CleanTechies

#219 How to Win in ClimateTech Under Trump

• Silas & Somil • Season 1 • Episode 219

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There’s no sugarcoating it…Trump is bad news for ClimateTech — but thankfully, we have interviewed 200+ ClimateTech Entrepreneurs on how to build politically resilient companies — ensuring the future is greener no matter who the president is. 

Today, we’re distilling those key lessons for you. 

  • Key risks across / what’s on the chopping block 
  • Possible silver linings & some wins 
  • Recognizing the reality of the situation 
  • Examples of likely downside 
  • Choose a new narrative 
  • Key advice to startups 
    • Better / Faster / Cheaper 
    • Bring on Non-Climate Investors 
    • Choose the Right Customers 
    • Involve CVCs
    • Build in Climate-Friendly States
    • Help the US Compete with China 
    • Recognize Climate is not Everyone’s #1 Issue 

We recognize the severity of the situation we are in. But since we are here, we might as well learn from it and continue to do the good work moving forward.

🚨 Also — a huge thank you to our paid subscribers for the questions and inspiration for this episode! Want to be a part of future ones? Upgrade to paid now!
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Topics 

  • 00:00 Brief Reactions
  • 02:53 Key Implications (What’s at Risk & Upsides?)
  • 06:11 Rural vs Urban Perspectives on Climate Issues
  • 09:00 Navigating Climate Conversations in a Conservative Context
  • 11:51 Opportunities and Risks for Climate Tech Under Trump
  • 15:13 Changing how you Market Your Climate Tech Startup 
  • 21:52 Strategies for Climate Tech Founders Moving Forward

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Somil Aggarwal (00:02)
Alright everyone, take a deep breath. We're here. We're doing it. Get ready. We are breaking down what the result of the 2024 election means for climate tech. Silas, how you feeling?

Silas Mähner (00:17)
To be honest, I'm not surprised at the result. think like, you already know me, I'm from a very conservative place in the country and I have a lot of friends in this, I guess you could say world and it's not exactly surprising to me. We can get into that if you want to, but I'm not exactly surprised. And I think maybe people would pick up that I alluded to this in some of our podcasts leading up to this election, that I have a bit of optimism, let's say that we can still have a lot of...

you say good outcomes over the next four years. Obviously, it's going to be more challenging, which we'll get into, but that's kind of where my head's at.

Somil Aggarwal (00:53)
Yeah, before any of our listeners get mad at Silas, I would like everyone to remember that, keep in mind, we all come from different places. For me, I majorly lived in major cities, so mostly democratic. I moved to Syracuse at one point, which is a fairly conservative area, so I feel like I've seen and lived in both. And all I can say is there's good people in both, and I think what we're here to do is hopefully show you how two people can agree on some of the negatives, but also the positives.

of what we have left to focus on for, you from 2024 to 2028. So we're gonna open up by establishing what does Trump mean for climate and energy? And that's a mixed bag. We don't have all the answers, but there've been some really smart people who have put things together. Cypher News is a group that does amazing reporting and I will say also very colorful, intriguing graphics. And so they listed out a couple of things that we need to know about what Trump means for climate and energy. The first is that hydrogen,

and tax credits for hydrogen production will likely be endorsed. The second is that nuclear is going to see a decent amount of support. The third is that on-shoring of productions, especially for critical minerals, is likely to be supported. The fourth is tariffs on Chinese solar panels are likely, as well as removing tax credits for solar and wind. Fifth, carbon emissions, the carbon emission restrictions for coal plants will likely be removed.

And lastly, EV tax credits is likely not going to be favorable in the next administration. So we don't have all the answers, nor do we claim to be the people who did all the research behind this, but we say that to anchor what are some of the real tangible things that we might see from this transition. So, if there's anything else you want to shout out.

Silas Mähner (02:42)
Yeah, I think the Cypher piece is really good. We can link to that in the show notes. I would also note that TNC did a breakdown that there's not all bad things from a climate perspective for this election. They put together a summary of, think it was $18 billion, roughly, worth of total wins of state investment in a lot of different referendums throughout the country. They break those down. We won't go through all of those. But there were some wins, which demonstrates a certain kind of interest from the electorate broadly.

in climate still.

Somil Aggarwal (03:17)
I think what's also to mention is if you don't live under a rock and you live on LinkedIn like we do, know, practically all of your connections have had an opinion. And one thing that I noticed that people are talking about is that, you know, this is only a setback. We're going to keep working. The private market fills with the public markets don't. I think there's some optimism around the fact that we will have options and answers, but it's very much worth stating that

There are real implications. For example, there are things at risk. Solar and wind tax credits, like we mentioned. Sentiment from LPs. A lot of LPs, we've covered this on the podcast multiple times, are concerned about the future exit potential and growth potential of climate tech investments. Some of our GP friends have even talked about raising a fund. Might be near impossible if you're doing it just solely based on credit. The idea of emissions regulations, labels, and measurements are likely to be much harder.

especially with potential repealing of current, sorry.

