Episode #299: Sundeep Ahuja, Climate Capital, “Earth Is A Big Ship And It’s Going To Take A While For Us To Turn This Ship Around”
Guest: Sundeep Ahuja is a 3x founder-turned-investor who’s currently GP @ Duro Ventures, Climate Capital, and DVC. Prior investments include Good Eggs, Substack, Mighty Buildings, Goodreads, and Shef. He’s also the author of Haline, a 4.5 star-rated “Hunger Games meets climate change” novel.
Date Recorded: 3/10/2021
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Summary: In episode 299, we welcome our guest, Sundeep Ahuja, a three-time founder-turned-investor, who’s currently a General Partner at Duro Ventures, Climate Capital, and DVC.
In today’s episode, we start by hearing about Sundeep’s entrepreneurial journey, then dipping his toe in angel investing by making his first investment into Goodreads. Then he shares the differences of using Angel List syndicates and rolling funds, and the benefits of each. We touch on why Sundeep decided to devote his investment career to help solve climate change. He explains what areas are attractive, why he places a lot of emphasis on the founder when making an investment decision, and what he thinks about valuations.
As we wind down, we talk about specific companies he’s invested in, from food delivery to gaming companies.
All this and more in episode 299 with Climate Capital’s Sundeep Ahuja.
Links from the Episode:
- 0:39 – Intro
- 1:28 – Welcome to our guest, Sundeep Ahuja
- 3:10 – Sundeep’s background and origin story
- 5:30 – Richrelevance
- 5:41 – kiva.org | Make a loan, change a life
- 6:34 – The inspiration that led Sundeep to angel investing
- 7:30 – Goodreads.com | Meet your next favourite book
- 8:01 – Change.org | The world’s largest platform for change
- 8:39 – Themes of mission driven companies across the past decade
- 10:10 – Climate Capital | Backing emissions reduction & adaptation
- 10:51 – The Meb Faber Show: Episode #254: Ken Nguyen, Republic “In The Past Ten Years, The Private Market Has Become Larger Because Companies Are Taking Longer To Go Public”
- 13:19 – Overview and mechanics of a rolling fund
- 14:36 – Sundeep’s investment thesis and perception of opportunity sets
- 15:57 – The first decentralized fund on AngelList – DVC
- 16:44 – Sapien (health and human potential)
- 16:53 – Mint (fintech)
- 17:43 – Is DVC a distributed venture capital firm?
- 18:20 – Investment size and what stage are companies receiving investments
- 19:34 – Being a pioneer in the climate capital space versus today
- 19:40 – Chris Sakka climate investment interview
- 21:06 – Haline by Sundeep Ahuja (post-climate change fiction novel)
- 22:54 – Opportunity subsets in climate change investment themes
- 23:51 – Different stages require a different level of knowledge
- 26:14 – Case study of Rebellyous Foods
- 27:06 – Amp Air
- 27:36 – Elroy Air | Autonomous air delivery
- 28:06 – Is startup ecosystem valuation compression being alleviated?
- 30:06 – Duro Ventures | Backing mission-driven founders
- 30:44 – Agricultural innovation and a climate-forward future
- 32:06 – Mootral | Saving our climate, one cow at a time
- 35:01 – Investing in possibility versus probability
- 35:36 – What companies Sundeep came across that left him awestruck
- 35:36 – Shef
- 38:37 – Good Eggs | Organic grocery delivery
- 39:55 – Sandbox VR | In here, it’s possible
- 41:26 – tv | The future of sports is now
- 43:08 – Browsing opportunities on AngelList and Republic
- 44:00 – Sundeep’s most memorable investment
- 44:44 – Learn more about Sundeep; X@duro.vc; email@example.com; LinkedIn, Twitter @sunrock, AngelList
Transcript of Episode 299:
Welcome Message: Welcome to the “Meb Faber Show” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: What’s up, everybody? Another awesome show with one of my favorite angel investors today. Guest is a three times founder turned investor who’s currently a general partner at Duro Ventures, Climate Capital, and DVC. In today’s episode we start by hearing about our guest’s own entrepreneur journey and dipping his toe and angel investing by making his first investment into Goodreads. And our guest shares the differences of using AngelList syndicates, rolling funds the benefits of each.
We touch on why our guest decided to devote his career to help solve climate change. He explains what areas are attractive, why he places a lot of emphasis on the founder when making an investment decision, and what he thinks about today’s valuations. As we wind down we talk about specific companies he’s invested in from food delivery to gaming companies. Please enjoy this episode with Climate Capital’s Sundeep Ahuja. Sundeep, welcome to the show.
Sundeep: Glad to be here.
Meb: I’m excited to talk to you about all sorts of stuff today. You got a lot going on, my man. Where in the world do we find you here? And close to spring break. By the way, it feels like…we’re recording this in mid-March, feels like…we’re about a month away from a global spring break reopening, does it feel that way up in Napa?
Sundeep: Not quite, right now it’s a bit rainy and the Napa population skews a little older. So I imagine that’s what it’s like in many other cities across the country.
Meb: Easier to social distance out on those vineyards though, come on, bunch of farmers, hardy farmers.
Sundeep: No doubt, no doubt, and it’s one beautiful thing, there has been a lot of outdoor dining with no space restrictions, which has been nice.
Meb: I miss it up there. I need to get back up that way. We came through there on our long drive about this past summer, but it was during all the fires going on so we…
Sundeep: That was real, the fire is real.
Meb: That was legit.
Sundeep: It was so real we had six air filters going out in my house and we’re Napa proper, many miles away from the actual fires and still, our smoke alarm went off in the middle of the night because there was so much smoke seeping in through all the closed windows and our six air filters didn’t quite filter it enough.
