Jyri Engeström - co-founder at Yes VC - joins the show to dive into the WW2 type mobilization effort that's required to tackle climate change & how at Yes VC they look for companies that can create and represent large social movements, particularly when it comes to solving climate change.
Today's You've Been Warmed episode is one of the most impressive thus far. I had the pleasure to speak to Jyri Engeström - a Finnish serial entrepreneur and investor, currently based in Silicon Valley. He is the co-founder of YES VC - a pre-seed and seed stage fund focused on companies at the vanguard of movements.
Before becoming an investor, Jyri had an impressive career as an entrepreneur, having founded Jaiku (which was acquired by Google) and Ditto (which was acquired by GroupOn).
At Yes VC, because of their investment focus on companies that can become social movements, it's extremely apparent how climate change comes into focus and represents a large part of what they're looking for.
I must confess that I wasn't expecting the turn that the first half of the interview took - Jyri made parallels between the climate crisis and WW2 with impeccable detail and references, he showed inspiring optimism that we can mobilise to tackle climate change and he laid out a compelling case as to how businesses, government & the society at large have to come together to realise that vision.
We then explored how climate change is becoming a priority for founders in Silicon Valley and how much that has changed recently, what they look at in terms of the companies they invest in and the thought process that goes behind that, as well as the sectors that he thinks require a lot of investment. There were also some deep philosophical thoughts and quotes towards the end, but I won't spoil that for you now.
I highly recommend that you tune into this one with your full attention, I promise it will not dissapoint.
JYRI & YES VC RELEVANT LINKS
Jyri's Twitter - https://twitter.com/jyri
Jyri's LinkedIn - https://www.linkedin.com/in/jyriengestrom/
Yes VC Website - https://yes.vc/
TIMECODES (to be corrected)
3:54 - His Background & Why He's a Climate Optimist
8:05 - Climate Scenarios Looking Forward & What Urgency We Need To Have
10:04 - Why We Need An Effort Comparative To The World War 2 Mobilization
17:13 - How Government & Businesses Need To Work Together
23:33 - The Rise Of Attention To Climate Change In Silicon Valley
28:28 - VC Challenges & What They Look For When Investing In Companies
35:20 - A Startup Example That Can Help Tackle Climate Change
39:43 - What Are The Areas That Require Massive Investment
52:17 - Science vs Business vs Politics vs Society
RESOURCES MENTIONED IN THIS EPISODE
True Ventures - https://trueventures.com/
Caterina Fake - https://en.wikipedia.org/wiki/Caterina_Fake
Flickr - https://www.flickr.com/
Kickstarter - https://www.kickstarter.com/
Etsy - https://www.etsy.com/
Bluebottle Coffee - https://bluebottlecoffee.com/
Saul Griffith - https://en.wikipedia.org/wiki/Saul_Griffith
'It’s too late for a carbon tax—it’s time for a world war against climate change' by Saul Griffith - https://www.fastcompany.com/90423806/its-too-late-for-a-carbon-tax-its-time-for-a-world-war-against-climate-change
Kelly Wanser - https://twitter.com/kellywanser
Slush Conference - https://www.slush.org/
Sundance Film Festival - https://en.wikipedia.org/wiki/Sundance_Film_Festival
Gamechangers Documentary - https://gamechangersmovie.com/
Saudi Aramco - https://www.saudiaramco.com/
'The Demon-Haunted World' Book by Carl Sagan - https://www.amazon.com/Demon-Haunted-World-Science-Candle-Dark-ebook/dp/B004W0I00Q
The Manhattan Project - https://en.wikipedia.org/wiki/Manhattan_Project
Alex Laskey (Rewiring America co-author) - https://www.ted.com/talks/alex_laskey_how_behavioral_science_can_lower_your_energy_bill?language=en
Jyri Engeström: (00:00)
It's actually probable that it all starts with America. Um, because the U S has inspired other countries. It'll inspire China, it'll inspire Germany, Japan, South Korea, Brazil, and the other important countries. Um, because of the way that, you know, media [inaudible], you know, the worlds kind of communication channels have been structured. Um, but that said, like you said, time is short. Inaction on climate over the past decades basically has used up our second chances already. So we don't have 10 years to get started. Like some people are saying we're making it sound like we have zero, you know? And the other thing is, yeah, we need a close to 100% adoption rate, meaning that we now need every new plow power plant to be zero carbon every new car to be electric or zero emission every new furnace to be electric. Okay. And powered by carbon free sources. So that means a pretty radical transformation of industry.
YBW Intro: (01:03)
Ladies and gentlemen, you've been more, it's time to figure out the climate crisis with the top scientists, activists and entrepreneurs helping us get out of this mess. Now let's welcome your host. Did I? Gosh. In three two one
did. There is, you've been warmed episode is one of the most impressive thus far. I had the pleasure to speak to URI anguish from a Finnish serial entrepreneur and investor currently based in Silicon Valley. He's the cofounder of yes VC, a pre-seed and seed stage fund focused on companies at the Vanguard of movements before becoming an investor. URI had an impressive career as an entrepreneur having founded Jaiku, which was acquired by Google and ditto, which was acquired by Groupon. Because of their investment focus on companies within yes VC that can become social movements. It's extremely apparent how climate change comes into focus and represents a large part of what they're looking for. I must confess that I wasn't expecting the turn that the first half of the interview took. URI made parallels between the climate crisis and world war II with impeccable detail and references. He showed inspiring optimism that we can mobilize to tackle climate change and he laid out a compelling case as to how businesses, government and the society at large have to come together to realize that vision.
