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CleanTechies
From Coal to Climate, VC Channel Sales Partners, LP Sentiment & More w/ Albert Bielinko (Telstra Ventures)
In this episode, Silas Mahner (@silasmahner) speaks w/ Albert Bielinko (@bielinko) a Partner at Telstra Ventures. Albert leads their CT investments and speaks to us today about many things, from how he started in coal to end up in climate. How they have helped their portfolio companies generate over $450m USD in sales through their channel partnerships. What the LP sentiment on CTVC is and his thoughts on the talent landscape?
This is full of quite a lot of value.
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Topics:
**2:07 Intro to Albert & Telstra Ventures
**4:49 TV's Remit
**7:59 How CT VC landscape has changed since 2014
**12:31 Raising funds
**18:29 Investment Thesis
**27:53 VCs w/ Sales Channels
**33:18 Investment Criteria
**35:45 How to determine TAM in new spaces
**39:51 LPs expectations for hardware vs software returns
**42:03 LP sentiment on CTVC
**45:29 Talent Landscape
**50:00 What's Next in CT
**53:07 Closing
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Links:
**Albert on LinkedIn: https://www.linkedin.com/in/albert-bielinko-4070a729/
**Telstra Ventures: https://telstraventures.com/
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**HMU on Twitter: @silasmahner
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Welcome back to the Clean Techies podcast, where we interview Climatech founders and VCs to discuss all things building and investing to solve the biggest challenge of our generation climate change. Today, we have the pleasure of speaking with someone from the land on under, albert Belinko, a partner at Telstra Ventures. They started as the venture arm of Telstra Corporation but have since become fully independent, while retaining partnerships with Telstra. Some of my favorite topics from today are probably the value of channel partnerships for the VCs to be competitive and in order to help their portfolio companies make sales. The sentiment among LPs surrounding Climatech Venture Capital was also really great to hear from Albert, and how ESG is forcing LPs to consider the full impact of their investments rather than just looking at the finance. I thought those were all really, for me, really big takeaways that I quite enjoyed hearing, but overall, i found a lot of value speaking with Albert and I hope you do, too. Enjoy the episode. All right, welcome to the pod, albert. How are you doing today?
Speaker 2:Very well, thanks, good to see you, yeah.
Speaker 1:I cannot complain. It's been aside from well. This won't come out right away, but last week was the, the smoke filled sky in New York City with the orange, the orange skies, and I wasn't here for that, thankfully. But other than that, the weather has been incredible. And what more could? what more could I ask for living in New York, great weather, it's a dream.
Speaker 2:That's awesome. It's a great city.
Speaker 1:Yeah, i quite like it. All right, very cool, let's get. let's jump right into things. Give us a quick background on yourself. How did you get into into Climatech, investing in particular?
Speaker 2:Great, yeah, happy to do that. So I'm one of the seven partners at Telstra Ventures, so we're a venture capital fund that was started about 12 years ago. Now we've invested over a billion dollars in 91 technology companies, mainly software, but also a bunch of hardware and software companies as well. Before that, i did a few things. I was previously a very unsuccessful founder, so I tried hard, but I was incredibly naive. Now that I'm on the other side of the of the fence, i actually didn't even realize that there was an industry around funding cash burning companies. Keep in mind I'm based in Sydney, australia, where back in 2011 and 12, there really wasn't a venture capital industry to speak of at the time, which is is quite sad. So it was in the food delivery space. So unfortunately, that didn't work out. We fell apart due to team reasons And then my background before that was I spent several years at Goldman Sachs, so I actually spent a lot of time, both in the technology and in the commodities metals and mining and oil and gas investment banking teams.
Speaker 2:At one point in that in that journey, i probably was the investment banking investment banker that might have known the most about coal companies, which is something I'm not very proud of, but I wanted to put that out there at the start. So at the time Australia there was a huge commodities boom going on and Australia is obviously very blessed with lots of natural resources, and so we I think we did maybe 12 transactions in that space And it really at the time I was extremely interested in the energy transition. So I knew the world was powering itself a lot through thermal coal And I could see the economics of solar and wind improving And there was lots of doom and gloom. It is a solar coaster, as we know in the solar industry, but overall I was extremely interested in that transition.
Speaker 2:I've always been someone who's very focused on a sustainable life, so I actually really enjoy taking my daughter to school. She's about five years old. I really enjoy taking her to school on the bus every day rather than driving, and I know that's a that's kind of a first world kind of. I'm very lucky to have that as a choice to make.
Speaker 2:But I genuinely enjoyed kind of making the more sustainable option over time, and so I've just always had a really strong interest in how the world powers itself And I guess, reading over time, it's really surprised me like several years ago, really surprised me how clear the scientific consensus was around climate change and yet how little action was actually happening. And so I've been investing very actively in the space now with Solstice Reventures for the last few years. So we are a fund that typically invests three to 12 mil USD per investment. We closed our third fund late last year at 350 mil USD. So we're very actively investing now, despite the doom and gloom of the market, where we're actively hunting for opportunities. And we actually have had an interest around kind of environmental solutions. You know, even dating back to 2014, we invested in docusign And we never mentioned the words climate tech, that that naming system didn't happen until later, but that their environmental benefits. I mean it would surprise most how much CO2 they're actually avoiding through obviously avoiding having to print off paper and all the water that's involved.
