Cleantech Startups

welcome to the balance sheet where you can rise above the noise and learn about the most important business issues of our age I'm your host and fellow student Conrad cha sometimes tackling climate change seems like such a huge insurmountable challenge you need the big guns like governments the people sector and large companies and they're all developing their own solutions to reduce carbon emissions but does tackling climate change lend itself to the startup environment can the VC model that has been so successful in scaling Global Tech companies do the same for clean tech startups can you app your way to Net Zero we have today Chris cerid to talk about these issues Chris was an entrepreneur uh before stumbling into Academia at Cambridge he has lots of experience teaching and guiding students interested in entrepreneurship and he knows more than most about what it takes to bring science and business together somehow he found the time to start carbon 13 and here he's here today to tell us what it takes to build clean tech Ventures so welcome Chris great to see you Conrad uh and good to be with you all Chris what is carbon 13 carbon 13 is the Venture builder for the climate emergency uh we had a i and the team had a core Insight when we when we kicked it off which was that the urgency of capitalism the the way that uh investors really like to make money sooner rather than later uh there's a Time Value to money uh absolutely matches the urgency of the climate crisis uh and that uh yes there are lot lot of ways in which humanity is going to need to adapt and evolve uh in order to to to get past climate change and and and find new ways of living on this planet sustainably uh but right now we have a tool we have a tool for making change and getting it around the world quite quickly uh and that's and that's startups and so maybe startups aren't perfect maybe Venture Capital isn't perfect but it is an established Vector of change and therefore we need to make as a Humanity we need to make use of it um in order to get the get the changes we need to see out into the world the other big advantage of using startups is that uh you know large companies will make a contribution to to the adaptation that we need to see but there are certain areas certain types of innovation that we know and this is what I've been studying for a long time that we know that uh the uh you know large corporations are bad at and you need entrepreneurs to tackle uh issues uh around uh like new regulations coming along large companies don't typically respond to to to regulations in a sort of proactive way they wait maybe they try to defer the regulations then they react entrepreneurs often get going before the regulations are fully clear fully uh F fully Inked in so you need entrepreneurs for that type of innovation you need entrepreneurs for any type of innovation where the new model the new innovation is going to cannibalize the revenue streams of existing businesses existing businesses tend not to touch that uh and so you need entrepreneurs if they are going to do something that is really fundamentally changing the nature of the of of of the industry uh in that way sometimes large companies are good at Behavior change type Innovation but generally they're not so great at it and it's entrepreneurs who are willing to take a bet on actually I think consumers are willing to look at look at look at things in a in in a different way and lastly you need startups for interdisciplinary innovation in a large company the the corporate culture the organizational culture the perspective on what is innovation tends to be pretty rigid uh and so if you want to blend insights from different domains uh entrepreneurs and entrepreneurial teams are much better at doing that uh so all of these things meant that we said we're going to fight climate change and you know as a personal Epiphany that I had in 2019 that I was going to spend the rest of my career are working to uh to to fight against the climate crisis uh you know entrepreneurs and startups are a big part of that and and our model was to uh build Ventures and do it at speed at in high volume quickly get things out out of the lab and into the commercial world uh as quickly as possible we've got a number of people in the audience who knows a bit a thing or two about this so uh someone that we know very well in Cambridge Jeremy uh is here thanks so much Jeremy for uh tuning in uh priia who was an MBA alone from almost 10 years ago I think and she works at Thea Ventures uh and I know they do a lot of Investments I think in clean tech and a lot of other social causes and Martin is from Toronto I think and he's or Canada and he's uh says entrepreneurs have a higher tolerance to risk before we go into some of the other issues um Chris why did you call it carbon 13 well carbon 13 is uh is an isotope of carbon uh that's very rare it's only about 1% of the carbon uh on the planet and when the climate scientists were working on the proof that climate change is caused by human beings uh they discovered that carbon 13 which is a b product of uh industrial activity starts showing up in tree rings in a greater quantity in about 1850 uh and there's a bunch of other experiments and sort of proofs in the in the in in the chain of proof but this was actually an important Discovery in being able to say definitively that this is not just a sort of a random walk that the climate's doing but that we're causing it and and part of the carbon 13 sort of ethos is uh we caused it we better fix it uh and and that's what the entrepreneurs we work with are doing and just a reminder to our audience you can put your questions for Chris in the chat or comments so Chris you mentioned U you made a very convincing case that entrepreneurs startups have a huge role to play when in in tackling climate change why is it that uh when we look at all the VC big VC Investments they are really you know the thing that grabs the headlines seem to be the next super app te you know the next Automotive automated driving things but we don't get to see hear that much about something that's going to help us bring down our carbon emissions yeah uh great great question so