CleanTechies Podcast

#145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table Construction, & More w/ Jay Kapoor (VSC Ventures)

January 05, 2024 Silas Mähner (CT Headhunter) & Somil Aggarwal (CT PM & Investor) Season 1 Episode 145
#145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table Construction, & More w/ Jay Kapoor (VSC Ventures)
CleanTechies Podcast
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CleanTechies Podcast
#145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table Construction, & More w/ Jay Kapoor (VSC Ventures)
Jan 05, 2024 Season 1 Episode 145
Silas Mähner (CT Headhunter) & Somil Aggarwal (CT PM & Investor)

On this episode, we interview Jay Kapoor, General Partner at VSC Ventures. VSC Ventures is a Seed-stage VC fund focusing on climate adaptation and industrial automation. Their central thesis is that although starting a company is becoming easier, its becoming harder and harder to get noticed. Their solution? Storytelling. Confused? Listen to this episode – you won’t be disappointed.

Jay needs no introduction – he has a podcast himself, comes from a VC and media background, and left a lasting impression on us as one of the most well-spoken guests we've ever had.
---
🌎 If you'd like to see the full PodLetter, go to our substack to see all the written content that supplements the audio interview.  
---
🚨🚨🚨 Shoutout to our sponsor Net Zero Insights — Net Zero Insights is the leading market intelligence platform on climate information with all the latest you need on funding rounds, VCs, and the climate tech ecosystem. Use this link to schedule your demo and get a 10% discount!! 🚨🚨🚨
---

📺 👀 Prefer to watch: Subscribe on YouTube.

Want to be part of the community and engage further? Check out the Slack Channel

Topics:
**5:50 Focus on Industrial Automation
**9:39 The Intersection of Industrial Automation and Climate
**15:26 Augmentation vs Replacement in Automation
**17:23 The Importance of Good Storytelling in Automation
**20:03 Jay’s Accidental Transition to Climate Investing
**25:40 Engaging with Government and Incumbents
**34:28 Founder/Market Fit: Founders from The Industry
**40:24 Impact on Fundraising and Time Horizons; Fund Size
**47:50 The Importance of Choosing the Right Investor
**50:47 Changing Cap Table Construction
**58:28 The Evolution of VCs' Value Prop
**1:02:20 The Role of PR in Climate Investing
**1:06:43 Founder vs Company Journey; Paint Jet's Story
**1:11:53 The Power of Storytelling in Pitch Decks
**1:17:06 Hiring and Building a Team
**1:20:53 Identifying Founders Willing to Adapt

Links:
**Connect with Jay | VSC Ventures
**Connect with Somil | Connect with Silas
**Check out our sponsor, NextWave Partners, for all your Climate, Renewables, and Sustainability recruitment needs.
**This podcast is NOT investment advice. Do your homework and due diligence before investing in anything discussed on this podcast.

Support the Show.

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Show Notes Transcript Chapter Markers

On this episode, we interview Jay Kapoor, General Partner at VSC Ventures. VSC Ventures is a Seed-stage VC fund focusing on climate adaptation and industrial automation. Their central thesis is that although starting a company is becoming easier, its becoming harder and harder to get noticed. Their solution? Storytelling. Confused? Listen to this episode – you won’t be disappointed.

Jay needs no introduction – he has a podcast himself, comes from a VC and media background, and left a lasting impression on us as one of the most well-spoken guests we've ever had.
---
🌎 If you'd like to see the full PodLetter, go to our substack to see all the written content that supplements the audio interview.  
---
🚨🚨🚨 Shoutout to our sponsor Net Zero Insights — Net Zero Insights is the leading market intelligence platform on climate information with all the latest you need on funding rounds, VCs, and the climate tech ecosystem. Use this link to schedule your demo and get a 10% discount!! 🚨🚨🚨
---

📺 👀 Prefer to watch: Subscribe on YouTube.

Want to be part of the community and engage further? Check out the Slack Channel

Topics:
**5:50 Focus on Industrial Automation
**9:39 The Intersection of Industrial Automation and Climate
**15:26 Augmentation vs Replacement in Automation
**17:23 The Importance of Good Storytelling in Automation
**20:03 Jay’s Accidental Transition to Climate Investing
**25:40 Engaging with Government and Incumbents
**34:28 Founder/Market Fit: Founders from The Industry
**40:24 Impact on Fundraising and Time Horizons; Fund Size
**47:50 The Importance of Choosing the Right Investor
**50:47 Changing Cap Table Construction
**58:28 The Evolution of VCs' Value Prop
**1:02:20 The Role of PR in Climate Investing
**1:06:43 Founder vs Company Journey; Paint Jet's Story
**1:11:53 The Power of Storytelling in Pitch Decks
**1:17:06 Hiring and Building a Team
**1:20:53 Identifying Founders Willing to Adapt

Links:
**Connect with Jay | VSC Ventures
**Connect with Somil | Connect with Silas
**Check out our sponsor, NextWave Partners, for all your Climate, Renewables, and Sustainability recruitment needs.
**This podcast is NOT investment advice. Do your homework and due diligence before investing in anything discussed on this podcast.

Support the Show.

SPEAKER 1: Jay Kapoor

How you tell that same story matters because how memorable it is often comes down to how memorable you are in telling your founder story.

And so for Nick, his story didn't start with the robots.

His story started with, well, I was just in this corner of the world, minding my business, building this company.

And it unlocked for me that this is fundamentally broken across the world, across industrial painting.

SPEAKER 2: Somil Aggarwal

Welcome back to the CleanTechies Podcast, where we interview the top climate founders and VCs to get their best advice for you.

On this episode, we interview Jay Kapoor, General Partner at VSC Ventures.

VSC Ventures is a seed stage VC fund focused on climate adaptation and industrial automation.

Their central thesis is that although starting a company is becoming easier, it's actually becoming harder and harder to get noticed.

Their solution?

Storytelling.

Confused?

Listen to this episode and you'll find out.

You won't be disappointed.

Jay himself needs no introduction.

He has a podcast, comes from a VC and media background, and left a lasting impression on us as one of the most well-spoken guests we've ever had.

Thanks so much to all of you for listening, and enjoy the episode!

Shoutout to our sponsors NetZero Insights.

NetZero Insights mission is to enable the transition to a sustainable future by giving decision makers access to the leading market intelligence platform on climate innovation.

Through the NetZero platform, NetZero Insights provides high quality data and insights on the CTVC ecosystem by being the best at tracking orgs and funding rounds.

I've had a great time using this to prepare for the podcast and researching companies, funding rounds, VCs, and the latest I need to know about the ecosystem.

Use the link in our description to schedule your personalized demo with the team and claim your 10% discount.

Thanks again to the Netzeer Insights team for sponsoring this show.

SPEAKER 3: Silas Mähner

Hey there.

Are you building a climate tech business and looking for very specialized talent?

Consider reaching out to our sponsors, NextWave Partners.

NextWave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally.

So if your team is growing or you're looking to make a career change yourself, feel free to reach out to NextWave at next-wavepartners.com or reach out to one of their consultants directly via their LinkedIn page.

SPEAKER 2: Somil Aggarwal

All right, Jay, welcome to the show.

How are you?

SPEAKER 1: Jay Kapoor

I'm doing well, guys.

Thank you so much for having me.

This is a pleasure.

SPEAKER 2: Somil Aggarwal

No, we're super excited.

We don't often get to talk to VCs who have their own podcast.

So we already, already have high expectations for this.

So, so it'll be a fun episode.

SPEAKER 1: Jay Kapoor

I want your listeners to set the bar low, man.

And then let's see if we can clear it.

SPEAKER 2: Somil Aggarwal

Yeah.

Why don't we kick it off?

Could you tell the audience more about yourself and what you do?

SPEAKER 1: Jay Kapoor

Yeah, I'll give you the quick quick story.

So I'm Jay Kapoor.

I'm the general partner of VSC Ventures.

We are a $21 million fund that invests in industrial automation and climate adaptation.

Really, the idea here is that there are two major themes that we think are going to define the next decade.

One is labor shortages and legacy industries.

People just don't want to do these jobs.

We're going to need AI, robotics, automation to do those jobs.

