Fundraising Secrets with Sonam Velani: Metrics, Investors & More!

Hey everyone, welcome again to A Founder Institute AMA. I'm super, super excited to be back with an investor AMA this time. I know we do these a couple of times a year, but it's always really interesting getting, you know, VCs from kind of like across the board when it comes to verticals they invest in. And this time around we have somebody who's super interesting and I'm really excited for this one. Before we really get into the AMA, Just to introduce myself, my name is Daniel. I'm a part of the Founder Institute marketing team, and I see that we have founders from all across the world in our audience. I see we have people from Lisbon, from Milan, I see people from California. Awesome. I myself am based out of Pakistan, and there is people from Germany. Awesome, awesome, awesome. So in case, uh, you're all wondering, we had around 300 people sign up for this AMA, so it's kind of Always really cool to know that people are super keen on learning more about the startup ecosystem. And before we really kick things off and let Sonam, our guest today, introduce herself, there is a Q&A button on the right-hand side of your screen. So if you do have questions for Sonam, whether it's about her organization Streetlife Ventures, or if it's about raising, or anything related to early-stage startups, or anything at all, please feel free to drop your question in. I will be sure to ask Sonam. Sonam, thank you so much for joining us.

Yeah, nice to see all of you. Thanks again for, for having me. Um, I'll start with a quick intro on who I am and what StreetLife Ventures does. Um, I'm the co-founder and managing partner of StreetLife Ventures. We are an early-stage venture fund investing at the intersection of cities and climate. The reason for that is that about half of humanity lives in cities and 70% of emissions come from cities. So I often say, you know, rather than all the doom and gloom that is in, you know, in climate change, we should be focusing on agency and optimism, right? And actually bringing solutions to market. We invest at the pre-seed and seed stage across 5 main sectors. These include buildings, energy, mobility and logistics, waste and water and adaptation as the biggest drivers of emissions in cities, as well as the biggest drivers of climate risk in cities. They're also huge categories in and of themselves, right? This is the sort of a $5 trillion market that we're talking about. So as a fund manager, right, we always think about what is that risk over the 10-year life of a fund and investing in large enough categories to diversify that risk. Because, you know, you and I can't predict when the mobility market might be harder, when the when the energy market might be hot, right, and what that will look like over the course of the next 10 years. We partner with cities, infrastructure groups, and real estate firms to help early-stage companies deploy their products, either in the physicality of the built environment or through technology systems. We sort of have this large urban deployment ecosystem that is very much so based with partners across the ecosystem to help these companies commercialize and scale. A lot of what we focus on as a fund are, um, how to navigate the local regulatory environment in climate, right? Uh, climate as a sector is very heavily regulated. Um, so how do you sort of think about deployment within the context of cities? How do you think about unit economics, positive operations, uh, within the complexity of urban spaces? Um, and leveraging the capital stack and specifically non-dilutive capital to help companies commercialize and scale to complement our venture investments. We invest across North America and Europe currently and sort of have a sliver of capital for other areas outside of that and are very excited to chat. A bit about my own background, I started my career in infrastructure finance at Goldman financing large transportation systems, water systems, energy systems and the like. Then worked at the World Bank and worked on, you know, how do you build infrastructure that doesn't fall apart during earthquakes, hurricanes, other natural disasters. Worked all over Asia during that time. Pakistan, India, Nepal, China, Thailand, you know, kind of east to west, the whole region. And then also was at the mayor's office in New York City. I was a senior advisor to the deputy mayor. And led the development of New York City's climate plan, how we as a city get to net zero by 2050. And, you know, New York has about $16 billion of investments, 30 different initiatives. And I think when you write a 400-page book, you want to actually think about what are the solutions we can actually implement and scale within our cities. And then worked at— led commercial partnerships for a startup called Zipline, which uses electric drones to deliver life-saving medicine and again has a really interesting capital stack, um, where we leverage a lot of non-dilutive capital, um, to help scale our hardware solutions and has helped us get to, um, you know, Series F, um, at this stage. So a lot of, you know, a winding career path, but I think so much of this is how do you actually take all the things that you learn along the way and bring it together, um, to support founders, you know, as they, as they scale their companies, um, in the climate tech Awesome, thank you, super comprehensive.

But I kind of want to zoom in on you as an investor before we kind of really get into our questions from the audience. What drove you to, you know, towards VC? Like you have, you have this like super interesting career and like it kind of like towards the end of it where you are right now, you decided that, hey, maybe this is where I have the most impact. Like what was that trigger?

