- Decarbonisation touches every element of the economy
- Blackbird looks for founders who are customer focused
- Responsible investing is a baseline now, not to be confused with climate tech investing
Three minute highlight video here.
Full video here.
Full transcript below:
Mick Liubinskas, Climate Salad 0:00
Hi everyone, Mick Liubinskas here from Climate Salad. Thank you so much for joining really amazing group of people here, loving got so much interest in passion around climate technology. And one of the best things about it for me has been being able to connect with and meet people who are also passionate about this space and, and who are investing their time resources experience. And when one of those people I've met over the last year is Phoebe from Blackbird ventures. Phoebe, it's been great to get to know you. And I'd love for you to give a quick introduction. And we can now dive into some of the big topic areas.
Phoebe Harrop, Blackbird 0:38
Yeah, very happy to do that. So Dakota kassala Hello to everyone, whether you're coming from Australia or New Zealand, if you're coming from Melbourne, I hope you haven't been too shaken by this morning's events. And I'm thinking of you from, we have a lot of experience in New Zealand with those sorts of earthquakes. And you know that you never get used to it. So I'm thinking of you all today. But anyway, it's a great pleasure to be here. So as Nick said, I'm an investor, I work at Blackbird. And I'm based in Auckland, where we have actually just two of us at the moment, listing a $16 million fund in Kiwi founders. And I'm part of the bigger like the investment team, which sits across Australia and New Zealand, I actually joined Blackbird only about 66 months ago. Prior to that I was in London for the last five years and in Melbourne for two years before that. So I'm a little bit new back to altaira. And to the both the kind of startup and technology landscape here also getting my head around everything from how government operates with technology startups and in the climate space through so who the kind of complete village of people here and it is. So the perspectives that I'm going to share today, kind of my observations as a relative newbie back to Australia or New Zealand, and should be taken with a grain of salt, because I'm still getting my head around it too.
Mick Liubinskas, Climate Salad 2:02
Amazing yet certainly. I've seen just incredible changes on so many fronts. Over the last few years, we've had a change of geography a change of role, and you've seen some of that change. I'd love to start with with that, like clean tech to climate tech. Philanthropy impact changes to be just main business as usual. Now, if you've seen that adjustment already happen, or is it Are we still in flux? And what do you see the big biggest changes that are that we have now, which we didn't have a few years ago?
Phoebe Harrop, Blackbird 2:38
Yeah, lots lots to cover there. I think if I think about my career, when I started working, it was in Melbourne for Bain and company as a strategy consultant. And one lunchtime, I went along to hear Dan Mediven talk from his impact Investment Group event investing group then. And he talked about kind of this idea of combining non financial objectives with with investment with finance. And that, to me was such a lightbulb moment, it was like, Oh, my gosh, that's so obvious. If only you could have that kind of lockstep impact with every financial decision you made, like how quickly could we create a more, you know, efficient and effective, sustainable, customer friendly world. And that idea is like was relatively new and I think is now become very mainstream. So even in my relatively short career today, the idea that businesses exist, not just to deliver financial returns to investors and instead need to be considered new to consider all of this stakeholders that sort of idea of ESG broadly construed is something that is relatively brief history that has now I think it does have adoption. And my, when I finished off at Bain and became an investment working generation, that is a fund that was set up by Al Gore and a group of partners from Goldman Sachs back in about 2002. So long time ago now. And they set up that firm with this belief that if you looked at the elements of the business, not just its financial returns, but also its you know, its governance practices, whether the very business model that it was relying on would be around in 50 years, whether it managed its supply chain in a way that was consistent with that sort of generational ownership. And that whole perspective was like completely iconoclastic in 2002 2003, and now it's 100% mainstream. So that kind of theory of change that they set out and found a generational long, has kind of come to fruition. Now what's interesting is in I did not live as an investor through clean tech 1.0 but definitely inherited some of the wisdom or maybe scars from that period while I was at generation working in their growth equity, private investing team and It seems that we are in a very exciting second wave of climate technologies call them. Where there's so much more availability of capital, there's supportive policy. I just thought earlier this morning that Xi Jinping has announced no external like no overseas funding for coal projects globally, which is a incredible milestone, and it puts a lot of pressure on fat on that whole sector. So you know, a lot of support in from different areas for decarbonisation, and technologies that can help achieve it. And the capital inflows are significant. So a lot of traditional high quality asset managers, venture capital funds, are creating dedicated climate funds, have you know, everyone from Robert Downey, Jr. to Bill Gates standing up specific funds, and that's creating really interesting conditions, which I'm sure we'll get into about the number of companies that are being funded the variety of technologies and, yeah, it's a very exciting time to be operating in the space, no matter what your interests are.
