Energytech Startups

00:00:00:01 - 00:00:20:12
Unknown
Transform your startup journey with the energy tech nexus. Connect with fellow founders. Access critical resources and be part of a community shaping the future of energy and carbon tech. Your path to building a Thunder Lizard starts here. Learn more at Energy Tech nexus.com. Welcome back to the show. We're here with the managing partner of Ncbi New Climate Ventures.

00:00:20:13 - 00:00:38:18
Unknown
Eric Rubinstein. Glad to have you here. You're one of our first guests, from the very beginning of the show. And we're glad to do a check up and hear how things are going. So, we're here in the middle of Ceraweek, and I guess we got to be a little timely and talk about, how your week has been before we jump into the the meat of the rest of the interview.

00:00:38:18 - 00:01:03:20
Unknown
Well, well, yeah. First, thank you for having me. Delighted to be back. And ceraweek, for those who don't know, is is a big, mostly oil and gas conference that's been happening for many years. Dan Yergin, who wrote The Prize, which is kind of the history of oil and oil markets, huge book and with follow up books, has been putting it on for a long time.

00:01:03:20 - 00:01:34:03
Unknown
And it's, it's evolved over the last number of years, a week where now there's more and more venture funds like ours, and more and more startups that are attending or that are just in the sphere in the orbit of the week, spent a lot of time downtown and, in, in kind of the Midtown area where the AI and, and Greentown Labs is, this week and it's, it's interesting because people are starting to really recognize the importance of new technologies in this broader transition that's happening.

00:01:34:03 - 00:02:07:22
Unknown
That isn't just an energy transition. It's really a new industrial revolution where we are bringing, energy closer to the source in terms of where it's produced. Instead of having to travel across the world with energy, you can be manufacturing that locally. Distributed manufacturing of goods is also something that's been happening more and more kind of tales from Covid and, and also from different, policy changes in the last number of years.

00:02:08:00 - 00:02:42:02
Unknown
But all of these things are starting to be talked about in a real way. And that's happening, this week. And it's kind of been, I guess, you have some turmoil in the Middle East again. That's coming up obviously, as well, but it hasn't been the main focal point of the week, which is really interesting in a week where you have a lot of people that determine policy or writing policy for countries all over the world in town, while on the sidelines, people are talking about, Iran and what's happening there and what the future might be.

00:02:42:04 - 00:03:07:14
Unknown
At the actual week there, there's been a lot more talk about energy security outside of that context. And this distributed manufacturing and things that you can do in order to localize production and make sure that we have the secure supply chains that we need, just as a society, as we continue to grow and develop so that there isn't wasted resource, and that we're using all that resource toward, the betterment of humanity.

00:03:07:20 - 00:03:25:04
Unknown
Yeah. You know, it's interesting to think about. Yeah. 7 or 8 years ago, a lot of the talk was traditional energy. And then the energy transition really emerged on on the scene in that era. And that's how we got the first commitments to to bring Greentown down here. And then I think energy transition really picked up full stream post Covid.

00:03:25:06 - 00:03:42:18
Unknown
And it was clear we didn't know what that meant at the time. We were just like a general energy transition. And now it's you're putting a good point on it. Like there's a clear way. I think, as an ecosystem reviewing it, it's the shortening supply chain. It's not about purely a transition to renewable or something else.

00:03:42:18 - 00:04:06:18
Unknown
It's about how do you create domestic power, how do you manage your domestic, molecules even. Right, because you still have to produce downstream, like plastics and things like that. And there's a big transition to maybe decoupling from the traditional like energy supply chain that is maybe emphasized by what's going on in the Middle East today, is you don't you don't want to be subject to 100 plus oil.

00:04:06:18 - 00:04:36:21
Unknown
Right. Well. And disruptive. Yeah. Yeah, yeah. It's almost you need redundancy in the system I think is part of it. You need reliability. And so what's happening, with energy prices today because of what's happening in the Middle East is kind of, very, very, very much pointing you in a direction, toward how do you have energy security and cheaper prices because you get priced out at some point.

00:04:36:21 - 00:05:13:07
Unknown
There's a high likelihood, I think, that, we're going to get to prices where there's just pure demand destruction. I heard, of oil being sold, at one geography in the world, at $180 a week. Right. Which is never happened before. So you're talking about prices that are. And then granted, this is in one specific location, however, that's going to get broader in terms of this, this upward price pressure, because of there not being oil being produced and moving and where it needs to be moved, with the Strait of Hormuz being down.

00:05:13:09 - 00:05:41:11
Unknown
That said, we've seen this in another context in the last couple of years, and it's the emergence of power demand actually returning. We had 15 years where there was zero growth in power demand effectively. And now in the last couple of years, you've crept up to one and a half, and now something around 2.7% is what's expected now, and that might continue to grow as well in the next couple of years.

00:05:41:11 - 00:06:04:02
Unknown
And one thing that's driving that, and that comes up a lot in the press is data centers. So the emergence of this demand from AI is is material, but it's also a convergence of the electrification that we've been looking at for a number of years now. So EVs for instance, we're known about have been sold for some time now.

00:06:04:03 - 00:06:27:03
Unknown
You know, ten years ago, you know you could see them on the roads, but it really ramped up starting in 2020. And as we look like at where we are now with more and more of these vehicles on the road, I'm just pointing to that because we can see it visually around us more and more. That's that's the electrify everything starting to emerge in a very more like, tangible way.

00:06:27:05 - 00:06:47:23
Unknown
But also we have LED light bulbs that we've replaced, you know, into our light sockets where they weren't there before, replacing light bulbs that we're using more energy. We have, nest devices now helping to control our thermostats. We have all these efficiencies that have been brought in on the market in the last number of years.

00:06:48:01 - 00:07:10:22
Unknown
And now it's hard to accelerate that in a material way. We're just naturally adopting it over time. And we're at a point where every single one of these, these elements that get added is actually adding to electricity demand at this point. Yeah. So it's maybe two parts of a different way there was a whole era of climate and energy in the last, I don't know, was like 15 years where everything was coming in was efficiency.

00:07:11:01 - 00:07:34:17
Unknown
And so when they were coming in, they were not they're not creating demand. And we've kind of we've already installed all the LEDs, we've already installed all the nests. So we're kind of almost returning back to a normal of normal energy growth, compounded by electrify everything compounded by the data centers. And I think I heard maybe it was before Ceraweek data centers are not the number one driver of demand growth is the electrification.

00:07:34:20 - 00:08:01:08
Unknown
They're not only not the number one, they're only five. Number five now number five. Yeah. Yeah. So ahead of that is heating and cooling. Yep. For instance like that takes significant energy. Buildings you can reduce the energy need of a building by 30% to 50% just by improving Hvac systems with new technologies and and doing some other, things to optimize your, the way that you operate.

00:08:01:10 - 00:08:28:14
Unknown
So it's, we're moving in that direction where you will have efficiency gains as well. But what's happening faster is the adoption of more and more of these elements that will be using electricity instead of burning gas or burning oil in order to either heat and cool or, you know, do other things in order to power. And in addition to that, the on shoring, or reshoring, manufacturing.

