Climb By VSC: Episode 46

Jay Kapoor: Hey folks, welcome back to another episode of Climb by VSC. I'm so thrilled today to be joined by Sarah Applebaum who serves as a partner at Pangea Ventures. Pangea is an advanced materials VC fund that backs companies utilizing the latest breakthroughs in material science, chemistry, and biology to solve many of society's most pressing issues. Naturally, a lot of these have been advancements that fit our preferred conversation topic of climate adaptation and climate innovation. Sara brings almost a decade of VC and company-building experience to the team at Pangea, and she has cultivated expertise in building teams, scaling early-stage ventures, and building the capital stacks for those companies as well. She's also an active mentor to many early-stage entrepreneurs. So, I want to start by saying thank you so much for joining me on Climb, Sarah.

Sarah Applebaum: Yeah. Jay, thanks so much for having me on the show.

JK: Well, I'm excited to chat with you on a host of topics, especially because we haven't really dove deep into this topic of material science investing and advanced materials investing. But before we get to that, for our listeners unfamiliar with Pangea, tell us about the origins of the fund, stage focus, check size, all that good stuff. And then also how you came to this work as a hard tech and advanced materials investor.

SA: Absolutely. So Pangea, for those who aren't familiar, is a 20-plus year, hard tech-focused venture capital fund founded in 2000-2001 and we invest in companies leveraging advancements in materials chemistry, biology, and biochemistry. Why these types of technology solutions you might ask well, we're very solution-oriented and believe that some of the world's most pressing and fundamental challenges like atmospheric decarbonisation, for example, need to be solved with science based hard tech solutions. And we want to be solving big important problems at pingy. So our areas of focus at the fund are climate solutions broadly which encompasses industrial decarbonisation technologies around energy transition, green chemistry, green materials and circular economy, food and water systems, so decarbonizing food production, alternative proteins, water treatment and industrial efficiencies related to water use and reuse. And of course, human health is directly impacted by the environment in which we live, whether that's air pollution, extreme heat, changing climate, water quality, and so we're also investing in human health and well being and technologies that help improve patient outcomes while reducing cost of care delivery. We are a Series A investor, so we look to invest in companies where the rubber has really started to hit the road when it comes to commercial traction. So the technology is proven. It left the lab and was demonstrated in the field with at least one strong reference customer. And so the primary proceeds is to build and scale the commercial side of the business as opposed to, you know, continuing to invest in fundamental scientific discovery. So our typical check size is in the $3M to $6M range, though we have a little bit of flexibility there. Always keep reserves for follow on, you know, we want to be long-term partners, with the founders and the management teams we work with. And geographically, we're investing in companies with operations in North America, so Canada and the United States

JK: Lots of stuff to unpack there so I guess we're gonna start; talking about, you know, this idea of Series A, as it pertains to companies at the stage right, looking through your portfolio obviously saw the overlap with what people would traditionally think of as like biotechnology investments, and then obviously, you know, climate investments that are working at the molecular level or they're working at biochemistry level. What are the stages really? I mean at this stage and maybe compare and contrast them to like a Series A in traditional venture versus what a Series A it looks like, when you're talking about material sciences?

SA: Great question, Jay. I think there's one other distinction that we need to layer on here; what does this series look like? You know, 2019 and 2023 vs. accelerated hype capital deployment cycle, from 2020 through to, I don't know mid to late 2022. Because you know, we were seeing companies 2021, raising $20, $30 $50 million seed rounds for technologies that were still in the lab, years away from commercialization in areas with a lot of tail winds behind them. Whether it's through you know, changing government regulation, government support drive from industry and you know, two topics come to mind there hydrogen and carbon capture in the climate space. And you know, we might be seeing some of that now still with chat GBT large language models and generative AI but different industries, different applications. And so I think generally speaking, whether you're a software investor, a hard tech or climate investor series A is where you really want us to be seeing evidence of product market fit as the company is advancing commercially at a rate that is equivalent to or starting to surpass the technology development rate where the material the product, the service is in hands of customers, they're getting that feedback pilots have been or are in the process of being completed, where there is a clear path to first revenue or that first revenue has already been realized. And if we think about enterprise software, you might be looking at cost of customer acquisition, monthly recurring revenue or other types of leading indicators, like ARR MRR for hard tech companies is less relevant. But what's more relevant is really understanding what that sales cycle looks like and why is somebody choosing to purchase from this particular startup as opposed to, you know, the incumbents in this space or other new entrants?

