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Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.

Planet-friendly investing is hot right now. Just don’t call it cleantech.

Planet-friendly investing is hot right now. Just don’t call it cleantech.

Hello and welcome to Pipeline. This week: Planet-friendly investing makes a comeback, the most-loved investors and the VC who hired Cambridge Analytica's data team.

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Overheard

  • Nothing ruffles investor feathers like a popularity contest. This week, TechCrunch published a list of 11 investors who "founders love the most" as part of a larger directory of around 400 founder-recommended investors. While publicly it's been all applause, some investors grumbled to me about their exclusion and having to play a new game of convincing founders to love them more.
  • Cambridge Analytica's team has a new job … working with a VC. Investor Bill Tai told Protocol that he's starting a new company with Cambridge Analytica's core data team. No word on what it is, but he says it has "huge potential". Let's just hope they've learned their lesson.
  • "There's definitely a herd mentality of investors," DialUp co-founder and CEO Danielle Baskin told me. She played this to her advantage when her "lucky pitch deck" viral email reached over 500 VCs. More than a creative pitch, the email is also an interesting study on how the venture capital industry often relies more on who you know than what you do.
  • Need to close a deal? Try TikTok. A sales rep for marketing platform #Paid turned a mundane "following up on payments" emails into a funny TikTok video. It worked: 30 minutes after he sent it, the brand paid and the deal was sealed. (Just please — don't send me "following up on this pitch" messages this way.)

Biz on Biz

Goodbye cleantech. It's all about 'planet-friendly' investing now.

After a boom in the late 2000s, cleantech became a bit of a dirty word in investment circles. But that's starting to change — only this time, call it "planet-friendly" or "planet-healing" investing.

  • Amazon launched a $2 billion climate pledge fund in June. It's a tag-teamed effort led by Matt Peterson on its corporate development team along with Kara Hurst, who runs its sustainability team, Amazon told me. So far the company's mum on any investments, though.
  • Chris Sacca also came out of retirement last month with Lowercarbon Capital. He's running it along with his wife, Crystal Sacca, and former Lowercase investor Clay Dumas. It's specifically focused on tech to "to reduce CO2 emissions, remove carbon from the atmosphere, and actively cool the planet."
  • Just this week, Mayfield hired IndieBio founder Arvind Gupta to start the Genesis Consortium, a group of funds and companies "to promote human and planetary evolution."
  • Even more generalist funds are making it a focus. Sequoia has been actively soliciting climate change investments, and has since made a few, although all in stealth.
  • Meanwhile, the final round of Bill Tai's Extreme Tech Challenge accelerator program took place this week, and it was built around the U.N.'s Sustainable Development Goals. The winner from over 2,400 applicants, Genecis, turns a company's organic waste in biodegradable plastics that can be reused within their operations.

That's a lot of money and interest in the space after a years-long cleantech investing lull.

  • VC firms spent over $25 billion in cleantech investments from 2006 to 2011 — but lost over half of it, according to an MIT study (although one could argue that's the point of venture capital). Still, investors continue to feel plenty of heartache over it.
  • But Gupta, the new Mayfield partner, told me that planet- or climate-friendly investing is a very different promise. "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," he said. "Planetary health is pinned to the amount of carbon dioxide in the air. … The entire goal of this industry is to bring that number down."
  • The breakthrough moment for the resurgence, at least to Gupta, was Beyond Meat's IPO. "… Everyone saw for the first time, in essence, a proxy for climate or planetary health companies taking off in the public markets," he said.

Now, venture capitalists are pushing founders to start companies in what Vinod Khosla called a "desperately needed" area.

  • Khosla has been one of the longest believers in the climate tech space, having not lost faith after the first cleantech investing spree. "People think climate investing didn't work out well, but it did," he told me, citing companies like Tesla, QuantumScape, View, LanzaTech and Mainspring Energy. "Climate investments do take longer to mature, but people are realizing that they can be good investments."
  • There's a flood of interest, but the investors will have to be patient if they want to see returns. "You gotta have persistence in this market," he said. "You can't do fashion investing in this area." Breakthrough Energy Ventures, one of the biggest players established by Bill Gates and a gaggle of other high-net-worth individuals (Khosla is a board member), is one example of a firm that set up a 20-year return horizon to take the long view.
  • In a new climate tech opus, Khosla broke down where he sees a lot of activity, and also the few technologies he's looking for but hasn't seen great efforts in yet: steel, HVAC and hydrogen for industrial processes, as some examples.
  • The investments may take longer, like a timeline of six or seven years of initial R&D work, but the outcomes are so outsized it can be worth it, Khosla believes. "These are all markets where you have a company worth tens of billions or $100 billion easily if you win the market," he said.

