#119 Partnering w/ Energy Majors in the Climate Revolution, Houston's Role in the Movement, Discovery Framework, & More w/ Eric Rubenstein (New Climate Ventures)

In this episode Silas Mahner (@silasmahner) interviews Eric Rubenstein about his journey into climate tech, the importance of partnering with Energy Majors in the Climate Revolution, the role of Houston in that movement, Eric's discovery framework, and his ideal founder traits.

Overall, a super good episode packed full of insights.

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Topics:
**1:36 Intro & His Climate Journey
**9:42 DTD Challenges of Being a VC
**13:59 New Climate Ventures
**15:50 Their Verticals
**22:27 His Exp Raising the Fund
**30:41 Houston & The Climate Revolution
**39:30 Ideal Founder Traits

Advice Section
**46:19 Discovery Mindset Framework & Tactics
**50:32 VCs Required Value Props
**55:10 Fundraising Advice
**58:56 His Role Model VCs

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Links:
**Connect with Eric: https://www.linkedin.com/in/eric--rubenstein/
**New Climate Ventures: https://www.newclimateventures.com/
**Check out our Sponsor, NextWave Partners: https://www.next-wavepartners.com/
**Follow CleanTechies on LinkedIn: https://www.linkedin.com/company/clean-techies/
**HMU on Twitter: @silasmahner

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**Similar Topic: Consultative VC, Understanding Customers (as a VC), Developing Industry Networks for Your PortCos, & More w/ Rick Zullo (Equal Ventures)
**Something Totally Different: Revolutionizing Takeout: Tackling Plastic Waste Crisis with Reusable Containers and Gamification w/ James Wilson (reUser)

Chapters

• 0:09 Climate Tech VC Investing
• 14:31 "Because we can't stop, we need to remove" (Investment Strategies)
• 22:28 Fundraising Challenges in Climate Tech
• 30:41 Transitioning Energy and Climate in Houston
• 39:25 Ideal Founder Traits
• 47:36 Discovery Mindset Framework & Tactics
• 50:32 VCs Require Value Props
• 55:10 Fundraising Advice
• 58:56 His role model VCs
• 1:00:08 Collaboration and Investment in Climate Solutions

Transcript

Silas Mahner: 0:09

Welcome back to the Clean Techies podcast, where we interview climate tech founders to discuss all things building and investing to solve the biggest challenge of our generation climate change. Today we have a pretty fun conversation with Eric Rubenstein, founding managing partner at New Climate Ventures, a pre-seed through series A climate VC that spates out of Houston investing across various verticals of the climate revolution. In this conversation we discuss his journey from corporate investing in ONG into founding NCV and the impetus for his shift into climate. We also talk about the role of energy majors in the energy transition as well as the climate revolution. He gives a lot of really solid advice to other climate VCs as well as to founders on the fundraising process. Overall, eric was a great guest and I'm glad we get to share this conversation with you. Enjoy the episode.

Silas Mahner: 0:56

All right. Welcome to the show, eric. How's it going? It's going well. Thanks, glad to have you on. We had a bit of technical difficulties before the show, but we're here and we're recording on a Saturday. I appreciate you jumping on on a Saturday. How are things in Houston?

Eric Rubenstein: 1:12

Things are quite warm, but aside from how hot it is and the inability to enjoy being outside as much as you normally would, it's been really good. It's been a great summer.

Silas Mahner: 1:22

Yeah, I was going to complain about how hot it is in New York because then I remembered I'm talking to somebody who's in Texas today, so I probably should keep my mouth shut. But anyways, I appreciate you coming on the show. Let's just start with a quick introduction to yourself and a little bit about your background.

Eric Rubenstein: 1:37

Yeah, absolutely. My background is largely in commodities trading from a professional perspective, was it Louis Dreyfus and then at Citigroup on the commodities trading desk? At each place, and while I was at Citigroup was not just working with the trade desk and informing our trading decisions, trading as well, I was working with customers. So talking to the petroleum producers, chemical companies, airlines, all the consumers and users and producers of petroleum and petroleum products, hedge funds, pension funds. I was dealing with technology companies and such and discussing the future of oil markets and different petrochemical markets and found a path, while the city, to invest directly in companies as a strategic investor. So was investing to first kind of streamline our processes, enhance our trade analytics and later to develop new markets.

Eric Rubenstein: 2:49

But all of that led to is the launch of New Climate Ventures in 2021. So, new Climate Ventures we're investing in decarbonization technologies with a focus on hard to decarbonize sectors and it's a cross sectors and across technologies. So we're investing in climate tech, circular economy, food and ag tech, energy transition and enabling technologies of software companies that can help folks to reduce their emissions or avoid emissions. So we have invested in 24 companies of the right now and are continuing to deploy and are investing in very wild and interesting technologies that a decade ago would not have been able to have a path toward being economic and viable. And today, with the technological enhancements we've had, with the adoption of renewable energy resources like wind and solar, which have greatly reduced the cost of power, you can really have these next generation technologies that are going to be viable in the coming, say, years and decades.

Silas Mahner: 3:58

Yeah, 100%. And I guess I'm really curious, like how did you go from what you were doing and how did you get interested in climate in the first place?

