 Good afternoon and welcome to today's Energy Seminar. I'm delighted and honored to introduce our speaker for today, Sarah Carney, who's the founder and executive director of the Prime Coalition. A great story about what Prime is and how it came to be, which I will not upstage her by giving my version of her story because she's got a great one. I would like to do two things though. I would like to acknowledge our good friend Alicia Seiger for recommending that Sarah come talk. You may remember last year about this time, a little later on the year. Alicia and Tom Heller gave an overview of the sustainable finance initiative here at Stanford, previewing their book, which was actually first released at the conference of parties on the Climate Convention in Glasgow, who said, if you want an even better speaker than me, some of you know Alicia's a very good speaker, you need to get Sarah. And then I did a little bit of research and I do believe not to give the whole story away that this Prime Coalition, which is a big thing in the world of sustainable finance, I actually think Alicia was the first person I heard probably 10 or 15 years ago the word sustainable finance. And if I'm not mistaken, as a student, Sarah came up with the idea of ideas that ultimately became the Prime Coalition and that is something I think that everybody else now calls impact investing at some scale in some comprehensive way. So without further ado, I'm delighted to introduce to you, Sarah Cardin. Thank you so much. Hi everyone, can you hear me all the way in the back? Can you raise your hand if you can give a thumbs up? All right, great. Thank you so much for making time to be here today. I know everyone here has a million other places that you could be. I'm psyched to be here and I'm really grateful to Sarah and John for inviting me. As John said, my name is Sarah Carney. I'm based outside of Boston, Massachusetts, and I'm a lifetime US east coaster. So as soon as I step off the plane in the Bay Area, I immediately feel like an imposter. So thank you in advance for making me feel a sense of belonging among my climate tech people. Prime is a non-profit public charity. Our mission is to mobilize philanthropists toward the market-driven solutions to climate change. And our vision is economic opportunity and a healthy environment for all people. Our mission and vision are what get me out of bed every day and help me make decisions about how to spend my time. So here are the reasons I decided to be with you all this evening. They are in no particular order. It's just a stream of consciousness list that I made during my airplane ride here earlier today. I'm speaking slowly right now to make sure that you'll ask questions about this during Q&A later about any of the things written on this slide. So we have until 5.30 together and this is the agenda that John and Sarah helped me map out. And by the way, this table is the format that we use for every single meeting we host at Prime, internally and externally in case you want to copy it. I highly recommend establishing a norm of appointing a meeting chair and asking that person to send a table around at least an hour before the meeting starts out of respect for everyone's time. Today I'm going to share Prime's origin story first and then I'm going to work my way back to where we are today. I'm going to linger on our values and why those are critically important to our next 10-year strategic plan, which we are in the midst of drafting right now. So I'm going to leave about half the session to Q&A so I can hear the things that you all are most curious about. But that means if you have a question in your mind as I go through my remarks, please write it down. I really want to get there. So let's get started. I met this gentleman, Arunas Chisonis, when I was graduating from high school in Western New York and he was the same age that at that point that I am today. He was the celebrity judge on the selection committee for an award that was for nerdy high school students. Someone anonymously nominated me for it. And he was a business celebrity at the time because his telecom company that he founded in 1998 was I think the second fastest rising technology company in North America in 2003 when he saw my resume through this nerdy high school award. So he asked me to come an intern at Paytech and at the end of my summer internship, he sat me down and he said, Sarah, I think my company is going to go public around the time you graduate from college. My wife and I care very deeply about energy systems and climate issues and we want you to help us set up our private foundation. So you can imagine I'm 18 years old and I said, I do not know what you mean when you say your company is going to go public. I have no idea what you mean when you say energy systems and climate issues and what the heck is a private foundation. So my job that I got in undergrad, I found a private foundation in town and tried to figure out what that was all about. And I really liked Arunas and Pam and in fact Paytech was acquired by a public company in 2006 and they had their family's personal liquidity event which put them in a cash position to form a private foundation and they're amazing. Having the opportunity to work with Arunas, his wife Pam, their four children as my first job out of undergrad was really like the honor of my life. They are risk taking, creative, kind and deeply concerned about climate change. And so in 2006, I thought they were going to say, okay Sarah, here are all the places we want to make grants and I would go and administer those grants. What a fun job. But it was even more fun than that because they gave me a blank sheet of paper and they said what are the most leveraged ways that philanthropy can make a difference to address climate change. And their resources we were giving away about $3-4 million a year and we had an