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My Climate Journey Episode 164: Mira Inbar, Partner at ArcTern Ventures
Today’s guest is Mira Inbar, Partner at ArcTern Ventures.
ArcTern Ventures is a Toronto-based climate-focused venture capital fund. They invest in early-stage climate startups across industries, energy, and agriculture mobility.
Growing up in Southwest Florida, Mira watched as the natural habitat around her was replaced by parking lots, supermarkets, and housing developments. After graduating from Oberlin, Mira volunteered with indigenous communities replanting trees in the Urubamba River valley and worked at Forest Trends, an international conservation organization. She then jump started her career as an environmentalist in the platinum mines of South Africa. Before joining ArcTern Ventures, Mira spent over a decade launching clean energy businesses in large corporations like Dow Chemical, NRG, and Shell.
In this episode, Mira walks me through what first motivated her to focus on climate and her career path from entrepreneurship to sustainability to venture capital. She explains ArcTern Ventures’ approach to investing, how the firm tracks impact and supports its portfolio. Mira also touches on greenwashing, the viability of a carbon tax, and the energy leaders of tomorrow. Mira has a unique background and experience that make her a fantastic guest.
Enjoy the show!
You can find me on twitter @jjacobs22 or @mcjpod and email at firstname.lastname@example.org, where I encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded June 18th, 2021
In Today’s episode we cover:
- Mira’s influences to tackle climate from growing up in Southwest Florida to working with platinum mines in South Africa
- ArcTern Ventures mission’s, their current $200M fund, and the firm’s approach to investing
- Mira’s experience working at Dow Chemical, NRG, and Shell and her entry point into large industry from a climate perspective
- The balanced of working for polluting corporations and being climate-motivated
- Why Mira is optimistic about everything outside of industry and why corporations are so hard to change
- How to know if a company is serious about sustainability
- The industry leaders post energy transition and if the major players will exist in the future
- Where to allocate our time and energy in the climate fight, especially when we’ve got a limited time window to implement changes
- How ArcTern balances impact and returns, and what the firm has learned from cleantech 1.0
- How ArcTern tracks and reports on climate impact
- The influence of a carbon price but why Mira doesn’t believe it will happen in the US
- What part does policy play when evaluating startups to invest in
- Why the US must address climate change and its effect on the world
Links to topics discussed in this episode:
- ArcTern Ventures: https://www.arcternventures.com/
- Carbon Pricing 101: https://www.ucsusa.org/resources/carbon-pricing-101
- The Increasing Dangers Of Corporate Greenwashing In The Era Of Sustainability
Jason Jacobs: Hey, everyone. Jason, here. I am the My Climate Journey show host. Before we get going, I wanted to take a minute and tell you about the My Climate Journey, or MCJ, as we call it, membership option. Membership came to be because there were a bunch of people that were listening to the show that weren’t just looking for education, but there were longing for a peer group as well. So we set up a slack community for those people. That’s now mushroomed into more than 1300 members.
There is an application to become a member. It’s not an exclusive thing. There’s four criteria we screen for; determination to tackle the problem of climate change, ambition to work on the most impactful solution areas, optimism that we can make a dent, and we’re not wasting our time for trying, and a collaborative spirit. Beyond that, the more diversity the better.
There’s a bunch of great things that have come out of that community, a number of founding teams that have met in there, a number of non-profits that have been established, a bunch of hiring, that’s been done, a bunch of companies that have raised capital in there, a bunch of funds that have gotten limited partners or investors for their funds in there, as well as a bunch of events and programming by members and for members, and some open source projects that are getting actively worked on that hatched in there as well. At any rate, if you want to learn more, you can go to myclimatejourney.co, the website, and click to become a member tab at the top. Enjoy the show.
Hello, everyone. This is Jason Jacobs, and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change and try to figure out how people like you and I can help.
Today’s guest is Mira Inbar, associate partner at ArcTern Ventures, a Toronto-based venture capital firm investing globally in breakthrough clean technology companies addressing climate change and sustainability. Mira has got an interesting background in that she started her career as an environmentalist in the minds of Africa. From there, she pivoted to big corporate where she spent over a decade launching clean energy businesses in large corporate industrials, such as Dow Chemical, NRG, and Shell.
And now, Mira is a venture capitalists investing in early-stage climate-focused companies and helping them scale. We have a great discussion in this episode about what first turned Mira onto the magnitude of the climate challenge, the twists and turns and how she’s gone about plotting her career choices along the way, entrepreneurship and bringing about change from the inside at these big corporates across oil and gas, utilities, and chemicals, and also Mira’s decision to become a venture capitalist, the role of early-stage innovation in tackling the climate challenge, as well as some sectors and [inaudible 00:03:03], if that’s a word that Mira’s most excited about. Okay. Mira Inbar welcome to the show.
Mira Inbar: Thank you so much for having me. Excited to be here.
Jason Jacobs: Well, I’m excited to have you, and you’ve got a, a different kind of background as well, just in the sense that you’re, I mean, since we’ve talked offline, I know how climate motivated you are and what you’re doing in you- in your day job now, but your history, you’ve been climbing motivated but you’ve been climbing motivated within these big companies that haven’t necessarily done the right thing by climate historically, which makes your perspective a super interesting one for me and for our audience to hear from and learn from.
