that they were just in the early stages. of thinking about spinning out of Kleiner Perkins and starting G2. So I joined initially in a very junior analyst role, then went off to business school and decided to come back and rejoin the team as the chief operating officer a couple of years ago.

JK: Yeah, so tell me about the Chief Operating Officer role because I think as a fund manager myself going through the sort of process of setting up a fund having worked at other you know, funds before where all that stuff was done for me those aspects you realize it's actually really interesting to me. So what is the COO actually doing at a, you know, almost billion dollar venture fund?

VS: It's a really interesting role because it's a very “Choose Your Own Adventure” jack of all trades. I personally spend about a quarter of my time on recruiting and people and HR processes. Ultimately, a lot of what makes a venture fund awesome is the people, another quarter of the time is fundraising and LP relations. So both talking to new LPs and then also making sure that our existing LPs are getting a good experience. And all of the reporting and answers to their questions. Another third of it is the finance operations compliance back office. So basically managing all of our service providers and ensuring that the firm can run well as a company and business right regardless of what your company does. You have to have all of these back office functions. And then I would say my final quarter is just being the person that handles new things as they arise. And this runs from our impact report and creating that whole impact reporting process which has become a much more formalized process in the last couple of years. The marketing and PR aspects, other random things as they arise, like where are we going to put our office? And what are we going to do with our work from home policies when COVID hits? So being someone that can help my partners do whatever they need so that they can focus on the investing side.

JK: Yeah, so that's a real sort of firefighting type role, right? You never know where the next challenge is going to arise makes me nostalgic for the sort of first year of our fund as we were still getting all of these questions set up. But it's great to know that as you grow the fund, there's somebody who focuses on those things. Talking about your background, a little bit more. Valerie, you know, one of the things that really stood out to me, especially as we see many, many more climate funds, and climate focus investors and build their presence, is that you actually come to this world with a deep background in environmental science, both in your undergraduate and graduate studies. Are there any key learnings or key people from those programs and lessons that you take from them that have helped you shape the direction of what you're building a G2 today?

VS: I think there's so many lessons from it. Maybe a couple that I'll mention. I think the first is just how interdisciplinary this whole climate problem is. I studied environmental science and public policy and undergrad, which was itself an interdisciplinary major that allowed me to mix the science with the business and the politics. And I think those three general subsets of the economy and infrastructure all need to come together. And so having that realization early on, and a network across the different sectors was very important to me. And one of the other learnings is just the amount of uncertainty and moving pieces that are required for us to make any sort of solution enduring and widespread, because the scale at which we need to solve climate is just so astronomical, that any of the solutions that we're coming up with in order to make a big dent often also have to be quite large. And so understanding that and the complications has been pretty impactful. In terms of people, my thesis advisor and undergrad, a professor named Dan Schrag has been a great mentor over the years. He's one of the people that inspired me to really focus on this and my undergrad career and he's been a mentor since he I think embodies a lot of what I say in terms of this being an interdisciplinary problem. In addition to being a professor and researching a number of different interesting topics. He also has worked in politics and policy. He directs many interdisciplinary centers at Harvard, and just generally is bringing people together and convening in a way that was very helpful as I was learning about the space and continues to be really helpful as a resource, whatever we engage, and he's always very helpful.

JK: It's so important to have folks that are looking at sort of both the academic side and then also how they actually translate into real viable solutions. David McColl from the Stanford climate ventures group there, and some of the cool work that he's doing. And that's definitely been an interesting area for me as I find more and more of these universities. You know, here in New York at Columbia University, they've set up a climate school. It's starting to become a real area of focus and study and where a lot of energy and students are going, so I'm happy to hear that you're bringing your many years of experience to it. You mentioned LP relations and LP support as being part of your role. You know, I saw a really interesting stat actually, just last week, where 2023 is on track to finish at a six year low for LP dollars is I guess, the way they phrased it. You mentioned this as being part of your purview. So I'm curious for kind of what you're hearing in the LP landscape, selfishly as a as a fund manager who wants to raise a fund to one day, what are LPS saying about this sort of climate venture ecosystem, the demand for climate funds and what do you think those LPs are actually looking for from those funds?