Meb: Yeah, we were actually coming through Reno and stayed in a hotel. And I’m pretty laid back about this stuff but at check-in, they’re like “You can’t smoke in your room,” yadda, yadda. We were in our room and it just smelled like somebody had smoked six packs of cigarettes. And I requested we move rooms, partially because I didn’t want to have to pay for it. We just didn’t know that all the fires were going on. And that was when there was a fire tornado in the area so we unplugged from social media for a little while. All right, anyway, let’s talk about investing. Your background, originally Stanford, entrepreneur, give us the quick origin story before you became more of a full-time investor.
Sundeep: I mean, Stanford origin story, I mean, the founding bug started back then. So Stanford CS and frankly tried to start my first company in 1997. I still remember buying a domain for it.
Meb: What was the domain?
Sundeep: Campus Source. We were building a sort of resource site for…this is 1997…a resource site for organizations on campus, students on campus to go online and find each other and find things.
Meb: So close to the Facebook.
Sundeep: I know.
Meb: You almost had it.
Sundeep: Funny thing. So my Stanford CS project actually was a social network called TrustCircles for the Palm OS. We literally built a social network to ask and tell your trust circle certain things. So I like to think that I started one of the first social networks for anyone who remembers the Palm OS that used to be a thing.
Meb: My roommate…I moved to San Francisco in ’01 and my roommate worked for a company, I’m blanking on the name of it. But it allowed you to do the earliest, sort of, e-commerce activities on the Palm. And he’d break out his little pencil used for the Palm Pilot and it’d be like “Here, we can just buy some movie tickets.” And I’m like, “This is taking forever, let’s just go to the theatre. Why would anyone want to buy tickets on their phone? This is so dumb.” Fast forward.
Sundeep: Totally. Fast forward. So yes, so Stanford CS, graduated though into a crazy market of literally startups that I was going to interview with going out of business before the interview. So ended up joining JPMorgan, did banking there. But then went back in tech, did some product to eBay and product to MySpace where I was finally bit by the entrepreneurial bug again, and frankly, I haven’t looked back.
Meb: Tell us a little bit about the entrepreneurship story and then we’ll hop over to the investing world.
Sundeep: For sure. So that social network that I…you know Palm OS TrustCircles, I was at MySpace thinking like we had this great opportunity to build this network of recommendations on top of the social graph. And they, at the time, were just making so much money that I think at that time Google just made an investment so there was not a lot of innovation. So I said, you know what, I’m just going to leave and do this on my own.
So the first company I tried to start was called Friendput to, sort of, ask and tell your friends things. And I have a patent to this day around it. But yeah, long story short, solo founder in L.A. back in 2006 was tough so came up to the Bay and joined the founding team at a company called RichRelevance. We ended up raising, I think, over $100 million over the course of the years of its existence. I left after two years to go start another company more in the social impact space.
If you know the nonprofit kiva.org, helped launch Kiva back in 2005-’06, and frankly, that was a real turning point for me. Matt, and Premal, and Jessica just built something incredible and then realized I want to be at the intersection of tech and impact. So meanwhile I was at RichRelevance, I was like, I got to get an impact, what do I do? And so I left to start this other company. It was called the Extraordinaries at the time they had pivoted and finally sold under the name Sparked.
But we built this micro-volunteering platform because one thing I realized at Kiva and my co-founders at the Extraordinaries, I realized in the room, I said, “All these people that wanted to come in and do things for not just nonprofits but imagine the 49ers or any kind of brand that has brand loyalty to build a platform for them to, kind of, micro-volunteer and build those relationships. Anyways, left that after some co-founder drama to start Blissmo, which is my first brand of climate. Ran that for several years as, kind of, a profitable side business. Really just been investing since.
Meb: Awesome. So you’re one of my favorite people to follow on the investing networks. We’ve invested in I imagine about half a dozen, a dozen investments together. And you’ve got a lot different going on and will let us start to layout your framework and thesis for what’s going on. You were certainly early to a number of things, early to AngelList syndicates, early to climate as an investment thesis. What was the beginning, sort of, inspiration or, kind of, approach and framework that you started? Was it just you were going to do a few angel deals on your own? Invest in some friends? Was it actually you started some funds? Like how did it all begin? This is, I imagine, almost a decade ago.
Sundeep: Yeah, 2013 is when the platform launched but I think my first check was about a decade ago into a buddy’s company, right. Like, I think all angel investing typically starts is your friend is starting something and you want to get involved. So that was my first check, ended up not working out. But another friend of mine was starting another company called Goodreads so I was like, “I believe in you and I’m going to write you this check,” and that turned into an exit to Amazon so like, hey, I’m good at this.
But that, kind of, was what really whet my appetite around angel investing but what really got me into it though is the syndicate platform. I knew Naval all back in the day and so he launched syndicates, I was like “Dude, Naval, I want to be the impact syndicator on the platform.” Again that was something I was excited about. And he’s like, “Look, that sounds great but we just launched, just bring us deals, we’re just looking for a great deal flow right now.” So I actually brought two of the first few deals to the platform. One was ReTargeter and the second was change.org.
And the funny thing is right around the time they started doing some press around it, Naval gave Forbes my name. Like, Tim Ferriss had also brought one of the first syndicates and he could have given Tim. The point he wanted to make is you can be a nobody like this random Sundeep Ahuja dude and launch syndicates. And so it was my name that he gave to Forbes and after that, all of a sudden I was in the business. Like, I didn’t mean to be, it’s not something I’d set out to do, but I was just getting deal flow and LPs and I started taking this a lot more seriously. And started spending time with Naval and others to understand how do I go pro, and that’s what I’ve worked to do over the last seven years now.
