Shomik Dutta of Overture

Welcome to the Puck Venture Capital and Beyond, a show that examines the changing landscape of our world. We'll have candid conversations with VCs, entrepreneurs, and thought leaders grappling with our current challenges and providing solutions to key problems we face as a nation. I'm Jim Beer, president of CMBG Advisors. This podcast brings change makers to the table to discover the inner workings behind their decision making strategies and ultimately to how they got to where they are today. All innovation comes from early stage entrepreneurs.

It does not come from sleepy conglomerates. That's never been the case. On today's episode of the Puck, we talk with Shameek Dutta, Managing Partner at Overture, a VC firm dedicated to investment in the future of sustainable energy. Shameek shares the innovative technologies that can move us towards a decarbonized future, Everything from harnessing the Earth's temperature differentials for energy, to pioneering lighter materials towards greater fuel efficiency, and so much more. This is a fascinating conversation, so let's get to it.

Shomik Datta, we are excited to have you on the puck today, and we wanna hear all about Overshare VC. But before we do, can you take a minute and give us a little bit about your background for our listeners? Yeah, Jim. Thanks for having me on. I have a pretty unorthodox venture background.

I started my career in democratic politics much to my Indian father's chagrin, as I've said before. I spent a summer investment banking at Lehman Brothers, and, of course, my dad was very excited about that and was pushing me to Lehman. But I instead took a different path to work on campaigns, and I worked on senate races. I worked for Martin O'Malley's first governor's race in Maryland. And then in 2007, got very lucky and linked up very early with senator Obama's exploratory committee as he was exploring a presidential run.

And I talked my way into a fundraising job, and I raised money for him through the primary, through the general election, did a bunch of get out the vote shifts in states like Pennsylvania, and then had the good fortune of being able to work for the president in the West Wing. At the time, I thought I was the White House chief of staff. It turns out I was just a special assistant that was literally getting coffee for folks, but it felt very important to me. And being in that building was profoundly kinda cool. But at some point, I had to grow up, and so I went off and got my MBA and went to Wharton for two years and worked on the president's reelect at the same time, which was its own hair raising challenge.

And then I was greenfielding utility scale solar and wind assets. I was really interested in climate, but took a detour in 2016 to focus on a impact venture fund called Higher Ground Labs that modernized all the political technology in the Democratic Party as an accelerator and as a fund. Ran that across three funds. I'm really proud of that work and that impact, but wanted to come back to climate. And I've formed a new fund in LA with some of my closest friends, all from the Obama journey, focused on early stage climate sustainability technologies that can produce venture scale returns.

One of my partners was the chief of staff of the US Department of Energy. His name is Brandon Hurlbut, who today runs the best government affairs firm in DC. Another is named Tamim Morad, who is a serial entrepreneur who built a company called Price Grabber and a company called eSalon, both of which produced extraordinary returns. And my fourth cofounder is again Michael O'Neil, a long time Obama fundraiser, Airbnb alum. And the four of us have known each other since 2007.

We've been dying to find a way to work together on something meaningful, and this is it. This is the most fun job that I've ever had. I hope I get to keep it forever, and that's what I'm up to. And that's awesome. And we know with all the money going into climate right now and the challenges, it's gonna take some creativity and otherwise to kinda organize it and do it right.

In being creative and jumping into things, how did you find your way to working? Even if you were just carrying coffee, how did you get into the West Wing? How did that come about? It was a lot of begging and pleading. It helps that, you know, I've been around the team for a very long time.

And, unfortunately, fundraisers have no hard skills, but that all is also a blessing in disguise that I could do anything. And so I ended up talking my way into the White House counsel's office, and I served as the special assistant to the White House counsel who oversaw two Supreme Court confirmations, a bunch of appellate and federal district court confirmations, and, of course, advise the president on hairy things like Guantanamo Bay. None of which I actually had anything to do with. I'm just wanted to puff myself up for a moment. I'm telling you who I associated with.

My job was to make sure the peanut M and M bowl was always full outside his office, and I did a damn good job of that. So let's talk about Overture and how the fund is structured and where you see it going. Yeah. We're, classic early stage venture fund. Our observation is that the government is playing the role of banker and referee and buyer in climate.

