Podcast Details


Alex Laplaza | Partner at LowerCarbon Capital

2022-09-23
In this episode we will be speaking with Alex Laplaza, who is a Partner at Lower Carbon Capital, which is a leading Climate Tech venture capital firm that was founded by Chris Sacca. Alex brings wide-ranging expertise on scalable climate solutions across energy, agriculture, transportation, and industry. In this conversation, we talk about how the start-up investment process works and what technologies Alex is particularly excited for in the Climate space. I hope you enjoy my conversation with Alex Laplaza!


Transcript


00:02 Introduction:
Are you looking to become a leader in clean energy and an expert in cleantech? Do you hope to get noticed in the crowd as you pursue a career in this fastly growing industry? You are in the right place. Join Karan Takkar as he invites clean energy leaders to share industry developments, highlight cleantech investment opportunities and shed light on how you can increase their chances of employment in this high-growth sector. We will also discuss the energy transition across key emerging markets like India and explore partnership opportunities for the US private and public sector. After all, this is the Zenergy podcast.

00:51 Karan Takhar:
In this episode, we will be speaking with Alex La Plaza, who's a partner at lower Carbon Capital, which is a leading climate tech venture capital firm that was founded by Chris Sacca. Alex brings wide-ranging expertise on scalable climate solutions across energy, agriculture, transportation, and industry. In this conversation, we talk about how the startup investment process works and what technologies Alex is particularly excited or in the climate space. I hope you enjoy my conversation with Alex Laplaza.

Hi Alex, thank you so much for taking the time to engage in this interview. I've been following lower carbon for a few years now. I'm a big Chris Sacca fan, as I mentioned to you a little bit ago, and also I really admire the path that you've taken; as a result, I'm really excited to speak with you for listeners who may be unfamiliar can you provide a brief background on lower carbon capital and what’s your role is in the company?

02:15 Alex Laplaza:
Hey Karan, happy to be here. Thank you for the opportunity. Excited for the chat, so lower carbon capital was in early stage venture capital fund, which means we invested in a series of eight companies, and our thesis is in the name. You know, we invest in technologies and solutions to reduce and remove greenhouse gas emissions, or what we call buying more time, which is essentially adaptation and resilience, so we particularly like the big chunks of the carbon emissions pie. We like solutions and technologies that can abate gigatons or remove gigatonnes, particularly in the hard-to abate sectors like aviation, industry, heavy transportation, anything like that, and my role in the company is I'm a partner within the company, that means I can source and lead investments in various companies. I'm very much a generalist. There are people on our team that is specialized in certain fields, particularly carbon removal or anything touching, chemical engineering, heavy industry, and biology. But me, I'm very much in general. So I can explore my curiosities. I have kind of more breadth than depth, and my interests and expertise type of span agriculture, industry, transportation, power, etc.

03:27 Karan Takhar:
Very interesting. I would love to hear about your path in the company. How did the opportunity to join the lower carbon team come about?

03:37 Alex Laplaza:
So, it actually came from a podcast. Funny enough, I was in grad school at the time. I was studying international policy at Stanford University, focused on climate and clean energy policy, particularly in emerging markets, places like India, East Africa, and Indonesia, and I got very involved in a course there called Sanford Climate Ventures, which was a course where you can pilot an idea you have for a climate tech startup, go through and learn everything there is to learn about building that startup and in fact actually have the opportunity to make it a real company and, that the course itself has spun out a number of really exciting some of the leaders in climate tech. Globally, companies like Furbo we've grid Knightress city. Just to name a few, so I got super involved in that course, both as a student but also just doing some work with the PR. Dave Danielson, the managing director at Breakthrough Energy Ventures, Bill Gates Climate Tech Fund and was looking for a job, wasn't particularly looking for a venture capital job, although seeing the work that breakthrough was doing. It was certainly interesting and intriguing, but I'd heard about lower carbon because my manager Clay went on my climate journey podcasts and revealed a little bit about what they're doing and mentioned that they were looking to hire an analyst, so I was fortunate to. I applied to receive their role, and Umm 2 and 1/2 years later came in around early 2020, and I've been here since.

05:08 Karan Takhar:
That's amazing as someone who isn't extremely familiar with how venture capital works. Could you provide some insight into the venture capital process in terms of potential investments coming into your preview and what the investment process looks like?

