Climb By VSC: Episode 14

Published February 1st, 2023

Andrew Beebe is the Managing Director at Obvious Ventures, a venture capital firm with over $1 billion AUM that invests in early-stage, purpose-driven entrepreneurs reimagining trillion-dollar industries. Andrew joined Obvious Ventures at the firm’s inception to lead investments in climate tech and clean energy solutions, and his investment thesis has led the company to invest in companies, like Proterra (an electric bus company, $PTRA), Lilium, (an electric flight company, $LILM), and Amply (an electric fleet management company).

History Doesn't Always Repeat Itself, But There's Some Rhyming In It That We Should Learn From

Vijay Chattha: Welcome, everyone to another edition of Climb, a podcast that is put together by VSC ventures and interviews people that we believe are moving the needle in terms of company building in the world of planet tech. Today we're really excited to have on Andrew Beebe, who is a general partner at obvious ventures, someone I've known for maybe a decade or more as someone who is truly had been through a number of the iterative cycles of sort of innovation as it applies to saving our planet. So just a little bit more on the firm, obvious ventures was set up by purpose driven founders previously involved in growing companies like Apple, Twitter and Patagonia. Andrew joined obvious at the firm's inception to lead investments in climate tech and clean energy, and his investment thesis has led the firm to invest in companies like Proterra Lilium, and amply and prior to that Andrew was an entrepreneur himself that built companies for the last two decades, all the way back to internet 1.0 And also the clean tech wave of the 2000s when he co founded Energy Innovations which he grew into a major solar developers serving customers like Google, Disney and Sony. So with that, Andrew, I hope I got most of that right and welcome to the show.

Andrew Beebe: You nailed it. Thanks so much for having me.

VC: Great. So, you know, the goal of our show is really to get into sort of how we can help founders build companies right now. And I think part of that also is the origin stories and how you've gotten to where you are. So maybe you can kind of start back to like pick what has gotten you to this place. What is made you passionate about focusing your life around this space. And so what's that journey been sort of an entrepreneur investor?

AB: Yeah, I think it's probably helpful to go into the Wayback Machine for a minute and just talk about my initial efforts around about being a founder in the internet 1.0 realm and in the mid 90s, believe it or not, I came west as this internet thing was starting to blossom. And interestingly, at the time, or I think relevant at the time, a lot of people got into it back then. Because it was a movement because it was changing things because it was empowering people and giving access to information to those that previously didn't have it and it was really a transformational period. And it was not clear to any of us that we were going to make any money that this was going to be a profitable endeavor. And I remember in 1998 going to the story place Sand Hill Road and asking the story investors to give us money for something like Shopify in the olden days, as Amazon was just becoming a thing. And the internet really was just become a commercial thing. And they would listen to our pitch very carefully and say many of them and many well known firms would say look, we just aren't sure that anyone's ever going to put their credit cards on the internet. Right? This was 1998. It was not the 70s it was a period when these things were really emerging, and people didn't totally get it on the investment side. They ultimately did get it and we raised a ton of money and we built a wonderful company. In 2002. We sold that company after riding through the .com bubble bursting and really seeing some incredible highs and incredible lows and I have all sorts of fun stories to share about that which are relevant even today. But at that point, I decided to look for the next wave of that kind of transformation, that massive macro tidal waves of change that would affect all parts of the global economy. And it was early but I came around to energy and broadly energy and then specifically renewable energy and then specifically solar energy and it was 2002. You know, Gore's movie hadn't come out. Climate change was like a thermostat setting. It just wasn't a thing at all. In fact, in fact, I realized recently, I didn't really I remembered I was in the audience for the filming of Inconvenient Truth in Los Angeles. There were many films and many audiences but I was in one of the original ones. So it was early days and thankfully because of great evangelism by Al Gore and John Doerr and others, the space got a lot of attention. And we were part of that one point out, you know, that Carlotta for as we call it, the installation phase where you're sort of just everyone's getting up to speed What the hell's going on. And it reminded me a lot of the early days of the Internet period where everyone really was scientists and dreamers. And there were a lot of PhDs and a lot of technical masters but no MBAs right? The suits had not shown up yet. It's very, very exciting time but it really takes waves and it takes ups and downs before the second phase that really, that's the scaling phase really shows up and I think that's where we are today.

