#174 Hardware Playbook, Science in VC, DeepTech Success Stories, Environmental-Based Returns, & More w/ Jessica Burley (Planet A)

What if Investors Only Made Money if they *actually* helped save the planet?

Welp... folks, we have the show for you because that's exactly what Planet A is doing.

Somil and Silas speak with Jessica Burley, a Berlin-based investor at the fund.

On top of learning how they are *actually* walking the talk, we found out how they use Carbon Life Cycle Assessments (LCAs) in their investing due diligence process.

Tune in to get the whole thing today! 🌱🌎

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Topics:
**01:29 Introduction and Background
**02:22 The Role of Life Cycle Assessments in Investing
**8:44 Article 9 and the European Regulatory Landscape
**10:27 Interest in Climate Tech Investing Outside of Europe
**12:54 The Increasing Pace of Climate Tech Innovation
**13:33 Jess's Journey to Climate Tech Investing
**17:35 Transitioning from a Small Fund to a Larger Fund21:43 The Role of Brand and **Value in Climate Tech Investing
**24:44 Sector Expertise and Operational Support in Investing
**26:23 Geothermal Drilling for Renewable Heating
**28:46 Investment Opportunities in Climate Tech
**30:45 The Hardware Playbook: Investing in Hardware Startups
**42:53 The German Climate Tech Ecosystem
**49:18 Building Genuine Relationships in the Climate Tech Ecosystem
**51:34 Takeaways
--- Evaluating Life Cycle Assessment in Investment Decisions
--- The Importance of the Hardware Playbook in the Investment Ecosystem
--- De-risking Talent in Startups

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Links:
**Jessica Burley | Planet A
**Follow CleanTechies on LinkedIn
**@Silas & @Somil_Agg on X 

Transcript

Somil Aggarwal (00:00)
Alright Jess, welcome to the show, how are you?

Jess (00:03)
I'm very good, very happy to be here. Thanks, Emil.

Somil Aggarwal (00:06)
We're super excited to have you. I was telling Silas leading up to this that I feel like there's a couple people that you end up seeing over and over again on LinkedIn for doing great work. They're pretty active in their ecosystems and I think your profile is definitely one of those. So we're super excited to have you on and talk about what you're doing.

Jess (00:22)
Thanks a lot, Samil. I'm very happy to be here. Very excited for the episode.

Somil Aggarwal (00:27)
So not to keep the audience in suspense, please tell us who are you and what do you do?

Jess (00:32)
So hi, I'm Jess. I'm originally from London and I'm an investor at Planet A, which is a green tech VC supporting founders who are building companies and developing technologies that fight climate change and environmental issues other than that, like pollution and loss of biodiversity.

Somil Aggarwal (00:51)
Plan A is a really, really great fund. One of the really cool things that they have is an in -house science team, or I think you call it an in -house impact team. So I'd love to hear about the relationship you have as an investor with that.

Jess (01:04)
Yeah, happily. So we're a little unusual in that we have in -house, as you call it, science impact team who do a life cycle assessments on each of our portfolio companies. So they're pretty integrated in the process also of selecting companies. They do analysis throughout the process and help us to research the impact it will have environmentally. And...

Life cycle assessments go really deep into a product's entire lifetime. So from cradle to hopefully second life and then finally death. And that goes into all of the different environmental impacts. So greenhouse gas emissions, but also biodiversity, waste and water effects. And yeah, is that answering your question or do you want me to go more deeply into how I work with them?

Somil Aggarwal (01:55)
I think the part you brought up, which is like having to calculate the life cycle analysis and going deep into that, it's a very hot topic. I work within a climate tech accelerator slash fund myself, and that's a very typical question that we're asking ourselves, which is how do you quantify that? So I'd love to hear from your perspective. How is plan A going about that? And what do you think is really working for you?

Jess (02:16)
Yeah, so we really pioneering the life cycle assessment. It's a pretty scientifically rigorous and accepted method. It's of course a little bit of a twist because we're looking at early stage companies, so they don't actually have necessarily a product. So it's a little bit of projection into how that product will be in the future. But I think it's really good to have that kind of rigor as we

actually believe that the companies who are the most environmentally friendly are those that will be the biggest winners in the longer term in this huge societal and planetary transition that we're experiencing, as we really believe that those who are actually got problems environmentally in some parts of them, or actually just greenwashing will be eventually found out by a public scrutiny. And as we...

transition further along and the regulations come in harsher and the subsidies come in stronger and the public's increasingly concerned about this problem. We believe those who are really having the biggest impact will be the winners of this transition.

Somil Aggarwal (03:31)
One really interesting thing about quantifying impact is where it sits on the investment process, right? Because it can differ from fund to fund, whether you're evaluating at the beginning, as this is like a barrier to whether we're going to look at the company in the first place, or you're looking at it as sort of a checkbox. I think that depends based on the, essentially the fabric of the fund. So I'd love to hear from your perspective, where do you incorporate that analysis and how does that affect your decision making?