We then explored how climate change is becoming a priority for founders in Silicon Valley and how much that has changed recently, what they look at in terms of the companies they invest in at DSVC and the thought process that goes behind that as well as the sectors that he thinks currently require a lot of investment and show a lot of promise. There are also some deep philosophical thoughts and quotes towards the end, but I won't spoil that for you now. I highly recommend that you tune into this one with your full attention and I promise it will not disappoint. All right, we are live. URI, welcome to the show. Thanks. Awesome to have you here. I'm super excited and um, I think it's going to be something quite similar to a few of the other people that, that I've spoken to, which you know as well, such as a hum person and Antero. Um, but before we go into specifics, if you can tell us a bit about your background for those people who are listening, who don't know you and basically how your activities as an entrepreneur and as an investor have intersected with sustainability, climate change, and making the world a better place in general.
Jyri Engeström: (03:54)
Of course. Yeah. So like on throw your LA I think, who was your last guest? Uh, founder of compensate? Uh, I am finished. I was born in Helsinki. I live in San Francisco, which is where I've been for over 10 years now. And, uh, originally a founder, um, I had, uh, founded a couple of different companies that then got sold, uh, to various larger businesses. One was acquired by Google, um, and another one was acquired by Groupon. And so I kind of grew up in this, you know, early web 2.0 era of when internet was going mobile and built companies that were, uh, building social networks, uh, on mobile. Basically one, the first one was Jaiku for those who might remember the one that was acquired by Google. I was sort of like a [inaudible] early competitor to Twitter and Facebook in Europe. And then, uh, the second one was called ditto and it was okay.
Jyri Engeström: (04:52)
Social mobile recommendations app that was brought up by Groupon 2012, I want to say. And so after doing this, um, I started investing and I've invested in lots of companies as an angel and also, um, worked at true ventures, which is a local Silicon Valley based early stage venture fund here who actually [inaudible] first funded my own company. Um, and then later on started a new VC fund together with my partner Katherine, a fake, uh, that fund is called yes VC, we say yes all day long and it was started in 2018 and so it's fairly new. Um, we have about 16 portfolio companies today. Um, so we've been investing roughly at a rate of about one every month and a half, I want to say. Mmm. And excited and interested about climate. I think, you know, our focus at yes VC is to invest in movements. Uh, what we, you know, as with the background
Jyri Engeström: (05:58)
myself and then cutter enough for those, remember cofounder of flicker, early investor in things like Kickstarter, chairman of Etsy. These are companies that are very community driven companies, um, at their core. And so we look for companies like that, um, companies that are addressing some kind of a potential new social movement. Um, you know, like if you think about the maker movement with Etsy or the crowd funding movement with Kickstarter or the third wave coffee movement with [inaudible] blue bottle coffee here in California for those who know blue bottle. So these are the kinds of companies we've invested in in the past and that we love. Mmm [inaudible] what's the mother of all movements right now? Well, it's climate change, right? And so this is the reason why I'm so excited about it and I think about it. Mmm. In a very optimistic way. I think, you know, maybe in comparison to some of your other guests, I think about it from the perspective of, you know, climate solution, optimism. Um, I think it's possible to solve the climate crisis in our lifetime. Um, and so that's sort of the [inaudible] unifying principle, um, that, you know, I think if you look at all our investments from yes, VC sort of underlies all of it.
Interesting. So you say you're, you're a climate optimist and you think that we can, we can solve it. How, how do you see that taking shape with technology and with the investments that you're making currently? I think according to projections that we have, which of course are not perfect, um, I think they're placing us somewhere on a path to getting to three degrees, warming by 2100 plus or minus one degree. Um, people seem to, that seems to be a consensus, but some people disagree. They think feedback loops can take it a bit higher. The point is we're not doing enough and two degrees, whereas the managed to take away the, the worst case scenario, they also took away the best case scenario is pretty implausible. So how do you see who can bridge that gap and at least stay under two degrees? What kind of companies do you think can help us get there?
Jyri Engeström: (08:05)
Well, and I think you're absolutely right. By the way, I'm not a climate change denier in any sense. I think there is a scenario that's likely that's very dire. Mmm. That said, you know, [inaudible] faced similar kinds of challenges as a society also in the past. Uh, you know, if you take world war II for instance, and I think that's actually where we should be looking at right now. Mmm. You know, [inaudible] [inaudible] the one unifying principle that underpins all of this. This is deep decarbonization, right? And that comes from what I believe it should be, a commitment to massive electrification. So we're going to need more than triple the amount of electricity we deliver here in the U S for instance.
Jyri Engeström: (08:56)
But the good news is that the technologies are already familiar to all of us. It's electric vehicles, solar cells, wind turbines, and heat pumps. They just need to be deployed at a far greater scale. And I sit here and Silicon Valley, so [inaudible] know part of my worldview or perspective. Um, also that, um, it's possible and it, it's actually probable that it all starts with America. Um, because the U S has inspired other countries, it'll inspire China. It'll inspire Germany, Japan, South Korea, Brazil, and the other important countries. Um, because of the way that, you know, media [inaudible], you know, the worlds kind of communication channels have been structured. Um, but that said, like you said, time is short. Inaction on climate over the past decades basically has used up our second chances already. So we don't have 10 years to get started. Like some people are saying we're making it sound like we have zero, you know?