VC: Got it. What is the difference? Between that first clean tech wave and this wave? Like sort of specifically why is now different and better in terms of being an entrepreneur?

AB: I mean, we don't have time to enumerate the ways in which it's different. The simple answer is it's different in almost all way ways. And I'll just name a couple of the big ones as far as I see it. And I think there's really one sort of, I don't know if you've got softer but more qualitative one that I think matters most, but on the quantitative, the quantum of dollars is radically different. The quantum of success stories is radically different. Ie there were zero, then and now we have not just Tesla, and Sunrun and nest and endface. But there are you know, we're tracking, I don't know 25-30 unicorns in climate alone today, and they aren't just sort of 2021 unicorns. A lot of them are gonna ride through these tough times they come out the other side and be the kinds of businesses that change the world forever. I mean, the fact that every single automaker in the world essentially has said yeah, we're done with the internal combustion engine. We're moving on. That that is a radical difference from where we were 15 years ago. And that's just mobility. The fact that every utility in America said yeah, we're never going to build another coal plant in our country. That's a radical difference in the past. So a lot of the technical transformations have taken place. Now the money is showing up to scale the hell out of a lot of those different industries. So that's a big, you know, the money is different. The policy is very different. The world is different, and we see climate every single day. But I think ultimately, to me, the big difference is the quality of the founders. And I can say that because I was one of them in the beginning and and we have come a long way. We have come a long way in terms of the volume and the clock quality of founders and just everyone wanting to come over. I spend 40% of my time recruiting but a lot of that is inbound, just incredible technologists, you know, had CTO of one of the largest tech companies in the world resigned, called and said, I want to get involved in climate. What should I do? You know, these are some of these are people that don't need to work for a living anymore. Some of them are people just coming out of school I talked to Yet Ming Chang at MIT, who is just an extraordinary prolific inventor and company founder and also terrific professor. And I asked him about the incoming class at MIT. And I said, you know, do you actually can we believe that the youth are going to save us on the climate front? He said, Look, 50% of the incoming kids want to work on climate, they want to study climate. So what do the other 50% want to do? He said they want to do robotics, and they want to do computer science, but also for climate. So you know, half of them are just undeclared. But 100% of them want to focus on climate. That's an MIT that was just not even close to the case 15 years ago, 20 years ago, so everything about the world has changed. But the real difference is that when you talk to young people, when you talk to consumers, when you talk to shareholders, they all have this new set of needs and demands, which is that they want their work to matter. They want their consumption to matter, and they want their investments to matter. And that's that's changed things forever.

VC: Amazing. And tell us about sort of, as you're thinking about as an investor, one thing we discussed was, you know, in terms of your themes, electrification, was a big one, sort of a focus area, and there are so many things in climate right now. You could look at decarbonisation, you could look at food and material science what have you, electrification seems, is the one thing that stood out when we talked before is that sort of your main focus, and then in that, like, what are the areas that founders there's still opportunity to build something that you want founders to build an income from?