Speaker 2:And then within Telstra Ventures, i've led a bunch of investments, like OpenSolar, which provides software for solar installers globally in 130 countries to make them more efficient in designing the solar PV installation on people's homes. And yeah, i'm very actively hunting in the space. So I've really been an energy nerd for many years now And even last night I was saying before we hit record, i asked, you know, was shaky and had a, had a good time out last night And I ended up spending some of that time talking about power purchase agreements with some nice gentleman, which is probably the most geeky thing you can. You can possibly do.
Speaker 1:Hey there, quick break to remind any founders or VCs listening. if you are looking for deal flow, seeking to raise funding, looking for partners to help service your needs, or perhaps you're looking for corporate investment partners, feel free to reach out to us through our Slack channel, which can be found in the description. Because we meet a lot of people in this space, we set aside time each week to make introductions to the various people that we encounter. This is something we do free of charge in order to help these incredible companies solving climate change to scale. Looking forward to hearing from you in the Slack channel. Yeah, no, no worries, i'm all here for it. I love these, these conversations. Sometimes my fiance gets annoyed when I go on my rants about these things. I get fascinated by it. It's kind of interesting.
Speaker 2:I can always tell them my wife is tuning out because she's not saying yep, yeah.
Speaker 1:Yeah, absolutely I understand the feeling. So, yeah, this is pretty interesting. I guess it's really fascinating to hear kind of your background coming from conventional, conventional energy, dirty energy, into the space, And I guess I'm kind of curious, before we jump into your investment strategy, I'm a little bit curious to know how things have changed, because it sounds like even back in 2014, you said Telstra was doing a little bit of kind of it wasn't considered climate tech. You know the name was was back then you would have referred to things as clean tech, but I don't even know if Doc Usine would have been considered that at the time perhaps. But what is the landscape changed? How has the landscape changed since then? Like in terms of this, like, what have the big things been? maybe give us the key highlights of the time from then to now. What changed, especially with regards to Australia?
Speaker 2:Yeah, so we started our firm in 2011, and so the the landscape has changed absolutely dramatically in that time. So in 2011 in Australia I actually remember when I was, when I was working at Goldman and I was I was tapped on the shoulder for this role and you know there were there were some conversations around it.
Speaker 2:I remember there was no job in Australia that was similar to work and I actually did a search and at the time there was an Australian firm that was starting to get up for their first, first fund, which I think was 30 mil, but they were still fundraising. So it was very, very early stage. back then Most founders out there, you know, they like probably I was, a few years before that I was, you know most founders probably didn't couldn't rely on, on a venture capital ecosystem to fund them.
Speaker 2:So you had companies like Atlassian that really had to be very, very frugal and very cash generative early on if they wanted to survive and so fast forward to I guess you know, maybe 2000 or you know 2018 to 2020. So we saw obviously a huge explosion in the number of venture capital firms, both globally and in Australia. I think in Australia there's probably 150 firms now, you know there's a handful that have reached significant scales. So we have 1.3 bill US under management, assets under management. There's a few other firms maybe three other firms that are over a billion, and then there's a very long tail of much smaller firms that go all the way down to about 10 mil, and some of them are pre-seed, for example. So it's a different focus.
Speaker 2:So I think it's really great for founders. There's a lot more options out there.
Speaker 1:There's you know, and there's a lot, a lot of different strategies.
Speaker 2:So there's some funds that are much more active that there are some that are indexing the market and really writing small checks very, very broadly, and so I think overall that's a strong benefit for founders. We see more ideas that will get funded rather than needing to fit a particular mold and specifically be cash flow generative like really early on, which means you're probably never going to have something that's funded, that needs a heavy investment early on. And I'd say a lot of climate companies, especially the hardware century companies, are in that mold where they'll need more capital early earlier on, before there's tangible revenues and profits. And so in Australia we've seen many funds now that have raised significant institutional funds. We've seen the superannuation or pension funds really invest aggressively into the market. So we have three super funds in Australia.
Speaker 2:The Australian funds are very, very large and that is because by law, about 9.5 percent of incomes is put into your superannuation fund and so that's created a I think it's a three trillion dollar superannuation industry and overall a really small part of that money goes into into the venture capital bucket within private equity. So it's it's an extremely small percentage today still, but it used to not exist and that's because of some of our LPs, like hostblast, for example, who have really, you know, really lived the way for that institutional market to enter the VC space and then obviously in the US I think it's probably more well documented there's many, many more funds.
Speaker 2:The level of competition has become extremely significant. You know, we saw with with all the money printing that occurred I think there was 10 trillion of cash that was basically printed in the in the US and so we just saw an extreme bubble, like activities, evaluations rose, you know, deal sizes just astronomically rose, and then obviously now we're on the tail end of that and it's it's much harder to raise capital now. So the landscape has changed dramatically and you know, if you'd, if you'd kind of told me how it would play out back in 2011, i honestly wouldn't have believed you.
Speaker 1:But um, but yeah, it's been a while right hey, there are you building a climate tech business and looking for very specialized talent? consider reaching out to our sponsors, next wave partners. Next wave 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 next wave at next-wavepartnerscom or reach out to one of their consultants directly via their LinkedIn page. So quick question on the you mentioned the fundraising landscape is a little more difficult now. Is that, and partially due to the things happening in the US, is that also affecting raising funds for, for an Australian firm, for example?
