Investing

Icon: We’ve Entered The Climate Decade, No Really

Many climate investors remember the early 2000s with a shudder. The promise of greentech riches mostly left a trail of green tears (with a few notable exceptions like Tesla, Beyond Meat, and Sunrun). But while investors pulled back, climate change doubled down and our decarbonization needs only accelerated. So when venture capitalist Andrew Beebe announced earlier this year that we’d really entered the climate decade, I was relieved but skeptical. Hadn’t we seen this ad before? Why was today different? So I sat down with Andrew to understand how climate startups can reach “escape velocity,” where Bill Gates is wrong, and what’s the hottest climatetech sector that most investors overlook.

Brendan Doherty: Andrew, welcome to Icons of Impact. You run a venture company started by one of Twitter’s founders. It’s got a great name too. Share a bit about Obvious Ventures.

Andrew Beebe:  Sure — Obvious was founded seven years ago by my partner Ev Williams, one of the founders of Twitter. We met when I was an internet entrepreneur in the late-90s. He came together with my now partners James Joaquin and Vishal Vasishth to create Obvious. They were all used to the venture-backed model but wanted to see a different kind of venture capital that was more purpose driven. Ones that are focused on the companies we wished existed in the world, with a purpose driven founder trying to transform trillion dollar industries. I came on right as they were closing their first fundraise, which they like to remind me on a regular basis that they did all the hard work. The core group has been together from the beginning and since then we’ve raised three additional funds and have a little over $600 million under management today. We’ve been doing the same thing since the outset: trying to solve real problems in transformational ways.

Doherty: Would you put climate on the top of that list?

Beebe: I would. So, we look at three different categories. One we call “Healthy Living,” which is about bringing full-stack healthcare to the fore and what we call “consumer wellness goods” — like consumer packaged goods but more focused on wellness and nutrition and health. Another big category is  “People Power.” That’s about education and fintech, and the way that we empower small businesses and give people financial empowerment and inclusion. The third category is “Sustainable Systems” and that’s what I tend to lead. When we’re discussing these systems, we’re really discussing mobility, energy systems, and the future of cities. Even our first two categories often have a climate lens to them. For instance, we invested early in Beyond Meat and that’s a climate story but also a health and wellness story.

Doherty: Yeah, Beyond Meat is much more intersectional in terms of its impact. Can you distill down your investment thesis? There’s a component to these trillion dollar opportunities where they have deeper impact, but obviously there’s got to be a strong economic calculation to it. 

Beebe: You know, we sort of jokingly say we ban the word “impact” which I know it’s tricky for this conversation but it’s also not really true. There’s some baggage that comes with the concept of impact investing — people say that it has to be concessionary and we definitely don’t believe that. In fact, we hope the opposite. We call it “world positive investing” and believe that such investments should outperform over time because companies that are truly solving the world’s biggest problems and led by values-driven people, those should be out-performers. 

Doherty: Agree but tell me more about your thesis.

Beebe: I think in venture capital, a lot of people will talk about Team, Timing, Tech, and TAM (total addressable market); sometimes people add Traction in there too. In the very early stages, I tend to focus on Team and TAM. I think, “Are these the kinds of people that you want to spend the next 10 years of your life transforming an industry with? And is that industry, even if it doesn’t exist today, absolutely massive and in need of transformation?” When we invested in Proterra five or six years ago, we believed municipal buses were in need of an overhaul because they polluted people in at-risk areas of our community. Those are the categories that we’re going to get really excited about.

Doherty: Yeah I’m a big believer in the idea that capitalism starts with human capital. A lot of how we think of capitalism is the Dow Jones or GDP, when really it’s about a much fuller understanding of productivity and wellness. Let’s shift gears — I read your great piece about entering the “Climate Decade.” In it, you acknowledge that there was a moment in the earlier 2000s when people thought we’d entered the climate decade only to see some spectacular failures and setbacks. It left a lot of smart folks skittish on the sector. What happened in the 2000s, and what makes today the “true” climate decade?

Beebe: I think in startup land we often talk about escape velocity, which is the ability to escape the gravitational force of some big entity and be free of it. And if you can’t do so, you come crashing back down to the ground usually to bad results. I think entire categories must reach escape velocity to succeed. In 2008, things like biofuels and even a lot of the solar industry and aspects of wind were simply not cost effective or technologically advanced enough to reach escape velocity. So they came crashing back down. At the same time, there was a lot of excitement by investors that this could be the next big thing. That excitement paired with the realities of the situation resulted in significant lost capital. Still, a bunch of other companies did get started then like Tesla
TSLA
, Beyond Meat, and Sunrun
RUN
and they were huge capital returning opportunities for early stage investors. So we shouldn’t throw the baby out with the bathwater.

Doherty: What’s different today?

Beebe: Well in Europe and China, the solar industry was alive and cranking over the last 15 years. It crushed the cost curves better than we were able to do in Silicon Valley. So instead of being the leading edge of that manufacturing cost curve reduction, we were just the recipients and beneficiaries of it. Now you see explosive growth in those categories but without venture capital. Instead they’re using project finance and infrastructure dollars. Also, we always say the Silicon Valley ecosystem has a multiplier effect in regards to acquiring venture capital peers to help invest in things of talent. But that wasn’t really fully enabled for cleantech or climatetech 15 years ago and it is now.