JK: Right, so said another way there has to be product market fit, but the signals of product market fit are very different when you're, you know, potentially looking at one or two customer proof points. Really, as I understand it, you're looking to see that this is solving the customer's problem that we know whether those metrics map to some kind of a revenue or a utilization target that's a little more flexible. Absolutely. And I guess talking about some of the various categories that you touched on in sort of the early question, we're talking about what climate tech encompasses, right, that's a lot. It's a lot of things from water filtration to metals and mining to, you know, all these different categories where advanced materials and chemistry kind of fits in. Are there any standard things that you look for across those companies? Or do you really have to take a bespoke approach when you're meeting companies that you know, potentially pitching you for a round?

SA: Great question from an industry or market perspective, Jay, definitely more of a bespoke approach because some industries are regulated if we think about agriculture and crop input. These are areas where you require EPA registration and EPA approvals. And so not unlike investing in medical devices or health care, you need to do field trials and collect data and submit your active ingredient for approval. And so that's a longer sales cycle versus a mining extraction of metals extraction technology, where it's not regulated. In that same way. And so we need to understand the regulatory environment industry tailwinds. But what's ubiquitous, I'd say across all of the companies that we look at that we do due diligence on and ultimately end up in our portfolio are led by strong passionate experienced management teams solving an urgent customer problem. And usually it's a top three or top five problem for their key customers so that it stays on the priority list through, you know, the ups and downs in markets, geopolitical situations, and other business items that come up where there's a clear path to scaling and profitability. So you know, we are looking to invest in companies that don't require $200 million in equity investment in order to build the first of their kind commercial installation, deliver products to customers and look really at capital efficient business models. And then of course, you know, you're on with the business model looks like overall market conditions competition, m&a activity, you know, can this be a venture scale company in terms of enterprise value and, you know, what does a potential liquidity event look like? You know, could this be an m&a target? Or is the business robust enough that it could be a go-public candidate, you know, in five to seven years because we have investors that we're accountable to?

JK: It's a really interesting scene that has emerged with a lot of our conversation on the show Sarah, where we compare and contrast sort of the lessons from clean tech 1.0 into kind of this new wave of climate tech and obviously, the quantum of dollars and climate tech today, LP dollars, especially so much greater than they were even in clean tech. But then obviously, the pitfalls were there, too. There were investments that were made, that today, we would call them infrastructure investments, and say that they may not necessarily have been the best fit for venture as somebody who has been in and around the space for a long time. Are there any lessons that you take from the past wave of what you call broadly climate tech investing that you apply to the deals you look at today?

SA: Absolutely. You know, it's hard to be in venture as a firm for 20 years and not have some lessons learned some of the key lessons that we've embedded in our DNA and incorporated into our investment thesis for this next generation of cleantech investing are around capital efficiency, capital light business models, how much investor capital is required to get to that first meaningful customer revenue. Second is around the stage of investment. There's a lot of non diluted funding research grants, government funding and philanthropic dollars going in to fund early stage scientific research and discovery around a lot of climate related solutions. That's not the right place for closed and 10 year venture funds to really be playing because this can take a very long time. And the third lesson: a lot of companies we've invested in the past or meet with today believe that their first revenue is six to 12 months out, however, that six to 12 months can be a constant over a five year period. The customer is changing and the spec regulations are changing. The technology is slower to adopt and those are the three things that are really core to our investment thesis.

JK: One of the things I was listening for that I maybe didn't pick up on was this idea of measuring impact. We're starting to see it become more of a thing that is a priority for LPS as they're thinking about where they allocate their dollars. We've had funds on that say, Hey, we want to be directionally positive, but we don't measure co2 And we have funds that have very strict co2 reduction requirements with every company. They look at where do you fall on that spectrum in terms of how you evaluate companies, and I guess extrapolate out how should the industry be thinking about investing in and measuring the impact of the companies they invest in?