Jess (03:56)
Yeah, it's a really good question. So we have the lead of the science team is investor, Lena Tiert. She's a GPM and she has a veto on all of our portfolio, all of our investment committee meetings. So she actually has the decision making power of whether or not we invest. It's definitely not just a tick box. And our carriers also link to hitting our KPIs and impact. So we're like,

structurally really focused on this. We don't do the life cycle assessment before we invest just because it's a lot of work. Like these things can be for one of our companies that was 300 pages long. Or no, sorry, it took 300 hours. It was not 300 pages, but very, very intensive to do them. So we tend to do like a pre life cycle assessment. So sort of smaller testing the waters to make sure that it would eventually.

pass that assessment. But yeah, in effect, it's throughout our process. So already, when we go to the second call, we make sure to get that sort of initial analysis from the science team, so that would be possible. And then when we take it to an investor committee meeting, we have a much longer analysis. And then finally, once we've made the investment, we go really deep into the analysis. And it's also very helpful for our founders to get these life cycle assessments because they can...

thereby take them into sales conversations or fundraising or even attracting talent who are increasingly concerned about greenwashing. And it gives a little bit of an edge over everyone who's just claiming to be sustainable to actually have the data and the proof behind that.

Silas Mähner (05:38)
Yeah, that's pretty interesting. So I want to make sure I understood that correctly. You said that the carry in the fund is linked to also the sustainable, I guess, the environmental impacts that you can achieve.

Jess (05:49)
Exactly. So the amount of carriers, of course, as all funds linked to our returns, but whether or not that carrier goes to us, it gets unlocked as such. It depends on whether we hit our KPIs.

Silas Mähner (06:03)
Yeah, so this is interesting. I guess, was there a particular reason behind doing this other than, you know, we should align the incentives that we're working towards? Was there something behind that? Like, oh, it helped us raise money from certain LPs. What was the reasoning besides just the obvious?

Jess (06:19)
No, you're spot on with the first one. It was just that we believe we should, you know, it's a misalignment of incentives if you say that all of our financial rewards are linked only to our financial gains. If we're saying that we're truly an impact fund, we should surely link our own financial rewards to our impact. In terms of LPs and fundraising for the fund, I think it wasn't really such an important part, but...

Definitely having the LCA, I think, made us stand out and we're also an Article 9 fund and some LPs have a bracket for being Article 9 and so that's also helpful. So in some, no it wasn't to help fundraise, but I do believe that some part of our impact thesis does help us.

Somil Aggarwal (07:09)
Yeah, I think that part of it is really, really relevant, especially as it relates to LPs. Whether or not they buy in the model that you're using is a part that people don't really think about and understand. I think this happens a lot with funds that are doing something called an evergreen fund where the funds, eventually what you make cycles only back into the fund. The thing that people don't really think about as a general audience member, general climate tech builder, is how does that affect the people who are giving you money and the profile there?

So it sounds like you really fit into a specific type of basically vision that an LP might have. I want to invest in, you said it was Title IX funds?

Jess (07:44)
Article 9, exactly.

Somil Aggarwal (07:48)
Article 9. Okay. Interesting. And so what is Article 9 just for our understanding?

Jess (07:52)
Yeah, absolutely. Sorry, it's not a super huge pyramid. It's still quite new, actually. It's a regulatory term in Europe, which you can only get once you've passed a lot of regulatory checkboxes. But really, you have to prove that you are integrating an assessment of impact into your investment decision. So there is Article 7, 8 and 9, 9 being the highest level of integration of that in your decision making.

Somil Aggarwal (08:21)
Okay, so that for you, you're seeing that as mostly a European phenomenon. Are you getting any interest from any other geographies about your type of thesis, maybe outside of Article 9?

Jess (08:31)
Outside of Europe, you mean? So we only invest in Europe and I think that means that most of our piece, at least all that I know of, are in Europe as well.

Somil Aggarwal (08:44)
Okay, very interesting.

Jess (08:45)
Yeah, but I'm sorry, in other words, I'm not sure I imagine though, having seen the amount of climate species also raising in other geographies that there's interest from LPs across the world.

Somil Aggarwal (08:49)
Yeah.

Silas Mähner (08:55)
Yeah. Yeah. I think that there, if I'm not mistaken, there's kind of a differentiation between the different articles and some of them are extremely strict and then certain LPs like that because they're very motivated by that. Some of them are like, hey, we're going to try to invest in climate stuff, but we're not going to claim it's all going to be purely climate. And I just believe that there's different like LP interests in the market because some aren't really, really sold on the climate issue, I guess you could say.

So it's interesting to see that you chose Article 9, specifically the stricter version.

Jess (09:29)
Yeah, you're completely right. And some LPs, I'm sure, are not too bothered about the impact and more just interested in the financial returns. But it's interesting how the conversation has changed, I think, a lot in, at least since I've been sort of in this field of how can impact even align with profits. And now it's more like, of course, impact aligns with profits, but how can you be the, you know, the one gaining the most. So it's an interesting shift in the conversation to...

to actually recognizing that it's really an interesting field from just a profit perspective. And then it's more about who will win in the field rather than whether or not it's possible to win in the field.

Silas Mähner (10:10)
Yeah, I do think it's also just worth commenting or maybe getting your thoughts on this, but being a VC, right? The typical, I guess, time horizon for returns is much shorter than a lot of long -term investors. And when you say, hey, we believe that companies are going to make better financial returns in the long term if they are environmentally aligned, it's just a really interesting kind of combination of things. Because when we talk about all this VC investing and climate, we're talking about usually, relatively speaking, shorter term.

horizons, even if it's a 10 -year fund, compared to a lot of people like family offices who are looking at 100 -year funds or 100 -year timelines. They're not investing with the short -term in mind, they're investing for the long -term. So it's just really interesting that these things get kind of bucketed together.

