Can 'planet-friendly' investments create the next trillion-dollar companies?
IndieBio creator Arvind Gupta is joining the venture firm Mayfield on a bet that climate change solutions are going to be the next great returns in venture.
It's easy to see some of the effects of climate change, from glaciers calving to rampant wildfires. Identifying the solutions is harder, but it is technological fixes that are being demanded by humanity, says IndieBio creator Arvind Gupta.
So Gupta is joining Mayfield, a 50-year-old venture firm known for investments in Atari, Genentech and Lyft, as its newest partner on a bet that the solutions are not only going to be great for the planet and humankind, but also great venture returns.
"What we're solving are paradoxes that can't be solved in any other way. How do you make more quality meat or protein available for a growing and hungry planet with less resources?" Gupta said. "These are the things that I think venture is perfectly suited for."
Six years ago, Gupta founded IndieBio, a life sciences accelerator that's led to investments in companies making everything from fake meat and fake wood, to others that are reengineering organ transplants and data storage.
He will join Mayfield as a partner to co-lead its engineering biology group with Ursheet Parikh, but he will remain an adviser and continue to work with IndieBio. Meanwhile, Mayfield will also team up with IndieBio's parent firm SOSV Ventures to create the Genesis Consortium, a group of funds and companies "to promote human and planetary evolution."
"In my transition to Mayfield, I'm hoping it is not just a moment for two firms, but a moment for the entire venture capital asset class to show not only are there venture backable companies in the space, but they are the great returns of the next 10 years," he said. "The next trillion-dollar companies come from the entire world voting that there's a better way to consume everything that we're used to consuming, but to do it in a sustainable way. Otherwise, we ruin the planet that we have."
In a conversation with Protocol, Gupta talked about why "planet-friendly" tech is a venture-backable business, the big problem he's still looking for entrepreneurs to solve, and whether there's a chance that any of this will stop the demise of our planet.
This interview has been lightly edited for length and clarity.
You like to invest in planet-friendly technologies, but I don't think any entrepreneur plans to build a company that's planet unfriendly. So how do you decide what to invest in and what "planet friendly" actually means?
No one sets out to build things that are planet unfriendly, but using traditional technologies [is] almost always by definition planet unfriendly. How do you get the energy? How do you actually make the raw materials for something?
Our status quo is what led us into this hole. And so the way I was thinking about it five and a half years ago when I started IndieBio is [that] biology as a technology allows you to edit or change life itself. And when you do that, you can rebalance the equation of efficiency. You could make things in a new way that would be fundamentally better for the planet, but also allow you to produce enough product for all the people that desire.
So a concrete example of that is [portfolio company] Clara Foods — egg whites, without the chicken. I bring them up because they were in [the] first class [of IndieBio] and were one of the very first "ahas." We got a paper application that said we're going to basically make these proteins that are in egg whites, but make them in bacteria and then purify the protein out, mix them back together and make egg whites and then sell it.
There's two great advantages to that idea. One is you remove animals from the supply chain, which is a great moral argument. But the second one, which was actually far more interesting to me, was the energy equation. By feeding sugar water, in essence, to a big stainless steel tank filled with bacteria, you could produce egg whites at a cost that was one-eighth of raising chickens. That was a watershed moment. There was a thesis prior to meeting Clara Foods, but when you saw the scientists that were actually ready to do those things, I knew this was going to be big.
Well, it's not enough to just develop these technologies, you have to bring them to market and sell them and convince consumers that this is better than the status quo. So how do you get consumers to actually care?
So the good news is, consumers already care. That's the key here. Food is sort of the vanguard of the movement, and the reason is because 1) everyone eats, and 2) it's not that expensive relative to everything else. If you're a young millennial or Gen Z, or someone [who] cares about the future of climate change, what can you possibly do? There's not many ways to actually make a personal impact on that movement.
What you can do is eat foods that have a lower environmental impact than other foods. So a plant-based burger has a lower environmental impact than a cow-based burger, and that is what led to Impossible Foods and Beyond Meats' breakout success. It's the ability for millennials or Gen Z or anyone to be able to vote with their dollar on climate change, and signal to themselves that they're being virtuous and signal to others they are being virtuous. That's the fundamental insight of this movement.
So when you think about how that spreads throughout the entire food supply chain, all of a sudden if I can get a cheese that looks, tastes, feels and behaves just like regular cheese, but it didn't go through a cow that is belching methane for its entire life and stuck in a cage — as the consumer, which one are you going to choose?
Consumers will also pay a premium. If you look at Beyond Meat and Impossible, those burgers are more expensive than cow-based burgers. And they ostensibly taste worse. But they have incredible market caps because of this shift.
So if food is the vanguard, what area comes next?
Sustainable fashion. Building materials construction. The house that I'm sitting in is completely made of wood, right? We're chopping down literally the Earth's lungs that suck in all the CO2 and store it. So how do you solve that using biology? [Portfolio company] Lingrove is a good example of a company that's making wood without the trees right by engineering flax. Furthermore, I'm now investing in companies that are pulling carbon dioxide out of the air, then turning that into bricks that you can make buildings with. And that's actually using a technique I learned from Iceland that they're experimenting with at their reactor sites.
So you're going to see this [innovation] go through the entire stack because people will demand it as climate change intensifies. And it's no longer a question of: Is climate change happening? There are people that will deny it all they want, but in the end, people will demand action and they will pay for action because they will think of their children, if not themselves.
But why is this a venture-backable sector? You have these technologies that may take more than 10 years to develop and get to market, and you still have the question of are people going to pay these premiums. Like, is fake wood actually better than real wood?