endowment that was managed by Merrill Lynch and this was in 2006. So we didn't have ARPA-E and corporate giving programs were looked very different to universities and so one of the ways that I felt philanthropy could make a really big difference was to find university-based science and engineering research that was going under-funded by government and corporate sources and just give it way more resources than it would otherwise be able to find. And what an incredible job for me at 22. So I got to know this really large community of university-based researchers and I think we had between 30 and 40 PhD and postdoctoral fellows at any given time and we would give them money for the fellowship as well as any equipment and materials that they needed in the lab. And then as those fellows wanted to start to form for-profit companies to carry forward their research ideas out of their non-profit labs they would come back to us knowing that I was representing a self-made technology entrepreneur and that he and his wife and all of their friends that had made money through their telecom company might want to make direct equity investments into these early-stage businesses. So they were looking for advice and equity investment. Together with some of the other telecom colleagues we became some of the most active angel investors at that time in early-stage energy technology startups. It left me with so many questions. I was being paid as a program officer at a private foundation. We were co-investing with traditional venture capital firms into for-profit companies. The money over here was in a private foundation. I was being paid with tax-exempt capital. The money over here did not flow through the foundation. It was being made as direct equity investments into for-profit companies. The venture capital firms that we were co-investing with why were they the least interested in the businesses that could make the biggest difference on the charitable causes that we cared about? Was it appropriate for me being paid with tax-exempt capital to be helping to make these introductions and helping with the diligence on the for-profit equity investments? Certainly of all, we had a private foundation. They paid me as staff. We paid Merrill Lynch to manage the endowment and then we were making direct equity investments. Wasn't there a better way for all of that to work together for this family to advance their charitable goals? So all of those questions led me back to graduate school in 2010 where I was hell-bent on making this brilliant MIT professor my research advisor. People here have a research advisor like this. She was a tough advisor in a good way. She immediately sent me to the Suffolk University Law Library to read as much of the U.S. tax code as possible. And our question together was, are there better financial vehicles for families that see for-profit investing as a critical tool in their toolbox to achieve their charitable goals? Hence, law library. Go and read the tax code. So I remember the day I was sitting on the floor and I came across the program-related investment language in the code. It was exactly what I had been looking for in theory, but I had been running a private foundation for five years and I had never heard of it. So I ultimately wrote my MIT thesis about how program-related investments had been used in the past and proposed their use for friction points all along the innovation and deployment pipeline for climate-related innovation. So imagine that this is September 28th, 2012, and this image is actually one part of two big posters where I got to stand in front and shout talk at anybody that would listen about the fact that there was a way to use charitable dollars to support the most important innovation of our time. It was my experience running the Chessonas Family Foundation that led me to Fiona, and then my research with Fiona, which in turn informed my MIT thesis and this poster that I made for the U.S. Department of Energy poster competition in September of 2012. I won $1,000 in that competition, and that money paid for two months of my groceries and rent, and it ultimately bought me enough time to circle up with the Betsy and Jesse Fink Family Foundation, back with the Chessonas Family Foundation, the Steful Family Foundation, and the Will and Jada Smith Foundation. These were the first four courageous philanthropic partners to what would eventually become Prime Coalition. So I now get chills when I look at this poster, especially this line, not now, but maybe soon. And on Thursday and Friday of last week we hosted Prime's annual investor meeting in Boston, where we had 80 philanthropists in person, and we had another 150 of them on Zoom, and they, along with lots of super smart colleagues, have made this dream come true over the past 10 years. So the key insight that Fiona and I had all those years ago is that there is an acute need for intermediation to lower the educational, operational, and perceived regulatory barriers that prevent any one philanthropist, no matter how much money you might have from deploying meaningful amounts of impact first capital into high impact, high growth companies, projects, or funds that might fight climate change at scale. So we built Prime to serve that purpose to lower the prohibitively high barriers for philanthropists of all shapes and sizes to join us in the market-driven fight against climate change. So this is very oversimplified but as shorthand we tend to talk about the two sides of Prime's intermediation house as money in and money out. On the money outside of the house, Thompson Reuters and PricewaterhouseCoopers used to collect information about clean tech venture capital flows, but they stopped using their clean tech flag altogether after reporting that there were zero dollars of initial investment into early stage climate relevant companies in Q2, Q3, and Q4 of 2016. The