00:08:28:14 - 00:08:54:22
Unknown
So you have industrial growth happening again. And that's, that's ahead of data centers as well. And then, yes, mobility is, is a very big one as well as we keep adding more and more of these EVs, which in a high energy price environment, meaning when gasoline prices are high and continuing to go higher, I expect we'll see a shift toward more EVs being bought in the coming months.

00:08:55:00 - 00:09:31:19
Unknown
Because people are going to want to hedge their own, you know, exposure to those prices. So as if you're making a decision and all of a sudden gasoline is instead of, well, here in Houston, we were at something like two and $2.50 just an hour, month and a half ago, maybe. And now we're above $3.50 at a lot of gas stations, presumably on our way to for for $4, four and a half dollars, over the coming weeks, if prices continue to go higher here, and as you're filling up and you start seeing that tick higher and higher and higher, I would expect that people start making that decision because we

00:09:31:19 - 00:09:56:08
Unknown
won't see our power prices going up in the same way as we are seeing our gasoline prices, at least in the near term. And that's going to drive inflation overall. Right. And and you know, isn't it like as, as a as we grow as as our GDP growth continues to be positive, and growing pretty fast, that, you know, the demand for electricity also grows the same way because we end up using more resources.

00:09:56:08 - 00:10:17:01
Unknown
And like you're saying, reshoring is also going to put an extra demand. Have have you looked at the data since both of you were talking about, you know, data center is not the number one demand, but has that changed in the past decade or two? Is it has always been buildings and cooling and heating. Oh well it yeah, it certainly wasn't data centers before.

00:10:17:01 - 00:10:42:04
Unknown
Yeah. Data was not. It still is not. But it's just adding look at and just the media and what it feels like that is the number one data centers are the only thing driving power demand. All we see is Microsoft and MIT. And these, these, you know, huge hyperscalers that are building another AI data center and it's costing billions of dollars.

00:10:42:04 - 00:11:14:06
Unknown
I mean, you're talking about I've heard estimates up to $1.5 trillion spent last year, on data centers and ancillary services. So that's a huge number. That's if it's just data center centric. I mean, it's astronomical, but, you don't hear about, what we're hearing about is sales not being as aggressive for EVs. And, you know, you, you hear, that side of the story when it comes to the electrify, everything.

00:11:14:08 - 00:11:43:15
Unknown
But you do hear this hyper growth in data centers and the risk that we're not going to be able to keep up with the power demand, which is real. And we're realistically not going to keep up with the power demand, which is why we need all of the above in order to power these. I mean, the we went from a period of time just a few years ago where all of the hyperscalers would have wanted only renewable power of different varieties in order to power the data centers.

00:11:43:17 - 00:12:10:18
Unknown
And now there is a huge interest, in gas fired power plants, even coal plants that have carbon capture on them. Starting to filter in, not just filtering aggressively move in as power sources. A company highlighted to me that diesel generators are being used in, in a huge volumes as well. The power of the data centers now.

00:12:10:18 - 00:12:42:21
Unknown
And that doesn't get talked about in the press. But when you dig into the annual reports or just, look at the sales from the folks, the producing, the diesel generators, the sales have increased and they've increased and been sold into in the data centers. So it's, it's all of the above that's needed even as we transition to there being these other sources of power like geothermal, which is going to be, I think, a material growth in geothermal power coming up in the in the upcoming years.

00:12:42:23 - 00:13:02:15
Unknown
But there's this gap period where before the technologies are scaled to the point and have been deployed in the in a robust way, where you're still going to need these traditional power sources. And I would assume that there's a likely case where you're still going to need those power sources that are there now, and they may not be replaced.

00:13:02:15 - 00:13:21:16
Unknown
And we're still going to have all those other sources be added to the grid, or behind the meter for that matter. I mean, if you look back two years, three years, all the data centers would have been, planning to be built on grid. And now you have behind the grid power. That's expected to be for roughly 30% of that.

00:13:21:18 - 00:13:41:05
Unknown
And I would expect that number to go way higher as well as we move forward here. So I guess what I'm hearing is like 4 or 5 years ago, it was not so much all of the above. Everyone wanted to talk about decarbonization, renewables, but now we need natural gas to fill some of the gaps, even coal in some instances for data centers and diesel generation.

00:13:41:05 - 00:14:05:15
Unknown
But, how is all of that impacting how you're looking at where are you going to invest going forward, and how is that transitioned from, you know, when you were back here three years ago and you were still more earlier in your fun fun than where you are today? Yeah, that's a great question. We have a lot of technologies in our portfolio today.

00:14:05:15 - 00:14:30:21
Unknown
Well, first off, we have a lot of portfolio companies that we didn't have before. We have over 35 companies in the portfolio. When I was here last time, I would suspect we had seven or maybe ten. So as we've continue to invest, we've invested in things that, maybe ironically, are helping to drive, the future of even those traditional, sources of, of power generation.

00:14:30:23 - 00:15:05:12
Unknown
An example that would be we have, a point source carbon capture company in our portfolio. And if you look back a few years would have expected that technology to be played at steel plants, at cement plants. We were looking at those types of companies as, as the first movers in terms of adopting technology like that, because hard to decarbonize industries like steel and cement need that kind of technology in order to, to continue to operate the way that they operate without some transformational, method to produce those those products, like steel.

00:15:05:14 - 00:15:34:19
Unknown
Fast forward to today and all this demand for data centers and all of a sudden, gas fired power plants and coal plants want that technology. And the reason they want the technology is the data centers are the buyers of the power, and they want that. They want it to be buying clean energy. And in order to create the clean energy off of those platforms, the coal plants and the and the and the gas fired power plants, you you need to put carbon capture on there, and you probably need to, put other systems in as well.

00:15:34:19 - 00:15:55:13
Unknown
So with the carbon capture company, like they should be thriving here going forward. We also were concerned, with how politics have moved in the United States in the last few years, that that sort of technology wouldn't have been of interest in the United States. And would have been of interest and other geographies like Europe and Canada.

00:15:55:15 - 00:16:16:23
Unknown
While it's true that Europe and Canada want those technologies, this emergence of data center growth has really pulled that interest back into the United States. So now, I mean, the next five, six, seven, eight projects that they do well, I think are going to be in the United States and not abroad, because of there's just an abundance of demand locally.

00:16:17:00 - 00:16:50:04
Unknown
So that's just one example. And then I could point to another example, solar. Have a company in our portfolio that makes, advanced solar panels that can produce 50% more, energy than traditional solar panels. And when the subsidies, were removed from the, from the IRA recently, there was concern that there wouldn't be enough customers or that there wouldn't be enough investors interested in technology like that.

00:16:50:06 - 00:17:11:07
Unknown
Data centers have totally changed that narrative as well, where they just need all the power they can get. And if you can produce more power on less land, then why not do that? And it's locally made solar panels as well, which also fits with the current narrative. You don't have to rely on other countries. You can make it here and you can sell it here.

00:17:11:07 - 00:17:32:18
Unknown
And so that supply chain is is made much more efficient. So if you can make the panel today and install it tomorrow, that's better than, making it today and installing it at six weeks from now. Then as an example, you know, that's obviously a very, interesting, exaggerated example in a way, but it's, it's, it's just representative of what's happening today.

