To facilitate carbon removal at gigaton scale, we need investors to put their money in climate solutions.
But VCs are often used to investing in in bits, not atoms. Climatetech hardware is more expensive and more challenging to replicate than software in many cases. And it’s more challenging to achieve orders of magnitude growth in a physical environment than a digital one.
So, what is the best way to finance climate solutions?
Dr. Marcius Extavour, PhD, is Chief Scientist and EVP of Energy and Climate at XPRIZE, a nonprofit that facilitates large-scale global competitions to crowdsource solutions to the world’s greatest challenges.
On this episode of Reversing Climate Change, Dr. Extavour joins Ross, Siobhan, and Asa to explore the current landscape of climatetech investment and explains why he wants to see more women and underrepresented minorities in the capital system.
Dr. Extavour discusses the carbon removal projects that are farthest along in terms of capitalization and describes the opportunities for traditional finance to fund climate solutions.
Listen in for Dr. Extavour’s insight on applying the spirit of collective action from crypto to the climate space and learn how you might participate in funding climate solutions.
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Dr. Extavour on Reversing Climate Change S3EP71
Full Transcript
Ross Kenyon: You’re listening to the Reversing Climate Change podcast by the team at Nori, the carbon removal marketplace. This is a show about the innovators and entrepreneurs developing solutions to climate change.
Hello and welcome to the Reversing Climate Change podcast with Nori. I’m Ross Kenyon, I’m the creative editor here and one of the co-founders, actually. And today I have with me — changing the order of how I say that, which now makes me feel like I did the whole thing left-handed. But okay, we’re going to keep going. Siobhan Montoya Lavender, co-founder of Thanks a Ton. Hey, Siobhan.
Siobhan Montoya Lavender: Hey, how’s it going?
Ross Kenyon: It’s good. Trying to break that path dependency a little bit.
Siobhan Montoya Lavender: Yeah, get a little loose with it.
Ross Kenyon: Asa Kamer, producer of Carbon Removal Newsroom. Hey, Asa.
Asa Kamer: Hi, everyone.
Ross Kenyon: Hey, we have an alumnus coming back here — Dr. Marcius Extavour, XPRIZE chief scientist and EVP of energy and climate over there. Hey, Marcius.
Marcius Extavour: Hey, what’s up?
Ross Kenyon: It’s been the better part of a year since you’ve been here, I think. We did one right when XPRIZE just started getting into carbon removal, or thereabouts. That sounds right?
Marcius Extavour: I’m just coming out of the COVID sort of time warp where you can’t — I can’t remember exactly when anything was. I’m starting to get my calendar back, but sometime in the last year, I think, sounds right to me.
Ross Kenyon: Is there an expectation that one is going to get that back?
Marcius Extavour: I think that it just all blends together for two some years. I’m going to keep saying it as if it will happen, so that maybe it will, but I can’t say for sure. That’s my own — anyway.
Ross Kenyon: Well, you travel around, not least — you are a hard person to schedule, because you’ve been bopping around going to different climate events, doing different carbon removal stuff.
Marcius Extavour: Yes, it’s been good. It’s been really good. I mean, my family has noticed too that I’m away again after being home every day for a really long time, which has been sweet. But yes, I’ve had the opportunity to go to a couple of events. The first time I really went anywhere, I think, was in April. That was the first time I went to a conference. Maybe — the point is, it was a conference and I just forgot what it’s like. Oh yeah, it’s nice to get into a room with other people that care about your thing too and talk to them, and you can talk to so many people at once, [unclear], and they’re just sort of hanging out. So yes, I’ve had a chance to be out there a little bit, and a couple other meetings that I get to go to this year, including the COP meeting, which will be, I think, wild and wonderful as it always is.
Ross Kenyon: I like the optimism — wild and wonderful. You just trying to get a free scuba diving trip out of it, or what?
Marcius Extavour: Yeah. Yeah, it’s funny. Like, when you work in [unclear] tech, I think there’s an assumption that, like, of course everybody dives. I’ve got nothing against the water. I would love to dive. I’ve never dived once. I’ve never put on scuba gear. I don’t know how to do that, and I know that you can really mess it up if you don’t do it right. So I would love to say, yeah, I went diving in the Red Sea, but in practice I’ll be lucky for maybe a little boat tour, or maybe just, like — in all honesty.
Ross Kenyon: Yeah, I didn’t know that. I didn’t know that stereotype, that tech people were into scuba diving.