VS: I completely believe the stats that you mentioned about being at a six year low for LP dollars. I think that we are lucky because to the extent that LPs are still making new commitments with managers that are already in their portfolio, climate tends to be one of the core topics where they're looking to expand and grow. And this seems to be of a lot of interest for a couple of reasons. I think one is whether you're representing an endowment and foundation or a family office or a corporation, there are just so many other stakeholders that are involved with those pools of LP capital that really care about climate and sustainability. The students the next generation are taking over family offices read the corporations that realize they have to meet sustainability targets. So there's a ton of interest in this space that has been very helpful. I think the other key movement is, and this has been a gradual transition over the last couple of years. A strong acceptance industry wide that climate and having positive climate impact. Does not mean taking concessionary economic or financial returns. So moving away from the mindset that climate and sustainability means impact investing, and therefore making less money, but rather viewing climate as a lens for finding great companies that can make a lot of profit while doing good for the world. And then sort of within the climate. Where do we see LPS looking? I think a lot of them have sort of taken the stance that they want to have representation across various different points of the capital stack from the very early stage all the way towards the more late venture early growth stage where we tend to play and then also even through infrastructure and private equity and other larger pools of climate capital. And it's been interesting to watch that dynamic of trying to find different funds that represent those different pieces, also different geographies. And then I think another piece that we're seeing is that many LPs are really looking for teams that have a track record of working together that has seen that first wave of cleantech one boil, and we're able to learn together and design their current funds around those learnings to not repeat the same mistakes.

JK: Yeah, I'm glad you brought up the clean tech 1.0 conversation because it seems to be a topic that comes up on our show often enough, especially when you see the quantum of dollars that's going into the space and you know students of history myself, I think you included would say look, there was a lot of stuff that went well with clean tech 1.0 But yet there were also a lot of venture dollars loss and a lot of people's companies that you know sort of didn't quite hit that mark. Let's talk about clean tech 1.0. Then, as someone who's been tracking this space for a decade, what are the kind of two or three most important lessons you think climate VCs today need to take from both the good and bad that happened in clean tech 1.0?

VS: I'll share two learnings for us here. One is that the invention of new technology is probably not the best fit for venture capital dollars with a traditional 10 year fund life. If you think about where venture thrives, it's when you can take a small amount of dollars and quickly work towards eliminating the biggest existential risks and it is really difficult to predict the timeline and the cost for invention and new technologies. That's where we think funds like Breakthrough Energy ventures that don't necessarily have that tenure fund life can be really powerful. Or you can have government money, a lot of this new inflation Reduction Act money or pools of capital that don't necessarily need to earn a financial return. Those are great places for them to play. For traditional venture capitalists that's looking to invest money and then get it back within the life of a fund. It is difficult to play in that early invention stage. I think the other learning for us is sort of related to that the best place to invest is in a business that already works. And we think of that as a couple of different components. One is you have to have a product or service that already functions. The second is you have to be able to produce that with positive unit economics. So you're not selling dollar bills for 99 cents, right but you are producing it at a price that customers are excited to pay. And then finally you have to have customers that have tried it out. And are willing to say this is great. I want more of it. So I think having that key business working is an important piece for us to look for. If you think about the first wave of clean tech, and some of the biggest winners in that space. Tesla always comes to mind as a great winner right? A big success but if you think about the 20 year history of Tesla, in the first 10 years up until they had a working product. The company took existential risks so many times right there were multiple instances of almost going bankrupt and someone who invested at the very early stages all the way until IPO only made less than 5x on their money. Whereas if you look at the next 10 years, if you invested just on the first day of IPO and held until today, that's 100x on your dollars without having taken much existential risk because you invested at a point that the product already works, right so that we believe is the way to do the best sort of venture style investing in climate tech find a product or service that works and invest with them as they inflect.

JK: As the early stage investor, sort of a follow up from that, right. I'm assuming a lot of the companies that come to you it's sort of that that median Series B stage where you're investing have taken in some venture dollars. What role do you think those early stage investors are playing in the success of this company, pre-wherever they come to G2 Venture Partners? Is there a role for venture capital at that stage or those early stage investors in that stage?