00:17:32:20 - 00:18:01:06
Unknown
You need that power. You need it here. You need it now. So go ahead and install it here. Now off of local manufacturing that is producing more power. Just by the inherent, technology that's that's underlying it. Yeah. Because that's an interesting point. Are they thinking about the build out for data centers as more modular, because they can easily install solar and wind and have it going, but a natural gas plant is going to take 4 to 5 years for it to be operational.

00:18:01:06 - 00:18:19:12
Unknown
So how are they thinking about this? And all of them want their data to center to be there first before anybody else. I think a good point to it is that that's a lot of that driver. In the same way you need, you know, the diesel, generators as well, because they're available and you can install them right away.

00:18:19:17 - 00:18:44:09
Unknown
Solar can get installed significantly faster. If there's a 3 to 5 year wait for the next gas fired generator, then you you need something in that interim, and solar paired with batteries, which have come down the cost curve significantly as well, even in the last few years since we last spoke. Yeah. Like that, that you can put all that together in a package that is reliable.

00:18:44:11 - 00:19:12:12
Unknown
And you can also have other sources of power feeding in as well. So while, it might not be prudent to have solar power and batteries be your sole source of power, for it to be in that mix of what's available is very important in a world where you need that energy or would like that energy security, because the sun is an abundant resource and it is there, and we should be using that in addition to other resources that we have.

00:19:12:14 - 00:19:31:05
Unknown
So for for those of us who don't know your friend very well, talk to us about your thesis. How did you start off your fund? And then, yeah, where you are. Has that thesis evolved over the past couple of years? Yeah. No, thanks for that question.

00:19:31:06 - 00:19:59:09
Unknown
For the large part, we come out of the energy industry, like my background was in commodity trading, was very much in the oil and refined products world for 15 years. And that kind of sets the the groundwork for understanding, how long it takes to install infrastructure and bring traditional technology, even traditional commodities, to market, let alone new technologies.

00:19:59:11 - 00:20:29:22
Unknown
So we've always had this underlying theme of you need incumbent technologies, but you also need these additive technologies. But the additive technologies need to get down to a cost parity, or at least have a path to getting down to cost parity with traditional technologies. So similar to on the power side, how, you had, gas power, let's say gas fire power, and then solar comes in and becomes the cheapest form of power on the planet.

00:20:30:00 - 00:20:51:21
Unknown
That wasn't the case. And then it was the case because the technology advanced and then it scaled. So looking at our, like where we came from, we saw that as the narrative new technologies are going to be created, built upon the success of, say, solar power coming to market and being as materially its successes as it has been.

00:20:51:23 - 00:21:20:00
Unknown
And it's going to be across a lot of different industries and a lot of different, commodities or things that we use every day, whether it's, plastics or metals or anything else. So this decarbonization falls out of that. We've been using decarbonization from the beginning as a filter, but we're starting to view it very much as just the derivative of what's happening.

00:21:20:02 - 00:21:56:19
Unknown
We are going to be more efficient because it's going to be cheaper to be more efficient. And using waste to produce power, let's say then. So what's kind of evolved? And as we look at our portfolio now, it's developed all the companies, decarbonize industries and hard to decarbonize industries in some form or fashion. But, there's a overarching theme of a new industrial revolution, which I alluded to before, that is emerged and is representative of 80% of our portfolio addresses a new industrial revolution.

00:21:56:21 - 00:22:28:00
Unknown
And of that, these days, 50% of the portfolio addresses data centers directly or indirectly. So as we look at how that's developed, on a go forward basis, the new industrial revolution is really the thing that we're emphasizing in terms of the way that we're looking at the world, with the derivatives being that it's going to be more efficient technology, that is going to either reduce the need to use power, let's say, or energy, or it's going to increase the, the amount of energy produced.

00:22:28:02 - 00:22:54:04
Unknown
So examples of, of both sides of that would be, technologies that, like software technologies that you can install and paired with hardware can reduce the energy need of a building like that. That's, efficiency gain. On the other side, you have, you can take, waste heat, even low grade waste heat and make power off of that heat.

00:22:54:06 - 00:23:23:13
Unknown
So if you can take that waste product which is being produced at industry all over the world, it's being produced in our phones, in our pockets, even when it heats up in your pocket. Right? Because of the just the compute power that. Imagine if the phone itself and I haven't seen the technology that can do that, so I'd love to hear from it here that has seen this yet, but, imagine your phone even recycling that waste heat so that it's not hot in your pocket.

00:23:23:13 - 00:23:46:10
Unknown
And, a discomfort to actually using that power to help power your phone and extend your battery life like that could even be interesting at that micro level. And I imagine we'll get there. But right now, you can do it off of everything from, a boiler. Yeah. To even at a data center, you can be taking that waste heat and recycling it back as power can.

00:23:46:12 - 00:24:07:12
Unknown
And energy is doing that. If you've looked at them, I've, from Janice, one of our companies. So we definitely. Yeah. Yeah. But yeah, for finding these different ways to heat source. Right? Yeah, yeah. And finding ways to monitor, even, produce chilling. Which is the thing I never even thought of. You can use white waste heat to drive, a compression cycle.

00:24:07:14 - 00:24:36:05
Unknown
And basically, go back and cool your data center. Yeah. They're all these like, creative ways of making your operations more efficient, which is also then decreasing your demand for electricity. That might be more carbon intensive. Right. So it's it's thinking about decarbonization. It's not just renewables that generate electricity, but also, using heat and other sources of energy.

00:24:36:05 - 00:25:07:16
Unknown
I guess that can drive us more power. Yeah, yeah. And beyond that, just there's a lot of waste in the world. And to the extent. Oh, absolutely. Stop wasting whatever that is. Whether it's the heat. Whether it's plastic the, the can be recycled plastic in there. So not, not just recycling but upcycling. If you can take a local waste product and turn it into something locally and that is usable, why not do that?

00:25:07:16 - 00:25:38:23
Unknown
So, we're leading two deals right now. For instance, one of them takes a byproduct of the aluminum making process called red mud, which has not been able to be, used in the sense that you couldn't extract the metals out of it for for production in the past. Now, there's technologies that, can actually take that waste that used to just be remediated, still is today being remediated so that it's, not leaking toxins into the Earth.

00:25:39:01 - 00:26:00:05
Unknown
And instead of remediating it, you can, effectively upcycle it, you can remove those metals from it and then use those metals, the iron and the gallium and the scandium and all these different things to make new computer chips or to make new things. So it's not just recycling in the, in the sense of it goes right back into the process.

00:26:00:07 - 00:26:20:09
Unknown
You can actually take it and use it somewhere else. Or you can take the other company, you can take a flue gas or emissions off of, say, a refinery, and they can turn it into chemicals and they can put it directly into the reactor and do that. So and that's unique because typically you need a carbon capture system and then you need a carbon utilization system.

00:26:20:11 - 00:26:51:01
Unknown
And they're usually two different companies. And it's usually very high CapEx to, to do the carbon capture, if you can do that cheaply, which we're kind of seeing the technologies evolve to the point of like, where is the portfolio then and where is it now? You're starting to see this evolution, even in the market of companies learning from what has happened in the last number of years, seeing what other companies have done and saying, okay, well, why don't we do that instead, which can be one step cheaper, faster, better.

00:26:51:03 - 00:27:20:20
Unknown
So this this theme of the future just being more and more efficient, you can even see it there where it'll be cheaper to do that. Carbon capture. And then now it's not going to work across every single use case. You'll need, you know, multiple different technologies. Still. But there there are areas where you're going to see those sorts of efficiencies where it's just significantly less CapEx, where before it was preventative to put that carbon capture on that refinery, let's say.

