 Ha ha the early birds. I'm impressed You should all um can all sit up here. You could all come forward. We're gonna. We are gonna have cold calling I think I'm told people will filter in But we're gonna go ahead anyway and have a fantastic conversation and to wake you up We're gonna let me show you a very quick video. So can we can you guys cue that up? So note note your discount code I'm David bank. I'm the editor of impact alpha We are a five-day week morning newsletter around impact investing. We have a podcast. We have a slack channel We have a we have conference calls. We're trying to build a community around what we called as you saw in their agents of impact of which you all are especially for getting up so early and Although Mariana went surfing this morning And but in my previous life, I was a tech reporter including for the Wall Street Journal and I've always thought that there's this nice parallelism between the way the Tech story developed and the way the impact story is developing and there's a set of ideas that are First not well understood and then over a course of a couple of years become in effect conventional wisdom and the new normal and And and tech, you know went through that there was a time when you couldn't talk about Apis, you know, people didn't actually know what you were meaning and they didn't know what network effects were Virtuous cycles are increasing returns to scale, which is something I want to get into And now that's just the way the world works and Impact in particular social environmental impact is going through the same trajectory. It's gradually gone from a fringy You know Affectation of some, you know in viral greenies or what have you and now it's increasingly you can see it all around you can see it All it's so kept but everywhere you it's it's increasingly part The way the financial system of the future is going to be is going to work and whether it's whether that's a one-year project Or a five-year project that's sort of the details But that sort of same trajectory where the whole system isn't changing the same way that the internet and Chips and Moore's law changed changed changed changed the world. So is impact I was thinking this morning It's not like some future thing like there's 500,000 Californians without power this morning There's fires raging in Sonoma. It's you know, it's like the need is there And so what Seth and Marianne I've talked about is bringing the exponential power of tech the rigor and Authenticity and engagement of impact and solving some big challenges. So that's what we're gonna we're gonna solve them all today I don't know we're getting we're gonna we're gonna we're gonna we're gonna get started So let me just introduce you very briefly and then I'll let you say more about yourself Seth actually I met at Socap a few years ago and Have watched as 50 years his venture fund has venture firm has Done some amazing things and you've just raised the second fund So fifth the headline we had was 50 million for 50 years. I don't know was that Yeah, that was the idea to get that headline But and you could say more about your Y Combinator background and what now we'll get into that Marianna Senko it's with future ventures and they have a first fund that is 200 million dollars and Both of them come out of the tech side. They're not these are not impact funds that are Thinking about tech solutions. These are tech funds that are thinking about impact. So Let's see, where can we get started what I was hoping to do actually was Instead of sort of having the philosophy first I was thinking of having the specifics first and throw them You know get the lead up get the lead up high as we say So maybe Seth I Don't first of all you can explain what the an investment committee actually means it at 50 years But if you were in the investment committee and you were taking Your company and you were now making the pitch for it. I want to understand how you pitch Impact and how that figures, you know, and you can I don't want to set you up too much so you can take it but you're now Presenting let's take SoluGen and You're I don't know who yet tell me you tell us who you have to convince But now convince us why we should why we should approve this investment in SoluGen Yeah, so I mean for for for 50 years. We have a very small sort of investment committee It's just the two partners. I co-founder of this with a woman named LMA day Who is a much more successful entrepreneur than I am founded three companies sold sold two of them And so, you know, what we look for fundamentally is is three things companies that have the potential to be massive businesses companies that have potential to have massive positive social or environmental impact and then founders that we think are both capable of Building it and also care about both of those things, right? So we want founders that genuinely want to build big businesses and we want founders that generally want to have positive impact and so You know, the impact analysis looks very different company to company So in a case like SoluGen, it's it's very very clear. So what SoluGen does is they have an enzymatic process That replaces the current way we produce a chemical called hydrogen peroxide. So hydrogen peroxide is currently produced to this process called the Anthroquinine process It requires these hundred fifty million dollar plants seven football fields large. They use petroleum based input So very unsustainable. There's about seventy different reactions that happen. Each of these reactions is very volatile So literally every year for the last five years one of these plants some on the world has exploded people die Toxic fumes get released into the atmosphere And for every ton of hydrogen peroxide produce these anthroquinine plants release 2.5 tons of co2 Greenhouse gas into the atmosphere. So it's just a nasty process in every way. And so SoluGen literally feeds plant sugars To these enzymes and these enzymes crank out hydrogen peroxide And not only is it completely safe and completely sustainable and cheaper than the existing process But for every ton of hydrogen peroxide that SoluGen makes they actually sequester six tons of co2 from the atmosphere So it's a net minus eight point five tons of co2 for every ton of hydrogen peroxide produced So in that case the sort of impact analysis is very very clear, right? This is this literally just takes greenhouse gas emissions out of the atmosphere And so all we need to do in that case is basically look into the technology and say do we actually believe that? That's the case right so we'll typically pull in PhDs to actually dive into the technology to make sure that we believe that But I think when it gets more interesting is when the impact is not so obvious, right? So we have a company in our portfolio called catalog DNA So they they store data in DNA so these DNA molecules to actually store data there And so, you know the impact there was was potentially twofold so one There's a lot of really important information either biomedical information or safe physics information like CERN That just gets thrown out today because we don't have the capacity to store it all And so this the the catalog team said what if we could just store all of Humanities information that way we could potentially accelerate the pace of science and discovery and these sorts of things And then the second thing was they said that we think Storing data in DNA will be more energy efficient and sustainable and the first sort of impact Angle was interesting to us, but it wasn't enough and so we actually asked them like bring us more data on the second And so they pulled a bunch of resources and it turns out that data centers actually consume three percent of the world's Electricity globally right so these are incredibly unsustainable things in the United States They consume so much in so much energy consume so much energy that it would take 34 500 megawatt coal plants just to power them right and what's beautiful about DNA is when you store it in DNA You actually need zero energy to keep it stored there because DNA doesn't require any energy