So is this time really different? Gupta thinks so, arguing that "planet-friendly" investment is fertile ground. A lot of the first cleantech era startups were based on businesses selling to each other and tied to the price of oil. This time, these are technologies that are being demanded by the consumer for the health of the planet as a whole.

  • "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," he said. "Otherwise, we ruin the planet that we have."

Still, easier said than done. It's only our planet at stake.

Do you think climate tech investing is the next breakout category or another venture failure? Email your thoughts to biz@protocol.com, and I may publish some answers in next week's newsletter.

A MESSAGE FROM THE FIVE NETWORK

FIVE

The world's first Mentor Operating System

Picture the mentor(s) in your life. You likely wouldn't be reading Protocol without their influence. We've democratized opportunity and scaled mentoring by addressing the network gap. FIVE Mentoring: powered by tech, amplified by humans.

Learn more here.

Inside Track

  • Ethics hotlines are not enough. January Ventures' Maren Thomas Bannon broke down the tech solutions that are helping companies handle sexism and racism.
  • Developer-focused businesses could be the next trillion-dollar companies, but GGV's Glenn Solomon says companies will have to win developers' hearts and minds first.
  • Former Shasta Ventures partner Nikhil Basu Trivedi says there is a segmentation happening in venture capital with firms either becoming agglomerators or specialists.
  • Only 40% of VC firms have done a remote deal, according to Omers Ventures, which surveyed over 150 firms. Also interesting: There's a preference for doing deals with founders who were met in-person before the pandemic, and reference-checking is through the roof.

Need to Know

  • A tech CEO and investor was killed. Gokada CEO Fahim Saleh, who was 33, was found dismembered in his Manhattan condo, and his former personal assistant was taken into custody on Friday.
  • Airbnb may actually IPO this year. Its gross bookings have rebounded, so an IPO is back on the table, according to The New York Times. Remember: Some of Airbnb's early employee shares expire as early as November, so it's a tight window.
  • Investors are teaming up for a VC Diversity Pledge. The Information reported that some VCs are organizing an effort to push firms to take on HBCUs as LPs. Sequoia, in a separate move, committed to diversifying its LP base.
  • This week in VC experiments: Contrary Capital is investing up to $100k in students who want to take a gap year to build a company.
  • Adam Neumann is back investing. The former CEO of WeWork was known for his eyebrow-raising investments, from a fake wave company to medical marijuana. Now he's paid $10 million for a reported 33% stake in Israeli mobility startup GoTo Global.
  • From Protocol: Startups are risky, so should you buy insurance?
  • This week in VC history: In 2012, tech was mourning the (quasi) death of Digg, the social media aggregator, after it was sold in pieces to Betaworks, LinkedIn and The Washington Post. The site is still somewhat around, having been sold again to BuySellAds in 2018.
  • And your weekend reading: Governments turned to technology as part of the pandemic response (contact-tracing apps, anyone?). But that may just be another act of "technology theater" that makes it look like technology will solve all the problems without really doing anything.

Five Questions For …

Kleiner Perkins' Bucky Moore

What's one of your new quarantine habits?

Visiting different parks and public spaces in San Francisco.

What's one startup or product that failed or was shut down that you wish was still here today?

Google Inbox. No question.

What was your first check?

Propeller Aero's seed in the Fall 2016. At the time, it was obvious that drones were on a path to transforming the construction industry. What was less obvious was who would be best positioned to benefit from this transformation. What stood out to me about the founding team was their shared ability to tune out the hype of drones and focus on the practical value that they could deliver. Their vision — to build the analytics cloud for the construction industry — remains steadfast to this day.

What's one of the worst predictions you've ever made?

Predicting the mass availability of L5 autonomy by the end of 2022, in 2016. Our worst predictions tend to be rooted in over-optimism about "the future we want." This one does not appear to be aging well.

What's one problem you wish an entrepreneur would solve?

Unifying all the messaging services we use into one common interface. If anyone reading is working on this problem, reach out!

A MESSAGE FROM THE FIVE NETWORK

FIVE

The world's first Mentor Operating System

Picture the mentor(s) in your life. You likely wouldn't be reading Protocol without their influence. We've democratized opportunity and scaled mentoring by addressing the network gap. FIVE Mentoring: powered by tech, amplified by humans.

Learn more here.

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