Yeah, I mean, I think, you know, a lot of money came into climate tech, especially in 2020, 2021, right? The sky turned orange in San Francisco and everyone's like, holy shit, there's climate change, right? But climate change, one, has existed for a long time, and two, unfortunately will continue to exist. But climate tech as a solution set is very, very different from your standard B2B SaaS enterprise software solution, right? It is extremely complicated space. It is heavily regulated. The operations are very complex. And what I saw, you know, during that time was that founders were being force-fed a lot of equity for these very large, you know, hardware-scale businesses where venture is an extremely expensive form of capital to take on as an early-stage founder. And I think, that bothered me a lot. My co-founder Laura also has the background across the urban tech space. She ran Citi Bike here in New York. Prior to that, she was at Sidewalk Labs and at BCG. And I think for both of us, you know, we were mentoring and advising startups in this space and kind of kept on seeing this challenge over and over again. I think that was one big driver for us. I think a second big driver on a personal note is that like there are very few women in this industry. I can count on one hand how many female-founded climate-type funds there are. And it's frankly an even smaller number, right, as you sort of broaden out to the broader tech industry. So I think on a personal level, actually thinking about climate as a new industry that is just starting, right, we are in the first inning of the sort of the first bat of the first inning of a very long baseball game, right, or a cricket game or a soccer game, or, you know, you pick your sport. We're at the beginning of this industry and how do you actually reflect both the challenges that you're trying to solve for and the people for whom you are building these solutions? And I think having sort of an equality of voices at the table and who actually gets funded has been very important to me as well.

So just kind of talking about how the space that you operate in, it's generally super hard to build in it, right? So as a VC, is it kind of equally as hard for you to find viable startups to invest in?

The climate industry is very healthy as an industry, right? There are lots and lots of smart people. Again, I think because there was such sort of this visceral reaction to kind of what was happening in our world, right, in 2020, and sort of these large systematic challenges that no one sector of the economy is going to be able to solve, or no one type of entrepreneur is going to be able to solve. Right. I think that has driven a lot of talent to the industry. I often say that we're sort of in this age of climate industrialism where we've seen this trifecta of talent, industrial policy from governments. Right. And then innovation sort of testbeds and ecosystems kind of coming together in cities, right? And a lot of founders are wanting to build in this space because these are challenges that we face in our day-to-day lives, right? Whether or not you can take your kids to school because your streets are flooded is a very local problem. And how do you actually build solutions to those problems within your local context, right? And be able to scale those solutions to different cities around the world. I think that problem set and the huge, huge market opportunity that awaits is very exciting for founders in this space. So, yeah, we don't— we— there's— I, you know, I often get asked the question, right? Like, oh, you know, can you find enough companies? Can you, you know, can you help scale these companies? Is there enough talent? And the answer to all of those things is a resounding yes, because there is a large talent pool coming into this space. And this is a generational defining opportunity, right? The energy trend Climate transition is, as I mentioned earlier, right, is about a $5 trillion opportunity. BC has a lot of, you know, big numbers, right? Total addressable market, right? This is as big as it gets because this is not just refining one sector of the economy, but climate tech is in every sector of the economy, right? It's how we live, how we operate businesses, and what that means in the context of a warming world.

So like when you kind of begin to hear founders and, you know, see pitches, right? What are, especially at the pre-seed stage, like what are some key markers of like, hey, this is a founder who I would potentially invest in or invest in? Like what do you look for there?

Yeah, we have a pretty built-out diligence criteria as a fund, right? So we kind of think about it in 3 main categories. The first is, is it a big problem? Is it a problem worth solving? There, of course, the numbers around what's the addressable market, what is the climate impact that this company is going to have. We have our own benchmarks where we're looking to, on the mitigation side, we're looking to mitigate 100 metric tons of carbon, 100 million metric tons of carbon over the next couple of decades. On the adaptation side, we are looking to help save at least 100 million people from the consequences of climate change using some of these technologies, right? So that— so there is a— is it a big problem? Is the first question, right? The second question is, is this a team that can actually solve this big problem, right? So that's where a lot of the founders' background comes into play, both on the technical side, right? And the you know, the background that they bring, the subject matter expertise, whether they're coming out of a PhD program at a university or they've been in the business side, on the policy side, right? And they know some of the challenges in this space. So that technical experience really matters. But in addition to that, the founder's sort of EQ skills also matter, right? Are they a good storyteller? Are they going to be able to be able to sell this product to other people? Are they going to be able to hire, right? And do they have sort of the gravitas to do that? Do they go out and talk to customers and really try to figure out what the pain points are? Are they open to feedback and iterate on their product, you know, as the company is growing? So all of those things matter, matter a lot on, you know, is this the right team? That can solve this problem. And then the third piece focuses on, you know, can they scale? So there we look at three different criteria: feasibility, viability, and desirability. Feasibility is around technical risk. We as a firm do not invest in anything below sort of a TRL 5 or 6, is basically the lowest that we can go. There are lots of non-dilutive incubators and accelerator programs available in the market. I sit on the boards and sort of selection committees for a lot of them. So for me, I'm often like wanting to see companies as they come through those programs until they have sort of a beta-level product and they're out doing pilots in market, right? And sort of those have, have a product that is applicable to the real world and is not just an idea on a deck. So that's all around the feasibility. The viability is, is this a unit economics positive business? How do you get to scale? What are the numbers, right? In terms of your growth trajectory, in terms of your projected revenues, where can you save on costs and sort of the operational elements of building a business? And then the last piece is on desirability. So are there other human beings who want to buy whatever it is that you're building at a price point that you want to sell it at? And I think that piece of it arguably is the hardest, right? Because people, you know, people don't buy things because they're green. People buy things because they are faster, better, and cheaper than the alternative, right? Or than the status quo. And that's a lot of what we look for in the companies that we invest in.