Mira Inbar: Thank you.
Jason Jacobs: Well, to kick things off, typically where we start is we just get a bit of context on where you are now. So maybe talk a bit about our current ventures and what it is, what you do.
Mira Inbar: I’m a partner with ArcTern Ventures. We are a climate-focused venture capital fund. So ArcTern has been around for about a decade, rolled through the first, what people call the clean tech 1.0 and our round continued to investing in climate. We invest in early-stage climate startups. And that runs the gamut of multiple industries, energy, agriculture mobility. And we’re on our second fund right now, which is a $200 million fund with strategic investors. So pension plans, banks, oil and gas firms looking to transition and others.
Jason Jacobs: Great. And I know that was a fairly recent transition. So maybe talk a bit about what led you down this path, and not so much just the path into our term but also just kind of the path into caring about climate. Where did that come from? When did that come about and how did that come about?
Mira Inbar: Yeah, so I grew up in Southwest Florida. And at the time when I was growing up, the natural habitat in Southwest Florida was extremely unique. I would spend my time in sub-tropical forests with epiphytes, mangrove wetlands. I would go walking in my neighborhood with families of sandhill cranes, like literally the mom and the dad, sandhill crane would be walking next to me in the neighborhood.
And I felt very connected to the natural world. And I grew up in a time when there was a lot of development happening in Florida and destruction of this natural habitat. And as a kid, I witnessed a lot of my natural, most of my natural landscapes disappear and get replaced by supermarkets and housing developments and parking lots. And that had a very profound impact on me. Because I felt connected to these places, and then these places disappeared. And I watched them in, you know, in the very dark moment. You know, one of my favorite forests was replaced with a supermarket literally across the street from another supermarket.
So that kind of changed my life. And I went to school at Oberlin College with the intention to become a conservation biologist. And I did my research in the Cloud Forest of Costa Rica. And when I was doing my research in the field station, you know, the scientists were telling me, you know, “You have to go to higher elevations to find a species of tree frog now because it’s getting warmer. And this one… You know, species of butterflies no longer in this habitat. They’ve just disappeared because it’s getting warmer.”
And there were all of these anecdotes around climate change. And when I went back to Oberlin, I studied with David Orr, and he’s a big, you know, writer and, and leader on climate. And it was with him that I first learned the science of climate change. And it completely freaked me out. And I felt like being a scientist was too narrowly focused. I wanted it to have an impact on a more global scale.
So got active on campus, you know, with the first green building to be put onto a university campus and started to actually work with students and lobby the administration to make a carbon commitment. And Oberlin was, I think, 20 years ahead of its time in this way. Three years after I graduated, they did sign a commitment to get to net zero by 2025. Now that’s only four years away.
Jason Jacobs: And when was that?
Mira Inbar: That was 2006. So three years after I left the school, they signed this commitment and they’re making progress towards that. And so I left, you know, the campus feeling like I-I needed to be doing things that are more practical on a global scale. I went to Peru and I volunteered with a non-profit, a local nonprofit in the Urubamba River valley. That’s a river valley in the Andes. And I volunteered with indigenous communities replanting trees, that native trees that had been cut down for fuel wood. And in this process, started to design a cleaner burning stove that wouldn’t need to use fuel wood.
And eventually I ran out of money doing that, you know. So I got a job with an international conservation organization. And this is a non-profit called Forest Trends. And Forest Trends was really, I think, at the forefront of thinking about market mechanisms for conserving ecosystem services. They were pushing for carbon offsets, biodiversity offsets, water credits, and working on programs.
So I was at the UN Convention on Biodiversity in Malaysia and my friend, Carrie TanKate and I got together and we thought, “Well, what if we worked with some of the dirtiest industries, extractive industries, and designed conservation programs that would offset their carbon and biodiversity impacts when they’re doing these new sites?”
And so we raised the money for this program. And the next four years, I spent working with mining sector in Africa designing carbon and biodiversity offsets. And I lived at a platinum mine, Anglo, American’s largest open pit platinum, mine, the Anglo Plats mine in South Africa. And that’s right on the border of Zimbabwe in Northern South Africa. And here I was, 25-year-old American woman.
Jason Jacobs: So at 25, ’cause you already have packed more in there than my entire career and I’m in my mid-forties. [laughs]
Mira Inbar: [laughs] I’m no longer 25, just to get things straight. But at the time, working with the Africana Mine Management, who, if you have experience going to South Africa and working with mine management, like, we had nothing in common, right? I was like the strangest thing they’d ever seen, but we found so much common ground and we worked together and we designed these carbon biodiversity offset projects.
And I developed so much respect for the mine management that I wanted to be like them. You know, I said, “I want to go into industry. I want to be like these guys. I want to be pushing sustainability from within.” I’d applied to business school on my dial-up connection in South Africa. And I could only use the internet like one hour a day when I was there. And luckily, it went through. Because I got into business school and that was my transition into industry.