05:33 Alex Laplaza:
The process is different for every fund. I would say some have very rigid and standardized processes for moving a company from exploring the opportunity just to a portfolio company. Others have a very little process and can move super quickly and don't put that much diligence in, so there's a wide range. The basic steps are; you know you get in touch with the team often that happens for, better or worse, though, Warm introductions, meaning you know someone within the fund, or if the company knows someone, look for the fund or vice versa, and there's a kind of an interlocutor that facilitates an introduction, but other times it's just the fund is out there looking for new opportunities their crafting PCs. They're exploring certain technology spaces in areas of innovation; whether it be in a university or a government lab etc., but then they get in touch with the company and the process of moving from that first call into a final investment, as I said, can vary quite a bit, but typically, it's just a series of calls of meetings, of presentations and on the part of the fund, they do their analysis, they do their due diligence. Sometimes they're very well informed; other times, they have to learn an entirely new field or discipline from scratch to get educated on the opportunity, and it's just kind of this iterative cycle of going back for the questions and answers, of exploring the opportunity and sizing up, you know, how meaningful it might be from a number of perspectives. So, no real standard process, but from that point on, once the fund is interested in investing, then there's the whole negotiation period of, OK, how much are you going to put in for, at what price, what's the valuation of your investment, what's the involvement that you'll have moving forward will you have a board seat, etc all these questions are kind of sorted out, but yeah, it's really a conversation between the company and the fund, exploring what the partnership might look like together and setting the guidelines of the journey of collaboration moving forward.

07:28 Karan Takhar:
Thank you for expanding on that. Has lower carbon been the first investor in the company, and how does that process compare to, say, if there's like extremely hot company on the market that lower carbon has been invested in?

07:45 Alex Laplaza:
We as a fund like. To be involved as early as possible, we really kind of consider ourselves as. Or we strive to be the first thought partner that a company has. So even before our company might be incorporated, we like having conversations with founders with ambitious ideas and visions and helping them craft the vision themselves. Other times we get involved a little down the road when the company is a little more mature, they have exciting traction, a promising path ahead, and we think that they're an inflection point where they can really dominate a space and, in effect have a meaningful impact on emissions or climate resilience and data, but typically we like to be involved at the earliest stages. So, what that looks like is often we just have people, we have our theses about technologies and spaces and sectors, and we meet someone who is thinking about similar or has a similar thesis, and then we kind of just go iteratively and work through them. The challenges that are outstanding work through kind of put to bed some risks, some questions, help them get aligned with the right people, the right teammates, etc, and just try to build a stable foundation for a long-term and successful company.

08:57 Karan Takhar:
Got it. For those early-stage investments, how much attention do you pay to the entrepreneur and the person who's building the company as opposed to the actual idea when you're evaluating whether to invest?

09:12 Alex Laplaza:
It's hard to say everyone has a thesis on the balance between the two or how much they prioritize one over the other. I would just say they're both fairly critical. The idea is obviously the foundation; it's fundamental it's the essence of the company, whereas the founder is also quite important just because at these early stages when there might not be a technology yet, or the business model isn't really figured out, there's a lot of open questions that are still yet to be answered about the company that won't be answered for potentially years and so you're making that investment and pinning your hopes on a person or a team, to be the right people to answer those questions, to know what questions they need to answer, and then to go answer them.

09:58 Karan Takhar:
I've always been curious about that. Thank you for expanding and clarifying. Now zooming out of the micro and going more towards the macroclimate, tech VC reported that there's about $40 billion of venture capital investment into more than 600 deals. In 2021, which reflects the huge boom in the industry. However, now we are potentially facing a recession. The book to hear your thoughts about what you're hearing in the climate tech investment community and whether you feel that these high volumes of investment in climate tech will persist.