I I can remember very well back in 2019 when we kicked off carbon 13 had so many coffees and meetings with investors uh and and I remember being introduced to one of the Cambridge Angels which is one of the sort of great uh great things we've got here in the Cambridge EAS system the the the the group of uh of of fantastic investors who really understand uh technological innovation very well uh and he was introduced to me as oh he's one of the Cambridge Angels who's really interested in clean tech and this guy said well I'm really disappointed that my friend introduced me as someone who is interested in clean tech because that just means I lost a lot of money on clean tech 1.0 uh and and of course there was a wave after Al Gore's uh film and inconen venient Truth uh sort of 15 years ago uh uh of uh of of climate Tech uh Innovation we didn't call it climate Tech in those days we called it clean tech uh and you know all many of those businesses that were started 15 years ago uh are actually some of the big players in the energy transition uh transition now they're not sexy they're not Tesla although some people would call Tesla a clean tech but we could that's that's a separate discussion um uh they're not sexy but they are changing the energy landscape they are driving really very significant changes in the carbon emissions profile of of of of the industry so you know what carbon 13's doing is working at the earliest stage and I feel feel pretty confident in saying that some of our uh some some of our investments uh We've made 65 investments in the last two years um some of our investments will be famous uh and and household names in a few years time now having said that we of those 65 Investments only two or three are consumer facing right the vast majority of the activity in the in the climate Tech space or at least what I think is the promising end of of the activity is focused on helping industry make the transition between uh high carbon intensity activity and and low or or net negative uh carbon intensity activity so so there's a certain element of behind the scenes uh sort of innovation that's that's that's part of the answer to your question other than the fact that um most of the climate Tech startups uh good ideas were going to be behind the scenes what is the difference between let's say a VC from a VC point of view investing in an app that can roll out on the App Store versus uh something on climate Tech what are the kind of different kinds of financial calculations and risk that go through the VC's mind well I think the key the key thing to understand is how again it comes back to this point I made earlier about urgency right uh if you do the financial model for how is a software only company going to get from just an idea to a really glob spanning company uh there are many examples of software companies that have done that in you know less than 10 years right and so if I'm an investor doing my calculations about when am I going to get my return you know uh 10 years from the start or let's say five to seven years after the company has done the sort of initial prototyping and testing and validation uh seems you know that that works out in terms of cost of capital uh quite nicely whereas if you're doing something Hardware based you might have to add an extra three years to how long it's going to going to take from just an idea to a glob spanning company right even a company we can think of like apple which grew so fast and so uh and was so so prominent as the microcomputer technology came to uh came came to reality it actually took 15 years for them to become a really important company financially right and and so uh and and they didn't become the sort of number one company in the world for many many years after that right so so it's literally uh you know PE people always focus on oh but you know Hardware ideas or science-based ideas are capital intensive it's it's partly that uh it's partly that you need to deploy money to build factories that doesn't need to or build installations that doesn't need to be done in the in the software world but it's but it's actually just as relevant to focus on you know is it going to take 10 years to come to maturity or 15 years to come to maturity investors care a lot about that kind of thing now again going back to the to 2019 I talked to so many investors who said for that reason for the reason of just we've just been covering you will never see VCS backing those kinds of companies and they of course those predictions in 2019 uh were totally wrong now why were they wrong they were wrong because ultimately the climate take bet is a is a relatively safe bet and I know that sounds ridiculous when you're talking about risky uh you know risky Venture Capital Innovation but it's not really a question of uh of if we're going to solve the climate crisis it's a question of when and how we're going to solve the climate crisis right we we won't survive on this planet if we don't address the carbon emissions right so uh investors really like that thesis they really like the idea that you know the question is not is there going to be techn technological change it's when and how what form is the technological change going to going to take if you look at the the VC boom over the last 30 years it's been based on the Internet it's been based on digital Technologies and the idea that all that stuff is inevitable climate Tech shares this sort of hey it's inevitable it's going to happen uh you just have to get your money on you know as an investor you just have to get your money on the right horse uh you don't have to worry about whether the race is one that's uh even you know worth uh worth running and if you compare that some of the things we've seen like crypto uh no offense to any crypto enthusiasts in the in in in the audience right but uh you know there's no danger that climate Tech is suddenly going to be seen as irrelevant uh in the way that crypto for example is currently you know viewed by most of the world there's still some hardcore people who say no but there's potential here but most of the world have said oh crypto is kind of a fat uh that's not going to happen to climatic and we have a question