Jess (10:56)
Yeah, yeah, maybe to that, though, I do see so much movement in this field already in the last three years. And I think the pace is really exciting that you can get very strong returns within even shorter than 10 years. There's just so much movement, both from the private investor side and also the regulatory side and the innovation side. I mean, it's all it feels at least like it's all really coming together.

Somil Aggarwal (11:24)
So by increased pace, you mean that innovation is getting faster, are people deploying capital faster? I'm curious, I guess, to what you're saying.

Jess (11:30)
of it.

Somil Aggarwal (11:32)
Yeah, everything that's fair. I think it's kind of like a maturing of the ecosystem. One thing I wanted to ask about that's specific to Plan A is how you ended up there, right? And I think because as a younger investor in climate, from what I understand from your journey as well, choosing this type of fund with this type of structure, I'm sure it was an intentional decision. Obviously, I don't think there are many people who would say no to the opportunity. So that's a part of it. But also then considering how these nuances of the way the fund operates,

factors into your decision making. So with that backdrop, I'd just love to ask you your own journey to climate BC and how you got there.

Jess (12:09)
Yeah, happily. So I do have a very unusual background to VC. I was very interested and concerned about climate change quite young. But back when NOAM was really doing anything, countries were breaking their commitments and companies had no real incentives to change. So I really wanted to work on climate from a policy angle. So that's what I studied. And then that's what I got involved with in my extracurricular activities. And after I left university, I joined

the UN development programme for a department looking at climate financing and entrepreneurship. I ultimately felt that I was better suited to working in a smaller organisation where I could have more impact. And in my free time, I was leading the writing of the European chapter for the first textbook on cellular agriculture, lab -grown meat, which at the time was actually like seen as sort of a silver bullet for climate and really, really exciting.

technology and I was looking a lot, it was originally that I was meant to write the policy piece, but I ended up writing the whole chapter and including the market and innovation. I got very excited by the power of technology to completely shift a market. And so I actually completely jumped careers and ended up in a climate startup in Berlin. And I loved the self -starter scene and it was...

really exciting to me that the startup I was in was sort of struggling to raise a bit and I already saw the impact that this side of finance and VC has on these early ideas getting traction and getting it made into reality. So I did some shadowing work and courses to make this jump into VC and innovation, but effectively I just got very lucky.

I was introduced by a friend working at TIER to Laurence Leichner, who's a serial climate entrepreneur, founder of TIER Mobility, also of Rebuy, which is Europe's largest firm platform, which he previously exited and then made TIER. And he committed actually 100 % of his stake in TIER to reinvest in the climate ecosystem. And he's a very dedicated guy and he was making angel investments on the side, but also as CEO of TIER, didn't manage to spend too much.

time to it. So he hired me as sort of the first and only employee. And I really, we were really aligned on vision. So we built out this sort of micro fund, I'd call it, called Blue Impact Ventures, making six investments in just a year, which was super exciting. And we were working quite small tickets. So we got to work alongside really top VCs. And I saw, yeah, I kind of had a crazy learning curve.

So very untraditional route into VC and then through that I had a lot of contact points with Planet A being both in Berlin and focused on climate and we also made a co -investment. And they were looking for someone junior and I also was at some point wanting to work in a bit more of a structured team. And so, yeah, I joined them quite at the beginning of that journey where they hadn't fully raised the fund and yeah.

have been with them since. So it's a very untraditional route into VC. I do feel, or at least I hope that some of the sort of policy understanding comes in and you probably already noticed that I often mention it. I think that markets are quite influenced by the policies, especially in Europe where there are a lot of regulatory sticks. And so having that research skills as well, I hope are also a little bit helpful. Yeah.

Somil Aggarwal (15:57)
I know you said you got lucky, but inherently in your journey, I think you manufactured opportunities for your own luck. I know Silas and I are big believers in this. At the point in time where you're taking classes, trying to get educated, working in a startup, I mean, you're setting up the prime steps to at least have the experience that's translatable. So one of the cool things you talked about is being the only employee as part of a group that's delivering capital, right? Part of this person who's really interested in delivering capital. And now you have somewhat of a more structured experience. So I'm curious, what do you feel like you learned from the first?

that's different from maybe a more formal junior VC role.

Jess (16:29)
Oh, super interesting question. I mean, the first role is of course, super scrappy. And so you're very efficient and lean. And I think that some of that's also helpful to hold on to when you're entering a slightly larger organization. That being said, I mean, when I joined Planet A, we were also quite early days. And so it's still felt like, and it still does feel very lean. And...

we kind of still building everything and it's really interesting to sort of be part of that journey and sort of, you know, it's almost like still being a slight startup yourself because you still have the fundraise and you still have to, you know, operationalize and create processes and so on. So I definitely think I took a bunch of learnings. I think probably the biggest one though was that as Blue Impact Ventures, it was,

essentially that we would only do small tickets and follow others. And I think that kind of collaborative spirit, where your entire investment is based on others, letting you into the round. So you also have to form a very strong network. And we of course, tried to bring as much value to the round as we could with Florence's background and connections and so on.