And then climate adaptation, climate change is creating new industries, it's disrupting legacy ones.

There's going to be startups that are born to service the needs that come out of those disruptions.

And that's going to continue to happen.

I tell people the way that 10 years ago, we were talking about software as a sector.

And now software is every sector is touching every industry.

Climate is going to be the exact same way.

There's not going to be a climate industry.

It's just every industry is dealing with climate disruption.

So we're trying to get ahead of that.

That's kind of the thesis behind our fund.

One, we invest up to 500k in a first check.

And the way we support our founders is through our experience in storytelling and content and media.

So to give you a little background, my partner Vijay started VSC, a PR agency about 20 years ago, back when no startups were working with, you know, PR agencies, because they just couldn't afford it.

And Vijay got creative, he started doing equity for services, he started doing some deferred cash payments,

Over time really built a strong portfolio of these founders that benefited from his PR success.

I come from the world of media strategy and content.

I used to work for the NFL for many years.

I worked to help launch Madison Square Garden Ventures.

One of our first projects was the MSG steer.

So some of you guys might have seen those videos

out in Vegas.

And I come from this world of understanding media and content and seeing how powerful it is, especially for folks that are building in these legacy, hard tech, heavy industry kind of backgrounds.

And so to us, it's if you can help tell those stories, then you can start to create really positive outcomes for those founders.

So that's what we do.

We invest in these founders.

We're not going to be your lead check.

We're not going to be your board seat.

But we are going to be hopefully the most active investor in your cap table, because we're with you every day as you're crafting your story, you're getting it out there, and hopefully starting to see some results from from that work.

So hopefully that was a quick enough, you know, background on myself.

And obviously we can we can talk about my journey to here if you're interested as well.

SPEAKER 2: Somil Aggarwal

I'm just gonna say that you won't find much pushback here in terms of how big fans of the PR side of the thesis there, the differentiator there.

We're no bias here.

Absolutely.

SPEAKER 3: Silas Mähner

We can't, we hate media completely.

Totally.

SPEAKER 1: Jay Kapoor

Yeah.

This is a, this is literally called preaching to the choir.

Right, gentlemen.

SPEAKER 2: Somil Aggarwal

But, um, I would love to back up.

And so you mentioned industrial automation.

Could you talk and give the audience a big general idea of the focus areas within that?

What are the subsectors you're looking at?

SPEAKER 1: Jay Kapoor

Yeah, I mean, think of anything that, you know, people traditionally call blue collar, right?

Which I think is an archaic term right now, or sometimes people, I think it's even worse when they call it unskilled labor.

It's like, yeah, I dare you to climb up a telephone pole and, you know, change the fuse box on there.

But really when we call them legacy industries, right?

That's what we try to impact with this sort of thesis around industrial automation.

Construction.

Architecture, Concrete, Mining, Planting, Agriculture, really the stuff that makes up

25 to 30% of global GDP, if not more.

And in fact, actually, these industries also have a massive impact on people's lives, even though we don't think about it, right?

And so to me, I think, when we talk about industrial automation, really, it has to be looked at from the lens of labor shortages, right?

What happened after COVID?

People who were doing good, you know, union, well-paying nine to five jobs that had pensions at the end of it, all of this got disrupted.

And these folks, you know, looked at their grandparents and looked at their parents and they said, we just don't want to be in those trades.

We don't want to be in those jobs.

Simultaneously, you have immigration policies in this country that have changed where, you know, they started with Trump.

But Biden really hasn't fundamentally changed how we do legal immigration in this country, despite obviously running on that platform.

That's for another day.

And so we're not bringing in new labor to fill these needs in our utilities industries, in our plumbing and electrician trades, in our construction and manufacturing trades, our warehousing trades.

So we're not bringing new people in to backfill these roles and call it homegrown Americans don't want to do those jobs.

So some someone has to do it, man.

We need our two day Amazon packages.

You know, we need new construction.

We need bridges to be built in this country.

New York City's roads are full of potholes.

Somebody's got to fill those holes.

Like it's going to have to ultimately come down to technology and robotics.

And so that's when I talk about industrial automation, you can't really decouple it from labor shortages.

But that said, every single one of these industries is thinking about two things.

Increasing revenue and decreasing costs.

And often what we find in this category of industrial automation is that the best solutions address both of them, right?

Maybe you enter in the door because you're decreasing costs and that makes you an easy product for somebody to adopt.

But the reason you stay is because you're unlocking new revenues for them.

You're unlocking new opportunities.

Maybe you don't have to lay anybody off

But they just repurpose those folks into revenue generating, you know, business lines or opportunities.

So that's kind of the category.

And then I know this is a climate conversation.

So every single one of those industries that I just mentioned also has a through line to climate.

SPEAKER 2: Somil Aggarwal

We wanted to take a quick break to tell you about another climate tech podcast.

Well, literally Ryan Grant Little hosts a podcast called another climate tech podcast, where he interviews climate tech founders and VCs, which has, I'm sure if you're listening to this podcast, you will love.

So we highly recommend checking them out.

The link will be in the description to this episode.

Now back to the show.

Right.

I think the through line is pretty clear.

We've actually had Elephant Energy on this podcast.

And he and D.R.

Richardson spoke at length about blue collar work and the difference between that and what people perceive to be like these fancy, magnificent jobs in climate.

There's equally this dearth of very, very necessary specialized electricians, specialized, you know, heating and cooling specialists.

Jay Kapoor VSC Ventures

Right.

So it's interesting to see, I wonder if you've changed or maybe perhaps been more reinvigorated about your thesis with the recent advances in AI.

This is like, again, like you said, it's a climate conversation slightly aside from that.

How do you think about automation, especially given all the things that have been changed in the past couple months?

SPEAKER 1: Jay Kapoor

Yeah, no, it's a good question.

Look, I think

Everybody thought that the first jobs to be automated away would be blue collar.

And I think as you said it, it turns out most of them are actually white collar jobs that we think are so complicated for people to do.

And then, you know, you plug it into ChatGPT and you're like, oh crap, like this lawyer is getting paid $1,000 to audit a legal document and ChatGPT did it in, you know, under 60 seconds.

How it's changed my viewpoint and where I think the opportunity is, is in augmentation, not replacement, right?

Folks are on job sites, they are in manufacturing plants, they are actively engaging with

Adam's Knot Bits Every Single Day.

And where generative AI can be super useful is how they are augmenting those existing processes.

Not to plug a portfolio company, but I'm going to do it anyway.

So we have an investment in a company called Concrete AI.

And Concrete AI started from this real basic understanding of the fact that cement and cementitious material is one, the most expensive component of any cubic yard of cement.

and the most carbon emitting of any cubic yard of cement.

So rough numbers, but 40% of the cost is cement and 92% of the emissions are cement.

Okay, well, how do you bring down cement?

It's a very important component of each block of concrete.

Well, it turns out that concrete actually differs in its strength and properties based on the use case.

You're going to have a much different makeup and much different mixture when you're building a high-rise than if you're doing the sidewalk outside of that high-rise, right?

What often ends up happening in this industry is people over-engineer.

You would much rather have a too strong

Jay Kapoor VSC Ventures Podcast featuring Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St.

In 28 days, it's going to have this level of PSI strength.

In 21 days, it's going to have this level of PSI strength.

Why is that important?

Well, if you're building a building, do you want to wait 28 days to put the next floor in?

Or do you want to get it done in 7 to 14 days?

Right?

And if we can then on top of that, come in and tell you, you know, you guys are using Boston granite, which is pretty expensive because it's really strong.

But actually for this use case, you could probably get away with a different composition of rock.

as part of your aggregate.

Oh, okay.

Now you've saved me money.

You've cut down my amount of time, but I've not lost any performance.

That is generative AI in an industrial automation context, right?

We are generating new mixes.

These mixes maybe never have existed before, but because of past performance and the data sets that they've been trained on, they can give you a confidence interval and say,

Today we

And I'm more and more convinced that, you know, who is this serving?

It's the quality control manager or the plant manager.

He's not getting replaced by this piece of software, but it is allowing him to operate his business better and ultimately, you know, save costs and drive revenue.