inputs to store it And so it turns out that this could be a massive sustainability plus right And so that was a little bit harder it took us longer to get there But we ended up getting there and invested okay So let's just take it very quickly and then we get to Marianna, but in the first case you found a company with Process I think as I remember saw you Jen their secret sauce is they can make these enzymes way cheaper because they have some I think you see Berkeley Scientist types who figured out a way to generate these enzymes so there's a the fabled 10x cost reduction that you all look for right But did you go looking for somebody to disrupt the petrochemical Industry did somebody just find you and say we've we're gonna we've got this thing that's gonna you know sell a lot of hydrogen peroxide I mean We come as an impact idea or did you go look for it as an impact idea or to just come as in the door as a good tech idea We do not Separate impact from great business so when we look for something we're not looking for a great business and then saying oh Does it have impact we're not looking for impact and saying has it doesn't have great business We just look for things that are great businesses that will have impact okay, so in that particular case We read about them said oh wow sustainable sustainable production technology could potentially be cheaper than the existing process Checks both boxes. Let's go and we found the team and talk to them and end up investing okay, then in the second case They come to you you say great business, but use as you said kind of General you know goodness kind of thesis but not specific enough then you went looking yeah for something that you could count measure Calculate as an impact so that then it could be coming exactly the difficult So sometimes you meet a company obviously great business obviously great impact and then you just need to say like Can this team pull it off and those are easy The difficult ones are sometimes you say wow this would have amazing impact, but I don't I don't believe the business model Right, I don't see how this gets to a billion dollars a year in revenue So we look for and on the flip side sometimes just say oh wow This will obviously be a good business, but like is this actually genuinely good for the world as the world need this And those are the tricky ones and so that I think when we have the most contentious discussions Between Ella and myself and our third-person show it's it's those cases where we believe in the business But maybe the impact isn't so clear or we love the impact, but we can't necessarily get bought in on the business Mary let's sort of same question, which is and I think you may have the same size investment Maybe even smaller right? But you're taking something like Commonwealth Fusion to the Decision makers just call it that and and and you're trying to say why this Why this why we should invest in this does does where does impact play in that pitch? Yeah, so for calibration also a two-person partnership, so my co-founder Steve Gerbertson and I started this fund a year ago, and we have deeply overlapping philosophies basically our Venn diagram of Interests and motivation is is basically a circle and so that you know, it's a good place to start a partnership from and Although our technical capabilities kind of come at it from different angles some recovering Physicists and material scientists and and he's an electrical engineer and kind of computer scientists And so we we tend to look at the same problem statements from slightly different technical angles and impact angles so again two-person Committee which is really just one of us gets really excited and then starts texting or calling the other and saying I don't really care where you are what you're doing. You need to come look at this and see this and and you know talk me off a cliff because Generally one of us will get really excited and passionate and do a bunch of homework and present the argument to the other And then you'll inherently step as the other into a devil's advocate play where you know is this really gonna work I've seen this with Steve. He's he's been in the industry for a long time. So he'll basically say, you know I've seen this 20 times over 20 years And and vice versa And so we basically game it out and again similar to Seth's point the most contentious discussions are actually the most interesting because if both Of us are immediately a yes, then we actually really pump the brakes and say why is this so obvious? Because there really are no obvious good ideas that haven't been done yet So there there's always a trick. There's always some question of Why will why won't this work? Why will this fail? And you know, it's it's team. It's capital requirement. It's total level of impact It's just you know, is it technically feasible from a first principle physics question Which tends to be a lot of what we consider as you know, like this, you know Founders tend to have these beautiful reality distortion fields of what they're gonna create in the world And you just kind of have to question them question them on In which way are they delusional, you know in this beautiful way where they're gonna create a fundamentally better world or one where They're slightly undermining kind of the basic principles of physics of the world and then maybe we question if it's even possible so with Commonwealth fusion systems with with all of that caveat essentially what happened is a friend of mine at MIT called and said I have something properly nuts for you to look at which always kind of gets me out of bed in the morning other than surf and And she said you have to come to Boston and you need to meet this new nuclear fusion company And I have to say that the first thing I said is that's great. Thank you for calling me and Hard no just hard pass Not because I don't think nuclear fusion is the right solution. I'm actually a little bit obsessed with it it's just there's so many problems and most of them come down to regulation and cost of capital right so Europe is building a giant fusion reactor, but it's gonna cost a hundred billion dollars It's still not obvious that it's gonna work We know that tokamak physics are reasonable, but the size and scale at which you have to build these plants basically makes them economic nightmares And so with a long list of I will go see this company as a favor to you friend But I'm gonna very gently tell them like thanks and good luck Fast-forward got on a plane got to Boston tour the facility met the team my jaw hit the floor one of the fundamental things we look for is our Incredible people leaving otherwise very very comfortable cushy Brilliant jobs to join the lifeboat that is a startup You know entering the seas of of all of the ways in which they will drown And that was the thing with commonwealth fusion is I saw one of the most phenomenal teams And you know teams leaving other portfolio companies like SpaceX Which is literally a rocket ship, right? To join this weird little MIT nuclear fusion company And and that was the thing that so then basically we did a bunch of diligence and you know ask the questions like from a regulation Sandpoint do the nuclear physics work do the magnetics work does the energy transfer work and Fluent scientists from all over the world asked a lot of questions did a lot of homework to the point of saying You know we're there's a lot of unanswered questions on the technology But we feel confident that it's generally in the correct trajectory The team is phenomenal and the impact question was trivial was basically like solve nuclear fusion solve a lot of World's problems right like so many of the world's issues are around energy scarcity So if we can change the energy scarcity equation you you fundamentally fix Well, maybe you don't fix but you start addressing an enormous percentage of the world's scarcity and yeah problems, right? Yeah, yeah, yeah Actually, that's interesting. I was gonna get to this later, but you raised it So you said are smart people leaving good jobs to go do this So we have a little section of impact alpha follow