And I think that this kind of founder -friendly mentality and also focus on networking and collaboration has definitely served me well coming into Planet A.

Somil Aggarwal (18:07)
And so you mentioned scrappy. I would say VC roles in general can feel pretty scrappy in terms of your sourcing and diligencing and the way that you have to go about just essentially creating structure out of chaos. But what does scrappy mean for you in that context? Is there something more to it?

Jess (18:18)
Yeah.

I think you put it well. You put it very well. I'm not sure I can do better.

Somil Aggarwal (18:28)
Okay, and that's totally fair. I think one of the things that's really interesting is when you are at the forefront of a fund and being the main one deploying capital, and I think not even just a small sized fund, there are some larger funds where there's only one or two junior people in the role. So even in that thing, you get somewhat of like an autonomous experience in terms of how to use source deals. You're also operating with maybe less of a brand or less of a known team, and that affects how people view you. So I'm curious, did you come across any experiences where...

you felt a shift in that people and founders didn't recognize you at some point, but then they started to recognize you maybe because you joined just by numbers a bigger team. Like did that stand out to you as an experience and how did you navigate that?

Jess (19:08)
Yeah, interesting. Yeah, it's definitely a different experience when you're part of a real and large and somewhat known fund and that you get that initial sort of intro a little easier. But I don't know how much that really wins founders over in the end. I mean, Atomoco does a nice survey every year of like what do founders care about versus what VCs think they care about.

And it always strikes me that every year, we see this belief that brand is the biggest issue for founders. And almost every year founders actually care about the person they're speaking to and whether or not the person gets them and builds rapport with them, gets a problem and can bring value. And, you know, essentially they're giving up part of their company to you. So they want to trust you. So I already understand that. And I think that it still boils down to that a lot of the time rather than.

the brand of your fund with the people within it.

Somil Aggarwal (20:12)
Wow, that's an incredible data point. I mean, I think that's something that's challenging what I think. I would assume that a brand would matter too. I wouldn't turn down an investment from A16Z, but maybe I should think about who actually at A16Z I'm working with, right? I guess how does that inform how you go about things? I mean, you're working with founders and talking to founders. Is that something that stays in the back of your mind? And how does that day to day change how you think about the whole process?

Jess (20:15)
Hehehe

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Yeah, for sure. I mean, I think it's really important not to rest on your laurels of having a good brand behind you and rather actually demonstrate to them that you understand the space and that you are also going to bring value by working with them. And yeah, we definitely have a very strong angle with that. We're quite an operational team. So we are now almost 20 people, but we only have actually five of us on the investment team.

And so we really overindex or not overindex, but index on supporting the founders. So we have help with talent acquisition and commerce and media and PR, as well as sort of leveraging the network that we have. So we have sort of ecosystem builders, people who are more operational or finance focused and really like to do that side. And then I suppose on the understanding that problem or their area, I think it's really helpful that the investment team,

we divide by sectors. So I actually only look at energy and transport and a bit of data. It means that I really sort of know those industries and I'm very familiar with the problems that they see in them. And so, or at least I think I am. And so when a founder comes to me, they get rather than sort of the, oh, it's your USP, but the question is like, oh, but have you encountered this that I have sort of seen over and over and, and.

maybe ask slightly more tailored questions to their areas that I think bring some value to them.

Somil Aggarwal (22:13)
Yeah, I'm gonna use what you said about knowing the space is a bad transition into a very clean playbook that you guys have put out. But before I do that, I actually want to take a second to call out your expertise within energy and transportation. So point blank, for the audience, I don't even really think we've practiced that at times, you're getting the fresh answer. What's exciting to you in those spaces right now?

Jess (22:34)
In energy and transport. Yeah, I mean, there's so much. Energy is a very exciting space to be in, especially. I think there's a lot to do there. And in transport too, but I think we've made quite a few bets that we're happy with in transport. So we spend a bit less time looking into new ones. Energy is such a key topic for the transition. So we've got like everything from like energy generation and storage and

Somil Aggarwal (22:36)
Yes.

Jess (23:04)
the grid to sort of demand response and low carbon heating and high temperature heating and cooling. There's so much to do in that space. And then in transport as well, right, we've got to decarbonize the whole logistics and personal transport as well. Within that, we've made a bet on sustainable aviation fuel and green methanol for

maritime and actually also one in sort of electric micro -ability. And in energy, we've made one in long duration energy storage and one in geothermal drilling, so you can access geothermal across the world. And yeah, still looking though for more base load potential, more storage and haven't made a bet yet in anything to do with heating, so really excited to do something there.

Actually, we have done sort of like personal heating, so that we've done solar and heat pumps, but thinking like industrial heating and cooling and so on.

Somil Aggarwal (24:08)
This is music in my ears. I'm actually curious to hear why you're passionate about heating and geothermal. The reason is that I'm very passionate about it. I think it's a great investment opportunity for 2024. But a lot of that and a lot of my laurels on that rest on the regulatory headwinds that have been created in New York City and New York State where I am. I'm curious, why are you passionate?

Jess (24:28)
Interesting. So there's two types of geothermal. I think you're probably referring to the shallower geothermal drilling for more residential or commercial use cases. So we actually made, which is super interesting also, but we actually made a bet in deep geothermal drilling. So GA drilling is the name. And they basically give us access to a permanent supply of renewable heating and power.