The stickers of emissions regulations, targets and measurements are much less likely to exist, especially with regulations being peeled back related to that. And we're likely to see the government at risk of no longer being a buyer for clean energy related things.

Silas Mähner (04:42)
I do think though, on the other hand, of course, we can highlight some of the hypothetical upsides. keep in mind, some of these are just from conversations. Some of it's from the general vibes of Twitter or in the tech space. And some of it's from some of the group chats I've been in the past few days. One of those, think, would be Lena Kahn getting ousted so we can hypothetically see more &A. I am not 100 % sure if she's been a cause of drag for &A in climate specifically, but I know that

broadly &A has suffered. So I think getting her out could be beneficial for &A, which is pretty important for climate tech companies from what we've heard from Sean Abramson, for example. Hydrogen, we talked about this earlier, would get a boost, I think, which is not on my bingo card, to be frank with you, because I was of the opinion that hydrogen was really, really going to struggle in these next couple of years. I thought a lot of companies are going to go out of business. But one of those tax credits is supposed to be, from the IRS, is meant to be...

expanded to approve hydrogen related technology and development, including where dirty energy is used to produce it. So it's not exactly a climate win, but if it can help the hydrogen space not fold up, which is frankly a space that has raised a lot of money from climate investors in the past few years, that could be a positive upside. I do think it's worth noting that the Trump administration appears to be a energy, like a pro-energy...

administration, so energy infrastructure itself should get built out. So transmission lines, this is like the key thing we've always talked about, is building out energy transmission is the biggest bottleneck right now in energy growth. So if we can see that plus like taking back the, let's say the authority of permitting agencies, we could see a lot of deployment for transmission projects, but also energy projects in general. So if you've got all these solar and wind developers out there,

assuming their economics still make sense after the tax credits are removed, I still think we're going to see a lot of energy going to grid that is renewable. Yes, it's going to be accompanied with others, but I personally question how many of these other dirty energy projects are even in the queue. I don't actually know. This is not something I'm familiar with, but that would be positive. And then I think the final thing I would wrap up with is I think nuclear appears to be very much supported.

by the administration, is something a lot of climate people are in favor of. think the challenge is always like, there's no way we're going to get permitted. if we see like, hey, national emergency, we need to build more energy so we can have the AI capacity to compete with China, that could be hypothetically really good. I don't know. Do you have any thoughts on those upsides?

Somil Aggarwal (07:23)
No, I think those upsides are all fair. definitely think energy infrastructure also goes along with jobs and job creation in how many Republicans who have benefited from the IRA have publicly mentioned they are somewhat hesitant to roll back the IRA. I think that is incredibly relevant for what we're going to see as in terms of energy infrastructure. think that's probably the most important thing around the Trump administration's potential for upside. I also think nuclear is seen as sort of a source for national security.

Silas Mähner (07:53)
Yeah. The one thing, just to put an extra point on it, you mentioned that there was, it came out already, there was 18 state representatives who were trying to say, keep the IRA. So I just want to make sure that it's clear. I know some of our paid subs were asking us to do analysis on which counties had the most benefit from the IRA so far. We might do that. We are not journalism. So we'll see about collecting that data at some point, but there is some positive sentiment and there's proof of that now.

Somil Aggarwal (07:53)
So I think those are two things.

Yes. Yeah.

Yeah.

Definitely. so we've all been inundated with too much climate media over the past two days, right? If you follow people in climate, if you know about the topic. And I think it's important that we remain centered around the fact that there are good and bad sides to everything. As someone who's traditionally a Democrat, I can appreciate that there are some genuine risks to the Trump administration for, sorry.

I can appreciate that there are some genuine risks with the Trump administration towards climate, but I also think that this is the situation that we're in and we have to look forward. And Silas, you and I always have what I would say is really honest conversations. And I think it's also informed a little bit by what you've seen and learned growing up. So I'd love for all of our clean techies to kind of hear how you think.

Silas Mähner (09:13)
Yeah, so I just want to give a little bit of my perspective. I don't know if you would say why I think Trump won or some of this will play into what I think founders need to consider in the next four years, but I just want to give a bit of background. I think why I believe I can speak to this well is because I was raised by very, very conservative people in a very conservative part of the country, like rural Wisconsin. I don't know if I've mentioned this or not, but I grew up in the woods, like not even in a town.