Jyri Engeström: (10:04)
And the other thing is, yeah, we need a close to 100% adoption rate, meaning that we now need every new plow power plant to be zero carbon, every new car to be electric or zero emission every new furnace to be electric. Okay. And powered by carbon free sources. So that means a pretty radical transformation of industry. But like I was saying before, uh, this is actually something that America as a society has done once before. The last time we did it, it was known as the arsenal of democracy and it was done to support the armament. All of the allies during world war II. Mmm. And I don't know if you knew this, but this is the example in history. And as a sociologist, I, I'm a history geek, so I am fascinated by this. After Hitler marched into France and Britain had to retreat from Dunkirk, the situation in Europe looked really bad.
Jyri Engeström: (11:07)
Churchill really needed Roosevelt to join the war. This was even before Pearl Harbor. Roosevelt knew that the allies wouldn't stand a chance without an unprecedented build up of manufacturing, the kind that the world had never seen, basically near, instantaneously. Okay. [inaudible] even if they were able to pull that off, it probably still needs some kind of a moonshot weapon. [inaudible] Mmm, that's right. Sounds kind of familiar to this sort of situation we're in right now. And what did he do? He charged the former [inaudible] guy, uh, this guy named Knutson to rally up industry for the tasks. And back then the industrials actually did step up to the plate for more production. Mmm. Knudson drafted the short list of the materials they needed. The U S government provided capital. Um, it was this thing called patriotism. Plus 7%. Basically they issued essentially capital with a guarantee of 7% profit on top of cost. Uh, so it was a new financing structure, Mmm. For industry and it got the job done in record time. So [inaudible] I think that with this combination of what we need today, [inaudible] a similar coalition of industry, um, including startups. And we also need a new kind of infrastructure level financing, uh, from the federal government here in the U S which I also think is totally doable. Um, basically need to replicate the war effort now for climate.
Jyri Engeström: (12:54)
Super interesting. I'm really enjoying this. I can talk, I can talk more about this. You know, like if you got me started, because if you think about it, I can hear it. Just listen to this. So go ahead. So in 1939, the U S had only 1700 aircraft, all of America. And these weren't built for world war. They were trainers and fighters. Most were pretty far from state of the art. Mmm. America had no bombers, there were no bombers, right? And yet, what do we all, no, about world war II. And America's involvement in it. It's the beef 52 is and the [inaudible] four liberator's, right? So in just six years, by 1945, U S had produced 300 a thousand new aircraft, including the legendary bombers. Uh, there's a single newly built Ford factory, a Willow run built a third of all of the B 24 liberator's. That's like over 6,000 bombers built by the single plant, um, in just a few years.
Jyri Engeström: (14:01)
All right. It's incredible, right? And it all costs about $190 billion is I think the [inaudible] running estimate of how much they see how much the U S government basically spent. Um, and, and, you know, they, it was, it was not just the airplanes. They launched almost a thousand aircraft carriers, battleships, cruisers, over 200 summaries, over 50 million tons of merchant ships. Um, there were like 88,000 tanks, quarter million artillery pieces, two and a half million trucks. Mmm. Two and a half million machine guns, 41 billion rounds of ammunition. Um, in addition to those 300,000 aircraft. So, yeah, this was an arsenal, uh, that was needed. And that was big enough to, to, you know, to defeat Germany on the access.
Jyri Engeström: (14:51)
Mmm. And you know, don't forget that on top of this, there was the heroic work of the Manhattan project. So yeah, America has done this before and this kind of manufacturing buildup, uh, you know, similar to the one that we're all one world war two, uh, for the allies isn't what's needed now for batteries, for solar, for wind, for heat pumps, electric vehicles, and uh, you know, we're also going to have to modernize the electricity grid. Mmm. And this can be done, this can, this can, you know, similar kind of a buildup can totally get this job done in a decade. We can do better than the Paris targets. So, you know, this is what causes my optimism is that I can see a historical precedent. I can see the technologies, there's line of sight to where we want to get to. It's a question of us getting, you know, our assistant gear and rolling up our sleeves and going to work.
Right. So, yeah, I totally agree with you and I, I love to believe in that. I think what's different with climate change psychologically, and I've discussed this with a few people, is that the threat doesn't seem as imminent as Hitler did because it's not a threat that you perceive. A lot of people don't perceive it as threatening because it's not something immediate. It's something that will happen in the future. And that's probably the reason why action has been delayed quite a bit. And then also what you're describing seems based on where America is right now as a complete one 80 turn, um, from, from a political, I know some people don't believe policies to effective and they believe in market forces, but what's you're describing seems to me like the government has to collaborate with, um, with industry and with companies, which I definitely agree with.
Um, and the only thing that I see is of the [inaudible] of a similar scale of what you're describing is the green new deal is the only thing that's being proposed, that that is of that scale. And a lot of people consider it radical and does not damage any of the democratic candidates that are actually pushing for it. So do you want to, do you want to talk a bit about maybe the relationship between government and companies and how this whole investment flow and money and deployment of this new infrastructure, which we definitely need is going to work in your view?