Speaker 2:Yeah, i think it affects everyone. I think you know, in in Australia, one of the things that has happened is so in in 2020 and 21, we saw a lot of very large US funds make a lot of investments like really large checks in Australian companies and to give you an idea of how much that has changed. So I remember, you know, back in maybe 2000 it might have been 2016 I remember referring an Australian company to a US VC that's probably quite, quite well known in the market and that VC told me come back at a 10 mil revenue. And I said I does have 10 mil Australian dollars of revenue. And he said no, no, come back when it's 10 mil USD of revenue. And and that same investor in 2021, he called me about a pre-product, pre-revenue, australian only company. So I mean that that that should kind of give listeners a kind of a really tangible example of how it changed.
Speaker 2:And I think what we're seeing now is, you know, there was an article in one of the one of the papers here in Australia just the other day saying how the US capital has has moved away from the Australian market. So I think it's much harder to raise that growth stage capital now if you're, if you're Australian. But I mean, at the end of the day, if you're a founder and you're building a solid business, there is capital for you. I mean, that's really the key point I want to highlight.
Speaker 2:Whilst there's lots of doom and gloom, there's lots of companies that are really struggling. If you, if you have something that's really differentiated in this market, there are still lots of pools of capital. I mean, we have our 350 mil USD fund that I mentioned earlier, but I know for a fact there's many others that do have large funds they do want to deploy in companies where the unit economics makes sense. So I think, if you're a bit more methodical about how you're building the business, rather than just grow at all costs, i definitely think there's capital there for you and I think it is a. You know, we saw in 2021, lots of optimization of funding rounds, like lots of you know chasing deals at really high prices.
Speaker 2:I think the market has changed in the sense now that I think just being more open with your, your potential investors, being more you know, more focused on building a relationship over time and showing them your progress over time and telling them what you think you'll do and showing them what you've done like actually kicking goals and also being open about things that haven't worked out, because, frankly, it's a very difficult macro economic environment right now and, and you know, there's companies that are executing very well but they have really hard external forces that they can't control.
Speaker 1:Yeah, you know, something I'm kind of keen to get your opinion on. Being in Australia is, i've heard takes on the fact that Australia has had to deal with probably some of the worst, if not the worst, actual effects of climate change is kind of happening to Australia first and it seems as though you're saying yet it's still not a massive like in terms of the infrastructure for VC investing to get solutions out and solving these problems. It's not massive. But I guess I'm kind of curious to know. The part of the question I'm trying to get to is was there any particular time in Australia where it really kicked into people's minds hey, we need to, we need to start investing into these climate, climate solutions. And could you talk a little bit about that because I am curious to understand your perspective on on that.
Speaker 2:Yeah, i mean there definitely are Australian companies that are executing really well with climate solutions. So I mean, for example, opensolar that I mentioned. So they provide software for solar installers to help them do a solar PV installation on a home. They started off as an Australian company a few years ago. We think they have kind of more than 50% of the Australian market. Now That's an estimate. I mean we'll see. But you know they're used very very widely by solar installers both here in the US and also other important markets like the UK.
Speaker 2:And so that's a business that was started here. The founders were from the Union of New South Wales Photovoltaics Lab, which is a really really well-respected lab in Australia, So we do have really strong universities here. I know there's many other companies in the space that we're not an investor in, like SunDrive is trying to create. I believe they're trying to create a different type of solar panel with, you know, 26% efficiency. I haven't met them, but I think that's what they're doing, So there is real innovation that's occurring. I mean, I know some other founders that are working on things like operational resilience in Australia that have really world-leading solutions as well.
Speaker 2:So I think in Australia we have the highest penetration of rooftop solar in the world. So we have about 30% of Australian homes that actually have solar on their roof. So I think it's about 3.4 million homes, which is a similar number to the US, despite the fact that US obviously having a 10 times larger population. So the US hopefully will go on that journey too with the Inflation Reduction Act and we'll see tens of millions of homes be electrified and get rooftop solar. But overall, we are seeing that Australian founders have seized the opportunity for providing solutions to some of these problems. They've been quite early in some of these phases and now they're reaping the benefits as the world really wants their solution, And I think solar is seeing that growth. I'm sure many of the others are as well.
Speaker 1:Yeah, yeah, okay, that's helpful. I appreciate the insight In terms of your investment strategy. When you are sourcing for deals or kind of looking out, how do you typically go about this? Is there a specific thesis you form and say, okay, based on XYZ, we have these things happening and changing, therefore we think there's going to be investment opportunities here. Do you just kind of toss a wide net? Could you explain kind of how you go about that and what your thesis is there?
Speaker 2:Yeah, it's a really good question. So we at Telstra Ventures are quite sector focused, so one of us will take the charge on a particular sector. So, for example, i cover climate tech as a sector. So I'll try to review everything that comes across Telstra Ventures in the space. My colleague, marcus, is an expert in cybersecurity. I think he's done over 20 investments in that space. And then I've similarly got colleagues who are experts in, for example, consumer in fintech, in data, et cetera. So we try to really spend a lot of time going deep in that space, in whichever space we're covering.