The nearest town was like 4,000 people. It was a manufacturing town and the nearest actual city was only 30,000 people and it was like an hour away. So, hour driving, by the way, not on a train or something like that. So, I grew up there and I kind of had a very conservative mindset growing up. mean, everybody was like, energy is going to kill the birds. It was kind of that typical thing that you hear played out. Then in 2020, I moved to New York to work in renewables and recruitment.

And that was going straight to a very obviously large metro area. And I saw a very different side there. once I was there for four years, I started to feel like I got an understanding of how kind of let's call them urban versus rural people think. And in the rural areas, the key thing I want to point out is people in the rural areas always said, man, those city people, they don't get it. They're stupid. They don't get it. And I was like, okay, whatever. But once I moved to a city,

I would always hear the same thing, but reversed. would say, they would say, those rural people, those country bumpkins, they don't get it. They're stupid. They're uneducated. And I started to realize that both sides believe that their issues are number one, which makes sense. In the city, effectively, you see social issues. You see different things. In the country, you don't really see social issues. You don't see homelessness. You don't really see racism in the country for the most part because there's just not that many people around. I grew up in a place that's pretty much just white.

and you don't think about these issues. So you don't even know the issue exists to another person. And this is what I'm trying to bring up, is there's this kind of unawareness of what matters to another person. And in climate, I think we can apply this generally to climate professionals who look at the science and they say, holy shit, the world is ending. We are in dire circumstances. This is like existential risk to the climate, to the planet, to humans.

A lot of people are concerned about the climate, but they don't actually believe that it's that existential. So while we say, okay, things are really dire, we need to take action, the majority of people are not in that boat. They might say, yeah, we should do something about it, but they're not going to be motivated to action. So this is the one thing I want to point out. If I were to say, analyze why I think he won, from a climate person's perspective, it makes no sense why he would win. Why would we vote for somebody who's anti-climate? But...

from, I guess, the other side of the aisle is like, we see other issues. We see economic issues. We see the potential issues of war. Well, whatever your issue is, they're other ones, right? And just because they don't put climate number one does not mean they're a bad person. That's all I wanted to say on that topic. Does that make sense?

Somil Aggarwal (12:24)
Yeah, I think the way that I would interpret it is also how do we make climate succeed when climate's not number one? I think that's what we're gonna see a lot of over the next four years, which is the thing that are gonna be on top of people's minds is jobs, national security, domestic affairs. And so how do we make climate a priority with all of those things? Speaking as someone who's grown up as a person of color, mainly around other Democrats, at least in terms of the people that I'm close to,

I can appreciate how there is that sort of disconnect between the problems that urban people face versus the problems that rural people face. And it's finding those, it's not even fair to say that all of Trump's voters were rural even. But at the end of the day, this is the administration that we have. Pending anything unexplainable or cataclysmic, this is who we're gonna have for the next four years. So.

Silas Mähner (13:07)
Correct.

Yeah.

Somil Aggarwal (13:20)
Before I move on, I just want to hear from you Silas. There's definitely some risk you run from being open about being either conservative yourself or being from a conservative place and climate. How in the conversations you've had are you feeling about that so far?

Silas Mähner (13:36)
I will be very honest. I've tried to make a let's say this, a mental determination that I'm going to try to be open about how I feel about things. Because I'll be very frank, being somebody who, let's just kind of imagine it like a gradient. When I moved to New York, I was still very much on the red team. Let's put it that way. And I feel like I went really, really far into the blue team. And now I feel quite in the middle. I really try to take an objective look at many issues.

What I would say is there was many, many times I didn't feel like I could talk about what I cared about over the past four years, because the people I was surrounded by were people who are very, very hardcore in one angle, and you can make a number of assumptions of what other things they care about. I've had even a few instances of people in my LinkedIn DMs, because I liked some post of somebody that shared different social perspective on things, saying that they might go tell people and try to...

prevent people from doing business with me. So I've had threats in my DMs to do this and I don't like that, but at the same time, I don't think that's the right way to live. I try to look at it from a perspective of, I do care about the climate, I care about clean tech. And I think that the benefit we have as we're talking about how can we make climate tech and clean tech investment, how can we make it enduring?

There's actually many, many ways. So I get into these arguments all the time with my uncles and stuff, who are still obviously very conservative. know, at Thanksgiving or whatever, I'll be like, well, you should have a Tesla and here's the benefits of all these things. The truth is most clean technologies actually have a huge number of benefits to different people across the spectrum, but in particular, I think the rural areas, right? If you look at reducing the cost of manufacturing, that's going to bolster the manufacturing places.

in the country, which oftentimes are rural or middle America, places that aren't considered typically Democrat, for example. So there's so many benefits that come along with clean technology and clean tech investment generally that I think there's many ways you can get co-benefits. Climate is a co-benefit to another thing, to reducing manufacturing costs or whatnot. So that is my, I guess you could say...

very unfiltered monologue about how I'm feeling going forward. I think, yes, there's some challenges. I want to be open about how I have different opinions on different things in the middle, but I still think there's ways we can package together climate with other objectives, national security, competing with China, supply chain risk, different things of that nature.