Meb: Tell me a little bit about what the company’, sector’s, industry’s, sort of, focus has been over the past 10 years. Are there any general themes that you’ve been really looking for? And give us a little also color on what the syndicate looks like, are you doing series A? Are you doing startup? What size checks? All that good stuff.
Sundeep: Some things I’m about to say I think today are, thankfully, more broadly accepted but back when I was doing it maybe less so. Backing mission-driven founders like, realized at Kiva how a mission even though it was a nonprofit just brought out so much more from people, everyone was, sort of, unified around what they were doing. The first company I said I co-founded, RichRelevance, we were a great business but I wouldn’t say we were mission-driven. But the second company I co-founded was very mission-driven. And even though we weren’t nearly as successful, again, that same drive and energy and whatnot.
So I realized that if I could find those companies that were both going to be successful and have a mission that would inspire customers, employees, team members, etc., that may be the best place to bet because, at the end of the day, capital is no longer a constraint, it was talent. And so how do you optimize for talent? You have people join a mission. And so backing a mission-driven founder’s just, kind of, been the broad thesis, frankly, ever since.
And climate specifically, as I mentioned, or I think you mentioned, it’s been something I’ve been involved with for several years. My first climate check was 2015 even though I’ve been advising and doing other stuff prior to that. And that, sort of, became its own, sort of, sub-thesis. So I now have two vehicles, I’ve got Duro Ventures, which is my broadly backing mission-driven founders, and Climate Capital, which is my strictly climate-focused vehicle.
Meb: We’ll dig into both of those. Before we hop over, for the people who aren’t familiar, we’ve actually talked about it quite a bit, had a fair amount of professional angel investors on the podcast, but how does it work for your syndicate? Is that you have a few hundred, a few thousand people? Are they, you know, the minimum they can invest? They have to be accredited? Just give us a quick, kind of, two-minute overview of how it actually works for people who are listening who may want to be investors as well.
Sundeep: Totally. And so a lot of credit to Naval and Nivi for what they launched with AngelList and then to Ken Nguyen, who you had on your show a little while ago for what he extended with Republic, which spun out of AngelList and, sort of, democratizing access to this asset class. But yeah, I mean, the long and short of it is folks who are accredited investors go to AngelList and back leads that they want to get deal flow from. And if accepted into the syndicate, they get invited to deals. And it’s up to them, everything is deal by deal, there’s no commitment to back a syndicate.
And then you, kind of, on a deal-by-deal basis, decide if you want to invest. If your default minimum is $1K, different syndicate leads have different philosophies as to what the minimum is. I’ve defaulted nearly all my syndicates to $1K because of that same reason of democratizing access. Someone wants to just put in 1,000 bucks, by all means, do, and if someone wants to put in $50,000, that’s their prerogative.
Meb: It’s something I suggest to all my listeners. I mean, look, we have almost 100,000 investors, a lot of people on this podcast who email in and say, “Hey, look, I want to follow along, Meb, with what you’re investing in.” And because I’m also a public fund manager, it creates huge headaches and problems, and it just makes it a regulatory burden. So, listeners, I suggest go follow Sundeep and others on there. And even if you are nervous, like he said, you can start to dip your toe in the water with 1,000 bucks in some of these investments.
And if anything, my personal experience we’ve talked a lot about here, I’ve been doing this since 2014 on AngelList, actually just had today probably the largest liquidity exit that goes back to 2015 of any investment. Actually, it wasn’t a liquidity investment because I think the company has more upside. But it goes to show you start to learn about these companies and ones that are doing cool things that also, by the way, apply to your personal life, apply to your business. And you can start to understand the whole game. You don’t have to put it all in the first deal. My God, don’t do that, listeners. But check out Sundeep, he writes some of the best memos and overviews. Don’t email me, email him, by the way. But check it out and start to understand the process because I think it’s a massive learning benefit as well as experiential too to be able to go through it and start to put real money to work.
Sundeep: A hundred per cent. I think if you’re accredited, absolutely get on AngelList and find what you do like and again, definitely back several and, sort of, find the deals you like of that deal flow. And if you’re not accredited, there’s Republic, which actually is now accredited and non-accredited but the opportunity to, sort of, invest in what you like is pretty awesome. And then you see it in the wild you’re like, “Hey, I’m an investor in that company,” and it’s always a good feeling.
Meb: So talk to me a little bit about the challenges of being a syndicate lead. You also have, I believe, a rolling fund, you could tell us a little bit about what that actually is. Do you have a preference for one or the other, or how’s it evolved over time?
Sundeep: It’s funny, I was just on a call with an LP right before this explaining rolling funds, which I think are still novel in the ecosystem. So for those who aren’t aware, what a rolling fund is when you invest in a typical fund, a person’s raising X amount of money, and it takes them a year, year-and-a-half, sometimes less, sometimes more. And in that period of time, they’re raising money they’re not really able to invest unless they invest personally and warehouse it into the fund.
What a rolling fund allows folks to do, it’s sort of like a subscription into an investment vehicle. Something like Netflix, Amazon Prime is, you know, your shopping and your movies, this is your investment. Every quarter, you’re going to put in X amount of money into this fund. So that’s what the experience is to the LP. And then to the fund manager, I don’t have to wait a year to start investing because I get the money today and so I can start writing checks today. And so I’m a huge fan of it. On both sides, I think it just solves a lot of problems. I think there’s a lot of software behind the scenes that, kind of, make things on a quarterly basis fair if you invest one quarter versus another and how things work. But just simplifying it, it’s the subscription to a fund.
Meb: So let’s start talking a little bit about your thesis, how you think about investments, maybe you can walk us through some investment process and sourcing the deals. You’ve been doing this long enough now that I’m sure in your head it feels like second nature, but to many people…maybe just peel back the curtain, feel free to start with climate if that’s what you want to talk about. But talk just a little bit about the broad opportunity set, and then how you go about actually writing the checks.