But coming out of business school, I said, “Look, I, I really want to go into the most carbon-intensive industries.” Because that is what this economy is based on. And if I could be like an entrepreneur, you know, someone who starts biz, these clean low carbon businesses from within, you know, maybe I can be part of some shift from within corporate and thereby industry can shift and the economy can shift. And so that was my thinking. And so I spent the next 10 years working in the chemical utility and oil and gas sectors, very carbon-intensive industries.
Jason Jacobs: So as, as someone who was very climate-motivated before going into those industries, what did you find when you got there? And so, I guess maybe, yeah, talk a bit about your entry point and maybe talk a bit about your perspective on those industries kind of sitting where you are today in, in 2021.
Mira Inbar: Yes. So when I joined Dow Chemical, that was the first company I went into, the time was a lot like it feels today. Obama had just taken presidency. The DOE was starting grant programs for clean energy manufacturing in the U.S. And so we ended up launching a lithium-ion battery business. And that’s what I spent all of my time in Dow doing, was building that business to manufacture cells and packs and sell those packs into electric transportation.
You know, so I was part of this entrepreneurial effort backed by this really big company. But I think when you’re in these industries, you do hear a lot of like, “We don’t do that around here. That’s not how we do the- Things. We’ve tried things before and that’s failed. And here are all the dead bodies.” So we were lucky in the sense that the government was ripe. And we kind of took advantage of the funding in order to launch our own joint venture in this space.
And, you know, that was the time when the automotive industry was going through its collapse. And we were actually hiring people from Ford and GM who had lost their jobs and we’re retraining them in battery manufacturing. And this is in Midland, Michigan, which I put up my hand, you know, Midland’s right here.
And so that was a very entrepreneurial time, but I was part of the rise and the fall in a very short period of time, because the industry also had a pretty big sink. And the battery industry sort of collapsed in the U.S. Electric transportation didn’t become what we thought it would be. It took longer. I think it’s getting there now. Now is that, you know, second inflection point. There is a lot of learning there. And then I ended up going to the utility in the oil and gas sectors after that.
Jason Jacobs: Before we move on, can you maybe just give a little color into some of the key learnings that came from that experience?
Mira Inbar: Yeah. So I think that we had, had a lumpy incentives. So there was a big focus on setting up battery manufacturing, which is great, local, domestic, you know, American-made batteries, however, the incentives were not evenly distributed across the value chain. So the OEMs didn’t have a lot of incentives to build these vehicles. And then people didn’t have a lot of incentives to buy them. They fleet owners.
You know, I was, I was very focused on the truck and bus segment and, you know, fleet owners didn’t have a lot of incentives. So we actually had an oversupply of local battery manufacturing. And this was before Tesla built its big Gigafactory. So, you know, our plants were some of the biggest in the U.S. at that time. Now they’re like what fraction of what Tesla is building. But they needed to get to capacity in order to get prices down. And to get to capacity, you need volume orders. And when natural gas got very cheap, a lot of the contracts that I was working on for two or three years just got, set aside, like truck makers basically said like, “Natural gas is super cheap. We’re not going to do electric right now. Maybe in four years, come back to us.”
Jason Jacobs: Uh-huh [affirmative]. And it’s, I mean, it’s so interesting because now that I think about it, I mean, you’ve worked in oil and gas, you’ve worked in chemicals, you’ve worked in utilities, and now you’re working in venture capital, I think the purists environmentalist would look at each one of those occupations distinctly and say, “If you’re climate motivated, don’t do that.” Yet you were climate motivated before you did any of those. So if one of those purists was sitting here and squawking at you, what, what would you tell them?
Mira Inbar: I always tried to put myself in positions where I could inflect and, you know, shift things. And I think that… You know, when I worked for Shell, we used to have climate activists outside protesting outside of where I worked in downtown San Francisco. And I would go out and thank them for being there. They play an important role because we need that pressure on industry. But we also need people inside that are trying to shift the needle. And then we need investors that… You know, we’ve seen now the role that investors play with the Exxon board shift, the role of boardrooms, all of these are points of leverage that… And we need good people in each one of them pushing the system.
Jason Jacobs: Uh-huh [affirmative]. And do you think that their cynicism about the incumbent in industry is warranted?
Mira Inbar: Yeah, I think so. I think that… My mother always told me in dating you can never change a man. And I think that’s very good advice in most situations. Corporations are like people, they’re very hard to change. So that doesn’t mean they can’t, but if they do want to change, they need to invest heavily in the change. So I think that there are embedded processes and cultures and systems that make it very hard to change. So we need to see, you know, real budgets being spent, the majority of their budgets being spent to transition the business if that’s, if that’s the intention.
Jason Jacobs: Uh-huh [affirmative]. And going into those industries, you have this theory of entrepreneurship and bringing about change from the inside, are you the same optimistic, more optimistic, or less optimistic about that theory of change than you were before you entered those jobs?
Mira Inbar: You know, I’m actually more optimistic today because of everything I see happening on the outside of industry. So, you know, the shift in boardrooms of, you know, board members who are climate conscious and pushing companies the role that investors are playing to push companies and the types of people that are joining these companies and shifting them from inside. A lot of people like me are working really hard right now inside of Shell, and NRG, and Dow, and working on these kinds of lowcome business lines.