SPEAKER 2: Somil Aggarwal

I think that's a really, I appreciate the example there.

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

And I think that's exactly plugging in.

This isn't necessarily hardware, but these deep processes that have potentially the, you know, technical risk behind them.

The people who have actually traversed that tech or in this case, deep tech risk, have actually been able to build a data moat over the years that they spent developing the actual technology.

So then utilizing that in use and improving their product to have fast iteration moving forward.

Silas Mähner, Somil Aggarwal

SPEAKER 3: Silas Mähner

One other comment to make on this space, we just had somebody on who talked about generating kind of early stage design work in water infrastructure, trends and infrastructure.

And they're really, really interesting company.

I think that it's underestimated that it's not going to, people really think it's going to take jobs away, but you can actually run different innovative designs, you have a lot more upfront time to explore new things with the same existing staff.

hypothetically build, you know, better products and the outcome.

So I think that this is something that I see as a really, really big positive inside of the climate specific AI usage.

SPEAKER 1: Jay Kapoor

Well, not to step on some of our future conversation, but like, like this is what PR is for, right?

You, you have people out there talking about job shortages in an industry, like a hundred thousand job shortage in the industrial painting industry.

And at the same time, you've got journalists writing about

These painting robots are taking everybody's jobs.

How can it be both?

It can't be, right?

And so ultimately, what is good storytelling?

It's saying, no, no, no, we are addressing a current need today.

We don't have enough trained trade labor that can service this need.

We have jobs to be done that are sitting idle in a pipeline for 9, 12, 18 months.

And we are presenting a human in the loop solution.

Silas Mähner, Somil Aggarwal

And that's okay because you know what most of these folks they can't hire six people for a job.

So take the six people that you have in your company and send them to do three jobs.

And this is where I think it's important to understand like what good PR does.

It gets ahead of these problems.

SPEAKER 3: Silas Mähner

One other thing, sorry, I know we got to go back to your story at some point, but I just want to jump in is that the point that sticks out to me, this point that sticks out to me right when you say this is these companies, if they can do this, they're going to have higher margins.

And hypothetically, these people can be paid more, right?

This goes into the topic of how ESG and climate kind of go together, where there's going to be

hypothetically more equitable outcomes for these workers who usually they don't want to stay as a painter because it doesn't sound prestigious or they can make more money doing something else, going to engineering school, whatever.

But if you can make these quote unquote regular jobs much more, you know, better income and everything, like why would anybody leave it, right?

It's not a bad job, right?

It's just like a little bit of, you know, you know, get a bit of grit on your fingernails, right?

So I think that that's a potential outcome with a lot of these things as well.

SPEAKER 1: Jay Kapoor

Sorry to just jump in.

No, no, no, no.

You're spot on, man.

Look, change is scary, right?

For a lot of people.

And so it's very easy to say, look, the thing that I've been doing continues to pay me well, continues to make a living for my family.

Don't bring a robot in here.

What I'm telling you is like, that's not even a consideration for most of the industries that I look at investing in.

The problem with them is I'm a business owner.

I used to be able to hire enough guys to do this job.

And for the last six, seven years, I haven't been able to, I can't find enough qualified labor to do this job.

So the guys that I do have, I want to upskill them and the sort of rote repetitive tasks that robots are really good at.

I want to invest in that.

Right.

And now there's a whole new sort of move around robotics as a service, and they don't have to put a hundred thousand dollars down.

They can start to pay for it on a monthly basis.

All that is happening and from a business model standpoint will continue to happen.

But let's kind of come back to the customer need.

I have jobs in my pipeline, and I don't have enough human beings to do it.

Like, even before you talk about change is scary, and we'd love to upskill these people, let's just come back to problem number one.

I can't even get enough people to fill these jobs.

And like, therein lies a multi-billion dollar opportunity.

SPEAKER 2: Somil Aggarwal

Yeah, no, I think that's like, it's, it's definitely a relevant opportunity for a lot of the people who take a second and say, okay, our infrastructure is crumbling, there isn't enough movement.

The transcend conversation that we had dealing with water infrastructure was talking about how, because of how slow this movement is, you have to plan 10 years ahead, because you can't plan in a rapid pace.

And what happens in three years is that the plan changes.

And

It is a massive, massive issue in infrastructure.

I think that goes with industrial automation, that the timing actually makes a lot of things possible that weren't previously possible.

Um, yeah, I am, I am going to be heavy handed here and I really, really, I personally, I know Silas has met you quite a bit.

I got to learn your story through your podcast or your LinkedIn, everything I could find, but I did end up reading that your transition to climate was accidental.

Uh, so I'd actually love to hear the story behind that.

SPEAKER 1: Jay Kapoor

Yeah, the first climate investment I made was in August of 2018 into a company called Revel.

Back then they were doing electric moped sharing, two wheel mobility.

You know, the funny thing is, and Frank will be honest with us because he's a very honest guy, but if anybody tells you that in 2018, we knew that Rebel would be a climate tech company, they're lying.

We didn't, right?

When we underwrote that deal, the idea was I've been in New York now almost 15 years.

And Frank kind of similarly, both of us grew up in places where

2WD Mobility

Two-wheeled mobility is accessible in basically every part of the world, except for America.

And we're not talking about kick scooters, by the way, because I had looked at all those deals.

And frankly, the unit economics on those deals just didn't make sense.

These things were treated like toys.

They were priced like toys.

It was, you know, $2 to $3 to get a mile on a kick scooter.

And you could tell that people didn't really respect them because they would pick them up and they would like

Thanks for

But we just didn't know what that was.

And if you go and listen to the episode that I just had Frank on my show, nor did he and Paul, his co-founder, right?

They were just trying to solve this two wheeled mobility problem.

And they saw a multi hundred million dollar opportunity just in the US to create a alternative to

Public transit with the MTA has let us down.

And, you know, private ownership of cars, mostly internal combustion engines.

Then the big change that happened and kind of how I got pulled into understanding this world of EVs and climate and mobility.

They suddenly pivoted to, you know, operating electric rideshare.

If you've spent any time in New York and now even in San Francisco, you'll see the beautiful blue rebel Teslas, and you'll see them all over New York.

Well, how can they make unit economics on rideshare work when Uber and Lyft struggled for a really long time to get those numbers right?

The way they did it was they became their own supply and their own demand.

What you see as Teslas and rideshare is actually the end product of the real business, which is operating their own charging stations.

What Tesla did across, you know, route one in California or up and down really any major highway where they've installed their own networks of superchargers.

Revel is looking to do that in dense urban situations like New York, like San Francisco, like Miami and so on.

And you start to realize, wait a minute.

Climate is touching basically every industry, right?

Climate is touching vehicles.

Climate is touching construction.

Climate is touching urban planning and agriculture.

We just had Shana Harris on my show who talked to us about the fact that we're all going to be eating way more mushroom-based products by the end of 2030.

So if you don't like mushrooms today, you will soon, basically.

So the idea there, guys, is like,

Climate

Silas Mähner, Somil Aggarwal

and Silas Mähner.

SPEAKER 3: Silas Mähner

This is perfect.

You set me up nicely.

First of all, I do love mushrooms, so I'm covered there.

But secondly, you talk about adapting.

This is something I've noticed.

Obviously, I'm not from climate either.

I had no interest in it growing up.

I kind of fell into it by accident.

I just wanted to move to New York, right?

That's how I ended up here.

But when you talk about adaptation, the thing that is fascinating to me, and I didn't have any depth of knowledge of the typical tech world or anything like that before.

I've been kind of learning about tech and climate altogether.

And the thing I've noticed that's very interesting is you have a lot of people building businesses in a way that is totally different from Silicon Valley, right, where they have to instead of just being in their bubble and doing their thing, they are forced to interact with government, interact with interactive, you know, different funding models, which we talked about with Sean.

Jay Kapoor VSC Ventures Podcast featuring Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

SPEAKER 1: Jay Kapoor

There's a couple of questions wrapped up in there, right?

But I'll start with the fact that we're all interacting with people that the tech industry for a long time kind of shunned and tried to stiff arm, to use an analogy from my sports background.

I just, I don't know if you guys have seen the show.

I'm super pumped.