VS: Well, I will say that we very much appreciate the role that you all are playing because it's the only way that there are such a great abundance of companies at the series B, C, D stage that we're able to invest in, so in no way trying to discount that really important job. When we see the companies that are brought to us by early stage investors that we like and trust. They often are much more mature and have processes that are set up and operate in a much cleaner way than a business that perhaps has been bootstrapping on their own and hasn't had that same sort of guidance. So we very much appreciate when they are already on the right track. You aren't just having a great product and a great team.

JK: I think you're saying it the right way as somebody who has been in the venture ecosystem for close to a decade I've seen, especially in 2021 was folks kind of getting away from what seed dollars were meant to do versus what series a dollars versus what preseed was. And obviously well documented that the valuations were out of whack but more importantly it was that to me as a seed investor, talking to customers, even if it's pilot customers has always been a very important part of my process. And you could do that back when seed investing was, hey, we've got some customers, we don't have product market fit yet. Right and when we get to product market fit, that's a great time for us to go to a Series A investor. And instead what we were seeing was pre product pre launch pre customer deals at 30 million post money valuation. And ultimately, by the time they get to you, you're probably better off waiting for whichever ones of those actually are going to develop. Ultimately, I think we passed on many, but not all of your feedback is very much jiving with my experience over the last three years in the market.

VS: I think you brought up an interesting point there too, about the different deal stages, and we think that the names have really blended over the years. They sort of never really reflected in every case, what mattered the most about the company. So we really think of it as we're looking for a company that's at that inflection point. We've done series A's. We've done series F's, we've done things that are of course in between we've invested in companies that have never taken venture dollars before we've come up with unique structures that make sense in the given situation. We don't think it really matters what stage you're at, but it's more about what has this comp company accomplished and what do we think is going to be the trajectory and the years to go.

JK: So I want to talk about this TED talk he did, because I really enjoyed it. We're gonna link it in the show notes so that our listeners can find it. But you talked specifically about decoupling economic growth from emissions, which was an interesting framing in context and then the idea was to create incentives for consumers to adopt climate positive solutions, even if they don't actually care about the climate. Talk to us a little bit about that. And then I'd love to sort of talk about an instance from your portfolio that kind of reflects that ethos.

VS: At the highest level, my belief is that altruism is all good and nice, but it just doesn't scale. If you want to make a big dent on climate. As we talked about earlier, the changes that we need are pretty substantial. You can't just depend on a small group of people making sacrifices in their life. For the sake of the environment. You sort of have two solutions that we probably need. One is we're going to have technologies or products and services that allow people to simultaneously live a better life or spend less money and be doing good for the environment. So coupling their personal incentives with the climate and planetary incentives, or the other solution is to have regulation or some sort of policy that requires us collectively to make those sacrifices for the greater good. If you think more about the individual side, I think the best products are ones that can really improve someone's life. One of our examples is Arcadia. So Arcadia is a digital utility that provides energy bill savings and sustainable energy alternatives, while creating a simpler, more automated customer experience. And what that means for the consumer is in many geographies across the country, you can sign up for our kts community solar platform, and then your electricity needs are going to be aggregated and shipped out to a community solar provider, which means you're going to be paying less than you previously were for your electricity bill. And you're going to be getting solar with it. And it's a billing process that's generally easier to use than your electric utility. And what's great about it is that it's open to so many customers that might not be able to install solar on their roof, either because it doesn't make sense in their specific home or they don't own their home. So it allows a broad swath of Americans, including in places who don't necessarily care about the actual climate, environmental impacts to have a better, cheaper, more sustainable product.

JK: What do you think about customer education, especially when it comes to energy transition companies specifically? I know we all bucket these deals very differently. But within climate, there's sort of so many different categories. Energy Transition is one category that we sort of, you know, try to bucket companies into the utilities process is hard enough to understand today as a renter as a homeowner to then turn around and say, Oh, by the way, actually, you're generating power in addition to the power that you're consuming, and we're offering you offset. Now there's companies that are talking about metering energy based on utilization at different times. To me it feels like there's a fair amount of education that needs to happen is that onus on the company, should that onus be on the utility provider or the customer like how do you really ensure I guess that customers buy in to this new problem given how maybe convoluted the solution could sound initially

VS: Agree that the solution is often complicated. I think the benefit is you don't necessarily need the customer to understand all of the different steps of where their electrons are going and where all the money is trading hands. All you need them to understand is this is the signup process. It only takes a couple of clicks. This is the bill that you will now be getting. You can pay it with your credit card by the way and this is your new bill and it will be for less money than you were previously paying. That's kind of all you need the consumer to understand. And then you can have the broader materials for those who are interested and want to dig in. But I think a key here is decoupling, understanding all of the different steps and all of the different players from the ability to participate and I think what it comes back to again, is if you can offer a real value proposition often in the case of saving money without them having to understand all the different steps you make the adoption a lot easier.