Mick Liubinskas, Climate Salad 6:16
I love to drill down in that into two from two angles. One is, you've got BlackRock AND gates and billions of dollars and trillions of dollars up here. And then you've got startups in New Zealand. So the how do you how do you go, but we need those startups to go to global impact. And to do that we kind of need the money to get down to the startups. Like how did both of those things happen in a fast enough way to solve these big problems? And and how do you see them from your lens in New Zealand? At the moment?
Phoebe Harrop, Blackbird 6:50
Yeah, good. Good question. I think it's, let's not confuse the sort of responsible investment movement, which applies to, you know, listed companies of all sorts, in private companies to that the kind of black rocks and I mean, it's arguable whether they've got a good track record on that front, but then at least talked a lot about that being important, this kind of debt, which is like responsible investment, being almost a baseline requirement now. And then separately, this kind of how do you scale innovative, novel climate technology solutions? I, you know, historically, there was a real problem in First of all, attracting venture capital. So you know, high risk tolerance, early stage investment money to support the prototype stage of, of climate technologies, then they'll walk in, I think that stage of things is, is starting to resolve. So, you know, Blackbird where I now am when by no means a climate focused fund, but we have some outstanding climate focused founders in our portfolio, the likes of sun, Dr. Making incredible progress for Bodhi, who is the best company you've probably never heard of, because I've been in stealth for energy bank, which is hidden in New Zealand.
Mick Liubinskas, Climate Salad 8:13
He's on the call. I think so. Just Yeah, that's, that will be aware, aware of that. But yeah,
Phoebe Harrop, Blackbird 8:24
only ever say nice things. And so I think that initial stage of, you know, injecting that high, high risk capital, to the point into founders at that stage with that kind of good move from ideation to prototyping. That's sort of part of the capital journey seems relatively well resolved. In New Zealand, you have, you have dedicated deep technology funds, the likes of outside ventures who also provide office, kind of office space r&d space, you have nuance capital, who has a focus on deep tech innovation, but then you also have kind of mainstream venture capital funds like icehouse, like Burnett bucket, who can see, you know, shiny, ambitious, world changing founders creating ideas in this space like, Tim, I think the interesting challenges, because I think it's also a time and place thing where that's probably true of the last two or three years. And what is going to be a challenge is the next phase. Once some of these innovative technologies move beyond prototype stage, they need to look globally for customers that need to scale manufacturing. They need to big build a very significant manufacturing plant in certain places like that kind of project capex or that, you know, bigger checks, with probably still a lot of patience, rather than a traditional debt facility, that kind of type of capital. I'm not exactly sure how that's gonna play out for Australia and New Zealand companies. And it's really important and problematic valley of death that needs to be overcome for our companies to be successful. So you do see, I'm generation itself where I was previously as innovating a they're about to announce a fund that will cover that kind of opportunity where there's a very promising technology, it's not yet at commercial scale. And there's an opportunity to provide patient more debt, like, I guess funding for for scale up. But that's probably the next opportunity in the capital stack where there's not so much supply, hopefully, that will change. And you'll be interested in any perspectives from umeko, from anyone in the room around that sort of next growth phase of capital, where you have capital intensive hardware, which is, you know, describes, I guess, most of climate tech that we're talking about?