So before we head on to, you know, just the audience questions, you talked a little bit about storytelling as a kind of like a good storytelling as a trait. That you look for? What would you say is a good story? Right? What are kind of the key components of, especially in your industry?

Yeah, I think it's combining storytelling with your technical competence, right? So you can go on ChatGPT and tell it to write a story and you can, in theory, like that will be good enough, right? And, and, and, you know, get you to sales. But that's, that's not what we're looking for, right? It's a combination of these different elements. So I'll give you an example. One of the companies that we've invested in is an early-stage company called Rhizome. They help utilities understand their climate risk and optimize their infrastructure investments to address that climate risk. So say, for example, you know, I live in New York City. My local utility here is called Con Ed. Con Ed has a lot of infrastructure that is on the waterfront areas. It's at extremely high flood risk. So which transformers and which substations should I fortify against that flood risk so that they don't, you know, burn out during, you know, during a hurricane or during sea level and sea level rise sort of impact? Event, right? If you're PG&E in California, which is the utility there, you have a lot of wildfire risk. So which stuff, which line should I put underground to protect against that wildfire risk, right? Or which line should I insulate? So I think that there's a lot of these different technical components, right? And they use AI and machine learning to basically help the utility understand that climate risk. And then they create a number of modeling scenarios where you get the financial ROI and the social ROI of that process. So I think that's an example of a company where the founder, Mish, has an incredible technical background. He was sort of a C-suite within a company called Urbint, which sells software products to utilities. His co-founder was the VP of engineering at Jupiter Intelligence, which is a big company in the climate risk space. Space and basically built out what these modeling tools look like over the course of 5 to 7 years. And Jupyter is sort of an industry leader in this space. They have come together in this and you've got the technical expertise, but then also Misha has this innate ability to basically explain all this very complicated information to key decision makers within a utility who might not be the You might be explaining this stuff to the folks who manage the capital plan, but they might not know the detailed, in-the-weeds technology and infrastructure layers within a utility. Oftentimes, if I'm at an energy conference and I talk about Rhizome, even without saying that we're an investor, people are like, oh, do you know me? And I think that is an element of not only is he a good storyteller because he can distill down what his product does in layman's terms so that the broader audience can understand it, but it's also like a combination of that is also with relationship building with the right power players within the industry. So I think that it's a combination of a lot of different skill sets that enhances that storytelling prowess.

Yeah, we always kind of talk about how you need to build a relationship with investors, right? Because what happens is we'll have founders who'll kind of start that journey and they'll make those, you know, first intros, but like 99% of the time it doesn't really lead into anything. So I think like what we do is like we talk about building that relationship, maintaining it. And I think like you said, right, it's a part of telling that story because if that investor is following you and your journey, it kind of all, you know, becomes a part of the story that you're trying to tell.

Right, right. Yeah, exactly right. It's a broad sort of comprehensive way in which you're telling that story, but you're also delivering product, right? And you've got people who've used that product that can sort of augment, you know, what you are saying to folks.

Exactly, exactly. Okay, so getting into audience questions here, we have this question that I found super interesting and super relevant. Jack asked, many SaaS startups, maybe like look at this question in a more broader sense, right? Many startups now incorporate AI into their products. How do you see investors evaluating AI startups? Or how do you as an investor evaluate an AI startup?