You know, the story of Uber, I'd read the book many years ago.

Basically the idea was, you know, what was the origins of Uber and then kind of how it led to Travis Kalanick's exit.

The whole idea with Uber was we're just going to steamroll cities as we get in there.

And the pace of customer adoption is going to outpace the ability of regulators to do something about us.

Right.

And I would say largely they were successful.

I mean, they steamrolled San Francisco.

Yeah, they, they ran into issues in other cities and you know, there may have been some borderline unethical things with how they use data to get around it.

But the, the large sort of takeaway for a lot of tech companies was you don't need to work with government, just steamroll them and, and you'll get there eventually.

And what I will tell any founder listening is, just because it worked for Travis, don't expect it to work for you.

Things that take a long time, especially in climate.

You know, they take things like zoning and permitting and, you know, different government agencies and environmental agencies potentially.

And so any of the work that you're doing that is interacting with the real world, there is probably somebody whose job it is to very deeply care about that thing.

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

talk about

There is somebody that cares about how the fish in this pond, like do, how they survive, how they, you know, thrive for generations.

You have to be able to willing to like bring that person in and, and converse with them and share with them why in the longterm you're on their side.

Right.

And I think sort of call it the tech of the 2010s.

wasn't interested or didn't feel like they needed to do that.

And what I tell you is like, we're here a decade later, and government folks have gotten wiser to this.

You know, corporations have gotten wiser to this.

They're just not going to get steamrolled by founders anymore.

And frankly, you know, back then, because I started kind of in the tech ecosystem in 2013, 2014, like,

Back then, tech was seen publicly as kind of this force for good.

And everybody was sort of like, yeah, I know it's like, messing with how TLC does things.

But you know what, I get my ride really quickly.

And generally, it's it's making my life better, right?

There's no consumer harm happening here.

And then we learned everything that was happening in the background that was actually consumer harm.

And you have to understand that we live in a time where tech is no longer seen as a overwhelming force for good.

It's seen as business enterprise.

And so if you think that, Oh, if I steamroll, you know, I'm using government specifically, but, but use anybody in your examples, I was like, Oh, I'm just gonna be able to like, not have to work with these folks.

Understand that you're, you're living in a different time now where that's not required.

So, okay.

I just laid out the problem.

Let's talk about the solution, right?

What do you really need to be doing?

You have to be engaging with these folks early and you have to be looking at them as kind of engaged partners who want to be heard, right?

Sure.

Even if they may not have the ability to block you or block what you're doing.

Taking the time to build the relationship, make them feel heard, help them understand why you're building something in a certain way.

Understand why they care about, you know, the approach being a certain way, why they maybe block or push back on past interactions in this space.

Yes, it feels like that shit's going to take a long time, but fighting with them post-fact, fighting with their lobbyists, that takes a lot longer and it costs a lot more.

And so I'll come back to Rebel as an example.

One of the really smart things they did was very early on, they brought advisors on that had networks within local city government.

And unlike Uber, unlike Lyft, they went and built relationships with New York Department of Transit.

They built relationships with the mayor's office.

They built relationships with, you know, taxi and limousine commissions and the folks that actually own the medallions.

And they tried to understand, okay, how do you guys operate taxi and livery in this country?

How do you guys operate?

And, and, you know, city bike kind of does things a certain way.

Are we going to be regulated as a motor vehicle?

Are we going to be regulated as a city bike?

You guys live in New York.

If you run a red light on a city bike, nobody writes you a ticket.

But if you do it on a, on a vehicle, on a motorcycle or a scooter, your, your, you know, license is attached to that.

You have to understand those nuances when you're building in

This world of, you know, EV mobility or climate or whatever, those nuances matter to your customers.

They matter to the people who are constituents of your product, even if they're not customers.

So hopefully that answers kind of your question, but like my broader philosophy here is look, man, these are hard problems and they take a long time, but if you're willing to engage with folks, you know, in your ecosystem in a positive way, it saves you a hell of a lot more headache in the future.

SPEAKER 3: Silas Mähner

Yeah, I think that's really fascinating.

I really, uh, very well put to my loaded question.

I think it was a great answer.

And thank goodness, uh, the bikes are regulated differently.

Cause I, they would be giving me tickets left to ride on my electric longboard.

SPEAKER 1: Jay Kapoor

As long as you wear a helmet, buddy, that's, that's all I say.

And I, by the way, I need to take my own advice.

Cause oftentimes I'm like not planning to ride a city bike that day and then it becomes more convenient.

And I'm like, ah, it's only a half mile.

If you're listening to the sound of my voice, please wear helmets.

Cause I've seen disasters happen on these things.

SPEAKER 3: Silas Mähner

Silas Mähner VSC Ventures

SPEAKER 2: Somil Aggarwal

was reading, and I think it also came up in conversation, the question about this generation's 25 year old entrepreneurs, right, and how the past, you know, call it 2025 years have been, you know, reshaped by first, like the very, very first onset in the early, you know, 2000s of these like young generation of entrepreneurs that are now built, you know, the Facebooks, Tesla, SpaceX, whatever have you of today.

And one of the things that

came out of that conversation was that corporates are the wiser for the way that a lot of innovation has happened.

And in the past, it was startups disrupting corporate innovation.

And now there's a lot of vehicles through corporate VCs, industry relationships with private investing, like venture capital, P firms, different things like that, that have just allowed for a lot more streamlined innovation that can kind of put the

Jay Kapoor VSC Ventures

SPEAKER 1: Jay Kapoor

I'd largely agree with what you're saying.

You know, we had Lior Susan from Eclipse Ventures on our show, it's a fund that we, you know, look to co invest with and really respect.

And Lior kind of had this observation where the archetype of a

Founder in Climate Adaptation Industrial Automation looks very different than folks that were building in consumer or marketplaces or D2C or you know all the stuff that was popular in the last decade.

It's not the hoodie coder you know who stays up until 3 a.m.

and codes and you know social network Mark Zuckerberg kind of guy.

Doesn't pay attention in a Sequoia meeting.

Yeah, exactly.

Right.

Shows up in pajamas.

It's not that person.

Typically, it's folks that come from industry.

They're maybe in their late 30s, early 40s.

They have families.

They are driven by different things.

They are driven to innovate for different reasons.

I mentioned concrete AI as an example earlier.

Alex, who's the CEO, came from that industry.

He spent 17 years in the concrete and aggregates industry before he started this company.

He's not a hoodie coder, right?

He's a seasoned executive, but he's a first-time founder.

And so I think you're absolutely right, Somil.

I think a lot of folks that want to tackle these legacy industries

SILAS MÄHNER, 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

has a deep understanding of the nuances of this industry, has relationships that they can sell into, right?

Maybe they're former employees or whatever, right?

Like they were heading up this team, now somebody else heads that team, but they know what the buyer archetype looks like, they know how those decisions are made, they know who they have to reach to, and they can shortcut the whole sales cycle to get there.

Okay, that's a strong signal to me of when we would be interested in digging in deeper with the founder.

Now, you might be listening and saying, well, Jay, I want to do something in the construction industry, but I don't come from that industry.

Right.

But I have some other skillset.

Okay.

I don't think that precludes anybody from founder market fit.

Well, I want to hear it when somebody comes in and says, Hey, my last company, you know, might've been in whatever direct to consumer or, uh, SAS, I was building a CRM, but.

I was so passionate about this category, I went and did customer discovery with 100 plus buyers in the space.

And the vast majority of them told me that priority number one was cutting costs.

Priority number two was new revenue.

Priority number three was whatever else, right?

And so I decided to go build a product that answered priority number one.

Okay, you know what that says to me as a founder?

You know how to sell.

You know how to take customer feedback.

You know how to prospect.

Like Mark Cuban has a saying, sales cures all, right?

If you can get out and sell, you build yourself a little bit more runway as a founder that maybe doesn't come from that industry, but has other skills.

Like maybe you've been a founder before, you actually know how to recruit and hire and build a team.

So we don't have to help you learn that.

We just have to help put enough experts in this industry in front of you.

And we know you're going to go knock it down.

Some founders, they actually have that second piece figured out.

They know the industry really well.

