The climate crisis is the defining issue of our age, and to fight it effectively, we’ll have to redesign our world. That requires money and technological innovation – but it also demands knowledge of local communities, and policymaking. Dawn Lippert works at the intersection of all of those issues.
She’s the founder and CEO of Elemental Excelerator, a non-profit incubator that helps climate-focused startups deploy their technologies. In September 2021, Elemental spun out a $60m venture-capital fund that will help entrepreneurs tackling climate change to scale their solutions more rapidly. She joins Azeem Azhar to discuss how innovative climate tech companies can make it to market, and why workers at Silicon Valley’s biggest companies are flocking to the fight against climate change.
They also discuss:
- The real-world challenges climate tech investors need to understand.
- What Silicon Valley investors need to learn to work in climate tech.
- Why climate impact investing is about more than reducing greenhouse gases.
AZEEM AZHAR: Hi there, I’m Azeem Azhar, and you are listening to the Exponential View podcast. Every week I come together with a brilliant mind to explore how exponential technologies are shaping our near future. Now, a few weeks ago, my book Exponential — or The Exponential Age in Canada and the U.S. — was published. In it, I talk about how accelerating technologies in a number of different domains are changing the way we live. The book was described by the Financial Times as deft and clear-eyed. If you love this podcast, you will love my book. Hop over to www.exponential-book.com to pick up a copy. Now these developments will improve our lives over the coming decade, but in that time, we’ll also have to face down some of our most profound challenges. And one challenge looms larger than all the others: manmade climate change. My guest today is Dawn Lippert. She is a founder and CEO of Elemental Excelerator, a nonprofit incubator that helps climate-focused startups deploy their technologies. Elemental has two headquarters, one in the Bay Area and one in Hawaii, and that’s where Dawn is speaking to us from today. Elemental Excelerator has funded more than 130 companies in sectors including clean energy, mobility, and agriculture. These companies have gone on to raise more than $2 billion to date. Last month, Dawn and her team spun out a $60 million venture capital fund, Earthshot Ventures, which looks to speed the progress of climate tech companies while providing access to a rapidly growing space for investors. Dawn’s work is largely about helping climate tech firms bridge the commercial “valley of death,” ensuring they are commercially viable, and scalable, and helping them get big enough to maximize their impact. Dawn Lippert, welcome to Exponential View.
DAWN LIPPERT: Thank you so much for having me.
AZEEM AZHAR: It’s become one of the hottest sectors just for founders, for investors, hasn’t it?
DAWN LIPPERT: It really has, and it’s been pretty exciting to see after more than a dozen years of working in this space and funding companies related to climate to see the level of talent and capital coming into this space has been really encouraging. It’s what we need to address this challenge.
AZEEM AZHAR: We spoke in 2020 when I was starting to learn a little bit more detail about climate tech, and I’m investing in the area more regularly myself, as well. What would you say have been the real highlights of transitions that we should pay attention to?
DAWN LIPPERT: I think there’s a couple of big forces that have even amplified over the last year. So certainly having really strong national-level government policy in the United States around climate has accelerated some things. We now see that alignment among local, state, federal, and even international players among policy and what needs to be done around climate. I would say the other thing that’s changed is that we have really strong corporate support. 2021 has really ramped up in terms of not only corporate commitments, but really putting dollars behind this, actually starting to buy low carbon technologies, starting to buy low carbon fuel credits, setting a market for carbon credits on the private side. So we’re just seeing some really creative and exciting financial commitments and new customers coming in from the corporate space. Over a thousand companies have now signed on to meet the Paris Agreement goals. Now we have over 200 companies signed onto the Amazon Climate Pledge. So together these kinds of companies are really driving some market interest. I think the third thing that we’ve seen in the last year is that every single week, almost every single day, I probably get a note from someone leaving Netflix, Google, Facebook, and wanting to bring their talent and their expertise to climate. So we’re just seeing an influx of talent there, largely driven by the fact that people are experiencing many of these climate fueled disasters in their own backyards. And so, people from all kinds of walks of life, including bankers, tech, etc. are shifting course and coming into work on climate, which is incredibly valuable.
AZEEM AZHAR: It’s three different lenses there, right? There’s the alignment of government policy, which has been an important part of your work for more than the last decade, really. The commitment from the corporations. And then finally this critical ingredient, which is talent. It almost sounds like a perfect storm to match the perfect storm, but what’s missing?
DAWN LIPPERT: Meeting this challenge requires an enormous amount of speed, which is very difficult for government. It’s even difficult for corporations. We only have a very few years to really bend the curve on climate. So we think a lot about speed and how to drive speed across these various players, or how to close gaps, so that we don’t have unnecessary lags and delays. One example of that would be at Elemental, we recently launched a policy lab. And the entire goal of the policy lab is to bring innovators closer to policy makers and help close that gap. Because we’re learning some really interesting things on the ground about how to mineralize carbon dioxide in concrete. But we want government to be able to adopt regulations and standards quickly that make that easier for private sector and public sector.