Sundeep: One thing I think, having been in the ecosystem for a long time as a founder and then now an investor, deal flow is simply something that I have no shortage of from either founders…I mean, our LPs now refer deals that we’ll look at. And so, to be honest, I had too much deal flow for me to do this. And the syndicates have no management fee. And so the rolling funds do because they’re funds and so there’s a little bit of cash coming in from there. But from a just how do I manage my life perspective, too much deal flow and not sure what to do with it. And I was at Republic for a while and AWS for a while, partially because the day job while, sort of, doing these syndicates on the side now with rolling funds I can, kind of, go full time which is what I’ve done, which is amazing.
But to answer the question around deal flow, it comes from all places. And then the big question is, what do you do with it? So what I’ve now done is I’ve actually started something that I think is novel on AngelList. I’m not totally familiar with every syndicate out there. But we’re starting what we think is, sort of, the first decentralized venture capital fund on AngelList. I have put out an application process and I had six people who were LPs in my syndicate who I started a new syndicate with, it’s called DVC. And the reason for that was, I’m not scalable but this team now is.
And so now when deals come my way, we have a process by which those deals get funneled into DVC. And DVC, we have an IC process where someone steps up to run the deal, another person steps up to be the investment committee, and then they, kind of, work with the founder and run diligence, etc., etc. And then if a deal, sort of, passes IC then the deal runner will, kind of, run it via the syndicate. And what we’ve further realized is, just as there’s hundreds if not thousands of syndicates out there, different LPs have different preferences, right.
So what we’re starting to do now is launch verticals. So we’re actually launching…we just launched actually Sapien, our first vertical, which is for health and human potential. So folks out there passionate about that, you should back Sapien. As a syndicate, we launched another one called Trademark, which is for consumer tech and brand. We launched another one called Mint for Fintech. Another one called Beyond for frontier tech. And so what we’re doing is we’re building this infrastructure to ingest deal flow, be it for me, be it from LPs, be it from the partners themselves, process to evaluate those deals. And then run the allocation on the most appropriate syndicate so that those folks who care about consumer tech and healthcare can back those syndicates, but if you don’t care about frontier tech, then don’t back Beyond.
That’s what we’ve set up as a scalable infrastructure for non-climate. And I’m currently in the process of actually applying that same infrastructure for climate because of the explosion in deal flow over the last six months that before I had my investment partner at Climate Capital can manage. But now, we literally added two people to the team in the last three weeks because there’s just so much deal flow.
Meb: It almost sounds like a distributed VC firm in some ways, is that a reasonable description?
Sundeep: A hundred per cent. That’s kind of…we were this morning having a branding call for what DVC stands for, you know, first it was a hat tip to Duro, which was the name of the fund I’d started. Initially, we were calling it Duro Venture Collective but now we’re our own fund, we’re distributed. Again, as I said, we source from our LPs, and we source through my network or the founders we’ve invested in. And of course, the team itself is going to continue to grow and scale. As we launch these new verticals we, will be able to add experts for each vertical and grow the team and then they’ll, kind of, become part of this, sort of, decentralized firm.
Meb: So what’s the, sort of, size? You guys writing checks of, like, a couple hundred grand or a couple million? Is it traditionally seed series A? What do the companies look like?
Sundeep: Yeah, so it varies. I think the short answer is we’re agnostic. If we find an allocation in a company we’re excited about…you know, I’ve run series C syndicates, in fact, a company called Mosaic, which is my first climate syndicate was a series C. But we tend to be early-stage and the reason for that is, that’s where we can leverage our network. The fact that we’re all…or most of us are former founders in the team we, kind of, get an allocation. And then from a check size perspective, $100,000 to $200,000 is probably the average. The largest syndicate I’ve ever run is an $800K syndicate. But I’d say the average is definitely, you know, $100,000 to $250,000.
And when we’re talking about a pre-seed round, or seed round, or even an A, that ends up being a large enough bite for it to matter, but not so large that you’re wondering, wait, why are we 90% of the round, like where are the other investors? I always, when I work with founders, want to make sure that even if my syndicate can raise more, I’m doing what I can to help them put together the best round we can. And so I’ll say look, even let’s cap us at $250,000 and let’s go find you some incredible other investors to run out this round. Because the next time they raise, I’ll hopefully get a larger allocation because it’ll just be a larger round.
Meb: So let’s start with climate. Again, you were pretty early here. Others, like Khosla, I was reading a Chris Sacca interview today where he was talking about climate and said, “I feel like the perception was that many of the early VCs didn’t have that great of returns.” But he’s saying that actually they had decent returns, just the early, kind of, pioneers there, it was really expensive, a lot of OPEX, a lot of just capital. Whereas today, it could be more of a dollar-light version versus the past. How has this changed over the past 10 years? What is the opportunity set? Walk us through the thesis.
Sundeep: So I think if we’re going to talk about my climate story, it’s got to start with my dad. So my dad worked for … for 40 years. And of course, being an Indian boy, he wanted me to be a doctor and yet he was out there and, kind of, helping us all breathe cleaner air. And so when I got to school, went into engineering, computer science. And then again, Kiva was just like, turning point for me where like, okay, I want to be an impact but I realized that poverty, which was Kiva’s mission, wasn’t mine, what was, and I just kept coming back to climate. And the more I dig into this existential risk, I think what attracted me to it is it just makes everything worse. Climate change exacerbates poverty, it exacerbates disease, it exacerbates the income inequality.