And what they need help with is, okay, how do you hire an executive who can help you build a startup?

Because that's very different than hiring an executive when you work at a multi-billion dollar company, right?

Jason Lemkin says this a lot, because 50% of VPs of sales are absolute garbage.

Today we're

And you said, OK, well, I spent all my money hiring you.

So go ahead and start creating the emails and start doing the prospecting and start getting on these sales calls.

And they go, no, no, no, no, no.

My last job, I had a team that did that for me.

You go, OK, buddy, well, we haven't raised our Series A yet or we haven't raised our Series B yet.

You're not going to get that here.

And then that's, that's when you realize that, okay, you've hired poorly.

So you could take somebody who knows an industry and you still have to teach them things.

Ultimately, it just comes down to, you know, what risk are you willing to take as an investor and the willingness of the founder to kind of engage on the stuff that they know and they don't know.

So a little bit of a long answer, but, um, I think what it comes back to me is like, yeah, I think the archetype of the founder that builds in these industries is changing.

But that doesn't mean that if you don't come from this industry that you can't build in climate or you can't build industrial automation.

SPEAKER 3: Silas Mähner

Maybe just a reason to use a recruiter when you're hiring.

SPEAKER 1: Jay Kapoor

I was trying to set you up, man.

SPEAKER 3: Silas Mähner

I was trying to give you the alley-oop there.

I appreciate that.

So this is something that, you know, not having a background in investing, I'm always curious about is we talk about building relationships, which is something I feel I'm pretty good at.

And I understand it takes time.

Usually we talk about building relationships with the parties involved, whether it's government or existing people that are kind of incumbent and doing this kind of, let's say doing the work and going slow rather than steamrolling people in the case of Uber.

How do you think that if climate companies are going to be successful by doing that, is this going to impact the way VCs raise where they say, okay, we have to actually raise with a longer time horizon to return the money?

Are there ways that you can make up for that with the PR side of things?

Like what is that going to do to shift the landscape if necessary?

And I know this is another loaded question, but it is, I think it's important.

Do you think that if you're building in hardware, that at the end of the day, when you are successful, the total returns won't matter because it'd be so much bigger, even if you wait a couple more years, like just kind of taking this all into, into account.

SPEAKER 1: Jay Kapoor

So there's two different questions.

So I'll, I'll answer the first one.

And then if I don't get to the second one, remind me and I'll get to it.

So your first question Silas was, how has it changed how funds are raised?

And I think the answer is, I don't think we know yet.

Right.

My general perspective is

Venture capital works when funds sizes are restricted, because you are aligned with your founders and your LPs, that success is returning money to your investors.

And the only way that happens is that your companies are outsized successes, right?

When you see funds that raise

200 300 400 billion dollar funds and they're getting 2% you know management fee on those funds and they have teams of you know I don't know 15 20 people everybody makes a million to two million bucks a year and they all go home happy and I know you know it people are gonna say well that doesn't kill my hunger to have a massive market leading fund yeah yeah I want to believe you but at the end of the day like

Realistically, LPs really want to back managers that are hungry.

And I know this in the LP conversations that I have, even though we're not raising for our fund for a while, but I still meet with the folks that you're backing or you're backed by or other folks in the industry.

There's a lot of LPs that are pulling out of these mega, mega stage, multi-stage funds, these mega size multi-stage funds.

because they're realizing that their incentives are no longer aligned with the with the investors.

And that also ends up impacting founders, because those mega multistage funds, and I know I've tweeted about this ad nauseum, you know, they will invest 500k checks, they'll invest $5 million checks, and they'll invest $50 million checks.

And then they'll go and they'll say, look, we love all of our children equally.

Welcome to the

Founders have to pick VCs who are aligned with their success, and LPs have to pick founders who are aligned with their success.

Now, what does that alignment look like from a timescale standpoint?

You're absolutely right, Silas.

Maybe it means a little bit more patience.

What's

It's setting the wrong expectations for founders.

It's setting the wrong expectations for LPs.

I had a mentor, one of my managing partners from my last fund, who said venture capital is a get-rich-slow scheme.

Silas Mähner, Somil Aggarwal

a category like climate, you're building in a category like hardware.

If you set those expectations up with your LPs, then I think you're setting everybody up for success.

You can be more patient as an investor.

You can raise funds in more reasonable clips.

Instead of going back every 18 to 24 months to raise again, you can go back every 36 months and let your LPs breathe a little bit and judge you on the performance of those initial funds.

Anyway, I'm like going off on a tangent because like this is I think how shit used to get done.

And then we had zero interest rate environment, all this money out there.

People had paper unicorns that they went and raised massive funds off of.

And now they're making more money from management fees than they're ever going to make from carry.

So I see you nodding Somil, like I feel like this is connecting a little bit, right?

Some of this has to change.

And I think it's going to change.

I think from the initial conversations I'm having with smart LPs, they're already reevaluating the cap on the size of fund they're going to come into.

Because after a certain point, they realize that, you know, you compensate a tiger too much, or sorry, you feed a tiger too much, you compensate a manager too much, and they just stop hunting.

SPEAKER 2: Somil Aggarwal

Yeah, I think that I, you called me out correctly.

I, this is actually, so I worked at a smaller size fund previously.

And so they were managing about, you know, I think 50 plus, but under 100 essentially in that range.

So smaller size, early stage VC.

And, you know, in that situation, you do see how the investors, the managing partners, you know, general venture partners as well, they're all aligned because the check size, each check they're writing is a decent sized percentage of their fund.

And their own returns in terms of how they are financially secure and stable are tied in because they didn't raise a giant fund.

In this particular scenario, I actually got to sit very close to, you know, I think a really remarkable manager because this was his third fund.

And in this scenario, he had done well on the first two, well enough to consider raising a larger fund, but actually chose to remain small so that he could have more conviction in each of the investments.

And that's essentially core to I think what you sell in that kind of model, which is I care.

VSC Ventures

SPEAKER 1: Jay Kapoor

environmentalist, a cold hearted capitalist, like you have to align incentives.

And we've gotten away from that.

And I think it has really messed with founders' minds on what matters when they're raising, right?

I'm not saying don't go after brand names.

People go to Harvard and Stanford and Carnegie Mellon for a reason, right?

You actually need to think a little bit more about

when you need that brand name and when that brand name is aligned with your success.

So do you need it in your seed round?

Maybe, maybe not.

Maybe you get a, a lead investor who is a practice board partner that understands how to take you from, you know, a couple of guys and gals in a garage into a real business with employees and culture and kind of, you know, you, you know how to build this thing out.

And then when you go to your Series A, that's when you go and get that mega fund with kind of a massive brand name that's going to help hopefully carry you through multiple successive rounds.

Maybe you don't even need that at Series A. Maybe at Series A, you need a sector specialist that's going to unlock new customer relationships for you.

You've built this perfect engine, put a dollar in and within nine months, $3 come out.

Great.

Now somebody has to go and find you more customers for that engine.

So you may not even need that mega fund at Series A. Maybe you need them at Series B, right?

So I'm just illustrating this example of understanding what you need, because those big funds, they're going to outbid the small funds every single day.

Every single day, upsizing your round from 4 to 5 million and upsizing your valuation from 45 to 50 million ultimately is not that big of a deal for them.

But for a small fund for whom, you know, every single piece of ownership, every single point of valuation matters.

Jay Kapoor

But, you know, things are this way for a reason.

And I've been doing this for close to a decade where I've seen enough founders get screwed over by their Series A or Series B well-regarded, well-branded fund because they thought they were the main and they ended up being the side piece.

SPEAKER 2: Somil Aggarwal

I was just going to say that.

I was like, do you want to be the main or the side of your investor?

It might have been a bit too crude, but I was exactly going to say that.

You cut me out there.

No, exactly.

I mean, I remember when I was reading about this, Samir Kaji was a similar like champion of this, not in climate, but again, in more generalist investing.

It just makes more sense for especially for founders who might be looking for that in.

I think a big time this matters is when you're going for a VC that you're looking to make introductions.

If you are, if you are their main, they're going to allocate a lot of their own resources and a lot of their own personal capital to you.

And so I think that's especially important.