And that decarbonization broadly is, to me, this 50 to $100,000,000,000,000 global market opportunity in which the very sort of underpinnings of some of the biggest industries in the world, steel, buildings, the way we build buildings, the way we farm and grow food, heavy manufacturing, transportation and mobility, mining. These are gonna need to change core processes of their functions in a very short period of time in order to be able to decarbonize in time for us to be able to keep global temperatures in check. And this is right now happening somewhat voluntarily. It is going to happen with a heavily regulated framework in the very near future. And as we said earlier in the show, all innovation comes from early stage entrepreneurs.

It does not come from sleepy conglomerates. That's never been the case. And so I think that places venture and these early stage climate entrepreneurs in a very interesting catalytic role to be able to bring decarbonization to the steel industry, a $1,100,000,000,000 total addressable market. You know, when you look for steel, you can just put up a slide of the planet because that is how large and how encompassing steel and cement are in the built environment, for example. And to change those core processes is gonna require technological breakthroughs.

And so those are the types of technologies that we wanna find in an early stage. And our other observation is that the government is the only sector large enough to breathe life into those inventions quickly enough to make a difference in our 2035 and our 2050 net zero emissions targets. And so that's the role Overture will always play in. We will invest early in world class entrepreneurs, and we'll help them navigate government and regulatory complexity to help them reach their objectives faster than they might otherwise have. We'll help them find non dilutive grant capital.

We'll help them find ultra low cost debt. We'll help them navigate this wall of money that has now come from the chips act, the infrastructure bill, and the IRA. And in doing so, I hope we can differentiate our capital on the way into a deal. But I also hope we can effectuate an outcome and help with a commercial cadence that's faster than they otherwise would have been able to go. We do this in partnership with my cofounder's government affairs firm, Boundary Stone.

Boundary Stone has deep incentives to perform well with Overture. And when we invest in a company, that company gets free access to the best government affairs firm in DC, Boundary Stone, that only does climate. And so Boundary Stone represents today about 95 clients across energy and mobility and storage and ag tech and everything else in climate. And our founders, you know, the pitch is to potential climate founders out there. The pitch is take a million bucks from us, and you'll get the best government affairs and lobbying firm in DC to represent you for free.

And as you can imagine, that's I think that pitch is resonating in the market. We're able to differentiate our capital quite well, and we're able to win deals that I think can help decarbonize big chunks of the global economy and become very successful. You know, knowing how much money the government is putting into this and also knowing how complex it is to be able to apply for that money and position yourself. I mean, it seems like a really smart way to go about this partnering with Boundary Stone and with your government connections and everything else. I mean, you talk about a way to differentiate yourselves.

It just seems like a brilliant way to position yourselves. I appreciate it. I mean, the proof will be in the execution. Absolutely. So we execute against what we think is a good idea.

We've made 12 investments thus far, and I think those portfolio companies are starting to see all the sort of process work effectively. But the IRA, I think it is still underreported how dramatic an industrial policy the IRA is for The United States. This is the first time since World War two where the government will pay a manufacturer to make something and will turn around and pay the customer to buy it. And so I'm sure the libertarians who are listening are aghast by the market perversion. But I think that, as Fred Wilson said, the climate crisis will be to this century what world wars were to the last century, and I agree with that sentiment.

I think it is a blinking red light that we have to address. And we also should not sacrifice the quality of human life. We should allow people to eat what they love. We should allow them to drive what they love. We should allow people to flourish in a changing climate, and that's gonna require technological breakthroughs to decarbonize major portions of life as we know it.

And so that's the bet we make. I am not personally a sort of degrowth evangelist, which some in the movement are. I think this is actually an amazing opportunity for innovation and technology to drive forward the next century. You know, there's geopolitical consequences to this. Someone will win the rare earth battle.

They will win technology that must be exported to the rest of the world. What better opportunity for The United States than to grab that? Yeah. And we're talking about the deficit before, and you're talking about the difference between throwing money at something versus building something that allows you to grow your GDP. Again, when you look back at the Internet today, and a lot of the brilliant things that have come about, it's it has been because of government spending, and the defense department, and everything else.

And so, I think there is a lot to be said about. We were all in a globalization. We shifted a lot of jobs overseas, and there's a lot of factors coming together now where, hey, we left a lot of our middle class behind. We need to have sophisticated stuff going on here, and we are a little late to the party. But I think the fact that all this money is available and there's people like you that are gonna help entrepreneurs find it, it's about time.

It really is. I'll tell you. I'll just give you some numbers around this because I see a lot of the sort of supply side economists shifting uncomfortably in their seats around the IRA. Under Eisenhower, roughly 6% of GDP went towards government infrastructure and strategic industry investment. Today, post IRA, that number is 0.5%.