the talent which is the same idea That's right, which is and in fact in this impact world a lot of people are leaving good jobs to go do Impact they're not they're not necessarily Raising $200 million first funds. So there's you know some some different motivations in some in some cases But but in fact, but one of the things you mentioned in the pre-call was carbon sequestration Is something that people are leaving good jobs to do and you guys had a impact tech Seth and Ella run a Some a symposium series called impact tech which I recommend to you. It's where I actually met Mariana the first time and And you both are keen on carbon sequestration. So let's take that example and then we'll get into the sort of broader Yeah, it's an interesting and so Full stop we haven't funded anything in carbon sequestration yet. Hopefully, you know knock on wood. I'm looking And and that's the point is that you know as a fund. We're not necessarily saying We really want a nuclear fusion deal. So let's go look at all of the companies. It's it's a push and a pull So we try to look at areas where the talent is moving and say, okay, let's go get somewhat informed in that space We I'm not claiming that we're experts in any particular experts in the things that we're experts in but then we try to move out Into adjacencies and say where is the talent going? Where is the impact because everything is about timing, right? We're venture capitalists being early is as bad as being wrong And and so I think that carbon sequestration is a really interesting space right now because there is an enormous amount of talent moving into it My problem with it to date is everything I've seen is not Well, I should be careful because you probably funded things in it, but And maybe I haven't seen the companies Of the things I've seen I have yet to see something at sufficient scale that it's gotten me excited I've seen Some small improvements some some marginal improvements and let me stop you scale. What would scale? What would appropriate scale mean to you? Oh, man? I should I should have done my homework a little bit better It has to have fundamental Change so it it can't be like a one or two percent improvement on current process. It needs everything needs to be It needs to have the promise of basically a thousand acts or you know metric metric tons of carbon removal and sequestration because Marginal projects have marginal solutions basically and they're at the end of the day You'll pour a bunch of capital into something that doesn't make a Mar a big difference and and what we see is that we're creating a lot more carbon than we're actually sequestering so that The solution that is actually meaningful in five ten years when it probably will hit market has to have enormous promise it has to be on the level of you know maybe not replacing but Like a coherent solution that's the equivalent of like a third of the canopy of the Brazilian rainforest because Turns out we're gonna burn it by then So if you're not if you're not thinking really big scale Then you're not probably thinking big enough and then in scale and that's interesting the way you went there is scale of impact Right, which you know at some level it correlates the scale of business, but but you put it as if you can solve the big challenge You've told me the business case will Present itself. That's right. So so that is a sort of impact first way to look at it Which is the check the challenge is big enough the solution then is big enough then the business will be big enough Yeah, we kind of joke a little bit that we don't really do I mean we do a market analysis, but we don't do that much of a market analysis for our early-stage companies because if the idea is Sufficiently like if you solve nuclear fusion or if you figure out how to do really really efficient data storage and transfer like the markets There I mean I don't I don't need a bottoms-up analysis from McKinsey to tell me that it's a good idea And also those numbers don't mean anything Let me give you let me give you the slightly curveball here One of the things I learned at that session was that the biggest Customer for the carbon that gets sequestered by some of these companies is the oil and gas industry Which pumps it back into the ground to pump more oil out And there was an interesting discussion is that like is that why we're sequestering carbon to make that they'll let the oil And gas industry have a cheaper way to pump more oil that seems kind of non-impacty So yeah, I think on the other hand it's what where the revenues can come from for these startups So how do you deal with that kind of thing? Well, so I think We also have not made any investments in the space despite being incredibly enthusiastic about it and Yeah, so you know and I'll answer your question in a second, but I think you were we're touching upon I think one of the really unique distinctions between the way we approach it and the way a lot of other to say people at Socap approach right where if there was a company that could guaranteed You know remove 1,000 megatons of co2 a year and make 20 million dollars a year, but that was but that was probably it There's a lot of funnercy that would be incredibly enthusiastic about that. We wouldn't Right and it's weird because we're looking for things You know we want things that could have potentially remove a gigaton a year and make you know a billion dollars a year And we would much rather Support something that has less of a chance of succeeding overall But but but a greater chance of really hitting a home run, right? And so it's this weird venture capital is a very weird space where you're willing to take Extraordinary risk so long as the financial and impact upside is just absolutely massive And and then so in terms of the oil industry sort of being larger consumers in these carbon markets I think of course it would be better if it wasn't them But at the end of the day a lot of these carbon removal technologies and the reason we haven't funded any of them Is they're all there's a lot of really interesting ones in the mechanical space and the biological space and in the chemical space that are that are Taking greenhouse gas out of the air and turning it into products that they can sell and they're all just on the wrong side of profitable And so this is a problem because if you can you know to take a take a penny and then sell it for or to I guess take a Dime and then sell it for nine cents, right? It's not a not a very scalable business model However, these carbon markets potentially offer a way for them to take that nine cents and bring it up to 14 cents And now they're they're doing it profitably But the problem with all these carbon markets is they're incredibly small and they're incredibly nascent, right? And so The oil industry buying these these things is actually potentially a really good thing long term because it's at least providing some seed funding some liquidity to these carbon markets which then might allow them to grow to scale where you're having a lot of different sort of Corporations participating in them although we think that those markets are not really going to reach the scale That's a meaningful unless there's you know regulatory change on a mass scale and for us And this is just a quirk of the way we think about things We are very comfortable with technical risk or even comfortable with market risk We're not comfortable with with that kind of regulatory risk So we have a test we call the mr. Burns test right which is mr. Burns a character from the Simpsons And he's basically the prototype of a self-absorbed greedy capitalist, right? And so we want companies that are making products that mr. Burns would buy right just because it's the best thing He can get at the cheapest cost and is the most convenient But that oh by the way are also really sustainable for the world or improving health or solving malnutrition or these sorts of things And so we don't like relying on a government subsidy for the companies that we fund to be successful Hmm. Okay, so there's a bunch of threads coming out here, which we'll try to by the