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Why Josh Felser left the VC firm he started to try to save the planet

It started with a COVID-19 task force.

Why Josh Felser left the VC firm he started to try to save the planet

"If we don't start now and we just depend on big companies, that's only going to take us part of the way there," says VC Josh Felser. "But if we start now, the companies that are small now in five years will hopefully be big and have the kind of impact that we're looking for."

Photo: Christopher Michel/Courtesy of Josh Felser

If Josh Felser needed a sign that his decision to leave Freestyle to save the planet was a good one, the last couple of weeks certainly delivered. California erupted in flames the day before Felser announced he was leaving the venture capital firm he co-founded. He left his home in Marin County to stay at a friend's house to escape the smoke. But the smoke caught up to him there, too — an inescapable reality for many Bay Area residents — just as a Category 4 hurricane began pounding the shores of Louisiana and Texas.

It's all left Felser feeling a deep sense of urgency to find projects that will do the most to address the planet's problems. "I lose sleep about this at night," he said.

He's not alone. Chris Sacca came out of retirement to launch Lowercarbon Capital. Firms like Sequoia are actively soliciting climate-related investments. Even Amazon launched a $2 billion climate pledge fund. After spending months working on a California task force to connect startups with the government to help in the COVID-19 crisis, Felser realized that he too wanted to do something more. He remains a board partner at Freestyle, but he's now trying to discover what kind of organization or fund he wants to build next to solve the planet's challenges — before time runs out.

This interview has been edited and condensed for clarity.

What made you take the leap to leave Freestyle?

I have been working in and around climate for a long time, really. I started an organization called #Climate.org, and I've donated to nonprofits and been on different committees at the Sierra Club and trying to effect change through the nonprofit path. And it's a challenging path, at least for me to leverage my background into impact.

So when the [COVID-19] crisis hit, having been at Freestyle for 11 years since Dave [Samuel] and I started investing together, I wanted to do something more. I ended up helping to start a task force with Bill Trenchard from First Round that was sourcing private company solutions to many of the problems the state of California was facing from the crisis. And it was a really eye-opening experience.

Bill and I report to the CIO of California, and our first job was food supply, which is not only a COVID crisis, it's a world climate crisis. Food banks, food pantries and schools were struggling to get all the food they needed just to supply their customers. We went through a long process, we looked at a bunch of companies, and we ended up recommending a company called Silo, and Silo became the solution. They bring together farmers and ranchers with buyers and in this case discounted product and sometimes free. So it was a powerful moment for me to see the impact we could have if we turn the private sector loose on some of these challenges.

Was the idea to connect startups as part of the solution?

Yes, both big and small companies. It's to move outside of the historical path, and not there's anything wrong with it, but the historical path for government to tap the private sector just goes through one of the big consulting firms — like Accenture and Booz — and they're performing a service, but I think our role was to connect the state of California directly to startups to help them solve many of these problems.

The COVID-19 crisis is a big one. Mental health is one of the areas we're focused on, and that is a challenge regardless of whether it's a crisis or not. The crisis just makes it harder. It makes everything harder.

So how does the task force fit into what you're planning on doing next?

Well, it was just eye opening to see just the challenge in front of us and that we need the private sector to be front and center in solving what the Earth is facing. And the best way for me to have an impact is to just do it full time and to build an organization that does this full time.

I know I want to focus on the business of the Earth. How do I do it? That's what I'm working on right now, to try and figure that out. I don't know if it's a fund. I don't know if it's some other financial structure, and I'm not going to do it alone. I'm going to work with other folks within the business of the Earth. It's a broad bucket, and so I need to do work over the next few months to figure out the right pathway, but I know that what my mission is: I believe the best way to effect change is for all of us, especially investors and founders, to create financially viable large companies that are going to be around for a long time, and have greening the Earth as part of what they do, not as a nonprofit, but as a for-profit enterprise.

Why could you not do that inside of a traditional VC firm? I just wrote about Arvind Gupta who joined Mayfield from IndieBio to focus on climate within a bigger firm. Why leave Freestyle to pursue this?

I wanted to have the firm and the partners in it from the ground up to all be motivated by the same mission, and Freestyle is a generalist fund. There are other changes that I think would be hard to deal with in any existing organization, things like the kinds of advisers that we motivate to help us by giving them carry in the fund. I think in order to really create a fertile environment for these companies that we're funding, we need to have more than just the investors. We need to have an approach that involves the best and the brightest across many categories, across food and water security, across manufacturing sustainability and efficiency, and I think to try and shoehorn that into an existing venture capital structure would be very hard.

Do you believe that climate change is a venture backable space?

I haven't said that yet. I said that I'm thinking about the structure. You may be right!