AB: Yeah, that's that's a great question. simple minded investor. I just take the global economy as a pie and slice it into as few different pieces as you can. If we acknowledge that every portion of the global economy is about to be reimagined through a climate lens. We can break it down and talk about opportunities of investment and opportunities for founders. The first one was energy generation, and we are decarbonizing energy generation. We've been doing it for about two decades, maybe three now, and it's going really well. There's a lot of work to be done, but that that is a big wedge and it's the biggest wedge. I don't believe there are that many transformational opportunities, relatively speaking in the energy generation space, because we've done so well because of all the great entrepreneurial work that so many people have done. And because of the incredible scaling work that Vestas and GE and Ron Wayne, you know, all these companies did a lot of work and it's it's humming now. There are tweaks, you know, end phases, a great startup story that built a better mousetrap for solar panels and inverters and batteries. There's a bunch of stuff in that space that might tweak things incrementally. Some of those might be venture worthy, but in general, we don't spend a lot of time there looking for the homeruns. The next big wedge is transportation, the moving of vehicles and then the moving of goods in every modality from space to underseas. All of that is going to be decarbonize. And that's a really, really fertile space. My family now has multiple different brands of electric vehicles. You know, 10 years ago, my first electric vehicle was a Nissan LEAF, but there was a leaf and there was a Tesla and that was it. Now we have every option out there. There's so much more work to be done. The quality differences between some of those vehicles is shocking the over the air update, you know concepts in a way we can utilize them. The reimagination of the tier two supplier network in an what I would call an EV native tier two supplier network is underway, you know, well underway and a lot of great companies are being built but even the way we buy and sell vehicles is going to change radically the way leases work all these things because we're solidifying every kind of portion of the electrification world. So things with four wheels, that's exciting things with two wheels and exciting but electric flight is just getting started. We invested in Lilium but there are many other great companies doing that. There's long haul issues that are very difficult, like universal hydrogen doing hydrogen based flight, there's fleet zero and all sorts of awesome maritime companies. candela is a really interesting Electric Boat Company. We're not investors in any of those, but those things are exciting and happening. So that's the next big wedge is just mobility and to answer your question directly, I do spend a lot of time there. It's not where we spend all of our time. Then there's like decarbonizing the rest of the economy, mainly industrials and that can be at you know, ag and industrials. So cement, steel, fertilizer these are traditionally tough businesses for venture capitalists, they're very low margin, oftentimes very capital intensive. But when you're transforming that entire industry, there are probably opportunities to build some big companies. Tesla is famously you know, went into this horribly low margin capital intensive, highly complex, global business and it's now one of the most valuable companies on the planet. So there's there's probably stuff to be done there and industrials. And there's certainly a lot of decarbonisation targets. I mean, the haber bosch process in creation of fertilizer is just a great example because it's a great like, you know, it transformed humanity forever. It did all sorts of great things. It's changed the equation in terms of hunger around the planet. It just happens to create a lot of co2 so we can probably give it an upgrade. And then finally, there's this other category of like, the layer on top and that's software that's helping everybody work out how all this happens. And that could be things like logistics efficiencies, it could be things like carbon trading and carbon markets. We're investors in Sinai, which is helping people both account for all their carbon at an enterprise level, but then also figure out where to reduce it in what sort of schedule so that you're doing the most efficient production possible. And then there are other companies that are helping people buy and sell carbon offsets, which I think is a very small industry today. And yet, if you look at science based targets and issues or anything else, it's got to become a very, very large industry for us to solve this challenge. So that's how we look at the whole pie. We will invest in all of those but we are less interested in the sort of the scaling phase businesses that are like more like yield products like solar farm investing and that kind of thing, where I spent a lot of my past and more interested in the technology that has the potential to become multibillion dollar and scale.

VC: Makes sense. And so when is the right time for the founders to come to you? Like what's the cheque size you're doing? And what are some of your like considerations when you look at the founders as well about like making the bet or not?

AB: It's a great question. I think we looked at something like 2000 companies this year, didn't meet with but looked at the DEXA or tracked and met with 2000 companies and we invested in something like 12 so that the pipe is it's a very wide slope and low slope and wide pipe and we you know, typically we invest in Seed or A, we typically write checks between $2 and $15 million in size. So that's a pretty wide range. But in general, the earlier the better, particularly in areas that we feel like we're pretty well versed in like climate or mobility. So we'll look at companies very early. I was recently meeting with some awesome founders that are, until last week, were still employees at a major ride sharing company but they had been germinating ideas with me and with other folks about an electrification, product or service. And they've now left and that's the kind of like we'll do that stage. We amply power with Vic Xiao, you know, I sat with him at a cafe and he pitched me his idea right as he was finishing an urn out from selling his previous company and we committed on the spot to invest in his company. So we'll do things very, very early. But I would say more typically, we are a series a company so we'll look for product market fit. And we'll look for, you know, we look at Team timing, TAM and tech and traction, but the team and the TAM are really at that early stage the most important thing, tech usually involves can even pivot can even be quite different. Pivoting a team is a euphemism that really makes it sound nicer than it really is. And that's not something that we typically do. We try to invest in that core team from the get go so we spend a lot of time looking for teams that gel well together solo founders can can be okay, but we want to understand what do they how do they work as recruiters who do they come together with and and that has led us oftentimes to have a bias toward repeat founders? Definitely not all the time. And some of the greatest founders we backed were not repeat. They were very technical. They were probably overlooked because of unconscious bias around not believing that a very technical person could become a great manager, a great communicator, and yet they have done incredible things in some cases, taking the companies all the way to IPO. So we will look for those repeat founders, deeply technical founders, but regardless of where exactly they've come from, looking for people who can and have proven an ability to build extraordinary teams

VC: Did you find that in 2023 moving forward with the market correction again, correction is dependent on what industry you're in and what have you, but is there a particular skills that are now you're looking for even more so or less so than these founders? Knowing that possibly fundraising may be harder? Possibly recruiting maybe easier? I don't know. Like, is there any shifts you see that that may matter more so moving forward?