end have drawn together risk You say we would like risk so the impact world is always saying oh we could be you know going in and providing a solution for low-income customers in an emerging market, but But everybody thinks that's a risky bet and and so they so then they spend a lot of time You know de-risking that deal and there's first-last guarantees and there's this and that to make it less risky So that quote mainstream investors will be able to go into this otherwise risky thing on the other hand You guys are saying bring on the risk So how do you put that together? So I think it's important to remember we're not mainstream investors, right? So venture capital to your point is is this weird little world and it we happen of this privilege and fortune of literally getting to Turn large piles into money and to hopefully much larger piles of money But that's the point is that that's actually a requirement for us. We we do have to generate returns And that means that we can't play to the mean This is not a game of averages venture capital never is and anyone who tries to play it that way will fail rather spectacularly You always play to the moonshots to the extreme case because the simple reality is in all venture funds 90% of the all returns are generated by one company and it's a power law from there So in every fund there's one outstanding rock star And so you're you're constantly making the insane bet under the assumption that one of these Hopefully God willing will work out and the rest of them can go to zero But it doesn't matter because the success stories are so enormous. So you have to believe that every single one is unduly large in its Future vision because anything that looks like oh that'll work out like that's a reasonable business is a really bad business for us I was speaking at a food tech conference in Korea Well, there's not a really established venture capital ecosystem And there were a lot of investors in the room who are from sort of other asset classes And I had a conversation with someone who and it really reminded me how weird venture capitalists He said he said what do you do? I said oh, I you know run a fund we invest in companies said Oh, do you invest in large companies? I said oh, no, there's small often times just a couple people They said oh, oh, but profitable companies. I said no no just about all them are losing money They said oh, but these are companies that you think will succeed and I was like well, no, you know Many of them probably are gonna fail and he's just had this quizzical look on his face Why would you do that? And it's because and it's because of the dynamic that Mariana just talked about and I think I I love Like so cap I love the world of impact investing I feel I feel so aligned here because everyone is pointing their lives in meaningful directions And it's fulfilled and happy and actually doing good in the world I think the one place I feel a little bit out of place is that there is an extreme aversion to risk here, right? And so The vast majority of investors are very uncomfortable with a company that say has only a 20% chance of succeeding but if they succeed could eliminate an entire category of problems, right? And for us, that's a bet we would take all day long, right? So, you know one of our companies is called Memphis Meats, right? So they they're they're cultivating real meat to eat without the cows So they basically they harvest it from cells directly instead of from from animals and and when we we we invested at the seed stage and this is a An incredibly interesting company because animal agriculture contributes more to greenhouse gas emissions than all of transportation combined every car Train truck plane and boat combined animal agriculture is a worse offender and and and it's really hard to move people off of meat Because they love it. They like it. It's a part of their habits a part of their culture And so Memphis Meats said what if we could give them the exact same meat That they already eat but just produce it in a sustainable ethical way And at the time there was a huge amount of risk ahead of them, right? Where if you had asked me to put a Percentage on the chance of success it might have probably would have been less than 20% that they'd be able to sort of scale up And get the cost down but man if they could succeed, right? It would not only be a massively profitable business made as a trillion-dollar industry But it could potentially eliminate one of the worst offenders to our climate crisis, right? And so this is the sort of thing that we love But I worry because it's the sort of thing that traditional impact investors are very uncomfortable with and why do I worry about it? I worry about it because these companies that are high risk But if successful will be massively impactful because traditional impact investors are uncomfortable with it They typically have to turn to the purely greedy capitalist Silicon Valley, San Juan Road investors And those investors while they understand business and can actually help scale at the end of the day Aren't so interested with with few exceptions in in the sort of impact missions of these companies And so if there ever does come a point where there's slight tensions between the two They're likely to push them in the wrong direction, right in the short-term direction Whereas if they had more impact the land capital they could protect their impact missions and actually We think build even bigger companies and more financially successful companies But definitely more impactful companies and so I would love it if this world got more comfortable with the sort of model that That that we we see and and and invest through every day Okay There's just a little bit of pushback which is some people think the venture capital model is actually one of the there's actually two Original sins of impact investing one is the foundation roots which sent it down a kind of quasi philanthropy thing and obviously foundations have a key role to play but it got Branded as kind of quasi philanthropy and that frankly scared off Investors who were looking for these kind of returns the other original sin though was on the other side Which is you know, it's it you know So kept sort of in in the Silicon Valley milieu and basically the venture that the two and twenty ten-year Venture fund became now impact funds the difference being that the payout. There was no thousand X Superstar in the in the in the fund and and and looking for that As you said could take you off of your impact mission And so there was a misalignment between the way the funds were structured and the actual Ventures that were getting funded or what the what the kind of capital that those Ventures needed which might be much more prosaic you know long-term dead and working capital and all that kind of stuff and And so the venture model actually has now and you guys are I'm sure Well aware of it, you know fallen into some at least skepticism as you know, you know, you know You know forget about unicorns, you know, you know, what about revenues, you know There's a lot of Dislocation and You've actually said misappropriation of resources in Silicon Valley chasing things that are not actually very impactful So how do you say a couple points there? So one There was a question If you if you build a house you need a lot of tools and and frankly there's so many the solving all the problems The world is way more complex than building a house and and venture capital is like it's like a hammer, right? If you want to nail some things in that house that hammer is really really great, right? But if you're trying to like Sand something you want to use a hammer, right? And so I think venture capital for a specific type of impact company can be a really great fit But in other times you might need patient filled for up a capital and other times you might need debt capital, right? And so I don't think venture capital is the end all be all but I do think for this very specific type of company That is high growth high reward high risk venture capital can be really really great And then in terms of of the critiques