JK: I guess in that same vein, Valerie, does climate change have a PR problem? And I asked that because sometimes when our clips go viral on platforms that we didn't expect it to I see the comments and I'm sure even under this clip, there's going to be some comments where folks are saying, Oh, this is all a hoax and it's all perpetrated in order to you know, tax us more on this that the other you know, you've talked about the inconvenient truth having a significant impact in shaping your perspective. I think we've been waiting 20 years for something like that to come back around where the public really leans into this being a viable solution. Does climate change have a PR problem?

VS: I think that to a certain extent, there is a PR problem. For better or worse. It definitely doesn't have the amount of publicity problems right climate change is talked about more now than probably ever before. And I think that on balance that's positive because it's led to a lot of great people deciding to dedicate their lives to the problem. It's led to many politicians prioritizing this in their platforms. It's just led to more action and more thinking around the space overall. I think the biggest problem though, is that in many situations, climate change has been too interlinked with other often liberal priorities. And that can be anything from income inequality to broader social justice to the lack of safe housing to urban decay. Or whatever other problem of the day, various people have decided to intermingle with climate change and actual core environmental protection. And the reason that I find that problematic is if you are a Republican or just generally right of center, or honestly and many other demographics that are for whatever reason, opposed to the other social justice causes. It is difficult to be a vocal supporter of climate change, and not be then tied in with all of these other topics that you may or may not want to support. And that means that the total number of people who can be strong supporters of climate change solutions are reduced and what I believe is a pretty detrimental way.

JK: The opposite side of that argument would be that they are related, right? I mean, the pipelines are built through First Nation lands or certain housing projects are built in certain areas because of taxation benefits. Guess what you're saying is that they shouldn't be talked about in the same breath, my understanding, kind of the advice to these folks correctly,

VS: As we discussed earlier, climate touches on everything and everyone and everything is interlinked. We have a bit of commentary in the world right now that in order to be supportive of fighting climate change, you must automatically also be a supporter of working on this portfolio of six other issues. And I think that it would be a lot healthier if people could pick and choose what their causes are, and that we don't automatically assume, hey, if you're working in climate tech, you must be supporting a certain presidential candidate or you must be supporting this whole other suite of policies, because then it becomes very binary. Either you're in for all of this, or we don't really want you on our team. And I think that the actual team based nature of it is in some ways detrimental because this should be a problem that everyone's working together to solve and then in the process of solving the climate. change with the right technology, we can be benefiting everyone. So there shouldn't be as much about us versus that mindset as I feel that there currently is.

JK: It's interesting too, because sometimes these stories don't get enough coverage. And there's a fat article that talked about Montana ranchers that realized actually it was more economically beneficial for them. To put up wind farms and to continue ranching. So now they just ranch because, you know, it's kind of what they've been doing and it's fun, but it's actually a loss leader. Where they make their money is on the wind farms on the acreage that they own. They don't want the publicity for it because in the circles they run, they may not be seen as fitting in anymore because of those beliefs. Certainly, I think ties into some of these ideas.

VS: That's a great story. I have to look into it because I love Montana.

JK: It was fascinating for me to read, for sure. And you know, I guess at that point, some of these transitions have happened fewer road bumps than others. I'm specifically thinking about the sort of future mobility thesis that Jeetu has had and I remember or heard you describe it as connected, electric shared autonomous, which of those four boxes do you think as a venture investor has been the hardest to get right? And what innovations are you looking forward to in that category?