00:27:20:22 - 00:28:00:07
Unknown
And now it's not preventative because you have a different technology that can do it for you. And produce value and create chemicals, and that can happen locally. And then all of a sudden you're going beyond what's happening in these disruptive supply chains. When you have disruptions in the Middle East, you can have that local production that creates this energy security where you don't have to worry, that you're not going to get that cargo that's going to take six weeks to get to you because you're producing it locally, and it's coming straight off of your existing asset that before couldn't create that because it used to be a liability.

00:28:00:07 - 00:28:30:14
Unknown
And you can create value and liabilities. Is that are you ready to lead the decarbonization charge? Energy Tech Nexus is your platform for growth, offering unique resources and expertise for energy and carbon tech founders. Join us at energy Tech nexus.com and start building your Thunder Lizard. I'm very curious and I guess change tack a little bit. You know, we're seeing the you're seeing these trends and it sounds like a lot of that's being driven by what you're seeing with your portfolio.

00:28:30:16 - 00:28:45:01
Unknown
How do you how do you put it together? Is this something where you're you're just kind of absorbing it passively and kind of have an moment? Or are you, like, sitting down and like looking at the, like the map or the history of the companies as they're evolving because because obviously the companies are reporting up their progress.

00:28:45:05 - 00:29:07:22
Unknown
Yeah. But like, how did the threads emerge? I'm very curious how that kind of feels, you know, so the threads are you saying across the portfolio. Yeah. And then how do you fill out like if I say you're going to design a portfolio today from scratch, how would you design it. Is that different today than before or is it just the current portfolio and how to navigate with those companies where they're going?

00:29:07:22 - 00:29:31:12
Unknown
Because it may not be where they were? I think it's more the former. You're seeing all these trends. How does that help you think about the next portfolio you want to build? Okay. Yeah. Well, I guess, another change in the last couple of years is, the Ukraine. Yeah. Having been invaded. And then that leading to higher interest rates.

00:29:31:12 - 00:29:49:08
Unknown
So that changed the dynamic in the market as well. The change in that dynamic in the market made it such that companies had to do more with less, because there wasn't as much capital to go around to support the companies in the way it had. And in the year or two prior to that, I think that's true of all private markets.

00:29:49:08 - 00:30:10:00
Unknown
You're seeing it not just in venture capital. You're seeing in real estate, you're seeing it, in private equity. You're seeing it everywhere in private markets. I would expect you'll see it in the credit markets here, as well as the credit funds are starting to struggle, which is becoming a hotter topic in the, in the media these days.

00:30:10:01 - 00:30:38:07
Unknown
But what that's meant is companies today, whether it's existing portfolio companies or new portfolio companies, or if you're developing a portfolio companies that would go in there, they have to do more with less, which means the technology gets further along before you invest or the the companies today that you can invest in at the same stage you would have invested in before, are further along, they're more advanced.

00:30:38:09 - 00:31:03:00
Unknown
So a few years ago, if you invested in a company, you might have expected that they would have a pilot plant, two years from now, because they are raising the money specifically to build that pilot plant. And it takes two years to build that pilot plant. What you're saying today is maybe they raised grant money, or maybe they figured out how to do that, and be further along in their cycle.

00:31:03:00 - 00:31:40:04
Unknown
Like they might have an offtake partner already. They might already have a corporation that has an asset that they've signed an ally with in order to move forward with a project as soon as they had funding for it, or that project might get funded by the corporation. And more often times we're seeing that these days where there's, there's a company that's further along in their commercial stage and in their development, and they're ready to move forward with the pilot, like immediately when they have the money from a seed raise, let's say, and that's very different from before.

00:31:40:04 - 00:32:24:18
Unknown
So in terms of, the technology types, they may not be, well, they, they might be different than before. I'd say the, the bigger thing is where they are in how far along those companies are when we invest more so than, as being very focused on, I guess, finding the next technology that's going to change the world because there's so many technologies we are already looking at and there's technologies we're revisiting from three years ago that three years ago we didn't think were investable at the time, but now we think are investable because those companies or those just the the technology subsector there for that particular technology has come further

00:32:24:18 - 00:32:48:00
Unknown
along in the last few years. Critical Minerals is one of those like the technology, like the one we're investing in now. A few years ago, we may have seen things that were somewhat similar to that, not that exact use case, but, this company is going to have a pilot up and running within the next six months before it might have been, oh, we're going to have something up and running a couple of years from now.

00:32:48:02 - 00:33:07:23
Unknown
And so those companies may not have that pilot up and running yet from a few years ago because they didn't get the funding they were expecting. But do you think that's just because the technology's advanced and they're kind of picking up from all the other advancements that have been made, or is it something different? You know, because to get to that stage where they are more advanced, they are ready to do their pilot tomorrow.

00:33:07:23 - 00:33:30:04
Unknown
They also need capital. So who's who's funding that development? Well, some of it is like that. The company that's, that's taking that red mud. I mean, they just started up nine months ago. Really? So you're talking about something that's only happened recently. So it was a founder market fit, seeing a problem, finding a solution for a problem.

00:33:30:06 - 00:34:00:20
Unknown
And it's a problem that people have looked at companies that were started ten years ago. I've looked at that, but they they couldn't solve it back then. So some of it is just science. Science and advanced finding the way and then and then going from there and the in the market being ready to fund that. But in other cases it is things that have been in lab or have been developed that were struggling to fundraise and now, have gotten far enough along, that they're, they're ready to move forward.

00:34:00:20 - 00:34:19:03
Unknown
So it's some of both. And I can't point to one or the other as, as the driver of what's happening today because it is both. So what I what I heard a lot this week, and he we hear a lot from founders is like, venture capital is broken and it's broken for hard tech and for climate tech.

00:34:19:03 - 00:34:45:11
Unknown
And so how do you how would you answer some of that question, those concerns for them? Because they go to investors. They want that traction. They want you to be closer to commercialization. But they're like, who's going to fund that? And yeah, and before you jump into it, like I think the conversation last few years has been, you know, how do we have this kind of tech stack with blended capital and kind of underlying all this that I think is what you referred to before, Eric, like interest rates are low, like in the 2020s.

00:34:45:11 - 00:35:02:16
Unknown
And so there was a ton of venture capital doesn't mean capital venture capital was working back then because none of those funds necessarily returned or succeeded. And and we've seen a lot of those funds, you know, they spend their money over 3 to 4 years, and a lot of them do not raise a second round, of their own from their own LPs.

00:35:02:16 - 00:35:32:08
Unknown
And so we're in this kind of period where it feels like there's there's just physically less capital. At the early stage. We're seeing the venture capital kind of get deployed into like larger mega rounds with the existing companies. And, and so maybe to put a finer point on like whatnot is saying is you tell me if this is a question is the question is the early stage a void or is it like was the proof point that a lot of those, you know, guys who had money when it was cheap, like, was that still fundamentally broken?

00:35:32:08 - 00:35:52:06
Unknown
Is that a good question? Yeah. I mean, it's just overall I mean we are we are seeing like bigger, bigger deals being done right and less moderated. That's done. And that could just be where we are right now with less capital being available, people being just more cautious of where they where they want to deploy. So there's less being deployed at Pre-Seed and seed stage.