So I think that, you know, we, we’ve kind of hit this moment where there’s so many people pushing at different points that I think there is a role for more optimism. However, like I said before, I think it’s very hard to transform companies and industry. And that’s why I joined venture capital because companies, I don’t think inherently can disrupt themselves. I think the disruption comes from outside. And these companies will buy or merge or partner with the disruptive technologies and they will try to adapt. But most of disruption is in opt- the optimism that I feel is from what I’m seeing happen from outside and knowing that, you know, industry will adapt to that.
Jason Jacobs: If I were coming out of, let’s say undergrad, and I was climbing motivated, if you look within those industries, there are some players, take an Oxy for example, that people kind of herroled as being on the forefront of being serious about the transition and really pushing things forward. And then you’ve got, let’s say an Exxon where I think people demonize and say stay far away and they’re not serious and they’ll, they’ll never be serious. If I want it to have an impact, is it better to go to one of the leaders or is it better to get into one of the laggards?
Mira Inbar: I would recommend if you’re just at an undergrad to go to a leader, because you’ll learn so much and you’ll be a part of really pushing change. I think for people who are weathered and experienced, then I recommend going into a laggard and pushing. It’s a hard fight, but if you’re new and you’re young, I think you can learn so much from being a part of a leader. Like a Microsoft, you know. You will learn so much by doing. And then you can take all that learning and you can go to a laggard and, and try to push the system.
Jason Jacobs: And since you have a, a more finely-tuned antenna than me, for sure, actually living and breathing this stuff from the inside for so long, which I never have, what’s your mental math to tell who the leaders are and who the laggards are? Who’s serious and how do you know? Everyone says the same words.
Mira Inbar: Yeah. Look at the percentage of their budget that they’re spending. Look at that. If they’re serious, they need to be spending serious money. Especially when they’re talking about transitioning their operations, like going from one industry to a new one. Like, for example, to go from oil and gas to renewable energy, you got to spend some serious money. So I just look at their CapEx budget and look at what percentage of that is spent.
Jason Jacobs: And when you look at the leadership pack today, and then you envision the leadership pack once we’ve completed the transition, what percentage of the current companies that are in that grouping do you think will be in that grouping post-transition?
Mira Inbar: I think that the incumbency has changed already. I think that we already have new energy incumbents, Tesla and Sunrun. They become incumbents. Their, the the size and scale that they can start acquiring and doing interesting things in the landscape. You know, we have different energy players, like the big renewable developers that are now bigger in scale. So I think that shift is already happening and those, those will be the leaders of tomorrow.
Jason Jacobs: Uh-huh [affirmative]. And it’s, it’s not just the environmental purists that bash, let’s say, industry. It’s also… I mean, I’ve felt if you look at like the deployment world and project finance and things like that, I think they really turn their nose up at venture capital and the early-stage technology innovation as well. Yet you have grown-up, climate-motivated, and then led into the big Sorny Industries, and now you’re going to early-stage venture capital. So talk a little bit about that transition. What led you to believe that that was the best home for you and the best lever for change? And then does that criticism keep you up at night?
Mira Inbar: Yeah, so I’m so used to being criticized. I don’t stay up because of that. I’m staying up because it’s 103 degrees here in Marin County, where I live and we’re on the brink of another terrible wildfire season. So that’s, that’s what keeps me up at night. But in terms of the thinking that I had…
So basically I spent 10 years, you know, working in industry and I basically just took a pause and said, let, let me look out into another 15, 20 years from now. Will the economy be based on these industries? No, I don’t think so. It’s shifting. It’s going to shift to low carbon. Do I think, inherently, these industries can disrupt themselves? Probably not. But I have this experience. I have the knowledge of the energy markets. I have knowledge of these technologies. I have experience no one shell. I was doing M&A, I was buying companies. So I’ve been on that side and I understand intimately the processes. And I think if you look at like the “clean tech 1.0,” a lot of what went wrong was startups thinking they could just go and change incumbent industry. It is hard to change systems. It’s hard to change infrastructure.
And so I thought, “This is a value. This knowledge is a value to startups to help them scale. Those will be the technologies of tomorrow. And I’d like to be helping seed those technologies and using my experience to help further. And get them over some of that… Help them learn quicker about how to scale with these incumbent industries or within them, you know, rather than having to learn it again like we had to do in Cleantech 1.0.
Jason Jacobs: I mean, I have these visions of these kind of quitter characters in my head saying, “But we’ve got 12 years. And if we’re just starting from nothing today, it doesn’t matter what it is or how impactful it can be. We’ve got 12 years. We’ve got stuff that’s on the shelf today that just needs to be scaled. And that’s where all of our energy and attention needs to go.” So how do you respond to that?
Mira Inbar: Well, that’s true. And that’s what, you know, we’re focused on. You know, when I was in industry and Shell, that technology does need to get adopted and needs to get implemented at scale. But here’s also a lot of gaps. I mean, we’re seeing, you know, autonic gaps. Look at low-cost carbon capture. This is a technology that, I think, is at the forefront of an inflection point. Look at the carbon offset market. There’s a lot of innovation that needs to happen to further these markets. And there’s an important role for venture capital to play to seed that and to help them scale faster.