So to me, it was the most scalable use of my time on Earth was to address this issue that was if unaddressed would literally make every problem worse. So that’s, kind of, how I got into it. And the more I dig into it the more, kind of, scared I got about what things might look like. In fact, I wrote a novel about a post-climate-change future called “Haline” on Amazon, 4.5 stars I think, sort of a “Hunger Games” meets climate change to try to get people to pay attention to this issue. I did a TV pilot, we went to the Maldives to, sort of, capture the story of rising sea levels and the people’s voices. And just try to use media to, kind of, raise awareness around this issue that I didn’t feel was getting enough attention back in 2013, ’12, ’14, ’11, etc.
Fast forward to your question about what’s changed about, sort of, how we approach it. I think one, I think, first of all, on the founder side, so many of these founders are coming in and bringing experience from other companies that they’ve already started, or companies they’ve worked at. And so they’re bringing in their lean startup method, they’re bringing in their, sort of, software approach. They’re bringing in approaches that have already worked in industry X and applying it now to climate. So I think just the level of talent and the quality of ideas is just profound. And so I think you’re just having a larger base of people starting companies, and those people are incredibly well-equipped to start those companies. Not all, but I’m definitely seeing a trend there.
On the flip side, yeah, technologists continued to do what technology does, which is make things better, faster, cheaper. And so those same companies, that same deck you may have looked at 10 years ago if look you at it today, all of a sudden, it’s a better, faster, cheaper way to do it because technology has improved, cost curves have come down, etc. So it is a different game, it is an exciting game.
The last thing I’ll say is, look, while it may feel like a bubble right now…I mean, we’re not going to stop climate change this year and okay, problem solved. I think the reason why you’re seeing so much talent and capital put into this is I think people realize Earth is a big ship, and it’s going to take a while for us to turn this ship around. And so in that time, let’s, kind of, all hands on deck for the next several years, decades, etc., and in that time, there’s going to be a lot of opportunity to start companies and a lot of money to be made.
Meb: What are some of the investment opportunity, sort of, themes? I think most people when they think of climate change they think particularly of energy, but there’s a lot of other subsets, everything from agriculture to all protein, and transportation. What are some of the areas you guys are focused on?
Sundeep: I mean, you’re exactly right. I think I was, again, chatting with someone this morning about, kind of, the different sectors that Climate Capital focuses on. And it may seem broad, right, energy, transportation, ag, protein, carbon adaptation. There’s a whole new suite of companies that are propping up being like, “Look, climate change is already here how do we best adapt? How do we mitigate what’s already happening?” And if we do address climate change, it’ll be death by 1,000 cuts, it’ll be the energy folks doing what they do, the transportation folks doing what they do, the ag, etc. Because each of these are opportunities for us to lower emissions, and in each of these, there’s going to be work to be done around adaptation. Climate change really does touch a lot of different areas, which allows us as a firm to be broad and yet focused.
Meb: Love to hear you talk about any case studies, any particular companies that came across your plate, you ended up investing in, the general thesis, as ways to, kind of, let us peek over your shoulder and walk through the process of what may fit in your criteria.
Sundeep: Sure. So I think one of the beautiful things…and you asked this question earlier about stage. What I really like about pre-seed and seed is I don’t have to be a battery expert to invest in a battery company. I need to make sure I know that the founder is legit, that the founder is coming from credibility, reference checks work, the market is broadly there, there’s some customer attraction, etc. But at that stage, it’s really a bet on the founder and a bet on the broader opportunity versus series A, for example, which it’s like, okay, you need someone who really knows the space to make sure that everything is going to work the way it should before you invest to scale.
So from our perspective, you know, if you ask about case studies, if you look at the portfolio of Climate Capital, which I’m looking at right now as we speak, each of these has a story. And I can tell you why, if you want to pick one, I invested. But if I were to boil it all down, it is a passionate founder who has a unique insight, has assembled a great team, and is going after big opportunity, and in some way is going to both reduce emissions and make a lot of money along the way.
Meb: So give us some examples.
Sundeep: Give you some examples, okay, let’s see. I mean, some of these are still confidential, right so I can’t…
Meb: I mean, you can give me some of the old ones from five years ago.
Sundeep: Yeah, yeah, yeah. So the one from five years ago is Mosaic, I mean, they’re continuing to just do phenomenally well, they’re, sort of, financing the Green Revolution, sort of, home renovation, and home solar, they’ve done well. The one that is sort of…WeaveGrid, they…you know, this is a perfect example. I mean it’s an incredible founder, a very detailed deck about what he was going to do, an incredibly detailed story about what he’d done in energy and utilities. Then he was talking about building a load balancing network for utilities and like, a lot of investors were turned away they’re like, “Oh, utilities, takes forever, etc., etc.” But what he saw was look, these EVs are batteries and these batteries can be used in support of how utilities execute. And he got me fired up about that vision. And so I partnered with Ramez Naam and we put a syndicate together and they’ve done phenomenally well. And it’s one example of a company that is getting a lot of investor interest because what they were doing when we invested a couple of years ago may have been not that interesting because it was too risky. Now, it’s like they were absolutely doing the right thing at the right time. So that’s one example.
Rebellious, going to the all-protein world, talk about a company that had to pivot. They started off doing plant-based nuggets and patties for food service. And then COVID, they had this incredible product and no customers and so they had to pivot to being D2C. So they’ve done incredibly well because they had just a great product and investors every step along the way have, sort of, supported their mission.
Meb: We’ll have to take a look. I mean, I’m located in Manhattan Beach, which is right…I think it’s right down the road, one of the big…is it Beyond or Impossible, I feel like is located in El Segundo. But we’re big fans of the Impossible and we have been trying all the various substitute proteins. One as a consumer, but also, you know, as an interested investor trying to stay curious. And we’re in a lot better place than we were 5, 10 years ago, that’s for sure, or 20 years ago, back the old Boca Burgers.