Yeah, I mean AI is in everything right now, right? I mean I use ChatGPT probably 20 times a day, right? And I think that can be true, you know, said of, you know, many of you. So I often think about, okay, AI is a tool that can be used to augment a product, right? And to augment a solution to something that you're trying to solve. I'm often asking, what is the technical moat of your algorithm, right? What is the aha moment of why the way you use AI is different from the next person over? And I think that's where a lot of startups fail, right? I get pitched a ton of companies where it's like, oh, I'm using AI to decarbonize buildings, or I'm using AI to like make the HVAC contractor workflow simpler, or I'm using AI to engage with, you know, engage with technology solutions on the energy management side, right? I'm using AI to optimize the energy stack within a data center so that it uses less energy, right? There's tons and tons of these different startups, but again, it's like, what is your technical moat? What differentiates you and what prevents the next person over from starting a, you know, a similar type of company? That's one piece on the technical side, right? And then the second is like, okay, well, how, how can you actually How good is your technical mode such that you can then sell this product, right, to your end buyer and make their own internal processes much more efficient? So those are often the questions that I'm asking within this space. I mean, I think in climate, you know, AI is often used for a lot of different things. I mentioned Rhizome, right, where they're basically using AI and machine learning models to understand climate risk and its impact on infrastructure systems. But there's also this challenge of AI is a huge, huge energy consumer, right? And how do you actually manage that energy? And to me, it's not just software that's going to be able to manage that energy, right? It's actually hardware and the physicality of the chips, the racks, the data centers that needs to be transformed. I was talking to a company a few days ago, right? They actually address this issue at the point source. So if you look at sort of semiconductor chips, up till now, it's very hard to sort of layer a cooling sort of laminate over those chips. In some cases, those chips get bigger and bigger, and the thermal energy on one side of the chip might be different than that on the other side of the chip. So this layer that this founder has developed, right, as a part of his PhD, you can put onto the chip and it self-regulates and sort of says, okay, I need to make this side of the, you know, the left side of the chip cooler than the right side of the chip. That I think is super interesting, right? Because it's going to the point source challenge on the energy consumption side and solving for that rather than like a high level, you know, let me load shift, you know, shift the energy load at peak hours, right? That stuff only gets you about 20% of the way, but it's the hardware that actually gets you 80% of the way.

Awesome. Yeah. And I think that's one of the bigger challenges with AI, about how do you justify using AI while at the same time that big drain on natural resources, right? At least now when we're reliant on fossil fuels basically, right?

Yeah, it's a huge drain, but it's also like Again, right, the world moves without being cognizant of the environmental impacts of different technologies and solutions. Like, this has happened since the Industrial Revolution. I don't think it's going to stop anytime soon, right? So I think it's more around how do you make systems much more efficient given the demands, like intellectual and technical demands of the world at large.

Yeah, makes sense. So we have a question here from Kaylee that's interesting. So they ask, how do you normally find startups and how should startups find you?

Yeah, so we have a huge network called Climate Tech Cities. We have a newsletter that goes out to multiple different cities every week, and we have about 25,000 people as a part of that network. Our newsletters, you know, New York Climate Tech, for example, we have all the different climate events in each city. We aggregate, you know, all that across our different partners. We host panel sessions, we host happy hours, we host demo nights. So it's a very active ecosystem that we're in. So we get a lot of founders like through our own events and through our sort of huge newsletter base. We hear about startups from other investors, right? I have biweekly or bimonthly phone calls set up on my calendar with a lot of other investors in the space who I like and I trust. We also do quite a bit on the— we do quite a bit on the event side. We ourselves go to events as well, right? But I think that is a little bit less common because I think it's hard to judge quality of someone you just met at a networking event. But that's another piece. And then I'd say one of our biggest sources is actually I sit on the boards of Venture for Climate Tech, Scale for Climate Tech, selection committees for Activate, for the Climate Exchange, right? All of these different climate tech incubators and accelerators. And that to me is actually the best source because those are companies that are a part of a program, I can kind of follow them and get to know them over the course of the past of a year or two, right? As they're bringing their product to market. And at that time, they're also ready for investment from us because we do invest in companies that, you know, have a product in pilot stage out in the market. And I think that's the right sweet spot for us. So a lot of different events. But yeah, if you go to our website, streetlifeventures.com, there's a section called Pitch Us. We make every founder, you know, fill out the same form. Even if you send me a startup and I trust you, everybody will fill out the same form because there's a lot of bias in this industry. So our goal is to actually reduce that bias and get standardized data across, um, across these, uh, industries, and then also be able to, um, uh, get, um, information about the startup so that you're not pitching us for the 100th time when you get on the phone with us. We know we review every deck, we send a list of about 10 to 15 questions ahead of time so that we can make our time most productive.

Okay, so just before I ask my next question, we'll have Fahima, who are producers, share the link in the chat. So you talked about founders pitching you again and again, right? Like, I'm sure you do have founders who approach you for the first time. So how should they be considerate of when to next pitch you? What would be your ideal cadence when it comes to contacting you?