tide was all the way out on traditional venture capital supporting clean tech back then, and this was one of two primary reasons that we built Prime's venture capital practice first. The second reason is that we thought we could do some meaningful work at the earliest stages of company formation with relatively small dollar amounts as we grew our community of philanthropic partners over time. So we ran three experiments in impact first venture capital over the past 10 years. This slide shows you those three phases. We called this our original 10-year strategic plan and I'm very joyful to report that the original 10-year strategic plan officially concluded 18 months early last October with our first close of the third fund here, Azola Ventures. But in phase one, the experiment question, as you can imagine, there were very, very, very few investments that had ever been made of this style and so the question was, what are the boundaries of what you're allowed to do with charitable capital? And the way that we did that from 2015 to 2018 is that we would cultivate a docket of companies that had three underwriting criteria. Can this one company hold promise for at least half a gigaton of CO2 equivalent emissions reduction? Do we see a path to commercial scale so that we can imagine that we are a bridge to somewhere as opposed to a bridge to nowhere? And additionality, what are the reasons that this will struggle to raise sufficient financial support without us? Now you can see here those three underwriting criteria withstood the test of time. Those are the three underwriting criteria that applied to phase one, phase two, and phase three. In phase one, again, the question was, what are you allowed to do? What are the boundaries of charitable capital? And so we would bring together just a few philanthropists around one company at a time. And each time it's almost like a Moore's Law of convincing people to do this. The first time it took us like a good nine to twelve months to convince three philanthropists that we were not totally crazy. And then it got shorter and shorter over time. If you want to talk more about the psychology of how we did that, I would love to talk more about that with you. But basically from 2015 to 2018 we supported 10 companies, one company at a time. We mobilized $24 million and we worked with 54 different philanthropic organizations. So as you can imagine, we just learned a whole bunch about how different types of organizations operate and what their interests are, how their processes are different. But our process was not great for the entrepreneurs themselves because they would get to the end of our diligence process and then we'd say woohoo, you did it. Now you get to fundraise with us for nine months. Not great in a startup environment. So in 2018 the next experiment that we ran is called Prime Impact Fund. The question we were experimenting with was can we aggregate a meaningful amount of this type of charitable capital in a blind pool, again at meaningful scale. And so to do a seed fund, the minimum fund size that we could imagine was $20 million. We had no idea if we would be able to get to that amount in a blind pool, but ultimately we raised $52 million and Prime Impact Fund now has made it all the way through its initial investment period. It has 16 portfolio companies and so that market research question of can we do it, not only could we do it but the momentum was way, way more than we could have anticipated in terms of the movement of the catalytic capital community around the concept of impact first investing. And so our third experiment that we're running now is called the Zola Ventures. There the experiment was can we put a sleeve that looks a lot like Prime Impact Fund where its impact first unabashedly concessionary definitely qualifies as charitable. Can we put that right next to under the same fund thesis of what we call a full cycle sleeve which is not charitable so that you can imagine crowding in institutional capital with prudent investor constraints to do transactions that they would never otherwise be able to do. And so there we imagined a $70 million catalytic sleeve alongside a $130 million full cycle sleeve. I'm very happy to announce that we've already closed 206 million. The catalytic sleeve is oversubscribed. The full cycle sleeve is still open but the investment team is actively investing from that fund now so I can talk much more about that. Before I do that fast forwarding to today according to data from clean tech VC two weeks ago although the overall venture capital market was hit with a negative 23% drop in Q3 of this year seed and series A funding and deal count in climate tech more than doubled compared to the first half of 2021. And 2021 was the year when climate tech venture capital hit a peak of 40 billion dollars. Early stage deals are insulated from broader macroeconomic factors for now because of the $20 billion of dry powder in the coffers of actively investing climate focused funds. So all of that movement you remember back in 2014 when we first started the tide was all the way out on traditional venture capital and now the tide has come all the way back in which is wonderful and joyful and makes us look super smart to follow on investment into our companies but all the movements today make the first of a kind project gap very acute so as these early stage solutions supported by us and by many other finance first venture firms graduate from venture capital they hit a wall where any whisper of technology risk prevents them from being able to raise traditional project finance. So again please ask me about our DCI which stands for Early Climate Infrastructure Program during Q&A if you're interested to hear more about what we're going to do about that capital gap but first I want to go back to our money in and money out over simplification because this is