Sundeep: Yeah. I’ll give you one more example from the portfolio, it’s Ampaire, so hybrid-electric aircraft. I still remember when I first chatted with Kevin, super interested, but what do I know about planes? Came through a strong reference, I did as much diligence as I could. And I was like, “Look, let’s stay close, would love to, kind of, get involved the next round so I can invest behind the lead.” Finally had that chance last year to get involved and it was in the news a couple of weeks ago, they were acquired by Surf Air. And it had nice markups new investment I just made a handful of months prior. I think the SPAC activity generally is opening up doors, I think Surf Air plans to go public.
Another company in my portfolio, like Ellroy Air, they raised literally right around the day the markets were crashing in March. And now are raising a round, or about to, because of this back door open like quite a markup. So it’s been fun to not only see these companies continue to execute and iterate but to see how market conditions have affected not just climate as an opportunity, but COVID and what that did to, sort of, the markets as well, investing in March and April and now seeing some of the returns that we’re seeing, it’s pretty exciting.
Meb: Well, it seemed like there was this brief period where the startup ecosystem valuations compressed quite a bit, but those have seemed to have ripped right back up. Talk to that comment if that’s accurate, or if it’s not, and when what has that, sort of, changed over the last handful of years? I was curious, as you look at what your experience has been and more and more peers and people come into the space, what’s changed what stayed the same there?
Sundeep: There was a quote I think on Twitter around like, “Are there enough founders to roll this capital?” Which is something I’ve been talking about with another friend not too long ago. There’s this flood of capital and obviously, what capital does is it drives up prices because founders can be picky and can start getting prices that they want. So prices are definitely up and it feels a bit of a loaded…in fact, the company I invested in literally two months ago I was raising an up-round now and I was able…it was a syndicate, a very private one, so I was only able to invite a handful of people who invested previously. And one investor was like, “Is this up-round based on traction, or just because it’s 2021?” And I was like, “A little bit of both.”
So you know, broadly, I think investors should always be vigilant. I think March and April was a fun time to invest. But I think what it did is as the public markets, kind of, shook up, a lot more folks started looking at private markets as a way to deploy capital. I think just and also the general accessibility to AngelList, Republic, and other platforms, Vincent, are doing to, sort of, make private capital accessible, what that does is just driving up prices.
So I guess if I were to provide any commentary on, sort of, how to navigate this, it’s just be vigilant. Always make sure that the founder you’re betting on, the company you’re betting on, etc. is…don’t be fooled by co-investors, and also don’t be turned off by a high sticker price. Like, I think that when I approach investing, I rarely pass on a deal because of the price because look either it’s…when you’re investing in startups it’s typically is, you know, zero or one. Either the company is going to go bust, who cares if you overpaid at the seed? Or it’s going to be big, in which case you’d be lucky you got in when you did.
Meb: You have a couple of websites that are pretty great, Duro, duro.vc, and climatecapital.co. And I like these because…and this is a compliment, by the way, this isn’t negative. But they’re very clean and minimalist. I feel like the last time I looked at, like, Berkshire Hathaway or some of these, like, family offices that just, like, have a phone number and that’s it. But it’s cool because it lists all your portfolio companies and, you know, it’s in the dozens. How many you say…you got to be close to 100, am I counting correctly?
Sundeep: Yeah, I’ve run over 100 syndicates.
Meb: That’s awesome. So I count about a dozen that I’ve invested in with you. And one of the fun areas that I have not, but should given my background, I come from a farming family, we talk a lot about how that world is changing. And you’ve straight-up done at least it looks like almost a dozen investments in, sort of, the ag space. And as I drive around on the tractor in Kansas, I often reflect and say, “Wow, why are there any people involved in this at all?” How is this…we’re maybe not a year away, but maybe it’s 5, 10, 20 from this being almost totally automated.
And you can, kind of, pick and pivot as you see fit. What are the main opportunities in the ag space? You’ve got everything from robotic farming, to palm oil alternatives, to methane-reducing cow feed, whatever that means. Tell us about any of those are any of the themes you see as opportunity there.
Sundeep: Again, I think one of the beautiful things about just this wave of interest in climate is because everyone is starting to realize there’s an opportunity, people are coming in with ag backgrounds and applying a climate lens and finding opportunity. So it’s not just about tech people finding climate, it’s about people across the industry realizing hey, how do I reinvent my own industry in a way that’s, sort of, climate forward? And that’s some of the companies you see listed like Mootral, you mentioned Mootral, like, the founder’s got an incredible background, and the founder has become almost a friend. And every time I chat with him, I’m so fired up about what they’re doing.
I mean, so much methane is emitted by cows, and so, you know, people can say, let’s not eat cows, but that’s not going to happen. A lot of people are very committed to eating meat and so, fine, what do you do about it? Well, what if we could reduce the methane emitted by cows, and that’s what they’re doing. A lot of science into it and now there’s, kind of, opportunities to, kind of, scale what their solution is across farming. But like, if a company like Mootral, or frankly, a lot of these companies at scale, the climate impact is profound.
Most of the companies you see here are startups, they’re relatively early stage. But what’s exciting is over the next several years, going back to these ag ones, C16 Biosciences is a palm oil alternative. The way palm oil is harvested, unfortunately, results in a lot of deforestation, which is a massive climate impact, it’s a very dirty process. But this concept of a palm oil alternative that, sort of, has the same properties all of a sudden palm oil is in everything. I don’t know if you know palm oil well, Google it, it is literally foods and beauty and this or that. Again, it’s not going to go away, so what do we do about it? Well, let’s invent an alternative. And so that’s what they’ve done. And they’re just in the earliest stages of, kind of, scaling. But again, when they do, the impact will be profound. Each of these, it’s pretty exciting to see what is possible at scale.