Jyri Engeström: (17:13)
Sure. And look, I'm on the screen here. As you were talking, I bought, pulled up, uh, you know, a snippet from wall street journal, uh, from 1933. And the, the headline is Berlin views Hitler calmly rise in stocks reflects confidence. He will not disrupt nation's affairs. 1933, wall street journal headline. Okay. So it's not as if there was,
Jyri Engeström: (17:50)
um, in the thirties about what was happening in Germany. [inaudible] you know, not as if 100% of the population of the Western world, uh, suddenly got woke and realized that they needed to go to war. This took time and there was debate and misinformation. Mmm. All of those elements were present back then. So I don't think that it's, uh, completely fair to just kind of shrug off, uh, you know, the kind of effort that was done by activists and investors and entrepreneurs already once before to make what I just described happen. It didn't just happen by itself, right? And so, you know, now if you think about today, um, you know, America has 120 million homes, um, and by extension, 120 million hot water heaters, HVAC systems, rooftops, fuse boxes, electricity meters, that all need upgrading, right? America has 250 million cars. Each of them needs to be retired, upgraded, or replaced Ben, Oh, electric car or other net zero emissions vehicle, right?
Jyri Engeström: (19:19)
There's five and a half million commercial buildings. They too need to be electrified. So HVAC, slow rooftops and the other decarbonisation upgrades. So the good news about all of this is that [inaudible] basically the kind of things that we all see and know, right? This is a plan that prioritizes people. Somebody has to go out there and do the work. And so it says a plan that voters can see from their kitchen table. The solutions look like our cars and trucks. Yeah. There are rooftops and basements. It's our furnaces and fridges. Um, it's, this is our families and our communities. So, you know, [inaudible] in a sense. Um, and I, you know, my friend Saul Griffith, who is the author of most of what I'm describing here, um, aye. Aye. I've been working with him on something he calls rewiring America. Um, you know, he's just moving to DC for four months to work with each of the candidates Mmm. On their climate communication campaign. And I think that this is exactly what the current presidential candidates are looking for. Mmm. A story
Jyri Engeström: (20:49)
[inaudible] re-establishes America as a global economic leader and a recasting of the American dream as something that can be bigger, healthier and happier than it was, and it's ever been, uh, while eliminating all our emissions. So it's an opportunity for revitalizing cities, rejuvenating the suburbs, you know, reigniting our rural towns. Mmm [inaudible] that's the part that makes me feel that there is a instantaneous connection with [inaudible], uh, Washington here. Uh, you know, it's not numbers, it's not statistics. It's even not science. It's jobs, you know, [inaudible] clean air and water, you know, it's cleaning our skies and our earth, right. Better food. And these are the kinds of things voters understand.
Jyri Engeström: (21:54)
Does that make sense?
yeah, it makes total sense. And especially young voters, you can see this a lot of really interesting activists in the U S and just by talking to activists in general, I'm, I'm very surprised by how eloquent and, and how well they can describe these problems even though they're, they're 14 1516 years old and they have an understanding of how the economy works and what the issues are and they're actually championing those ideas. So I like your vision and I really hope it, it, it comes true and I think 2020 is going to show us if things start going in that direction or if we get more of the same what we had so far. Um, moving on from that, I wanted to ask you and kind of pivoting to the other elements, the M D investment side, let's say the private investment space and what happens in Silicon Valley and not only there, obviously there's other hubs around the world.
Um, there was by all accounts a clean tech investment boom, um, about 12 to 14 years ago, which kind of fizzled out because of the financial crisis I've seen now on another podcast. And if you hang her up, climb with Twitter, which, um, I don't know how representative it is of what's happening in the real world. So you're there and I want to ask you, a lot of people have even said that climate is a new crypto, um, with, uh, an illusion to the crypto mania that happened a few years ago. Um, do you kind of feel just by being in San Francisco that a lot of founders now are trying to tackle climate change? Is that like the problem that everyone wants to tackle right now? And how do you see that evolving over the next few years?
Jyri Engeström: (23:33)
Yes. My friend Kelly Windsor, who she had a, she has a nonprofit called silver lining, and I remember I went to, she talks about climate engineering, so actually increasing the reflectivity of, of the atmosphere, uh, know bye spraying substances into the air at high altitudes to reflect sunlight back into space. So this is probably on the very edge of how radical can you get, uh, when you're talking about, you know, solving climate change. And, you know, even a year ago, uh, you know, I went to listen to her speak and yeah, there were, you know, a few woke people there. Um, and, but, you know, it was a pretty small community, right. And just a couple of weeks ago, Mmm. She had an event here, yeah. At the Virgin hotel in San Francisco. And it was standing room only. Mmm. And I saw a bunch of friends there that I haven't seen in years, founders of companies. My friend Kristen Segra stall, who's a founder of [inaudible] Playfish, a gaming company, was the first guy to raise his hand and ask a question after the presentation.
Jyri Engeström: (25:00)
I was like, Oh, what's he doing here? He's like gaming entrepreneur. Mmm know. So I think that anecdotally, my experiences, yes. It's something that people are starting to realize, uh, they can build their next phase of their career as founders on. Mmm. Just similarly as, you know, when I was starting out in my early twenties and you know, I could see the upcoming title wave of mobile, right. You could just envision a world 10 years from then where everyone would have a mobile device. Then the kind of opportunity that would present to an entrepreneur who was building software that allowed people to connect through those devices. Right. And so you look at the smart entrepreneurs now and I think that they are anticipating a similar shift and plugging in, you know, reading their homework, coming up with ideas, you know, I dunno pretty much every weekend now.