Jason Jacobs: Uh-huh [affirmative]. And so m- maybe that’s a good segue. So if you may, talk a bit about ArcTern and the overview of the model, some of the history, wherever you want to go, but just give us a sense more about the firm and the approach.
Mira Inbar: Yeah. So ArcTern has been around for about a decade. It was founded by two entrepreneurs, Tom Rand and Marray McCaig, out of Canada. So Toronto-based fund, and now with offices in San Francisco, with me, and Oslo, Norway, as well. And so we’re on our second fund. Like I said earlier, it’s a $200 million fund. We have strategic LPs. They tend to come in late- in later stages and write bigger checks.
And our first screening criteria is around carbon. That keeps us honest that we’re truly investing in climate technologies. So we do a carbon TAM. And now we’re investing in, you know, climate resiliency and adaptation so that we’re developing criteria around that from an environmental perspective. But that’s our first screen. And then we are a 10-year financial VC. So it’s any other criteria you’d hear from any other VC on your fund, you know, being big markets, product market fit, good team, scalability. And so that’s how we think about it. And we look across multiple markets where, you know, agnostic to the market, honestly, as long as it is really a climate technology.
Jason Jacobs: Uh-huh [affirmative]. And, I mean, one of the things that, that I wrestle with is that climate really isn’t an industry. It’s not an industry in the way that FinTech is or the way that Enterprise Software is, or the way that ad tech is, or blockchain, crypto. I mean, climate tech-like. We need to decarbonize every sector of our global economy. So, I mean, there’s, there’s hardware, there’s software, there’s machine learning, AI, there’s industrial processes, there’s chemicals, there’s biotech, there’s… I mean, the list just goes on and on.
So given that you have a larger fund and presumably you’re leading at least some of these rounds ha- how do you develop the competency to have the conviction to lead given how broad that climate purview is?
Mira Inbar: We spend a lot of time looking at different markets and developing theses in certain markets. And we also all come from different backgrounds. So one of our general partners is a software guy. You know, he’s so used to looking at software companies, founded a couple software companies, wasn’t software VC. So I think he adds a ton of value and insight into most of the software deals that we look at. And then like, you know, myself coming with more harder industry perspective and lens. So I think that we, we have different competencies on the team that helps us filter things early, but we’re also developing theses in different markets.
But you’re right. And, you know, this is the thing. You know, I think that climate will just be a part of most generalist funds, because it’s going to be embedded in everything. And so those that do focus on climate need to focus, but they also need to be pretty broad because it, it is such a ubiquitous topic. How do you see it? I’m, I’m curious how you think about all those different topic areas.
Jason Jacobs: No. Today, we can get by because we have small checks in, typically, much larger rounds with a strong institutional VC leading that has set track expertise that we don’t. So while we do form our own conviction and we don’t rely on the conviction of the institutional VC, for sure, oftentimes we’re [inaudible 00:27:10] saying, we’re- they’re sharing their memos. We can get up to speed on some of the technical and scientific diligence that we just, and techno-economic analyses and things like that, that we just aren’t equipped to do our own, especially as a, as a tiny fund, what we know how to do is we know how to get access and we need to be helpful post-investment.
And there’s things we can assess like Team and is there a narrative intuitive, and we have a wide range of experts we can go do for counsel, but I think… I mean, our level of diligence would need to change if we were in a position to lead, and either we would need a much bigger team or we would need to make much more concentrated bets where we could spend a lot more time evaluating in order to make the model work. Because it would never work leading with the, the pace that we’re trying to keep today with our little checks.
Mira Inbar: For sure. Yeah, we have a team of 13 people, associates and principals analysts. And we do, we spend the time on the diligence.
Jason Jacobs: Uh-huh [affirmative]. And when you look at the return profile, there’s two factors, right? Those kind of return and impact as a, as a climate focus fund. And, I mean, one of the things I worry about is, if you were going to optimize for impact, that’s kind of one facto, and if you were going to optimize for returns, that’s another factor. But to the extent that they overlap, are you kind of relegated to like medium impact and medium returns? Or do you think you can truly have your cake and eat it too?
Mira Inbar: I think that we were striving for the best of both. So we have a cr- criteria matrix that we use. And we would like everything to be green, but sometimes things are yellow, you know. And I think carbon is… It’s important that we’re reaching a certain threshold on carbon. So we can feel like we’re staying honest that these are really climate criteria, but throughout the portfolio, obviously, you know, there are varying degrees at which you can hit certain other financial criteria. So some, we have strong beliefs that they will knock it out of the park, and others we think will probably be a low return, but maybe a more certain return.
And so I think we just, we just look at it from portfolio perspective like that, but we, we would never invest in a deal where one of our criteria is red, meaning that we’ve never invested, the environmental criteria is red, or, you know, one of the financial metrics is red. We try to get, you know, green, orange, on almost everything. That makes it challenging, right? That’s why they didn’t just develop a AI program to do venture capital.