Mick Liubinskas, Climate Salad 10:55
It is a really interesting question, I think, I would have hoped for this kind of change in the world and movement of capital and entrepreneurship and research and those things, I think that's really positive. And I think, Michael Molyneux is also because as climate scientist speaks a lot about how important the next three years are, because we cannot wait till all actions we do in the next three years have a massive positive impact on where we are at the end of this decade. So that action is really critical. But even with my best crystal ball, it's really hard to see how all those components fit in together. And it goes to that last point you raised about deep tech and hard technology, science tech, when you think that focus in this area, between SAS, which we've got pretty good models on and blackbirds got an outstanding reputation with growing those companies from New Zealand and Australia globally. And you can see how they would scale to energy bank, which has, which is like, you know, doing an update of culture, amp versus doing an update of energy bank as a product, like they are just materially different things. But we can't SAS is not going to solve all of our problems. We need to do some of that hard stuff. And there, you're speaking to Andrew Rogers, an angel investor in this space. And we're like, Well, how do we get our heads around understanding the path of these companies? We've never claimed it's not going to be exactly the same. So given the backwards, not 100%, climate tech focus, do you do? Is there a layer that's still the same, which is outstanding co founding team solving the problem? I don't care how the technology is the capital requirements, we'll work that out. Or do you think it's going to be you know, what we won't do ag or we won't do transport will only do these kinds of things? Because we've got to get deeper than what do you think there might be another lens by which we want to filter and understand the opportunities?
Phoebe Harrop, Blackbird 12:52
Yeah, I think that the genuine Eric at Spotify characterises the difference in these business models between like a preference for investing in bits or preference for investing, in essence. And I think what you're seeing, among many venture funds is been increasing interest in atom based investments. So Blackbird has long actually invested in hardware innovation, and zooks was an early investment, full stack autonomous Robo vehicle. We've invested in space companies, medical device companies, across the board. And that's one of the reasons pretty much one of those strong reasons that I joined Blackbird because it's the lens is not really about business models, or industries or sectors, although we definitely have some strengths as the same kind of bottom up SAS and in other areas, what the lens that we really bring Is this about founders finding people who are doing their life's work, and who have a really understand a problem and developing a solution that has a compelling answer to that problem, such that it will change their customer's life. And people that are customer obsessed, problem lead rather than solution lead. They are solving all sorts of problems. And so we are much more particularly in New Zealand, super agnostic as to what people are doing. It's much more about understanding the people themselves, their motivations, how deeply they go along the customer journey to understand the problem. And the solution that that creating. And I think it's interesting in if you imagine a paradigm, challenging hardware innovation, and climate technology, like like many MIT innovation and our in our portfolio, as well as energy bank, it's those things, it's harder to see the clues about customer obsession, and because you may be many years before you can, you can sell something to a customer that, you know what I loved about him is that he already done that work to talk to all of the potential customers and understand what they need and kind of try and work backwards from that too. To create a solution. So I would say the things we look for and founders don't really difference too much between business models. It's always about customer obsession, or hype, you know, technical and product vision that will deliver an amazing experience that customers 10 times better than the status quo. And people who are seeking to do their life's work and build companies that that ideal 810 2030 years.
Mick Liubinskas, Climate Salad 15:26
Yeah, that's a really good point. So I think the mitzvos Adams is, is a really great way to frame it. The the one thing you touched on is the difference in bottom up sales. Again, I won't say it's easy, but you can build a company in Australia, New Zealand, sell it online, put a big credit card details, like the tools around that are pretty known. Versus again, a you know fable or vow foods or Vito foods are an energy bank or or mga thermal, the sales cycle to go to market model is is harder and in a big part of what my drive and showed or tested this for with climate salaries, help them get customers, help them get customers customers solves a lot of problems. But that model of experimentation to find product market fit even. And then then there's in the scalable model, they're quite different. Have you found you need it, you need either different skills in the core team or different skills around you or Blackbird to support those companies that have more complex go to market models? Or is that something that in climate tech, we're still we're still laying the track down on?