Somil Aggarwal (16:20)
I think what's most important about that is just like having the awareness that there are benefits to climate technology. And one of my favorite conversations that I think there's still no decided way forward between the two of us is that, look, it's kind of like the best climate technologies will succeed. And that's genuinely fair. And there's ways that we figure that out. But there also are real implications of, for example, something we broke down with Susan Sue, what does an absent LPO do to climate, right?

or what is a less functioning DOE or potentially a more gas-aligned, gas and oil-aligned DOE, what does that do? I like to think about it from the point of view of our founders, right, and the guests that we've had on. Me, I'm a Democrat, so I feel like my view is a little bit more boring. I don't think I have as many interesting anecdotes to say. I generally align with the fact that the government should be supportive of climate technologies. However, if we look at one of our previous guests, Mitrakem.

Now, Vivus joined us and told us about how they're pioneering battery technology and they're doing it with the lens of on-shoring. And so this is an example, a clear example of, okay, the Trump administration has come out especially and not really liked the way that the Biden administration and the U.S. has supported EV production, at least in the style, the tax incentives, things of that nature, that they've done it. However, here you have a company that works with batteries that is somewhere in the middle.

They do some work with batteries, but they're also really, really beneficial for on-shoring. So for example, domestic production, right? They produce within the United States. It's likely going to be a beneficial thing for the Trump administration, and they create jobs. They themselves were the recipient of a $125 million grant from the DOE, Office of Manufacturing and Energy Supply Chains. They also did this in collaboration with the state of Michigan, which is a very competitive state, so you can be sure that they're sort of a...

a bipartisan representation there. That's an example where maybe there's the case for a founder like that where they might be the recipient of subsidies in the future. However, let's look to another one, which is LI Cycle. They received a $375 million loan. They're also building in US, but they're doing it for lithium ion battery recycling, something that maybe you can make a case is good for on-shoring. Maybe it's not as applicable because you're essentially recycling what's already there.

Silas Mähner (18:46)
Well, I would just point out two things. So I think from the recycling piece, this is something actually I am relatively bullish on is now that we've had Liz on and we understand that minerals are infinitely recyclable. If we are going to extract minerals from other parts of the world and they're going to go into our supply chain through the products that are produced, once they get to the US, why would we ever let them leave? Okay. So we can take the metals out and reuse them for recycling, which is really, really positive. I don't know if...

Trump administration recognizes these things, right? I hope that somebody of reason like kind of points these things out because it makes total common sense to do this. And I think it would probably appeal to the majority of the way they talk. don't know. Nobody knows for sure, but I do have a belief that if you can make the appeal properly, that it benefit us. I think on the battery side too, it's worth noting the general increase in the idea that from a defense perspective,

Drones are kind of the future. And my understanding is that there's a lot of these drones that are manufactured in China right now. Like they have the best drone manufacturing because of the, yeah, because of the, specifically because of the battery range capacity. So if we can make an argument that regardless of what you believe, climate or not, there will be batteries in the future. Batteries are a part of the future economy, no matter what. Why in the world would we allow them to be manufactured offshore or elsewhere if we are genuinely

Somil Aggarwal (19:51)
I think it's like 90%, like it's some crazy number.

Silas Mähner (20:14)
in a, you know, a cold war with China. don't personally necessarily take that belief, by the way, I just want to point that out there. I think that a lot of people believe that posture, both Republican and Democrat, that we are in this war with China. I don't believe that personally. But if you take that posture, I still think that it makes sense to focus on building batteries and ensuring that production.

Somil Aggarwal (20:34)
just doing our mid-episode reminder that we are not geopolitics experts. These are just things that we try to learn as informed citizens. But we bring up these two founders for that exact reason, which is, look, you think these are climate companies, but whether it's battery on-shoring or if it's mineral recycling, these are sort of what we call middle-of-the-line companies. Liz and Vivus are both people that we've had the absolute pleasure of speaking with. And so for people like them,

Silas Mähner (20:37)
Hahaha

Somil Aggarwal (21:00)
they've received 125 and $375 million grants respectively. And this isn't Liz, is LI Cycle, the company that built a factory in Rochester, New York, not too far from where I'm from. There's a real implication of commercialization here. So one of the benefits is that on-shoring is great. One of the risks is that how much will the DOE actively take apart or LPO or lack thereof.

take part in supporting the commercialization of these facilities. The reason that's a concern is because one thing we've noticed with our founders is your first plans is usually not actually scalable. Sometimes it's a hodgepodge of a bunch of different agreements and rev shares and basically things that you've pieced together like a puzzle in order to get that out the door. So I know one thing Silas and I go back on is in theory a good product, a good factory scales.