Jyri Engeström: (26:08)
Mmm. You know, I end up taking a hike or having dinner with other founders, um, who we're talking about this who are know, excited. They have ideas. Mmm. They're trying out various stuff. Um, most of them are software founders and a part of this involves hardware, which is new to people. Um, you know, if you want to sequester carbon for instance, you know, you're at some point probably going to have to touch, you know, Mmm. Real physical molecules of carbon, uh, and, or if you're trying to create energy, um, you know, there's many things you can do to increase efficiency and [inaudible] affect things like regulation, politics, decision making that involves software. But this is just that much deeper and broader scope, uh, and playing field for what you can imagine. Um, and I think that it's actually, um, you know, it's inspiring their imagination. Um, this is part of what makes me optimistic, right? It's cause I can see that mental shift happening and looking at the kinds of people that are engaging. There are some of the smartest people there are. Yeah.
Yeah. I mean, as I prefaced it with my question, that's the feeling that I got, but it's really encouraging to hear it come from, from you as well. Since you're there and you're deep in the trenches and as you mentioned, you speak to all these founders and you see they, they're kind of seeing the same opportunity that you saw, um, with the previous big trends. So hopefully climate becomes the next big trend that they follow. How does this influence your, your investment strategy? Like what kind of companies do you look for when you invest, um, in subjects that can help the planet? I know you and your partner Katharina you host, um, I mean she hosts a podcast called should this exist and there you, um, she interviews creators of radical new technologies that know not only pitch the business case of their technologies but also the human case of their startups. Is this somewhat representative of what you're looking at? Um, within yes. VC basically funding higher risk ventures early that if successful have the potential to have massive impact.
Jyri Engeström: (28:28)
Absolutely. Yeah. So the challenge for VC here is time. Timeline, right? Um, cause a lot of the kind of infrastructural changes that I just described, uh, are going to, you know, basically [inaudible] require a lot of labor. They require a different kind of financing model from VC. Right. And so VC is a pretty narrow tool. And actually a part of what I'm seeing now happen is I just had a chat Mmm. At slush in Finland, which a conference I know, you know, well, um, with a former VC who was now starting a debt financing, uh, instrument, uh, specifically, uh, for climate. So know I also see VCs who have an open mind kind of [inaudible] broadening their outlook and kind of inventing instruments, national instruments that they think are better suited to the task of this kind of enormous, a scale up that needs to happen of something that already exists like pumps.
Jyri Engeström: (29:42)
So, you know, that's one thing. Um, now for yes, VC specifically, which the traditional, uh, kind of plain vanilla, early stage VC fund, you know, the way that early stage DC works is pretty simple. Like, let's imagine that, uh, let's imagine we have a $50 million fund and these are just, you know, uh, broad numbers, right? Um, so really just, um, for example, right. And let's just imagine that 10 million of that goes into a management fees and legal costs and other costs over the 10 year lifespan of the fund. Right? That's probably a little bit more than in reality would happen. Yeah. You know, there are actual real costs. Then if you look at, um, funds, they oftentimes actually a big chunk of it goes into various kinds of fees. So now we have $40 million left to invest right now. How does that 40 million get it invested?
Jyri Engeström: (30:42)
Well, actually not all of that goes into first Jack's into new companies. Um, in many VC funds, only a fraction of that actually goes into investments in new companies. Uh, for an early stage fund, let's call it a 50, 50 split. So 20 million, I'm going to invest now into, you're a new company, uh, that other lady's new company over there. Um, you know, and 20 I'm going to reserve for following checks. I'm into the best companies to defend my ownership. And then later on, as they raise more financing, right? So now we've gone down from $50 million to only 20 that I'm actually dealing out to new bets. Right? And here I am. Yes. VC, I'm looking for movements. I've got $20 million to now I can't put all of that into one company. Right? Because that would be, yup. Way too concentrated portfolio, because I know these are early stage bets.
Jyri Engeström: (31:44)
Most of these companies are actually going to fail. That's fine. Right? So I need diversity. So I'm going to do 20 companies. So $1 million on average per new company. Right? So okay, here I've got $1 million check and you've just pitched me your company. What am I thinking? Like what makes me decide about investing or not investing? Right? Well now think about my business model, right? So I had that $1 million check, but behind it I have this $50 million fund, right? Which is my investors, my LPs, basically my buddies that believe in me and that have handed me over some of their money because they think that I can make them more money. Nope. What's their expectation of me? Well, they need to make their money back at least three X at least three times in the 10 year life span of this fund for this too.
Jyri Engeström: (32:45)
Even count as a reasonable VC fund, but more likely they're hoping that it's going to be five X even Tenex. Right? But let's just say that I need it just to keep my job. Um, I need to make their money back. Three X so that $50 million has to turn into $150 million, right? I, that's my job. Right. And now coming back to that last rate, if there's going to be 20 companies in the portfolio, how many of those are actually going to return capital? Well, if you just look at the, you know, the curve, um, it's actually [inaudible] there's going to be one, maybe two in there that return almost all of that money, right? The rest are going to fail or return something insignificant. And so with each of those companies, you know, I have to be able to justify that. I see line of sight to a situation where that $1 million, it's not going to return just three X, not even [inaudible] that, that bet.
Jyri Engeström: (33:54)
It could be the only one in this entire fund that returns that and tire fund and not just one X but three X. So I'm looking at that $1 million, potentially turning into $150 million down the line. And if I buy, let's say it's a $10 million post money valuation, um, early stage seed check, uh, I write the check for $1 million. Now 150 times 10 million, it's 1.5 billion, right? So the minimum at which that company is going to have to exit is one and a half billion dollars, and that's assuming zero dilution. So in reality, it's probably looking more like, you know, somewhere between two to $3 billion. And so for every company that I invest in, I have to have conviction that it can exit at that kind of valuation, right? And so that's a pretty tall order, uh, for me to make an investment. Right? And so if you think about climate now, um, and that has to happen within the lifespan of the fund, right?