I think I noticed that a way to quantify where you are in the kind of VCU needs also how much you're going to rely on their relationships.

And I think that factors in especially to how much of a percentage you are of their fund.

So I just wanted to add that.

SPEAKER 1: Jay Kapoor

Yeah.

And I think on top of that, Somil, like, you know, we talked about two things that I think are changing in terms of industries, right?

We talked about industrial automation and we talked about climate adaptation.

I think a third thing that is changing is cap table construction in the next decade.

So if you'll allow me to kind of wax poetically for a couple of minutes, it used to be that people kind of wanted one anchor fund, and then they wanted a couple of small angels to kind of fill out the round, right?

I think that is going to change over the next decade.

And I think what that's going to lead to is, let's look at an average seed round, let's say 4 million on 16 posts, right, or something like that.

So you're taking about 25% dilution, if my math is correct, right?

So you're putting up 25% of your round.

Of that 4 million,

1.5 to 2 million is going to come from a lead investor, right?

Let's say 1.5 comes from a lead investor.

Another million comes from a very actively engaged investor that maybe didn't lead, but is going to kind of be your second biggest share.

That's 2.5 of 4 million.

So what are you going to do with that remaining 1.5 million?

Right?

You're not going to split that up into 10 small checks.

That's too much to manage.

So what you're going to do is you're going to go find

Maybe two, three or four other funds that all bring something different to the table.

One of them is going to be a stellar fund that excels in recruiting.

Another one is going to be a stellar fund that understands your industry deeply, and maybe some of their LPs are corporations that are going to be your first pilot customers.

And then maybe you're going to go get a fund that understands PR and storytelling and is going to be there to help you.

But ultimately,

You're going to build your own Avengers.

You're going to build your own cap table of the best funds in each of these categories.

And that's different, right?

It used to be one stop shop.

You would go to, I don't know, General Catalyst or Andreessen.

I mean, these are, these are funds that we co-invest with.

We like them, but I'm just saying historically, you kind of just wanted to get blessed by one of these funds.

And then the rest of the round, listen, there's going to be no issue filling it out.

If you say Andreessen's leading my round, right?

Generally speaking, I think maybe with the exception of Andreessen as a brand, it's changing for a lot of these funds where founders are going to say, you know what, I'd rather actually build my cap table with four or five funds designed to support me from this journey from seed to series A. And as that cap table construction changes, I think founders willingness and appetite to

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

being not just one fund, but actually, you know, a collection of them.

SPEAKER 3: Silas Mähner

Yeah.

I think Susan Sue said something to this effect that your, your investors should be perceived as your advisors, right?

Don't just, just, just get an investor.

You be thoughtful about it.

And I think, especially if we talk about the, the nature of building a climate generally, especially in hardware, it makes a lot more sense that you approach it in a much, a more,

Jay Kapoor VSC Ventures

Jay Kapoor VSC Ventures Podcast featuring Silas Mähner, Somil Aggarwal

I want to make sure I get this right, because again, I'm not an investor.

So it sounds as though the if the kind of baseline was, you know, we raise this fund as a VC and we're going to return at this time, that kind of going into climate was a skewed view of what it used to be because of zero interest rates and everything like that.

So you're saying that it's not necessarily that much different from kind of the early days of tech investing, perhaps it's more it's more similar than we think.

So the outcomes are probably going to be also good, right?

There shouldn't be any massive adjustments on the way that VCs have to raise.

SPEAKER 1: Jay Kapoor

I think a 10 to 12 year time horizon is absolutely appropriate for a VC fund.

I think where the expectation needs to be reset is that you're going to have fat, juicy markups every two years, right?

So you invested

In year one, by year three, this company is already 5x.

By year five, it's 4x on top of that.

But you know what I mean?

Like, that's just not how these companies are built.

I'm sure when Sean came on your show, he talked about that too, because I've seen the map.

He built this great sort of curve of how these companies raise, when they raise, how much non dilutive funding.

So I'll crib from him a little bit, right?

It actually looks like a traditional J-curve or a hockey stick road, right?

Where you're kind of flat for a little while and you're maybe flat a little longer than you expect it to be.

A software company is going to have a smaller part of that hockey stick down here and it's going to sort of curve up a little bit more.

And hardware and climate companies

Oftentimes they have three to four, even five years where they are ideating and maybe building with a design partner.

And they've got one to two customers, but those customers are enough for them to continue to build a really strong product.

And then boom, they explode year five.

And that's when they take off.

So I don't think 10 to 12 years is unreasonable for an LP to have a fund expectation.

I think the expectations of

Welcome back.

SPEAKER 3: Silas Mähner

The outcomes are usually actually relatively close for hardware versus software.

It's just that the funding map to get there is totally different, right?

And I think that's the thing that people need to have that self-awareness as a climate founder of what am I building, right?

Just make sure you're not pursuing the wrong mission.

Something my dad always said is like going a hundred miles an hour is only good if you're going in the right direction, right?

You don't want to be going the wrong way.

If you're headed north and you accidentally turn south, that's a terrible idea.

So yeah, I'll rest my comments there.

SPEAKER 1: Jay Kapoor

Yeah.

Yeah, well, you were asking something, I think, initially about also how, like, how these companies are built and how these funds need to reassess the services they provide, right?

And it's something that we've thought about, too.

You know, one of the upcoming episodes on our show, CLIMB, check it out every Wednesday mornings, if you like climate podcasts.

And if you're listening to this one, I'm sure you do.

We had Helena Merck from Streamline, which is a company that helps founders get access to grants.

Maybe she's been on your show as well.

I didn't have a chance to check.

Coming up.

They're coming up.

Yeah, great.

Okay.

All right, good.

Maybe we'll just release it on the same day, guys.

You know, one of the interesting things with Helena was understanding

You know, how founders engage with these grants, how long it potentially takes to access them, at what point certain grants make sense, you know, when a phase one or phase two or phase three is applicable.

I don't think a lot of funds are thinking about this.

And I think if they're building in hardware and climate, they're going to have to.

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

doing a paid design partnership with a potential large customer.

You know, people initially started with, oh, I'm just going to sell them.

And actually, what some of these innovation groups really want you to do is to come in and say, hey, you guys have this amazing campus full of great engineers who really understand the customer super well.

We would love to do a manufacturing partnership with you.

And yeah, we retain our IP, but we're happy to do some rev share for the first couple of years to really get this thing off the ground.

Actually, that de-risks for a VC, this company, more than you might think.

Because to me, it says, there's now a reputation risk of Siemens or ABB or one of these large companies.

They've put their name behind you.

And if you as a founder, dig in a little bit, look at the folks in your ecosystem, go to their corporate venture arms, or go to their innovation groups, and offer to build some of those kind of design partnerships, you find that actually, that becomes more non dilutive, because they'll pony up a little bit of money.

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

There's a lot more capital out there than you might realize and it doesn't just have to be equity financing from VCs.

SPEAKER 2: Somil Aggarwal

I swear I think the podcast on you makes a huge difference.

I think that's exactly what we wanted to transition to right after this.

But

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

VSC Ventures

SPEAKER 1: Jay Kapoor

Yeah, so the idea behind VSC Ventures was these companies need the help now, but they don't have the money to pay for it, right?

Much like I've been preaching for the last hour of, you know, understand your customer's problem, speak to many customers about it, and then go build a solution that solves it.

We took some of that feedback on ourselves, right?

Who are our customers, the founders, who we want to serve, we want to be invested with, you know, we want to be along for the ride with, and

Over doing this at other funds, when I was at Launch Capital, I was leading and taking board seats and understanding where these companies really struggled.

We started to see that actually good PR makes a huge difference in a company's ability to close new customers,

So why do so many folks struggle at it?

Because ultimately, when you are really close to the problem, it sometimes is hard to step back and kind of craft a whole story.

Stuff that you think is obvious, like it's in my head, I live this problem every single day.

Everybody else does too.

No, they don't.

And people are thinking about, you know, the score of the last Jets game, right?

They're not thinking about your industry and your problem, or, you know, how you're going to solve it every single day.

So that's where we think having somebody as a partner, as a consigliere to come in and help you craft your story makes a big difference.

Now what do most people do?

What do large companies do?