00:35:52:08 - 00:36:20:23
Unknown
But in general, because the way venture capital has developed is funding SaaS companies, digital companies where you can very quickly see the revenue and really see if there's a product market fit. But this is we're talking about product development that takes longer. So a lot of it is that to how do we get capital there, especially in an environment like we are today where you don't have, you know, grants available and capital from the government available to fill those gaps?

00:36:20:23 - 00:36:43:15
Unknown
Yeah, I'd say I think there's two things. One is timelines. Right. You need to be able to develop a company fast enough. Technology, fast enough getting to market fast enough where, there can be a return on investment within, say, a ten year period. So that a venture fund has a shot at actually getting this thing and cycling money back to their investors because that's the model.

00:36:43:17 - 00:37:01:08
Unknown
So there's the timeline that and then there's also the how do you make that timeline happen. Is the money. Right. So you also need the money. So there's the two things I'd say is one is this term of missing middle has become more pronounced in the last couple of years. Yeah I see it in two context.

00:37:01:08 - 00:37:22:10
Unknown
One would be there's like a series B stage where folks say there's kind of a missing middle there where there is enough funding. There you have the later stage companies that are raising, say, $100 million or $400 million, like these huge rounds. And then you have the early stage companies, which are raising to five, ten, 20 million.

00:37:22:12 - 00:37:55:16
Unknown
But when companies need, say, 50 million, it's been really hard to come by in the last couple of years. So there's that, that missing middle, there's the missing middle around spoke the first of a kind plants. So the infrastructure side, you need someone to, fund that first infrastructure. And so and then I'll relate that to two other things, which is, you have moonshots, which presumably will take a long time because of the funding requirements.

00:37:55:16 - 00:38:24:20
Unknown
In order to make that moonshot a reality. So the moonshots, I think, are the ones that are probably struggling or going to struggle more than others because it's really hard to commercialize those as quickly as some of these other technologies. So that would be one side, something that is super capital intensive in order to manufacture and build and scale, is going to struggle more, particularly if you need that proof of concept at that scale before you can really deploy widely.

00:38:24:22 - 00:38:48:07
Unknown
All right. So that'll be one thing. And then on the other side, so that's the moonshots on the one side. On the other side, it's this question of that missing middle and how you solve for that and what companies have found, or at least what we're seeing in our portfolio, which is not across everyone's portfolios necessarily, but I'm seeing more and more of it in the market are companies that, that have their they're spun out of the lab.

00:38:48:07 - 00:39:26:03
Unknown
They they already have proven at the lab level. They've proven at, say, a small pilot level. They have a demonstration up and running of some variety. And that demonstration project, is deemed to be a de-risking the technology enough where instead of building a big commercial plant, which is where I think the whole industry expected companies needed to be, is that, folks, that first of a kind, big commercial plant, was necessary was the perception in order to, really deploy into the market and have corporations and others start building that technology at a meaningful scale.

00:39:26:05 - 00:39:49:16
Unknown
What we're starting to see over the last, 12 to 18 months, I'd say, is this emergence of you have that demonstration up and running, and people are willing companies are willing to sign up to build those plants themselves, that first commercial plant, because they don't need proof at that scale, because they've already proven and de-risk the technology itself.

00:39:49:18 - 00:40:11:06
Unknown
And all you have to do is fund that bigger scale. And yes, there will be bumps along the way. And but, what we're starting to see are big deals happening where hundreds of millions of dollars are being deployed in order to build those projects. Now. And when you're saying that the companies this is the customers, the industrial companies are the ones fronting the money.

00:40:11:06 - 00:40:40:13
Unknown
Now, because I think some of the issue before is a lot of earlier climate tech. The goal was to get it on the grid, or you had to compete with whatever was at the time. $0.04 a kilowatt hour of energy. And and between, you know, what we're seeing with low load growth, the fact that people want to secure their own supply, they want to secure their own power, they want to secure their own, you know, molecules and, they're not necessarily dependent on the, like, legacy infrastructure.

00:40:40:13 - 00:40:59:14
Unknown
Right? They literally want it their back door. And so they're willing to pay a premium. And I it may literally be more profitable. Yes, to build that plant and operate that plant than it is to do it off of traditional, off of the oil and gas industry, let's say. So, I'll give you an example.

00:40:59:16 - 00:41:29:06
Unknown
One of our companies can take in carbon dioxide and produce fuels and waxes. And they have a customer that wants to make waxes, to make lubricants. And in doing so, those lubricants can be more profitable than the lubricants they're currently making, because 60% of that barrel of wax. Let's say, can be used to make that lubricant, these special lubricants versus 3% of the oil barrel.

00:41:29:08 - 00:41:51:07
Unknown
So the amount of processing needed for them to get to the point where they can make the lubricant from oil is more than the amount of processing needed here. So at a big scale, you can actually make more money. Here is is what we're expecting, and what they're expecting, which is why they want to put these projects together.

00:41:51:09 - 00:42:10:14
Unknown
Do you think, this shift is because and there's energy security associated with this on top of that. So you can also make it locally. And so you have less supply risk in terms of supply chain, less resource risk. And in addition to that, you're you're more profitable. Like the whole thing just starts to make more and more and more sense.

00:42:10:14 - 00:42:42:05
Unknown
Thus the idea of this new industrial revolution just overpowering anything that, that, you know, is a, decarbonization theme, because it's just better technology that is going to be more profitable for the customer at the end of the day. And the same way that solar is cheaper power today than, than, you know, other source of power, do you find do you think this is because the industrial customers are getting smarter, they have more ability to find the technology they need.

00:42:42:10 - 00:43:04:08
Unknown
Like is is this a new trend in in how industry adopts technology? That's a good question. I'm not sure on that front, because it still takes a long time for them to evaluate, to make a decision, to do something. I'd like to see those decisions happen a lot faster than than they they are happening. Well, there's I think there's two dimensions on this, right?

00:43:04:08 - 00:43:22:07
Unknown
Some of it is their evaluation time, but it's also the choice to evaluate. Right. And and so I'm curious like are more companies evaluating it because the bar is lower. And and we used to run into the situation where I would pitch people our business and they take a look. They they kick the tires, but they didn't have a way to even decide internally.

00:43:22:07 - 00:43:44:19
Unknown
And so I'm curious if you're, you're seeing those kind of two dimensions shift. Yeah, I think that's that's probably true that like when you start seeing others adopting the new technologies, it makes you more interested in adopting or at least seeing if it makes sense to do that as well. I mean, I related to AI adoption, people that aren't first movers and adopting AI in their lives.

00:43:44:21 - 00:44:11:10
Unknown
I would say I'm one of those that at first which platform is, like even from a very basic level, do you want to use ChatGPT or do you want to use something else as an example? Right. And you're there, are there going to be there's a learning curve to learning one platform versus another platform. You know, waiting to see how that shakes out and then going with whatever platforms seem to be doing the best for different use cases might make sense.

00:44:11:10 - 00:44:32:22
Unknown
So what we're finding, even in in the way that we're operating is in some instances, ChatGPT is better. In some instances, perplexity is better. You know, different things for different use cases. But there's a learning curve to get there. And so we're building like I'm building personally off of other people's learnings in order to do that, in order to fuel my adoption.