So it shouldn't take more than 10 years. The goal of early-stage venture is to de-risk that question: Is this fake wood really better than the real one? Early-stage venture will answer that question, but it'll also build the business model.
[Portfolio company] Memphis Meats is a great example of this. At the pre-seed stage, can you make meat in a dish? If you can, would it taste good? If it tastes good, will people buy it? If people would buy it, can you make enough of it? If you can make enough of it, will regulation allow it? So the only reason it was venture backable is because the answers to those questions, if all correct, is a trillion-dollar industry that gets reinvented.
That's what's different about human and planetary health: The market sizes are just enormous.
What we're solving are paradoxes that can't be solved in any other way. How do you make more quality meat or protein available for a growing and hungry planet with less resources? These are the things that I think venture is perfectly suited for. As a matter of fact, in my transition to Mayfield, I'm hoping it is not just a moment for two firms, but a moment for the entire venture capital asset class to show not only are there venture-backable companies in the space, but they are the great returns of the next 10 years.
The next trillion-dollar companies come from the entire world voting that there's a better way to consume everything that we're used to consuming, but to do it in a sustainable way. Otherwise, we ruin the planet that we have.
The venture industry has tried to go down this path before. Cleantech investment was a huge sector that kind of failed, and now cleantech is like a dirty word to some venture capitalists — which is probably why we're talking about planetary-friendly businesses instead. Why do you think this will be different?
Cleantech was this singular and narrow promise: We will make energy cleaner because the cost of oil is $150 a barrel. And the entire cleantech industry was pinned literally to the price of a barrel of oil. And as soon as the price of the barrel of oil cratered, so did the entire industry.
Planetary health is pinned to the amount of carbon dioxide in the air. So if that number craters, sure — I would be thrilled to see that number crater. The entire goal of this industry is to bring that number down. In the process, what I believe will happen is not only will we solve this CO2 number and bring it down, but we will also create better products for the world. There's no reason to make things unsustainably when we have an alternative to make things sustainable.
I was reading about Thomas Malthus the other day, and the Malthusian trap is this idea that the human population is going to grow so big that the environment can't sustain it and everyone dies. The only reason humans kept on going was because we invented technology and the Industrial Revolution, which allowed us to escape the Malthusian trap, only to delay it until today. And so now we're facing the next technological revolution that's gonna allow us to escape this loop. And that's what planetary health is. It's not the singular or narrow focus of how do I replace a barrel of oil with something that's cheaper, but how do I reduce the amount of CO2 in the air? How do I reduce the amount of heavy metals in our drinking water? Because people will pay for that since it is becoming an actual problem. They say timing is everything, and we're about out of time.
Well, when I was asking my co-workers what questions I should be asking you, one of them wanted to know, "Can planet-friendly tech actually save the planet? Or does it only postpone our inevitable demise?"
[Laughs] Your co-worker has a good question.
We did worry about how she was feeling for a second there.
A lot of people have that question. I get it. It's the fundamental anxiety of Gen Z, for sure, and millennials, and to some extent Gen X. And the answer is, I believe this technology will get us over the line.
Humanity and people solve problems that are in front of them. People don't tend to put a lot of money and time and energy into problems that are so far away they can't really understand or see it. And that again goes back to timing, the time is now because we can see it. So, to answer your co-worker, I will say that I'm an optimist. I think that humanity will rally and solve the problem because it'll be in front of their face. And I never bet against humanity's productivity and intelligence.
Well, it's clear that Mayfield is obviously investing heavily by bringing you on board, as well as the consortium you are starting. There's also been news about Chris Sacca starting a fund focused on planet-healing technologies, and Amazon's got a $2 billion climate pledge happening. How do you feel about all this money being concentrated in this field at once? Will we see a hype cycle of sustainability companies being backed like the frenzy around AI companies?
One, it's not enough. I want to see more capital flowing in. And part of what I'm doing here is I'm helping to educate later-stage firms on synthetic biology or engineering biology as an asset class, so they understand what they're seeing.
Is it a hype cycle? I don't know. Is climate change a hype cycle? That's really the question. If it is, and turns out climate change isn't happening, then cool, right?
Well I'm talking more specifically an investment hype cycle where venture capitals are going after this.
I think venture capital goes after problems that are lucrative to solve. The effects of climate change cause problems that are going to become increasingly more lucrative to solve, [like the way] Beyond Meat changed everything in the space.
When the IPO of Beyond Meat happened, everyone saw for the first time, in essence, a proxy for climate or planetary health companies taking off in the public markets. And that is an incredible shift of mindset that no one ever saw coming. That is what has made this less of a hype cycle and more of a tsunami.
There's also a portfolio approach happening that didn't happen in other ways in clean tech 1.0 or like AI or autonomous vehicles. Those are singular visions being driven by tech — everyone should have a self-driving car because isn't that obviously a better way to do something?
This is the opposite. This is demand driven. Consumers are looking for a solution. Technology has not done its job to deliver these types of solutions to consumers waiting for them. And that's what planetary health is aiming to solve: delivering the solutions that consumers are demanding. Look, don't wreck the environment, don't spew CO2 into our atmosphere, but please give me a good melty cheese pizza or give me a great-looking house. And that's the key.
So you have companies that are pulling CO2 out of the air to make bricks, you've got fake wood, fake alcohol — you kind of run the gamut. But what's an area that you're still looking for an entrepreneur to solve a problem?
An area that we're looking at a lot, but it's hard to find great companies, is the oceans. The oceans are literally everyone's problem, but nobody's problem because no one owns it. It's a really interesting problem area where there's massive amounts of microplastics, there's massive amounts of acidification happening, and we're depleting our fish stocks. That's an area that I'm thinking about. It's just that we don't see very much of it in planetary health.
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