Climb By VSC: Episode 7

Jay Kapoor: All right, Meera, thank you so much for joining me on Climb by VSC.

Meera Clark: Jay, thanks so much for having me. It's crazy after what five six years I don't even know how long it's been since we've known each other but it's fun to continue having the excuses to collaborate.

JK: I know I feel like it's been many, many different funds that you and I have worked at and now we are finally here able to collaborate on something so quite a journey has been for both of us. Well, let's let's start there, actually. So you've worked and learned from some fantastic investors and funds like obvious and Redpoint and more recently, you've been thinking and writing about climate tech. So where did this interest in climate tech begin and what draws you to the category today?

MC: ​​Yeah, you know, I think it comes down to kind of two primary elements. One is kind of my general excitement or propensity towards the space. The other is kind of the the classic timing question, which can be a little bit harder to answer. But as it relates to my interest, I think it was really instilled in me at a very young age. From an investment perspective, it's a trend I've been monitoring for quite some time. Those maybe kind of only dove in into an earnest more recently, I think, you know, it goes without saying and we could certainly go down the rabbit hole at some other point in time. But clean tech 1.0 was a pretty challenging time for the VC ecosystem. You know, a lot of money was lost. A lot of scars were left and so as I made my move into investing for the first time, they guess what, five years ago, it was very much with this mission driven orientation. My first investing job was actually at Morgan Stanley and investing in women and multicultural founders off balance sheet as part of their accelerator. But while I felt the ESG alignment there within climate, I think the jury was still out in terms of if and when this category would be investable.

JK: I love hearing the clarity that you sort of laid out the push pull side of it because I think that's absolutely true. you recently wrote about the environmental era. You covered some of that thesis here just now. And you also shared a detailed climate SAS market map, in your wonderful newsletter, the content of the conscious consumer. Can you elaborate on some of these sub segments and why you feel confident that there are unicorns to emerge from from each of these categories?

MC: Absolutely. I mean, I think to your point, what we've seen in this wave of climate excitement is that climate is not a sector it is an overarching lens that we apply to almost every single category within the Redpoint portfolio which is both exciting and overwhelming in terms of the number of areas that we can theoretically spend time. I think what's been interesting, kind of before unpacking the various pockets where we see opportunity, but what's been interesting with this wave as you look at kind of the proliferation of climate, unicorns and how quickly they're becoming unicorns versus the last wave is a lot more of today's climate leaders are more software like or marketplace like an orientation. They aren't these heavy, you know, lab bench risks, science projects that require hundreds of millions to build and take you know, several years to even prove out. And so you're actually seeing these companies serve as much better investments for investors, which is exciting because it then lends itself or encourages additional capital to continue to fall into the category. So for me that's really exciting as we think about, you know, whether or not this category is investable, and how our LPs are gonna feel about us deploying, you know, hopefully, you know, a meaningful percentage of the portfolio and to various pockets of the theme.

JK: What really excited me to chat with you right off the jump was talking about the consumer side because, frankly, you're one of the first folks on the show has actually been excited about the consumer opportunity. Actually, it feels like a lot of climate investors. And I include myself to a degree to just given the the mix of companies that I see I think they lean pretty heavy b2b. What I guess gives you optimism about the consumer side of this, like, why do you feel like there is so much opportunity, just talking about the sort of consumer categories?

MC: Yeah. You know, I think for better for worse, so much of investing, following the money and with the IRA being implemented. I do think it is truly a game changer, right. As it relates to the consumer opportunity. I would agree that you know, five years ago, even two years ago, a lot of the consumer opportunities were kept because people weren't willing to pay or from a cost comparison perspective. You really couldn't justify him investing in these sorts of solutions, however, which I guess I alluded to a little bit earlier today, given the fact that it is not only a more delightful experience to go with some of these climate conscious solutions, but it's also a lot cheaper for consumers. To me, that's really the kicker is the cost question cost and convenience, too, is as we kind of think about you know, what is the consumer looking for coming out of COVID? I do think that now is a really special and unique opportunity in terms of shipping priorities for consumers. And they think at the end of the day, you know, investment returns are also dependent on the entry price that you're getting. And so many of these b2b solutions, even pre launch, are getting built up so much. And so I think there is an argument to be made for, you know, making relative value play with some of this consumer exposure, but we'll see how it plays out.