Speaker 2:So one of the peculiarities, one of the ways our fund is really different, is that we started when we started 12 years ago. We started as executives at the largest Australian telco, which is called Telstra. So Telstra is a business that has very high market share in every market in Australia. It's the Australia's number one brand. Actually, it's an iconic company. It's got, i think, about 18 million services in operation on a population of 25 million people, and it's also operating in 20 other countries, especially in Asia. So we often so.
Speaker 2:Since then, in mid-2018, we gained our independence, so we created our own fund and we raised money from new investors, including the superannuation funds I mentioned. We have 20 family officers, we have a European telco, and then we their partners invested personally significantly in the funds as well, and so we also benefit from some of the proprietary insights that our LPs bring. So especially Telstra, but also some of the other partners that we have. So Telstra is very advanced in this space. It's been net zero, it's been carbon neutral since 2020. And it's got really significant plans to reduce the absolute level of emissions by 50% by 2030. So it's a really strong adopter of renewable technology. It's purchase land and it's doing its own carbon farming as well, and so just through those insights, we hear of a lot of opportunities, a lot of companies that are trying different things in the market. We can we also bring them opportunities to discuss them as well.
Speaker 2:And then for our portfolio companies, our Telstra and some of our other channels.
Speaker 2:That include Vodafone, infosys, techmehindra and dozens of others they act as channels for our portfolio founders that opt in as well, and so so far, since we started, we've actually generated over 450 mil USD of revenue for the portfolio companies, which is significant. So if you're a founder and you want to, you've got product market fit, you've got a really great product and you just want to access more customers in a cost effective way, you know our channels can really help, and so we've really leveraged that, both for sharing insights, for also getting into competitive deals and then, frankly, for really helping the companies afterwards by generating lots of revenue for them. So, for example, we invested in CrowdStrike, which is the global leader in end point cybersecurity. I think it's a $40 billion company. Today It's listed and that's how they protect all of Telstra's laptops enterprise wide, and we made that introduction. And then we we've also helped them be helped Telstra become a sales channel for them, which has been a very significant driver of new annual recurring revenue for CrowdStrike and also revenue and margin generator for Telstra. So it's a really strong win-win. And so today we are a financial investor, like we have a committed fund and we're focused on financial returns, but we're trying to get the best of both worlds And so the learnings we get from that really help our sector kind of expertise. And then one thing we've also learned is it's just super important to stay open minded in this business.
Speaker 2:So I, you know, one of the investments I made a couple of years ago was a business called enable which provides rebate management software And a retailer sells a product through a wholesaler or through a distributor or with a buying group. Usually there's a, there's a rebate, that's paid and that rebate can be more than 100% of the profitability of the retail. So it's actually very significant but that that that whole process has been tracked in Excel and it's been very manual and error prone, and so we made that investment and that that business has been, you know, just a rocket ship. I think they grew, you know, 3x in the last year They raised a 94 mil series C round that was oversubscribed And you know I'd be lying if I said to you that I had a grand thesis about rebates when, when, when, i, very fortunately, were Andrew but the founder of that business.
Speaker 2:So I think in this business you need to be open minded, like really, it's the founders that show us the way. But it does really help if you, if you do have an open mind. If you are, you know, if you I try to read as much as I can. I'm sure all all the investors you know in the field do as well. So, just understanding the way the world is changing, there are a lot of sectors that we're really excited by and we're very actively hunting, and sometimes it's quite, you know, quite frustrating because we think there should be a company to solving a particular problem but we haven't found one we've loved, and sometimes that's probably BC whoopers, right Like it's. You know, we we think it's easier than it actually is.
Speaker 2:And then you find out, kind of through an industry insider later on why a particular idea just hasn't worked. But we definitely go through, you know, seeking ideas. So when I invested in open solar, i was very keen to find companies that could make the whole process of residential electrification and solar residential solar much more efficient, and I had a thesis around software driving that, and so I did a just spent as much time reading, as much as I could, you know, literally chatting to solar installers like interviewing as many installers I could find they probably thought I was the weirdest dude they've ever met And and yeah, and so we do tend to go deep sometimes, and sometimes that results in an investment, which is exciting.
Speaker 1:So if your team is growing or you're looking to make a career change yourself, feel free to reach out to next wave at next hyphen wave partnerscom, or reach out to one of their consultants directly via their LinkedIn page. Yeah, i think it's pretty fascinating. I can imagine that, not being not being in the specific industries there. There's always those ideas like, oh man, this would be a great idea. And then you talk to somebody in space and like have you realized this? And you're like, oh no, i didn't think about that. Right. It's probably humbling but also relatively exciting to do Exactly.
Speaker 2:And sometimes, sometimes, like actually as a founder, being naive, like not being an insider, is useful, because if you were an insider you would never have tried something. And then a founder who doesn't know like hits their head against the wall enough that like somehow it starts working And like that's where real magic happens.
Speaker 1:Yeah, it is fascinating to see how different companies play out. I mean, i've had some pretty what I thought were pretty cool solutions that came through. You know people who were in the industry, but they were really like at the very entry level. They were like technicians or something, so they understood problems more than the other people who manage the businesses, and that's the way it is, kind of thing you know. And then there's the people who just say you know what? I'm just going to change it anyways, i don't care what they say, i'm going to try to fix it. I love seeing people. It's kind of interesting to see how people just act upon the world and try to make you know, make their dent in it.