There are genuine issues and there's a reason the good number, the Goldilocks number somewhere between three and five factories or facilities, especially with GDRF funding. There's a reason why that's the critical number because usually by then you've ironed out a lot of the kinks. I think as we see loan amounts, at least from the LPO, go down or become extinct and generally speaking, NSF funding goes down in a Republican administration just from the point of view of government spending on science.

there could be some concerns that there are less ways that the government is supporting innovative climate tech companies and getting to market. And that, I think, is a room for genuine concern.

Silas Mähner (22:34)
I do think it's pretty undoubtable that we will see lack of support broadly for new science initiatives. I'm pretty sure you pointed this out to me that most Republican administrations tend to not fund science research too much. mean, at least they reduce it. So we'll see. My hope is that the people who have good positions of authority to speak with different constituencies in DC will...

bring up to the new administration, the perspective of making America a very pro-tech invention type of country where the inventions are coming out of here, because that's kind of what led us to this point, in my opinion, as being a big country was a lot of that. So I hope that we see more people just not giving up basically and in trying to influence the incoming administration to make some of these things priority.

I think this leads us into our next perspective, if you will, our next section of today's show, where we want to talk about the spin of how you market climate tech now. We've already alluded to it a little bit, but I think that in order to keep moving forward under duress, if you will, under the next four years, the way that you have to market climate is going to be different. We talked about this before, right? It's you have to...

find something that is a positive outcome rather than a hypothetical really, really negative outcome, which is extinction of the human race. Because like I said, not many people genuinely believe that. So therefore, they're not going to be driven to action. However, if you can pitch them, we're going to have energy abundance. We're going to make America the technology leader. We're going to produce all of these new technologies. Because quite frankly, if you look at climate over the past two decades, it has had a lot.

of the scientific breakthroughs in terms of technology, right? You could argue some, there's definitely other areas with like pharma, for example, that's benefited, but I think climate has seen a lot of that. So I think that's one angle. You can say we want to become an independent country from a supply chain perspective. There's so many things that you can pitch to make the focus on climate still there, but it'll be subtly in the background, if you will, or it'll be related to it.

We've had many people we've bumped into actually recently who are kind of like in this defense slash climate bucket of investing. They kind of see them together. And I think that that's what you're going to see is you have to effectively spin how you focus on your messaging, if you will, your climate messaging. It's not going to be climate from a perspective that we're all going to go extinct. You know what mean?

Somil Aggarwal (25:20)
Right. And I think this is like, this is some of the nitty gritty, really unique things that founders have to go through that isn't really something that's like a playbook, which is how do you fit the time that you're in to fundraise, to get partnerships, to demonstrate long-term potential, right? Founders frankly might have to now market their companies completely differently than they had to before, right? Tangibly, this means changing their decks, changing their taglines, the same way founders have to react to AI, right? Now we might have to react to national security.

Silas Mähner (25:47)
Exactly.

And the thing is, people change on a dime. As soon as the open AI stuff started, you and I both saw it even within Climate. Immediately, everybody mentioned AI in their decks. There was not a single company that didn't bring up AI somehow. So I don't think it's necessarily that super challenging for founders to adjust the messaging. The hard part will be whether or not they can pivot the hardware pieces to still be in line with some of those things.

Somil Aggarwal (26:16)
I think it goes upstream too though, if you're thinking about from like a startup perspective, know, one thing that we started to hear and I've heard from a lot of my investing friends is that it's A, gonna be really hard to raise a climate fund here on out, at least for the short term, but B, we'll therefore see more generalist investors coming into climate, right? Which already happens, you know, there's a fantastic company on California, Symbium, which I got to know really well. One of their main investors is a generalist investor, the same investor that's invested in many

Silas Mähner (26:31)
Yeah.

Somil Aggarwal (26:45)
you know, prominent software companies. So that happens, but you're going to A, see this bias towards software and B, I think it'll expose something that needed to happen, which is greater communication between general venture and clean energy venture or climate tech, right? Go ahead.

Silas Mähner (27:05)
Well, I just wanted to add one thing, which is I think a possible benefit of bringing general VC in is, forget who I talked to about this, but generalist VCs have much higher valuations on companies typically when you compare to climate. So that could actually benefit depending on how you pitch things. If you can get generalist VCs interested, you could actually see better valuations, which could help a lot of people come out of this doldrum.