Phoebe Harrop, Blackbird 16:39
Many of being determined to define climate tech as well, because I think I think that very broadly, because I know we've got another on the call as well. I mean, for example, there are a lot of really interesting consumer models you've mentioned now in fable like, in a sense, they've actually got very known well worn paths to market around, you know, distribution for grocery retail. And so the challenge there is, is not so yeah, they have a very different challenge, which is very much on the scaling. Obviously, you're creating a prototype that works scaling supply chains for the right inputs, and then manufacturing at a sufficient scale, that they can meet a kind of unit economics price that makes sense for a grocery shop. Yeah, that those things are a little different in the sense that they're bringing novel technologies to food production, that, you know, food system, that that whole idea is relatively recent. Previously, it was sort of just like, you know, repackaging different commodity ingredients in different ways. And spending a lot more time on brand and marketing. Now, it's investing a lot more upfront and creating a product that's differentiated and, and lower emissions. Whereas shoff, you know, for other business models, but I would say it's not climate tech specific, you know, we have given more space in our portfolio that are building rockets in the same way that rocket lab builds rockets, yet they have very different go to market challenges to about I think, with a lot of climate tickets, I mean, it's a sweeping statement. But in most cases, there's such a clear market need for decarbonisation options, that if you do understand a problem that exists and a customer persona or profile that has that problem, and you build something that hasn't existed before and solves their problem, and they actually will buy it. So it's it's like, you know, if it's trying to sell a new mushroom burgers, in a sense harder, because because there are other barriers available, trying to sell a medium long duration energy storage solution, if it works, give them 10 years, then like that is 100% got customers because you can go and talk to energy retailers, renewable energy owners, and they will grab with both hands. So it's maybe a little simplistic model, but the the garden market should resolve itself. I think the biggest challenge with these fundamental climate technologies is a little more the it's a manufacturing scale up pace.
Mick Liubinskas, Climate Salad 19:14
Yeah. Really, that's a really big names. I hadn't thought about that, that fable need to change consumer behaviour. I'm a committed person, I've got fable in my fridge right now. But that's a change thing. Whereas other things are just filling new gaps which didn't even exist. Same thing around carbon pricing and like those there are they are it's it's it's green space versus red space actually like trying to get a Midwest American to have a mushroom burger over a hamburger is going to be a challenge. So
Phoebe Harrop, Blackbird 19:49
the way the other way to think about is in a sense, like most things are going to be climate technologies because decarbonisation touches every element of the economy. So there are very few categories. It was Dave earlier on the call saying that he's working on a decarbonisation pathway for Bitcoin mining. Yeah, that, you know, literally every element of the economy has challenges around sustainability, and opportunities for entrepreneurs of all stripes to to bring things to Market. But yes, they will have different challenges depending on what and what exactly they're doing.
Mick Liubinskas, Climate Salad 20:24
Yeah, that's I think that's totally true. Everything has carbon or consumes carbon in some ways, and has has costs of the environment, which we need to be aware of. That goes to another area to dig in on his level of impact. So, you know, someone was talking to someone just before about your Google's do no harm, okay, that's it's not negative, but it's sort of positive. You know, what, there are companies that are kind of supportive and indirectly beneficial. And there are companies who like sucking out carbon from the world from the air and turning it into, you know, putting it underground. So in terms of direct, I took a tonne out of the sky. How do you evaluate that? Are you looking for like really concrete? What your What is your projected Bill Gates breakthrough? need to be pursuing 1% of the whole problem? And are you okay with things which are indirect or passive, more passive in terms of their impacts?
Phoebe Harrop, Blackbird 21:23
Yeah, I think this comes down to how different investors operate, what their focus is how they would talk about their unique service like proposition and the way that they've talked to, or the way that they talk to their own clients about what they're doing. So think about Generation Y was previously, the whole USP beer was. We look globally for companies who, through business model and technology innovation are making the world more efficient, more sustainable along sort of the lines of the Sustainable Development Goals. And so we would just look for businesses that were reducing greenhouse gas emissions, or improving human health outcomes or financial inclusion. And so we would judge ourselves by whether we, with our portfolio companies with kind of having impacts on those lines. With greenhouse gas emissions, it's actually relatively easy to track impact. And so in a sense, it's also easy to say, we've got a threshold above which that we consider that impactful enough or not to spend our dollars on, there's a lot of interesting work about, you know, the dollar return on impact that the likes of the rise group has done. And that's a really legitimate way to be a responsible or an impact focused fund. And I think there's, it's really important for many funds to do that, and hold themselves to a high standard around where they'll spend their time and money. With Blackbird. Again, we're not an impact fund without a lid. And we believe in investing in companies that we hope will change the world over decades. And you could say that Canva is a more impactful company, then, you know, many of our portfolio in the sense that they've got 50 60 million active monthly active users who, who kind of use it to run their own businesses, which themselves have many positive impacts, now, and Cliff committed a third of their equity, I think, to invest directly in products like give directly. And so impacts a tricky topic. I think, what I guess my theory of change personally, is if you invest in solutions that make the world more efficient, that's right, it may allow for more efficient uses of resources, improve people's lives the way it's the industries operate, and they're good businesses, and those founders are going to go the distance to create enduring companies, then you'll have lockstep In fact, as those companies scale, so almost, it's like, of course, there's a trade off. But, you know, really awesome impact a lot of scale is not as good as a little bit less impact. And yeah, actually, next year, think about a generation one of our portfolio companies was Asana, and is Asana still in the portfolio. And when we did the kind of, you know, greenhouse gas impacts reporting out on our portfolio, they came out as one of the strongest contributors, which sounds really weird. But if you have even very small assumptions about a tool like that, enabling remote collaboration and stopping people taking so many meetings in the office, this is pretty COVID. The actual magnitude of that investment was significant because it's such an amazingly successful company. So it's a index and interesting topic.