Doherty: Climate is often very partisan in the U.S. Do you feel we’re past the point where partisan opposition can slow progress, that it’s gotten to a point where the markets will drive it now? Or is there still a strong role for policy to play? For instance, Biden’s huge infrastructure bill could unlock enormous amounts of climate capital. 

Beebe:  Yeah, it’s a really important question. In most of the rest of the world, the climate debate is over and now it’s just a debate about which solutions we’re going to use. France just voted to restrict short haul flights because of climate. Most Americans could never imagine that you’d not be allowed to fly from LA to San Francisco because of the climate. The way I look at it is, we did some extraordinary work moving the  climate ball forward around electric vehicles and decommissioning coal plants and transitioning to renewables, even under Trump. So, if we could do all of that in the last four years with Trump, imagine what we can do with four years of Biden. Increasingly climate is one of those things where everyday you wait to get on the bandwagon is another day you look more and more wrong in your position politically. I do believe that more and more Republicans — especially moderates but possibly all perspectives — will realize we have to do something. And then there’ll be a great, constructive debate about the best way to do that, as opposed to just resisting the inevitable.

Doherty: Public polling shows that most Americans believe that climate change is real. I think it’s the jobs and re-skilling parts that are tricky. It’s no surprise that the Biden administration is trying to figure out how to help coal workers in West Virginia, home of swing Senator Joe Manchin. There’s often a liberal, more elite version of climate change that doesn’t leave much space for others. I’m a big fan of figuring out how to meet people where they are.

Beebe: I agree. I think the first time around we didn’t do enough to look at this from a jobs and working families perspective, and recognize the transition we’re going through and how that can really be a massive benefit to the health and economic welfare of hardworking people across the country. Now I think we’ve come to understand that part and are working on communicating better. The number of people employed in wind is much, much larger now than coal, same with solar compared to coal. 

Doherty: Switching gears. Did you read Bill Gates’ book How To Avoid A Climate Disaster

Beebe: I have not, though I’ve read a bunch of his other stuff.

Doherty: Given that you’ve read some of his work, are there positions he takes that you disagree with? 

Beebe: A few years ago I wrote a piece strongly disagreeing with his perspective. I’m a huge fan of the Gates family broadly speaking, how they’ve distributed their capital and worked so tirelessly without ego to try to impact health and climate. I think they came to realize that climate change was a precursor issue to tackling global health. At the same time, Bill has relied heavily on an academic Vaclav Smil who writes, without a strong basis, on core aspects of technology transition and the speed at which it can occur. I worry that an over-reliance on Smil’s analysis originally led Gates to believe that the only way for us to solve the climate crisis was to come up with miracle solutions. I worries there was not enough focus on the value of the hard work of so many people who are not really performing miracles, but just putting up another wind tower or finding a way to tweak manufacturing of solar panels to make them more cost effective. I think those things alone can get us most of the way there. 

Doherty: That’s an interesting distinction you’re hitting — there’s room for all the tools on the table. I think his book isn’t about where to necessarily invest but how we avoid a climate disaster. I believe that can be a different lens. He’s making the case that we’ve got to focus on the biggest, most scalable solutions in addressing climate change.

Beebe: I think it’s a great question and worthy of real debate. I’m not dismissive of his efforts and writing books about this stuff is just a good idea as it gets people talking. We need to activate everyone, right? What gave me some anxiety when reading his ideas was I felt it implied to people that unless you’re a nuclear physicist, there’s not much you can do. That if you don’t have a miracle popping into your mind right now you might as well just go back and do a crossword puzzle because it’s all coming to an end. I know that’s not really what he means. But I don’t want to let anyone off the hook here or imply there’s not a role for everyone to play. And when we say to people, “We need miracles or we need the greatest scientists in the world,” those may be true statements but we also need everyone else. I sometimes worry that that gets lost in the shuffle. 

Doherty: I appreciate that viewpoint and I do think people need to feel like they can actively participate because climate often does feel so abstract. So the moment you give someone an out they’re more likely to say, “Okay I’ll take it and can feel absolved of having this responsibility.” I want to end with a few rapid fire questions. Who’s your favorite twitter handle to follow?

Beebe:  Jason Jacobs’ My Climate Journey

Doherty: Your first ritual of the morning?

Beebe:  Espresso. 

Doherty: A good start. Favorite contrarian thinker?

Beebe: Jigar Shah

Doherty: Andrew Beebe, 10 years from today, what would you look back upon and grin at? 

 Beebe: We did it. We bent the curve, not just on COVID but on climate.

Doherty: What would your partner say is their favorite trait of yours, and what would they say is your most challenging one?

Beebe: I was going to say humility but that would be a joke.

Doherty: What would you say is one sector within climatetech that is poised for real growth but it’s overlooked or missed?

Beebe: Aquaculture – it is a very non-US category of the economy and yet it’s massive. It’s bigger than beef globally. And there’s a lot that aquaculture can offer to the future health of humanity and of the planet simultaneously, so I think there’s a lot to be done there.

Doherty: Who do you admire the most and why?

Beebe: I know I’m supposed to have a good answer for that, but I never do. I think Bill McDonough has done a lot of great writing on sustainability and thought through where we go from here. Also I have a love/hate relationship with Elon Musk, probably like a lot of people … 

Doherty: After just seeing SpaceX return astronauts to space, I’d say I’m more in love in this moment. Thanks Andrew.


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