Speaker 2:Yeah, yeah, and like the founders of open solar, so they were actually the previous founders of sub jevity, which was one of the game, one of the largest, like the number three installer in the US. It grew to, i think, 200 million US of revenue And so they actually saw the importance of software in the design process, like they were actually the customers that they now serve today. So it's yeah, solving your own problem in a differentiated ways is often a really great way to approach it.
Speaker 1:Yeah, 100%. What about something you mentioned I'm just going to maybe reiterate to people I think was really fascinating which was the channels? I don't know if you have any more comments to mention on this, but the channel, sales and and partnering with you know, Telstra, for example. I just want to. This is quite fascinating, something I hadn't thought about. But you think about the, the significant value that you've been able to bring to the portfolio companies.
Speaker 1:That is not something a lot of VCs have. They all say. You know we've got partnerships, we do this, but like not to knock any VCs that I've had on or not, or nothing, but Not a lot of them have that right there, just several people who might have some connections, but not nothing more than than the average VC. So I do you have any comments on? You know maybe, as I've brought up this negative point, like still the reason why we still need VCs that may not have those connections. They're a little easier to set up. Those partnerships are maybe hard to come by. Just your thoughts, broadly speaking, on the importance of channels and you know The role of VCs without those extra channels to sell into.
Speaker 2:Yeah, so it's a really good point. So in my like eight years of being a venture capitalist, i've actually never met another firm that quantifies the actual revenue, the dollars that they've generated for their portfolio companies.
Speaker 2:I think you know and there are some, some other firms that are doing some really great work actually Helping their companies with customer introduction. So, for example, i think Intel Capital actually Quantifies the number of meetings it sets up with customers, which is like much, much better than nothing. But I've actually never met another firm that actually quantifies the dollars that have been generated and so what. That's what we really focused on. It's what we spend, like we we have not done a lot of marketing to the global VC community, but we have done a lot of marketing of our portfolio into channels and into customers, and so we have a four-person team That all they do is focus on that generating additional revenue for the portfolio. So I think it's something that's really nuanced It.
Speaker 2:You, i think you definitely need to have product market fit before you try to get another large company, before you try to get a large existing Company with it with a channel to try to sell it.
Speaker 2:Because, frankly, if you're still changing a product, if you're still changing the pricing, you know we've just seen that not work at all. So I think, having you know being at a stage where your post product market fit, you know you can call up 10 customers and there'll be strong references. That's that, to me, is when channels start to get really interesting, because if you can find a way to actually align interests, you can do really well, and it really does come down to that alignment. And so when I see channels fail, it's usually because the, the people on the ground at the potential channel partner are just not Incentivized enough to actually sell your product. You know, you as a founder, your product. So if you can find a way to make it interesting for whoever it actually is on the ground That's helping you get these additional customers, then it, then it can be a wonderful, wonderful way to build a business, especially in this market that we're in now, where cash is a lot harder to come by, we have found I think you know what about portfolio companies, whisper.
Speaker 2:The founder of that business, jeremy, has actually said publicly that he he has found Corporate corporates like Telstra ventures to be a really exciting way to grow his business in a capital efficient way. So being able to acquire customers without kind of investing as aggressively in a very expensive sales force is is interesting.
Speaker 2:So I think it really comes down to making it successful. We've seen lots of channels not work within, within lots of you know across the universe, and so just being really specific about the level of fit, like how interesting your product is to their, to their customer base, and they are having lots of different touch points within a company, rather than just having one Champion who might leave at some point, that they might derail you, and there's finding a way to kind of increase your, your mind share within that channel over time And be a real partner to them. I think it can be really successful and then in terms of the like other venture capitalists.
Speaker 2:So you know, we think it's lots of capital options are really really good for founders at the end of the day. So there's some, some venture capitalists who are you know, who are people who have founders, who've built huge businesses And they're they're going to be extremely helpful to a founder to help them navigate the ups and downs. There's different, different venture capitalists, different investors bring different things And so, like, i guess my advice for founders just like be Be clear on, like what value a particular investor is is adding and you know you should, you should to the extent you have options. If you have options, you should be really prioritizing those that can can actually help you. Like, can they open a different market kit for you? Can they? you know, are they deep in a particular, for example? like, are they deep in product? and somehow that can be useful. And just be clear about who who is?
Speaker 2:helping you where and what value they bring.
Speaker 1:And so I think a good a mix is always a useful thing.
Speaker 2:We've we've co-invested with lots of the greatest funds and also lots of the of the largest corporates in the world, and I think different people have helped make make some of those startups quite successful.
Speaker 1:Yeah, i do find this really really interesting. I think that it's obviously difficult to form partnerships, especially if you're not part of the organization already, like in the situation with Telstra, but I do think it can be fascinating to see. For example, especially in climate tech, you've got a lot of companies that at a particular stage They need a pilot project. And landing a pilot project is a pain in the ass, right Like it can be very, very difficult. So if, if there's a VC that wants to, you know, pop up and maybe maybe the company that would purchase that pilot doesn't have a Corporate venture arm But they are willing to, you know, partner with somebody, you should find those right and maybe, maybe that's something for VC to consider to differentiate themselves, because there are.
Speaker 1:I Mean, obviously there's still, there's still need for more funding, but there's still a lot of VCs popping up, especially the past two years in climate. It's really crazy to see them like explode. How many, how many there are. Hopefully, hopefully continues, but no, i think it's really fascinating. That's a really. I thought I was really good insight. It's something I had not heard of before, so I really appreciate that. One thing, just to clarify for people listening, for anybody looking to get funded? what, what, what are the investment criteria that you guys look at?