10:42 Alex Laplaza:
The short answer is yes, I do think there's going to be continued and increasing interest and capital flowing into climate tech. As I said, out of pure necessity. It's becoming clearer and clearer to virtually everyone in the world that this is a challenge that is going to be critical and needs to be dealt with, and that's going to require lots of capital. And on the other side is I think more and more people are starting to recognize the economic opportunity and the investment opportunity because when you're starting point. This is the belief that decarbonization is inevitable and required for the longevity and sustainability of the economy. If that's your starting point, the next natural step is that you have to transform every major sector of the global economy. Every industry needs to be transformed and touched in a way, and that's a massive opportunity for wealth creation. That's a massive opportunity for investment returns. Just anytime there is such a change within these industries, there are opportunities to generate quite a. Bit of wealth, so beyond the opportunity, economic opportunity, and just the pure need and challenge of decarbonizing and I think climate tech will persist precisely because it's addressing a lot of the challenges that we're dealing with in this present moment. Think about spiking energy prices, the geopolitics of energy, the geopolitics of food and food prices and food insecurity, inflation, and supply chain disruptions. These are all challenges and features of the present moment that climate tech is well poised to address through a number of different technologies, whether it be decentralized energy generation, clean and inherently cheap energy generation, closer supply chains, or disinflation through lower energy prices. All these are promises of climate tech as a sector that I think position it well to endure this downturn. That being said; there are certainly a lot of challenges that climate tech will have to deal with that I don't think are unique to climate tech, but are just inherent to being part of the global economy, things like supply chain disruptions for hardware driving up the price of materials for solar panels. For example, of battery materials, there are a lot of challenges ahead that are going to be difficult to deal with, but ultimately I think as a sector, the interest and capital flowing into it will.

12:57 Karan Takhar:
Are there any particular emerging technologies that you are excited about in the climate-type space?

13:05 Alex Laplaza:
Yeah, there are quite a few. I mean, that's the cool part about this job is I get exposed to so many exciting technologies and solutions that I couldn't even have imagined just years ago. In particular, I think when I get really excited when I see solutions that are just better, cheaper, faster, stronger, or just cooler than existing alternatives or the incumbents or the status quo, and the reason that excites me is that that means the incentive is aligned for a sustainable decarbonized solution to win irrespective of the consumer or the customer's position or fear or concerns about climate change. You know, they're not doing this out of the goodness of their heart or because they believe climate change is a challenge that needs to be addressed, but just because it's in their interest to do so, and when you have those incentives aligned is that's when you see massive growth, and that's when you see big chunks of the emissions by being taken out of just because you're offering a solution that's better and that wins specific sectors and technologies that work you see that our things like cement and steel, we're starting to see novel processes, novel approaches to steel and cement production, just heavy industry more broadly that offer commodities that are lower cost are more performative and in doing so they offer a path to really meaningful emissions reduction. It's just by nature of the scale of these industries, and the scale of commodities and the volumes produced, so when you can offer us a solution in these sectors the potential for emissions reduction, the missions abatement is really meaningful, and that's when I get super excited.

14:44 Karan Takhar:
That makes so much sense. When you and your team are evaluating an investment and deciding whether to put money into a company, what are some of the time horizons that your team works for in terms of by this year? We would expect X-level ROI just from a few of my conversations; I've sort of gotten a sense that climate investments have a little longer-term climate tech time horizon like climate tech investments because a lot of them are hardware-based and have long R&D cycles, thus requiring long-term capital. Can you speak a little bit about that dynamic and how your team balances the need for short-term ROI with what I'm assuming? And please correct me if I'm wrong; what I'm assuming to be a longer-term climate tech time.

15:43 Alex Laplaza:
I would say it's generally true that climate tech can take longer just because a lot of climate tech is hardware. It's stealing the ground projects. Eventually, it's even infrastructure, and that is always going to take longer than a software company; for example, that being said, I don't think the timelines are all that protracted; I think they're actually getting shorter and shorter thanks to a number of enabling technologies, things like advanced computing that will enable us to simulate technologies in real-time before they're ever. Even built so, just really reducing and truncating the iteration cycles of hardware and not certain technologies are making those timelines shorter. To answer a question about lower carbon and our expectations, we are in the climate tech industry, and I think all of our investors are aware of that, and they are aware that hardware takes longer, but we also tell them this story that we're actually seeing these timelines decrease and you're seeing companies grow just as fast as software companies. There are also plenty of climate tech companies that are software companies and grow in the same way that you think traditional VC-backed software companies grow, and then there are other technologies that are just always going to take much longer, but I think the nuclear fusion, for example, I think the promise and, the potential returns of those companies, you don't expect it to return quickly, but you recognize at the end of the road it's going to be well worth it if it works out.

17:05 Karan Takhar:
Thank you so much for expanding on that now, we want to talk about lower carbon and recent investment in solar schools there, and I know you spent a summer working with India's largest renewable developer as its green scholar back in 2019, which is renewed power. Can you talk about the major takeaways from this experience?