When I think about what I'm doing, climate is just one part of it. I can tell you the first investment that I've made is in a company in the materials business. Their mission is to create software that allows companies to know where the materials come from, let them choose materials that are sustainable, see the factory of origin, and manage the materials, so they can actually say, "I'm going to create a carbon neutral sofa," or, if you're Reebok, "I'm going to create a recyclable shoe." So that's a venture backable company. It's software that manages materials, but there will be other examples that may not be venture backed. And I think I want to structure for those, too.

Do you believe startups are in a position to have the economies of scale that are needed to be effective in saving the planet, especially on the timelines that are needed right now?

I don't think they can do it alone. We have to get into the cycle of repairing the Earth. If we don't start now and we just depend on big companies, that's only going to take us part of the way there. But if we start now, the companies that are small now in five years will hopefully be big and have the kind of impact that we're looking for.

I would like to be able to invest in companies all across the stack, from seed to series D. That's part of what we'll need to do because if we're building this team of experts and we see an opportunity to really help the planet from a company that's raising a series D, why wouldn't we be able to help there? That's part of what is so challenging in the space: How do you create an organization from the ground up that can have flexibility, both in what is venture-backable and what is not, and in investing in different stages of the company's life cycle? Those are important things to figure out. I don't have them figured out yet.

What's interesting to me about the space right now is there are people like you who are starting new things, and we saw Chris Sacca's fund Lowercarbon capital. But then there are the big players like the Breakthrough Ventures, which is Bill Gates' big initiative, and Amazon's fund. So it seems like there is money coming in both on the big corporate capital side, and then more grassroots, smaller, "Let's build this kind of thing from the ground up."

All of that is needed. Anyone who's proprietary about, "Oh, I'm the only one that can do it" — that's the wrong attitude. It is the biggest problem we've ever faced, and I think that's gonna require all hands on deck.

It's certainly possible for large corporations who have different motivations to also be impactful here, but it does take more work from them, and it takes more work with both the public perception of how motivated they are to do the right thing and action. One of the reasons why I was so excited about this materials company is because when they go into a business, they're not saying, "Hey we're a green the Earth company." They go in and say, "Hey we're going to help you manage your materials more efficiently. And by doing that we're also going to help you create a carbon neutral sofa or a recyclable shoe." But that's a big part of their pitches. They help companies in a more general sense, but by doing so, they're now able to help in a green way.

Is there a stigma then around "green" companies or are we just going to see climate as like an add-on benefit?

The category that I'm looking at and others are working in already — climate is a part of it. But sadly, as we all know, it's become a political term, and we want to get away from that.

In the for-profit world, there will be some companies that say, "Hey, we're in the business of greening the Earth." And there will be many more that say, "Hey, we're going to help you create a more efficient supply chain, and in doing so, we're going to help you become a greener, more sustainable company." That second strategy is going to have more of a far-reaching impact on the Earth than what has been done today, which is more of a, "We're a climate change company, work with us."

So as you're talking to people about what comes next, is there anything that you've learned that you want to stay away from or pitfalls you want to avoid?

One of the challenges is I do feel an urgency.

There are a lot of climate companies that are really well intentioned but have come to entrepreneurship from academia, or even the nonprofit world, and I have found in my conversations with them that it's more challenging to be on the same page about urgency and the pace of software development. That's not necessarily one area, but it is something that I've noticed, and I'm certainly seeing a change in the industry, and as there are more general tech entrepreneurs joining with the OG entrepreneurs in the space, I'm seeing it become a more exciting space overall.

Are you still involved in the task force right now? Is that continuing into the fall?

It's great. We have our weekly meeting and in that we talk about the priorities for the group. We just posted a problem statement the state created to find a data management solution to the huge challenge in front of CalREDIE. When you take a test and it's positive in California, those results then go to CalREDIE. CalREDIE then manages it, analyzes it, and then publishes in aggregate what you see on all the different websites that try to track cases and deaths and positive test rates. So that whole infrastructure needs to be improved, and that was posted last week and we got a lot of folks applying to submit their solutions, and the state is in the middle of selecting the right company to work with here.

That's been really fascinating to watch, so I think we'll see more problem statements like that from the state in areas that are of critical importance, going beyond COVID. It's COVID right now, but I think you'll see more and more of this. One of the great ways the state can tap the private sector is by posting its greatest needs in a way that the private sector can discover the issue and then actually be part of the solution.

Last question, did you end up buying that EarthWindFire.VC domain?

I did not! I couldn't get .VC in the end. I thought it was just being parked, but it seems to be tough to get so I need to go back to the drawing board. I do like Avatar, and Avatar is earth, wind, fire, water, but there's an Avatar Ventures somewhere, and it's doing something different. So back to the drawing board.

Update: This post was updated on Sept. 14 to correct the photo credit.

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