Somil Aggarwal (27:28)
Yeah. I think it really is going to depend on the math. Did we need more climate companies to exist to achieve progress or did we need better climate companies to exist to achieve progress?

Silas Mähner (27:38)
Yeah. One other thing I wanted to point out is like, obviously raising a climate only VC fund will probably be challenging. However, I still believe there's going be people who raise it because what we do know is while the Trump administration doesn't necessarily care about climate, it's pretty clear, there are many, many, many corporates, other governments, and other huge, huge asset managers that have

signed commitments to net zero into climate. maybe some of those will say, hey, we're going to back out. But I actually think that still the majority of them are going to stick with it because the longer trend, like business people understand and corporates understand that the long tail trend is towards a pro climate world, especially for their workforce. They will not be able to hire people if they are massively polluting and ruining the world. So I still think that there's money out there to raise a climate fund is what I'm trying to say.

Somil Aggarwal (28:30)
Right.

Silas Mähner (28:34)
But I also believe it may be almost a good thing that the people who are actually qualified to build those funds will be the ones getting the money, the people who have some sort of track record.

Somil Aggarwal (28:43)
I think it's a little more complicated because when the responsibility, especially if you look at 2016, when the responsibility shifted to the private markets, you also saw more funding looking at philanthropy, right? It's kind of like the people who would have normally kind of been like, okay, the government's doing good work, I'm gonna take a step back, they may step in, but the scale that we're talking about is much less. So I wanna be cognizant of that as well, which is I think you'll seeing a culling and.

Silas Mähner (28:57)
Mm-hmm.

True.

Somil Aggarwal (29:11)
the general response to a culling is higher quality, but there's less of it. So I think it's going to be interesting from a founder's perspective to acknowledge and grapple with the fact that, you know, there's gonna be less funds available doing good work in climate, but is that inherently worse? Does that make you up your game? Does it mean that each fund that's investing is now making a meaningful impact versus before? A lot of them were wasting people's time.

You know, I think the jury's out there. I do think there's reasons that a correction was needed. I think it's tough to see that there might be some overall lack of momentum in the space causing that cut.

Silas Mähner (29:48)
True. Do you foresee, do you have any takes on, I know we didn't prep for this, but I'm going ask you anyways, do you have any takes on whether or not there's just going to be like only the best companies are getting funded and now all of the VCs are going to chase those companies because they know they need to have a certain kind of growth within the next couple of years before all the other funds run out money?

Somil Aggarwal (30:10)
I think the issue right now is that climate is competing with AI and automation and hardware related to AI. So what I think is that people will take more calls with climate companies because they're circulating more just by the fact that more climate founders will likely reach out to generalist VCs now than before. So I think there's going to be more attention towards the best companies because like we said, a big part of the green revolution or know,

Silas Mähner (30:28)
Mm-hmm.

Somil Aggarwal (30:37)
I don't exactly know the word green industrialization is the fact that certain things are just going to be done better and hardware and deep tech is just sometimes just a good moat that protects these innovations. But I don't necessarily think that all of the generalist investors will be going towards the best climate companies. think climate is still considered a niche field with an all of venture. And so I don't think that you're going to see, you know,

Silas Mähner (30:58)
Yeah.

Somil Aggarwal (31:03)
the best companies ever receiving term sheets from all of the big funds, because it's still going to be a conversation of, hey, do I want to invest in a sector like this, giving the macro? That's what a lot of people ask all the time.

Silas Mähner (31:14)
Yeah. The one other thing I would point out is that maybe this is somewhat going like still in favor of climate is traditional VCs have started a lot recently to start investing in hardware. If you look at like Palmer Lucky's company and then all the robotics companies that have been popping up, hardware is becoming like a possibility again. It's something that is not totally out of the question. We're not just seeing only software VCs like all over the place. Some of the bigger

some of the bigger VC funds in Silicon Valley are investing in hardware. So hopefully that will then spill over into the hardware that is Climatech.

Somil Aggarwal (31:54)
And I think we've seen like Andreessen Horowitz, for example, they had their American dynamism. They invested a number of hardware related companies with that. I think you can see that funders are starting to realize that software might not be the best moat in the world. And so this is a good opportunity for climate to brand itself and understand as an industry, what are the examples that we can point to and how do we demonstrate that we are viable investments? I just think that there is something to be said about the fact that although it did probably

inflate and keep alive some bad companies. The funding and the uplift of climate tech allowed for very innovative things to be developed. And the loss of that means that we might see more scalable technologies succeed, but we may not see the most innovative. And that's a genuine trade-off.

Silas Mähner (32:32)
sure.