Yeah, I mean, we are all inundated with information, emails, text messages, WhatsApps, LinkedIn messages, et cetera, et cetera. The list goes on and on. So I think everyone in this call is busy, right? So I think just be mindful of that. I often say like, if I don't get back to you in 2 or 3 weeks, bump it up, right? Chances are that it just like fell in my inbox. But I think that's one piece of it. I think the second piece of it is that if it's not a right fit for us, we will tell you that. Our diligence process is 3 to 4 weeks. We go deep as a part of that process. But if it's not a right fit, it's not a right fit, right? Thousands of other VCs out there. So like so much of this is like raising capital from people where you have that match and being mindful of that, right? But yeah, I think oftentimes, you know, if I get a pitch and it's not at the right time for us, I have a CRM system, right? I put it into my sort of tracking column and then I always tell the founder, you know, feel free to add me to an update newsletter that you send. You know, oftentimes founders send like monthly or yearly newsletters and things like that. So that's been an easy way for us to sort of understand what the updates are within the company and keep tabs. And then we'll often say in our email response to you, we'll often say, you know, when you get to X number of pilots or when you finish this, you know, this product that you're developing, right? Or this feature that you're developing, that's a good time to check in. So we as investors are very sort of forthcoming with that information, right? Because like we also have to fundraise, right? Like I have to go out and fundraise for my venture fund so that I can then invest in startups. I know sort of what that ecosystem is like and how challenging all of this can be.

Awesome. So, okay, we have this question here from Peter and it's a two-parter here. When going into a pitch, how much should you be able to explain A, your data room and the key verticals and like how do you plan to grow those? Like how do you want this information laid out for you?

Yeah, so as I mentioned, we have a process, right? We have a form that you fill out. It takes about 7 to 10 minutes where we ask you information on your climate impact, your traction, right? All of those things that I talked about sort of in my, in the diligence questions that I mentioned earlier. Um, and then we, um, aim to, uh, sort of review all of that, um, and, um, again, send you a list of questions ahead of a first call. Um, in some cases, founders sort of respond to those questions, and others we use the time on the call to go through those questions. Um, it's a mixed, uh, mixed bag, but, um, we aim to really focus on how can we actually build a product or, you know, how can, how are you actually building your product? What are your revenue numbers like? What is your path to scale? You know, what are the go-to-market verticals? How have you learned about the customer to prioritize which of those go-to-market verticals is most valuable to you right now? Who are the main buyers within those verticals and like, how are you forming those relationships? So there's a lot of those types of questions. That we will ask early on. And then if we are satisfied with those answers and again, if it's a good fit, right, then we'll then go in and ask for a more detailed data room to dive into some of those numbers.

And just generally, right, from a pre-seed stage perspective, because we have a couple of people including Tom in the Q&A asking how important is it to have a a robust business model, right? Especially at the pre-seed stage, because it's very hard to define those metrics at times. So what's a good way to communicate that?

Yeah, well, I mean, what goes into the model is what comes out of the model, right? So I think one of the things that often irks me is that I often see founders like, oh, I'm going to go from basically zero revenue to 2 million in revenue within the next 6 months to like 10 million in revenue in the next 2 years, right? And then that hockey stick growth, like that doesn't happen. That did not happen with Uber. It did not happen with like, you know, Google, etc., etc., right? These companies take time to grow. So you have to be realistic about what that looks like for you. I often say, like, if I see those kind of like, kind of really frankly, like somewhat ridiculous numbers, right, that then I question the judgment of the founder and their ability to understand how their market functions and what that growth profile looks like. So I think the most important thing is to be realistic, right, about that growth trajectory, base your numbers in concrete facts, right, and some of the customer discovery that you've done, some of the sort of product development that you may have done up to this point. And that's what I would focus on.

So like particularly in the startups that you invest in, climate infrastructure, all that, do you feel like, or maybe if you could just kind of educate us here when it comes to growth and when to actually expect that growth, do you feel like it's like vastly different from let's say B2B SaaS? Right?

Yeah, the growth is very different, right? I think that especially if you're building a hardware company, we invest both in hardware and software, but particularly if you're building a hardware company, oftentimes it's scaled growth, right? So it's like you'll have a product, you're, you're going to spend a couple years, oftentimes 2 to 3 years developing a really good product and testing that product in the real world, right? Testing the capabilities abilities, whatnot, right? And only then do you kind of get to that, to that scale, right? Because you have a product that works, right? And then you can sort of push an on switch to then go out and sell. Whereas I think on the software side, it's quite different because you can iterate on software solutions much, much faster. You can bring something to market, you can tweak your code, etc. You can build in new functionality sort of along the way. So that product development cycle just looks different where you have like more consistent steady growth versus like kind of flatline and then, you know, and then a curve up. So I'd say that's the biggest difference between, you know, between the two. But one big thing to consider is actually like, how do you actually finance that growth? Right. So we work with a lot of founders on non-dilutive capital, as I mentioned. Venture is an extremely expensive form of capital to take on, right? You are diluting yourself as a founder anytime you bring in a VC on your cap table. So a lot of what we focus on is how can we actually put in venture dollars, but then help our founders get non-dilutive capital, be that grants from different government programs at the state and local level, occasionally at the federal level, be that again, non-dilutive incubators and accelerators that we're partners with. Be that revenue-based debt or asset-backed financing that can be provided by the green banks in the ecosystem, or in New York, we have a NYSEEP, which is the New York City Energy Efficiency Corporation, right, that can do small loans to startups up to about $5 to $7 million, right? So there's a lot of different debt products that I'd also encourage founders to utilize. And again, right, for our portfolio, we do a lot of sort of matchmaking and connections in this space. But I think that is critical as well.