Jyri Engeström: (35:01)
You know, it means that it's a super narrow slice of company that, you know, seems to have the capability to get the, that sort of valuation that quickly. Um, and I'll give you an example of a company we have invested in.
Jyri Engeström: (35:20)
So we've invested in, uh, a company that is still in stealth mode, but that actually grows oysters. Another selfish, right? And so [inaudible] seems, uh, a very unlikely investment from a Silicon Valley venture fund that's back mostly software companies. Um, but then if you think about it, oysters are the only carbon negative, uh, animal protein. Uh, there is, right? Because they actually, okay, sequester carbon in their shells, right? So for every 100 grams of oysters, 12 grams is actually sequestered carbon. Um, and now that's exciting because you're kind of used to the idea that anytime you eat meat, um, you're going to be letting off the missions.
Jyri Engeström: (36:19)
Well, it turns out every time you eat oysters, you're actually sequestering carbon. If those shells are disposed of properly and not let back into the atmosphere, right. The carbon's not let back into the atmosphere. And also they eat seaweed, which as you know, is also a carbon sink. So Mmm. This is an example of the sort of opportunity where it's a high margin product. It can be automated with robotics and software. Mmm. And you can see line of sight to a situation where know with proper execution, uh, you can get to that kind of outcome. Mmm. And so this is, I think now what founders are trying to figure out is where are those kinds of opportunities? If you assume that, you know, increasingly consumers everywhere around the world, but particularly in the U S are just waking up to this idea. Um, you know, there, you know, you look at these movies that are, we just came back from Sundance, Katarina on the board of Sundance though.
Jyri Engeström: (37:25)
So we go every year, um, and it's Sundays. Film festival is an America where it's the marketplace, four new independent films, right? They get premiere, therefore, the first time and the buyers, the distributors are there. So it's nowadays the Netflix is the Amazons, the apples and of course the also the traditional film studios like Warner, um, universal and so on. Right? And they make deals. It's kind of like the Y Combinator demo day of American film. Right? Um, they buy the ones that they think are most likely to make a big success. [inaudible] there's a lot of movies being produced right now about climate change. There's a lot of films being produced about regenerative agriculture or veganism. Think about game changers on Netflix. If you haven't seen the movie, I really recommend it. I just watched it with my kids this weekend. It's amazing. You know, I don't think anyone in our family after seeing game can really justify eating meat anymore.
Jyri Engeström: (38:38)
So these are all the kind of trickles that are playing into this enormous, you know, kind of build up of, I actually don't need so much like this. The other thing is like, you know, well we know at right from just the entrepreneurship is, you know, every single dollar you put into a startup ecosystem versus the incumbent ecosystem actually matters 10 times, right? Because, you know, think about a Tesla getting started. Like they couldn't get loans, like they can't get financing, um, every single dollar matters so much to them that they can get right. So, uh, and it's a similar situation with, you know, things like regenerative agriculture. You, you know, we need to basically, with each one of our dollars be funding the sustainable carbon negative ecosystem rather than the incumbent ecosystem, you know, so yeah. Instead of buying burgers, you know, buying beyond meat really matters.
Jyri Engeström: (39:43)
You know, instead of buying another used gasoline powered car, buying a used Tesla or other electric car, it really matters because it's moving that dollar, uh, from basically supporting, you know, the price of used gasoline cars into supporting the price and the demand for electric cars, right? So we needed basically, even with banks, you know, there are banks, financial institutions now you, that are rethinking, uh, the kinds of loans that they're giving out and who they're giving out the loans to, right. You know, put your money in a bank that is actively lending money. [inaudible] the regenerative ecosystem companies, right? So on every level, we have enormous leverage with just their dollars because it's a capitalistic world. And that crazy thing is that even though these existing incumbents, you know, you think about like a Saudi Aramco, the, you know, the number one company with the highest amount of carbon emissions, you know, on earth today, Mmm. And they're completely dependent on want the price of one single community commodity, which is oil, right? And so know you actually don't need large fluctuations of capital flow before they start, uh, actually wave like having an effect, you know, a change in the situation. So, you know, this is the part that you see over and over again play out in just normal startup world. You think about how quickly a new Silicon Valley startups can actually disrupt an industry. And it's kind of amazing. It's almost magical if you really think about
Jyri Engeström: (41:33)
the scale difference between, I dunno, uh, some payment system like square and the incumbents. Um, and then, you know, it's an outsize the fact, um, that they actually have on the market or a blue bottle. Coffee and Starbucks, you know, they're like truly like David and Goliath, but nevertheless, um, it captures people's imagination and there's that kind of tipping point and then boom, know, and so this is the part where, you know, I just think in the next five to six years, we're going to see more of these coming out of not just Silicon Valley but also Europe. Um, these kinds of companies and our business is to be an investor in them. Right? So that's why I'm on the podcast, to put out the word that, you know, there are funds out there like yes, VC that are actively looking at this base from this perspective.