VS: I'm glad that you remember those four words. We definitely think that they're all overlapping, interlinked, but critical to the future of transportation. I think as a venture investor today, perhaps one of the hardest spaces to play is electrification of the transportation sector, specifically because of all of the progress that has already been made. If you think about all of the electric vehicles that are out there, all of the different types of charging infrastructure. We're still very interested in this, but it's probably the most commoditized of those four, and therefore the hardest to find differentiation, the slowest piece for the world as a whole has been autonomy. So I think we are basically there on electric vehicles, right? We have to roll them out to a greater extent. We have to build a charging infrastructure that facilitates it, but the technology already exists. The same is true for sharing vehicles. If you think about the prevalence of Uber and Lyft we can't really imagine a world where that doesn't exist anymore. Right. And the same is true for connected vehicles. We have a company in our portfolio that works on camera telematics. So those pieces are all highly sophisticated and basically work. If you think about autonomy. We think that this is a really interesting space. We made an early bet on Luminar. They make LIDAR for autonomous vehicles, and they're doing very well on track to be rolled out in a lot of different vehicles, but we still don't yet have a fully autonomous vehicle at large scale the way that we have shared or electric vehicles at large scale. So I think that's where a lot of the change and progress is to be seen.

JK: It's interesting too, because when I was looking at those four categories that you mentioned, they all sort of intersect with government and local interests and state interests in different ways. Yes, setting up charging plants is, you know, one part of the problem, but the moment you start talking about autonomous and I just saw that you know, Cruise's recalling part of his fleet because of an accident on that sort of future mobility piece. Is there a move fast and break things way too, to an autonomous future? Or are we going to be tied in with the pace at which local and state governments move on these issues?

VS: I think there's a bit of a move fast but don't break things. way to do it. And an example for autonomy is to first rule out your autonomy in locations where it is a lot safer to have something not work perfectly. So an example would be in a warehouse setting where you have autonomous robots that are moving equipment back and forth, because in that slow speed environment if there's any issue the solution is just stopped moving. It's very easy to program your robot to say, we're moving autonomously 99% of the time. If there's some confusion, just stop moving, and then we'll come and fix it. If you have a truck loading dock where every truck is moving at five miles per hour, the solution can just be to stop. Whereas on the highway you can't just say oh, I'm confused. I've just got to stop in the middle of the highway. You look for environments like that, where you have a larger window or room for error without causing any accidents. I think you can move quickly in those spaces. And then as the equipment gets more sophisticated, roll out to situations where you don't have such an easy loophole to take advantage of whatever you have confusion.

JK: I may sound a little sort of glib in these cases, but I sort of think that the challenge that the government has is they try to get to zero accidents, zero injuries sort of zero. Here in New York, we have this whole concept called Vision Zero. a skeptic, myself might say it is really hard to get to zero accidents in anything, right? I mean, even when we think about manufacturing processes, we have, you know, margins of error. We have six sigma and yet I think when we come to something like this, which is an important part of how we get to electrification of cities, safer cities, better transport of materials and goods, we are almost hamstrung a little bit by the fact that it has to be 99.99999% perfect and the oh point however many zeros 1% that it causes an accident reverberates down a billion dollar projects.

VS: I agree with that. But I think the more fair standard is it has to be better than the status quo. And the status quo is very far from accident free. Yeah. So if you start to have that mindset, then the margin for error should be a lot more than perhaps what the regulators are currently going for.

JK: So speaking a little bit more about the kind of regulatory and political side you've argued about carbon offsets and the fact that they're an inefficient use of time and money specifically that political advocacy might be a better use of those resources. Help us understand that thinking a little bit and then let's sort of talk about it some more.

VS: So I want to first caveat this with I think you're referring to a debate blog series? That was a specific structure that our team came up with so that we could list the best arguments on both sides of certain controversial topics. So more reflection of these are the arguments that exist as opposed to my personal beliefs. I think let me make that argument for you. It's that with carbon offsets, often people are spending money to support projects that either were already going to happen or are not making a substantial dent, in terms of moving us towards a more sustainable world. And on the flip side, we know that in today's political environment, some individual politicians can have a huge impact on passing legislation such as the inflation Reduction Act, or even on a smaller scale, closing down a coal plant in a particular neighborhood, or allowing for a new experimental type of electric or autonomous fleets. And especially in some of those state and local elections. It does not take that much money to influence the outcome of a race or to influence whether or not a particular law or policy gets passed. And if all of the money that is currently being spent on voluntary carbon credits, is instead allocated to this political advocacy, you could potentially have a world where you're moving much faster towards the kinds of regulations and legal frameworks that are needed for us to make real enduring climate change.