Speaker 2:Yeah, so we, we tend to focus on post product market fit companies, so they, they have a product in market. It's somehow, you know, much better than the status quo, like it solves a Problem in a really, you know, really comprehensive or different way. So it's like a 10x better solution and You know it's they have some early customers at least that we can speak to so that that's where we've done the best as an investor.
Speaker 2:That's where we've added the most value, you know, from a channel point of view, from introductions, etc. So usually we, we tend to invest at 1 to 10 mil of revenue. We can also invest later as well. So where we are, we are fairly flexible as an investor, but we're trying to find companies that are, you know, have created a product. They, they have a disruptive opportunity somehow, and ultimately the problem is one that's significant. So we, we think over time, like it's, it's going to become a really big problem. Maybe it's more today. You know, i think if you'd done the, the numbers on electronic signatures, when we invested in DocuSign, that would have been a tiny, tiny market at that time.
Speaker 2:I mean, it would have been, you know, probably in the tens of millions of annual revenue for the whole market And and and, by the way, this parts back to the other question of how has the market changed? back then there were only like five different Vendors in that space, so some a much kind of, whereas now there's some spaces with 50 or 100 vendors. So, you know, we tend to see can, can this company like, whilst it might be small today, can it ultimately become a large opportunity? So that's that's where we get really excited, and so we gravitate to founders that that are, you know, just, are quite ambitious. They want they've kind of started the, the inklings of something that's exciting and they're at the start of an inflection point And we think we can really help them.
Speaker 2:So that's where we tend to focus and then also conscious that in climate There's more companies that just need more capital earlier before this you know There's this there's few companies that that are, you know, have that much revenue, i guess, like there are a few, but not not a huge amount, given our earlier spaces. And so we're also very, very open-minded about also going earlier in companies that are really creating new industries from scratch. So we're we're spending lots of time thinking about where it makes sense to invest there.
Speaker 1:One thing I'm curious. I don't know if you mentioned this exactly or not, but how, when you're looking at a Market where the TAM appears to be small because you know, for example, nobody's you know Nobody's using electronic signatures or whatnot, how do you try to determine the, the like? what is the technical method for trying to determine the potential market of something that doesn't necessarily exist, like, okay, of the Conventional users? you know there's usually x percentage that could change, or one. How do you tend to do that? Because I think, if I'm not mistaken, climate tech has a lot of those instances where there's something that may be kind of there but not really, and Hypothetically it's big, but it could also have the hypothetically be zero.
Speaker 2:You Yeah, so we put on a blindfold and throw an article. No, i think these are the hardest questions to kind of deal with, right? Is it something that's small today, because it's inherently like only a tiny fraction of people care, or is it something that, for some reason, lots of people or lots of companies will end up caring? And so I think, overall, like we try to do as much, we try to be as knowledgeable as we can about a space, so we try to speak to as many intelligent people, as many industry experts, we try to understand what are the things?
Speaker 2:that have been holding back a particular market, like is it, for example, the cost of that technology, which has obviously been the case with solar, for example? So as cost has come down and it's become the cheapest form of energy in the world, you're seeing dramatic, dramatic take up of that technology. And so we try to understand I guess we try to learn from the experts. We speak to as many intelligent people, we speak to end customers who are kind of buying, and try to understand their behavior. And then the actual kind of process, the customer journey, we try to understand, like, does it really simplify, does it solve an important problem for someone or not? And yeah, we tend to just look at, try to form a view of how big it could ultimately be if it's successful.
Speaker 2:So I mean, when DocuSign, when we did DocuSign, i mean there were lots of people who were very bearish on the space as well There were people that thought it was a commodity and every company would have their own electronic signature And so I guess overall, the assessment we're doing is is this something that there'll be there'll only be kind of a hundred organizations that spend money on this Or is this something that becomes ubiquitous and really replaces an existing way of doing things?
Speaker 2:So that's the assessment we're doing, and then a lot of it is also the founder as well. So I mean some founders, sometimes they're, if you create an Excel model you probably just wouldn't get to numbers that are that exciting.
Speaker 2:You have a founder that is a real force of nature and that founder can actually just kind of bend the world to kind of their view of things. And yeah, i mean if you kind of looked at people throughout history, like Thomas Edison, i mean that if you'd done the analysis on things like light globes and things like that back in the day, i'm sure you would have thought that's an incredibly tiny and not interesting market, and then the world has changed dramatically. So yeah, i think we it's just lots of thinking and lots of, lots of analysis.
Speaker 1:Yeah, that's quite interesting. I mean I can imagine there's only there's only so far that the kind of the numbers can take you, and then you have to kind of go with your gut at some point. There's a bit of research you have to do. But one other question I have, which I did not plan to ask but I came up and I'm thinking about it now, is you know, with the fact that you invest a lot in software but also sometimes in hardware, does that ever cause because the usually the expectation for return on investment with hardware tends to be longer in most cases Does that cause any difficulties in terms of your LP's expectations on returns? Has that ever been an issue Like how do you manage that split, or is there specific circumstances where that's not necessarily an issue for Telstra?