where we really get to celebrate. This is where I think what we've done at Prime over the past ten years is astounding. I can't believe it myself. When we started there were less than ten single transactions that used program related investments to support science and engineering in any cause area and today at Prime alone we've completed at least one catalytic capital transaction with more than 250 philanthropic organizations. So one of the things that I'm most proud of is that our community includes 78 first time philanthropic investors that had never used a program related investment or a recoverable grant before and 49 investors that had never done anything to address climate change with their investments or their grants before. So it's critically important to our team that we're building an inclusive community that's open to any type of philanthropist no matter what they might want to give or how much they have to give or where they're based or how new to climate they might be and it feels like we're really achieving that so far. Many of you have probably read or heard about Prime's catalytic investing program and I want to remind us all that Prime's catalytic investments have themselves led us to develop two additional nonprofit programs. All three of these are key to our team continuing to earn and deserve our philanthropic partners trust in the long term. So our impact accountability program shares what we've learned as an impact first investor with other climate investors. We've learned over time that Prime can serve this role because we are both investor and nonprofit which is something that we've learned is really special about what we have going on. We have over 3,000 users of our open source software tool called Crane and we have 200 investment managers that are relying on us to standardize forward emissions measurement through project frame. Our learning and leadership program shares what we've learned at Prime about impact first investing with other catalytic capital asset owners, advisors, and intermediaries. We are asked all the time now to share our lessons learned. People will come to us probably three or four times a month and say I want to be the Prime of XYZ. And so we're teaching our first ever pilot course at MIT in January around the mechanics of catalytic capital intermediation. Please reach out if you want to make a trip to Cambridge. But we're also going to publish a resource library and iterate the course material until it's ready to be recorded as an open source online course to share with anyone anywhere who's interested in deploying catalytic capital either as an asset owner or as an intermediary like Prime. So this is what our key performance indicators look like when they're all rolled up from all three programs. Many outside our walls look at Prime and consider us already successful. I agree these numbers are astounding and they serve as a sign of deep courage and commitment from our philanthropic partners but money in and money out is not in and of itself success. None of these indicators matter if we're not making a dent in global emissions and doing it in a way that centers equity. So we have to contemplate deeply who is benefiting or who might be harmed by our interventions along the way. Because of all of the momentum from our philanthropic partner community we have never had more wind at our backs as we do today at Prime. This is in large part due to the momentum that we're experiencing not only with our own philanthropic partners but as I said there's just this huge tidal wave of interest in the concept of impact first investing among the philanthropy community. Our own board recognizes the momentum and has challenged our team to imagine how we could scale our impact 100 x in the next 10 years. And so before I say more about the next 10 years I just want to recognize this incredible team of people on this photo and they are the ones that are going to be responsible for driving us forward. But this is a photo from our recent staff retreat in June and many of us we recognize we kind of agree with our board but each one of these individuals embodies Prime's values of humility, care, tenacity, abundance, and additionality. And we encourage each other around those values. We question when those values are being put to the test we make space when those values are in tension with each other. For example, and I know this is going to be an important concept for anyone here. How can we scale our impact 100 x on one hand and interrogate the risk of mission driven overwork on the other hand. So the reason this team feels that tension acutely is that we are deeply mission driven people and we alongside our board want to be able to scale our impact in the next 10 years which we view as the decisive decade for our climate. We have many options for how we might do that in the context of our theory of change. And we are making those decisions over the next six months. So to explain more and I promise this is getting toward the end of my remarks I can't wait to get to Q&A. But I wanted to use an extended metaphor pool parties. I tried to make this a nice warm one even as we slide into fall. So before we founded Prime there were a handful of people who might have liked swimming and maybe they knew that catalytic capital pool was a pool that exists but they were looking over the hedges from a distance. And there was no one swimming in the pool to make it a fun place to be. So over Prime's first 10 years we hosted three different summer seasons. As I said before in the first summer we set up 10 tiny kiddie pools where we asked three to six philanthropists to bravely stand ankle deep in each. They didn't know each other and the kiddie pools were not deep enough to get everybody wet. Especially our portfolio company leaders that needed a full depth pool to really swim toward their optimal development plans