JK: No, I liked that. I mean, some of the uphill battle that consumer companies will always have is around customer acquisition. You know, one would hope that that's made a little bit easier because consumers are so focused on this, they want to have alternatives and if they can find them reasonably priced. So hopefully it should be a little bit of an easier, easier sell, I guess, building on that point. The mirror like some funds are very focused on measuring, you know, kilo watts of energy and kilotons of carbon reduction, and others. I think, focus more towards a directionally positive impact, right to sort of phrase it that way. Where do you lean as an investor and why is that sort of your chosen approach?

MC: Yeah, I would say we lean towards more of a directionally positive impact, which is, you know, it works for us totally get that it doesn't work for everyone. And I think in many ways, it's also dependent right on what your LPs are asking for. I think for us, we think about this climate conversation, it's very much of an evolution we are not going to get to you know, netzero tomorrow. And so as we think about, you know, driving both education engagement and, you know, more meaningful action longer term, we're trying to take steps in the right direction, which can hopefully take us leaps and bounds. And so kind of thinking through, you know, how can we lead to that gradual progression in terms of improvement, I think aligns a little bit more with how we're thinking about the market.

JK: And given that you're investing relatively early, you know, anywhere from first check to sort of, you know, what will sort of say as general early stage, how do you ensure that quality deals find you right, kind of balancing that filter between inbound often sort of cold opportunities, versus taking a very thesis driven you know, outbound approach what what's your process like?

MC: Yeah, I will say I think in many ways, at least for me, climate has been one of the easier areas to find deals and the reason that is, is because the climate communities both on the founder side, but also on the investor side are so strong. Similarly, I think it's a space because it's newer, people are looking for guidance or funds to raise their hand and say, hey, I'm interested. And so I we're not playing that we're there yet, but I would say we are trying to do a more deliberate job of, you know, putting our ideas out there or sharing our learning so that, you know, when an amazing founder is beginning to think through a seed stage raise or what funds are going to be on their radar, you know, our hope and our dream is that red point, you know, can earn their spot on that list. And so we're thinking a lot about, you know, more of the marketing side as well as we continue to build our own brand in the category.

JK: I know you're doing a lot of stuff in wellness and health and now climate. What has surprised you the most?

MC: Oh, that's a good question. Um I would say what has surprised me the most and excited me the most would be a little bit of what I refer to and it's how quickly this space has taken off. Things are moving a lot quicker, so yeah I would say that's probably the biggest surprise on my end.

JK: Yeah. I was actually going to think back to how quickly communities have come around around this idea as well. The number of conferences that are coming up the number of investor networks, investor dinners around climate. I want to believe sort of optimistically, this is not just because it is a great capital opportunity, but also because there are investors that really care about this. What are a few things that you feel early stage companies do really well, when they are raising their round from Redpoint.

MC: Yeah, I would say there's probably three things in my world that I care the most about, or we care the most about, regardless of whether they're b2b or b2c businesses. Whether you're selling to a business or a consumer, you still have customers. And so I think that customer acquisition motion is huge. We want to understand how efficiently you can engage customers, whether they're finding you or you're finding them and what the payback on on that looks like. Also, for us, you know, a lot of what we get excited about at seed rather, is you know, the dream that the founders are saying and what gets us over the line. Let's say it's every day is the fact that they've been able to make that killer tech hire, they've been able to build this really impressive, you know, end to end experience that we think is truly about the business. And so I think that that technical mode is definitely something that's also top of mind, given the fact that this is not simply a marketing exercise. There really is no true differentiation on that factor.