So we are nowhere close to what historical levels have been in massive infrastructure projects and investments. And I do see this decoupling story from China as, like, a central thrust. Set aside climate for a moment, We have just overly relied upon a potentially hostile nation for way too much of our stuff. The top 10 lithium battery manufacturers in the world are all in Asia. They're not all in China, but many of them are.

And so it is time for us to onshore some of the basic things we need. I think we gotta precursor of it in COVID when we noticed that our pharmaceuticals and our masks and things we cared about were not coming up on time. That is gonna get way worse if a cold war turns into a hot war or something in between. And so onshoring things like crystal wafering to make solar panels, acid roasting processes to be able to mine lithium, these are core productive functions that we're gonna have to figure out quickly. And I don't think we need to do it in yesterday's processes.

We can do it better with synthetic biology and with technological breakthroughs. And so that those are exciting opportunities, I think, for founders where there's a ready and waiting government appetite to drive that stuff forward. To your point about the percentage of money that's being spent on technology and infrastructure, I think one of the challenges on the political front is the aging population and the entitlements. You know, when you look at Medicare and Social Security as a percentage of our budget, it's such a large percentage that there's not a lot of appetite to raise taxes. And the problem is that it's politically easier to print money, and so something's gonna have to change at some point in the calculus.

And, yes, I think the threat that's come out, like, waking up to the fact that China was not gonna become our, quote, friend, that not everybody race to embrace democracy. I think we did get scared in this whole Taiwan thing and everybody else. And so it did get this bipartisan coming together. And now, I mean, we should be doing more from my perspective. Yeah.

This is a total aside. I heard, Tristan Harris was talking about social media's impact on the brain, and he said that we have prehistoric brains, medieval laws, and godlike technology. And I think, similarly, the ways we are sort of structured in this country are still twentieth century structures trying to govern twenty first century realities. Right? No one is gonna retire at 65 in this next generation.

Folks are gonna live much longer lives. There's a lot different over the next twenty years than we have rooted ourselves in the last hundred, and yet our political systems are very much, like, sort of predicated on path dependent behavior, and that's gonna be a problem. You need to change that, especially, you know, things like the chat GBT revolution in a policy context. I can promise you there is nobody on Capitol Hill that is ready for how to think about an artificial intelligence framework as much as they should be. And so, you know, you have senators that ask Mark Zuckerberg how they make money if Facebook is free.

That's what we're dealing with. And so there's the wake up call that needs to happen right now on sort of the policy frameworks for the lives we're gonna lead for the next hundred years. You know, absolutely. Look at what's going on before the Supreme Court today with section two thirty and trying to deal with this stuff. It is really complex.

I also think it's an extremely exciting time to be alive, and you'll look at what these entrepreneurs are doing and the opportunities, it's never been greater. You know, you were talking about steel, and you were talking about new technology. Can you give our listeners some ideas of the kind of companies you're looking at and technologies that are being developed now that are gonna have major impacts down the road? Yeah. I'll tell you about one that we just actually have not yet announced.

So I'll break some news on the puck here. We are just investing in a company called Dexmat, which is building a carbon nanofiber that has the conductivity of copper that is lighter than aluminum and three times stronger than steel. And the reason this is so interesting to us is that the three metals, copper, aluminum, and steel, can be thought of as three bogeymen in the climate apocalypse. You have in copper a metal that is considered the most important metal in all of electrification. It is in every solar panel, every wind turbine, every electric vehicle, let alone all of its other applications.

And yet the world is operating at a major deficit, a sort of two to one demand supply imbalance that is widening because most copper mines take decades to come online, and we just don't have enough of this stuff. In the next twenty years, the International Energy Agency predicts that we will need more copper than we have used in the last hundred and forty years collectively in the world. So that's a problem. Then take aluminum, which is in every aircraft, every airplane. It is in advanced, you know, computer chips.

The process of making aluminum and making steel, those two processes alone account for 10% of global greenhouse gas emissions. It is a massive problem. And yet steel and aluminum embody just about everything in the built environment, every transportation vehicle, everything that flies. And they are light and they are strong. And so to be able to replace that with something that is stronger and lighter and more conductive than copper would be a breakthrough that would enable better performing solar panels, lighter aircraft, lighter fuel, lighter airplanes, lighter vehicles, all of which could be, you know, more fuel efficient.