Speaker 2:Yeah. So I think overall I mean, we're only going to make an investment if we believe a 10x return, 10x cash on cash return, is possible And we think there's some reason to be excited about its prospect as well. So I think overall, like we you know, when we make a hardware investment, we're not like we're not just accepting a lower return or just expecting it to be a somehow a bad investment, like we're investing in it because we think it's somehow a really exciting technology. So, for example, we invested in a business that does has a programmable robot that can recognize faces and interact with you, and it's really quite remarkable. It's very useful in use cases like education, for example, and entertainment with kids and things like that, and it's really like a marvelous experience, and so the product is something that's very sought after.
Speaker 2:And then so, at the end of the day, we're trying to invest in things that are just a real breakthrough, and so from that perspective, we often see them just be, you know, the exciting companies that we think will hit a strong return. They will. We do tend to need to reserve more capital for those hardware companies. So you know they tend to be more hardware intensive And so that requires, you know, more analysis around the plan actually being fully funded, and so I think that is important So you can achieve. You know it's getting cheaper and cheaper to make software, obviously, especially with some of the innovations that are occurring at the moment, and so with hardware, you know we are more cognizant about a company being well funded to achieve its potential and not getting kind of stuck in the middle.
Speaker 1:Yeah, that makes a lot of sense. I think that's that's interesting. I don't know if this is something you can speak to or not, but I am very curious about the sentiment among LPs Right now to you know if you're, if you're trying to know if you've recently raised the fund or not, but just any, any insight you can offer to insight on the LP sentiment around climate tech investing and are they still very interested in it, even though you know there was all these crazy valuations, economy shrink kind of tightening up, etc.
Speaker 2:It's a really great question And I think it's very top of mind that you know 2006, the clean tech 1.0 kind of movement that started there, i think a lot of LPs you know didn't do well through that period. I think the risk, adjusted returns just weren't weren't really worth the investment.
Speaker 2:I think, unfortunately, and you know, there were also some very, very large blow ups, like Cylindra that I'm sure some of the listeners will remember. And so I think generally the LPs are, you know they're excited about the changes that are occurring. They're very I describe them as cautiously optimistic overall, so they want to learn more. We're seeing really, really strong changes to kind of ESG affect the LPs themselves So that the LPs, how they report what they invest in, like that is changing quite dramatically because of the need to incorporate more facets of an investment rather than just financials, so especially the impact of that business.
Speaker 2:So that is a really important movement that's occurring at the moment And it's requiring kind of more data to be shared, more of a more you know we are really carefully considering the ESG implications of every investment and then, over time with an investment, we're working really closely with the founders to understand what their ESG footprint actually is. We have lots of companies that we're doing that. That's actually a board level KPI. Some of the metrics are, for example, co2 avoided is a metric or something like that. But you know, we have board. Diversity is a really important issue that, frankly, hasn't, hasn't, is no, any kind of dealt with. It needs, we need a lot of improvement on that front, and so overall.
Speaker 2:I'd say there's. There's a real excitement among the LP community. I think they're also keen to understand potential disruption within their wider portfolio. So, as I mentioned, vcs are really small part of the of the private equity asset class and then you have huge buckets like debt and infrastructure and listed equities, and so so there's definitely capacity.
Speaker 2:Some of the LPs have really large positions in industries that could well be disrupted over time, so I think they're really keen to get the benefit of those learnings, to understand new business models, and I think overall they're just placing a high degree of emphasis on GPS that can pick well within the space. I think it's it's less of a space that kind of all boats will float and I think it's more specific teams will really execute well. I think execution is unbelievably important in the, in the, in the, in the climate tech space. like to state the really obvious, like there's a big difference, like it's a lot. It definitely feels higher stakes overall, like this It's. It's tricky to get a business to really work in this space then, for example, releasing a mobile app And you know, especially with the level of cash that's been being raised and invested. So yeah.
Speaker 2:I'd say it's extremely topical and you know there's that we still meet some LPs that are still pretty early in the journey around climate tech, like there are some that don't really have an exposure and they're just came to learn more, so it is also a diverse community as well.
Speaker 1:Yeah, that's really. that's a really interesting to hear. I appreciate that. I think we've got time for one probably more major topic. What is the talent market like, both internally, for your own hiring needs within the company and then within the within the, the portfolio companies?
Speaker 2:Yeah, so it's interesting, like I mean, the really good thing about climate tech in hiring is like we actually see that our portfolio companies that are making a real difference in climate, like they're actually able to hire excellent people really easily, like they are genuinely like it's a problem that so many people care about especially kind of really like really talented senior people have done really well and that they have had successful careers and they kind of look for meaning at a certain point, and so we're just seeing a lot of people who have had success really want to dive into, into climate tech companies.
Speaker 2:So, for example, like with open solar, one of the like their their head of the US and CMO was actually the former CMO of LinkedIn up until their IPO.
Speaker 2:So you're seeing that people who have just tremendous amount of optionality really choose to work in companies that are moving the needle on on climate tech and we're also working with We're also we also led the series A for a business called rethought insurance, which provides flood insurance for the in the US market using climate change start on every property to price flood policies, and so they've been able to hire really great people. And then the founder himself, corey, was previously the CTO of RMS, which is the really big risk model to the insurance industry. So we're seeing people of a really high caliber choose to work in companies that that actually are trying to adapt or deal with with climate and like to me, like that is actually one of the things that makes me most, you know, gives me the most hope that humanity will find solutions to the crisis that we're in. I think it's. It's an unbelievably urgent problem and where you know, when smart people move early, like that's a really good sign that money should follow them at scale.