Jyri Engeström: (42:34)
No, we're writing checks. Uh, you know, we're looking for founders that understand how this system works and that have come up with some kind of innovative solution. No, you know, we need discoveries that, you know, number one, greener supply chains. Number two, sequester carbon in our products. Number three, grow better food with healthier soils. Number four, provide better batteries, you know, and guarantee seasonal energy storage. Uh, you know, these are, we also need solutions to the [inaudible]. You know the heart hard to solve a mission problem. So a new generation of refrigerants, we need to make steel without coal. We need cement without CO2 and plastics without nitrous oxides. Oh, that's the list. So get to work.
I didn't want to stop as you can see. I'm excited. Yeah. I had so many questions written down and you kind of touched on, on all of them because I wanted to ask you about other technologies that you see. You would see yourself investing in. You just covered them now. Um, yeah. Like what kind of advice you'd give to people listening to the podcast. Um, but it your last 12 minutes or so just encapsulated everything. So I think that's really comprehensive and it really gives a good overview of what you're looking at and how people can get involved. Especially when you mentioned, um, it reminds me of the point that hump was made on, on the pod when he spoke about voting with our money. That we can vote in elections, but we can also vote with them with our money. Because where we choose, of course we can do activism. And all of that. But we can also choose to put our money and not only what we buy, but also the banks that we bank with and, and all of that. Everything that every piece of capital that we choose to allocate in one way or another makes a difference. So,
Jyri Engeström: (44:25)
absolutely. And you don't like, you know, billionaires might imagine they'll go to the, or Mars, you know, people with $100 billion, uh, you know, Mike, bye, New Zealand citizenship, you know, those were 10 million might imagine retreating to Wyoming, uh, the Rocky mountains. Uh, but the rest of us, we'll have to stay and fight. [inaudible] you know, the future will be awesome. Solving climate change and improving, and I'm going to, you know, emphasizes every voter's life given where we are in the current cycle. It's 2020. Okay. Mmm. And we're going to need to see something dramatic shift in Washington D C you know, what's not to like [inaudible] a juicy crisis to apply ourselves to. Right? We haven't been in a situation like this since world war II. You know, it's a generation. Uh, you know, the people that are that age right now, um, [inaudible] [inaudible] got it made, like they don't need to wake up in the morning and wonder what they should be committing their lives to.
Jyri Engeström: (45:39)
Right. This is our world war moment and it has this incredible unifying effect on society. Like, I'm finished, right? Finland was invaded by the Soviet union during world war II and just, you know, two decades before that Finland had had the bloodiest civil war in history where, you know, half of, uh, the country basically, uh, was that the throat of the other half and there was enormous killing, um, enormous Stripe that was like, you think America is divided in politics, like look at Finland in 1918, uh, you know, this is nothing compared to that. And yet, uh, you know, that country pulled itself together and, you know, everyone fought side-by-side and you know, managed, you know, incredibly, uh, against [inaudible] doll odds too. Okay. Defeat the Soviet invasion, um, in the winter war. And so it's because I think also I come from this kind of history, right, where I have, you know, kind of, you know, sort of Ben brought up listening to, you know, my grandfather's, um, stories about when he was 17 years old and you know, he was on the front line in Eastern Finland.
Jyri Engeström: (47:10)
Um, and the kind of heroic acts. Mmm. And I think to myself, wow, you know, I didn't have that opportunity when I was 17 [inaudible] things were kind of going well, yeah. And now you know that, you know, Gretta Turnberg 17 today and look at her, you know, she is a hero, right? She is committing heroic acts as we speak. And what an inspiration [inaudible] what an inspiration. Four, my kids who are 12, 12 and 11, you know, I have three children myself. Like know, it's incredible. Right? And I can just see, you know, how their eyes light up. Mmm. You know, when they imagine what they can do, you know, and they're the ones that ultimately are gonna, you know, obviously I have to live with the consequences. So our jobs now as investors, as founder is as politicians, all that yeah. Is too basically, you know, in Finnish whiskey, I like [inaudible], which means, uh, you know, that was when, you know, you move, uh, you the war machinery, uh, to the border, right? We have to, uh, basically make the world ready for them to take over.
Jyri Engeström: (48:34)
Yeah. And the other thing is, you know, if you think about it like, you know, particularly, sorry, particularly Silicon Valley right now, you know, uh, there isn't so much exciting go like so much exciting stuff going on in the Valley. Uh, it's, it's actually kind of a bummer, right? You know, here we have, uh, [inaudible] we were all celebrating, okay. The victory of, you know, techno capitalism, and then boom, Donald Trump gets elected, you know, it kind of pulled the rug from underneath everyone's feet and we suddenly realized almost like Oppenheimer after the bomb was dropped on Hiroshima. Right. Basically, that this may have been the greatest mistake in human history, you know, from a different angle. And I think that Silicon Valley has had a similar kind of waking up moment, um, with [inaudible] social media platforms and the advertising driven business model that power's Twitter and Facebook that basically has led to the situation where like Carl Sagan, you know, if you remember the pioneer in Voyager space probes, Carl Sagan created the famous pioneer plaque and the voids are gold golden record.
Jyri Engeström: (49:54)
Those messages that could potentially be understood by extraterrestrial intelligence that might find them. Anyway, so I was just reading his book, ah, the demon haunted world heat published his book in 1995 a year before his death and he wrote [inaudible] he wrote about the future. He said, I have a foreboding of an America in my children's or grandchildren's time when the United States, it's a service and information economy and [inaudible] nearly all the key manufacturing industries have slipped away to other countries. And when awesome technological powers are in the hands of a very few, uh, no one representing the public interest can even grasp [inaudible] [inaudible] issues. When the people have lost the ability to set their own agendas or knowledgeably questioned those in authority. And when clutching our crystals and nervously consulting or horoscopes or critical faculties in decline, unable to discuss English between what feels good and what's true, we slide almost without noticing back into superstition and darkness.