00:44:33:00 - 00:44:48:01
Unknown
I think corporations are doing the same thing where they see what others are doing and they say, okay, well, all right, now I got all that looks like the best way. Why don't I go that way? Good luck seeing everyone try it these ways. And that's the path that works best for me. So I think there is an element of that.

00:44:48:01 - 00:45:14:19
Unknown
I think you're right. But I think in addition to that you have technologies that are just further along that are ready to at least have certain types of first movers adopt them. And I think though we'll see a second wave of this when the bigger and bigger, bigger companies are going to be adopting those technologies after, say, they're these first use cases in market, and then you're going to really see the scaling accelerate in the same way that solar now is.

00:45:14:19 - 00:45:38:11
Unknown
It's agnostic to who's deploying it. Because it's such a fungible technology. I guess in that way everyone understands solar or. Yes, or but there's many solar developers now. And in the early days there, there may have only been one solar developer trying at first. Right. So I think as we move forward, you'll see that adoption really happening in a different way than is happening now.

00:45:38:13 - 00:46:05:06
Unknown
And it's no different than what we've seen with other technologies and the, you know, arc of, of mankind. And to talk to us about, now where you are today and, you know, you're going to be raising your second fund soon at some point and, you know, where are you on that journey? Where do you think we are compared to where you were when you raised your first fund and where your LPs are and what they want to see?

00:46:05:08 - 00:46:29:00
Unknown
Oh that's interesting. LPs want to see returns. Yeah. So that hasn't changed. Yeah. And they want to see recycling and money back to them. And that hasn't changed. The, the thing that, that also is happening with, with at least our LPs is we do have some investors who are more strategic in nature. They own actual assets.

00:46:29:00 - 00:46:54:17
Unknown
And, they want to find technologies that will fit with their business or their assets. So we've been working with them over the last number of years and showing them different technologies, and they've been evaluating those alongside us, in order to figure out for themselves what technologies would work for them and what they want to adopt and what they want to invest in.

00:46:54:19 - 00:47:23:19
Unknown
Going forward, I think it's a lot of the same from all of those perspectives. I think it's just, and I think that, you know, as, we've learned over time, and brought investors along with us on that journey of understanding different sectors and subsectors and, different business models and how those business models can be improved and evolve.

00:47:23:21 - 00:48:00:18
Unknown
I think people will get comfortable with the way that you've worked with them. It's same with our peers. We've been working with other funds, with other corporations, in order to build rounds or, you know, there's there's a lot of collaboration in this space, which is something I really enjoy and like, and so as, people come to recognize that, you know, what you're doing and you're actually, you know, doing what you said you were going to do, hoping that that translates to, to, you know, being able to continue doing this for a long time and, folks wanting to continue to come back and either new investors come in in

00:48:00:18 - 00:48:22:07
Unknown
the future, their current investors come back and that's, that's those are the kinds of conversations we're starting to have as we're on the front end of this, this journey, toward, toward growth of, of our platform. Do you find, LPs need a lot of education on kind of you have this deep knowledge now and kind of where the market is.

00:48:22:09 - 00:48:45:06
Unknown
And part of the reason they're hiring you because you're doing that, they're not they're not experts. But, how does that, I guess how does it education happen or what? What do you feel like you have to really show them? Is it you're writing an executive summary? I'm just curious, like what the prep work is to go out and raise, a fund to if, when you start thinking about that.

00:48:45:07 - 00:49:15:06
Unknown
Well, the thing I guess the thing we have now is history. You do? Yeah. So. And we can lean on, performance. On the one hand, but also we have now a history of communications that we've provided to our investors that we can lean on and show. Okay. Well, I don't recall the exact number, but we've been putting out quarterly updates and the quarterly updates.

00:49:15:07 - 00:49:54:11
Unknown
The way that we manage it, which is somewhat learned, by what I am or am not saying from funds that I personally am invested in over time is we have we spotlight something in, in every quarterly update. So it might be, a sector that we're looking at. So, maybe not terribly surprising. In our last quarterly update, we did, a whole analysis of data center market and, and the how our technology is mapped to a data center market and technologies that we're looking at within that, that segment.

00:49:54:13 - 00:50:15:12
Unknown
And a lot of these technologies apply to other industries as well. But we use that because it was extremely topical and people are asking us about it. And we are explaining it to them. And that's been a very interesting conversation with not just our investors, our investors, but others, and in the broader community.

00:50:15:14 - 00:50:45:05
Unknown
But we've also done that for heat pumps. We've done that for, solar and solar to say we've done that for, you know, other, for critical minerals. So we, we've already done it for all these different subsectors. And then other times we'll just do an annual review and, and that'll be the spotlight is this is every, you know, a summary of everything that's been happening, and the evolution of things over that period of time.

00:50:45:07 - 00:51:05:23
Unknown
But then we also have our portfolio company updates, and that's becoming more and more interesting because we have more and more portfolio companies in the early days when you have five companies, it's a different update than when you have 35 companies, because there's always something happening with most companies. So, maybe the notes are getting a little bit longer with some of those updates.

00:51:06:01 - 00:51:24:15
Unknown
But yeah, we, we include those communications and then it allows us to be able to show that, potential investors, even as we're, you know, starting to educate them on what we've been doing. If they didn't, maybe they knew us peripherally, but didn't know, you know, as deeply, what we had been doing. And and I found that that's, a good way to get people up to date.

00:51:24:20 - 00:51:46:11
Unknown
Yeah, I saw one of these updates. It's substantial. Like, I think it's like 20 patients, like. Or, 50, but, like, I shoot for somewhere around seven. But but yeah, but I mean, actually the most recent one we did because data centers were such a big topic as we had to kind of separate out the spotlight, because it was a it was a lengthier spotlight on that one.

00:51:46:13 - 00:52:03:22
Unknown
Yeah. It's like, yeah, when the companies are doing a lot, they take up, you know, a lot of space and you got to communicate that. And then the spotlights. Yeah. But I get a lot of good, feedback on on that because there are funds like I'm invested in funds that I haven't seen a, an update in a year or two even.

00:52:04:00 - 00:52:38:03
Unknown
Are they still alive and and, you know, like, you know, what's going on, guys, like, I understand the investment period's over, but like, I still want to be informed as to what's happening in the portfolio or in the market and see those evolutions. And it's typically when something happens, like an election where all of a sudden you get, you know, a flurry of these in your inbox because people are explaining how the, you know, the change in policy and policy is going to affect the portfolio, but maybe you haven't heard from them in a year prior to that.

00:52:38:05 - 00:53:04:07
Unknown
So, yeah, I think the quarterly updates are a good practice for fund managers to be in because it it allows you to reflect on what's happening and, and explain it to people that are interested in what's happening, in the portfolio. And then there's the one on one conversations to where, where I find those, different investors of ours at least have, different interests.

00:53:04:09 - 00:53:28:14
Unknown
Some are interested in software. Some are interested in maybe fintech. Like, within their, some of them are interested in, carbon utilization technology, some are interested in metals. So as you as you get to know better and better your different, investors, you can reach out to them on a very pointed basis and say, hey, I'm seeing this in the market.