Yeah, that is true. Cool. Well, let's go to the part that I think is going to be most helpful for founders listening in particular is we want to give some of our, I guess you could say takes on what you need to do tangibly in the next four-ish years to succeed as a Closet Climate Tech company. And this is going to be, I would say largely based on what we've heard through the interviews we've done over the past three years. So there's a lot of different people we've talked to and we've got some takes here. So let's work through these.

I think the most important, which may sound really obvious, is you need to sell slash build based on price and quality improvements. As we talked about before, you may believe that we are at an existential situation with climate, but a lot of people don't agree with you. We just have to recognize the reality versus what we understand and find a way to still make that sale to whoever you're talking to.

I'll just give a couple of examples of founders who've been on the pod who've taken this perspective. Haven Energy, I remember very explicitly their thing was, hey, we have a better product that solves an issue for people in, I believe they were working on home electrification in rural areas. They're like, we don't even talk about climate in our pitch. It's not even on our website. It's just like it benefits the people that we're selling to. Therefore, it's good thing. We've got Gravity Climate. They're a carbon accounting platform, but...

the way they really make their sales is they appeal to the CEOs and CFOs when they say, hey, let's scan your operations and reduce your OPEX by a massive amount. and by the way, we're also measuring your carbon. So it's a total win-win. On a separate note, they also help the procurement teams by helping them find technologies that can actually help solve those problems. So they don't even, like they don't rely on a climate.

nature anyways. They may have to pitch their sounds slightly differently because if carbon accounting is zero interest, they would have to focus on other pieces, but they've still gotten by without it being a climate first specific kind of sale. And then look at CarbonCure Technologies, the concrete carbon capture cement company. They make the same product, but it's stronger and it's the same price. So you've got a greener product, it's stronger, and it's the same price. Who's going to say no to it? Those are just a couple of examples.

Somil Aggarwal (35:04)
The next thing is something that we've preached a lot. We've gotten this advice a lot, which is engage and raise from non-climate investors. I think this is more relevant than ever as we might see a dearth of climate tech investors in general in about two, three years, not only because of the administration, but because of just general bad investing practices causing it to be hard to re-raise, right? But a good investment is a good investment. And what matters is that your investor understands the macros and the minutia of your industry.

So a good example is Pathways, right? I think we're huge fans of theirs as one of our best performing episodes. And you can see why their technology allowed them to raise not only from climate investors, but from non-climate investors. Another one, for example, I believe Haven also raised from Lera Hippo, which is a very famous seed software investor. But the two examples we gave are software. And I do think that's a bias that we want to be careful about.

Silas Mähner (35:48)
True, yeah.

Well, there is one more example I forgot to put on here, which is Liz Dennett. So they got into the mining, is it Rio Tinto's accelerator? So they're getting investment from a corporate, right? Which you could kind of put in this bucket depending on if they're climate only is usually, they're usually not like explicitly climate investors at CVCs, but I mean, they just help a mining operation make more money. So mining operations are of course going to say yes, you know what I mean?

Somil Aggarwal (36:02)
Mm-hmm.

And at the end of the day, you can even point to examples of things like Mitrachem, where we keep mentioning it, but they're just a fantastic company. They raised their A, I believe, from social capital. I believe it was a $15 million round. And so when you have Chamath Palapitiya on your board, on your website, that raises eyebrows quite a bit. And so it just is more important than ever to be able to market a good investment as a good investment, not a good climate investment.

Silas Mähner (36:48)
The next point would be to choose your customers correctly. for example, multinational corporates still have to contend with EU regulations. My understanding is nothing changed in the EU as of this week. So there's still lots of different regulations they have to comply with there. Those are oftentimes going to still be applied to or involved in the way they do business in the US. So you can still sell to them. You can also have certain customers who are just committed to sustainability in general.

they're still going to keep investing in things. I don't think Amazon or Pepsi or Walmart are going to stop investing in climate initiatives to my understanding. Those are a couple of things to keep in mind. Who are you selling to? Think ahead when you're building your strategy and your roadmap. Does my potential customer still have an interest in what I'm building? If I am, really, really focus on the climate piece.

Somil Aggarwal (37:38)
The next point is something that also relates a little bit to the venture side, which is involve CVCs. So these are, doesn't have to be pure CVCs, it could also be the innovation investing arms of corporates, but let people know you exist. Working with them early can validate how you bring your tech to market. And even, know, I feel like we keep mentioning this, but it truly was an informative talk. In the third Sphere talk at New York Climate Week, we recently did an episode on it with Sean Abramson for the third time.

you can see how beneficial it is to involve people who are not only your funders, but strategics, right? And I think more than ever, if the universe of players is smaller, then you have less of a chance of just being able to sell your product because of how good it is. Realistically, you need to let the people know you exist from the beginning in order to have a chance to land them at a later contract. That is going to be incredibly important, and CVCs are obviously the way for people to know

that you exist in the first place.