here from Boris Boris adoko who's a NBA Alum and he's based in daaka Sagal I think it's a good time to ask this question which is he has says he advises uh climate tech companies operating in subsaharan Africa and somehow this clean tech or climate Tech portion of the entire landscape of climate Finance is very small especially in that part of the world because they there's a perception that there's a larger risk in terms of climate Tech Investments there what are your thoughts about how you could people could shift that perception to something like what you mentioned that climatech is inevitable and people should get on that horse or find a horse to get on it's a great question Boris I I I I think the the challenge is one that is is universal to Innovation not just climate Tech Innovation and that is that people looking to place those early stage age bets on what could happen in 10 or 12 years time they make the Assumption which could be wrong uh but they make the assumption that you know the the the the most relevant future companies are going to come out of the Innovation hubs that we know Cambridge MIT Stanford Shenzhen and uh Bangalore and so on right so uh so it means that if you're not in one of those Innovation hubs you don't see so much activity around the really kind of Cutting Edge early stage stuff you're more involved and I'm imagining this is what you what what your bread and butter is in your job uh you're more involved in rolling out technologies that originated in one of those places that I just mentioned right uh now this is a a fundamental challenge for every government is to say okay how can how can our Innovation hubs become more uh more Central to uh to actually originating the Innovations not just being the recipient of those Innovations being rolled out um and I think in Africa there's actually an interesting uh Play If You Think About by by the end of this Century uh I think I've seen that the majority of the world's population will be living in Africa uh the you know the the the the areas of the world that are going to be hardest hit by the climatic changes are often in Africa and and and those two uh points you know kind of could lead to the direction of some kind of important innovation hubs AR arising in Africa now obviously there are already some very interesting Innovation activities going on uh in in the uh in you know in the hubs that we know um but they do struggle to be seen as oh well this is the cluster where you want to look for the next uh the next thing and I think governments need to be quite strategic about saying okay how can we increase our our soft power over the next 20 40 50 years uh one of the ways is by really fostering those very uncertain uh early stage Innovation activities in our geography I hope that's a that you know that's that's uh that's helpful for us I think that leads on very nicely to Sam's question which is the role of governments uh how should governments partner with VCS uh to to catalyze these well risky climate Tech Innovation or do you feel that private markets uh are doing it fine well Sam we're we're seeing a massive experiment on exactly the question that you're asking in the form of the inflation reduction act uh in the US uh which is doing doing precisely what you're what you're talking about and creating a pull factor if you like for um uh for these uh for for these for these uh uh Innovation activities uh it's fascinating from a sort of global perspective to see you know the Americans like appear you know the US government appears to like the idea of addressing the climate crisis through subsidies and incentives whereas the EU governments uh and and the UK is a bit closer to that than they are to the us on this particular uh uh area prefer to focus on regulation right and it's almost like it's a it's a sort of two competing theories of change right the the the Europeans are saying change the regulations and establish companies and startups will innovate in response to those changes and the Americans are saying yeah you know show me the money uh and and and and and do it that way um I'm glad that there's two that both approaches are being tried right I think if if it would be a shame if the EU abandoned its approach and went to the US approach and in a in a way uh the US approach especially given the the the polarization in their politics uh they they could have a lot of difficulty with the with the eu's approach so I think it's good it's healthy for the world that we've got sort of different uh different different models uh different models here people you know to your question Sam people talk a lot about the missing middle in climate finance and the idea that you know is there uh is is there a you know a chance to um you know get get get projects through what sometimes called the technological Valley of Death uh that that that that happens and I think there's two things to think about one is if you look at venture capital and you look at any given entrepreneur complaining that they can't raise their next fundraising round you have to remember that the V venture capital is kind of a tournament uh and and it's a feature not a bug that some entrepreneurs are going to fail and uh and not be able to raise their next fundraising round that's part of how the whole Venture Capital sort of funnel is selecting the best technologies that that you know really seem to be getting traction and and and and doing well so if you hear an entrepreneur complaining they can't raise their next investment it's not always a sign that there's something broken in The Innovation System it's actually part of what's what's supposed to happen uh the other thing I'd say is that going back to my comments about inevitability we are going to see the missing middle problem solved because the world cannot afford for uh for all these you know every all these Technologies to to to uh to Fall by the way sides but you know the difference between yeah some are going to fail and that's actually sort of how the VC system works uh and uh there are going to be instruments created in line with your question that will sort of deal with the the the sort of project Finance structured finance and sort of capital