17:32 Alex Laplaza:
Yeah, happy too. My major takeaway from my time with her new power, my time in India, was that India is probably the most exciting big place in the world for decarbonization. It's the most exciting chapter of the energy transition, and there are a number of reasons. Mainly it's just that the resource potential is so exciting. The wind and solar potential of India are among the best in the world demand is growing so quickly for just electricity generation more generally than given the population growth. Given the rising incomes given the industrialization, I think they're going to need to add what's equivalent to an EU-sized grid to their grid, which is already the third largest in the world today. So, everything is moving super quickly as a result, and fewer renewables and clean energy and decarbonization are just purely in India itself interest. There's no onus for India to decarbonize for the good of the world as a country that has contributed disproportionately little to the challenge of climate change to the emissions already in the atmosphere. You know, they have a right to develop as everyone else does, but that being said, they recognize that developing in a way that is clean is actually just pure self-interest. It's an opportunity for them to reduce their imports and fossil fuels, to slash the air pollution that is choking their cities, to improve their energy security, and energy access of 1.31 point 4 billion people, all those combined to get me really. Did about the promise of climate tech in India, and in the particular promise of renewables and solar. Square is riding all those trends. They recognize that you know the grid is actually quite fragile in India. Still, it's only going to grow more and more difficult as more generation comes online. It's more demand comes online, and yet there's solar potential in India. It's just phenomenal, and so if you can offer rooftop solar as a service to two homes to residents in India, that's an opportunity for them to gain energy security and improve their energy assets while also reducing their costs, and it's kind of, it's all these theses that I just outlined about India's rising demand, rising energy needs. Well, also it being in their pure self-interest and they're doing so in a way that it's just, you know offers like an unparalleled customer service experience to Indian consumers, Indian households, and for that reason, I think they're poised to do really well, they already have been, and the team is phenomenal over there. Neeraj and Shreya are just excellent founders and even better people, and they're proving that they can not only go up against some of the biggest players in renewables in India as a small startup but, in fact, beat them, and it's pretty remarkable.

20:08 Karan Takhar:
Are you still exploring further investments in this quickly emerging market in the low carbon space?

20:16 Alex Laplaza:
We are, yes, we've had another investment. In a company called River but it hasn't revealed all that much yet, but they'll be surely some exciting information coming out soon. They are developing electric 2-wheelers, a market that is obviously growing super rapidly in India but doing so much in a similar way to start square with an unparalleled. Customer service experience that I think, is going to ensure that they will go to, brand beyond that like I said about all the factors that make me excited about India, we're always looking for stuff just because the market is so huge, the need is so huge, and all the incentives are perfectly aligned for low carbon, clean and affordable technologies. So, we're always looking to do more.

20:58 Karan Takhar:
Got it. My last question is more on a personal front. As I mentioned earlier, I'm really inspired by the journey that you've taken and, in many ways, would like to be on a similar path, and I'm going to be sharing this interview with a lot of fellow graduate students and a lot of the listeners lean on the younger side. So would love to hear your advice for people like myself who are interested in either getting into clean energy investing, clean tech investing, or just entering the climate space more generally. Is there any advice that comes to mind?

21:42 Alex Laplaza:
But my I would say that there's never been a better moment to make your career a climate career, and there really is no need to have prior climate experience expertise. You don't even need to be particularly passionate about it. It's just the opportunity in front of us is that we're transforming every sector of the global economy, and that apparently needs every kind of skill set, every kind of personality. It's all here on the deck, and the opportunity isn't just the economic opportunity to make your chronic career exciting and promising, but more so, it's just it's super meaningful. It's truly the dream job that you wake up every day excited to go to work, excited to make a contribution, and to end the day feeling like whatever work you've done that day was contributing to something greater than yourself, so that's what I would say is the opportunity has never been better with how to get into climate, you know like I said, there's every kind of experience, every kind of expertise. It's all needed, so there's always a way to make a cut, there are more and more companies every day that are more and more varied, and there's going to be an opportunity for everyone. With regards to the policy students, I would say, you know, I was one myself, and I wasn't quite sure how to apply my policy skills in an environment other than academic, think tanks, or public service, and I think with climate and energy in particular. The policy expertise is critical, and I would never discount it; I think it's pretty fundamental, and it's actually super valuable for all sorts of players, private and public. So, don't ever get discouraged. You know, I've been there. I once wasn't sure how to buy my policy degrees. I think there's ample opportunity.

23:25 Karan Takhar:
Thank you so much, Alex; I really appreciate all your insight.

23:28 Alex Laplaza:
My pleasure.

23:30 Conclusion:
Thanks for listening. We hope you enjoyed the episode. Check out the episode description or show notes. For more information on our guests. See you next time.
 

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