And so it's hard not to get excited about companies like Dexmat, which came out of the University of Rice, a material scientist named doctor Ramesh, who ran the sun shot program at the US Department of Energy and is considered by Steve Chu, the Nobel Laureate, to be the best material scientist in the world. He's the one who called my business partner and told him about it. And so we just invested in that company, and it's gonna be producing a lot more of this carbon nanotube material in the coming years. But there's other choke points. Right?

I think a lot about the sort of inevitability of the energy transition we need to make and then what are the choke points that are withholding that. And one of them is in transmission and distribution. You know, the ability to build we I think we have to build something like enough miles of transmission to go from here to the moon and back three times, and we have to do it in the next ten years. And it has to happen very quickly. And so if you use Blackhawk helicopters, for example, to string high voltage transmission lines, which is how PG and E does it, that is a very expensive and slow proposition.

There are autonomous drones that can do that work today. If you consider the shortages in rare earth materials and the fact that you can use synthetic biology to perhaps extract those more efficiently or recycle existing batteries, you know, there's ways of getting through some of those choke points that I think become the interesting technology enabled venture scale returns. And one of the problems is that investment skeptics and climate see the full sort of array of the capital stack that gets used. And so they look at project finance. They look at all the other stuff that goes in there.

They say, this is not venture scale returns. And they're right in some portions of the stack. But I think if you can find the technology sort of rifle shots, there's very interesting opportunities in huge markets that get uncovered. When you look at things like batteries, recently in the restructuring world, somebody came to us that had was, like, a $100,000,000 invested in battery technology. And it was it was from Europe actually.

And the company was struggling. I mean, but they were coming up with a new type of battery and so forth. Airplanes still fly most of the time 600 miles an hour, give or take across the country. I know we have supersonic, but there's certain areas that have not had these Moore's law breakthroughs. From what I understand, I mean, batteries are an area where, you know, they're heavy.

You know, it's a biggest part of an electric car. Do you think there's room for optimism and breakthrough in battery technology? I don't know enough. I'm not an electrical engineer. We don't invest in novel battery technology in part because we know what we don't know.

But from the smarter folks I've read, it does seem clear that transcontinental flight will never be done with electric solutions because of the weight and range challenges of putting that much in the HIM ion. There are companies that have some really wild solutions, including one I talked to recently that wants to be able to recharge planes' batteries mid flight the same way a fighter pilot does with the refueling. But there is just not enough juice in those batteries to take a heavy plane across an ocean. And so there, you are gonna see either sustainable aviation fuels or potentially hydrogen needing to carry the rest of the load. And I think sustainable aviation fuels is gonna go through a renaissance, which you are starting to see now.

United, I think, just announced a $500,000,000 fund to invest exclusively in sustainable aviation fuels. And it's the realization that electricity won't do the trick that is gonna drive a lot of interesting outcomes there. We are talking about having everybody drive an electric car within a certain number of years, and we're talking about this huge movement towards sustainability and so forth. But there are at least some articles that I've read that say, look, when you look at the percentage of electricity that's generated with renewables versus the old fashioned way. Without nuclear really coming online with these mini nuclear plants and really doing a large percentage of it, it's not gonna get us to the level where we have enough generation of electricity to take care of all these electric demands.

Is that not true? And what's your position? And are we are we gonna have enough electricity to actually do this? Our thesis on electricity is the somewhat contradictory. In the long term, I think there is a very good chance we will have plentiful, endlessly produced electricity at near marginal costs of zero.

And in the near term, we are gonna see incredible price volatility. We are gonna see curtailments and electricity shortages and a lot of crazy shit that happens in the meantime. Because the reality is that renewable penetration of the grid is gonna cause a lot of price fluctuation. You're gonna need to find ways to smooth the demand side within the same amount of dexterity that we do on the supply side, And we're in for a wild ride. And so helping commercial and industrial customers smooth their OPEX expectations for electricity charges that could spike as much as two x in a day in some markets is gonna be really important.

And that's where, you know, we are investing heavily in battery management software that can help take used EV batteries, for example, and help commercial industrial customers just save money. There's a company called Moment Energy in in Canada, for example, we're invested in that does just that, that FICA, another LA fund is invested in. But, you know, in the long term, I think you need to see some nuclear miniaturization work, and some of the mini nuclear work is very interesting. You're gonna need to introduce more firm base power to the grid in the form of geothermal. And, you know, the sort of hydro projects are under duress right now because of droughts.