SA: So two part question, what do we do and what do we think the industry should be doing at large, and thank you so much for raising impact. It didn't come up in our earlier conversation because this is so embedded in our thesis in philosophy at Pangea. All we want to do is invest in back high impact entrepreneurs that are solving big problems related to climate, food, water and human health. And so it's really integral in everything that we do. We do track the impact of our portfolio companies. We've been publishing an annual impact report, which is available on our website and we can hopefully link to it in the description here just published our fifth annual impact report in April of this year. The four metrics that we track across our portfolio are all quantitative tonnes of co2 permanently sequestered or emissions avoided. increase in food production or reduction in food waste, cubic meters of water treated, and then lives impacted for our investments pertaining to human health. And so some of our portfolio companies will touch on multiple metrics here. Others will just touch on why every company that we invest in must have the potential to make a meaningful impact or meaningful contribution towards at least one of these metrics. We don't specify the minimum threshold but what we do look at is what is the magnitude of that impact and how does that translate from a impact multiplier on dollars invested just as you would look at an expected return on capital and a financial multiple if I put in $10 into startup company X, how much will I get out based on revenue projections, financial models, market conditions, all of those things. We also look at the impact multiplier. So for every dollar invested, what is the magnitude of impact based on what the technology is, the company's financial forecasts and how the technology roadmap is looking? And that's really important and what we found through correlating our existing portfolio is, the higher the multiplier on impact, the more successful these companies are, both in terms of customer acquisition and revenue generation, but also in terms of financial returns to their shareholders.

JK: I guess let's extrapolate it out a little bit. Is this self reported by the companies, is this an independent report that the companies generate for you and say hey this third party has kind of blessed our operations, given the work that we've done. Do you measure and verify when you are putting together this impact report?

SA: Absolutely. And to be clear, we are not certifying the impact of our portfolio companies, nor are we conducting, you know, detailed life cycle analysis for our portfolio companies. Many of our portfolio companies are working with third party organizations to conduct life cycle analyses, understand the embodied carbon in their product in their operations. Some of our portfolio companies like carbon capture technologies in the green building materials space are generating, you know, third party verified carbon credits, and so are working with robust partners on the generation verification and monitoring of those carbon credits. And so we pull those inputs and place those into our impact report. And so you know, we have a robust survey and questionnaire that we send out to all of our portfolio companies that feeds into the data in our impact report, just like we have financial reporting requirements. We have impact reporting requirements for all of our portfolio companies, and I will say at the time of our investment, most of the CEOs that we invest in are already starting to think about impact. You know, maybe they've already done a preliminary lifecycle analysis to understand the impact of their operations, or it's something that's in their roadmap over the next 12 to 24 months. It's something their customers are asking for, it's something their employees care about. We can help them work through that process. The second part of your question, Jay was about what should the industry be doing writ large? You know, I don't think we're in a position to prescribe what other groups or folks should be doing, you know, the SEC is talking about regulating, you know, ESG reporting for public markets. I think having some standards is a great place to start and there are groups like impact capital managers of which Pangea is a member, which is working to not only build capacity and educate private markets, investors in the venture capital in sort of lower market private equity, space around impact, but also align on common metrics, vocabulary and methodologies to bring a little bit more consistency to the industry. So there are groups that are working on and we're very supportive of those efforts.

JK: Yeah, and I'll sign on to that piece too, because I think it's always frustrating to me when I see a company that isn't necessarily sort of climate-related pitch to us. You guys, I think have a very specific focus around material sciences. When it comes to us we'll see a range of gamut of companies that are purporting to have some kind of a climate impact. And the question to me is always by what standard, are we measuring it and who's verifying it? So I'll conclude that if somebody can actually come up with the right standards to do it, makes me feel better, right about the companies that we're investing in on that topic of prescribing things to the industry. I know that's not a position you want to take, but I'll go ahead and say that I've been surprised by the number of climate funds that are focused on software first, or software-only companies and solutions may be sort of preaching to the converted, but given your impact on hard tech and you know, hard sciences, can software only work when it comes to climate solutions. What is your feeling on that?