Jason Jacobs: And I want to get into maybe some of the interest areas and the thesis PSIThesis said that you’ve been spending your time. But before we do, given that ArcTern was around through the first wave, you know, a lot of firms that were around through the first wave are not around today yet ArcTern is- continue to power through, what do you think the key learnings are coming out of that first wave and how has ArcTern evolved or shifted your strategy as a result of that? With a caveat that, I know you weren’t there at that time, but whatever you’ve been able to pick up as you’ve been at the firm and getting to know all the people and the institutional knowledge.
Mira Inbar: Yeah, well, I think, you know, ’cause I wasn’t in venture capital during Cleantech 1.0, but I was in an operational role. And I think my perspective from that is, I think it’s really important for the investors to match their investment thesis to what they’re investing in. And I think that’s… Kind of a learning from that, from that phase was that there was a mismatch. You had, you know, generalist VCs, very hard-nosed VCs, that were investing in things that are more like longer term heavy cap CapEx going to be 20 year horizon. And so you just… I think that that’s key thing, like understand the technology roadmap and match your investment thesis to the technology.
But I think today we’re in such a different position because there’s such a broader mix of climate technologies and investment funds with different varying levels of investment theses. So, you know, we see a lot more software now than we ever did. Like the first fund was, so much of the deal flow was energy-focused. And now so much of the deal flow is everything including energy, but agriculture, circular economy, mobility, pure software, software and services, software and hardware, pure hardware. So there’s this a greater diversity now, I think, which will lead to a lot more successful results for everybody.
Jason Jacobs: And if you look at the entrepreneur ranks or the functional roles as well, there’s kind of a grizzled veterans, you know, like what ArcTern is on the investor side, there’s that kind of in-these-domains who’ve been around, you know, through the first wave and they have kind of the institutional history, the lessons learned, but also maybe some PTSD there, they tend to be, at least from, I don’t want to over-generalize, but more cynical.
And then you’ve got the people that are coming in from Silicon Valley. They probably… You know, maybe they graduated college and they’ve, and they went to the Valley and they’ve only known boom times and they’d never experienced real adversity. And they’re, they’re coming in brimming with optimism or, you might call it over optimism, sort of very different cultures.
One thing I wrestled with is, on the one hand, it needs to be chocolate and peanut butter and they need to kind of combine, but on the other, they’re so different that, you know, do they end up weighing each other down, or, I don’t know, like it’s… Do you see that same tension and what you think the answer is to the extent that there is one in terms of the right mix of, of expertise and experience with that kind of new, new blood.
Mira Inbar: Yeah. I think they both need each other. I’m so excited about everybody coming into this because I’ve been working on this and it’s like been a very lonely field for so long, you know, that you feel that you’re working on the most important thing that nobody cares about. And I’m so excited that people want to come in and apply their skills. And we need them. We absolutely need them. And there should be more of them.
So I think the cynicism is warranted because changing existing systems is hard. It’s not as easy as building an app. Let’s be honest about it. We’re changing food systems. We’re changing energy systems, infrastructure. The cynicism is, to a degree, warranted, but so is the optimism. And I think they need each other. I think that the, what I would say to the, the newcomers is just like, “Please predict hard times. Please know that and stick around.”
So know that there will be a dip. And you will hit some walls, and it may not scale as fast as you think it will, you might not feel like you’re making as much success in the timeframe that you’re used to feeling successful, but please stick around because we need you. And you will get there, but it will take a little bit longer. And then, you know, I think to the hard-nose veterans, I think that actually we will miss a lot of things that the newbies will see. Because, you know, we’re using history to guide us in some respects. And I think the fresh eyes will see things differently.
And so I think that we need each other, we need the perspective of the newbies, and the newbies also need a little bit of grounding, probably from people who have been through it before.
Jason Jacobs: And another tension want to flag that I’d love to get your opinion on, and I, I mean, I saved for the benefit of the audience, but actually it’s going to help me too. Which is one of the secrets about the pod, right? Or any podcasts for that matter is that you get to learn as, as the host. But you said that there’s kind of a check box up front where you do the analysis on the carbon TAM. And then after that, it adjust like any other venture firm.
When I came in, my first wave, it was like, “Are we screwed? Should we even bother?” And then it was like, “Oh, we’re not screwed.” Kind of like [inaudible 00:34:39] mindset of like, well, but most of the things are distraction. There’s like 10 things that matter and we just need to focus on those outside things where… That’s actually not my perspective at all right now. I feel much more like it’s this integrated rainforest where we need big things and small things and everything in between. And the more we can kind of soften things in other areas, the more it, like kind of, ripens the fruit in the areas that are maybe holding back. So if there’s a big thing, that big thing still needs those little things around it to kind of pave the way.
And so given that, how do you, you know… Is it too tunnel vision to just look at carbon, for example, when assessing climate impact? I mean, I’ll, I’ll pick a random one, but, like, take the liquid depth or something. It’s like a water company and it’s just water, but in a metal can, instead of a plastic can, like, is, is that a climate thing or, or some of this like vintage clothes, you know, reuse, right? Or like a marketplace for vintage clothes? Like, some firms call that a climate thing and then others would say, “That is screen washing.” It’s like, “You can’t call that climate. You’re just trying to drop behind the climate halo.” So what’s the truth? Or what’s your perspective?