Jyri Engeström: (51:02)
So this, you know, very dark vision of, of basically us losing our scientific understanding of the world and replacing it with what Sagan [inaudible], uh, kind of celebration of ignorance actually became true because of the technology we created in part. Right. And so, you know, like Sagan said, he wrote the candle flame gutters. It's little pool of light trembles, darkness gathers the demons begin to stir, right? So, yeah, it's that reality that Silicon Valley's been living with ever since Trump's election in 2016. Right? And so we're ready. We're, we're ready for something new. You know, a mission that we actually feel we can own and, you know, create technology that makes us proud. Right. It helps us recruit new hires from, you know, the kids that are just finishing school now. They want to join a mission. Right. We all know that, um, this is the whole tenet of YC, right. Build stuff that matters. And so you, from that perspective, it's just good business.
Wow. Okay. It's really, you got me when w when you started reading the, the excerpts from the book. It's right here open literally. Yeah. No, I can, I can, I can definitely see everything you're describing even though I live in Europe is pretty visible from, from my end and from anyone who, who follows the scene. Um, and yeah, I, I definitely agree with everything that she said. I wanted to ask you. I would literally end the episode on that note because it's just the perfect ending. But, uh, I have a question that I ask everyone and you kind of touched on it, uh, throughout your answers. Um, but I just want to want to get a reply from everyone on this topic. So I, I try to get guests to rank, um, the following sectors in order of importance to tackling climate change one through four. A lot of people know this is kind of a trick question. So they just talk about the, the kind of intersection between all these elements. But if you just want to maybe summarize everything that we've spoken about on this episode and talk about the relationship between them, so their politics and policy.
Jyri Engeström: (53:26)
So anything that government can do, um, to tackle climate change. Second one is society. So the activism, civil disobedience, lifestyle changes that we spoke about. Third one is businesses, um, and what they can do. And the fourth one is scientific research and innovation. So, you know, breakthrough is nuclear technology, um, energy efficiency, battery power, and so on. Which ones do you think are the most important or how do you think they'll interact with each other? And how do you see them play out? Got it. Well, I mean, I'm going to say two things. One, okay. We need a Manhattan project for a material economy that absorbs carbon rather than a Midsummer. And I think that that starts with industry [inaudible] business, right? Maybe it's just because I'm a VC, but that's where I naturally look too. Right? Similar. Is this Apollo project for agriculture that's a questers carb rather than amidst it.
Jyri Engeström: (54:34)
And then just brings innovation and invention and the ingenuity back to our rural areas. I was just in Kansas, uh, visiting a company called green field robotics that [inaudible] small robots. Uh, it's basically like, imagine Uber for robotic planters, robotic Cedars, robotic weeders, and also fences that move by themselves so that the animals that are grazing on the fallow fields don't graze the same place, but continually move like the Buffalo did back when the great Plains were still inhabited by, you know, there, when, when they were the natural habitat of the Buffalo. Right. And so this is an example of where, you know, we basically need not just business, but also farmers, uh, and the agriculturalists. And so this is, I think, you know, from my perspective, uh, a reimagining of the climate dialogue fundamentally from where the environmentalist, uh, dialogue basically has been. If we sacrifice a lot, the future will suck a little bit less.
Jyri Engeström: (56:00)
Uh, but this is, you know, reimagining of this dialogue is to say like, we've been given by God this one opportunity to solve the climate climate crisis. Right. Bye. Upgrading. And I will say American infrastructure because we're talking about this election elections here, and I think this is where the tipping point for the world really has to happen. And renewing our suburbs and rejuvenating our farms in our cities, lowering energy costs, they're going to, we're going to clean our rivers and our skies. We're going to grow our forest. We're going to improve our health and dramatically strengthen our economy, uh, while leading the world to a new abundance. No, right. The future will be awesome. So I'm going to end with that. Awesome. Yeah. I don't think there's anything else to say. Thanks for, thanks for all the knowledge you dropped on us and, uh, uh, it was my pleasure.
Jyri Engeström: (57:05)
Yeah, I'll, I'll link your blog and everything else where you, I saw you published some articles and everything about the SVC and, uh, hopefully everyone enjoys this episode. Thanks a lot. And full credit to Saul Griffith and Alex Laskey, rewiring America. Uh, you know it as you can kind of tell I'm a convert but I just want to make attribution clear. Most of the hard work of Oh, you know, the stuff that I was talking about. Mmm. You know, all comes from them. Uh, and keep an eye out. Um, cause you know you're going to hear about them. So thank you. Awesome. I'll link them in the show notes. Thanks a lot. Thanks. Cheers.
Can I go share again, thank you so much for listening to this. You've been warmed episode. I really hope you enjoyed it as much as I did. Now you can find all the episodes on our website and it's www dot you've been warmed.com both in audio and written form so you can find the transcriptions on there. I'd love for you to reach out to me on Twitter and tell me what's your favorite episode has been thus far or if you have any feedback on the episode they just listened to. My Twitter handle is at D R G Stephanie's school. So DRG coming from Drago ish, my first name, and then Stephanie's school, which is my last name. And finally, if you want to get notified when new episodes are out, subscribe to this podcast and consider dropping a review for us if you enjoy the content that's all for now. See you soon.