Eric Rubenstein: 4:06

Yeah, no great question. I found that in my personal portfolio, everything I was investing in was gravitating towards sustainability and when I was starting to develop these new investments and new markets, to develop new markets, recycled plastics was the first area that I was approaching and I saw the technologies in advanced recycling could be emissions reducing relative to both mechanical and just virgin petrochemical production. And so that was kind of the first light bulb. And then the second was in 2019, when the first handful of companies started really announcing their emissions reductions goals, so their sustainability goals around carbon emissions and looking at what had happened with recycled plastics and how the Coca-Cola and Pepsi's of the world had made announcements and then had kept increasing the amount of recycled plastics that they wanted in their bottle mixes over the course of a number of years, expected that there would be a much bigger universe of companies that were going to be making announcements and wanting to decrease their carbon emissions. So that number has gone from a handful in 2019 to over 4,000 today, so that trend has kind of accelerated and continued as anticipated. And so looking at that and then looking at the new technologies, the carbon sequestration technologies and carbon capture technologies and carbon utilization technologies and then looking even at a wider lens and a broader scope, really started to solidify the idea, for me at least, that the future was here and we'd be able to actually bring these into market.

Eric Rubenstein: 6:02

And so consumers had spoken, and we all, as consumers, have said that we want this. We're willing to buy these products, shoes that are lower carbon emission shoes, we're willing to adopt wind and solar, we're willing to buy Teslas. You know all of these things. The corporations have latched on and they've made the announcements I'm talking about, but they've gone way further than that and they're adopting technologies, they're involved in the marketplace and all of that's like the government interests as well, which is more obvious today with the IRA and the US and other policies. But it was really that light bulb around. Recycled plastics, alternative foods, agricultural technologies, carbon capture, storage, utilization technologies all of these and beyond are at a point where we can really make this something that adopts into society and could even be a lower cost to society in the future, once we scale the same way that wind and solar has been.

Silas Mahner: 7:10

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. As 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.

Silas Mahner: 7:39

Yeah, okay, very interesting. Yeah, I love to understand people's journey because it's usually pretty different for everybody. There are some things that are similar, but a lot of times it's a very different type of path into it. I'm kind of curious if you could talk a little bit about and I don't know if this is referring to your own investments or not but you said that you were CIO on your LinkedIn of a family office. Is that referring to your own investments or was that with another group? I'm just kind of curious how that informs your decisions now as a VC in the space.

Eric Rubenstein: 8:12

Yeah, that's my family's. Okay, yeah, so it's myself and my kind of broader family. So back when I started personally investing in companies and in venture funds, my dad started to see what I was doing as I was talking about it and he really started to like the idea and the thesis I had around how to build an alternative asset portfolio, and previous to that, I was investing in real estate and we were co-investing in real estate. So that's really where that came from.

Silas Mahner: 8:41

So I guess the question I was really curious about is if you were investing into funds at the time rather than into individual projects, why then decide to start your own VC fund? Did you see a specific value prop to do that separately, or why would you do it yourself instead of just continuing to invest in other funds doing that?

Eric Rubenstein: 8:59

No, I was investing in both. It started like the first investments I made in the venture space for venture funds. But it brought it out pretty quickly. So even by the time new climate ventures was launched, at least, I personally had invested in over 30 companies, and then my partners as well. We've all invested in numerous companies, so it's between all of us. It's hundreds of companies I think we have invested.

Silas Mahner: 9:27

Okay, got it. Okay, that's helpful. I just want to make sure I clarified that. And then one thing I'm curious a lot of people they see VC as this ideal, this is where you want to get to. These people are invincible. But could you talk about the biggest challenges on a daily basis of being a VC, because a lot of people don't see call it the difficult side of it- yeah, yeah, and particularly when you're a first time fund, when it's really a startup itself.

Eric Rubenstein: 9:58

So, yeah, and just reflecting back though on the Again, why get into VC? I mean, another thing I was saying is that there just wasn't attention, or at least there weren't as many funds, in the early stages, and that's where kind of a gap was, I'd say, or just less a focus, from the institutional level on climate tech. So where funds were being raised a few years ago and even still you have folks that are raising bigger funds, that are deploying in a traditional strategy of investing in roughly 10 companies, that are going very deep into all those companies in terms of putting a lot of money to use, which means that if you're going to be writing a, say, 5 million, 10 million, 15, 20 million dollar check into a company, you can't be doing that if the company is only raising 2 million dollars at that time. So a lot of the money that's in the space from the institutional side is coming in later than these seed stages. Our focus tends to be pre-seed through series A, so we're speaking to that and we're building a bigger portfolio as well to reflect that. So if climate change needs all of the above approach. We want to be able to invest across these different verticals and really address that and have multiple investments in each of the kind of verticals such that we can address the climate action that needs to happen. So just to mention that.

Eric Rubenstein: 11:26

But then, in terms of what's the challenge of being a VC, it's really that day to day that you're not just making investments and you don't naturally like, if you're at a corporation and you're making investments in companies, you have an infrastructure around you.

Eric Rubenstein: 11:42

There are lawyers that work at that company, most likely that you can talk to, and before going outside council in the case that you have to go to outside council there's going to be other things that make things a lot easier and smoother.

Eric Rubenstein: 11:57

Your entire back office is probably right there in-house.

Eric Rubenstein: 12:00

So having to deal with that day to day and having to make sure both the fund is operating well and the investments that you're making are being diligence and monitored well and putting all of that effort in is really something that I don't think people recognize in startups in particular, where I mean, at least we are bombarded by startups that are seeking to raise capital and by people that are trying to raise capital on their behalf, and it's hard to respond to everybody because there's a lot of people approaching and at the same time, we're looking with them a thesis and we're trying to find specific things that we want to invest in and we're teasing that out of the market as well.

Eric Rubenstein: 12:50

So, yeah, I think it's all the above. It's keeping up with being respectful to the startups that are raising, knowing that they want money but they don't necessarily know how challenging it is also on our end and how we're founders ourselves, in a way, and have our energy split between eight different areas all the time. So I'd say those are the challenges. It's just that we are a startup as well.