AZEEM AZHAR: One of the things that I talk about in my new book, The Exponential Age, is that the potentials of the technology accelerate away from the capacities of the institutions to create policy, to adapt to them. And what you’ve identified is to close that exponential gap, to create actually a policy environment that’s healthy for mineralized carbon dioxide. We need policy innovation, and that’s something that you are going to be doing yourself through Elemental.
DAWN LIPPERT: Yes because actually policy makers really want to know what are the things that are working on the ground and what can they do? Many of them at the state and city level have made commitments to be net zero, have made commitments to reduce their carbon emissions, and they actually really are hungry for these solutions. So a lot of the work of the policy lab is showing what’s actually working on the ground because that’s what makes us different from other investors. We fund first-of-their-kind projects in real communities, and then we have those proof points to work with policy makers and say, these are some things that are working, and here’s what that might mean for permitting. Here’s what it might mean for building codes. Here’s what it might mean for regulations and FAA [U.S. Federal Aviation Administration] as you’re regulating hybrid electric aircraft, right? So it’s all the next frontier things. And to try and get really specific about what are exactly the barriers and what are the specific opportunities related to new technology. We want a carbon prize, we want the energy standard, all these various large things. But there are actually a lot of really specific things around permitting geothermal, around these things are actually creating real barriers on the ground.
AZEEM AZHAR: Let’s just step back a bit and give our listeners a view of some of the basics of the challenge. So one of the things you said was we’ve only got a few years to bend the curve. So which curve are we talking about? In what way do we need to bend it? And what is a few? Is a few 9, or is a few 15, or is a few 35.
DAWN LIPPERT: We’re trying to bend the curve onto carbon emissions and the emissions of all greenhouse producing gases. We have as few years as it will take. So science tells us that we really need to reach net zero no later than 2050. But to stave off the worst effects of climate change, we really need to do that earlier, which means that our emissions need to start — when we say bend the curve, instead of going up, which they have been doing — they actually need to really start coming down. And that’s a huge economic transformation. It’s going to be the largest transformation of our economy since this digital revolution. So we had the agricultural revolution, we had the industrial revolution, the digital revolution, then we’re going to have to have this decarbonization revolution and it will be as significant across our entire economy as what we’ve experienced as these major shifts before.
AZEEM AZHAR: This is almost like the Aesop’s Fable of the hare and the tortoise, where the hare hangs around and the tortoise is steady as she goes and the tortoise wins the race. And there’s a danger in a society that’s driven by a faith in technology that you think, like the hare, you can sit around and sprint right at the end. So in some sense, even if we have magical, mystical technologies — like fusion power and quantum computing down the track — we need to start to see real signs that the curve has been bent. And that’s something that we can probably measure on a monthly basis from the instruments a few hundred miles away from you in Mauna Loa.
DAWN LIPPERT: Yeah, exactly. That’s where they are. And that brings up such an interesting point, and that was really my second thought about what’s missing in this. Like you said, technology has a role to play here. But the other ingredient that I think is really missing is the community capacity to deploy these new things and accept them. The electricians and general contractors and plumbers and others will have to actually install all this new technology. There’s a lot of physical things in the world that will need to change in order to make this transition happen. And so often what we see missing as part of that is this investment in the community. Technology can bring half the solution, and the community brings the other half. So in order to bring in the unknown, to bring in what’s new, you really need to build community trust and capacity to do that.
AZEEM AZHAR: There’s the old Swahili proverb, if you want to go fast, go alone. If you want to go far, go together. And you are advocating a go together modality at a moment where we also need to go fast. So that is a circle that you are proposing that we need to square through certain mechanisms.
DAWN LIPPERT: You’re right. That’s the exact challenge we have is that we have to go together. We have to use our climate transition to address historical inequities that have been exacerbated by our fossil fuel economy. And at the same time, we have to do it on a timeframe so that people who are living in most vulnerable communities and most vulnerable countries are not experiencing the worst effects of climate change.
AZEEM AZHAR: All of this will also take a lot of money. I did some research, which you helped us with last year, which looked at the levels of funding going into a very broad definition of climate tech. We identified that from a standing start, nearly 6 percent of all venture dollars were going into climate tech and it was growing at 70 to 80 percent per annum. So from a low base and still a small proportion of a small asset class, money was moving. I’m curious about how the process of investing in a climate tech startup differs from the next social network or enterprise software-as-a-service business.