They go and they pay an agency, I don't know, up to a quarter million dollars a year.

Welcome back.

So that's kind of how the idea behind VSC came together.

We know this is really powerful.

We have seen how it makes a difference.

We've seen how generating press, there's a chart that we haven't put up on our website, but more and more, I talk to people, I feel like I should.

We took one of our portfolio companies and we took one of their biggest competitors.

This company has raised, I think, less than 6 million bucks.

Their biggest competitor has raised over a hundred million.

If you put them side by side in terms of press, guys, you couldn't tell the difference.

You could not, you would think, Oh man, these guys must go head to head, you know, every single day.

And they do when they're selling the customers and the customers deciding between one solution and the other.

Um, what are they going to do?

They're going to look you up.

They're going to look at your press.

They're going to look at your content.

They're going to see, you know, press hits about your CEO.

They're going to watch videos about how your solution works.

Testimonials from past customers.

There's like a checklist of nine to 10 of these things that our team has been doing for the better part of 20 years, that now we're taking from doing it for later stage companies and applying it to doing it for our startups.

And we know that it makes a difference.

We know that good storytelling unlocks sales and unlocks good hires.

And we don't want founders to have to wait until series B when they can afford it.

to have this service.

So that's really that's really the ethos.

That's kind of what we're doing.

We heard that our customers needed it today.

And we found an innovative structure by which to give it to them.

They can't afford it with cash.

Great, maybe they can afford it with equity.

And that's that's the way we support them.

SPEAKER 2: Somil Aggarwal

I know it's it feels very much like one of the phrases we've heard on this podcast is investing in kind and with sweat equity, not just putting in the capital.

But and so so that's from Eli Gescheit from Siemens Energy Ventures.

And I think it very much is diverting resources that wouldn't normally be available to these companies and doing it in a way where that is your differentiator as a fund as well.

You mentioned a checklist and I we had the fortune of being able to talk about this beforehand.

on that checklist is also how to do storytelling as a founder.

So I'd love to hear your perspective on that and how you advise founders just about going about that process.

SPEAKER 1: Jay Kapoor

Yeah, there's I think, two, two steps to that, right?

One is how you tell your founder story.

And then the second is how you tell your company story.

So I'll talk about the founder story.

And then remind me if I don't get the company story, I'll make sure I hit some points on that as well.

Most folks listening, maybe they're familiar with the term the hero's journey.

Maybe they've read Joseph Campbell's Hero with a Thousand Faces.

I'm a big movie buff.

I actually, in college, in addition to getting my finance degree, I took three semesters of screenwriting.

Best decision I ever made.

Really helped me understand the fundamentals of like how stories work and kind of how you break it down.

And you only get there by reading hundreds of scripts, both good and bad ones.

Let's get back to structurally how you tell your founder's story.

Well, the basics of a hero's journey are, there's a hero, he or she is called to action by some, you know, deity or external force.

The best example, by the way, if you're listening to this, you're like, how do I apply this in real life?

Think of Star Wars.

Star Wars, the original one from 1977, George Lucas basically wrote it with hero with a thousand faces like open on his lap, right?

It follows the prototypical journey beat by beat.

There's a hero, they're called to adventure.

They turn down the call initially, then the call becomes so strong because of something that happens in their life that they decide to go on this journey.

On this journey, they uncover truths about the world that were previously kept from them or they didn't really understand.

They realize that they must take action in order to confront these truths about the world.

Nick From Paintjet

Initially started as a small business owner.

He bought a SertaPro painters franchise and he scaled it from zero to one and a half million in revenue.

And then he was faced with the truth of the world.

My labor costs are never going to scale.

I want to paint these hundred thousand square foot warehouses.

I want to solve this problem that the world has, but I can't hire enough human beings to get up there and do it.

So what am I going to do instead?

Well, I need to challenge something about the world.

People don't think that automation can solve this problem.

I'm going to show them that automation can solve this problem.

So he goes on and he puts a team around him that allows him to build paint jet robots.

And now what Paintjet does is paint a 100,000 square foot warehouse five times faster than a human team could do it.

And oh, by the way, instead of six people, it takes two.

Shouted about this a little bit earlier.

How you tell that same story matters because how memorable it is often comes down to how memorable you are in telling your founder story.

And so for Nick, his story didn't start with the robots.

His story started with, well, I was just in this corner of the world, minding my business, building this company.

And it unlocked for me that this is fundamentally broken across the world, across industrial painting.

And yeah, I could have refused my call to action by just being, you know, somebody that built a successful small business.

Maybe I bought a couple more franchises and I was the, you know, industrial painting guy in and around Nashville, Tennessee.

But instead, he's on a path to building a multi-billion dollar business because he unlocked this fundamental truth and then got after it, right?

That is a memorable story for anybody that meets this founder.

And it comes back to the fundamentals of what makes a good story, a good movie, any Star Wars, any Marvel movie.

It's all the same things.

And so when I come back to the fundamentals of good storytelling, it starts with the fundamentals of how you introduce yourself as a founder, how you introduce yourself as the hero of the story, and how you introduce this big problem that you're going after.

And you want to get your audience on your side.

They're going to say, wow,

You are the hero and I ride with you as you go and you solve this big problem.

So that's actually what I tell people as they are pitching their company, don't forget that you're also pitching yourself and your own hero's journey.

SPEAKER 3: Silas Mähner

I think you should consider becoming a hypnotist, a hypnotist.

I was like totally drawn into this.

This is so good.

This is so good.

So

SPEAKER 1: Jay Kapoor

I thought you meant I was putting you to sleep, Silas.

SPEAKER 3: Silas Mähner

No, no, no.

Because I have severe ADHD, right?

So I'm constantly thinking about other things, but nothing else mattered in this moment.

I was just so focused.

So I appreciate you helping me out here.

So did you want to talk about the company stuff anymore?

Otherwise, you'd want to go on to Pitch Decks?

SPEAKER 1: Jay Kapoor

Yeah, I'll touch a little bit on that.

And this is maybe more tactical than sort of what I just talked about with the founders journey.

I look at hundreds of pitch decks every month.

Founders are really bad at how they craft their pitch decks.

They are.

They are.

They know their own stories super, super well, but they're not great at how they craft it.

So we'll give you some, some, some free tactical stuff here, right?

Before you put a deck together, before you put a single chart or graph or logo on a deck, go into an empty Google doc, Word doc file.

Decide, let's say I want 12 or 15 slides for this deck.

write 12 to 15 bullet points in the form of a story.

And it usually starts with something like there was a problem in the world.

Solutions had been tried, but never got there.

I came across this problem in a certain way.

I ideated or me and my team ideated this solution.

We tested this solution with potential customers, or here's the feedback that we heard from people who wanted this solution.

Here is, you know, what the solution looks like, or maybe you do that a little bit earlier, but you kind of go into deeper about why this solution really works.

And then talk to me about what the future state of the world looks like if I'm successful, right?

That is eight to nine bullet points.

Yeah.

Maybe that'll turn into 12 to 15 slides before you put a single thing down.

Make sure that you write your slide headers, because those 12 to 15 bullet points I just gave you, those are going to be the slide headers of these slides that you're putting together.

And then go and drop charts and logos and whatever onto your slides, but they all come back and they speak to that slide header.

Now, here's why.

Here's the tactical reason why.

DocSend put this data out a couple of years ago.

The average amount of time that a VC spends looking at a deck

2 minutes and 44 seconds.

A couple of years ago, it was 3 minutes and 35 seconds.

So it's been going down.

And most folks look at this on mobile.

So all those little dots and lines that you're putting next to, you know, your information, really all they're looking at is the slide headers.

And if you can tell a story in 12 to 15 slide headers, why this is an important problem

Why you are the best person to go solve this problem.

Why other people have tried and failed.

Why you won't fail.

And look at all these people that are rooting for you not to fail.

These customers that are relying on you to solve that problem.

If you can answer that in 12 to 15 slide headers, dude, it doesn't even matter what you put on the slide, but you know, obviously spend time on it, make it look good.

But it won't matter, because you've already convinced somebody in 12 to 15 bullet points, which turn into 12 to 15 slide headers.