Silas Mähner (38:40)
Yeah. And then the other one would be, it may not be that obvious to people, but just build in climate friendly states. We had, I believe it was Ample talked about this. were like, I asked him point blank. I actually asked him after the recording. I don't think I asked him on the recording about if he's concerned about the election. And he was like, not really, because we're focused on California right now and in Spain and Japan. And it doesn't really matter because...

California is still going to be a pro climate state. So building California, New York, Massachusetts, Connecticut, I even think there's probably going to be really strong argument for Texas, right? A lot of Texas is now, like Houston, to my understanding, is kind of mobilizing around just future of energy generally. They've always have been. I think that they were really like, we've got a good thing going with oil and gas for a long time, so they didn't invent too much. now it seems, you could ask other people this, but I think the tide is changing. So they're focused on future of energy in general.

Just pick a state that is going to be conducive to what you're doing, especially if you are reliant on these sort of grants or doing partnerships with the government. There's plenty of states out there that are still investing in this stuff.

Somil Aggarwal (39:44)
Six, which we spent a whole segment in this, is build your narrative. And if anything, build a new narrative. Whether it's combating our dependency on China and offshoring in general, or creating jobs, or improving our national security, change the narrative of your technology and be conscious. Do some A-B testing around with your investors, with your founder friends. Find out what's resonating in attracting capital in this day and age.

Silas Mähner (40:10)
I think this will be especially important for regulatory affairs teams and policy teams who are trying to influence different groups. could be at state level or at the federal level. There is going to be a lot of appetite to do these things, if you want to say, put America first again. So if there's ways you can do that, that should be in your policy proposals. And I would say the last thing is, again, we talked about this already a lot, but just remember that climate is not exactly everyone's number one issue.

and that does not make them a bad person just because you disagree on it. They may just not be as convicted as you are or maybe they're not convicted at all for all we know about the seriousness of the situation, but do not demonize them because if you just kind of wag your finger at somebody and poo poo them, that's not going to be a very good way to make friends. Okay. I can say that from watching the way my, let's call it relatives and people that I grew up around, the way they reacted to the way

A lot of people wave the finger at them just because they didn't understand they were treated poorly. So you don't want to do that to your customers or to your investors.

Somil Aggarwal (41:15)
This is the result of months of asking the best climate tech entrepreneurs from starting from seed all the way to series B, series C. These founders have been thinking about this and we're aware that we might have to be in the situation we're in months ago. And what we want is for all founders, you know, whether you're building in climate tech or climate tech adjacent, or just listening to this podcast because you're interested in what climate tech entrepreneurship is, is that you take stock of the current situation.

depending on your political views, rejoice or express sorrow, but understand that the work continues. That's the one thing that every cheesy post says, but it's true. And these seven tips will help you understand from the best entrepreneurs that we've learned from what to do in a Trump administration.

Silas Mähner (42:03)
Yeah. And there's the last thing I want to put on, just like the whole color of what I had been talking to Somil about before the election even happened was if things went this way, that yes, it kind of sucks. Like it's going to be really challenging. Definitely from a missions perspective, we're going backwards. But if we can figure out a way to exist in a Trump administration and still advance our technology, our companies, it'll make climate tech...

as a category or if you will, like the energy transition broadly, substantially more resilient so that way it becomes truly bipartisan and that hopefully every president from now on will always have a climate policy involved. I don't see why. I mean, we already do know that the majority of America actually supports like building clean technology. They just may not quite understand fully like the way they think negative things are actually happening when they're not.

My hope is that we prove that clean tech is actually just the future tech. It's not even per se about the cleanliness of it. It's just about this is truly innovative. This will advance more jobs in America. This would be very positive for us in that no matter who is in the office next, we will have advancements in clean energy investment and clean technology investment.

Somil Aggarwal (43:22)
With that, thank you to all the clean techies listening. We're done, we're off the bully pulpit. Let's see how the backlash is.

Silas Mähner (43:30)
Yeah. And if you want, just make a, we'll make a plug here. Definitely consider becoming a paid sub to the podcast. We've got a group chat with a number of people here and we're always talking about things in the background of how we can navigate this. And I think probably having community, we didn't talk about this before, but having community during the next four years is going be more important than ever. So let's onward and upward, I guess.

Somil Aggarwal (43:51)
Thank you to all the paid subscribers who contributed the talking point to this episode.

Silas Mähner (43:54)
Thanks.


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Silas Mahner

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Somil Aggarwal

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