Speaker 1:Okay, yeah, interesting. That's cool here, i think. Obviously I work in the town space in the daytime and it's very interesting to see, especially with all of the layoffs in the US, there is really a lot of people. They're choosing to make their next play into Climatech. They're even willing to take time to find that role. Everybody wants a job at Climatech. My LinkedIn is always blowing up like hey, can you give me a job? I'll try to help you as much as I can.
Speaker 2:It's really a force to behold. Really amazing people are clamoring to get roles at some of these young companies that are making a difference. It's really exciting. Hopefully, we just see an explosion of really great Climatech companies and just the people behind them. The other thing is we also need a lot more electricians. We actually need a lot more people doing wind turbine maintenance and roles like that People to staff carbon developers a lot of roles like this. There's all these industries that will lead to attract a huge number of people. The role of training is really quite important as well. I'm sure we're going to see a lot of opportunity for reskilling and upskilling. We're an investor in a company, for example, called Springboard, which is the largest private player in the online remote school space. They're seeing a really strong interest in moving into Climatech as well.
Speaker 1:Yeah, i think it's also something that I've noticed with a lot of people come on is there's a certain when you're a Climatech company even especially when you think about more of the less white color type work, the things that are maybe less education required, or the people who work there the people are willing to come work for those companies. They really want to work there. If you're a company who's just a conventional company, you're not doing anything particularly clean. you're probably going to struggle with talent retention as well, because there are going to be quote unquote conventional companies that aren't doing a climate technology per se, but they're doing something and they're doing it in a more responsible way. They're advertising that and they're showing, hey, we are making a commitment to the things around us and it's going to bring the people from the other organizations there.
Speaker 1:It's a talent for just non-climate tech companies. Maybe you're a restaurant or something but you buy offsets or something to make it more ESG oriented. You might be able to attract better wait staff, for example. It's just very simple things, but I think it plays a big part and a lot of people tend to overlook that Very cool.
Speaker 1:With that, what are you excited for next? When you get to see a lot of interesting things, a lot of potential deals, interesting developments in the space, what is next in your opinion? that's really exciting coming up in the climate technology space.
Speaker 2:Yeah, so much is the answer. Do you have another round? So we're really excited in lots and lots of different areas. So general electrification is something where we're really excited by. Open solar is one play on it, there's many others as well. So companies that are helping to electrify the world at scale. We also invest in the business called BuildOps, which provides contract and management software, and so a lot of their customers are contractors who are extremely busy electrifying big companies as well.
Speaker 2:So we see a lot of room to run for that general theme for households and also businesses to electrify and really transition entirely off gas and oil. So we think that energy mix, transition to renewables being 80% of the energy mix, is like we think that's on the scale of another industrial revolution. Basically, we think it's giant. There's lots of other areas I'm very interested in, so virtual power plants, the idea of aggregating different distributed energy resources. I haven't made an investment in that space yet, but to me that is an exciting future And I wonder if the time is now ripe for that idea to really work. So the idea being that as we introduce more renewables into the grid.
Speaker 2:The grid is obviously under more pressure. It's more volatile. So if there's an intelligent brain that can aggregate different distributed energy resources and then activate or deactivate them as needed when the grid is under stress, to me that's a really wonderful idea. And I wonder if we have enough penetration to now make that work. And batteries obviously, coming down the cost curve is a really important part of that. We think generally grid resilience technologies like we're going to need the grid to have trillions of dollars of investment. There's huge amount of opportunity there. I mean, the grid is a space where it's typically been really hard for startups to really play in.
Speaker 2:But I wonder if there's enough of a dislocation, enough opportunity to really create some gigantic companies around that. And then I'm also extremely intrigued by direct air capture, like the actual concept of sucking emissions, sucking carbon out of the sky. There's lots of different ways that are being done, the companies that are pioneering that space, they're intriguing to me. And then also on the nuclear SMR side, i mean, i think there's lots of opportunities. So I'm very excited by lots of things that I'm very actively looking for new investments to make at the moment.
Speaker 1:Very nice. Well, hopefully some people who are looking for investment go your way, and I'll definitely keep an eye out for myself, but this has been really great to have you on Any final thoughts you want to leave us with?
Speaker 2:No, please get all your smartest friends into climate tech. Honestly, we need as many smart people helping as possible And maybe like at last reflection. so when?
Speaker 2:I look back to kind of 100 years ago, maybe 150 years ago, it was widely predicted that humanity would run out of food And, like lots of the smartest people at the time said, oh you know, we're population's growing so much we're going to run out of food. And then ammonium nitrate was invented by two German physicists And that really changed the world in 5x the per farm productivity, and obviously we haven't run out of food. And so I think there's lots of reasons to be quite scared about what's happening in the market, like the level of emissions, and that the changes in temperatures is something we humanity hasn't seen before. But I do think it will be. It will be amazing humans that make breakthroughs like that that really change the course of history. So and I'd love to play a tiny part, kind of helping those families succeed Absolutely.
Speaker 1:Well, this has been great having you on. I really appreciate this, definitely keen to see how you guys continue to invest and we'll definitely stay in touch.
Speaker 2:Excellent, thanks so much.