Silas Mahner: 13:16

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. Yeah, I think it's probably easy, as somebody who doesn't work in VC, to consider and think oh well, they've got all the money, so therefore they must have executive assistants running around doing everything for them, and all they got to do is look at my pitch deck. So why don't they? But that's not really the reality, right?

Eric Rubenstein: 13:58

Yeah.

Silas Mahner: 14:00

I'd like to. So let's kind of shift specifically into the nuances of new climate ventures. So we already talked about how you started it. I want to ask and have you kind of reiterate or restate the remit you focus on and why you decided to focus on that remit.

Eric Rubenstein: 14:21

The remit being decarbonization.

Silas Mahner: 14:24

Yeah, in terms of like what stage you invest in and the different types of companies and how you're broader cost them.

Eric Rubenstein: 14:30

Okay, so, yeah. So I guess, circling back to that, we, the idea, is to tackle climate change head on right. The idea within that is to decarbonize the planet, and that's the way that we are approaching that problem. And so we have these verticals that we've thought up, that address that, where the idea of there's a whole carbon tech ecosystem that needs to be developed and furthered. We can't just decarbonize the planet by changing the operations of businesses because, say, and multiple reasons, but say, one reason is just, technology isn't there yet. So, say, you're a steel company, you're still going to have to use a lot of heat in order to create steel. You're going to be using a lot of energy as a result of that. It's a, it's a challenge to decarbonize the steel industry today, in the future, maybe we can, we can decarbonize it significantly. We're still not going to get to zero carbon emissions likely in the next 30 years, let's say, for the steel industry. So if we can't get to zero, then we need to also be removing emissions from the atmosphere in addition to that, to decarbonize that space, right, and so to get to an actual zero carbon world and that way where we're not emitting more than we are producing or where we're not emitting more than the world would naturally be emitting if we weren't burning fossil fuels and using energy we need to also be removing. So there's the carbon management ecosystem is one that we think about, the and then, as you kind of shift through, recycling of things is something that's important, whether it's recycling plastics and things that we put to our curbside, or if it's taking waste products, agricultural byproducts, let's say industrial byproducts, and recycling those so they don't go to waste, so that we don't have to produce new things, because the production of things is something that is generally and usually more emitting than the recycling of things. So it's kind of like reduce, reuse. You know the situation where, on the one end, where you can reduce what you're doing, you can recycle what you're doing, what you've already produced, and then you can remove it as well. So that's the removal angle.

Eric Rubenstein: 17:03

And then, when you start looking sector wise, there are areas like the food and agricultural sector that produce a lot of emissions. So that's where food and egg comes in. Just the proteins we eat are 14% of global emissions that they produce, and that's just for the proteins. So the transportation used in agricultural etc. Is not included in that calculation, the airline industry is going to be hard to decarbonize. We already have an infrastructure in place to move jet fuel around, to get it to airports. The planes obviously are using that jet fuel. So to be able to change the hydrogen or electricity in the future, you both need a technological advancement for the, for the aircraft. But in addition to that you need a whole new energy infrastructure in order to supply the energy for the plane to be able to operate, whether that's electricity or hydrogen in those instances, which is going to be a challenge for society, to kind of get to a place where you've totally got to fly away from jet fuel anytime soon. So, as an example, like that's an industry that's that's going to have challenges. So, looking at sustainable aviation fuels, looking at different technologies for aircraft, we haven't done a lot in that particular space in which we have a concept that that the world has to tackle.

Eric Rubenstein: 18:28

The built environment is another where you look at construction, similar to mentioning steel. It's embedded in that that conversation. When you're building buildings, you have a lot of materials that take a lot of emissions to make, whether that's cement, whether that's steel, whether that's glass. Finding solutions to reduce the emissions associated with the production of those materials, looking at things that can make the building itself more efficient. So as, as a few kind of examples there, we've invested in a company that effectively embeds CO2 into cement. So it's, it's converting basically CO2 into cement. That addresses that, that area. We invest in a polymer company that makes a polymer that reflects virtually 100% of the heat away from sunlight, which is going to be used in windows is our expectation and where they've started. So that's. That's another one where it just makes the buildings more energy efficient. It's so hot out right now. Part of that in the home and part of the cooling that has to happen is just because of the radiation coming through windows and that heating a room. So if we can prevent that radiation from coming in and it's, it's another way to decarbonize the construction industry without having to change your HVAC system and do other things. So some examples, but that's.

Eric Rubenstein: 20:05

We were also noticing that there's, like I said, there's less people coming in as early that have this institutional mindset, or I mean this kind of corporate strategy mindset of this is how a company, this is how you attract those investors that can help us enhance in the future.

Eric Rubenstein: 20:26

This is how we can work within our ecosystem of people that we know and have worked with over many years in order to bring customers on board, in order to bring investors on board. So it's there is kind of a strategic element to the way that we approach our investments as well as to how we can help and who we can help. It's often not just a question of can we put money to work and will this benefit the planet and can we make money doing it. It's also can we help these companies and really help them get to where they need to be. When you're that early in the in the age of the company and the development of the company, of pre seed and seed, there's going to be money coming in. After that's going to be bigger money that you want the right money there in order to help to develop the company further and to really help the company grow.

Silas Mahner: 21:19

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, our 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 hyphen wave partners dot com or reach out to one of their consultants directly via their LinkedIn page. Okay, now, I appreciate that. I think it's really helpful. And just to reiterate the purpose, on the early stages there wasn't a lot of companies, right? So that's why you you wanted to focus on that. I think it's quite interesting that you, having been on the institutional side, are now investing on the on the early stage, because you understand, kind of, what it takes to get to that point, so you can help guide them. I think that's a certain value add that's important.