and go to market strategies. The upside was that there were minimal construction costs for Prime and we could explore the boundaries of what's possible with catalytic capital by asking our guests to dip their toes carefully. And those parties were fun but they were small and they were not inclusive enough. The invitations we sent were pretty janky. So in summer number two we got our act together. This is Prime Impact Fund. We substantiated, designed, constructed a proper swimming pool in a backyard that we fully owned. We didn't know if we could get enough party guests to jump in but we invited everyone we knew from our neighborhood and as soon as a few of our philanthropic partner brave first movers jumped in then the party was really hoppin. That pool all of a sudden felt like a comfortable place for many catalytic investors of all different swimming abilities and we felt like we had good guardrails around the yard to safeguard impact. Even though the pool was in a private backyard it was important to us that it was open to anyone in the community. Democratization of access is important to getting the diversity of perspectives that we all need in the water. Okay in the third summer we built a whole new house next door with its own backyard pool so that we could host a double pool party. Party guests that needed cold water could swim next door and party guests that preferred warm water could swim in Prime's backyard pool. There were even party guests that wanted to swim in both pools. So this mega party encouraged not only those from our block to participate but even those from different neighborhoods that might not otherwise have been able to swim at all or would have considered swimming a fun thing to do. The construction of the fence between the two pools was very complicated but it left us at Prime feeling like we could imagine many future pool parties with all sorts of neighbors as co-hosts in order to serve pool party goers with all different goals. So as we think about Prime's next 10 years how many pools can we construct or parties can we host at any given time. What shape temperature depth and location should those pools take do we need to build the pools ourselves or could we teach many others how to build pools or host parties and how far can we get toward mission by building fences around other people's pools to safeguard impact. To set the metaphor aside our first 10 years focused on one impact hurdle emissions reduction very narrow it focused on one capital gap the earliest stages of company formation and we partnered with one management team which we built in house and then spun out into a Zola management company. So we're now imagining how to expand toward doing more than one thing at once to raise the scale of the climate challenge on one hand and in order to rise to the momentum of catalytic capital movement on the other. We're planning to publish our 2, 5, 10 year plan strategic plan in the first half of 2023. We're going to try our best to preserve our special sauce even as we rise to the urgency and scale of our mission and we're going to keep building hosting and swimming even when it's hard especially when it's hard we hope our philanthropic partners will keep coming back to our pool parties knowing that we are always doing our utmost to put charitable capital to its highest and best use. And then I also want to say one last thing before we open it up to Q&A which is I want to acknowledge that I use this extended metaphor about a party to talk about something that is causing and will cause tremendous harm to many many people. I often get caught in that tension. Myself yearning for joy in order to stay sane sane enough to keep working on this every day over many years. So while at the same time appreciating the seriousness of the moment. So I know you all probably feel that same way not only about climate change but about many of the issues that you all are thinking about and working on. So I just I want to give us permission to have fun as one of our longest standing philanthropic partners always says to me we can hold more than one thing in our minds at a time. I have some great questions. Thanks for presentation. Most of the KPI's listed around engaging philanthropists into catalytic capital or impact testing. You guys don't at least in showing KPI's around the performance of your investments. It's not clear what you guys are measuring there. So are there specific things you mentioned about returns on the investments and submissions that they talk about? Yes. Actually I have some slides on this anticipating your questions so let me go get to those. I almost didn't mention it because there's so much there. Okay. So over our first three programs we've kind of learned that there are five phases that you need to go through methodically in order to launch any new catalytic capital investment program. So you first have to substantiate the need like why do you need charitable capital in that capital gap and characterize what is the capital gap, why can't government, why is government not covering it, why are other private investors not covering it. Once you convince yourself we do that for three thresholds both kind of compliance like does this qualify as charitable optics? Will this look like we're lining the pockets of any follow on investors with charitable capital and conviction? I think that's far and away the highest hurdle for us is convincing ourselves that it's a good use of time and resources. Once we believe that there's a capital gap that needs to be addressed this way we move on to designing. So that's like what are all of the corporate form options that you could use to step into the gap that you've just substantiated. You pick the one that has the most strengths, the least weaknesses, and then you move into constructing so that's when you actually engage attorneys to draft legal documents. After