But you're gonna need to find more clean sources of firm power other than intermittent power, or you're gonna need to deploy batteries very quickly into the grid. And I think it was in NextEra's 10 public report the other month where they had something you know, these numbers might be off a little bit, but something like 50,000 batteries deployed. And that number will be something like 500,000 batteries in the next two years. I mean, they are just quickly ramping up deployment of these things. And so when you think about the ecosystem around those needs, there's some interesting opport I think investment opportunities around that.

And none more central in our mind, at least, than all of these used batteries that are coming out of electric vehicles and out of electric airplanes. The FAA has regulated that when a battery pack is up to 90% of its useful life, so it has 90% useful life, it must come out of aircraft. And similarly, in electric vehicles, when a battery pack has about 70% of its useful life left, it also must come out of the car. And so what is to be done with that ocean of batteries that are coming out? They should be used for grid storage and for saving customers money when there's volatility in demand.

So it's very interesting opportunities there that that we see. You've mentioned geothermal a few times. That's an area I don't know a lot about. We had talked earlier about how, you know, it's been some time up in Mammoth, and there's a lot of geothermal activity up in Mammoth, for instance. In The US, is that a big game changer potentially?

And is it in certain markets? And how does that come to play? Yeah. There's two applications that we observe. One is producing grid scale electrons by using the sort of Earth's temperatures of the Earth's core to spin steam turbines and produce energy, which is what a company called Fervo does.

But there's also other interesting opportunities in being able to enable heating and cooling of buildings by using geothermal. And, you know, in the winter, the Earth's subsurface will be warmer than the surface. And in the summer, the inverse will be true. It'll be cooler under the Earth's surface than it will be above the surface. And so you can use those temperature differentials to help heat and cool buildings very effectively.

We're investors in a company called Bedrock, for example, based in Los Angeles. The CEO's name is Jocelyn Lai. She's partnered with the former chief scientist of Baker Hughes, and he has invented a rig that can unlock heating and cooling for massive data warehouses for Amazon fulfillment centers, for huge office buildings. You know, the largest asset owner in America, CIM, has invested in that company that's helping them prototype and test. And so when you think about the confluence of, you know, these corporations, 60% of Fortune 500 companies representing something like 26,000,000,000,000 in revenue have committed to net zero emissions pledges by 2050.

Meaning, if you have these giant Amazon fulfillment centers and Amazon incidentally is pledges by 2035, you have to figure out how to heat and cool that with no emissions. And that's simply not practical today unless you unlock geothermal to do so. And so we're really excited about companies like that. And so when you talk about unlocking geothermal, I know literally they're talking about building this new luxury hotel up in the Sierras. They were talking about drilling down a certain amount and being able to tap into that.

Is that what you're gonna mean? Like, are these huge Amazon warehouses, are they in places where you can drill down and actually tap into geothermal activity? So in the case of heating and cooling, you're not going the depth required to unlock, like, electrons for Amazon. You're just need to about 2,000 feet below the Earth's surface, which is not that hard in order to be able to unlock the temperature differentials to do heating and cooling as a service. And so there, you know, it is about having the right telemetry on the rig.

It is about having the right software to understand what's under this Earth's surface and then be able to do this quickly and punch holes in the ground. And once you do that and punch holes in the ground and you're providing them as a service, it's quite sticky. And so the interesting opportunity for Bedrock for us is to be able to provide heating and cooling as a service for these very large marquee customers that need it today. So literally, in the same way that somebody's pricing out building a certain square foot warehouse or doing whatever, one of the these technologies will be such that in terms of the development of the building when they're doing this, they will have a plans and specifications to be able to go down 2,000 feet to tap into this heat differential to actually provide essentially free heating and air conditioning for these buildings essentially. Correct.

And it doesn't even need to be for a new build. They could go into a parking lot of an existing build and punch the hole and be up and running. Wow. And you think about the electricity intensity and cooling intensity for data centers, that is a huge opportunity because most of those companies that operate those data centers have made that net zero pledge. There's even, you know, newer companies out there that are trying to build green data centers like Crusoe, which initially started with Bitcoin mining and is now shifting into green data centers as well.

And, you know, they're an early potential customer of a company like Bedrock's. I mean, is hydrogen an area you guys are looking at as well? You know, we are skeptical of green hydrogen. The electricity intensity and, you know, 50% loss factor in the amount of electricity it takes to produce green hydrogen, we think, would be better used for electrification. In methane pyrolysis and other applications, I see plenty of opportunity, but we are, you know, a little more focused on the electrification of everything right now and in the sort of unending deployment opportunities in wind and solar.