Silas Mahner: 22:07

I was just listening to a podcast this morning and they were talking about a lot of people. There was the era of VCs that, oh, we just invest, we don't, we don't really help you out with anything. That way, we're out of your way, right, was there? Quote, unquote value prop, but in reality, it's just an excuse. Right, because there is no value prop. Right, there's nothing specific that you can bring to the table besides dollars as a VC. I want to ask, though what was your experience raising the fund? So, yes, it's the first time, fun for you. I'm sure you have partners that you went into this with, but could you talk about the key things that you experienced, how easy or difficult it was, and what were the key, I guess, factors that really allowed you to successfully raise that fund?

Eric Rubenstein: 22:49

Yeah. So I think the experience myself and my partners and is that there was a big change, I'd say, in the world when Eastern Europe, the war in Eastern Europe really started last year and we've seen it both from a company's fundraising perspective and from fund-to-fund fundraising perspective funds fundraising perspective where people just broadly that were investing in these companies and funds, everyone slowed down right, everyone had time to think and make decisions as to where they wanted to place their money, because people were reevaluating the world and reevaluating the opportunities. We had a really big run-up and big deployment period in 2021, and Silicon Valley is a symptom of this as well Silicon Valley Bank and the failure there in the end, where a lot of money came into the space and then things changed and everyone started drawing down deploying capital on the venture side and the venture fund side and on the company side where the companies were deploying that money. So you kind of came to this point where companies needed to increase runway and be careful with how they were managing their money, where funds were pulling back and making less investments and or slowing their process, evaluating their portfolio and then making sure their portfolio was stable before and or while bringing on new investments, which just meant less new investments. So the whole industry has kind of slowed down. And this is probably I just put it across the board into other areas as well where interest rates going up has kind of changed some of the mindset. So I'd say, in fundraising there was a change from free Eastern Europe going to war and where we are today, and that's just an investor mindset. So things had take longer than they had taken before and getting people over the line has had been more and is more challenging, I'd say.

Eric Rubenstein: 25:15

The other thing is in the venture space. The pullback that's really happened has been in the later stages where valuations of have dramatically come down, I'd say, and many of the later stages. Carter will put notes out on this and others, so it's well documented. So later stages have pulled back and there are certain areas within venture that have also been insulated, climate tech being one that has been more insulated where valuations are generally creeping higher. Part of that might be because generally climate tech companies are earlier stage companies, broadly speaking.

Eric Rubenstein: 25:54

To begin with, I don't think you see a lot of pre IPO climate tech companies out there today where we will see a lot of that in the coming years, but you do have a lot of these seed companies coming up and series a, series B is happening and valuations are largely higher in the climate tech space, so it's this interesting kind of juxtaposition. So, yeah, we did see a slowdown in our ability to fundraise and I think everyone has seen some of that, but at the same time, like we anticipate that's going to get better as as just the economy continues to truck forward, as people ingest what higher interest rates mean for society and as we get past a period where people are worried about recession, like they are still.

Silas Mahner: 26:41

Yeah, I think I think that's interesting. I mean I would. I guess it's encouraging a little bit to know that climate didn't slow down as much in terms of new funds being raised right compared to traditional tech, despite all of the issues and investing early stage funds being. This is like the worst time for the stage funds when you look at the difference in the outcomes right now currently. But obviously this is just kind of an adjustment period coming off of the really big bull market. And the thing I'm kind of curious about is do you think that the slowdown and this like people stepping back and thinking, thinking twice about what they're doing Is it in the long run yet? Maybe it's slowed the process now, but is it in the long run going to be good for the climate movement because people are saying, hey, we need to help, you know, make sure we transition off of dependency on certain certain fuels or things of that nature. I'm just kind of curious if you think in the long run it's going to be positive or negative.

Eric Rubenstein: 27:37

The slowdown.

Silas Mahner: 27:39

The retrospect people stepping back and like looking at the war and saying, okay, what, what should we be doing? Going forward, because I think there was a lot of people rushing and maybe maybe they decide, okay, now that we see the how negatively this, this war, can affect the world and in particular, europe, like should we be investing in more clean energy or whatnot, etc.

Eric Rubenstein: 27:59

I think there has been a shift already in that mentality from from the investors, where I mean, in a couple ways, one at least funds say, like growth funds, though when, when you talk to some of them that they want to be going earlier because they recognize if you want to be in climate, you have to be a bit, a little bit earlier than you would have been, otherwise you have to be writing smaller checks. I don't see as much of that where they're they're actually acting and writing the smaller checks, but they say they want to be doing that. So I mean that's some somewhat encouraging for sure that there's recognition that you need to be a little bit earlier in order to deploy into the space. So people want to deploy as the point. And then, second, like there's there's energy security. I mean can certainly come from these technology, these advancements and technology. So I think that's something that people recognize and that you know any sort of disruption and supply chain does bring that to the forefront. So there is definitely an element of over the last few years, both with cobit and then with with the turmoil in Eastern Europe, both of those kind of solidifying that energy security is important. And and then there's there's more focus, I think, and the weather helps, I think, in this conversation, where the first thing that that we might talk about and I get it almost every day right now where many people that day, the first thing they ask me is is it as hot in Houston as people say?

Eric Rubenstein: 29:34

Or they say, you know, are you know surviving down there? When this is I mean it's summer it's always hot in Houston in the summer. That's. That's not an abnormal thing. I should be the other way, where I'm asking people in other parts of the world that are normally a lot cooler, like if it's too hot, like I was being told the story about Pennsylvania and it used to get into the 60s or so at night up there and now it's in like the 70s 80s at night, so it's not as comfortable as it used to be during the summer, like this summer versus other summers, but but the point there being that it touches people more, the extreme weather events are more frequent and the more that it actually impacts people's lives, the more that they start saying, oh, maybe this, this climate change, is real, and start seeing it as something that needs to be addressed rather than something that's going to potentially solve itself over time, because the world will cycle through this and people will be okay. So, yeah, I think for many different factors, it's we people are getting more interested.