JK: Given the depth of knowledge, sometimes it is needed you know when we're talking about energy or even just the chemical compounds to create a less emissions heavy cement, I find myself like pulling up my old like AP Chemistry books sometimes to understand this stuff. But I’m curious to know, do you have a team internally? Are you digging deep into the science about this? How do you get comfortable with the technical aspects of the diligence given how deep some of the tech is for these companies?

MC: Yeah, thanks. I think about this in a few ways. First and foremost, just to be fully transparent, I would say we take a lot less what's called lab interest for a scientific risk that a lot of other firms do. Let's, you know, call out lower carbon as an, you know, extreme example, that have multiple PhDs on their team or climate scientists on their team. And that is fantastic. And guess what they're going to understand this so much more deeply than us. And if a company is looking for the optimal, you know, seed stage partner, it's probably going to be them versus us and like, that's okay. We want founders to have the best possible partners on their cap table. We think about positioning ourselves not as we understand, you know, the chemical compound of your cement deeper than anyone else. But, you know, we trust the rest of your cap table to you know, advise you on that front, and we're gonna support you on something else. And so I think it's also an exercise and understanding what role you're supposed to play around the table because everyone does not need to do everything. And if you're trying to do everything, you're probably not doing them all well, but understanding kind of like where your sweet spot is is the best scenario for everyone.

JK: Yeah, I'm really glad you said that because that's my biggest advice to founders whenever I'm, you know, what are going to like TechStars Demo Day or speaking to folks is like, take an active role in the formation of your cap table, especially a seed stage because these folks are gonna longest put them to work right and actually, ask them upfront, be transparent with them. Like that's, I think the direction that I want the venture industry to go and I and I'm trying to like, you know, encourage founders to demand more. Because, look, fundraising, it sucks. It's such a long process, that sometimes when you get that term sheet, all you want to do is like, okay, whoever is willing to write the check, come on in, let's go, let's shut this thing down so we can get back to building the company. And that's like a little bit sort of nearsighted sometimes, right? Because if you get the right folks around the table now, now you've got your dream team, you've got folks that are really complementing each other versus, you know, everybody trying to pretend they're the science expert. I'm really happy to hear you say that. So I guess we're where we'll close. And this is where I love to close with all of our guests, because so much of the public discourse around climate has become like fatalist to the point of being demotivating. And I like to leave our listeners on a sense of urgency but also hope and optimism. Meera, what is something that gives you a lot of optimism in this ongoing fight against climate change?

MC: One of the things that makes me the most excited about all of the activity that we're seeing is the broader missions ability. To bring consumers together, and to reunite communities that I think have become fractured or a little bit more distant over the course of COVID. Whether it is circular economy, solution, sharing economy solutions, you name it, you're seeing people engage with one another, you know, sharing goods or experiences with one another. I'm looking to work with one another in a way that I think very few other movements have been able to effectively aggregate at this scale. And so for me, it is I hope that as we all talk about, you know where is the soul of our communities gone or what have you, it's my hope that you know, this broader movement will be able to reignite a little bit of that and bring us back to the more community centric orientation of years or decades past.

JK: I think, you know, it's such a great point, because it is all hands on deck when it comes to climate like this is not something that a small subset of us can choose to make a contribution to, and it sort of fixes itself. And so I think the more the more that there are communities and even if it's sort of selfish, right, you want your area to be you know, fire resilient, you want your area to have emergency services when there is a flood or there is a climate disaster. Using that to bring communities together and using that to bring like minded people together, will hopefully only accelerate the active effort that people are taking towards fixing this. I'm grateful that Redpoint is excited about climate. I'm grateful that you're investing in this because I just want to share deals with you and hopefully we get to find one to do together very soon. So, Meera, thank you so much for joining me on Climb by VSC.

MC: Thanks so much for having me! And hopefully we can do it again soon.