SA: And that's a tough question, Jay. You're putting me on the spot. There is a place for software and software only innovations in climate, whether it's around leveraging advancements in AI for materials discovery, climate modeling, and other sort of advanced compute functions that helps accelerate the innovation window. We also need software tools to assist with carbon credit accounting, monitoring, verification, and sort of what does that marketplace ultimately look like? And it's going to fall into sort of like the FinTech accounting function at some point, but I think we're fooling ourselves. If we believe that software only innovations and software tools and productivity and efficiency enhancements are going to make meaningful short term impacts in atmospheric co2, helping bolster and accelerate the energy transition and support climate science writ large. We've really need hard tech and innovative science solutions to accelerate energy transition, you know, help drive down the cost of green hydrogen or low co2 hydrogen production and improve the cost profile of energy storage and accelerate, you know, the decarbonisation of our atmosphere.

JK: Where are you funding these companies? I guess is the question are you spending time with you know, professors at universities or programs like that where somebody is, you know, discovered something in a lab and has now taken it to commercial scale where it's interesting for you or is there another way that you you find these unique companies?

SA: We definitely have relationships with universities, national labs and other research centers, but those are longer term relationships where we might be tracking a professor's lab or research project for a decade before a company is spun out and is at the right stage for investment by a series a firm that looks like Pangea. Most of the opportunities that we invest in are companies that we've tracked, you know, quite honestly for multiple years. You know, maybe we met the entrepreneur and the founder through an incubator, or you know, a fanatically run accelerator related to clean tech climate solutions. Something in that vein, we also have cultivated really deep relationships with seed and precede investors.

JK: And so a strong referral channel makes a lot of sense. I want to chat with you about PH7, because that was a really interesting company as I was looking across your portfolio. And I understand that you were quite involved in that. So maybe let's start by by telling our listeners, what is PH7 and how you met the company?

SA: Absolutely. So PH7 is a Canadian company based in Vancouver. And what they do is they've developed a low temperature, green chemistry based approach to extract precious metals from a variety of waste streams. What does this mean exactly? They're extracting platinum, palladium, rhodium and other platinum metal groups from industrial catalysts. These could be catalysts that are found in your car in the catalytic converter petrochemical refining catalysts, or materials that are in membranes for fuel cells and electrolyzers. And why is this a climate solution? Why is this important? Well, most of these metals today are extracted using smelters, which is a high temperature, energy intensive process. We put all the material in a furnace at about 2000 degrees centigrade, that takes a lot of energy and generates a lot of carbon dioxide emissions. And you're shipping, you know, quite dense material all over the world in order to do this. And so pH sevens solution is low temperature, low cost doesn't have this large co2 footprint and is quite an elegant solution. And so they're building their first of its kind commercial plant here in the Vancouver area at five tonnes per day, which will be up and running in 2024. And then they have a second generation technology using similar processes for copper extraction from both recycled material and also looking at primary resource extraction. And copper, as you might know, is really important as it is an energy transition metal as we move through increased electrification. We need it for our electric vehicles. We need it for grid transmission and distribution and electronics and other things like that.

JK: And what was it about the team or the product that kind of convinced you that hey, this is a great investment that I need to be a part of?

SA: Yeah, so two things, one, you know, high conviction in Mohammed who's the founder and CEO of the company, he accomplished a tremendous amount with very little in terms of funding in time. You know, when we invested in the company, I think less than $2 million in investor capital had gone into the company and they had an operational pilot plant at 100 kilograms per day of material they were able to process with already deep cultivated relationships with customers. Some of who have also joined this series as CO investors.

JK: Yeah, I mean, ties back to the criteria you were laying out at the top of our conversation, right, which is there's a product in the market where there's customers you can talk to and there's real proof points that this is solving a customer problem. And then obviously, you know the market as you just laid out for us large and continues to stay important. So I was listening to that. I'm like, yeah, check, check, check and check. Sir. That makes a ton of sense. on your end. When you look at I guess these companies as I understand it, and correct me if I'm wrong, you didn't work in materials science, Materials Engineering, how do you evaluate the science behind these things? Or do you work with an independent partner to go out and validate that? And I ask that for more for selfish reasons, because we see really cool companies, where I'm like, Man, I am not smart enough to tell you whether the biochemistry works and how do I go about validating that as part of my diligence process?