Eric Rubenstein: 30:41

I could give one more anecdote about just Houston, where, when we were talking about starting a fund a few years ago, a lot of people in Houston were resistant to the idea of decarbonization technologies.

Eric Rubenstein: 30:56

Energy transition is something people have gotten comfortable with with renewable energies.

Eric Rubenstein: 31:02

But when you start talking decarbonization, it starts to feel more viscerally impactful to someone and say, the oil industry, that made their money in the oil industry and where you're talking about getting off of oil ultimately. But there's a change I think that's happened in the last couple of years where people are starting to recognize that we need to do something and there are ways that we can change our businesses to adapt them to include these technologies, and then you can be part of the solution as well. That's an argument that I think is easy to make. Is if you're saying, an oil company, why not put up a unit that is taking CO2 and turning it into a sustainable aviation fuel? Why not have that if you can economically make that work? And then have that as part of your portfolio and start transitioning your portfolio the same way utilities have by incorporating renewable power into their power mix. I think it's something where you've seen the transition or you're seeing it in many different ways and this interest in both climate technologies, but in earlier stages.

Silas Mahner: 32:13

As a result of that, I was going to ask this later, but because you brought it up, I want to ask it now. Which is this idea of, in particular? People usually give a lot of flak to Houston because it's like the oil and gas it's the energy cap for the world. I was talking with people in the past about this and I said, listen, even though Houston was an oil and gas place, that was the innovation at the time, way back. But now they are still interested in being the future of the energy space. I am curious to hear maybe there's always a negative light cast on it, but I hear the positive light or your optimism on partnering with the oil and gas companies to actually do things in a good way to help transition this energy and climate transition. If you have any thoughts on that, I would be keen to hear that and the general vibes in Houston around this.

Eric Rubenstein: 33:07

Yeah, we work often with oil majors or energy majors and chemical companies. Excuse me. There's a genuine interest in both being involved with these early stage technologies but also somehow incorporating them into their businesses. We are co-invested with some oil majors, energy majors and such in some of our companies, for instance, because they recognize that that change is necessary. When you think about the financing needed in order to really scale these technologies, we're going to need a lot of money coming in. There's a gap in financing right at the critical stage of growth where you're proving out the technology on a commercial scale. Then after that, we're still going to need plants just being put up of all these different technologies in different areas. Who's going to finance that growth? Ultimately, I think it's going to be the energy companies in a big way, in addition to, say, private equity and industries that are specific to these places, like airlines and whatnot. You're going to need all of that and the energy companies have to be a part of that. Some of the energy companies have their own corporate venture that they invest in companies, and we're doing that alongside them.

Eric Rubenstein: 34:32

I think the problem is that the major companies or the bigger companies out there they all have to deploy so much money into infrastructure every year that they're putting a million dollars or five million dollars or even 20 million dollars into a project in order to start scaling a new technology. When you have billions you need to put to work is really challenging. It's a very small number where it takes many people as well in order to be involved in it, so you're distracting those people from doing the other things that they would have been doing otherwise. So you need a little task force, basically in order to be doing these things rather than have it be permeating through your entire organization at this time. And that's kind of the challenge, I think, is you need the organizations, you need the opportunity to be big enough for them to be actually changing and transitioning entirely away from what they're doing to new things.

Eric Rubenstein: 35:36

But I mean, at the same time, if the economic opportunity is there, they're going to do it and they're interested in doing the right thing as well. So there's a lot of factors, but, yes, every day we are involved with people in Houston because we are based in Houston, which means that there's a lot of energy, people and the interest is there. It's just challenging to figure out exactly how we get there, and there's more and more involvement every day. I mean, houston is doing a great job of bringing more and more content and information and cooperation into the fold through some of the initiatives that are happening locally.

Silas Mahner: 36:15

I also think it's important to note that there's a certain if you're let's just put it as what's a pretty common thing where you've got a PhD student or somebody really technical wanting to make a change in the climate, wanting to make a positive climate impact, and they're coming in with, in a lot of cases, like zero network or maybe their network is largely sustainability or environmentally oriented, but those people don't sit in the same buildings as the oil and gas people. But the oil and gas people, or these big energy companies in general, have a lot of distribution. They have a lot of. If they do decide to adopt a new technology, you've immediately got a huge customer.

Silas Mahner: 36:53

And I think that in juxtaposing the two, you're going to have issues, but you're going to buy heads and it's going to feel like a battle, but if you can work with them, you're going to be able to sell your products.

Silas Mahner: 37:02

You can have a certain investment and some insight as to how the, the conventional space works, because you can't completely try to upend the industry. You have to understand, like if you're trying to change a conventional space, you need to understand how they do business and then work with them. But in addition, the people are saying that we just have to turn off all oil and gas, Like, if we do that, you immediately are going to have run into issues where you have no ability to actually build new technologies, because you need energy to build things. Right, you need energy to construct factories and build cities and stuff like that. So I think it's a difficult reality for a lot of people to face, who are especially very passionate specifically about the degradation of the environment, but to remember that there's reality, right, we have to work in conjunction with what's what's true. So I appreciate you bringing that up.