Mick Liubinskas, Climate Salad 24:46
Yeah, interesting. Yeah, I can see you grappling with sort of things that we're all grappling with, I think and there is there's going in a good direction, and then some of them are easy to manage measure in hindsight, but it's a little bit like founders. getting their five year cash flow forecast right up like that some of them are going to be much bigger, and some of them might be smaller, but we need kind of everything right now. Right? So it's it's okay, we work that out. But yeah, that's where you draw the line, I think is is definitely tougher sometimes. So there's a trade off of scale and impact as well, like a little bit of impact globally, for a billion people is massive, whereas some people will have a like, one, I can replace one coal fired plant with wind turbines. That's locally individually huge, but not globally. Huge. So it's such a big trade off.
Phoebe Harrop, Blackbird 25:38
Yeah. And I guess the hope is that there are almost like capital pools available for all these different kinds of interventions. But there may also be I don't have a good example that comes to mind that maybe you do, where a business model has many positive attributes, but then has some, some negative ones, you know, maybe relies on rare metals or in therefore extractive industries to widgets. Yeah,
Mick Liubinskas, Climate Salad 26:02
yeah. Yeah, I think catering shipping, I think there's, and there, there are big hard things to solve by shipping in long haul flights as well. And there are things which I think have to be stick changes. So we can't jump straight to perfectly sustainable environment without massive impacts on the world and health and other things and go, I've got two quick questions right up to the audience, please hit the raise your hand function, if you'd like to ask a question. But one of them relates to that, which is incumbents and big organisations making participating in this, we can't completely disrupt them, ignore them. But for a startup, if a startup either wants to have a partnership or a customer, or maybe strategic investment from an incumbent, do you see that as like a? Yeah. What are your thoughts around around incumbents Platt participating in the innovation and startup space?
Phoebe Harrop, Blackbird 26:59
as customers that really important and can be we didn't really talk about this year that? Yeah, obviously, incumbent companies that have a lot of pressures to decarbonize their own operations, or supply chains, they're going to be important pull factors for a lot of the climate technologies that are being innovated by startups. And the question of investment, strategic investment is always a tricky one. I guess, in my experience, corporate investors don't often live up to the promise, and in terms of being really helpful and kind of providing input or strategic advice and introductions and so on that they might promise, of course, that's a really blanket statement. But I suppose for any founders who are considering taking strategic investment, it's it's worth considering, like, is equity, the best way to buy that advice? And I guess what we would say often is the best companies that have the best products can get that love input advice from their customers without having to give equity. So sometimes it's a red flag. It's like, Yeah,
Mick Liubinskas, Climate Salad 28:15
that makes sense. Yeah. Yeah. That's a good way to think about it is your trading equities for that? What do you What are you hoping to get in is another way to get it?
Phoebe Harrop, Blackbird 28:24
Yeah, because money is the most expensive option always.
Mick Liubinskas, Climate Salad 28:28
Phoebe Harrop, Blackbird 28:29
I think I was gonna say that I think what's different about like, this cleantech period is, there is a lot more, there are a lot more vocal poll from large corporations for this technology, innovation. So I was hearing last week about Fortescue metals, wanting to, you know, create a hydrogen powered tracking fleet of its massive mining vehicles. Yeah, they may be out of create opportunities for companies in that space that wouldn't exist. If they had those they had to rely on you know, market price of hydrogen and renewable energy and the inputs required to come down to a certain point in stage. They need almost like to get a foot on the ladder by having those corporates and federally subsidised because that's important to them from a shareholder perspective and sustainability, should we be around as a business perspective to make this happen? So it'll be interesting to see whether some of those tipping points start happening, and kind of getting a leg up to innovative technologies that need to get down that cost curve?