you've done that and probably in partnership with investment managers or investment expertise only then do you move into fundraising. Once you've raised enough money then you can move into implementation. In our case because we are working on venture capital funds we usually have to wait until first close which is when you get to like a minimum fund size to proceed with the thesis. The reason I say all of this and talk about the five phases is there are impact elements on the money outside of the house embedded in each one of these not the least of which is implementation of the program itself. So substantiating is the beginning of what you're asking about. It's like doing a really rigorous job to characterize why charitable capital is needed. In the construction of the legal documents there are so many structural ways that we've actually built this into the actual legal documents differently than had been done before and so both in the underwriting criteria we have that impact hurdle. Additionality is one of the underwriting criteria in the fund formation documents is where we codify our investment managers carried interest is gated by accomplishment of climate impact milestones. We made a governing committee that is related to investments proceeding that has to kind of do interrogate how the diligence was done on both impact and additionality. So I just want to kind of say that I think a lot of the art of this is actually in the design and construction periods not only in the implementation but that said once we're in implementation mode then of course the diligence around both the effects of impact which for us is emissions reduction and the co-benefits and co-risks of impact that are not in our underwriting criteria huge part of our diligence process. As I said it's gating to an investment proceeding and then after an investment is made we do so much around tracking, monitoring, reporting. We do that both kind of day to day in our investment managers governance of portfolio companies. We also do bi-annual reporting to our investors. We have impact sections on each company in the portfolio that we report back and then every five years we get a third party impact audit. I think really importantly and there's a lot of detail that goes into this and very few funds do this but if you're ever interviewing to work on an investment management team you should ask like how are your managers evaluated based on the actions that they've taken toward impact. Ours at exit have this third party governing committee that will evaluate the actions that they've taken both to steer companies toward positive emissions impact to steer companies away from harmful emissions impact and to steer companies away from unintended social consequences. So those are just like some of the things. That's such a good question. Hi, Holmes Hamon. Glad to see you and congratulations on all the success. I hope that you might mention two things that might seem Stanford related. One is the historic role that you played in rewriting the U.S. Treasury rules for what constitutes a program related investment. In other words you helped change the course of U.S. financial history in this part of the sector by writing public comments that then were integrated in the agency's rulemaking that made this field legal and I wanted to put a flag over it because there's another moment like that right now in U.S. history where there's so many new rules being promulgated. What a question. Not a question statement? Compliment maybe? Well I want you to claim victory there because it's such a high impact start of the story. Prime wouldn't exist without that intersectional work. There's so much intersectional work here too right on both the money inside which is what you're talking about and the money outside which is a big moment right now with the inflation reduction act. You know government allocation and policy decision is just an integral part of everything that we do if we're doing anything related to civic infrastructure. Look I'm like this is me struggling to take a victory lap but when I first got a grant out of grad school from the Jesse and Betsy Fink Family Foundation they did not give me a specific deliverable I thought that we were going to be 100% focused on this and there were two issues at the time. One that the program related investment language and the tax code was too abstruse and had too few examples for any one private foundation to know what they were allowed to do and two, and I hope this blows your hair back, climate change is not a charitable purpose in the tax code y'all. It's insane. And so I thought my deliverable back then was going to be exclusively focused on trying to improve those two things in the regulatory language. What we found as we dug into it is that even if we exclusively focused on the policy aspects of it it wasn't going to go far enough and so I think Prime was really born out of that realization. It's like yes you have to work on the policy yes you have to be in touch with public sector actors, yes you have to collaborate with government and you have to go further to actually influence people to take advantage of it. You have to go out and do it. Yeah you have to go out and actually build it. I wanted Steven Chu to be on one of your first judge panels in one of the first rounds and then he hit the podium and told everybody he was one of the volunteer people who were vetting and it was like a thousand to one. You had an incredible ratio of number of submissions to number of companies that you could support at the outset. That ratio could have even gotten larger since then. What is the total amount of money that you think Prime could convey that would bring that ratio down to something that is a reasonable capture of the potential you see. Oh my goodness. Well the thing that I'll start by saying is that I think it's a very time