Meb: The funny thing that…we talked a little bit about this in a prior podcast, I think we may have been talking about the non-fungible tokens and what’s going on with Top Shot. But the cool thing about going through this whole process as an investor for the past seven years has been many times something will cross my plate, and I’ll be like, “Huh, that seems really dumb,” and that seems very dismissive. But also at the same time, many of those have gone on to be incredible companies and just my reaction was uninformed.
And so it’s been a great experience whenever I have that reaction in many cases to almost dig deeper, or at least be open-minded, and it’s helped to cure some of that closed-mindedness. But I was laughing as you were talking about the methane-reducing cow feed because it seems like a crazy idea on the surface. But then as you think about it, it seems like if there’s a…I don’t know who to attribute this to this, but someone in your world was saying, a good lens to think about investing in startups is what if it does work? If something…you know, hey, this is stupid there’s a small chance of it working, but instead of saying no, no, no, on that side, say, what happens if this does work? What does the opportunity set and TAM actually look like? And that to me, opens up a whole new perspective. And so things like Mootral, if I’m even pronouncing it right, is interesting in that regard because it could be a defining concept, which at its core is just is a cow burps or cow farts or both, I guess probably both.
Sundeep: Both, I think. I like to think of…so preceding seed investing is investing in possibility and I think series A investment is investing in probability. And so when you’re investing in possibility, it’s really fun. Even companies I pass on that I really just hope do well, it is just so fun to meet the team and understand what vision they’re trying to bring to life. And then when I do invest I get to, kind of, help them in their vision and to see them, again, then raise their series A, and then raise their series B and execute, it’s just the best. I mean, again, those who can, do, those who can’t, invest, right, like I don’t think I’ll be starting a company any time soon but I love backing founders and helping them do what they do.
Meb: It’s too much work, my god, it’s exhausting. All right, so I’m looking through your companies, and this is so fun, which companies…and I know this is like they’re all your children and feel free to pick a few. But as you come across them, what were some that literally stopped you in your tracks and you’re like, “Oh my god, that’s just a brilliant idea?” Because this has happened to me a handful of times in the past decade where I said either, “Why is no one doing this?” Or, “If this works, my god, I have to be an investor. Even if it doesn’t work, at least that someone’s trying it.” Is there anything that comes to mind as you come across your portfolio?
Sundeep: Yeah, I mean I’d like to think that’s most of them. But first thought, best thought, a company called Chef. I remember when I chatted with them, I remember exactly where I was walking around actually the streets of Venice, actually. I was on a call with the team and what they’d launched was this anyone…just like Uber is everyone’s private driver, Chef is everyone’s private chef. So chefs who can go and, sort of, list their services and then families that need help with home cooking because they don’t have the time or resources and they haven’t had the capital to do it can, sort of, order food, right. And not just like the dish for tonight, it’s like for the week. So my mom cooks dinner for my family, every Sunday my parents come and drop off a week’s worth of food.
Meb: What’s her go-to, what’s her best dish?
Sundeep: Oh my gosh, she makes Indian food, so anything she makes is the best. But I will say she’s got the best guacamole in the world for any guac fans out there. And for a minute my wife and I were in Memphis, Tennessee, she was there for a fellowship and she was working crazy because she’s in fellowship and I was, kind of, traveling back and forth between the Bay. So we had to solve the food problem and we found independently this, like, Indian woman who started this, kind of, like, food delivery shop. And so that was, kind of, while we didn’t have my mom, we had this, like, other person who we’d go buy a bunch of food, you know, from twice a week, bring it home and cook it. So anyway, so long story short, when I heard about Chef, I was like not everyone’s got their mom in driving distance but who doesn’t like home-cooked clean food? So there you go, it’s still one of my favorites and they’re, thankfully, doing quite well.
Meb: As you were talking, I was looking it up and literally trying to sign up and not available in Manhattan Beach yet. You got to talk to…
Sundeep: Coming soon.
Meb: …the founder and say, “L.A…
Sundeep: I will tell him.
Meb: …dream market, come on, man.” And I imagine that one, like, it’s such a great marketplace if you could just figure out…I mean I imagine one of the biggest roadblocks would be potentially just legality or like is that even a roadblock anymore? Can, like, people just sell food and bring it over?
Sundeep: A hundred per cent. So actually, the only state…I don’t know where it is now but when we invested, I think we invested right after demo day if I remember correctly. Literally, January 1st of that year it had just become legal in the State of California to do what Chef does. First-mover advantage into a brand new market that’s still illegal in other states or most of them anyways. So yeah, the answer to the question about, sort of, favorites though, sometimes you meet a company like Chef like I did and I was like, “Oh, my gosh, yes, this is perfect and I got to get involved.” Others, it’s a love affair before you get to invest. I love Good Eggs. Like, I loved Good Eggs. I don’t know if you know them, they’re a grocery delivery in the Bay Area. And then I had a chance to invest and that’s also gratifying when it’s like, “Oh, great, I get to join this vision and join this company and be supportive,” that’s always a lot of fun.
Meb: And what is Good Eggs, is it farm egg delivery or something?
Sundeep: For folks in the Bay Area, hopefully they know and love it. It’s your farmers’ market on your phone. So you basically…The best…My wife to this day wishes Good Eggs delivered out to Napa. The best strawberries, the best vegetables. Anyways, fun fact, I think the food that you even get at Whole Foods has been several days before it actually into the store versus Good Eggs, it’s like the night before, or the day before or whatever it is.
Meb: Removing the middleman…I mean I grew up partially in Colorado and remember we used to have milk delivery. And it’s funny to see some of these startups, kind of, come all the way back around to some of the direct consumer local ideas, which makes so much sense instead of shipping it from I don’t know how many thousands of miles away to doing something locally. That’s pretty cool. We probably got time for another one or two if there’s any particular weird ones where you’re like, “Man, that’s a bizarre idea, but okay, maybe that’s a cool one.”