of venture capital, so you sort of mentioned two So one is that oh look, there's some really big failures in the role of venture capital and like that's not that's like That's built into the model, right? So you know in venture capital you would expect sometimes there to be really big massive flame-outs That's a good thing because that's a sign of the over investment lots of research lots of tries lots of you know Exactly you try a lot of big things a lot of things will fail. So Jeff Bezos is famous for Talking at Amazon about the number of times Amazon fails big right because he won't and he won't he wants that so they launched this thing called the Firephone it was like it was like literally an Android competitor. It was a phone They sunk a ton of money into it launched it it was a complete flop right people don't remember that but like you know He wants there to be big failures because that's the only way you get big successes And so that's that's okay now the misallocation of resources this I am on board 100% right, but it's not a critique of Venture capital as an asset class or as a structure. It's a critique of the current focus of the vast majority of venture capitalists right You know, I know so many brilliant people who work in venture capital run funds They may be built and sold companies for a billion dollars. They have incredible leverage They have incredible talent incredible expertise incredible networks, and what are they doing? They're chasing the next like e-gaming, you know unicorn, and it's just it's so tragic right because it's mind-numbing There's so many huge problems in the world There's so many opportunities to make money and do good and these people are funding Frivelties right and and I do think that the vast majority of venture capitalists Are chasing those silly things and so I do have a problem with the venture capital industry in general But it doesn't mean that it can't be fixed right let's assume they're You know quasi-rational and that they're actually looking at I mean everybody always has said we in my tech days You know big challenges big solutions big opportunities, right? So the water what are bigger challenges than you know water scarcity, you know, car, you know climate obviously, you know food You know, you know even housing transportation sanitation But you know perhaps like for example the biggest Climate carbon sequestration technology at scale is forests, right? But you guys are not looking at forest advancement. It's a different kind of money, right? Oh, you are yeah Oh, I'd love to be corrected on that. Yeah. Yeah forest as the technology Well, there's a lot of I mean there's a lot of interesting tech companies that enable those sort of investments, right? So, you know, they're not in our portfolio, but yeah, well, yeah, I'll jump in for a second like Planet Labs is a company that Steve and I have been involved with and former funds and former lives, but Planet tiny satellites basically small one year one two three to six you CubeSats that get funneled out of rocket ship and then Basically drag position themselves into a global orbit taking a picture of every Every portion of the earth once a day every day and what's amazing is it's actually the most incredible technology for tracking precursors to deforestation because you can actually track change of where people are illegally cutting roads into protected forests of protected parts of the rainforest and Go and send in Basically troops to stop them before they go and start burning the next part of Brazil And so that is a brilliant technology. That's absolutely right And then the other aspect is well now that the ground actually burned. How do you think about? reseeding it in economically feasible and sustainable and high growth way and so I've been looking at Basically seed deployment from drones although that's a little bit You can talk about the economics about why that might not work as a venture-scaled business But we're absolutely looking at like the the earth knows how to fix itself. We as techno optimists know how to Kind of hopefully push it in the right direction, but I think we always have this question of saying What's what's the right way in which? technology accelerates the kind of natural evolutions that need to happen without causing Massive irreparable damage, we wouldn't invest in a forest plot itself But at the at the carbon symposium you might have met there was a company called drone seed So you know, that's one of these companies there They're the fire they're firing you know trees into like these little darts in the ground plant trees more quickly It's you know not an art portfolio But a pretty interesting approach because they want to get to a billion trees billion trees Right, so that's a that's a pure tech company that can enable this sort of forest forest play There's a company that was there called Pachama They're using satellite imagery from people like planet plus drone imagery plus LIDAR and machine learning to figure out where you should plant and To track whether or not those forests are actually staying up or getting harvested down so that people can plug into the carbon market So I think there's a lot of really interesting technology plays that we could potentially be interested in in that market Just not that we're not buying the forest themselves. Okay, so we're getting Oh wait, we still got a fair amount of time So are we boring you no I was looking my clock here and thinking we were done, but we actually have a decent The one I want to ask you guys and then I want to I want to actually Have the audience ask it so I'll queue you up and one of you can ask this Which is the met the measure the m board the measurement question how they measure and so I'm not gonna ask that But y'all should ask that the one I want to ask is the unintended consequences one which is yeah I'm sure you get now because unintended consequences are rife in technology um, and You know you can find that there's some first order Positive benefit, but there might be some second or third order Negative benefit that you didn't think about and maybe the net net is either a wash or even negative And you said, you know, you're a techno optimist, you know Optimism was all the rage for a while then it's sort of now is sort of But you're still a techno optimist, but what is what about how do you think through the unimpossible unintended consequences? Yeah, I think it's it's a often a difficult question And and there to say that there's no negative consequences to anything I think it's kind of folly almost almost anything you do there's some negative consequences You know we have a company in our portfolio called startski robotics. They're building driverless trucks, right? So why is it impactful? Well, a you know Million people get killed from trucks being driven poorly because of sleepy drivers every every year and be they can you know Transportation contributes massively to greenhouse gas emissions and if all you did was drove existing trucks more efficiently You would drastically reduce that contribution But you know question what if you if you're building these automated trucks Are you're putting drivers out of work drivers is one of the most common professions that people have and that's an obvious negative externality of this company and so You know we we felt very comfortable startski because they're actually using a tele operation approach Which is very different than others so they actually will will employ drivers in their headquarters And when the truck gets confused it calls home and our truck driver drives behind what looks like a super fancy video game Set up drives the trucks and so they'll actually employ a lot of truck drivers But for sure less than then have jobs now And so for us what we what we want to see is that the positive impact is just so obviously massive That the the negative externalities are sort of washed away, right? And so when it comes to like the climate crisis or a million people dying a year Those are obviously bigger problems than you know people some people losing their jobs, which is unfortunate And so