SA: Yeah, Jay, you're absolutely right. I do not have advanced chemistry. Or you know, a material science degree. I have Undergraduate Chemistry Biology, which you know, now is also quite dated, like things that we're looking at investing in, like graphene, for example, weren't discovered when I was in school. And so how do we go about doing due diligence and we've got some very deep technical expertise on our team. We have team members who are PhDs in chemistry and material science and members of our team have worked in heavy industries like oil and gas, pulp and paper and mining. And so we really do due diligence. On every opportunity through a team led process. We also rely on our limited partners to some extent, we are backed by some of the world's largest industrial companies, many of whom are subject matter experts in particular areas and so we do consult with them around, maybe less. Does the technology fundamentally work but around market conditions? And is this opportunity that we're looking at truly competitive and compelling with what they have going on as internal research projects? And then thirdly, you know, customer references are really important because we're investing at the commercial stage. The customers that these companies have are largely very sophisticated. It's not, you know, Bob down the road who was buying one unit of x. These are sophisticated fortune 500 No publicly listed companies, industry leaders, and so their technical due diligence process is really robust. as well. And so we always do customer reference calls and it'll we do find occasionally, there's something that we feel like we don't truly understand within our own team or we think there are additional risks around scale up or in the technology roadmap, we will consult with you know, third party, researchers, academics or other consultants to really make sure that we are crossing all the T's dotting all the I's and our technical due diligence,

JK: It makes a lot of sense, especially given the stage that you're coming in at your de risking some of the technology risk through your network. The other thing that always sticks out to me is a kind of business model risk. And I'll describe that as broadly a sales cycle, right how long it takes to get something into deployment to actually get paid for it. Even once it's in deployment, how do you think about taking that sort of business model or sales cycle risk with these companies and what do you do to de risk that on your diligence front.

SA: Jay, it all comes back to the stage of investment both on Yeah, how we do risk from a technology standpoint and a market standpoint. And of course, you can never fully de risk either of those points. But because we're investing at the stage where the technology has already left the lab, there's been sort of multiple magnitudes of scale up from the bench, with product in the hands of customers. The fundamental question of does the technology work has largely been answered? No, there are still questions around you know, can the company hit competitive pricing? Will there be performance degradation as the company scales even further? And of course fast followers in the industry? Will this continue to stay sort of a leading technology solution? Similarly on the business model side, because we're investing in companies that already have secured a first customer and or are in you know, advanced negotiations for those first sales? There's some evidence around what the sales cycle is and what customers will be looking for to do their in house pilots or other validations before becoming a repeatable customer. And so we can understand is this a two year sales process? Is it a six month sales process? And we do a lot of diligence on what the overall sales funnel looks like if there's nobody at the top of the funnel and we know it's a two year sales process. The company is going to really struggle to not only generate consistent revenue over the next several years, but to grow and so we diligence the existing customers, also the sales funnel and want to make sure we really understand the market dynamics. Is there a regulatory change that's accelerating customer adoption or a need to sort of make industry changes? Is it geographically constrained? And what are the right stage gates that will accelerate customer adoption, whether it's related to pricing, sales volumes and ability to produce delivery windows, and those types of things.

JK: But it's actually exactly what I was hoping to learn because the thing that I sometimes are challenged with is like how long of a sales cycle is too long, right? Is it nine months? Is it 12 months and there's no hard and fast rules? And so you know, for our founders that are listening to this like, if it takes you 12 months to close a customer, but it's a, you know, 500k ACV contract that may be okay, in your industry. I think it's often about educating the VC sitting across the table from you why you feel like that timescale makes sense. Right? And to your point about looking in the pipeline, seeing where things are at certainly feels like a good way to do diligence and, you know, insofar as the founders that are pitching us are going to help us do that it makes our job a little bit easier. Sarah, why don't we spend a little time on the segment that we'd love to call Hyper hopeful, where we pick a topic, we get the guests opinion, and if there's more to unpack than we will? Does that sound good? Sounds great. Let's do it. So our first topic is green hydrogen. It's being touted as the fuel of the future. It has the potential to decarbonize Heavy Industries and transportation, and yet there are still concerns around production efficiency, and infrastructure requirements for green hydrogen. Is it actually going to be the fuel of the future in the near future? Let's say by 2030. Hype or hopeful?