intensive Finance uh and the instruments that need to be in place to make that happen though they you know many I I know many talented entrepreneurs are working on precisely that problem is you know they want to be the ones to come up with the fintech uh instruments that are uh that that are that are going to solve that problem so Chris this is a good time for you maybe if we talk a bit about carbon 13 how do you how does carbon 13 go about that process of selecting which kind of uh Ventures to bank thank you very much well I it's a bottomup process right carbon 13 is uh is basic the basic idea is that uh rather than trying to predict in advance what the future of uh uh you know technological landscape looks like which is what a lot of investors do they try to kind of say ah this is how I think the world's going to go uh we are looking to back the best teams right and of course we're we're we're we're thinking carefully about their ideas uh and the quality of their ideas and the and the evidence that they've been able to put together about their ideas but uh but really there's a lot of evidence in uh in in the world and in Academia to tell us that the quality of the team is is supremely important when you're making these early stage uh uh investment decisions now the way our process works is we bring together a cohort twice a year in Cambridge uh and we also have cohorts in Berlin and we do work uh virtually as well we bring together cohorts of uh 80 people 40 technologists and 40 uh business people uh commercial folks the average age of our cohorts is 37 right so so these are not people who are straight out of University we we sometimes have people who got sort of amazing first class honors in their engineering degree in in Cambridge but but on the whole it's it's uh it's people who are a bit more seasoned um the technology ol IST and the scientists are typically bringing some kind of Ip some kind of intellectual property uh some idea um the commercial Founders sometimes they're bringing an idea but often uh they are just bringing their experience and they're looking for somebody fantastic to work with right um we talk a lot in carbon 13 about half hunches right that one person's got a technology hunch another person's got a market hunch and it's not until the two meet uh that you start to really see the magic the magic happen uh we run a program that's our program is eight and a half months and it starts with six weeks of the 40 technologists and the 40 uh um commercial folks meet uh getting together and it's a little bit like love Island they have to team up uh if they don't team up they're off the program and from a given group of 80 we get roughly 30 teams forming and those 30 teams go through to the second stage which is a three-month program where we're we have our entrepreneurs and res res who are successful uh entrepreneurs exited entrepreneurs we have our carbon experts in residents who are people who really understand the the sort of levers of impact and how decarbonization Works uh in the real world and uh the teams work with those experts uh and there's a big group of domain experts coming from the Cambridge ecosystem primarily that we have uh that we've assembled uh and uh they work with those experts to put flesh on the bones of their idea and of course a big part of it not just Consulting experts it's going out and talking to customers right and figuring out well you know it's all very well to have a Grand Vision uh but how is the journey going to start right who's the first pilot customer what's the first value proposition that's going to be important to that to that customer at the end of the three months the 30 teams pitch our investment committee uh they do two pitches they do what we call the carbon pitch where they need to uh convince us that uh the venture has a chance of uh reducing emissions by 10 million tons CO2 equivalent uh per anom right that if if it scales if it reaches sort of critical mass is it going to have that level of impact uh and then they do an investment pitch which is you know is this a good business idea and we think it's important to have both pitches right because uh there's a lot of greenwashing out there uh and you know we we don't we don't want to waste our investors money and we don't want to waste our time uh focused on stuff that is not uh is is not really kind of going to make a big difference uh we're trying to find points of Leverage that are really going to make a make make a significant impact um and it's and it goes beyond that our the carbon pitch and the idea that you're going for 10 million tons CO2 equivalent emissions perom is partly about uh you know having a big Vision right if you want to raise Venture Capital if you want to be going on the venture capit Capital Journey you need to be doing something that is is is potentially going to become a major organization a major company and 10 million tons CO2 equivalent emissions is a lot of carbon uh the carbon footprint of a typical British person is six and a half tons or an average British person is six and a half tons so uh you know you can see that if you're going to reduce Global emissions by 10 million tons that's a big company that's that's something that's got a lot of fingers and a lot of pies and is really making a difference um so yeah that's our process once we we make about we make a certain number of Investments per cohort and uh then there's another three-month process which is helping them make further progress and get ready to raise more money we're investing1 120,000 pounds in each of our of our startups we've made 65 Investments like that in the last two years and then they need to go on and and and spread their wings uh and and uh get out get away from carbon 13 if you like and uh and and raise money from from other investors Chris you mentioned love Island I've I swear I've never watched a single episode so I don't know what happens there but you know when you when you bring these yeah when you bring these scientists and the people with the business ideas what's the kind of dynamics that kind of U uh the atmosphere in in in when when you bring them together do they have very different views and how do you