JK: Yeah, I know it's one of the challenges of being an early stage investor. Maybe you guys see that your stage as well as how many companies we see that are pitching us some form of carbon accounting, carbon credit transfer, carbon credit marketplace. And the big challenge that I've had in this space, really from the start is the lack of standardization. We just don't have that in these markets. And I'm right there with you. There is no real easy transparent way. For us to actually understand that. These credits are tying back to incrementally positive projects, and not actually freeing up Delta Airlines to pollute further in the name of well, we purchase these credits. I think you're right there is probably more work to be done in terms of changing hearts and minds around this topic, whether it's political advocacy, or lobbying or whatever, but then there is contributing to projects where we don't actually see the outcomes as easily. Yeah, and I think the

VS: The hard piece about this space is that we believe that there are some carbon offset projects that are very real, additional and enduring, right. And we think that the money that's being used to support these projects that wouldn't otherwise exist, are having a real impact that's positive on this climate challenge. But I think the problem is you have to weed through so much in order to find those correct projects. And so we fear that a lot of money is being wasted in the interim. I think that on the standard point, that's almost a separate thing. There's the carbon accounting piece, and then there's the carbon offset piece, right? I think on the carbon accounting piece, it feels very obvious to me that we have to move towards a future similar to GAAP accounting standards, where everyone is measuring and reporting their carbon emissions in a consistent way. It's unreasonable right now that every fund or every player has their own separate data request for their impact report, and that every company has to fill out all of these different templates and track things in their own way and it changes every year. I don't think that the difficulty of the current situation means that we can just stop working on it. I personally think that there has to be some sort of more official governing body that sets some regulations as opposed to letting individual people choose but I think it's actually going to be good to let the free market play out for a couple more years and see what sticks and what seems to work before some powerful force just say this is what everyone has to do,

JK: I’m right there with you Valerie, I think, I think it's important to see how consumers or I guess companies in this case, are actually behaving in the open market before we established some kind of standards, but a version of gaap or something to that degree, it's not going to be perfect right comes back to our conversation of needs to be better than the existing alternative. An existing alternative is kind of a free for all and frankly investable. So I'm right there with you. So let's do hype or hopeful so this is a segment that our listeners are very familiar with. First timer for you, but I know you've heard a few episodes. So we pick a trending topic. We get the guests' opinion on whether it's promising or all hype. So let's talk about AI. AI is being touted as a tool for weather modeling and predicting natural disasters. And while many will believe in its potential, others argue that we're overestimating the capabilities of AI in the face of nature's complexity. I mean, I just think about Lahaina and what happened in Maui just this past week. Is AI's ability to help the world avoid natural disasters hype or ultimately hopeful?.

VS: I think that AI power is very helpful. Specifically on the topic of natural disasters. I think it will help us predict and adapt to natural disasters but not avoid them. Right now the hurricane is going to happen with or without AI. It might be able to tell us this specific group of people needs to leave and this specific group of people needs to do XYZ other things at their home, and you have that predictability and you can adapt and adjust much better. But actually preventing these climate disasters is going to require much more substantive actions in the physical world that AI alone won't be able to solve.

JK: Do you think people trust AI enough to move on those recommendations? Or are we not not there yet?

VS: I think that we're not there yet. People wouldn't trust AI only tools. But I think that human decision making enhanced by AI is already powerful in many situations. And I think it's only going to get better over time.

JK: So we're talking about transportation equity. This was a really interesting theme that emerged as I was sort of researching it, you know, this idea of transportation equity, and increased support for electrified public transit in cities. Is this a hopeful solution for congestion or just political and urban planning hype?

VS: Also very helpful for me on this front. If you look at a lot of cities, especially in Europe, but other parts of the world, they already have much better public transportation infrastructure than we do in the US. There's very many proven cases that we can improve our public transportation beyond what we have today and doing so in an electric and connected way is going to be helpful. I worry about making this too much about transportation equity, and saying that this is you know, for the sake of a specific group of people versus this is just a future that's going to be better for everyone involved. If that's the angle that we can take it I'm very hopeful.