Those cost curves and tipping points are so dramatic, they're difficult to overstate. You know? When I was working as a solar developer, the average cost per kilowatt hour was somewhere around $12, and it is today somewhere around 50¢. I mean, it's just like an extraordinary cost curve, and the same is happening in lithium ion. And so when you think about the fact that the grid, which is today roughly, I would guess, 5% of the country is solar problem, is expected to be 50% in the next twenty years.

So every residential rooftop, commercial rooftop, farm, there's endless opportunity in the deployment of that, the software required to maintain those plants, the engineering, procurement, and construction, and operating and maintenance tasks of those plants. There's a lot of sort of technological needs there. And so you're seeing venture scale outcomes in companies like Aurora Solar already and putting more opportunity to come. You talk about we're at 5% and you're saying did you say get to 50% in twenty years? We are expected to get to 50%.

It is growing that rapidly. And not because of government action, but because the levelized cost of electricity is that much cheaper. I mean, wind and solar make more sense than coal today, not because the US government says so, but because it's just cheaper for the customer. Where do you see the biggest driver? Is it gonna be homeowners and apartment buildings and office buildings putting in these solar panels?

Or is it gonna be these big solar farms in the Mojave Desert? I'm I'm sure it's a combination, but where do you see the biggest impact being? I mean, the biggest impact will be by utility scale projects, but I think there is tons of profit and opportunity for you know, there's a company called Sunstone Credit, for example, that we are not invested in that is doing instant loan qualifications for commercial rooftops. There's a company we're not invested in called Level ten that's building a marketplace that is connecting corporations that wanna buy solar projects to developers that wanna build them. And so, you know, there's a lots of sort of software opportunities in this sector.

There's a YC company that has built a robotics device to be able to deploy the utility scale farm faster. There's a company that's built a drone that can just monitor, you know, the operations and maintenance of these huge facilities, these turbines that are now gigantic are not very safe for workers to go climb. Someone needs to inspect those and understand what's going wrong. And so there's a lot of sort of confluence of edge compute and computer vision and drone technology that's getting deployed that can help understand, you know, meaningful changes in the performance of these plants once built. And so those are the places where we're very focused right now.

Do you see, like, in the area of all this money that's available, and obviously, you're gonna be helping entrepreneurs go after it and using your relationship with Boundary to go after that. Are there gonna be bottlenecks? In other words, do we have the employees and the entrepreneurs and enough out there to be able to practically spend this money on the time frame that we're talking about? We have a major bottleneck coming in the form of people that can do this work. And you put the nail on the head, which is there are just not enough electricians and not enough HVAC contractors to deploy all the heat pumps, all of the solar panels, all of the EV chargers that we need.

And so there's very interesting companies. Sam Steyer has a company, for example, that came out of YC that is working on this for helping to train people because I kind of agree with the argument that we've overeducated too many Americans into, like, mediocre political science degrees and then put them into a workforce with a lot of debt, and they're pissed. The reality is that an electrician or an HVAC contractor is a great job over a $100,000 a year, and we don't have anywhere near enough of them. You know, the EV chargers, I think something like 30% of EV chargers don't function correctly. And so there's a company called Charger Help that's very interesting that's just scaling the workforce and the technology to be able to help address the number of charges that can be fixed quickly, and there are just not enough people to do it.

And so the workforce development angle helping find and train those people and then place them is, I think, a rifle shot for an interesting investment thesis. Other bottlenecks I find interesting are in permitting. You know, just getting permitting for the massive amount of transmission and distribution upgrade we need to do is a major backlog. Interconnection backlogs are plaguing a lot of these utilities. In critical minerals, I think everyone is sort of aware of the shortages we deal with.

In storage and grid stability, we also have bottlenecks to deal with. So all of these will require some technological unlock. Some of them will just require political will, and that sometimes it turns out is trickier than technology. Absolutely. I mean, when you look at in California, we're talking about trying to build more housing, and we've been investing in ADUs, for instance, autonomous dwelling units.

And just pulling simple permits takes a couple of years, and it's like, you gotta be kidding me. You can't get anything built. It's also interesting on the labor side because we're talking about inflation coming down because the bottlenecks in terms of production and stuff has changed, so to speak. But we got so few people for these job openings. If you look at Germany with trade schools and the other things they've done, we are gonna need to get creative in terms of, as you said, training the right people to do this work.