AB: Yeah, I mean, repeat founders have been oftentimes been through some ups and downs and and that makes that kind of characteristic even more important. I mean, look, I remember in 2000, running a very, very hot startup with lots of venture money and amazing team of people and cover magazines and all this stuff. Harvard Business School asked me to come and speak to their first years as one of these CEOs. And I went out and believe it or not, I had a full on man bun, ponytail and rotor motorcycle, and all the stuff you know, it was it was straight out of central casting, and that these first year HBs people who'd like really spent their whole life trying to get to that seat, you know, we're so frustrated because they think we're proud of themselves for getting engaged. Yes, but they were also disappointed. They weren't doing this cool thing out in Silicon Valley. And they basically asked me in a lot of different polite ways, like how can we be more like you? And I told them they all had to quit school and come west and you know, they were just wasting their lives away here at Harvard Business School, and it drove them absolutely bananas. And then the next year, everything had changed. And my company was in a tank. We were really having a tough time, the bubble had burst, funding had just disappeared. And we were doing layoffs, it was a really tough time and after that, of course, HBS asked me to come back and speak to that same group of students they were now second years about to graduate and basically all they could ask me very politely again was how can we avoid being you? It was amazing what a year could do and of course, not deterred because I knew it was coming. I said to them, you need to stay in school as long as fucking possible. And you know, go to Kennedy School, do whatever you can, but don't come west, whatever you do. And of course, that just drove them even more crazy because they were about to graduate and they all decided to come west and so those kinds of experiences cannot be read in a book or maybe not even heard on a podcast or whatever, and turned into simple directives for action, but the experience does matter. So in this challenging period, which I feel strongly we are entering into. This is where people will earn their stripes and they will either earn them as those first time people going through it and they can and I did that and I earned some stripes. I made a bunch of mistakes. The second time I went through tough times in 2008. It was on the climate tech side and climate Tech was being you know, wholesale, assassinated and turned into a political hot potato and all this stuff and then the economy collapsed. We were better prepared that time around because we could see some of the chess pieces falling into place. And we knew this is when you get ahead of it. This is when you sell the business and we were able to successfully do that. So this will be a learning period for a lot of people. I do hope that everyone is really open to that learning and open to listening to their peers listening to their board members listening to whoever they need to to make sure that they've got lessons from the past or just different perspectives. You know, history does not really repeat itself but there's some rhyming in there somewhere and we will be able to, we'll be able to learn from one another for sure.

VC: Are you guiding founders to possibly raise more money to weather this are you looking for more commercial traction than maybe possibly would have looked at it two years ago? Are there any specific mechanics that you're sort of tweaking?

AB: Yes, and yes, for sure. Look, every circumstance is different. So I don't want to just say you know raise if you got it kind of thing, because there are circumstantial issues where if you're on the cusp of Q greater than one, and you're going to do that in six months, and you've got three years of runway, like maybe you don't raise now you know, maybe if you're really confident you wait six months, but in general, if you've got an opportunity to take in more capital, take it in, if you've got supportive investors and they want to help bridge you, whatever it is, take the terms and do it. Because they are when you say no to that they're gonna say okay, I've got a limited pool here. I'm gonna go give it to the next portfolio company that's in need. And then when you come back six months from now, say I was just kidding, I actually really need that they might not have the budget or they might not be in the same position. So this is a great like, take what you can get right now kind of moment, broadly speaking, every circumstance is a little bit different. And on on the upfront side, we're still seeing everyone will say this, but you know, great deals still get done. The difference for us right now is that we have a lot more time to make decisions. And what that means is that the offers are not coming to founders as fast as they were. But that's because the offers over the last two years were coming truly irrationally fast and investor making a decision about your company in 48 hours is not a good idea. It's not a good idea for you. It's not a good idea for them, and that's what was happening a lot over the last couple of years. So in fact, we're not really like this is not some crazy new normal, where everything is really terrible. This is just a return to normalcy. It may get worse and we might say the new normal is really really bad, but really we're just returning to where things were two or three years ago.