we unless it's a very obvious where the impact is here and the negative externalities here We won't we won't invest I think just So one wholly agreed and maybe an adjacent point is one of the ways that we think about it is It's a little bit of a character test for the founding team, right? So there's this question that we kind of always ask and in a pithy sense. It's it's basically like who does your technology screw? and terrible to say that way, but honestly and It's interesting because you hope it's some big incumbent with a fat market that is ready to be sure Right in an ideal sense But what I'm actually looking for is a really really thoughtful answer Because a founder who comes in and says well this on it this up ends the oil and gas industry and ends there that that's not an interesting answer and it really suggests to me a Fallacy in in a logic train there where they say, you know, we're right This is our reality distortion. Everything's gonna be beautiful and roses and puppies once we're successful And and the answer is there's always these hidden externalities that come in from from from another industry from somebody else Looking at how to change your technology into a weapon and I've literally experienced this my the first company I started We thought we had this brilliant solution for a long-range low frequency communication turns out It's most useful as a weapons guidance system And so I learned the very hard way that the best of intentions can be met with a strong hammer when Sorry, you had invested in I had started this company out of out of grad school and You know learn learn the hard way that good intentions are Just you know pave the road on the way to building a very efficient weapons systems And it was because we we hadn't really thought about it back then we were we were you know Clever graduate students who who thought we were on to some brilliant technology that was gonna fix a lot of things And it ended up probably helping kill a lot of people which I don't sleep terribly well at night because of that and But it's just just go one level deeper. What happened to the company and what how did you deal with it? I can't actually speak very much about what happened to the company because now it's it's our controlled technology and the government is often running with it and I Really hope that it re surges into more Beneficial commercial practices that kind of thing is what made Tony Stark, you know become iron man You're welcome So honestly the the point is that we we really sit down and dig in with founders and look for that thoughtful Compelling argument where often the answer is the founder saying look I don't know but these are the things that keep me up at night And so really what I'm looking for is someone who's aware enough that They're you know, they're checking over their shoulder and they're looking behind them And they're saying what are the ways in which I inadvertently cause damage because we can't prevent it But at least we can be aware of it and hopefully kind of you know Clot the bleeding early right right. All right. Let's um, let's get some some questions I can't see all that well. Maybe if I put my glasses on it'll be better and It's first thing is it's somebody gonna ask my measurement question You want to try? Yeah, ask your own question, ask your own question, please Thanks, I'm hi my questions from me and You when you said you weren't going to invest in and like you were using all your logic for this nuclear You know fusion company, but then you walked in and said oh the talent's amazing like it feels like so you didn't walk me through the rest of How your Logic disappeared by you know, we hear so much in terms of like impact investing as a gut is an instinct and You know a lot of these arguments kind of play out when you have that one moment And it's can you can you walk me through that transition that you made? Absolutely and and I do apologize because right the problem is that it's so easy to tell these stories We're like you come in and you have this big beat over the head moment And that's a much nicer story than the reality, which is I spent three weeks up till three o'clock in the morning Reading everything I possibly could calling noble physicists Finding every reason to not invest in this company and So so the short answer is right You walk in and you get this gut feel what you actually get is a gut feel of saying oh, I might be wrong in my Fundamental assumptions right so I have a really really strong strongly held belief But I am willing to suddenly refraining to consider reframing it right That's what the team gave me that sense of not I walked in there and said let's write you guys a check I walked in there and said I Think I Don't quite Have the same conviction of a hell no that I had when I first walked in this room And that's enough of a reason for me to go spin up a bunch of work Right because the reality is like one of our most expensive things is our time They're like infinite things that we could look at And limited time and like we don't scale it's funny We obsessively invest in scalable businesses, but we don't scale So we have to be really mindful of our time and keeping everyone at their best and highest use is not spinning up a massive Diligence process into something that you're a certain know-on So the things that changed for me is they had excellent answers to the regulatory framework They had an incredible team the technical diligence played out I mean I had a list of questions like 20 pages long and then I Basically called every person I had ever met in an around nuclear fusion and asked them for their quite hard questions and So what what happened is like the feeling changed and then that spun up a process that actually resulted in us saying Okay, now now we're at a different stage now We're really considering investing and then and then you start talking about economics and if the rest of it makes sense this has actually been like a a Huge part of growth for me So I was like captain of the math team in high school and like Internet nuclear physics lab and in a studied logic and philosophy in college And so I was like rational rational rational rational And then I came to appreciate that there are some problems or some questions where Intuition is really really valuable and that you can actually get to a better answer more quickly and more accurately than you can They're just like a strict rational analysis and so the key is is to know What questions intuition is really good at and what questions it's not right, so I think in terms of like Do these founders genuinely care about this? Are they gonna push through the hard times? Do they like each other what I want to work with them intuition is amazing for those things Right like we've been evolving for a very long time to be good at those types of judgments But is this technology going to scale and be economical that's a really bad place for intuition, right? and so I think the key is to is to be very intuitive when it comes to people and then For the really hard things like the market or the technology or the scalability to be like hyper hyper rational And then when those two things come together, that's when you get really good decisions and they I mean our company is kind of like a Cognitive or competitor potentially and and when you guys measure impact you go you put all that work into Investing but then do you have the space in your lives to do the Math and put in the time to measure the impact of the investment With with planet labs great technology But are people actually using that to make decisions and therefore impact and I would argue that better data does not result in Perfect decisions because again to your point. We're instinctive human beings And so we're not necessarily using all the data in the world to make those decisions So so yeah, do you guys spend time on the tail end to measure impact as much as you put in? Thank you Yeah, all the questions like better data for what right because like a lot of things that leads a better decision making or more data Can be used both by Environmentalists or people