Yeah, that's super interesting because we literally had somebody in the Q&A ask about like, how do you approach funding when, if you're not ready for VC funding, right? I believe it was Bob. Anyways, yeah, so we have this question here from Salman and this is kind of a more of a general question and maybe you could answer it too because like you said, the problem of climate change, for example, is so massive. Sulman asked, you mentioned when vetting a company, you ask the question, is the problem big enough? What if a VC tells you the problem is too big? Is there such a thing?

There's no problem that's too big, right? You have to think about big problems and then funnel them down into small sections as to what can you actually address with your product, right? So the energy grid is a huge problem. The United States, for example, we have the lowest reliability and affordability and renewable sort of resources in our grid compared to all other OECD countries, right? That is not a league table that you want to be on. And that challenge is just going to continue to grow as the world electrifies and the demand from AI and data centers and things like that continues to increase. Increase, right? Um, we basically need double capacity, um, over the next 20 to 30 years. Uh, it is extremely expensive to build out new transmission infrastructure, um, and sort of new sort of hard assets, right? But what can you do to optimize and juice the grid for what it has? So things like virtual power plants, where one of our portfolio companies, Public Grid, they basically like work with a whole bunch of buildings And they get renters, right, tenants of those buildings to sort of come onto their platform. And then they can source renewable energy through community solar, nearby community solar projects, and offer those to, you know, to these customers. They can also connect with the local utility and all the incentives that the local utilities are offering to get the, you know, to get tenants to use less energy, right? And then they also participate in sort of demand response. So if you can aggregate all the saved, you know, you can send a text message or like set a unit's air conditioner from, you know, 72 degrees to 74 degrees in the middle of the afternoon on a hot summer day like today, right? If you can actually save that energy, aggregate all that energy and sell it back to the grid, that is choosing what you already have, right? It's making it much more efficient. So that's just like one example of like the 10,000 different companies, right? Or the 10,000 different ways that you can address the challenge of the grid. So it's thinking about like, how can you break this big, big problem down into bite-sized chunks and develop a product for that particular bite-sized chunk and scale and be the market leader sort of within that niche?

Awesome. So you talked about how, you know, you focus on North America. We do have founders from all across the world here. So one of the questions that we're getting is, let's say, maybe not you, but maybe if it's, you know, a different investor, how do you, as a founder from, let's say, a developing region, you know, garner the interest of a VC who operates across the globe?

Yeah, I think we, we do operate across the globe in the sense that we try to, we try to help our company. Our companies are domiciled like in the US or Europe, right? But we are able, like several of our companies operate in other parts of the country, other parts of the world. So for example, one of our portfolio companies, we're just about to make this investment in a portfolio company company called Estia. They're basically like a— it's like a hydrogel technology. So hydrogel is basically a product that you can— it's a gel-based product that you can dip into water, into cold water, put it into a fabric, and then that water evaporates as it touches the human skin. So it actually cools down the body about 10 degrees Celsius, right? It's pretty significant. Huge, huge challenge if you're working in the construction industry, if you're working in the logistics industry, if you're working in agriculture, right? Any outdoor, outdoor labor-intensive area or labor-intensive company will want to buy this for their workers because productivity decreases significantly, you know, once you hit sort of a 90-degree threshold, right? 90-degree Fahrenheit threshold. So that company manufactures in Taiwan. Some of their first customers are in Singapore and in Japan, and the founders are based here in the States, right? So I think that there is like so much of this as can your technology actually be applied in multiple different jurisdictions and like how do you scale? And then as a fund, you know, for our next fund, we certainly want to be able to invest in other parts of the world, right? So much of this is also building out our own sort of capacities to have local knowledge and networks. But that's a big focus area because both Laura and I have a lot of background. I worked at the World Bank, right? You can probably see this map behind me. I love exploring different places and sort of getting to know local ecosystems. So I think that's something that's like a big focus area for us. And the next one, because climate change doesn't have borders, right? And that's one of the challenges, like how do you actually address these big systematic global problems with new solutions?