VC: Yeah, makes sense. Now, one thing that we know I think I've seen as we've gotten more interested in investing in the space is sort of the delineation between sort of on the software side, right? So there's, of course hard tech companies. creating amazing things, often capital intensive, often scary for venture capitalists to invest in that are not used to those or they got burned in some sort of hardware, consumer play, you know, three or four years ago. But then there's the software companies that are coming in, right. I think there's this belief today. VCs get software, we get SAS, we get how that works. But then the companies that come in, are you kind of wonder, is this just a pivot to climate? Is it truly is there a big enough business just to do this? Only for climate like how do you look at that? Yeah, great question. I

AB: mean, first of all, what I'd say is, venture capital started with hardware, you know, with chips and with a biotech early, not the beginning, but early days. And we still do a lot of that, you know, hardware is a key part of the venture world. It's super hard, as many people have pointed out, but it is, you know, it's a central part of what venture capital is. And you don't have to look for other than any kind of drug discovery work where people are really investing in things that may not bear fruit or revenue or proof, even like, you know, Product Market Fit until they're public. Right and we'll look we'll we'll look at Fusion the same way you know, cold fusion is this sort of magical potential outcome, but to underwrite it, you really have to buy into something that isn't going to produce the result that they're promising until billions have been invested literally billions in a single company, and they've probably gone to the public markets to get some of that. So there are a lot of different ways to play this game. But in the software side, I think you're asking the right question. People are excited about climate as a space the macro looks pretty good. Gosh, the entire global economy is about to be reset around this new lens, sort of like the internet. You know, the internet we've reset around a digital connected world. And we're still 30 years in going through that reset we're about to do and we're in the midst of the early stages of doing the exact same thing around a decarbonized global economy. That's a great investment thesis. It's accurate and it's exciting. However, it is not all going to happen in software. So I think your question is a great one when you're looking at any kind of software play, is it you know, an example would be somebody just building a water manager or air handling management software for buildings, you know, yes, buildings need air handling, do they all need one type of software? And is it really going to be deployed in every single building across the country? Or does this really only work for greenhouses or does it only work for a specific vertical? And if it does, really, how big is that market potential instead of just oh, it's climate? So it's going to be huge and I think a lot of software players who looked at you know, story firms like emergence, who really did incredible work defining that the SAS space and then owning it and then getting into vertical SAS, they start to try to port that just to climate because it sounds like Oh, vertical SAS for this, but very quickly you get to a very, very narrow specific addressable market, and then you don't really have a high probability of venture returns. And that's why I think traditional or generalist funds are all getting super excited about carbon accounting or carbon management for enterprise just because that is a space that every single large company on the planet is going to need. And you know, and it's, it doesn't have to necessarily be verticalized. It could there. There may be generalist SAS platforms like Sinai that are going to do that. And I think that that is like if we could find more places like that to replicate, I think you'll see a lot more generalist software oriented investors coming in. If we can't, you're gonna find a bunch of folks who I would say, rather than optimizing for homeruns, which is typically what we do, we look for multibillion dollar companies being built you might optimize for singles and doubles. And some people call that Moneyball, you know, which was a great strategy baseball that actually worked really well for some folks. You know, you might do that in venture and say, I'm going to do a solar field software management product. I'm going to do a large scale wind farm development piece of software or weather analytics software that's only for wildfires, for utilities or something. I think a lot of those I've looked at a lot of them. I think they're very interesting businesses. I can't find my way to believing any of them are going to turn into billion dollar businesses or multi billion dollar businesses, but if you're playing Moneyball, those could be great bets.

VC: Makes sense. And that's interesting. You bring up the point around, like, what is a venture scale return? What are the return profiles? One thing I've learned in this business is there's a lot of new climate funds and then they all have different mandates and some are family offices. Some are corporate, from the obvious perspective with your LPS is the return profile for investing in this space. Do you have any other any different expectations from LPS in terms of value back to humanity versus just the money like just curious on that?