Eric Rubenstein: 37:52

Yeah, and I think another term that's being adopted more and more is, instead of talking about energy transition, talking about an energy addition where really we're adding these new technologies and we're going to need more energy and more energy and more energy over time. So the fact that we're just going to need more means that we we're adding these technologies and, while on the edges, it will take away from these core businesses of of the energy companies, and that'll be, it'll be gradual, because we need to. We do need to transition society, but we need to transition society by adding new energy, you know, production capabilities from different sources and and also just adding to the mix of what all of us are involved in. There's going to be more energy over time. So it's it will be gradual, like you're saying it's. There's no way to flip a switch and turn off all the you know oil and gas production and half society function, yeah, so yeah, we need to. We need to transition through an addition. Yeah, and in addition to that there's.

Silas Mahner: 39:02

Obviously you have to consider all the countries that are developing right. They, if they can build renewables, you know easily. If there's ways to do that, that's good, but we still cannot prevent these countries from developing. That's very, very, you know, inequitable to them to prevent them just because of the climate issue. We're going to find ways to do it in a clean way where they can still achieve achieve the outcome of growth. Going back to to the investment side, what are the? I really can't understand. What are the characteristics of the traits that you tend to look for in founders? The technology, whatever it is, in the startups that you choose to invest in, anywhere from pre seed to series A?

Eric Rubenstein: 39:42

Yeah, with founders I'd say a lot of the focus is on the team and on the founders. When you're in these early stages, you have to. If the founder can't make a technology successful, the technology on its own won't become successful. You can have great technology that just never really makes it to market because there wasn't a commercial path to bring it there. So you do need a commercial mindset as a founder, not just a technical mindset, or at least the company needs that skill set in the mix of its management team and it has to be something that's embedded and strong. So serial founders are oftentimes easier to want to back because they have experience, whether they were successful in the past. Typically when, definitely if they are successful, then that makes it a lot easier to make a decision.

Eric Rubenstein: 40:42

But just having the understanding of what it takes to and the challenges with being a founder and scaling a business is important. The founders need to understand their technology. They need to be able to communicate well. There's a lot of just factors that are quantifiable in that regard, that are more qualitative, that need to be considered.

Eric Rubenstein: 41:10

But it's a belief that these founders, someone who inspires belief, is important because it's a belief that they can actually do what they say they want to do, and that they have to be, I guess, understand also and have a plan of how they're going to get to where they need to be, and be pragmatic.

Eric Rubenstein: 41:31

They need to be open to, I guess, not too rigid in the way that they're thinking. They need to be flexible and need to be coachable. If they are too, I guess, fixed in the way they think something needs to happen, it means the opportunity to shift slightly in one direction or another, change entirely the way they were approaching something. It's going to be hard for them to do, but in those early stages you run into problems with the technology, you run into issues in the external environment where fundraising becomes challenging, you stretch your money, you run into all these different issues that need to be troubleshooting, addressed. So being able to listen to the people around you or just find the information you need from people or from places to adapt to situations is super important, and so being coachable is something that we also rely heavily on in our evaluation of founders.

Silas Mahner: 42:31

When you are looking at a technology, are there certain positive or maybe disqualifying characteristics that you look at when you say, okay, fundamentally, if this technology is doing this, we need to see this potential market or this factor, like you mentioned, the steel decarbonization. It's about the energy side. Are there any frameworks that you have, aside from the founders, looking at the potential market for the technology?

Eric Rubenstein: 42:58

Yeah, I mean it typically starts with the size of the market and evaluating if the size of the market is big enough, and as you start moving down and you steal as an example like you just did, yeah, there's a large steel market. It needs disruption. You look at the landscape of other companies in that space that are trying to do the thing that competes to change that industry. And it may not be just technologies that are directly competing. Say, if you were trying to create a decarbonized steel. You look at all the other companies that are trying to decarbonize or create a decarbonized steel, but then it's also things that might compete as other building materials. Are there other things that people are going to be using instead of steel? And what's happening in that kind of clean tech area of the world and of investment potential, and you start looking at that. So it has this fan, I guess, of focus where you start narrow and then you build out from there to understand how that fits into an investment thesis for that particular use case in that particular area. And so, yeah, we definitely do that and we want the companies to understand too if they don't know who their competitors are and if they're not thinking about what competition might look like or if they're not looking at how much money it'll take to hit specific milestones that they need to hit in order to get to where they need to be, in order to raise more capital. I mean, that's oftentimes a place where we get uncomfortable with a company that we're diligently saying is, if they need more money than they think they need and they're unwilling to raise it, and if they're milestones don't line up with their next fundraising round that they want to approach, then what are they going to build a story around to raise that capital and then they're going to increase the value of the company in that period of time in order for them to be able to raise that next round or attract investors in. So those are things we definitely evaluate and want to make sure that the team has not just thoughts on, but that they're planning around those milestones, that they know what those milestones are, that they understand what it takes to get there in terms of dollars and so all of those things that we think about in terms of not just the market, not just the competitive landscape.

Eric Rubenstein: 45:24

There's a universe of things that we need those founders to understand and be thinking about, and there are a lot of times, things that you know. There are all the things that go into our investment decisions. You know we're asking them these questions and we're challenging their assumptions to the extent that they need to be at least the questions brought up as to why they're doing things one way and not another way, or and oftentimes founders have great answers and they have thought through all these things and they have an idea about how they're going to go to market, how they're going to bring on customers or they've already brought on customers. It's, yes, it's a very there's a lot that goes into it, but and the founder need to have a lot of things in mind as they are going through both fundraising on their end because they're probably answering these questions for others as well but also on running their business.

Silas Mahner: 46:18

Okay, very good, I appreciate that. I want to go to the section about advice to founders and BC, so I think let me see. The first question I kind of want to ask is so, as a VC, how, what is your, I guess, method for discovering new things or making sure that you're, as you said, like keeping in an open mind to different methods and rather than just saying how do we decarbonize what's here? You know what if there's a completely new alternative, like what is your reading schedule? Just how do you, how do you make sure that you're taking in new information and trying to be on top of things?