00:53:28:14 - 00:54:03:11
Unknown
Like, what do you think? Like you're an expert in this area. What do you think? Like, give us some feedback, so that we can we can learn from you. And in turn, they're learning from us because we're seeing things that they're not seeing. And that's a really nice relationship to have when you can set up that meeting and, spend an hour going through a couple different decks and, learning from, you know, both sides, I feel like something I've struggled with personally since, I don't know, 2018, 2019 is getting the time to sit and think and reflect and like what's going on.

00:54:03:12 - 00:54:25:06
Unknown
And I, you know, doing a show like this, I definitely get to absorb things by diffusion. But it's personally, I find it hard to, to do analysis, if that makes sense, because there's just so, so much evidence all the time. Yeah, yeah. And it's become easier to do analysis and everyone's doing it. Well. Dump dumping, random thoughts into clod is not the answer.

00:54:25:10 - 00:54:47:22
Unknown
But I that's what I rely on. Right? Right. It's a lot of it's helpful and it takes a lot of time. Yeah. I was in I was in a pitch yesterday. Yeah. And the company was pitching, and while they were pitching a first call on Google as maybe one word, and I look something up there and, and it was helpful for, like, me just picking something up quickly that I could, I could, use in the conversation.

00:54:48:00 - 00:55:07:14
Unknown
But then I went to ChatGPT and just wrote, you know, a couple sentences and is like, hey, can you can you do that? It's affectively. You're saying, do this analysis for me. And let's say I would have done that before in an email and sent it to a somewhat like an intern or a junior analyst or something. And maybe three days later I'm getting something back.

00:55:07:14 - 00:55:32:14
Unknown
That is a thoughtful like summary. I mean, within five seconds I had a data table and not only a data table, but a whole write up around like an analysis of that and a questions as to the how the you know, what the next step was. And in that analysis, and that gave me so much to go on in that five seconds that I could talk to the company and show it.

00:55:32:14 - 00:55:51:03
Unknown
I actually showed it to the company. I said, hey, you know, what do you think of this? Like, this is what, like you're telling me this and this says this and and it matches, but it also says these other six things. So explain that to me. And it just enriches the conversation. But it's something that none of us would have been able to do a few years ago.

00:55:51:05 - 00:56:11:21
Unknown
So it's pretty wild the way, you know, technology has changed and saved our time. But does that mean I have time to reflect in the way that you're saying and really like, analyze an entire, you know, segment? As, as we're learning new things. Yeah. You got to carve out the time, right? It's still important, to make sure that you have time to think and.

00:56:11:21 - 00:56:37:10
Unknown
Right. Yeah. And when you're running a business, running a fund, there's a lot of pull on that time. So yeah prioritizing is really important. Yeah. Well yeah. So I still had some. This is all right. We're at an hour, but we can keep going. Let's do one more. One more question for me. You know, I was wondering, you know, this past week, you've probably gotten pitched at a lot.

00:56:37:12 - 00:56:50:22
Unknown
You've seen a lot of companies. What is one thing you wish founders knew before they approached you? Oh. That's interesting.

00:56:51:00 - 00:57:09:20
Unknown
I guess in one, in not one instance. But one thing that founders should focus on is having a, like a one sentence pitch. I've had founders come up and give me their card and say, had like to talk to you. Can we plan a meeting for next week? And I'm like, I don't know who you are. I don't know what your company is.

00:57:09:20 - 00:57:27:02
Unknown
I don't know what you know. I don't know anything. I would, I remember you, I know I don't want to have a meeting next week. I'm sorry. Like like I'll check my calendar is what you say, but it's really. I'm not I'm not going to go look you up because I've had ten people that day also say the same thing.

00:57:27:04 - 00:57:52:01
Unknown
Right. But if there is a founder who comes up and has a really Chris this is what I do. I've looked at your portfolio. I think this is a great fit for these two reasons. That's just a totally different conversation. It may be the same outcome of let me check my calendar. And I don't know that I have time next week or whatever, but it may be, you know, let's let's have a I'm free in an hour.

00:57:52:03 - 00:58:10:01
Unknown
Yeah. Like, are you still going to be here like that? Like let's let's set aside some time then. So I mean, the way they approach people, that's that's not just founders. It's very, you know, the human thing. You got to spark some interest in the other person and why we should have that meeting. Yeah. But like so I haven't been in the founders seat.

00:58:10:05 - 00:58:30:22
Unknown
So I totally get it. Like you should do that. But I will tell you how awkward it is to look at someone's portfolio and then try to guess what the investor's thinking, because I would be, I'll worry. I'll go up and say, I see this pattern. I think this is what you think and then just be very wrong, because obviously, yeah, we're not inside your head and and how to concisely say that in two sentences all at once.

00:58:30:22 - 00:58:47:08
Unknown
I can definitely see how I would get up to you and hand you my card and then just choke on myself. And in terms of trying to explain yourself to you. Yeah. Does that make sense. Yeah. And so leading like with what you, what your technology is. Yeah. And and maybe if there's an interest there that sparks that.

00:58:47:08 - 00:59:14:07
Unknown
Oh and and I've looked at your portfolio and I'm, I'm making this up on the fly. Right. Yeah. But it's the, telling you what you do in a way that is exciting to me is a good starting point. Exactly. Yeah. But, yeah. No, you're right, because, I mean, we don't even have all of our companies on our, like, on our website yet, as an example, because we wait for them to announce it before we announce it, just out of respect and we try and coordinate that.

00:59:14:09 - 00:59:33:02
Unknown
But also, like, just because you see a trend in the portfolio, either it means we're interested in that and we're going to do more of it, or it means we've done all we're going to do of that. We're not going to do any more of it because we're focused in other areas and in the our current case, we're at the very tail end of deploying at a fun one.

00:59:33:02 - 00:59:54:13
Unknown
So there's going to be a lot of things we're not going to be investing in that we already invested in, because we've already invested in it. And we need to round out the portfolio. And it's it is hard to navigate and it's hard to navigate. Going the other way to at what stage as a company. Right. So as an investor, when we're looking at a company online, it may look like they're super advanced.

00:59:54:15 - 01:00:19:17
Unknown
We may assume the valuation is going to be extremely high. But then I found that you can reach out to that company in cold sometimes and find out that they're very affordable and right in your wheelhouse in terms of stage. And but the online presence makes it look like they're so much further ahead, which means they're doing a great job of that public perception in that way and then in that PR marketing.

01:00:19:22 - 01:00:44:12
Unknown
But on the other side, it means that it's really hard for me to figure it out. And you know, the sources that we would use in order to see what valuations are, a lot of the data is either wrong or isn't available. So it's really hard to decipher that. So that's a that's just another thing that's difficult out there even for investors to tease out, is who is appropriate for me of everything out there.

01:00:44:14 - 01:01:09:21
Unknown
Because just because you see a company doesn't mean it. The stealth company might be the one that is further along than the one that's, you know, been out in the public eye. Which is kind of the irony of, of markets, but it's the inefficiency of the information. Around early stage companies. Yeah. So and this gives me a good follow up because I think, you know, I was fundraising in the 20 tens.

01:01:09:21 - 01:01:27:01
Unknown
So it was just a weird time in climate. And I think the we were always, you know, taught like the investor tells you what your valuation is. And, I found if I didn't give a target, of what I wanted the business to be like, I wouldn't get a response. Or people would assume the price is too high.