Somil Aggarwal (24:40)
Mm -hmm. Yes.

Jess (24:56)
They've got these super critical drills that can go through the crust across 90 % of the Earth's surface. So, geothermal drilling used to be sort of only for Iceland, who has like 97 % or something crazy of their energy from renewable sources. But with these kinds of drills, I think there's a few others in the US also doing similar, they can destroy hard rock because they have these like high powered plasma pulses. And that means that...

Somil Aggarwal (25:10)
I think.

Jess (25:24)
you can massively reduce the cost of geothermal projects and enable them to be across the world. So it's really, really exciting because we really need this base load solar and wind, of course, very volatile and so quite mineral or critical resource intensive. Whereas this would be really little materials and a really high energy output. So that's what really excites me. But I also think.

We've seen a few in geothermal drilling with shorter drills. I don't know if there's a huge amount. I think that's more like the tech is commercialized by now and we need to roll it out. So I'm definitely interested in those kinds of plays too. Whereas geo drilling is more like fundamental research and development, or they've got a little further by now. So they're actually looking to commercialize soon, but it's more at that stage.

Somil Aggarwal (26:20)
Very exciting. And timing is a big part of investing in climate. So before we fully move off of this, the last thing I'd really love to hear is why invest now?

Jess (26:28)
Great question. I think that you're just getting insane headwinds from, well, I'm going to start off with my background policy. So, of course, you've got the IRA, but we also have in Europe the CHIPS Act and FIT for 55 and a whole bunch of other regulations coming in, which is all compounding to me that there's increasingly hard to do. Non -climate business and increasingly interesting to do.

to create businesses and support this transition. And then another one is talent. So we're increasingly seeing talent being willing to sacrifice their own reimbursement or compensation for impact. And I think that's really exciting and gives a huge edge to the company's building in this space. And then also, of course, there's a huge amount of capital that's dedicated to climate by now.

which is really exciting because I think this was a big problem in clean tech 1 .0 was that there were very few fully dedicated funds and now we have these funds that they have to deploy in climate only and so the support is there to really grow and we are still missing a lot of sort of growth funding and I'm sure there's many data points that could counter that idea that there needs to be more but there is still like billions and billions in the space by now. So...

So those are three reasons. I'm sure there's many more. I've probably missed a big one, but I think that gives a good start maybe.

Somil Aggarwal (28:05)
No, no, I think when you're talking about the timing, I mean, if you're looking at the actual maturity of the policy and those implications, and then you talked about the labor and the workforce, the ability to actually capitalize on that, and then the money going into it, I don't know if you need anything else to have a good investment, frankly. So I'd love to get into the hardware playbook. I think this is a staple of Planet A, and it's something that really, really excited a lot of us when it first came out. So the first thing I'd love to hear is, from your understanding,

What was the inspiration behind it? How did it come to be? And I'd love to get into some of the specifics of what you love most about it.

Jess (28:38)
Oh, yeah, happy to talk about it. I have to first of all say that we did it not alone, but also with Norsken and Speed Invest, who had two other European funds, one based in Austria and the other in Sweden. And how did it happen? So it actually came through, I'm sure you're aware that there's other sort of software manuals and playbooks and so on. And we...

And these other two funds were all investing in this space, but we're sort of trying to align on actually what we do expect for hardware because we don't have this kind of 2 million ARR at series A and the sort of magic numbers that we want to see or, you know, the month -on -month growth. It's just a completely different world. And there's a lot of nuance and complexity to what you need in a hardware startup to make it work. Both from like the defensibility coming mostly from intellectual property.

to the sort of team needing much more science -based and still having the commercial side. In effect, it came from conversations with these two funds and I essentially was saying, hey, why don't we do this? And we were actually thinking to do it on our own. So I said that I was doing it. They said they were doing it. I said, well, surely let's team up. So then we came together and actually it was three...

or about five of us who were not partners and had not built anything in hardware ourselves. And so we had been sort of supporting investments in this space, but we really were very aware that we are not the people to tell you what to do in a hardware investment. And so it was really based on data that we got from Net Zero Insights and a huge amount from interviews and surveys of those who were built and invested in the space.

And so we, I think, got a few hundred respondents to the survey. And the Net Zero Insights had a few thousand rounds that they tracked in climate hardware. And we had like tons of interviews with the founders in the space and also investors. And so then we kind of tried to amalgamate all of that into this playbook.

Silas Mähner (31:00)
Can you tell for people who are not familiar with the playbook, can you just kind of walk through what are the, there's a couple of things we can go through. First of all, what are the, I guess, key metrics or things that tend to be somewhat standard if you're building a hardware startup? Like, okay, I'm a founder. Here's the things I need to be aware of in order to hit my metrics to get my next fundraising. Can you talk a little bit about that?