reconcile that well that is part of our magic is is that uh what we what I've seen a lot of in my career in universities is scientist driven Innovation where quite reasonably the scientist is very is very proud and pleased with themselves and the and the quality of their thinking and the and the the cleverness of their Innovation but the result is all too often it I mean obviously not always but all too often the result is that the scientist leading the project doesn't take commercial input at the right moment uh or or sort of get somebody commercial on board but sort of as a helper right rather than somebody who's really significant in driving the project so part of our magic is that we we insist we will not invest in teams where there isn't this blend of of Technical and business expertise in the team um and they the glue that brings them together to your question is that we're calling to them to come and work on an idea with major potential to decarbonize right and so we are really screen we get a th applications per cohort we interview about 250 people we make 120 offers uh 80 people actually show up uh from those 120 offers and we are you know we're we're uh we're screening to a certain extent on how purpose-driven are people right are are they doing it because they just see climate Tech as like the the latest money-making bandwagon to jump on or are they doing it for purpose-driven reasons and we think purpose-driven reasons it's not just that hey we we like to sit around the campfire and all uh seeing from the same him sheet about the importance of of addressing climate change it's it's about having the persistence and the risk appetite as Martin was saying earlier uh for the for the Long Haul right for for being able to to to go on a 10year journey to build a major organization right um now once you form that team and the team is aligned around a vision and Mission uh and we do a lot of work in carbon 13 to get good sort of Foundations in place for for for the team uh then instead of the commercial person being viewed as oh you know you're helping me with my technological innovation the commercial person is part of the team right they've got you know they they're kind of co- co-leading co-owning the project right and that's you know there are different ways that it works out in terms of how much Equity each person how many shares in the company each person takes uh who's sitting around the table that depends on lots of factors but you know the top team includes the right people who for the whole journey right you know you're going to need to bring on different skills at different stages of the journey but my observation throughout my career is if you leave the commercial stuff on the side and you just say oh no this is a technical challenge uh then you slow down and sometimes kill the potential of it really to to to to to go to the Moon um so that's a very you know I love your question because it's a very important part of what carbon 13 is all about and which are the sort of hot areas uh of investor interest in climate Tech that you see well right now uh the two hottest I would say are well remember that I'm talking about the earliest stage right so if you look at the if you if if you download a report from PWC or or cvc.org is a great resource for people who are interested in climate Tech venture capital um you're going to see that the vast majority of money is going into the energy transition and uh and transport right uh but that is just a reflection that those two categories are the mature categories that sort of got kicked off in clean tech 1.0 15 years ago so the

hot areas in terms of early stage right now are built environment and Agri agriculture agriculture and food right and built environment it's simply because that's seen as a lwh hanging fruit for The Regulators right The Regulators are putting great pressure on the construction industry generally to move to net Zer techniques really quickly and that creates a pull factor where every construction firm that you can think of in the world is looking for Net Zero innovations that can help them drive down the the embodied carbon and the and the carbon in their uh in their in their in their project um the other area is agriculture that's because there's two tracks it's not just a two push factors right it's not just uh decarbonization in in ACH it's also that the world food system has a lot of problems right is under a lot of pressure kind of partly coming from climate change but a lot of it coming from just intensive agriculture to feed eight eight nine billion people uh is very very difficult and we are depleting the top soil for example uh at at an astonishing rate I mean if we if we don't slow down the rate at which we're depleting the top so there will be no food in 40 years time or no you know no food there'll be famine worldwide famine in 40 years time so so the drivers of agricultural Innovation are extremely urgent uh and and not just driven by the climate uh imperative so so that's the other area that's very uh that's that's very hot and we have a question here from uh Baba Tarak uh a re recent here at cjbs MF program and Baba batak says you know apart from Hardware do you think that there's room for say uh software uh SAS startups right software as a service startups uh to do things like data capture mitigating climate related risk uh help build resilience right do you think there is that uh room for them in this fight to tackle climate change sure absolutely yeah about half of carbon 13's uh Investments are software uh in software companies um in the last couple of rounds of Investments that we've made we've moved to a position more like onethird sort of what you might call Pure Hardware companies one-third pure software companies and onethird hybrid companies where maybe the there's a a sensor or some kind of Robotics involved but the business model is based on data and and uh and and is a hybrid sort of thing um I think in the Green fintech Space where we've made quite a few Investments there's that you know there's a lot of room for software uh software based Innovation and inure Tech is is something that you mention in your your question one of the leading