01:01:27:04 - 01:01:43:04
Unknown
Yeah. And and even today, I don't know what to tell founders like, should, should they go in with a target valuation? And, you know, my standard answer was always we're going to sell a third of the business, right? Which I think is kind of a cop out because, that's that's just like what a typical series deal looks like.

01:01:43:04 - 01:02:07:01
Unknown
But I mean, do you find it helpful when a founder comes in and says, we're like, do they want, if there's a number or there's a range or like, how do you how do you think about that? I'd say it depends. Yeah. But usually prefer when they don't give a number. Okay. I prefer that they say how much they want to raise or have a couple scenarios of what they'd like.

01:02:07:01 - 01:02:31:00
Unknown
And we'd like to raise 5 million in the case that we're doing this. But with 20 million, we can do this. It's more about the use of funds is what I'm hearing. And that's really where and the progress that would be made with that money and how that would accelerate growth or increase the value of the company, because you can raise at a lower valuation, let's say if you're raising 5 million, because of that dilution, is going to be last versus say, 20 million.

01:02:31:01 - 01:03:02:16
Unknown
But, you may not the the uptick in value from the 5 million investment might be significantly more than the uptick in value from a 20 million investment, as an example. So, the investor kind of does have to help determine that valuation in that regard. And then you're subject to the market. If you give a number that's too high, then you may just scare investors away, because I think you're either unrealistic or that you're just not worth that.

01:03:02:21 - 01:03:29:08
Unknown
If you say something to low, like you might be, you know, selling yourself short. So there is this interesting middle that, yeah, that that needs to be raised. It's not a one size fits all, I think, on that front. And then I think if you if you don't give a number upfront of what you're targeting, it's having investor might ask you what valuations you raise that previously or the terms of what you've done in the past.

01:03:29:08 - 01:03:48:18
Unknown
And that start setting a floor or help starting guide toward what expectations might be without you actually as a founder, saying what you're expecting. Because people can infer from that like oh they're going to want something higher than that. Or if it's the case where they haven't made enough progress to justify higher than that, then the investor might make that decision.

01:03:48:18 - 01:04:15:23
Unknown
You know, they're they're worth the same in the case where I mean, founders sometimes find this that, that they raise at a really high valuation and, and that was the market's different now and they need to be at a lower valuation. So like all those cases have happened in the past one, 2 or 3 years. And yeah, you don't want to scare investors off, but you also want to be, you know, realistic and helping draw them in.

01:04:15:23 - 01:04:38:22
Unknown
And if you have a realistic target for your valuation, it's not unfair to just share that. Yeah. But yeah, it's, it's a dance. Yeah. I'm. I got one more question now. All right. I'm curious. I'm starting to see this in software deals. Yes. Where, founders and the board, open, a safe note right after they close around, to take on kind of rolling investment.

01:04:38:22 - 01:05:03:05
Unknown
Oh, interesting. Just give me the face. You're giving me. I'm. I'm guessing you're not seeing that at that much in climate. Like, immediately after, like, just like within a month, you say I'm opening a safe. That's a discount on the next round. 20%. 30%. And in some ways, it's to kind of play off the momentum from earlier round or let people who honestly miss the boat come in, but they're gonna pay a higher price.

01:05:03:07 - 01:05:32:08
Unknown
And I think that works if there's demand for it. Yeah. You don't just open a note without there being investors. The board has to approve it, too. Yeah, yeah. So I think it's if there's oversubscribed rounds and way too much demand for something, then yes, I, I can see that happening. But, just because you need more money is not the, you know, I wouldn't expect that to be successful in that instance where it's like, we just closed this and now you can invest in a discount to the next round because you haven't proven anything.

01:05:32:08 - 01:05:52:05
Unknown
You know, I like you prove something and then you do that typically. Or if you need the money for something, then you know you raise because you need the money for something. If you just raised a round, presumably you don't need that extra money. It's it's nice to have, but not necessarily. So I think you need oversubscribed round where there's, you know, more investment dollars that want to come in.

01:05:52:07 - 01:06:09:05
Unknown
Then you can, absorb in at that time. And then I could see that happening and have seen that happen in the past. But it's not a super prevalent thing out there. From what I see, I think it's more of like the trend of what I, in a generic, company that would last, like 18 to 18 months.

01:06:09:08 - 01:06:27:10
Unknown
Yeah. And, it's it's predicated on the safe note being just broadly accepted. And I think the conventional wisdom was once you raised a price round, you wouldn't do safe notes again. And that's what was surprising to me was, oh, yeah. And there's a lot of whether you want to call it a bridge round or a pre the next round.

01:06:27:10 - 01:06:47:05
Unknown
Yeah. Yeah, there's, there's a lot of those bridge rounds and pre the next rounds that have been happening. But more often than not it's like, why don't you just increase the size of your round and take a little more money in? Because everyone there's a lot of uncertainty in the world. Everyone needs a little bit more money than they think they need.

01:06:47:07 - 01:07:05:11
Unknown
Take it in. But if you have. Yeah. I mean, if you can, instead raise on an uncapped instrument, the valuation isn't set and it's being set off of the future. And if you're you should go in assuming you're going to grow into that and taking that money is, is, I would say, a good thing for a founder to do.

01:07:05:11 - 01:07:34:17
Unknown
But yeah, it's got to be the right circumstances and the investor appetite has to be there. I wouldn't just be raising, for the sake of raising, but yeah, if there's if there's demand for it, like we're in some situations that, there's more demand for the round then than, the round can handle. And the conversation becomes somewhat like that where it's, do we open up, a safe for some other convertible instrument with, with a pre money cap that's higher than the round that we're raising?

01:07:34:19 - 01:07:51:21
Unknown
In order to take in that money and to show that, look, these people committed when the value was here. Yeah, yeah. You know, it's been six months of fundraising. There's been progress during that six months. There's going to be more progress in the next three months. This probably isn't going to close for another three months because of the diligence that you're going to have to put in.

01:07:51:21 - 01:08:17:20
Unknown
But if you want to do that diligence, and you're and you're really excited about this, share that. Like this is this is going to be the new price. Yeah. Some of those conversations are happening. But it is a function of I think the market having improved, where we had two years, where the market had slowed down, and it really felt like it materially picked up and call it September of 2025.

01:08:17:23 - 01:08:40:01
Unknown
Okay. Where there were there was more investor interest rounds where term sheets were being written, rounds were coming together. Like a lot of times we're seeing when a lead term sheet comes in, all of a sudden there's interest in that company and rounds coming together. But it might have taken a year to get that term sheet before. And now some of those term sheets are coming within a few months.

01:08:40:03 - 01:09:04:12
Unknown
So it's kind of the world's improved. So to the point earlier of whether venture is is a broken model, I think is the way it was described, I don't think it's I think the it's an evolving model. But so our public markets, our public markets are broken model like there's significantly less IPOs. Yeah. Companies are staying private longer.

01:09:04:14 - 01:09:18:12
Unknown
I wouldn't say any of these things are broken per se. It's just a they ebb and they flow and we'll see how they evolve over time. Interesting. That's a good way to end it. Yeah. Thank you. Yeah. Thanks for coming in and sharing your thanks for taking the time. Yeah. It's a lot of fun. Look forward to doing again the.