AB: Yeah, definitely not. Our LPS many of whom are big family offices, some of which have investment groups that are just doing climate directly. We have endowments, sovereign funds, just every every type of institutional investor and they are investing in our belief that if we find these purpose driven founders transforming the biggest industries in the world, we should post outsized returns. So that's the obvious thesis. That's all it is. And that means we have to compete on the same terms in terms of measurement as every other venture firm out there. I think if I were to just sort of articulate that, the difference is that they just believe we have a unique thesis, this thesis that you get outsized returns because of the purpose, not despite the purpose of the businesses.

VC: Totally, that's great. That makes sense. So I think we're going to shift a little bit to some, you know, I think, maybe just personal growth type questions I have as somebody out there who has been in the space for now two decades plus, as you come up in your career, just couple of questions. I had one like, sort of, but are there any particular best piece of advice you've gotten, as you were an entrepreneur? And then sort of Secondly, the best piece of advice you got as an investor that, you know, is stayed with you?

AB: Well, I mean, this probably is on both sides, but we are you know, I think as investors we are here to support we work in service of the founders. And that's a, an attempt to staying humble and making sure we know who's really driving the ship, but it's also a reality and it's a good thing to remember as an investor that we don't get to say, hey, if that strategy is not working, you've got to go do this one. You don't, you know, they don't really work. They don't report directly to us and they are not in every single circumstance going to listen to every piece of advice we give and so, and I felt that or I got that advice somewhere along the way as a founder because sometimes founders will fall into the reverse to where, especially in the early stages, and they've got great investors that they really like our board members or advisors, and they might just perpetually take that advice. You know, if I think a fellow investor said to me if I'm the smartest person in that boardroom, I'm in the wrong room, right as an investor, the founders should be the smartest ones in the room when it comes to how to think about their business. Investors can poke holes at this we can we can guide and we can give ideas, but that's not a patronizing way of saying actually tell you what to do. And just Townshend as a tough question or as advice that literally is just the reality you should be. You should know more about your business more about your customers and more about your team than we do and look to us for advice and it took me probably, I don't know it took me four, four years to figure that out as a CEO, as a founder. And once I did, I think it changed the tenor of how I managed the business. And then the second piece was I in both my companies, I had great co founders. And that matters a lot. At least to me the way I operated. I know people who have started businesses on their own and done really great things but either in that founding phase or soon after, it's rare that we don't look to the depth of the whole senior team at least to understand the full picture of the business, that matters a ton. It matters because A players hire A players and B players hire C players. And it matters because that ripple effect will take hold very very quickly. And it will ultimately, in my belief, it's often what destroys you know, a well funded company that's got the other pieces in place. It's the breakdown of the team that causes the collapse of the business.

VC: That's great. Now, ask you a follow up there. How quickly can you identify the difference between an A player and a B player?

AB: Well, not in 24 hours, not in 48. And again, I don't think we did any of those deals in last couple of years. But we did deals at speeds that for us not in those timeframes. For us we're uncomfortable, and we'll we'll see. You know, I think time will tell that the cycle on these things takes a while but I think especially once you've spent time with the whole team, you quickly get a referential view. And then we of course, do secondary references and we do sort of deep referencing work on the founders. And from that you do I think pretty quickly within a few days, I think we can usually get through the right picture of who these people are. That that's true, I would say with geographic and sectoral spreads, that gets longer and longer. So if I'm looking at founders in India who never worked in the United States and aren't deeply connected to us, and it's in a space like carbon sequestration, or agriculture or something that I just don't know that much about. It takes a lot longer. And that's one of the reasons it's not you know, VCs, it's not just we're lazy and we don't want to get on planes. it's actually quite difficult for us to build out that richness of contacts and reference ability in different parts of the world.

VC: How important is it with the location of these companies now that you're backing?

AB: We you know, we typically say that we're only going to back companies in North America and occasionally Europe. We have enough of a network in both of those areas almost anywhere in the US, somewhat stronger, somewhat capable in in Canada, and then in various European countries. We built a little bit of a network around Germany and around some of the Nordics. So there's, that tends to define what we'll look at. We will look far afield like Israel or Australia or India, we've looked at things all over the world, but I think in general, we tend to focus on North America and Northern Europe.

VC: Got it. So one of the interesting things about Obvious is a bit of some of the mechanics of how you work with founders. So sort of reading about this. I remember when you announced it on social media, but there was this idea of sort of this mission driven term sheet. I don't know if you could kind of jump in a little bit on like what that is. And so I guess it's like the world positive term sheet.