Mick Liubinskas, Climate Salad 29:33
Yeah, I think that's right. I see. Definitely a big difference between blockbuster participating in in on streaming videos versus these were based on the cleared clear risk of them not participating. But that also doesn't mean they are they are, they can still be a great partner for us for startups. So I think it's good that they're participating in asking the questions, but um, yeah, definitely ask your own questions about that value. Last question. Go to Michael and a question. Women in climate tech, I've been a big supporter of women in entrepreneurship generally. I mean, there's amazing women in research. And we've got some amazing female founders in, in climate salad, Queen, Julia and yours and others. Do you see it as a combination of the new opportunity, big space and some real natural talents around research and science? And that, that there's a real opportunity for women to play a bigger role in climate tech than having tech? Or any thoughts on what you've seen either in New Zealand in terms of good things in that direction?
Phoebe Harrop, Blackbird 30:35
Yeah, look, diversity in all its forms is still a challenge throughout the tech landscape. I'd say clean tech looks more or less the same. I don't think there's a any sort of major differences. If you think about the sort of broad construction of climate tickets, including everything from consumer models through to sort of deep technologies. That's definitely true. One thing I read last week was that only 20% of Australian startups that were funded in the first half of the year, have a female founder, which is shockingly low. But the average round size of the rounds that they raised was $17 million, versus 10. So somehow, they're like, you know, raising more money, perhaps, perhaps at a later stage. And, you know, who knows what the actual causation is there before there was interesting.
Mick Liubinskas, Climate Salad 31:24
I saw another stat that said, VCs typically discount projections from female founders by only 15%. And male founders by 50%. Bigger. So there's clearly a lot more honesty and integrity in female founders prediction. So
Phoebe Harrop, Blackbird 31:41
yeah, I think that the issues, ones that's kind of true across the technology landscape in it, it is hard to say exactly what the causation of those low founder participation rates on I'd be interested actually to hear from the group about their perceptions. But there are some, you know, what helps is having amazing female founder role models who have come from very, you know, a range of different backgrounds, range of personality types and spikes, or technical co founders, as well as CEOs and seeing that people have been successful. So in our portfolio, I think Phoebe Gardner, who's the CEO of body, she's an architect and founder, she's about 25. It's just an incredible example. And actually, Olympia as well, who's pursuing a kind of a similar in a similar category actually, also stand out, you have Katherine at bright, all have yet some some great examples. And there's many more who are operating different business model approaches, but in some way, part of the decarbonisation story here in New Zealand or Australia. And then I do think it's important to have female investors because that also makes the conversation we're just potentially makes them more comfortable environment, maybe a perception that you're not always in rooms, we are the only woman. And so we've got some amazing climate focused female investors like Lucy at grok, or in chat here in New Zealand at outset. I think that does help. But I have no doubt. I mean, there are many more structural challenges that exist in and we shouldn't just be focused on gender diversity either. So stick around around on that one.
Mick Liubinskas, Climate Salad 33:27
Yeah. This title question on Michael Blanc, jumping with your first question.
