Venture Capital and Carbon Neutrality

kevin butz FvFuMYVbhzE unsplash

When I read an article yesterday criticizing the venture capital community for not being focused on funding innovation to support carbon neutrality, I got mad. And I anger-tweeted. Then I re-read the article to make sure I wasn’t overreacting. And you know, the journalist wasn’t totally wrong. The reality is that venture capital has historically done a terrible job of investing in any type of transformative technology. 

So why did I get mad? I got mad because I literally started our venture capital firm to focus on transformative technologies that reduce waste in the built environment. Why don’t we talk about it more? Well, the investor community needs a simple message. If we talk about the impact side of our mission, investors think we are charitable. So instead, we focus our messaging on our ability to deliver top financial returns. 

Here is a slide from our investor pitch deck. One slide to describe the biggest impact we are making for humanity. Out of 30+ slides.

Screen Shot 2020 01 30 at 6.51.15 AM

Usually, when you get really mad, it isn’t about the other person. It’s about your own internal strife. I wasn’t mad at the journalist; I was mad at myself. I do feel like I have had to stay quiet about what really matters to me. Bottom line: innovation has been killing the planet. Construction and buildings, specifically, have been killing the planet. We must do better. Luckily, the problem is also the answer; innovation can get us out of this mess. I believe that transformative technology can save the planet AND increase your bottom line. 

Here are a few things you should know about the intersections of venture capital, the built environment, and carbon neutrality. 

Innovation is happening in universities that need funding and talent.

Outside of life-sciences, the vast majority of venture capital has been poured into shared economy, B2B marketing tools, and the like. It is simple: venture capital has become very big, and VCs have to chase opportunities that allow them to deploy large amounts of capital. Consequently, entrepreneurs tend to stay away from ideas that create vast research and development efforts while focusing on ideas that require massive amounts of sales and marketing money to scale. Most transformative ideas come from university research. They are sustained by large amounts of grant money. The skills required to take a research project and commercialize it are very different from the skills of a university professor. Read The Gap Funding Myth to understand the talent gap issues. Currently, most startups focused on environmental impact are focused on social engineering and convenience, not transformative technology. 

You don’t need to recycle, compost, etc if you don’t create the waste in the first place. 

We need to focus on the root cause of waste. About 20% of new construction materials ends up in the dumpster. Why such a high percentage? Because no one focuses on the waste factor. There is waste in designing, building, and operating a building. Those home renovation shows are a great example. The “demo” montage is entertaining for most folks, but I sit there and think “that was a perfectly good toilet! Why would you toss that into the dumpster?” Commercial construction is not much different. But it doesn’t have to be that way. What if a jobsite didn’t have a dumpster? What if an owner asked more questions during the design process about construction waste? What if there was better collaboration between designers and manufacturers so that they understood sizing trends? If a roll of carpet comes in a certain width and a designer designs space in certain increments, then waste can be reduced by optimizing those two factors. The same could be done with drywall and many other materials. If you take that 20% figure globally and reduce a little waste everywhere, we can give everyone a free home.

LEED is a great start, and we can do better.

LEED (Leadership in Energy and Environmental Design) is a green building certification program. In order to be LEED certified, a building must be designed and built following certain guidelines that save water and energy, reduce waste, and reduce CO2 emissions. Certification is offered worldwide. LEED has been a first good step, and owners have embraced getting their building credentialed. However, most owners would say that they are spending more to save the planet. Thus the conflict: saving the planet takes more money and time. Innovation changes this. When improvement metrics shift to compliance, the mission is lost. 

Eliminating building waste is a massive financial opportunity being exploited by our firm. As I’ve said, maximizing financial returns and saving the environment are not mutually exclusive. In fact, I’d argue that doing both is the only long-term path to success. Investing in real transformative technology takes a lot of effort and technical ability, but it pays off in more than one way. It’s the way of the future, and we’re doing it now.

So let me know if you’d like to hear more about our work. And remember: don’t get mad at other people when you’re actually mad at yourself.

One thought on “Venture Capital and Carbon Neutrality

Comments are closed.