DAWN LIPPERT: So this year, the first half of 2021, startups raised about $16 billion from venture capital, which essentially outpaces all of 2020. So that’s really encouraging. I think what’s important about investing in climate technologies is particularly understanding the fact that these technologies don’t usually just exist in the cloud. That they actually do need to cause real things to happen on the ground. And so understanding those particular challenges around deployment, around what happens when an idea meets reality is such a critical part of investing in climate. One example is that we, a couple years ago, invested in a company called Ampaire, which is a hybrid electric airplane company. And we funded their first ever commercial flight, the first ever commercial flight for any hybrid electric air aircraft, which was a short-haul flight between Kahului and Hana on the island of Maui. And really showing you can invent this really interesting and innovative hybrid electric airplane technology, and it reduces fuel by huge amount and pollution by huge amount in the island, but what’s actually required to make that successful is all the infrastructure around it. So working with the utility, actually working with the county, working with the department of transportation, the airports — figuring out how to install airplane chargers, which people have never actually installed before. That’s where this challenge gets really interesting is because it requires so many different stakeholders and there’s the ability to make huge change. But really just thinking about the technology in a vacuum will not help us get where we need to go as climate investors. And I’m really excited to see so many tech investors coming into climate because they bring in a totally different skill set about how to scale a company really quickly, and how to hire and really grow sales. And I think we’re excellent co-investors with those firms. And this is what we’ve seen over and over because we really understand the regulatory environment. We really understand what it takes to get things done on the ground. We understand how to negotiate with different kinds of contractors or bring in community partners from the beginning to co-design projects. And so these are different skill sets, and I think both are really needed to be successful investors.
AZEEM AZHAR: Most capital is rather ambivalent as to where it gets deployed, right? It needs its rate of return, and that’s what it looks for. What we’ve seen within the traditional tech VC world has been a clear understanding of the value points, right? The inflection points where a company goes from seed to Series A to Series B to Series C. And it’s slightly different, whether it’s consumer product versus enterprise software, but all of the investors in the pool understand what those value inflection points are and they understand what their role is. I’m really good at Series A and helping you build out your first sales team and I’m the person who will get you to IPO. And we’ve understood it and, as a result, we’ve taken out some of the risk in what’s still a high-risk industry and therefore more capital flows in. How mature is that playbook in climate tech? And, in a sense, how mature do you think it needs to get to unlock much more capital over the coming years?
DAWN LIPPERT: Like you mentioned, VC has just one really small slice of this. But other parts of the capital equation have actually matured enormously, whether it’s around project finance, so that you’re enabling hardware to get in the ground in a scalable way, whether it’s different kinds of debt instruments, and even the public markets. We’ve had four companies go public via SPACs in the last year or so. These companies are really scaling and already accessing that kind of capital. So it’s really been fascinating to see that even in our portfolio, which you would think, “oh, Elemental, it’s largely a startup portfolio.” Well, now it’s a portfolio of startups and really mature companies. And many of those mature companies have founders and early executives that are spinning out and starting new companies.
AZEEM AZHAR: J.B. Straubel, who was CTO at Tesla, left to found Redwood Materials, which is doing battery recycling. And so you are seeing a mafioso, in a good way, potentially emerge.
DAWN LIPPERT: And there’s actually a couple dozen who’ve left Tesla, seen really interesting gaps in the market from really that firsthand experience, and are starting some fascinating companies. So as more of these companies go public, as more of them mature — that again creates a lot more talent that has that experience and will come back and start new companies again in climate.
AZEEM AZHAR: I’m curious about the talent that is coming out of existing Silicon Valley tech firms. Do they show up at your door just brimming with fire and energy, like they’re about to tackle an ultra marathon? What are the vignettes that you see of these personalities who are abandoning their well healed jobs and stock options? And they say, “hold on, now I want to do climate.” What is going on in their hearts and in their heads when they come to you?
DAWN LIPPERT: I would say, not all, but many of them have children. I would say many of them actually live in a place that has been directly affected by one of the climate fuel disasters in the last two, three years. We had a spike of people after the Camp Fire coming into climate and saying, “This is what I want to do. I’m leaving my job to do this.” So these are very personal impacts now that people are feeling. And I would say that people, like you said, they’ve built a good nest egg. They’ve had a good ten to 20 years at some of these tech companies and have done pretty well financially. And now they’re having kids, looking around and smelling wildfire smoke, and realizing that they want to do something different the next 20 years of their life.
AZEEM AZHAR: What is the most important thing this talent needs to learn? Many of them listen to this show. So it’s a chance for you to address many of them. What is the gap that they have with all of the skills they have brought about managing uncertainty and complex organizations and growing and scaling ?
DAWN LIPPERT: One is to get out of the office, get into real communities where technology’s being deployed. So that could mean volunteering to put solar on someone’s roof or going to visit some of these sites where technology’s really going in. But getting as close to the ground as possible, getting as proximate as possible to where new technologies are getting deployed, how people are reacting to it is incredibly valuable. And I just don’t see people doing that enough. I think we would get a lot farther if people got on the ground more. And then the second thing is to find ways to engage in the government side of what’s happening, whether it’s local government at the city council level, working on building permits — real