Michael Molitor 33:34
Yeah, great. Thanks. Thanks. Big thanks. Thanks, PBS, the father of two young daughters. They're eight and five. Yeah, I'm heartened to see so many women doing so well, in this area. In fact, it says Olivia moltar next to my name because my eight year old, who is much more digitally savvy than I am, has been using my phone for zoom calls. And I just realised that her name is said, Look, here's here's, here's my concern. First of all, I'm gobsmacked by the number of funds, VCs launching climate tech funds. It's fantastic, right? And the people that I meet, and Mick has been fantastic. I've met an extraordinary group of people, we are attracting some really outstanding people. That's a fantastic sign. But here's my concern. I've got two young daughters, I wake up every day and think about are we going to maintain climate system stability, right. And I see all this money being poured into climate tech. And there seems to be a mismatch between investments which are leading to improvements in our odds of not destabilising the climate system. Right. But improving resource productivity. So when I look at food when I look at stationary energy and transport, the reason why climate change is a great thing incandescent is those areas are horrible, they're terrible. I mean, you couldn't invest if I gave you $50,000 you couldn't create a food system that's worse than what we have. Right. So if I enter the sea, the opportunity to improve food production, even with even without CRISPR and synthetic biology is absolutely massive. So here's what I'm, I expect to see trillions of dollars chasing resource productivity improvements, right? And they're gonna make good money, you know, the LPS are going to do well, the founder is going to do well, and all those things should happen. But there's a complete mismatch between climate tech investments, and the problem, right, so one of the examples that I shared with Mick and I think I shared in a piece that was posted on climate solidus, climate system stability requires a very large amount of emissions to be reduced as quickly as possible. I don't see anything happening in the investment space, that places a premium on companies, even catalyst, you know, breakthrough, you know, I advise the Robert Downey group. I know those guys very, very well. I don't see anybody making the connection between the key elements, right? How do we right? Is there a chance that we're going to, I mean, that Blackbird and these leading industries, like your firm, are going to start thinking about ensuring that we're actually addressing the problem? Because I don't, frankly, I don't I don't see it. Yes.
Phoebe Harrop, Blackbird 36:19
Well, what some examples be of like, you know, if you're in my shoes, what would you put money into, which would truly address the problem?
Michael Molitor 36:26
Yeah, so I mean, me thing, right. I mean, you know, there's a lot of talk about a whole new global effort and targets around me saying, I don't really care about targets or reports or meetings, right. But, and reducing methane and investments in reducing methane from from gas pipeline leaks, or else, that's one where you can get a huge return very quickly in terms of improving climate stability. Now, the problem is that you can make money doing that, but not the same kind of money you can make with SAS, right? So in less than market can assign, we have to move to a market where that assigns a premium to climate stability investments, right? Because I if I'm a VC, and I can invest in two guys and four girls writing code all night, right. As opposed to a company with hardware that's going to be chasing, you know, gas pipeline leakage, for example, or looking at creative. I'm gonna go I'm gonna go the fast route, right? I mean, so it but if that methane opportunity attracts a premium, because there's a climate stability premium, then then SAS doesn't look as good, right?
Phoebe Harrop, Blackbird 37:38
So I'd say probably is increasingly a climate premium stability only because there are so many thematic funds that are cropping up around decarbonisation. So, you know, the risk actually is like, stuffs getting funded, that won't end up working out one end up scaling, because there's a lot of capital sloshing around looking for those innovations. So that's, um, I don't know, if necessarily, I guess my point is also that it doesn't really start with investors like we, we have the privilege of working with founders who are going out and, you know, identifying real market needs and building solutions for them. And so, I'd say it's a little bit of a chicken egg problem and a flywheel opportunity in the sense that if you have meaningful policy commitments to say methane as an alternative sport, as an alternative energy source, or turning waste, methane into energy, whatever you might be getting at in terms of the technology, you're thinking of, you have meaningful policy decisions that support that, then you also have customers who are private entities or public entities who want those solutions and pull them then the then the startups will be formed that will create solutions that those companies and governments will want. So I don't know if we can, if you can start with innovation, I think that's probably been the frustration of the last, you know, quarter, five or 10 years ago, where it's like, you know, we have this great solution at IP x in this part of the economy to make it more efficient, but no one wants it yet, because they're not being forced to want it. And so it's a little bit of like a firewall that's required to get spinning for the push and pull to start happening. And it does feel like it's happening in many areas there probably some that you're thinking about where progress is too slow. And it's an interesting question to ask, what is the unlock there is having a good solution to, to, you know, XYZ thing enough for it to be adopted? Or do you actually need this kind of actor or this kind of actor to actually want it for that to scale? I think it does ultimately come back to customers who's going to pay for this innovation? Why did they pay for it and how do you create the conditions where it's a no brainer for them to buy the solution that's better. And that's not something that startups themselves necessarily can create the conditions in the abstract.
Transcribed by https://otter.aiPrincipal at Blackbird, Phoebe Harrop, spoke to Climate Salad about the climate tech landscape across Australia and New Zealand as well as the evolution of impact investing.