Yep. And the other sort of black swan that's coming for this is China's willingness to grossly subsidize industries in order to punish foreign competition. And so even if we have the labor available to do some of this electrification work, when China spotted solar panels, they went all in and bankrupted almost every single German manufacturer, almost every other Asian manufacturer. And so we have to be really conscious of the fact that, yes, we have to invest in the workforce development. But I think some of the domestic subsidization work of the IRA is a direct sort of rifle shot against what China has done in the past and is continuing to do.

And so that's really important. If we wanna have a domestic industry, you have to keep it alive. And under, you know, what happened in sort of climate1.o to almost every engineering procurement construction firm that was not Chinese, every solar manufacturer, every panel, every, crystal line wafer, they're all in China today. I mean, 95 plus percent market share, and that's deeply concerning. So that's something that we're gonna see onshoring in the next hopefully, in the next ten years.

Yeah. And I know there's a lot of manufacturing shifting to Mexico. I mean, even China is investing in big manufacturing facilities in Mexico, which was something I just recently heard about. So it's clearly you know, people are definitely trying to bring manufacturing back closer to home. COVID created a lot of things.

You got the geopolitical stuff because of what's going on now with Russia and and so forth. So it is an exciting time to see this stuff. And you you guys are you're right in the middle of the storm. Well, I hope that we have a sturdy boat. Absolutely.

In terms of technology and companies you work with, do you think that all this AI revolution, will it have an impact on the clean energy companies you're doing stuff? Will AI facilitate some of these companies work? Yes. We're investors in a parametric flood insurance technology, for example, called flood base, which is quite exciting, which is modeling granularly where water has fallen after a storm and where water will fall. And it turns out that understanding how water moves in a storm is actually very hard to do.

I didn't appreciate this until I met this company. Flood Base was on the cover of Nature magazine for having flood maps that were six times more accurate than anything else known to science. And a lot of this is a machine learning exercise. And the things you can do with this is, again, part of our thesis is that human life needs to flourish under a changing environment. And floods are no longer protected with the same degree of insurance coverage as they were before because reinsurance companies have exited the market because they didn't have a good way to price flood risk.

The traditional indemnity models have kind of fallen apart. And so this company, Floodbase, is helping reinsurance companies reenter a flood market with major customers like Munich Re that have both invested in the round and are actively helping deploy them. And so I find those applications endlessly interesting. And in understanding climate risk generally, you know, businesses are just facing climate risk in their supply chains, in their manufacturing lines. Insurance companies are dealing with subcatastrophic risk.

You know, things like the storm happening right now in California is gonna ruin a lot of crops. There's an article the other day in Texas that I think something like 35% of all cotton grown in Texas failed this year. 35%. And so machine learning and AI are gonna be very necessary in predicting and understanding weather patterns, which will then help enable businesses to smooth out these subcatastrophic weather risks that are gonna have real consequences to their balance sheets and help insurance companies build products to be able to hedge out those risks. So I see lots of applications there.

Also in grid balancing, the grid itself is a fascinating subject for conversation. But if you believe that utilities will become as valuable as the oil and gas industry because we electrify everything, they are at the center of it. They are gonna need to manage their grid with twenty first century capabilities that they currently do not have. And so someone needs to build those things for them, and machine learning and artificial intelligence will be very interesting components of how you model a grid, a modern grid. And in the same way that companies like Google built ad exchanges, you're gonna need to transact electricity with the same amount of deafness programmatically at times.

And so that's another astonishing application that I see a big market for. So in the area of Tesla and different things where Elon Musk has kinda made EV and cars cool and stuff. What else do you see going on out there that is going to get people's attention? I mean, we, you know, we had all this talk about self driving cars for a long time. California's time and all these fast speed trains we were gonna build, but unfortunately, look at the environmental craziness in terms of getting that done, which has turned out to be very frustrating.

What in the area of, like, kinda cool things going on out there do you think will be, like, any thought of who's gonna be the next Elon Musk that's gonna get people young people excited about this? You know, there's some very unsexy industries that are gonna change very quickly. A lot of them are in the petrochemical world, and a lot of these are the sort of industrial eyesores that I frankly don't understand. But there are companies like Solugen that are introducing a new way to produce the chemicals that we need in all of our industrial processes. And I think you're gonna see a revolution in that stuff.

