Climb By VSC: Episode 6

Published November 16th, 2022

In our latest episode of CLIMB by VSC, we speak with Tommy Leep, founding partner of Jetstream, where he invests in pre-seed climate sustainability and biodiversity startups. Tommy previously worked at AngelList, Haystack and Floodgate, and invested in startups like Robinhood, Patreon, Clubhouse and Mercury.

In Climate, There's Opportunities for Everyone

Jay Kapoor: Today I'm thrilled to be joined by our friend Tommy Lee, founding partner of Jet Stream, investing in climate sustainability and biodiversity startups. He has previously worked at AngelList, Haystack and Floodgate and has invested in startups like Robinhood, Clubhouse and Mercury. He started gesturing to help private tech startup founders get access to people and resources that they need to create a thriving planet. Tommy, I love that mission. And I'm so glad that you're joining me today.

Tommy Leep: Thanks Jay, great to be here.

JK: Yeah, absolutely. Man. Well, you have had an awesome experience working at some fantastic funds like Floodgate, Congruent and Haystack. But as I understand it, your climate journey actually started with a book. So maybe let's kick our conversation off there. What was that book and how did it lead you to launching your own climate focused syndicate and fund with Jet Stream?

TL: A mentor and friend recommended this book. I'm usually not someone who likes to talk about kind of fatalism of climate change. But the book actually was a great pass. For me. I think I read it and in two days, I just couldn't put it down. And yeah, a lot of surprises. And I realize I also had some catching up to do. So I started to look around and try to figure out who in the VC and startup community was talking about climate change. Very few people were using that phrase and, you know, not a whole lot of startups were in the space.

JK: In your newsletter, The Breeze, you mentioned that if you’re an investor today, there is no reason to not invest in climate tech. Do you still believe that?

TL: Yeah, and maybe even more now than before. There are a lot of areas around climate I mean, you can say climate tech is maybe a theme more than an industry, energy, transportation and food and add even kind of the more consumer events like fashion. And then there are other kind of more like natural or focus things like removing carbon dioxide, greenhouse gases from the environment, and more. So kind of across all of these areas, there certainly are ways for lots of people to get involved.

JK: I guess keeping on that theme a little bit, Tommy, what would you consider to be an underreported or an under discussed opportunity within climate? Where do you think investors should really be turning their attention and time?

TL: I think that one of the most exciting things is energy and the promise of clean energy in abundance. I wish more investors would spend their time there, specifically scientific people. LowerCarbon just launched a fusion fund, which is really promising. I’m excited about that. I think if we can unlock this energy in a massive way, it will benefit humanity right away.

JK: Right away. Do you think there's a structural challenge? Because I struggle with that that problem as well. Do you think that has to change to get more VCs involved in energy?

TL: I mean, there are certainly unicorn opportunities today, and to tackle climate change seriously, we need big shifts across many areas in the economy.

JK: Yeah, no, absolutely. And to that point up, there is something for everyone. Especially with the amount of money that's coming out from, you know, governments, even with the inflation Reduction Act, or governments across the world.

TL: Yeah, there's opportunities for everyone because there are a lot of funds coming in at many different stages. You know, the billions of dollars and it's fantastic for where we want to go. But I do think there's a lot to go around. So it's it's cool seeing a lot of scientists being being pulled in.

JK: Let's talk a little bit about that then. So, you know, I love that in your investment range. You've done some hardware and robotics, you obviously know software platforms where you're focusing some energy management companies. You talked about an investment that you feel especially excited about and talk a little bit about what drew you to that deal?

TL: Sure. Yeah, I think a really fun one is one called Simplify Burn, which is a company that is using a biodegradable material to make new clothing products that can then be degraded, recycled and reused. And they're starting with shoes. And so they're making a shoe that over time after its use can be fully back graded. So that kind of interesting thing of clothing, I think on average Americans buy clothing, clothing item and wear it seven times and then throw it away. And there's suddenly the numbers are crazy kind of worldwide, that we produce like 130 billion articles of clothing. And yeah, maybe only 80 billion of them are bought and even used and so 50 billion just go straight into waste. And at scale, because they use machines and other people, they'll be able to do this at much cheaper than the least expensive factories around the world that use labor by being able to undercut a lot of production pricing.

JK: And have the founder come from an industry like this. This seems like a very highly technical, you know, chemical engineering problem that the founder come from this like what drew you to this opportunity?

TL: Yeah, so the two founders, the CEO, Maria came from fashion, so she'd been working with many materials over a 20 year career at one of the big concepts of fashion, and our co founder Phil is a startup operator who started a handful of companies. And then they partnered with a few labs and since then . They've brought kind of all the materials and the manufacturing in house and their headquarters in North Carolina.

JK: I struggle with this a lot. When we see you know, these precede opportunities. You talked about this magical combination of a scientist or practitioner meeting a startup operator. We're seeing that more and more on our end as well. But I guess given how early you're investing, I'm assuming it's sometimes pre-launch or even pre-product. How does one effectively evaluate climate companies that early? Like what are the markers of success that that you're looking for? When you know something is a great investment project?

TL: For sure, yeah, I would say a little bit more on kind of the the markers or the characteristics that picked up over the last 10 or 11 years of being in more genuine generalist VC roles. I'd want to see exceptionalism or some characteristics that show determination and capabilities and kind of among all three, not just kind of one really great person, but on a team. And then the last thing for me is really, you know, it's kind of more of a personal thing when I choose to invest. It's just good for me. You know, do I do I, uh, can I offer something unique to this company? Do I think that they could use my help, particularly, and, you know, do I like to found your style? Do we have a good working relationship because I'm expecting to be in a 10 year relationship with them.