sensitive question. It will always be a contemporaneous answer. As I said before there's so much when we first started the tide was all the way out so the only thing we had to do to substantiate additionality was ask the question will this company be funded or not without us and the answer was always no because no one was being funded. Over time and now again very joyfully there's a lot you know it's kind of come back as a hot topic among finance first venture firms which is great what we estimated when we substantiated the capital gap for Azola this was in 2019-2020 so it was like just before this big wave of traditional venture capital came crashing down in a good way like lots of it. There was probably and I should say this is just for our style of underwriting criteria of very large emissions reduction path to commercial scale and additionality well over a billion dollars just for that one thesis and then I think what's even more important is when you think about first of the kind projects, late stage demos maybe accelerating deployment in places that matter and then if you adjust your underwriting criteria around impact to include other things it's just the very teeny tiny tip of the iceberg that we just started with but I think the good news is that there's you know 86,000 private foundations in the U.S. and we've now worked with 250 of them so that's also the tip of the iceberg. I think there's I can't overstate both the need on the money outside and the opportunity on the money inside. I should also acknowledge what Holmes said about the great people around this work in the middle and the intermediation. We have an investment advisory committee that's comprised of 25 of the most active and historically financially successful finance first venture capital firms represented as volunteers for us and they get together quarterly just to say yes I would love to invest in this company. Here are the reasons that I would struggle to support this company today and that helps substantiate the additionality argument in real time. It's just an incredible group of people so that really lent credibility at the outset before we had anything to show for ourselves. Hi, I'm Bharti Singla Thank you so much for this talk and for starting Prime as someone who started up in 2016. I really appreciate catalytic capital. As you mentioned things are changing now. Capital is available. What do you think is the biggest challenge for clean tech startups now in the journey to solve for climate change? I'm so glad you asked this question. We just had our annual investor meeting last week where we had all 28 of our portfolio CEOs come together and they were talking about what's going on with their business and I would say 75% of them they're getting to the stage where they have to make hard choices around do I do a bigger demonstration project? Do I go full commercial scale and try to do a first of a kind project? Who do I partner with? Am I trying to pay for that from the money that I've raised from venture capitalists? They're untrained in the ways of project finance so I really think this early climate infrastructure gap is very acute. Not just for our portfolio but for the portfolios of any of the venture firms that are actively investing so I'm very excited for Prime to kind of dig in on that and apply some of the same lessons learned and underwriting criteria that we have been applying to the earliest stages of company formation. Now bring it to this later which capital gap which we've known has already always existed it's just very acute right now and we didn't think there was sufficient interest or activity on the money inside to actually do those transactions it just requires more capital and when you think about the axes of additionality you can make an additionality argument based on lower financial returns or you're taking disproportionate risk or it's a longer time horizon it's a different mix of additionality arguments for project finance in venture capital world you can kind of max out on financial returns and say we're purposefully taking disproportionate risk but in project finance land whether you need to cover pre-development costs or be a first loss loan reserve or just have non-profit companion programming to help with community engagement and citing those are very different concessions for the philanthropy community to take on so I'm very excited and eager to start doing that and that's definitely what we're hearing is kind of the biggest need right now Hi Sarah thank you so much it was really engaging talk my name is Agulati and I'm really curious to learn more about how because I mean it is charitable investments but it's still investment into ventures so does prime contract like returns on that investment and what are the time periods like and the other part of that question is now with you know companies like venture arms like breakthrough and the engine out of MIT taking more tough tech and you know harder decisions on like tough tech companies how are you redefining additionality for prime? I love this question I should also disclaim her that my partner is on the investment team at the engine I have inside info let's see where to start first I will say that I'll start with what our message to investors and then I'll talk about co and follow on investment and then I'll talk about how our additionality assessment has changed over time so what we say to investors is that we are concessionary on risk which means that we are very purposefully naming substantiating and taking risks that no one else can take. For both prime impact fund which was 100% catalytic and now the catalytic sleeve of Azola the fund life cycle is 15 years with two year extensions so that's kind of similar to breakthrough and the engine but all of the money coming in is unabashedly impact first which gives us just this incredible risk tolerance and the