So that's sort of like I started with a little bit more like nebulous, Star Wars-y, you know, whatever.

This is tactical.

You can do this tomorrow if you're fundraising.

Take your slide deck, you've probably got all great information and content out there.

But reformat it, take a blank slide, write your slide headers, and then go ahead and put in data and charts and logos that support those slide headers.

SPEAKER 2: Somil Aggarwal

I think that's like, especially in terms of looking at it from the VC point of view, it's crazy to us how many founders we see who are following these almost like Guy Kawasaki style slides that feel very formulaic, but can't actually even rely on the slides to tell their story.

Like even the founders that we'll talk to on the podcast, sometimes the whole point of the podcast is to rework their story.

And you can kind of tell the reverse engineering some of their old habits.

And I think that has a lot of the ideas of like what should a good slide deck look like versus what actually works to sell your company to investors.

SPEAKER 1: Jay Kapoor

And a good PR person or a good story kind of, you know, advisor or a good VC that's working with you.

They're going to respect that you are the best person to tell this story.

You are the best.

You already have the information in your head.

If you are the founder or the person that launched this, it's your story, right?

I can't tell Luke Skywalker's story better than Luke Skywalker.

It's his story.

But what you can do is you can start to pull that information out of somebody's head and say, it's all there.

It just needs to be arranged in a way that makes it

Concise and memorable.

SPEAKER 3: Silas Mähner

When it comes to advising the founders you work with, or maybe even just some good stories around what they've done well in the topic of hiring, can you talk just about like hiring co-founders or top talent initially?

Any, any kind of things, obviously I want to talk my own book a little bit here.

SPEAKER 1: Jay Kapoor

Yeah, man, I think good hiring takes a level of self reflection that sometimes founders really struggle with.

Because to hire often means you are accepting that you're not the best person to do something.

And if you've been kind of grinding away and doing everything for a long time,

You know, for some founders, it can be hard to give up control.

I see, I see it both ways.

I see some founders that cannot wait to offload stuff off of their plate.

And I see founders to kind of hold, you know, they'll go and make a sales hire, but they'll still hold onto the final close because they feel like I need to be really close to my customer.

And this thing doesn't work if I'm not there.

That's okay.

You know, it comes in different flavors.

You really have to understand where do you thrive, but also you have to understand where does the business need you most right now?

I tell a lot of CEOs that the fundamental job of a CEO is three things, three things only.

Set the vision, hire the people, make sure there's enough money to keep doing number one and number two.

That's it.

Set the vision, hire the people, make sure there's enough money.

Anything else that you are doing as a CEO is temporary until you can do 1, 2, and 3.

And I think a lot of CEOs, especially founder CEOs, it's hard for them to make the jump from

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

Is that means that dude or that woman is crushing it.

They're bringing in new business, they're closing on it.

They're hitting their targets.

You should want that.

You as the CEO should want your VP of sales to be your most highly compensated individual.

That means that you're kind of designing incentives the right way.

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

You've got three jobs.

Everything else you're doing in the meantime, set a timeline, set a roadmap for when you can offload that to somebody else.

And then kind of get right with yourself a little bit, whether it's therapy, or it's talking to your VC, which is basically a form of therapy, like

Help them understand the roles that you struggle with and help them support you in that.

Because if it's one of those three things, if you struggle with setting the vision or you struggle with hiring or you struggle with raising money, then that I think really needs intervention where somebody has to level you up.

Maybe that's getting coaching.

Maybe that's supporting you with a really great COO that actually does know how to fundraise.

And so as you guys work together, you're going to learn these things.

I think it requires a level of open honesty.

And I tend to find the founders that are willing to have that level of openness and honesty with their investors.

And they treat them like adults and they treat them like real partners in the business.

Those are the ones that tend to go a lot farther.

SPEAKER 3: Silas Mähner

So on the same kind of just flipping it.

So in terms of advice to VCs on how do you, are there any particular questions or tactics you have to ask

Founders to identify if they are the type of founder who is, let's say, more malleable.

They're the person who will recognize those things because they're certain, like if you have the wrong person, they're just unwilling to change and they have like this hard head in the wrong way, you're probably screwed.

So do you have any particular questions to identify what type of founder you're talking to and whether or not they kind of meet that willingness to adapt kind of mentality?

SPEAKER 1: Jay Kapoor

Yeah, I mean, let's talk about in the hiring context, right?

Because you could spend a half hour to an hour with a founder just talking about past hires.

Tell me about the last hire you made.

Tell me about the best hire you made at your last company.

What made them so great?

What were the things that you look for?

How do you source them?

How did you convince them?

How long do they stay?

When do they leave?

Tell me about the worst hire you made at your last company.

What made them the worst hire?

Knowing what you know now, how would you do it differently?

Going back to that time, is there something you could have done to empower this person better or, you know, help them thrive in this role better?

You very quickly start to understand if somebody has kind of done the work to understand where they succeed and where they fail, where they are strong and where they're weak.

And I want founders to know that

Just because you struggle with something that it's not an automatic no, right?

In fact, being a little bit honest and being kind of forthcoming with your challenges and your struggles as a founder makes good investors more likely to take a chance on you.

Then you're obfuscating something.

You tell me, man, I'm a great salesperson.

I could really, I could sell ice to an Eskimo.

And then I go look at your pipeline and I'm like, okay, you haven't given close shit.

Okay.

So you're telling me one thing, but you're actually something else, right?

Or you're like, man, I'm really great at hiring.

Like I know, you know, I could hire anybody.

Okay.

But you couldn't convince a single person from the last company you worked at to come follow you into doing this.

Welcome to

Passionate, confident intensity from my founders.

So passion, you got to love what you're doing.

It's a long slog, eight to 10 years, you're going to be in this business.

You know, confident.

You got to know that this is the right path, Silas.

You said it right away, right?

You got to know that you're heading north before you start running a hundred miles an hour at that direction, right?

So you got to have a confidence and the confidence has to be founded in something.

And then intensity.

You know, we're, we're not building lifestyle businesses that grow 20% year on year.

If you're building a venture scale business, understand that your VC is expecting you double next year.

You've doubled in a year after that.

You triple the year after that, you triple the year after that, you triple the year after that.

And then you IPO.

That's what they're expecting of you.

You need to 2X revenue in the near term.

And very soon you're going to have to 3X that revenue.

So.

Set those expectations with yourself.

You have to have the willingness and intensity to go do that.

And that's not for everybody.

As a VC, I would like to know that before I hand over a significant portion of my tiny $21 million fund to you.

SPEAKER 2: Somil Aggarwal

I think that's a perfect way to wrap up the show.

To be honest, I know we kind of go over this in the beginning.

I'm a huge NBA fan, huge NBA podcast fan as well.

I wish I could have time to talk to you about how it was like having JJ Redick on your show.

Silas Mähner VSC Ventures

SPEAKER 1: Jay Kapoor

Yeah, I mean, you can find me on LinkedIn and Twitter personally.

So at Jay Kapoor NYC on Twitter, easy to find on LinkedIn, Silas and I are usually sharing each other's posts, so you can find us there.

And if you want to learn more about VSC Ventures, go to our website, vscventures.com.

My email is easy enough to find and you can send me anything you're working on.

And like I said, we don't lead, but we love meeting companies before they have a lead.

And oftentimes,

Silas Mähner, Somil Aggarwal titled 145 Climate x Industrial Automation, Climate Storytelling, Changing Cap Table St

Amazing.

Well, thanks so much for coming on.

Thank you guys, this was great.



Intro & Background
Focus on Industrial Automation
The Intersection of Industrial Automation and Climate
Augmentation vs Replacement in Automation
The Importance of Good Storytelling in Automation
Jay’s Accidental Transition to Climate Investing
Engaging with Government and Incumbents
Founder/Market Fit; Founders from The Industry
Impact on Fundraising and Time Horizons; Fund Size
The Importance of Choosing the Right Investor
Changing Cap Table Construction
The Evolution of VCs' Value Prop
The Role of PR in Climate Investing
Founder vs Company Journey; Paint Jet's Story
The Power of Storytelling in Pitch Decks;
Hiring and Building a Team
Identifying Founders Willing to Adapt