JK: I'm glad you mentioned that part about going into the conversation or going into this relationship, assuming it's going to be a 10-year relationship. There have been a lot of you know, pardon the phrase shotgun marriages, where there's a lot of capital out there, a lot of deals were getting done. And it seems like now everybody's kind of waking up and again, to follow the analogy, see who they're in bed with. How do you looking at sort of the next couple of years? You expect that to change?

TL: Yeah, probably these days. Just given where the market is. founders are spending more time with investors and vice versa, investors probably spending more time and embedding getting to know founders. One of the nice things about kind of where where I'm investing is usually I do have some some time a month or two where I can get to know founders, actually a lot of my best investments I've done in their founders over some years and then they get in touch with me when they're actually starting a company and we partner up there.

JK: Yeah. Is there anything in particular that surprised you? Or I guess I'll say what surprised you the most coming from being a general tech investor for so many years to then shifting focus completely on to climate innovation?

TL: Yeah, sure. I think the big thing is that there are there are many industries within climate, you know, as I was saying earlier, like energy itself is just a beast of an industry. There's a lot to understand there. So, you know, over the last three years and just kind of continuing today, I'm still pretty much a student of these, these markets and industries. I think kind of classically, the best founders are the ones that deeply understand their industries and kind of can effectively tell investors the story of a future and pull it back to the present and teach us how things might play out.

JK: Yeah. I'm asking mostly selfishly, but are there resources that you turn to or things that you're kind of reading on a daily or weekly basis? That that you feel like is giving you a really good digest into some of these deeper categories?

TL: Yeah, nothing kind of methodical, I think, again, kind of back to the network means my network for kind of connections and information. I try to maybe just kind of follow people on Twitter who I think are really smart and read content there. I think a lot of founders and investors who are stuck in these spaces tend to be really good leading indicators.

JK: I think there's some newsletters that I enjoy and I think there's some good folks that I think do aggregation of really good reporting. But yeah, that's sort of like, you know, the way we have leading voices in like social and mobile, folks that we're talking about sort of the psychology of customer acquisition and adoption there. We're still early days in climate for that, right. I feel like I'm missing those those little daily reads, so to speak.

TL: Yeah. I'd say the other the other kind of my other strategy I guess, or what I find myself doing is going to the edges of my network as much as possible. They can share things that you might not have heard of. So I like kind of in the sense of, you know, one side just trying to stay in motion and conversation with folks and then the other pushing out into the network and trying to pick up interesting signals from interesting people

JK: You talked about one of the ways that you're helping your pre seed companies is getting them ready for that seed stage raise. We love to talk about scaling tactics on Climb for a lot of our climate startups. Given how early you're investing, what are a couple of things that preseed climate companies can start doing early on to ensure they have that successful seed stage raise?

TL: Yeah, I think I think the big one is getting to more than just a business. So I think kind of one for preseed companies, expect to iterate you know, have a point of view and an angle, but then when you hit the market kind of expected, learn and iterate.

JK: What are a couple of the tips and tricks, like what's the process you take startups through to ensure that they're, they're telling the effective story, whether it's to customers or to investors?

TL: Yeah, so I'm blanking a bit on the name but there's a great medium post called the greatest sales deck I've ever seen, or I've ever read. And, you know, it lays out a really nice story framework that I think has just some really kind of, kind of well said points. One of them is great stories start with change. So it's really nice to have a point of view or to be able to talk about a change that's going to happen.

JK: What I love about that answer is that it implicitly answers the why now, and I think a lot of climate startups that at least a pitch to us, sort of start with the assumption that like, because they have spent their life in it, or how much time they have spent building this company, they implicitly understand the urgency of the problem, but given how broad climate tech is, sitting back here, I may not actually understand the why now of why heat pumps need to be replaced because of the inefficiency. But when you sit there and you make the problem real and you actually describe the change as you're talking about that's happening, then the why now and the urgency becomes that much more implicit.

TL: Yeah, and I would say you know, you know, a kind of another, like feedback I get on it is like VCs, they want things in a structured way. It might take some coaching, then, you know, you can you can basically tell a compelling story and if it gets our investors to believe, and then you can bring them the data to help support them to believe.

JK: Yeah, and that idea of coaching is there a way to, like, test for that and your diligence? What are the ways that you test for that question?

TL: You know, it's a balance, because on one side, I do want founders that have a strong opinion about, you know, what they're building and then on this on the other side, I do want them to see that kind of what I'm offering or what I can help with is something that they listen to. And the whole point is to then help them grow the business they're building.

JK: I mentioned at the top that you have worked with some really story and experienced investors over your career in general tech. Is there any advice or lessons that you still carry with you now that you have you know, struck out on your own to build test string?

TL: Yeah, having started my career at floodgate, 2011 model, lots of nuggets there. You know, one of them was, you know, just the idea of, he had some list of questions that he would ask in a boardroom. And for example, one is our market growing, two is our position in the market growing. It's simple frameworks, but you know, really clear.

JK: Yeah, it's the simple frameworks that allow you to apply it to any categories such that you know, when climate tech becomes something that we all collectively say, this is an urgent problem. We can bring some of those frameworks from from federal tech over here as we talked about earlier on.

JK: So Tommy, I think you know, two big things that I take away from our conversation today. One is as you are starting to grow your understanding, look at the sort of margins of your network and find the people there. I love how you phrase that. And I think the second piece is really about looking at these relationships as 10 year relationships and they may not end up there or they may the first company that somebody starts may not be successful, but the second one will be and because you have looked at that long term relationship and done right by that person as an investor, but also as a founder looking for an investor. I think it's something that I'm taking away from this conversation as well. I really thank you so much. for joining me and for sharing your journey.

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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