So one of the, one of the things that I kind of thought of while you were talking was because you operate in kind of like such a difficult domain and it's a lot of it is like very hard science. In fact, all of it is like very hard science, right? So how, How hard is the due diligence on your part when it comes to the actual products?

Yeah, it's a good question. So we basically, our process is that we will have a first call with the founder, we'll review the deck, have a first call with the founder, we'll go from that, and then we will kind of decide whether or not we want to continue having calls, right, and digging in. We go through, we have probably like 5 to 6 calls with the founder over the course, or the founding team, right, over the course of sort of making an investment decision. We'll dig into the numbers, etc., etc. We will then call outside sort of buyers, right? We'll talk to some of the customers that the founder has sold to. We'll also talk to others in the ecosystem. So if you're selling and building decarbonization technology, right, I'll open up my Rolodex of all the real estate folks that I know and give them a call and ask them like, what do you think about these different, you know, these different technologies? And then I'll take it from there, right? So for us, it is a big, it's a big focus for doing that diligence with outside parties to understand what is the pain point in the industry and how is this product solving that pain point. That's one piece of it. On the technical piece, we have, what we call the gauntlet. So we have a network of several deep technical experts who we've known sort of over the course of our own careers. We will send our investment memo to them and we'll ask them to tear it apart, right? Because you develop a lot of sunk fallacy, right? As you're getting to know the founders over the course of many weeks, right? And we ask them to tear it apart such that we kind of know what we don't know, right? Or we don't know, in some cases we don't know what we don't know. In other cases, we do know what we don't know, right? And ask them for their feedback as a part of that process. And then only will we go through and sort of negotiate terms and make an investment. So we are not the types of investors where like, you send me a pitch deck and you say your round is closing next week and it's a hot deal and like, please come in, that is not us, right? We take usually at least 2 months to diligence companies kind of start to finish.

And I'm sure a lot of people, they appreciate the transparency on the amount of time that you take because I think a lot of people have had this experience where they'll reach out to investor, they have that first initial conversation, it's going really well, and then it's, you know, radio silence. So I think a lot of people would really appreciate the transparency. Uh, okay, so Sonam, we have about 10 minutes left. What I want to do is I want to go through a couple of questions super quickly. Uh, first of all, we have Doris here from, uh, Germany. Uh, hi Sonam, I'm an architect based in Berlin, currently working on developing a faster and more affordable construction process to help address the housing shortage. Do you have advice on how to make this idea scalable? Or like, how do you communicate the scalability of an idea to an investor?

Yeah, I mean, housing is a big problem, right? Like, the total addressable market is huge, right? Because everybody needs a home to live in, um, and construction is extremely, extremely difficult, often mired in bureaucratic hurdles. Um, there's a ton that you can do on sort of new building materials, things like that. But I think one of the biggest problems in this space is that a lot of companies— there's two things that I see regularly in the market. One is like, let me develop a software tool to make the construction process easier, um, and kind of connect workflows and things like that. And frankly, I think that's a really saturated part of the market. I don't like to invest in that space because I think that there are more than enough companies out there, and it's about like consolidating that market. Um, the second is actually on like things like modular construction or new construction technologies, um, to make the actual physical output of homes faster and cheaper. And I think that there is like more innovation to be had on that side of the house. But where companies often fail is that they will build kind of this very complicated process, but you've got to then build a factory to build out that process, right? Or you've got to, you know, put a lot of hard capital cost into developing those products rather than working with contract manufacturers or otherwise. And I think that's where a lot of these sort of modular solutions fail. These are not venture-backable businesses, right? They're more like holdco structures. So you have to think about, can you create two different parts of a business where you might have— on one side you might have sort of a software layer, right, that then integrates with the hardware side. And in the future, you could potentially spin off the software layer and turn that into its own business line. So yeah, so I think just thinking about is this the right type of company for venture is what you should be asking because most, like 95% of the businesses in the world should not be raising venture capital because it just doesn't make sense. It's very expensive.

Okay, so kind of going to the basics a little bit, what are a couple of things that you feel every founder should have in their pitch deck? Like a couple of slides that you feel like you absolutely cannot miss out on?

Um, who are you and why are you, why are you doing this, right? So like, first and foremost, especially at the earliest stages, like, I as an investor, I'm investing in you and your prowess, um, within this industry, right? Um, so, so understanding your backgrounds, um, your technical expertise, you know, your business expertise, why, why you, and what's the founding story in of the team. Um, the other pieces is, um, uh, what's the problem that you're trying to solve and why this part of the industry, right, versus any other? And, um, what are the technical elements of your solution, right? What is your specific technical moat? Um, how are you differentiated against the competition? So I love it when people actually give me, you know, 4 or 5 other other products in the same space and why they, you know, why this new product is going to be different than all the others. Um, uh, what are your go-to-market sort of, um, uh, categories, right? Who are the buyers that you're targeting, um, in this space? Um, and then the last big thing that I really need to know is, um, what are your unit economics today? And like, what do you, what do you expect those to be, you know, 5 years from now? Um, as scale, and what does, you know, what does that graph look like over the course of the life cycle of the company?