Jess (31:22)
Actually, yes, we were going to do a sort of, I don't know if you're familiar with P9 napkin of like the metrics that you need. But our friends at EQT and Contrarian, where we found out we're doing the same. So it seems like a lot of those had this idea and the same idea at the same time, cool climate breaks, you should watch this space because they think they're going to announce soon. And they have all of those metrics. So we decided not to try and compete, but rather to focus on a different aspect.

which goes a bit deeper into different parts. So we have like technology and product and our team and our business model, capital stack, sales and go to market, IP and patents and so on. And the reason that I don't want to give you just some sort of numbers is because I think it's quite complex. It's a bit more nuanced, I think, than software. And they have a few different profiles for the different kinds of hardware because you have like, as I was saying, for the geothermal, you have like this sort of more

research in a really deep tech or just sort of rolling out hardware which is already commercialized and a few different sorts of plays in between. So there's not like and you have to have different expectations for each. So there's no boilerplate answer I'm afraid.

Silas Mähner (32:36)
Okay. Yeah, no worries. I guess maybe perhaps another thing would be, what are the core components that you tend to look at when you're evaluating a deal that's hardware? You say, okay, we need to make sure the founders, aside from the lifecycle analysis, we need to make sure the founders understand these core pillars about what they're heading into so that we feel comfortable that they're going to navigate it properly and especially where there's knowledge gaps.

we know that they're aware of those things and they're not going to just run 100 miles an hour into an iceberg, right? Can you talk about those kind of core things?

Jess (33:13)
Yeah, absolutely. Yeah, I think team is really core to this. And so one of our biggest takeaways is that they really need to be aware of their own lackings and actually also bring in someone who for a very commercial, very early, I think we often see that scientists CEOs focus on sort of tinkering away on the product.

and can actually be quite detrimental to the company in the longer run if they don't start engaging. I think that's never too early time. I think we need to learn from software that you should be engaging with customers from day one and actually like listening to what they need because it's not always the best product that they need. They might just need good enough or they might need a certain part of it to, you know, there's so many different aspects, right? Like how easy is it to integrate?

Do they care more about the capex or the total cost of ownership and these sorts of things? You cannot really know if you don't engage with them. So I think bringing in someone commercially minded from day one to really build that is where we've seen the greatest success stories. And then, yeah, we also give advice around like IP and patents and helping to get grants, help to find a business model that actually works for them.

which I think is also an interesting one because a lot of VCs often recommend that they just go and license it because you get these nice juicy sort of recurring revenues. It seems sort of scalable, it seems quite simple. But something that we found out is that actually it's really hard to do because no one wants to pay to license it until you've had a few plants running and got a lot of operational hours and we've proved it works.

Silas Mähner (34:47)
Hahaha.

Jess (35:06)
So that was something that maybe surprised me that I think maybe VCs and probably ourselves as well give sort of poor advice on and that actually sometimes what we expect, it's not very nuanced and then we need to sort of look into the details of each business to really know what to advise them on.

Silas Mähner (35:26)
Yeah, okay. That's quite interesting. So just to maybe make sure I've got this circled correctly, the core things are, if it's a, especially if it's a science led team, they need to have a recognition that they're going to have to focus on the commercial needs of the customer first, rather than just like, oh, we're going to build the coolest piece of technology, regardless of how people use it. If they don't like it, then they're not using it right. That kind of, you can't have that mentality. You need to have that commercial piece paired with it. And then in addition, the...

I guess it sounds like you guys offer the advice on this or that the pointers on the IP and the grants and kind of managing that landscape. Is that correct?

Jess (36:03)
Yeah, exactly. Yeah. And that they should perhaps just one addition is that scientists, CEOs should really think about de -risking the team by adding commercial hires to the leadership team from early on. Yeah.

Silas Mähner (36:17)
And how do you, so obviously I'm not an investor, but I've talked to a lot of founders early on and I'm just kind of curious, how do you approach founders that you think, okay, their technology is very good, but they don't seem to recognize kind of that need for the commercial talent. Maybe there's some level of, you could say arrogance or something there. How do you approach that conversation to say, hey, listen, like we need to kind of de -risk the team and get some more points of view on this. How do you approach that?

Jess (36:46)
Yeah, it's a great question. I mean, I think it's not that uncommon as well that, you know, you have a super impressive science team who are very, very good at what they do. But they're not thinking that business is as important as sort of getting the science right, or that the business comes later because the science isn't there yet. So, yeah, it's sometimes hard to get them to see that. I suppose we can get them to talk to us, some of our portfolios.

that have been successful. But I think it's some fundamental level with the CEO of a company cannot see, and that goes for software as well, for any company, cannot see that they have weaknesses in some areas. It's quite a big problem because everyone is not going to be perfect at everything. You have to delegate, you have to hire to fill what you're not so good at. So if you think you can really do everything.

all the time, then you're not going to be a very effective leader. So that's sort of an issue, I would say, in itself.

Silas Mähner (37:49)
Yeah, I think it requires a huge level of humility, especially when you're building a climate because at the end of the day, if you're building a climate, hopefully you're not just building for yourself or you're building because you're trying to help solve this problem and you need to be willing to take feedback and to do these hard things that are sometimes very personally not fun, not fun to hear. So you need to have that. But I guess, you know, I'm kind of curious beyond this.

What are some of the main things that founders can do that, like when you see a founder, these three things really, really blow us away. These are really impressive to us.

Jess (38:26)
Yeah, absolutely. Actually having that humility, I think would be one of my number one things. I think understanding your weaknesses and showing willingness to work on them is so, so key. And I actually prefer to work with founders who start off good, but have this potential to be incredible versus starting off great and just always staying great. So that would be number one.