AB: Yeah. So we created this concept of the growth positive term sheet, which was just really interesting. Awareness from my partner James Joaquin, who looked up one day and realize that term sheets when founders really the first time you guys returned to the founder. My reaction as a founder and for a lot of people that we work with, I think the reaction generally is I can't believe I'm burning so much legal money and so much of our time and like literally taking this deal to the brink overturns about things that are so unlikely to ever manifest. So we'll talk about all these hypotheticals about when we finally go public and the threshold of when we can go public without asking every single investor and all this stuff that you know, has to manifest in very weird circumstances. People are surprised by that. While meanwhile, we are not necessarily always talking about our hopes and dreams and the way we want to run the company the things that we want to build into the DNA of our value set, which are so core to tomorrow, that tomorrow of running the business. So we created a non binding addition to the term sheet where we would give entrepreneurs the opportunity to just write in the other things they think are important. So that might include Hey, we want to have a deep and immediate focus on real governance at the board level. Yes, we told you in the term sheet, we want this in this board composition, but we also want to have people with diverse backgrounds at the board level. We want to have people from different industries. We want to focus on diversity within our own team. We want to be a B Corp. We want to be a PB, public benefits Corporation. You know all of these different things that describe more clearly the intentions of the founders and their values. We wanted to give them a space to put that down so that on day two, or the first board meeting, there weren't a series of surprises like wow, I didn't know you cared about that or you don't care about that. And we do and it's been really catalyzing because it's just a fill in the blank in a lot of ways. We give some suggestions but it's up to people to fill it out as they want. We are now taking it to the next level and working with the nbca to try to incorporate some of the basic concepts of the language into an actual nbca form, which all of us many of us use as a starting point for negotiation with founders. And I think that some of it is pretty boilerplate and basic, but would be valuable to have built into actual binding term sheets.

VC: That's amazing. It's very unique. And are you seeing impact and now that you've implemented as a change that the companies operate, how they manifest these things more clearly, or were earlier in the process of company building?

AB: Here's what I think. I think it is a more of a self selecting or screening tool in the sense that when we broadcast these ideas, when we explain what world positive means to us, we no longer get people we rarely get people coming in who are doing things that don't share a lot of these basic values and therefore by the time they're getting to the world positive term sheet, they're like sure, yeah, of course. But you already know this. But sure, yeah, I'd love to fill that out. That's great. And we think it's precedent setting for other investors to be able to broadcast the way the founders are thinking. So I think it's helped. It's helped with clarity of alignment more than anything else, but it hasn't changed. I don't think it's really changed the behavior because we don't, again, we want people to come to these conclusions on their own. We don't want them to follow our lead solely because we're suggesting so it's a good question. I don't I don't think so. But certainly over eight years and 100 deals that we've invested in, we are now at a place where we do not get you know world negative opportunities coming our way we really get people who are values aligned.

VC: Make sense? What is your take on cold fusion? Many people have heard about it for the first time in the last two weeks. What is it? What does it mean?

AB: Is this the part where we both crack a beer and start to get into it? I am super excited about fusion and fission as a human on planet Earth. I'm having a tough time getting excited about either category as investable from a venture standpoint. So and I have plenty of people who I respect deeply in the venture world who are who are putting a lot of money to work focused on particularly cold fusion, but some fission as well. And and, you know, bless their hearts. I'm glad they are and it's certainly in the home run category. I worry about the timelines for these technologies. And I worry about some of the ROI in terms of you know, how do you really work when and how do you get your money out? So I think the announcement from Enron was exciting. I think even more exciting is some of the startup work that's been underway for decades. Well, they're, they're both exciting in their own ways, but Commonwealth fusion I think is just an outlier, doing some super exciting things. But the issue is not the breakthrough that Enron described, where we get more energy out than we put in. It's more a techno economic version of this queue number of more energy than we get than we put in. It's really more dollars out then dollars that we put in both CapEx and OpEx. And, and it would appear to me that we're a long long way away from dollars in to dollars out being greater than one.

Thank you so much for reading our latest update from VSC Ventures Fund I. We're in the early days of our long and healthy partnership with all of you, so please reach out to us with additional questions on anything above. Thank you again for your support for our vision and our fund!

Vijay Chattha & Jay Kapoor

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