Okay, so we have this question here that I found super interesting. It's, uh, Pavel. He has a super kind of specific question. I wanted to kind of get your take on this. Uh, they have an industrial recycling startup, uh, they're operating a pilot plant, uh, invent— investor has, uh, okay, so I kind of don't understand what you're saying there, Pavel, but anyways, the challenges are angel— for angels, the CapEx is too high. VC, it's not a VC case. For PE, it's just too early stage. How do they finance growth? Like, what are some of the next steps that they might consider?

Yeah, I mean, I think, um, industrial recycling is hard. Yeah, there's, there's a lot of CapEx for sure. I think, um, one of the things that I would recommend looking into is, again, non-dilutive capital, right? So can you get a grant for $500,000 to $1 million to help you be able to scale your product. The second thing is I would, I would actually look for strategic partnerships, right? So there are tons of waste management companies out there that are trying to look for new technologies to like improve their own operations. Does it make sense to create a strategic partnership today where you can help kind of test your technology and build it within the confines of of a large player in this space. So those are some things that I would think about as you scale.

Awesome. So just kind of before we wrap up, how would you recommend a super early stage founder go about validating their idea? Because I think the type of problems that you're trying to solve are really big and I think a lot of people, they probably have a ton of ideas, right? So how do you go about that?

Yeah, I mean, even before you start building a product, go have, talk to 35 people, 40 people, right? Within this space to understand what the pain points are. So again, buildings is one category that we invest in, right? Some of the pain points are that It's very expensive to put up solar panels and change out your HVAC system into heat pumps, right, and whatnot, right? Like, it's not a technology problem, it's a business model problem. So that's like one category that you could focus in on, right? Another might be around, you know, materials, right? So building construction materials and the challenges around structural integrity that's required versus some of the newer technologies, right? The carbon-light technologies that are coming to market. So first and foremost, like, go and talk to people within the industry to understand what problems— what are the biggest problems, right? Because everybody has a list of 100 different problems that they, like, in theory want to solve for, but what are the top 5? And ask them, right, if you could wave a magic wand, what is the solution that you would actually want to solve this pain point for you, right? And then you go out and you try to build, you know, built something in response to that.

Okay, so before we kind of leave it off here, just a final question. We kind of, we talk about this oftentimes and our general recommendation is you should have a co-founder, but how do you feel as, you know, as an investor, do you look for a co-founder, you know, co-founders? Do you, are you willing to invest in like a solo founder?

We are open to investing in solo founders, but I think the challenge is that like building a startup is really hard, right? It is an extraordinary amount of work. And I can say this myself, right? We have started a venture fund, right? It's basically like a startup in and of itself, right? And so I think that is one thing to keep in mind in terms of just like what your own personal bandwidth is and the reality of the world that you live in, right? And how challenging that can be just with life demands, right? And thinking about what that could mean for you. So we're often looking for folks who do have co-founders, right? And especially because one person does not necessarily have all the skills needed to be able to start and scale a company. So can you bring on someone who has someone, 2, 3, 4 people, however many you want, right, that has those complementary skill sets so that you can get to market faster with a product to solve this big problem.

Awesome. Awesome. Thank you so much for joining us today. I really, really appreciate you taking out the time. And I know all the questions that we got, it was pretty obvious that everybody kind of really loved it. So thank you so much.

Yeah, thank you. And again, happy to stay in touch if you're raising within sort of the climate space, right? Feel free to fill in our pitch form. Again, I can't emphasize enough, like, you know, take a look at a company's, at a venture fund's website and actually understand like what they're investing in, right? Versus kind of wasting your time kind of willy-nilly applying for stuff because we all have very specific theses, right? So that's something that I would recommend just in general. But yeah, certainly keep in touch. I'm the only one with my name on the internet, which is both a good and bad thing, but I'm very easily Googleable and findable. I'm happy to connect on LinkedIn and be a resource, you know, as you all bring your companies to life.

Awesome. There you have it, folks. Thank you so much for joining us today. We'll have a replay of the webinar out to you in the next 48 hours. I hope you have an awesome day ahead, and we will be open for networking. So if you want to connect with founders from across the world, please feel free to stay back. I hope you have an awesome day. Thank you so much, Sonam, for joining us again.

Likewise, thank you, Daniel, for having me. All right, good luck everyone.