Second, as I've sort of also discussed, is knowing your customer insight out. So I think even if it's pre -seed, you should really already have tried to do your research and really know, preferably if you've even worked in that space before. So you really, really deeply know what the customer needs, what the problem points are. Three things that they could do to impress me. I suppose then the final thing is knowing, having a big vision. So...

you know, having the idea that they can, we have a large fund. We have to believe that because of power law returns, all of the investments we make could be fund returners, which in effect means that they need to grow to be very, very large companies. So I need to see that kind of ambition and vision to be huge rather than sort of a rather small early exit acquisition or something like this. So I really love to see that they want to.

do something and that also feeds into the impact side, right? If it's super scalable and going to be huge, it's also going to be a huge impact because we only invest by the business and the impact are really aligned.

Somil Aggarwal (39:57)
I think those are all great points. Also echoed by a lot of what the other people on the podcast say, especially I think given the stage that you invest in and the earlier stage of technology, it's really based on how far and how long the founder is willing to invest and grind and take the company. And so I think a lot of the metrics you're talking about are especially relevant to people who are deciding from a very early stage where the company goes.

We've established a lot of really great things about your work, what you do, the brilliance of Planet A, as well as their partners. One of the things I'd love to do before we sign out, I think we're getting to our last major topic, is probably a little bit closer to home, pun intended, no pun intended, I guess, whatever it is, but being within the German climate tech ecosystem. Myself, I'm super passionate about what local communities can do for climate tech. So I'd love to hear your experience in that.

The first thing is, you know, what is the German climate technology system been like? Give a bit of a description for us and the audience. I'm frankly not super familiar with it, but then also I'd love to dive into some of the key components that might make it really special.

Jess (40:58)
Thanks a lot for your question. Yeah. So it's super vibrant. I'm from London originally, and so there's also a great ecosystem here. But I feel like in Berlin, at least, there's a real self -starter atmosphere where there's just so many people working in this field and belief that if you really try hard enough, you can make it, which I love. And that's the question of...

you know, what have you done before and we're requesting of like, where are you going? And so that's sort of my explanation. I don't know if I'm touching on all the points you're interested in. In terms of ecosystem building and community, there's one organization that I'm particularly involved with and would love to shine a spotlight on, which is kind of at Mosaic, which is essentially focused on

supporting diverse founders, so people with diverse traits and investors in the climate space to connect and support world in a number of both a sort of peer support and also bringing in people who maybe don't have diverse traits to support them, but are aligned to get more people with diverse traits into leading positions. And it's essentially, I just love the sort of founding belief of it, which is that the

the people leading climate transition today are going to be the leaders of sort of the whole economy tomorrow. And so we should try our hardest to make sure that these leaders are really representative of the world we're living in. And I think that's really powerful. So I'm really happy that I can be involved in that as I also get to meet a lot of really amazing and inspirational and diverse founders and investors in the space.

Somil Aggarwal (42:50)
Definitely, and I think that overview is fantastic. One thing I love to talk about is I think you're very active within the climate tech space and I think that's why we wanted to pose this question to you. This is more of maybe a personal question, but I think it's something that I resonate with that I'd love to ask you about. Basically, what I think, the sense that I get from what you do, and I think there's also one of the benefits and fortunes we have about being young in VC and in climate and climate tech and being able to talk to lots of founders. When you do that in one or two or more ways,

This is something that this is not a famous term by any means, but maybe I'll try to get it out there into the ether. It's what I call a compounding of presence. And it's basically by the fact that you are involved in a number of things at the same time in the same general space, both topically and geographically. A lot of these things eventually end up in places where you are at an event and someone's seen you from one context, now they see you from another, whether it's supporting the German climate tech ecosystem you're investing.

So you end up creating really, really great connections and people really, really revere what you do. However, the other side of that is that it sometimes gets hard to manage these things. So I'm curious, especially being active both as a great investor as part of Plan A, but also your own person who's interested in the broader ecosystem. How do you manage those commitments and how do you make them work together? Are there any cool stories you have about?

Jess (44:09)
Thanks a lot for the kind words. I wish I had a sort of silver bullet secret, but I'm afraid I don't have one. I think it is a lot often. VC itself is a very demanding job and then to add on top of it is maybe a little crazy, but I love it and I think I would go even more crazy if I weren't doing it all. I suppose it's just...

that it's so exciting to be working here. And I think I've always been a little bit like that, biting into a lot of things. And yeah, there's so many exciting projects to be done in this space. It feels really like very young still. But yeah, I don't know any productivity sort of magic tricks there, I'm afraid.

Silas Mähner (45:03)
Out of curiosity, are there any particular, for people who might be skeptical of getting out there and doing things, this is something I'm a big fan of is being present socially on social media to help reinforce your brand and things like that. I know it sounds like you're not necessarily doing it just for that sake or super intentionally about it, but could you talk a little bit about the benefits that it's brought for whether that's deal flow or just opportunities or seeing new things like being present in these communities?

communities physically, but then also socially, kind of online and helping people highlight things to you that help you learn on a constant basis.

Jess (45:38)
Yeah, yeah, I think you're right. I'm not like super intentional about it in that like I'm sort of tracking metrics or return on investment of time or something like this. I think it's it definitely does bring benefits in that we get a lot of inbound on LinkedIn as a company. And our job is to find people effectively to find people in this space. So it definitely does help there.