uh in terms of valuation one of the leading Investments that we've made is is in a company called K which is the world's first insurer for carbon offsets right so you all these compan are buying carbon offsets uh they they uh they as we've seen actually recently in the news uh it's hard to be sure that the carbon that you've paid that that let's say a Microsoft or a stripe has paid to have offset has actually been been done right and so uh K is providing an insurance product to uh Ure against the risk of carbon non- delivery and the effect of that is to drive fraud out of the market and increase the overall all quality of the carbon offset market so it's a very interesting uh interesting angle on the on on on the whole approach um there's something in your question Batar which is implying that analytics has a major role to play which is absolutely right and if you if you look at the carbon 13 portfolio and you click on platforms uh you're going to see a a lot of analytics uh startups like that which are really pure uh pure pure pure data plays pure software plays that that work in that Direction um thanks for the question really appreciate it and Chris we have this real Global audience because the next question is from uh Indonesia so Cynthia says uh they've Jakarta has just launched a climate Tech Hub and she's asking about the waste industry right uh what is the potential of clean tech climate Tech innovation in this space are there are people inv invting well absolutely I I'm I you know I'm going to be able to give a really um quick and clear answer to your question because one of my academic colleagues EMA we we had a a random chat yes yesterday at at our faculty meeting and he asked me to email him this morning uh I'm just going to put it in the chat if that's all right with Conrad uh a list of the companies that carbon 13 is invested in that have roots in the waste industry um okay no I can't do it I have to connect to comment you can just put it in the private chat and then I I I put it in the private chat fantastic fantastic I'll just um so that's a list uh okay it hasn't come through in a particularly formatted way but that's a list of the of the uh of the climate Tech Investments that somehow have that element of resource efficiency around waste streams uh and so I hope if you look at that if you if you if you look at the websites of those uh there's about 10 companies uh it will give you some inspiration for what you're trying to do in Indonesia and you know Cynthia I mean I'm a I'm a uh I'm not you know I'm working on carbon 13 but I'm very keen to support climate Innovation uh anywhere in the world so please do get in touch if if you think uh I can give you some useful perspectives I'm very happy to make some time and this is the list of Waste Tech Investments so Chris just clarify was are these Investments That Caron 13 has put in so those are all companies that carbon 13 has invested in uh so I I mean I won't run through every single one because there's quite a few but uh food squared for example is working on taking away streams and turning them into food products right and there's quite a lot of startups working uh working in that area but there's some very clever biochemists in that team who are saying okay we need to not just create these products we need to find more innovative ways of taking a was stream and developing it into uh an an edible product uh cocoon is taking waste material that gets generated internally in a steel factory uh and and and turning and sorry not in a steel factory in a concrete Factory and turning it into sustainable steel right uh and so this is a really it's a fascinating uh Innovation where there are Eros surine ing one of the waste products that comes out of a of a cement uh production process and uh by doing that they're able to turn it into a Sustainable Building Material and there's quite a few Building Material uh startups uh on on on the list here key hydrogen is generating green hydrogen from uh uh landfill sites right uh and and has a very interesting approach to that anyway I won't go through every single one because that'll start to they'll start to blur into each other and uh and I'm not sure it's it's super relevant for everybody in the in the discussion but I'm glad you asked the question Cy Cynthia uh it's taken us almost 45 minutes but someone had to ask a question about generative you you know generative AI yeah um so capil from India asked everybody drink that's the buzz word do do you see any applications of generative AI or AI in general in climate climate Tech well anytime you've you okay so AI in general I mean there's a great joke in the startup world where we say yeah it's AI when you're talking to investors and it's machine learning when you're hiring Engineers to uh to develop the the underlying Tech um you know machine learning and AI has been around for you know a while generative AI has obviously got this incredible profile which I mean and justifiably so it's very exciting uh very exciting technology and I'll come back to that but you know anytime you got analytics uh uh it's a natural a natural extension of any analytics model to say okay so and can we use machine learning and AI to extract uh actionable insights uh and maybe even automate actual actionable insights into actions uh using that stream of analytics right so that's that's a you know that's almost a generic tool that you would say you know applies to any any startup idea certainly any analytics based software idea um generative AI I mean as an entrepreneurship lecturer I feel super privileged to be around at the birth of generative AI I mean if you're my age mid-50s you think oh the big innovation in my lifetime happened with the rise of the microcomputer and the internet um but now we get another wave which I think shows every every promise of being just as important or more important than uh in terms of just changing the world uh that than than that innov wave of innovation so super exciting um when I talked to my entrepreneurship classes in the MBA about uh about generative AI the way I think of it is this if you look at the the top AI startups at the moment it's about like go if you go a great