additionality underwriting criteria in the fund formation documents means that we cannot do things that other people will do we don't chase hot deals as soon as their sufficient interest in a round around a company we back away very joyfully because we're like oh great success like this company is going to exist in the world which advances our mission so the way that we talk about financial returns is only as a signal of that company's progress on a commercial path toward the eventual impact that are investors we don't even like to use the word investors we say philanthropic partners care most about. Now part of the experiment in Azola is that we have a full cycle sleeve which is not charitable and so that's going to be very interesting to see as the returns come back kind of how that interacts with the catalytic sleeve. The argument part for that paired fund structure is that the catalytic sleeve wins from an impact standpoint which is their top priority because our investment managers which are impact incentivized and deeply mission oriented people can stay involved longer into each portfolio company's life by having the full cycle sleeve to draw on and heavy up behind winners they get to stay on the board longer to influence the company toward the highest impact development path. The full cycle sleeve wins because it invests in a pre-wired one-to-one ratio in any initial investment where we can substantiate additionality with the catalytic sleeve and so you can imagine a seed round series A maybe series B it's kind of getting in at the low stock price and then once a company graduates from additionality the catalytic sleeve can no longer invest but you can selectively choose to take advantage of the pro rata rights and continue to heavy up behind winners and so the economic argument could be very strong. The modeling was fun. I think the third part of it my answer was oh that was only the first part. The second one was how do we relate to break through the engine we love firms like that that are going in on tough tech they tend to be either our co-investors once we're at the table the risks signal value even in rounds where we felt there was additionality becomes a more comfortable swimming pool. Follow on investors I don't quote me on this but I think we have like six or seven portfolio companies that became break through portfolio companies but we're going earlier we're taking more risk both break through and the engine are represented on that investment advisory committee that I mentioned so they're just determined like when can you not do things because we'll do it very purposefully and then the third part of your question on how is additionality evolved over time as I said before when we first started it was a binary assessment you know will this company be funded or not it's gotten a lot more nuanced over time just the rubric that our investment advisory committee uses now is much more sophisticated kind of learned about all of the different ways that you could substantiate an additionality argument just based on observation of our own portfolio and we now compliment we don't just take investment advisory committee unilaterally we also substantiate it with historical data and circumstances of the round so that's become very interesting like I said before additionality is always a point in time assessment always a challenge because investment world kind of moves very quickly so if we do a point in time assessment and then there's two even three weeks until the investment actually closes so many things can happen during that time what we've noticed is that our presence usually is a very helpful signal value of a company's future potential and so not only are we catalytic with the money but just our presence and the credibility of our investment team is also catalytic in and of itself and that feels good and right before we end this part of the program I do have a couple of questions first of all I was surprised no students ask where they can apply for a job if I were here I would have thought about that first and that is the role of government now Homespence and Steve Chu I think probably was your first and biggest fan because RPE invented with a few other people was trying to plug the gap at that stage so I imagine government helps you on the front end because government labs produce tech that can then be built upon but then on the so I assume you're a great big fan of RPE which became a lot of the people that bring through energy on the other end you didn't really talk about this but you mentioned it what you're feeling about IRA it's going to be great in terms of the overall goal of enhancing Green Jack innovation you think it's going to be better than that you and others work with the government I do this work in the private sector because I am such a pessimist on political will and government action and so I was very pleasantly surprised that we got something like IRA done go on Biden administration I think it's going to be great I hope it's going to be great my fear is that when they have that much money to get out the door that the types of companies that I'm talking about need a lot of help to get ready to receive it like all of these companies over here need to demonstrate do their first of a kind and be ready to do like 10 or 20 projects in order to partner with OSED I think it's going to be great I think we need like 100 times that the scale of the problem is hard to wrap your mind around but that said I will remind you we actually have a reception outside going on which is actually outside and not on the second floor like it was two weeks ago and with that I'd like to thank Sarah for a totally awesome inspiring talk that is totally memorable I bet this will be one of our most downloaded videos of all time thank you so much for having me and maybe be on time primeclonetion.org that's where our job distances are