Mira Inbar: I think it just depends on the firms. So, I mean, we have been thinking about developing other criteria, like around waste, especially focused on the circular economy, but you also have to stay focused because this is such a broad field. So focusing on carbon for us just keeps us narrowly, you know, focused on climate change impacts as we can measure it. But that doesn’t mean that we won’t look at something else. We just need to figure out how we, how we measure it. But I think that this could, for most investors, this could just become such a broad field that it does help to kind of focus on, where do you think your, your investments will make the biggest impact.
Jason Jacobs: And do you track and/or report on climate impact post-investment or is it only that filter up front?
Mira Inbar: Yeah. We are starting to track in our portfolio. So we do do the portfolio tracking and, and we do keep tied to how they’re doing from a carbon perspective.
Jason Jacobs: Uh-huh [affirmative]. Yeah, we’ve been wondering about that, cause it seems like that’s a hard thing to do for early stage private companies, but it also seems like an opportunity just to kind of put some thought into helping to find maybe some standards for how these companies could track their own progress. I, I don’t know what the answer is, but it’s, it’s an interest area of ours.
Mira Inbar: Yeah. Right now, it’s our own sort of assessment. You know, it’s our own analysis where we think they are. But I think it’s a, it’s an interesting area of collaboration. We should follow up on that after the podcast.
Jason Jacobs: That’d be great. And then… Yeah, maybe we haven’t talked much about the… You said you were thesis-driven investors, so where are some areas that you’re spending time and excited about?
Mira Inbar: So… Yeah, I think in our portfolio today, we have some of the bigger categories of, you know, where carbon emissions are coming from. So we have energy, agriculture, construction. And then, you know, areas that we’re excited about, I think we continue to be excited about all the development in the software category, obviously, for all the reasons that you know about, you know, digitizing the grid, having better supply chain, transparency, facilitating carbon markets, but also, you know, looking a lot at low-cost carbon capture, you know, seeing what’s happening in the carbon offset market with just enormous demand for high-quality carbon offsets and things like 45Q bringing costs in some respect. Like, I think this is an area with a lot of innovation.
I think we’re seeing, you know, we’re interested in climate resiliency and adaptation. We’re seeing a lot of innovation in terms of, you know… I’m seeing here in California wildfire technology, wildfire insurance, the increasing role of data and satellites to improve the decision-making around climate risk. And then what we’d love to find and continue to track are the alternatives to the meat and dairy industry. So we made an investment in a cellular meat company called Mosa Meat. I think that, you know, there’s a lot of innovation that’s happening in dairy and fish as well. So continuing to track that area.
Jason Jacobs: Uh-huh [affirmative]. And how do you think about the policy and regulatory landscape? Another kind of generalization that I hear frequently from investors is, “We’ll not back anything that’s reliant on future policy that we can’t control.” Is that… I’m not phrasing very well, but, but, I guess, what is your philosophy both when you’re evaluating an investment, but also how do you support these companies post-investment that, that either rely on or at least are influenced by a future policy?
Mira Inbar: So there’s two answers to that. So one answer is climate technology is already influenced by policy and regulation because we’ve been subsidizing, for a hundred years, the fossil fuel industry. So we’ve been influencing. It’s been influenced. It is being influenced. Private sector has a role to play. I think what we’re seeing in the carbon offset market is the early, you know, development of this voluntary market being propelled by an incredible demand because of all the net zero commitments that companies have made.
But again, we do need regulators to create a functional, transparent, incredible market. And so there’s a role that regulators need to play to make this a good market, a credible market. So, I think, you know, on the one side, these technologies can take off with just private sector, but not to the degree that we really need them to. And if we are in a race for time, things will go a lot faster if we have policies.
So we don’t spend our time lobbying, we just don’t have the bandwidth, we don’t have the people, but, you know, we try to help educate our portfolio companies what could be most impactful for them. You know, like most VCs, we wouldn’t invest purely based on the hope that a regulation takes place, but we do look at that as potential upside. And we don’t completely discount it.
You know, we hope that there’s a business model where they can scale if these regulations fall at their wayside, but we do have a belief that certain markets will develop and the regulations will catch up. And I think like what we saw with 45Q and what we’re seeing with the carbon offset market, I think we do believe that the regulations will catch and create more credibility in those markets.
Jason Jacobs: How do you think about portfolio support post-investment and how similar or different do you think it is relative to the needs of non-climate focus technology companies?
Mira Inbar: So we have several of our partners are founders. So they have, you know, the hands-on experience and they love to work with the CEOs in that regard. And then I described, you know, what I bring from a industry standpoint. I think that it’s very helpful for early-stage companies to tap into a broader network in industry and to develop like early insights like voice of the customer with, you know, buyers and potential customers.
I don’t think it, it happens well enough in the early days. So getting those early insights from industrial buyers, I think is really important, tapping into, like you’re alluding to, regulatory developments. But again, it depends with the f- and you know, this like what the founder is looking for, if they want the hands-on support or if they want you just to sit back and, and look pretty. So we, we’re kind of flexible, but we find that a lot of our portfolio companies really do look for us to, you know, help them in certain areas and, especially tapping into our networks within these different industries.