tool for for thinking about these kinds of issues is uh is is CB insights which comes from crunch base um uh so they they generate a a you know what are the Hot 100 AI startups um and what you see is about 40% of those startups are what I would call uh pix and axis startups they're just building building out the infrastructure that allows generative AI to to become useful uh about 30% of that list 30 35% of that list is uh is somehow cross industry platforms using generative AI I'm I'm quite bearish on the prospects for the this type of innovation because I don't find it to be sufficiently customer-led right it's it's basically saying hey there is a tool that is used across lots of Industries maybe we can do a generative AI version of that and I think that my observation over the years is that though that that as a starting point for a startup often leads you into a blind alley where you never really quite find the thing that is super relevant to a particular customer that allows you to sort of get things get things going the the the companies that excite me and I'm going to link this back to your question in a minute capill um are the ones that actually are focused on real industry three pain points now it's only 25% of the top 100 list but that's just a sign of how nent the Gen technology is and if any entrepreneurs are listening or people who are sort of thinking okay how how am I going to get in on the Gen uh uh Revolution I would say two things one is don't fall for the idea of just being an app in an in open ai's um ecosystem do your own build your own company that's advice number one and the second is look for real pain points point in industry and then say okay how could gen be applied to that pain Point uh that's the play that you know in five years time you're going to be very happy you heard this advice rather than the one that says okay what are a what are VCS funding right now a lot of pix and axes a lot of infrastructure uh stuff look for stuff that really solves actual problems in the real world um now that does link back to your question Capal because you know the way we're advising people in carbon 13 to think about gen is to say yeah okay gen is a tool go identify the decarbonization opportunities and then think about how gen can be applied to them so I'm sorry if that seems a little bit of an abstract answer to your question but assure you it's the right answer we've got a few more questions and I know we're running short on time so Chris you got to be really succinct here um priia priia asks uh what about what's your view about carbon carbon offsets is this just a temporary Innovation for corpor Ates to make the transition to Net Zero is it another Financial mechanism it will create another asset class or is it just the solve our corporate conscience that last part I added oh boy well Pria I mean I'm I'm sort of I'm glad you asked me that question and I'm not glad because my view my view is is very black and white um and my view is that the car the voluntary carbon markets should be outlawed um they're a scam uh and uh if you look at the work of Elanor Ostrom the great Nobel prize winning Economist a late late uh Nobel prize winning Economist uh you only have to read the first three chapters of her of her book governing the commons uh to to arrive at the same view that I just expressed because what she shows so clearly is that when you have a common resource and there you know that's an exact thing that Maps exactly onto what uh the carbon budget is our ability to emit carbon as a common resource we can only do so much of it um when you have a common resource throughout the history of mankind we have never seen a successful market-based solution to protecting common resource right and what Elanor Ostrom shows in her book is that that's not because humans are somehow flawed although obviously we are right uh it's because mathematically the amount of money that you can make by free riding and and committing fraud and scamming a market-based solution for a common resource is more always going to be more mathematically than the amount of money it makes sense to spend on policing uh that uh that that that that resource right so you know the fact that the the discuss you know that the journalistic coverage is saying 90% of carbon voluntary carbon Market offsets appear to be fraudulent I mean that's not a surprise that's like a feature of the way that the whole thing is designed designed is that it's it's easier to scam it than it is to do it and more profitable to scam it than it is to do it for real and there's no effective way of setting up a safeguard so I always say to people look if you say oh no but there's got to be ways to improve the situation go no go read the first three chapters of ostrom's book and you will arrive at a different conclusion and what what we need to move to um in case you're looking for the solution uh is we need to move to carbon taxes because government's sort of greed and hunger for resources is is something we can rely on whereas people deciding that it's easier to make money in the carbon offset market doing it properly than it is doing it fraudulently I'm afraid we cannot rely on that um so I you know that's where I see now let me be clear I'm only talking about the voluntary carbon markets right I believe that the incentives work out in a very different way in the uh in in the in sort of regulated carbon markets and and so I don't you know that's a useful tool that I think we should we should continue with but uh voluntary carbon Market offsets I think are are doomed the only investment that carbon 13 has made in uh startup that deals in that market is K that I mentioned earlier uh and that at least has the virtue of being a startup that is very much focused on improving the quality of this of the of of the market now I know I'm just contradicting myself because I just said that it can't be improved but uh of course the investments in carbon 13 are made by investment committee not just by you know Chris C's academic research right so uh it's um it's it's but there you go um freia great question fantastic question really really import important question and uh we we'll take the last question