Sundeep: I’ll give you one more and then I’d love to, kind of, recap a couple of things that I think your listeners might appreciate. Sandbox VR was…I think you know I’m one of those people that either love it or hate it. When I lived in Tennessee for the six months, one thing I realized is there’s not a lot to do in a lot of cities. For those of us who live in New York, or L.A., or San Francisco, there’s a lot to do but for a lot of places, there’s just not. I’d just come out of living in Memphis…no offense to anyone who lives in Memphis, but I didn’t find there’d be a lot to do. Went to the farmers’ market, did a couple of restaurants we liked, went downtown, but there is a limit to activities.
And what they were promising was this concept of a holodeck in every neighborhood. If you know escape rooms, right, escape rooms are what? An empty warehouse with, like, a bit of a maze, and then you make a lot of money just by, sort of, having people run through that maze. Imagine if the maze was digital, and could be remade for the next person that comes in an hour later. That’s what Sandbox VR does, right? And imagine one on every other block. So you’re bored, you can go play this game with your friends, or not just games, right, I mean, the vision I think is education, immersion, anything that, sort of, VR can deliver, but in a tactile way. So not just your goggles, it’s the vest, it’s the gloves, it’s, sort of, the full experience.
I still remember pitching Andreessen, my buddy…I shouldn’t use the word buddy…acquaintance of mine, Andrew Chen at Andreessen, when I’d invested saying, “Look, I really like this company.” And a lot of kind of like pushback like, fast forward they’re not leading series A. But the idea of real estate, VR, like, all these things that were, kind of, like, “I don’t know about this,” they were hit hard by COVID but they’re coming back strong.
Meb: It’s like Tron essentially, right, like it’s, like, not too far away from that, sort of, reality.
Sundeep: Okay, since you mentioned Tron, I got to tell you about a company called arcadia.tv. Yeah, it’s basically…it’s the future sports. So just what I described what a Sandbox VR is, you put in a bunch of gear and it’s within a room and it’s a little more constricted. What Arcadia is doing is you go to a soccer field or a football field, and then you put these VR goggles on, and then you’re literally running through, like, digital obstacle courses. That is…anyway, check out arcadia.tv.
Meb: I was laughing as you were talking about nothing to do in town, it brought back memories to going to high school in North Carolina, where people would talk about what to do, they’re like, “Let’s go meet in the Kroger parking lot.” Like, that is literally the most interesting thing you guys can come up with, just go hang out in this parking lot?
Sundeep: And no longer. Now you can go to your local Sandbox VR, you can go play arcadia.tv, and it’s a pretty exciting world around the corner here.
Meb: I would say the problem is I tried. I bought an Oculus or whatnot a couple of years ago, just trying to be an early adopter, keep up with tech. And played one game for like six hours or something and my wife came up like 3 in the morning, she’s like, “What are you doing?” I was like, “What? I just got to complete this level.” She’s like, “You know what time it is? It’s like 4 in the morning.” And I was like, “Okay, well, let’s return this tomorrow.”
Sundeep: One thing about both Arcadia and Sandbox is they are social, right, so you got to leave the house, you got to meet your friends. It’s something to do as opposed to just being in a room by yourself.
Meb: Yeah. Which to me seems like the big missing piece in VR to date but seems to be changing, you know, when it becomes social. That was the whole point of the games when we were growing up is that you’re with your buddies. When they figure that out, then watch out.
Sundeep: I think they have. Look, I appreciate…I mean I want to, kind of, close with for folks who are listening, one, just want to plug AngelList as a platform. I think if you’re not already on it, and you were looking for access to early-stage investing, back some syndicates and see if you find anything you like. And I think, Meb, you said earlier definitely pace yourself, there’s a lot of deal flow. So for folks who are getting into it, I would absolutely say start small. Second, Republic as well, the company that I was at for a while for folks who are looking for extended deal flow.
And then as far as plugging what I’m working on, Climate Capital, we both have a rolling fund and a syndicate that are open for investment. And DVC for folks who want to start either sending us deals or finding the deals that our network finds, back DVC as a syndicate and find the verticals you like, be it finance, we have one called Mint, be it frontier tech, we’ve one called Beyond. And that way it’ll be, sort of, more filtered to what you’re looking for.
Meb: And lastly, before we let you go, Sundeep, you got to tell us what’s been your most memorable investment, good, bad, in-between?
Sundeep: I got to say Goodreads. I mean, I literally was the first non-founder user and I think 007, number seven user. And I was there right when Otis was starting it. It was just so fun to see him get it off the ground and then when I had a chance to invest, I was so excited to do so. Then the company gets bought by Amazon and they end up rolling it out to their full network, like, it was just…I’m just so happy for Otis and the team there and also just fun to be a part of that story.
Meb: How’s your book rated on Goodreads, better or worse than Amazon?
Sundeep: Goodreads readers are a little harsher than Amazon. But yeah, anyways, it’s still rating better than most, put it that way.
Meb: And lastly, the best way to get in touch with you to find you, is there a single place?
Sundeep: Yeah, you can email me at firstname.lastname@example.org or email@example.com. But LinkedIn is great. Not on Twitter much, my handle is @sunrock, but you can find me there as well. On Clubhouse, @Sundeep. But yeah, honestly the best thing to do is back me at AngelList so it’s literally angel.co/sundeep, start there and we’ll go from there.
Meb: Awesome, Sundeep, thanks for joining us today.
Sundeep: Thank you, Meb, have a great day.
Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at firstname.lastname@example.org, we love to read the reviews. Please review us on iTunes and subscribe the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.