that are trying to clean up toxic oil spills, but also by like hedge funds that are exploiting a world economies, right? And so I think so we have we have basically two two broad types of companies one companies that are directly Having positive impact right so like solid in like they're just directly doing good right for every dollar They make they're like literally reducing the amount of greenhouse gas in there And then we have what we call impact infrastructure companies So planet is not in our portfolio, but it's this type of company where they might not directly be doing good But we think that they're going to enable a bunch of other people doing good So in our portfolio, we have a company called open trance So they they automate a lot of work that's done in a wet lab, right? So right now you have PhD level scientists that are like Pipetting by hand for hours. These are people who have gone through 12 years of advanced degree schooling And so open tron just builds a really cheap robot that like does all that for them So they can focus on real science and so for us. It's like okay accelerating scientists, right? What it what does scientists generally do what is the output of science, right? And when we actually like did that analysis and like 90% of the output of science is positive for the world You know like maybe like 8% is like just neutral and then there is like sometimes 2% That's like bad for the world right like maybe like nuclear bomb type stuff And so clearly if you just accelerate scientists, you're gonna have a really positive impact on the world And so the question is how do you actually measure it later on? So we're very fortunate in that we we're seed we're seed investors So oftentimes we're investing in like it's three founders in a room, right? And and so to even measure the financial health of these companies is really difficult at this stage never never mind the impact health But at some point we of course want to as we mature as an organization We were only been around for four years and as our companies mature we want to make sure that those sort of Theories of change that we had when we invested were accurate so that if they were not accurate We can sort of change our own decision-making process and so We're what we've basically talked to all of our companies about is is once you reach scale Where us asking you to fill out paperwork and measure stuff is not potentially going to be an existential threat to your business I know it sounds really crazy But for like a couple founders that are just trying to survive any additional work is a lot Then we're gonna have that conversation with you and figure out how to measure to make sure that you're having the impact You want so that we can make sure we're having the impact we want yeah So I can't speak directly to planet right now because that was an investment from a former fund And so hopefully that fund is doing that and it within future ventures. We're not currently investors in planet labs I can speak to a separate company out of Pittsburgh a handful of Carnegie Mellon professors Called bridge dot AI that we that I just invested in and One of the things that we're trying to do is they're effectively a very clever A Little bit in stealth mode, so I'm gonna figure out how to say this Sufficiently broadly there. They're basically a very interesting bridge between devices on the edge that are running computer vision models and Your big mothership back-end servers that need to figure out if your model is actually running to spec And if you need to retrain it but the problem is if you start pummeling all of that data across that's computationally expensive and the energy transfer is expensive and honestly what most people do today is they like go and shove USB sticks in Cameras that are around the world and then ship them back and figure out You know if the real world data is useful and so like the whole thing when it doesn't scale a ton of data is left left on On the floor and there's a lot of places that we're not deploying Interesting clever things that could be collecting more useful data because of this kind of transfer problem So these guys have a very clever solution about how to how to make it far more efficient and how to only send the data back that Will actually tell you is your model performing to spec and if not what pieces you should retrain on? and one of the One of the questions that we have is how do we qualify the impact of this company going right seed stage? Literally for people working on it. I think you know we went from like four to eight people in the last two weeks So massive growth But one of the fundamental questions like what's a KPI of this company on? What are the right metrics to measure and we we started thinking about it? We're basically a B testing of like what what is the right measurement? Is it like? Total bits transferred is it over potential like what's the numerator and the denominator and the answer is we have Honestly, no idea, but we're gonna measure a bunch of things and Figure out which one and not that just tells our story better, right? Because like I can generate data that makes me look good But which one is actually an effective measure of an impact of change? And and I think that's very non-true like that's that's like fundamental work that we None of us really have a great answer to and if we did then it would already exist like this is right It's this is like baseline principles One of the things that that I've always thought as a when I talked about the parallels between the tech Story and the impact story is that there's Tech stories always been about driving costs, you know Radically lower and also driving volumes radically higher. So yeah So that's not that dissimilar from what the base of the pyramid Economic argument has been which is you could have very profitable businesses At very low margins it was very affordable and quality services for many many more people and that that's An often tech enabled whether it's obviously the mobile phones is that classic example? But solar energy is on that pathway and now fintech is on that pathway How do you guys think about the massive that the the true scaling? Tech thing to millions of people who may be very low income Think about in two ways so one not all companies follow that model So Apple is known for only selling super expensive stuff at very high margins and you know I don't know if they're the most valuable company in the world today But they're often are and so exceptionally proves the rule. Yeah, we're fine With that model so long as it will impact everyone So just because just to positively impact the life doesn't mean you actually have to provide a service directly to that person, right? So Solgene will will never sell to 99.99% of people right because they're making industrial chemicals and selling into industry But they will benefit everyone because they're tackling the climate crisis. So that we're very we're very okay with and then other Other companies in our portfolio That direct that where the benefit is provided by an interaction with the company We want to see a path to them reaching everyone in the world They don't have to do it right away right because it's hard enough to build a scalable business And doing it when at a price point where everyone can afford it from the get-go is oftentimes impossible, right? So I actually think that the Tesla model is kind of interesting, right? So Elon from the very early days laid out a a master plan He called it and he said we want to build affordable Electric cars for everyone. How are we gonna start? We can't do that now So we're gonna start by selling a hundred of these super awesome sports cars for a million dollars each And then we're gonna use that capital on that scale to drive down our costs increase our scale and then build this like, you know Luxury car that costs $80,000 and then we're gonna repeat and then we're gonna have a model 3 That's gonna be $30,000 and then we're gonna make something even cheaper and sure enough They've been doing that right and so we have a company in our portfolio called