Eric Rubenstein: 46:55

Oh, wow, yeah, because there's there's industry specific things to say, climate tax. So I'm on a lot of mailing lists for climate kind of thoughts and reflections and research and information, so through that you can find certain trends and then you look into different companies within those trends. Like that's one way of doing it, paying attention to just the broader world and what's happening and then and and seeing kind of globally and topically where the world is and what's interesting. Sales trends are interesting, just looking at consumer behavior, because ultimately consumers are going to speak as these products come to market and understanding, like, where consumer interest is. And that's sometimes the easier because you know we are consumers as well and when we have, we have things that we'll buy or not buy and we can. We can actually, you know, you and I even just see this where you know what are.

Eric Rubenstein: 48:04

What kind of clothing are people buying, what brands are they attracted to? Because some of the brands are doing great work and adopting new materials in the case of clothing or recycled materials, alternative materials into their products. The shipping people are using different shipping materials. There's enhancements in optimizing just delivery. So all of these things are things that you can see in even the news. There's accelerators, incubators you know different groups that are helping startups to get to where they need to be. The universities you can look at universities and Brands that are being given out of governments or different philanthropic organizations as well, and as you see where that money is going, that can be highlight Both where they want to put their money, which means that there's not deleted financing for these companies, and also what's interesting in the world talking about their funds.

Eric Rubenstein: 49:09

Talking to corporations and understanding where their interests are and where they want to place their money and where the exciting things are in the world that they are trying to invest in, and so corporations, or adopt, for that matter, when it comes to corporations.

Eric Rubenstein: 49:29

So if corporations are saying, hey, I guess a real time one would be petrochemical companies. Petrochemical companies are more interested right now in recycled plastics and they are in biodegradable, compostable plastics, so that I mean I'm widening that out as if all of them are like that. But it is something that when you talk to one, two, three, four different companies and they all are saying the same thing, it starts to become a trend that you notice, and so then you look for companies that are in the recycled plastics arena, more so than the compostable arena, for instance. So that I mean, another way is a lot of companies do come to us directly these days. So then we haven't, we've invested, I think, only one company that's come to us directly so far, but but that there will be more. And so there, those are different ways that we source, source or deal flow.

Silas Mahner: 50:28

Okay, and then from you know, when you talk about the certain that we don't mention this a little bit earlier that the values that you can provide to your portfolio companies, kind of the value prop, what would you say are the core things that you believe a VC should absolutely have to provide to portfolio companies to really add value?

Eric Rubenstein: 50:49

based on your experience, Well, I mean have to, is the money right, like that's the have to the you should, I think, is the other area, excuse me and I think that what you should do if you're a venture fund is you should be helping your company is like just placing money In my opinion isn't enough. It's necessary, obviously, but the way we behave is we introduce other potential investors, potential customers. We advise on strategy. Sometimes we're doing these things from a formal capacity as a board member or board observer or an advisor. Oftentimes it's it's an informal capacity where through our diligence process, oftentimes we we get to know the founders well enough that they want to bounce ideas around with us and they want some guidance periodically and have catch ups about what's going on in the business.

Eric Rubenstein: 51:50

And I think that's a healthy way to behave for investors to understand what's happening in a business so that you can help in the future. When they do have financing needs or when they do have strategic kind of directions, they need to go in. Not everyone's equipped to do that, but I think largely funds can equip themselves to do that. If they don't have kind of certain areas of knowledge of how to help a company, they can always hire in or introduce them to somebody. That's the easiest thing to do. Just making those introductions is very important and let the founders find the people through your network that that can help them. So opening up one's network, I think, is probably the most important thing of fun can do other than just fund companies.

Silas Mahner: 52:37

Okay, and what about, from a founder's perspective? Your advice to founders, either on what to keep in mind as they're starting their journey let's say very early, like raising pre seed or seed as I started their journey what are the things that should keep in mind, kind of in the long term, because it's easy to get caught up in the small stuff like what? What would that advice be to founders? Maybe, maybe, common mistakes. You see that you think, hey, we need founders need to avoid this in order to make it all the way through to series a and, you know, proving out the technology.

Eric Rubenstein: 53:11

I mean that's challenging. It kind of depends what area they're in, I'd say, because I would say making sure you have commercial traction is important. But making sure you have commercial traction is more important for, say, a consumer product than it is for a technology that is novel, that is going to be game changing in an area. There, making sure you have, like a pilot plant or a commercial pilot that's operational is super important. Being asset light, I think, is very important too, particularly in the climate tech space.

Eric Rubenstein: 53:50

A lot of founders, when we first meet them, want to build big plants and spend a lot of money to build those plants.

Eric Rubenstein: 53:56

Better to build the smallest plant you possibly can that proves your tech out at a scale that will allow for that big plant to be entirely de-risk, let's say, and for you to be able to allow someone to spend the money to build that plant.

Eric Rubenstein: 54:12

As a startup. You don't need to be building that big plant, you need to find someone else to finance those big plants. You need to be asset light, improving things out as far as you can on the technological front without building and spending a lot of money on a big plant. You may need to do that for, say, your first commercial plant, but making sure that you're not doing that after then is important. So thinking and being very aware of attracting customers in or creating revenue, being asset light and improving the tech out to a point where it can scale, be licensed or where others can be spending that money, and identifying what types of people, what types of groups, what types of companies will be spending that money and talking to them about it and gearing up for them to be that customer in the future, I think those are important things that founders should be considering, particularly in climate tech.