to Ahmed U on this idea of greed so Ahmed asked uh Chris how have you as a venture Builder balance the pursuit of rapid growth that the VC model demands with doing the right thing it's a great question okay so you know you may have heard me say earlier Ahmad that uh you know venture capital is flawed the startup industry is flawed but you know what it exists right now and it's a way that we we already know how to change the world using the startup industry right and the VC industry we've been doing it consistently for the last 30 years right and and of course the VC industry goes back the history of the VC industry goes back further than than than the early 1990s but um but the Boom in the VC industry to roll out the internet to roll out digital Technologies and so on uh is something we we we that kind of works and we know how to do it now does it res is it wasteful yeah maybe you know it depends on how you look at it right it's a tournament a tournament means that some there's some winners and and some of the best losers in the tournament probably had something to offer right but the way the tournament worked the winners got got the spoils right um is that an efficient point of view if you're one of those best losers it may feel very very uncomfortable from Humanity's point of view from the world economy's point of view a tournament works right so it's a you know it's it's it's it's It's Tricky there now there's an interesting aspect to your question which is about growth right and and what can we say in terms of uh you know are there models which need to be need to win but don't fit the rapid exponential growth model and let me give you the example of Tesla right so some people say and certainly Elon Musk who actually I I got to tell you despite you know all the froth around his story I think we have to respect a lot as an entrepreneur and I I you know I kind of have a sneaking admiration for the guy Elon Musk would tell you that Tesla is a clean tech company it's a climate tech company it's designed to reduce emissions but Tesla are honest enough that they put the amount of emissions that they consider that they've reduced on their website it's not that not that much right the manufacturing process right of creating a a car that is typically gonna have one person in it uh is a very carbon intensive process uses a lot of Steel uses a lot of industrial process is the result in a lot of a lot of carbon emissions right so I meet a lot of people and I know a lot of people who would say you know the what the transition we need to make is finding ways of doing transport that get people out of their cars right that get people out of single occupancy vehicles and into different forms of Transport that are just inherently more efficient right and I I kind of agree right I agree with that that you that is that is a transition that we we need to make as as a species right so you know as a thought experiment would we say that the fact that Tesla could raise a lot of money to grow their their Innovation very quickly is a bad thing because it's kind of crowding out other innovations that we need I'm going to reject that thought experiment right I'm going to say no it's not a bad thing that Tesla was able to grow as long as the system is able to recognize truly decarbonizing ideas when they come along and get behind those and and and push them to the top right VC is not the answer for all the systemic and structural problems that we have in the world clearly right and and even uh the question that we got from Sagal right saying hey you know you know like I know lots of people who say yeah uh VC is kind of a new imperialism where we we generate the Innovations in certain hubs and then we we drive them uh we drive them to the rest of the world and isn't that kind of the same as as what imper Imperial uh system did um you know I don't think you can make a by the way I'm not saying you can make a moral equivalence there obviously you know people are making their choices to buy things in the market system from their own free will so it's not there you don't have this element of compulsion uh that that was so you know that is the is the great sin of the imperial system but um but my point is that we can't solve all the problems of the world through VC but we can solve some of them and uh and why not try right why not get you know that's how I I wake up at two in the morning and a lot of the time thinking is what I'm doing enough right is what I'm doing enough to make a difference to The Climate crisis right I'm I'm you know I'm working hard on it but you know should I be doing more should I be doing something different is what I I'm doing the right thing you know I I want to do the right thing uh and I subject myself to that reflection and scrutin scrutiny all the time right but uh I'm you know I'm I'm content that I have in carbon 13 I've launched a vector of change right that has some relevance to the world and has some reality to the changes that we're making and I would rather I would rather light a candle than curse the darkness right so uh so that's my you know that's that's that's kind of core to the the the logic I I love your question because I think we should all be asking ourselves that question am I doing the right thing right um thank you yeah thank you so much Chris for lighting that candle right yeah and uh I think if people are interested this is the website for common 13 is that right that's right yeah and please uh I think we need more people to join Chris and others like him in terms of helping tackle climate change so thank you so much Chris we wish you and all the startups from car 13 The Very Best of success success because everyone in the world needs those needs those wins as you say thank you to our audience for for watching and your questions today it's a double header and so the balance sheet actually is back later at 1715 hours UK time where we'll have uh NRA Jory who will be talking about sustainability in large companies so we're moving from startups to large companies um so if you can please join us then till then stay well and see you next [Music] time

2023-11-17 21:37

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