SA: Ah, this is a tough one. Let's qualify this if we're gonna say fuel of the future is hydrogen, and am I gonna get into my hydrogen powered vehicle in 2030? And drive to the grocery store? No, I think you know, we can all recognize that you know, the industry writ large is moving towards electrification for mobility and transportation. However, hydrogen as a fuel for industrial applications, fleet vehicles, heavy Industries. Absolutely. And you know, 90% of hydrogen produced industrially today is used on site and chemical processes, other industrial processes, food and agriculture to produce fertilizer, and improves ammonia for fertilizer, like it's really, really important. industrially. And if we can reduce the co2 footprint of hydrogen that's used in industry, whether that's through green hydrogen, or you know, whatever you have the rainbow, turquoise, blue, you know, yellow whatever you want to look at, but reducing the co2 footprint of that are pairing hydrogen with point source carbon capture can absolutely have impact, you know, Pangea recently made an investment in the green hydrogen space. And so this is an area that, you know, we have, you know, belief in as an important part of the energy transition.

JK: Yeah, no, I appreciate that and certainly something that we're hopeful towards in terms of specific use cases, but I hear you maybe, you know, putting 2030 on as my deadline for success was maybe a little aggressive as well. You talked about carbon capture a little bit. This has become kind of a favorite whipping topic on the show, so I'm curious for your thoughts on it too. Obviously, real opportunities. We've seen it work at scale. With a lot of, you know, large funded companies. And yet, some of those customers end up being you know, oil and gas and natural gas companies. I literally just saw an article that talked about might have been Exxon Mobil or Chevron saying, well with, you know, direct air capture, we might be able to continue to stay in business for 60-70 more years, which climate proponents would say probably not a good idea. So carbon capture working at scale, to help us get to net zero is that hype or hopeful?

SA: Hopeful, and it's absolutely required. But on the flip side, we can't continue with business as usual with everything else that we do industrially from a transportation perspective, and there's two pieces to carbon capture, right? There's, you know, carbon capture, whether it's DAC direct air capture or Point Source Capture from, you know, direct generated emissions to remove that from the atmosphere or prevent it from entering the atmosphere. But the second piece, which is, you know, perhaps even more important and where this comment from the energy industry was coming from is what do you do with the co2 once you capture it? Do we pump it underground and hope that it's permanently sequestered? Do we use it for enhanced oil recovery to reduce the co2 intensity of conventional petrochemical products? Do we convert it into fuels, which is perhaps where this comment was coming from to use it for Aviation and Transportation and all those sorts of things and end up with a carbon neutral fuel, perhaps. But if we think about the fuel side of things, it's just creating sort of a more closed loop carbon system. It's not necessarily reducing atmospheric co2 Unless we can find ways to sequester co2 more permanently and you know, one of the areas that we're spending a lot of time looking at and are really excited about is the idea of using nature and biology in particular, to capture atmospheric co2 Whether it's in oceans or in soils, and we are getting close to making an investment in the nature based carbon capture or co2 abatement sector, And so I look forward to being able to share more about that soon.

JK: Yeah, I think it's certainly an interesting category for me. I'm somebody who kind of did a full you know, one ad on this topic. Initially, I was like, Oh my God, why are we not just taking all of that IRA money and giving it right to direct air capture? And then you realize, like, oh, no, most of the customers for these businesses are in the energy industry. And yet, to your point, maybe it's not, you know, adding net new carbon but it's also not necessarily taking it out of cycle. And so certainly something to keep an eye on. I remain hopeful, I think as you do, but today, it's not being used in the way that climate proponents would be too thrilled about. So the last piece I thought we were gonna chat a little bit about the IRA and government involvement at the top of our conversation. We didn't quite get there. So I'll ask it as a hype or hopeful question, IRA Washington government in general as a catalyst for climate innovation, Is it hype, or is it hopeful?