astronomers So they're building small geostationary satellites to cover the earth and internet So there's four billion people right now who have no access to the internet and this isn't like poor access or intermittent access I just they've never been connected and there's only so many ways of getting service to those people right? You know and running wires is prohibitively expensive Google's trying these like giant balloons, but they can't get above 80% availability Facebook tried solar powered drones but shut that project down and so most smart people have decided that satellites are the answer And so astronomers is building the small satellites that can provide really really cheap bandwidth Now their initial customer base are going to be people in the developed world who aren't connected Right, so they just closed a large contract to cover Alaska and internet Why because those people can pay more and while astronomers isn't at scale yet Astronauts costs are higher But as they get to scale and astronomers costs reduce then they can offer bandwidth at a lower cost point And so their goal is to reach the four billion in the developing world who have no access Right. And so those are the sort of two models and if the latter one We definitely want to see a way that it can serve everyone. Great. Let's get some questions and you can chime in We have one up there. Oh, sorry. Oh, sorry about that. Um, I really enjoyed the discussion around risk I think a lot of panels and maybe a lot of themes this whole weekend are about how a lot of Roadblocks we see with investment stems from this whole lack of diversity and inclusion within the investor pool and so I was wondering in the Discussion today whether or not you think that that also plays a role in the whole risk tolerance or intolerance that you were discussing earlier I think it's a huge problem in the industry. I don't know if it exacerbates The problems around risk tolerance or intolerance, right? So I think that you know the the venture capital industry is like overwhelmingly male Especially if you look at the decision-makers and overwhelmingly white And I think that leads to a lack of perspectives that a leads to better financial returns I mean this is I think The argument that I use for people who I don't necessarily think care about the diversity from like the way we care about it Which is from like the moral standpoint There's a lot of studies that show that it just boosts returns having woman on your investment team boost returns having diverse perspective boost returns and so It's it's bad for the industry both in terms of returns and it's bad because it definitely impacts what sorts of things get funded I think oftentimes there are blind spots because these partnerships are so homogenous So yeah, but I don't know if it exacerbates the particular problem in terms of risk risk Possibly the only thing that it exacerbates is that to your point of that People Have a particular mindset, right and a particular risk tolerance Inherently because of their lives their education their experience and so if your entire investment community looks roughly the same They have roughly the same risk tolerance and perception of whatever they're looking at and so the question is My assumption is that if you add more diversity in the investment pool Then you possibly don't change the level of risk, but you kind of broaden the horizon of what they're looking at and possibly become just Slightly more comfortable with something that a different perspective would otherwise just not understand So I think exactly to your point that the proof is in the data diversity boosts Performance and so we should optimize for that One firm or moral standpoint, but also just from a return standpoint like it's obvious We call that one that's one of the key sources of impact alpha. Yeah, actually Marianna Cued me up for this. I'm gonna ask it Number or percentage of founders and CEOs in portfolio companies women and people of color Can I crawl under my 60 percent? What of our founders 60 percent of our companies have a underrepresented founder? 68 68 percent. Yeah, this is where I start digging a hole under my chair I Could give you a list of excuses which are you know, we just got started as a fund This is we haven't even through our first year the simple reality is we haven't done a great job on this yet We have ten investments to date of which every I will give my Founders incredible credit in that it within the executive team. They're In every case, but one is kind of an underrepresented Group, but we have not done as good a job as we could and should have and I'm actively working on that and you know Part of it is just this question of fixing our funnel and the second is just actually making a Better trajectory and at the same time, I'm not going to change the standards or my interest areas and so right there there's a push and a pull here and I think Future mentors needs to do a better job on this and we will and we're aware of it and that's that's a trajectory Not to be rude, but just my journalistic Ethics require me to actually press that the actual answer to the question. Yeah So the number is we don't have any female CEOs We do have Founder like so so from that from a gender bias perspective We have no female CEOs in the portfolio and 10 companies to date So, you know, so you're leaving some leaving some returns on the table. Yeah All right one more question Okay, their mic is here and I called on you earlier We have we have one but it's SpaceX. So I don't know if that counts Well, you gotta have one to get the two to three to four great Thank you for such an engaging discussion So I want to go back to when you were talking about markets for all of these technologies and this hasn't come up yet But given the kind of technology you invest in and the scope of impact I would imagine that governments would make really good customers and so first of all is that true and Second if that's the case then from a VC perspective, how do you think about? You know regulation and then the returns that you that your portfolio companies would make Governments are the best of the best and the worst of the worst of customers They are the worst because it is a very very long sale cycle Which for startups can be very very tough The process is often incredibly political where it's more about obviously These are run by politicians more about who you know than the quality of the product And then they're the best of the best because government spend a huge amount of money And if you can get one of these contracts oftentimes They will sign a ten-year exclusive contract and you just really don't have to worry about anymore And of course from the impact perspective governments have massive scale And so I would say those two things kind of come together for us and make us neutral So we're not like more excited if you're serving governments or less excited because there's obviously pros and cons Yeah, I mean If you if you're if your business lives and dies by winning a government contract it will die most like if it's a seed stage company and you didn't just Leave a job as the Joint Chiefs of Staff basically right so unless you have some unique perspective about why you Single-handedly as an individual will win a contract because of a series relationships you have you're in a really bad place So honestly some of the most successful companies that we've seen that have relied on that have successfully Won and executed on government contracts are ones that are basically started by billionaires or phenomena phenomenally wealthy people to begin with so that the level of access is just it's right They have this unfettered level of access that Accelerates them forward versus three people right out of grad school It's it's such an uphill battle Then you say is this really the correct trajectory and if it is are you guys really the right people to do it? Which is a little unfortunate Great. Well, we're in overtime now. So let's leave it there Thank You Mariana and Seth and all of you and Have a great day at SoCAP and and and that's it. Thanks for getting up