It won't be as exciting as an electric car that you can touch feel, but I think it'll be profoundly important. And so platforms are being built using synthetic biology that I'm very excited about. And then I think Tesla has revolutionized light duty vehicles, but all of the mid duty vehicles, the class four to six trucks that you see idling outside all of our homes, every FedEx truck, every UPS truck, every food truck, laundry and linen truck, those are the mid duty workhorses that backbone The US sort of delivery system and ecommerce, which grows at 24% CAGR every year. That stuff needs to be get electrified. And so there's a very exciting company in Los Angeles called Harbinger that has built a beautiful EV mid duty truck.

And electrifying that truck has a giant $15,000,000,000 market in The US every year on mid duty trucks, but also globally. And so being able to decarbonize and give those drivers a quiet truck that is fun to drive and safer to drive, that can take more payload because it is lighter than its internal combustion counterpart, that's a very exciting platform. You know, when you look at mid counterpart. That's a very exciting platform. You know, when you look at mid duty, it's every school bus, every RV truck, every ecommerce truck.

It's quite a large category. And this company, Harbingers, built a platform that can extend its electric strip chassis to any of those use cases. And so we are very excited about companies like that when we see them. Are drones also gonna be part of this? Many drones are electric.

There's electric vertical and takeoff and landing sort of aircraft. And it'll be very interesting to see Los Angeles sort of experiment with this. I've heard rumors that for the upcoming Olympics, they're gonna be clearing some rooftop space to allow for two to four passenger electric vertical and takeoff drones to be able to operate, which is, you know, will be wild to see. That stuff, the sort of short distance eVTOL experience will be very interesting to watch develop. I think that we'll kind of leapfrog the the high speed trains with aircraft that can go 200 miles reliably electric, quickly and quietly taking off vertically where you don't need airspace and, you know, getting some interesting opportunities with repurposing commercial real estate for that experience in rooftops.

It's exciting, and there's a lot of crazy stuff going on. With the traffic problem in LA, if we can start seeing abilities to use drones and other things to move from place to place, it'll be exciting. Yeah. My message to other venture investors that might be listening is to keep an open mind, to not pattern match from past historical experience and fit to future prediction. I think that the next twenty five to fifty years are gonna look very different than they have in the past and that there is an eye watering amount of opportunity in this sector.

And to so my encouragement is for anyone interested in investing to spend more time in the sector, I'm happy to get on the phone with folks, walk them through the portfolio. We've got a bunch of companies that are actively raising rounds. And, largely, I think the climate economy has stayed resilient and kind of immune from the drawbacks that you see in other markets. And I think that's for a good reason because we're in for a pretty wild ride with governments and corporations and employees and pension funds that are aligned, on a pretty big mission. So jump in.

When you look at politics and you look at the swing states and you look at where this money is gonna go and where these jobs are gonna go I mean, obviously, I'm in California, so I see a lot of stuff going on here. We've got Silicon Valley. We've got Silicon Beach. And there's a lot of, obviously, exciting stuff going on in California. Do you see this really revitalizing kind of the Midwest and some of the states that have been left behind with globalization?

Because, again, the coal mining jobs, the fracking jobs, I mean, people do want this access to these better paying jobs. Is there gonna be a lot of opportunity for some of these swing states in the Midwest to take advantage of this? I wish this was my line. Somebody said, this is fundamentally blue state demand and red state supply. And when you look at the battery belt being built in the Midwest, the wind belt that exists today in the Midwest, when you look at what the CHIPS Act has done, they've sort of finalized the I think two of the states are Arizona and Texas for the major chips infrastructure work to be done.

The reason I'm so excited about the IRAs, I think this is there's something for everybody in here, and there's reason to be excited whether you're in a blue state or a red state. And so while the technological innovation may remain in a lot of sort of blue state hubs in places like MIT and in Berkeley and in Silicon Valley. The deployment of this is gonna be in red states that have mining infrastructure, that have oil and gas infrastructure, you know, repurposing idle oil wells to be able to reduce methane emissions and do something useful. There's lots of stuff that's gonna happen in red states. And so those workers, I think, will be pleasantly surprised and can upscale.

Right? I'm always surprised by focus on coal workers in America. It's a very interesting story. There's 50,000 total coal workers in America. There's something like 450,000 solar and wind workers in America.

And so, you know, we all think in stories, and I think the story of the next hundred years will be one of decarbonization being celebrated as a growth driver for The United States as a job creator and an innovation hub, and that's as it should be. It's a great place to end, and this has been terrific. The POC Venture Capital and Beyond is produced by CMG Advisors. Advisors. If you enjoyed the conversation today and haven't yet subscribed to our show, you can find us on iTunes, Apple Podcasts, and SoundCloud.

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