SA: It's hopeful you know, there's two sides to the coin. You know, there's lots of detractors generally on you know, should the government be regulating industries supporting one direction or another picking sides? And I'm not going to comment on that. But if you look at the IRA in the US, you know, the Green Deal in Europe and other government led initiatives where they're providing significant funding, and or non dilutive sort of subsidies for specific industries, the catalyst for private sector spending, innovation, jobs, job creation and retraining are hugely impactful. And so, you know, the IRA in the US has really encouraged a tremendous amount of investment from the private sector spending innovation related to clean tech broadly around grid scale storage, green fuels or low carbon fuels production, Hydrogen, Carbon Capture and more at the risk of being a little bit controversial. I think these types of initiatives and subsidies and efforts need to be paired with a reduction in the subsidies and tax incentives for the industries in which they are trying to overtake so if we're going to subsidize green hydrogen production and clean energy, we should probably reduce some of the other subsidies and tax incentives that we have on the oil and gas industry to just level the playing field a little bit. Similarly, if we want to invest in and support, you know, the cultivation of plant based alternative proteins, you know, should we be reducing some of the subsidies and tax incentives for traditional agriculture? That's, you know, a controversial and challenging opinion perhaps, but, you know, something that I'd love to see as part of the dialogue.

JK: No, I'm sure there's a lot of lobbyists that might hear this topic. And their hair might catch on fire. No, but I'm sorry, you're spot on. We had a guest recently on the show who talked about the idea that dollars that are spent on buying carbon credits might be better spent on local and state political action accomplishing much more that way than buying carbon offsets, potentially. One of the things to me coming from being a general sort of software investor into now spending the majority of my time and climate adaptation is how closely linked a lot of these challenges are to just how the government operates or doesn't operate sometimes. And for VCs who have been so kind of brought into the mindset of moving fast to break things, don't worry about governmental catch up eventually. It just doesn't happen like this. And so there's a level of education, I think, for all of us on, on how we manage interaction with the government if I think they believe like you that overall that involvement is hopeful.

SA: Yeah, and I just want to double click on that for a quick second for a lot of the listeners around government involvement, you know, at the local, municipal and state level and how important that is, and we see it in disaster response. We see it in building codes, and how, you know, little changes in these areas, especially around sort of building codes, procurement, and other things can have really significant impacts on climate adaptation, in particular in terms of, you know, resiliency of the built environment to wildfires, water use and reuse energy efficiency for both heating and cooling and how more efficient systems you know, might be subsidized through rebates or other programs to help reduce the overall burden on the grid.

JK: So your advice is to get involved, right? If you care about these topics, it's not enough to just be working with the companies and the startups that are doing it, but also to be paying attention to your local political movement.

SA: Yes, that would be a great place to start.

JK: Fair enough, we will close where we'd like to close with all of our guests, you know, reflecting on the fact that there is a lot of doom and gloom out there in terms of climate action or the lack of climate action, but we'd like to focus on the good especially as we leave our listeners today. What is one thing that gives you a lot of hope and optimism about this broader fight against climate change?

SA: There are some brilliant scientists and passionate exceptional entrepreneurs that have dedicated their lives and their resources to helping solve some of these problems. We're seeing government's move into this we're seeing you know, big companies and industry you know, move into this and support companies occidental energy just acquired. Direct air capture company carbon engineering for over a billion dollars, and are really putting their resources where their mouth is, is not virtue signaling. And so I'm really encouraged even in what has been a more challenging economic cycle. You know, we're August 2023. That investment is still flowing into this space at all stages.

JK: Yeah, certainly. And I'll echo that the best part of my day is getting to speak to founders. And again, we're a little bit earlier than you because we invested in a seed stage, the best part of my day, speaking to founders and just seeing their enthusiasm, their excitement for what they're building. Why do they feel like it's, you know, going to be the solution of the future? There is no better anecdote for climate anxiety than speaking to, you know, a seed and early stage founder about what they're building. So I'm right there with you. Sarah, thank you so much for joining me on the climb today. I learned a ton I am super excited to keep up with more of the investments that you and Pangea are looking at over the coming future and want to thank you so much for joining me on the show.

SA: Awesome. Thanks for having me. This was a lot of fun.