JK: Yeah, I'm right there with you. One of the first investments I made that we didn't even realize was a climate investment at the time was a company called Revel here in New York, where you might have seen, you know, on your last trip here, the mopeds and the Tesla's. And they started as moped sharing. And what it's turned into is urban grid electrification is actually allowing for the largest charging station in North America. This is stuff that the government needs to be doing, but isn't. But really, the better solution would have been if the MTA actually put a train that runs to their home, because we're not there. You know, the free market has to come up with solutions. So the second order externality will be more free or movement of people from areas where there isn't the political will to actually put public transit.

VS: And I think also the idea of what public transit is can change over time. Maybe it is more about these mopeds or shared vehicle sort of structures, and having that hodgepodge of solutions in different parts of the city in different parts of the country could make sense. But I think we're far from there. So all of the experimentation I'm pretty supportive of.

JK: Connected, electric, shared , autonomous, we're on our way. So now we will close on a couple of questions. One is really about this idea of company building. So you're, you know at this series B stage, you've looked at companies, you know, founders that come from different backgrounds at tech and software that are building in the world of energy, mobility, industrials, robotics. Are there common pitfalls that you see outside or founders encounter when they're building in this space? And how do you advise some of those founders?

VS: I think there are a few common pitfalls. Probably the biggest one for people who aren't in the industrial space trying to move in is just understanding the sales cycle and the nuances of selling to more old school industrial players be that electric utilities or auto OEMs and just knowing who to talk to how to talk to them how to pitch your idea in a way that shows that it can be working in collaboration with what already exists, as opposed to trying to fundamentally destroy or change it, and then doing so in a manner that's fast enough for you to build your startup and continue to iterate and do all the other things that you're used to in Silicon Valley. The other piece that we see as being really important is just managing your cash needs for a capital intensive business and making sure that you don't run out of cash before you manage to hit that breakeven or cash flow positive moment is just so important for the company's long term survival.

JK: Yeah, I'm so glad you talked about that. That bit in terms of actually managing cash. One of our previous guests talked about the difference between a first time founder and a repeat founder. And the answer he gave was focus. The more focused you are, the better you manage your capital because you're only allocating it to the things that matter. I've never actually had anybody on the show talk specifically about Capital Management. Leave it to our first partner and COO on the show to to bring that topic up. But I'm all about money management. So yes, yes, Andy. Well, look, ultimately, we're in an environment right now where, you know, capital is constrained, especially at the later stages for climate companies. Listen to our episode with Michael from Wellington on it, or any of the other sort of later stage folks that have joined us on the show. We're seeing some of those trends changing. But right now, we're advising all of our companies to have 18-24 months of runway and that capital management and that focus of where you allocate ultimately you know, stays important. So I know a lot of our listeners are founders themselves at different stages of the building process. That advice should not fall on deaf ears. I guess what I'll say is that this has been such a fantastic and really wide ranging conversation. Oh, we'd love to close with all of our guests on really the same question, which is, you know, there's a lot of doom and gloom out there. In terms of lack of climate action, or just how fast people would love to see things moving. But as somebody who's been in and around the space, would love to focus on the good with you. So what's one thing that gives you hope and optimism about this fight against climate change

VS: All the people that want to work on climate! I know a lot of your guests have talked about that. So I won't belabor it. So maybe a more interesting answer, I think is just how many options there already are in our world, using technology that already exists to make a difference for the climate and sustainability and the environment while also improving your own life or improving the bottom line of the company and just the opportunities that we have by simply applying these new technologies and novel interesting ways. Without having to make huge sacrifices while benefiting the environment.

JK: We only have to look around to see the change already happening. These are economic benefits that are happening all around us. And so I think the win-win is a really great way to present that at value. This has been a really fun conversation with me. I'm so glad that we finally got to meet. And I'm thrilled for folks to hear this conversation. Where can they find more about you and G2 Venture Partners?

VS: So our website is G2vp.com. I'm on LinkedIn and our firm is on Twitter. So happy to share any of those links for the show notes.

JK: Okay, awesome. We'll do that. So thank you, everybody, for tuning into this episode. And Valerie, thank you so much for your time on Climb by VSC today.

VS: Thanks for the invite. It's been great to chat with you.