Jason Jacobs: If you could wave your magic wand and change one thing that is outside the scope of your control, that would most accelerate, I mean, usually I ask about climate more broadly, but maybe I’ll focus on early-stage impactful climate innovation, what would it be? and would you change it.
Mira Inbar: Well, the number one thing I would ask for is a price on carbon of at least a hundred dollars a ton. And then you have a meaningful market and you can make meaningful progress these technologies can scale. What I’m most worried about is that we will just don’t have enough time and we’re already living in, we’re living in the Anthropocene. I think we need some things that are going to just accelerate this transition beyond private money, beyond great investors coming to the table. So that’s what I would advocate for. And I guess if I could, you know, I would change Congress and get that done, if I could do anything.
Jason Jacobs: Yeah. And th- I mean, this is kind of a bigger-picture question, but when a lot of people answer that, and I think when you just answered that. You were talking about the U.S, but, I mean, the climate doesn’t care about U.S versus Europe versus wherever. You know, there’s one planet and it’s a, it’s a global problem. And it seems like, you know, price on carbon, for example, that, maybe in some other parts of the world, they’re much further along and, and they’re a lot more minimal to that kind of thing.
I mean, people say, “Well, the U.S is like one of the superpowers and it, it’s essential that the U.S… Right? But I mean, there’s a world where like the rest of the world just kind of moves on and the U.S gets left behind. I don’t prefer that world, but if you want to address the problem one way or another, like we need to do what we need to do.” So, I guess, how important is what the U.S does to address climate change.
Mira Inbar: It is important because we’re a huge part of the problem. And we have to do it. We just have to do it. So, you know, we’re trying to do it with state renewable portfolio standards. Corporates are making commitments. I think that we’re at an inflection point with the number of net zero pledges there are. That is fundamentally changing things. If companies want to meet their net zero targets, they have to make massive changes from an operational standpoint and there needs to be like a hundred times the amount of carbon offsets there are today.
So I think that we will get there, but, you know, to your earlier point, we need a little bit of a nudge from the regulatory as well.
Jason Jacobs: Uh-huh [affirmative]. And, I mean, there’s many people that I’ve talked to that while… I mean, some actually don’t think they would have a price carbon even if they could, but most seem to think that a price on carbon would be one of the most impactful things that we could do. But very few people actually believe that it’s possible, at least in the U.S. do you actually think that it’s possible? And if so, what would we need to do to make it happen?
Mira Inbar: I don’t think it’s possible. I don’t think that the Democrats in Congress are behind the carbon price. They’re pushing for a renewable portfolio standard. Ironically, I think more Republicans are in favor of price on carbon. But we just have this deadlock system. So… I’m both an optimist and a pessimist, depending on what time of day you talked to me, but I think I’m optimistic and kind of pushing for what we can do from an investment standpoint, you know, and where the market will take off. I think the regulators will catch up. I just don’t think it will be in the short term.
Jason Jacobs: And, uh, Mira, for anyone listening to the show who is inspired by your voice and, and your thoughts and your work at ArcTern, who do you want to hear from? Where do you need help?
Mira Inbar: I would love to hear from founders who are looking for early-stage investment. We’re actively investing. We’re looking for good companies to fill our portfolio. So please reach out to me. Other partners would love to share experiences with other people investing in this area, just like yourself.
Jason Jacobs: Great. Is there anything I didn’t ask you that I should have, or any parting words for listeners.
Mira Inbar: I want to thank you. This is so great. And I, I really appreciate everything you’ve done. I did want to use my time in the spotlight just to pay tribute to a friend that I lost over the past couple of weeks, who dedicated his career to climate change. His name was Brian Riley. And he started his career building wind farms in Wyoming. Then he built the solar platform at NRG, which is where I worked with him. And then most recently, started his own company called [Meis 00:46:40], which is in the circular economy. And he was a climate champion. He had a climate journey. and I just wanted to use this time to pay tribute to him and his life.
Jason Jacobs: Oh, that’s great. I’m, I’m so sorry to hear that, Mira. And what a nice tribute. We’ll definitely leave that in.
Mira Inbar: Thank you.
Jason Jacobs: Well, thanks again for coming on the show. I learned a ton. I think you’re doing awesome work. And I’m really excited to see how things progress for you and also to hopefully be a more frequent collaborator, as well.
Mira Inbar: Yeah, it’d be so fun. I’m sorry I didn’t ask you more questions. [laughs]
Jason Jacobs: No, no. That’s quite intentional. I’m just the host. [laughs]
Mira Inbar: [laughs]
Jason Jacobs: It’s a lot harder on your side of the desk.
Mira Inbar: [laughs]
Jason Jacobs: Thanks, Mira.
Mira Inbar: Thank you.
Jason Jacobs: Hey, everyone. Jason here. Thanks again for joining me on My Climate Journey. If you’d like to learn more about the journey, you can visit us at myclimatejourney.co. Note, that is .co not .com. Someday we’ll get the .com, but right now .co. You can also find me on Twitter @jjacobs22, where I would encourage you to share your feedback on the episode or suggestions for future guests you’d like to hear.
And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers may be say that. Thank you.