But I like LinkedIn actually, which is the only social media platform that I am on. I think it's quite a nice place in that there's a lot of support. There's very rarely I see any kind of viciousness. I mean, you have your entire CV there and all of your work colleagues, so it would be like quite hard to troll. And I think a lot of people do put in the effort to try and like bring educational pieces there.

So I do often learn through looking at posts app. And I think it's a great resource also because, I mean, you do get to meet some and make connections with some really interesting people who you might not otherwise have connected with and then can turn that into maybe physical meetings or virtual meetings.

Somil Aggarwal (46:52)
I know you talked about being in VC and what that's meant to you, sort of your untraditional path, but how it's all really worked out. Now that you've been in this space for a number of years, and I think you've gotten to not only work directly with founders, but directly with other VCs and potentially other junior VCs as well, I'd love to just hear your perspective on, if you were to go back in time, you're just starting your role, maybe even if you want to go all the way back to when you were working at the UN.

What are three pieces of advice you'd give yourself just to be a good climate VC?

Jess (47:25)
It's a great, great question. I really struggled with this one, actually. I think there's so many things that you can do. And it's also different at different stages of sort of entering. I think at the beginning, it's really important to just be a yes man and do absolutely everything and try and engage with that as much as you can. And then at some point, you of course need to learn how to also say no and prioritize. But I think.

I think building like real relationships with people in this space has probably been the most rewarding part of it and genuinely make friends as well as just sort of like a network for sort of transactional games. And I think I'm really lucky in that there's actually really, really wonderful people working in this space. So I feel lucky that I get to connect with them and make friends with them. So, yeah, I think building genuine relationships.

my biggest piece of advice is people entering the field.

Somil Aggarwal (48:28)
Amazing. Well, I think that's probably the perfect place to end off. I hope we've built a very genuine connection here. I think I'm a huge fan of what you're doing and the way that you've been able to work everything that you are involved in into this one cohesive way of supporting founders and furthering the climate ecosystem. So I really appreciate you taking the time. Before we sign off, where can the audience find you?

Jess (48:33)
Thank you.

Thanks so much, Samil. And I also really loved being here. So thanks a lot for having me. Yeah, they can find me on LinkedIn, probably as easiest, Jessica Verde. Happy to have any kind of non -warm intro, welcome to reach out and say hi.

Somil Aggarwal (49:04)
Amazing. Well, thank you.

Jess (49:06)
Thanks so much.

Somil Aggarwal (49:08)
All right, if you've made it to this point of the episode, thanks so much for listening. This is the takeaway section and I'm super excited to talk about this one because I think it's a very relatable episode for both Silas and I. So getting right into it, the two things that really stood out to me was first, where Planet A evaluates the life cycle assessment in their process. This is a nuance that, especially me being active within looking at startups, it's a question that you have to ask is where do you actually factor in the emissions and how accurate can you be?

They having had some rejected purely based off the impact, I think it's a bold and refreshing strategy that's more actionable than just purely assessing because you could quantify, but actually taking, doing something based on those quantifications is incredible. Also doing this for early stage companies who don't normally have access to this kind of methodology, I think that might make a big difference and it's not something we talked about, but I wonder if they're able to then take that and give it to other investors and maybe you're seeing this overall ecosystem effect.

The second thing is I'm just really happy to see the hardware playbook in effect. I see it as an ecosystem boost. She referenced previous software playbooks, but having to embrace the nuance that hardware is, I think this allows the seeding of new generations of hardware -informed investors. If you have content like this, it doesn't matter if it's perfect the first time, you give other investors in sort of like this herd mentality space that investing is the confidence that you can actually learn about something enough to invest it. So whether they're right or not,

They'll probably cause enough capital to go in it to make real change. But those are my takeaways.

Silas Mähner (50:36)
Yeah, I think those are quite interesting. I am especially interested in the LCA process being early and kind of I am curious how it affects any companies that want to pivot, right? If they're stuck to this kind of outcome that they're projecting, they have to stick to it to some extent, right? That's a nuance we didn't explore, but for me, the two things that were really fascinating, I guess the first one that she mentioned early on was that their fund carry is linked to...

the financial incentives are linked to the environmental positive impacts that they can bring. So actually reducing carbon emissions broadly. And I just thought it's pretty interesting to see a VC really walking the walk instead of just talking about it because there's a lot of VCs who are saying these things, but if they were forced to do something like this, I have a feeling there would be a lot that would probably walk away from the table and say, hey, this is just not for me. We're going to go broader tech. The second thing, which is obviously close to my heart,

and in particular because I've been seeing it a lot with some of the founders I've bumped into over the past months, is their approach to de -risking the talent of the business. So talking to the founders, especially if they're scientific kind of focused founders and saying, hey, we want you to bring in commercial talent to de -risk your team and your perspective on the market, and really seeing how they respond to that. If they're hesitant or they say, oh, we don't need that, they kind of get an idea whether or not they want to invest in them because...

They're trying to look ahead, which I really liked, and say, hey, we think that they're going to run into these issues based off of their personalities or, I guess you could say, unwillingness to have humility about where their knowledge gaps are. So those two things really stood out to me. I liked those a lot.

Somil Aggarwal (52:19)
Thanks so much for listening and see you next time.