Silas Mahner: 55:10

And what about advice to founders during the fundraising process, any common things that you say, hey, there's usually a knowledge gap in this area. They don't provide this information, especially at the early stages, and there's a lot of companies right now, at that stage right, we don't have necessarily the most mature market where there's tons of growth funding happening. So what is the advice to founders on the whole fundraising process as a whole?

Eric Rubenstein: 55:32

Yeah, having a nice tight pitch is important Knowing your business, being able to explain your business and being able to do it in a way that excites people. There, people get really good at pitching, or people who are really good at pitching. They get you excited and they can do that very easily and it's because they have an exciting product. They know what they need, or at least they know how to say what they need, what kind of funding they need, how far that gets them, what milestones they're going to be hitting Like being able to just say things very easily and having even a one-line explanation of what the company does. That is very simple to understand. That's important, and it may be a little bit different than just what the core product is and does. It may be. This is what we're doing to help society and then going from there and it's not just we are decarbonizing society. We are changing the way that people think about building buildings by bringing the best X thing to market in the easiest way possible and being able to explain that. That ability to communicate is helpful. And, as a founder, if that's not your natural state, if you aren't good at that, you're probably not going to have time to train for that. You may not have the capital to invest in whether time or money and being coached on it, but finding people that will help you with that pitch, that you can test it out with In the early days of the pitch to hone it whether that's other founders, whether that's investors kind of making sure that there's something there is important.

Eric Rubenstein: 57:25

See, too many founders that don't know how to pitch and you have to tease the information out of them. It doesn't mean that they're not going to be successful and it doesn't mean we're not going to fund them, but it just makes it a little more challenging to get from A to B and make a decision. So the cleaner that pitch is, the easier it is for someone to make a decision. Having a data room or just having information on hand that you think investors are going to want, already prepared before going to folks to raise money, is it would be useful as well.

Eric Rubenstein: 57:58

We are always going to be asking for supplementing materials. We're going to be wanting to see financial models in order to understand how the company is actually going to achieve what it says it's going to achieve in the period of time it says it's going to achieve it, and these are near term things. Right, this is 1824 months that we're looking at. We expect things are going to change, but making sure you have all those materials on hand, I would say, is important. So, from a founder, from a fundraising perspective, get your pitch down, get your materials in order and test it out a little bit before going to market and then just sell it.

Silas Mahner: 58:33

Yeah, I think it's difficult, for I've had a number of people on who are very technical in nature and they hate the fundraising process because it's just not them right. They don't enjoy it. But a lot of them either find a co-founder to help them with that or they get coaching and they try to adjust their mindset. One last question I have would be for you is are there any particular climate VCs that you look up to and that you really respect and you think they're doing things really well? I'm just kind of curious to hear who your role model is.

Eric Rubenstein: 59:08

Yeah, there's a lot of great VCs out there. I mean I guess I can. It's pretty easy to point to the ones that people talk about, like breakthrough and lower carbon capital, but we've co-invested with some great investors as well. Muse M-U-S is a great co-investor of ours. Energy Foundry is one that we've co-invested with. So just picking a couple, I mean the corporations as well. Toyota Ventures is very knowledgeable and thoughtful. Fine Structure is a venture fund associated with Fidelity. They're doing great things. So there's a lot of great corporations out there that are doing great things or have funds associated with them that we cooperate with and work with and co-invest with and really like what they're doing as well.

Silas Mahner: 1:00:08

Yeah, I love to hear when there's collaboration across the different stages, because I think it's obviously there's nuances. Everything is maybe generally understood what milestones have to get to in order to get the next fundraising, but it's important to understand the nuances and the slight changes and what other people are seeing at different levels, because there's information there's a lot of information now, so it's about finding, like, different types of information and the right kind of information to inform your decisions. But no, I really this has been really great. I really appreciate you coming on. I quite enjoyed some of the broader discussions that we had today. Where should people reach out to you and what's your call to action to the audience?

Eric Rubenstein: 1:00:47

Yeah, feel free to find me on LinkedIn. Our website also, wwwnewclimateventurescom can always go there and submit a form or just see what we're doing, see the portfolio and get involved with portfolio companies. You know, just from a listener perspective. Just being aware of the problems that are out there, in kind of the broader climate change situation that we're in, is important, but actually solving that in your day to day life, our purchasing decisions, matter, where we are spending our money matters, and corporations respond to that, and the startups are being built to support the interests of the consumers, whether that's us as consumers or the consumers as the corporations and the government. So I think we just need to speak with our, with our dollars, invest in the space as well, invest in startups, invest in funds. You know, happy to have conversations about about that with folks.

Eric Rubenstein: 1:02:00

If people want to fund some of the companies and whatnot and like their technologies or just want prototypes or access like beta testers, I would say companies probably need to. They can find it on their own, but having people that are excited about the space, involved in the space and transitioning their careers even to be in the space We've seen plenty of that Feel free to reach out if those are things of interest and can help out and, on those fronts, talk to people you know often about how they want to transition away from whatever industry they're in finance or energy and how do you break into these different areas, whether it's venture or just how do you, you know, find a startup they want to work for and what should they be considering? I was having one of those conversations yesterday with somebody who is killig in companies and in an effort to find a job at them, but also has a lot of insights on the companies as well that he's diligence saying so, it was a really interesting conversation I had yesterday. But yeah, feel free to reach out.

Silas Mahner: 1:03:04

Yeah, absolutely. That last point is interesting. I've met a lot of people who are looking to go into the company, so I usually tell them to do a bit of consultant work so they can get insight before they, before they join. But no, I really appreciate you coming on, eric. This has been really, really incredible. I'm looking forward to seeing what you guys continue to do.

Eric Rubenstein: 1:03:34

Appreciate it. Yeah, look forward to being in touch.