Marcius Extavour: I may have just made it up, but I think — look, with full respect to anybody that’s into diving, diving is sometimes a plaything of wealthy people, and we know that the playthings of wealthy people are catnip for tech types sometimes. So I’ve come across more than an inordinate number of people that are into diving, and I don’t know, it’s just — this is just me and my own BS. But sometimes I like to force — it’ll be pointed out that, like, I’m not necessarily part of the club in that way, if it’s a privilege thing. And so, yes, I’m getting a little sensitive about it.
But yeah, so it’s not like I’m going to, you know, let somebody know I’m not going diving. But yes, if the assumption is we’re all divers because why wouldn’t you be, then that’s okay to say, well, you know, actually I’m afraid of water, or no, I never learned that, or whatever the case may be.
Ross Kenyon: That wasn’t offered as an extracurricular at my school.
Marcius Extavour: There you go. Exactly. Mine either. And I hated swimming lessons, for the record. Let’s just get that out of the way.
Siobhan Montoya Lavender: That’s funny, I’ve never associated that, but I guess that is kind of a — it is kind of a rich-y kind of hobby.
Marcius Extavour: I don’t know, it could just be in my head. I’m sensitive like that. And let me just say too, it seems like the most amazing thing. What I’d like to get under the water and look at beautiful coral and other sea creatures — I absolutely would. So maybe I should just stop complaining and [unclear].
Ross Kenyon: I mean, I was just looking for an easy joke, because they only ever have COP in places you would want to go, really. So I was like, wherever it was, there was a joke coming.
Marcius Extavour: Hmm, that’s been about me. Yeah, it’s in Sharm el-Sheikh, which I know about as — I think it’s a famous resort city in the region, where people nearby vacation if they can. So I’m looking forward to it. The planning is chaotic. It’s more chaotic than usual, as far as I can tell, this year, but it’s in a beautiful place. So I’m assuming there’ll be some really interesting and fun things to do in between hotel conference rooms and badging and that kind of thing, which is the usual COP experience.
Ross Kenyon: Have you been before?
Marcius Extavour: I have been a couple of times, yeah. But COP alone is like a music festival, or like, I don’t know, Fashion Week. Fashion Week isn’t one thing, it’s 50 different things all happening in the same city at the same time. And there might be one official opening ceremony of fashion — because I’ve never been to Fashion Week, is it this way? Instead of the — like, often people ask, am I going to COP, or should I speak at a COP, or is it worth it to go? And I’ll usually say, well, there are a bunch of different things happening, and if there’s something interesting, you check it out. My experience is that it’s a really great opportunity to meet a lot of people in a short time, especially people from outside North America, from places that we don’t necessarily get to, or whole communities that we aren’t necessarily a part of.
So, meeting people — and increasingly COP has become not just a place where the climate scientists get together, or climate scientists and international negotiators get together to work on treaties. That still happens, and there’s a process for that, and there’s a process for sharing scientific results. But now there’s this whole festival of side events. The NGOs, the governments, the investors, the companies, the citizen groups have all organized their own things, sort of satellite meetings near COP, and that’s part of COP now. Frankly, that’s where I’ll spend most of my time — at interesting side events that are a lot more accessible to people if you don’t have the official UN accreditation.
But a lot of interesting stuff goes on, especially now that climate is becoming more interesting to investor and business communities. I think in years past they weren’t really hanging around. The first COP I went to was Paris 2015.
Ross Kenyon: Okay, so you’ll have a good kind of barometer sense on what that was like versus what’s coming here.
Marcius Extavour: That’s right. That’s right. Last thing maybe I’ll say is, there is sort of a rhythm to the negotiations on different articles. So with the agreement last year, one of the big areas of focus was Article 6 of the Paris Agreement. This year, I think, is considered to be more of a down year, in the sense that there aren’t massive pieces that are anticipated to move forward to work out details of various agreements. So the COPs go on a cycle, is what I’m trying to say — some COPs are considered more noteworthy, more consequential than others, but you sort of never know until after the fact what actually happens, what the mood is, what is actually achieved at the negotiating table, from the treaty side of things.
But, I mean, I’m looking forward to COP as the conference. I’ll get to meet a lot of climate people that I don’t really get to meet, probably more organizations I don’t normally get to interact with. I’m especially excited that this is the first African COP. It’s in Egypt, and I’m curious to see how many people — how many actual Africans are able to attend from other parts of the continent. We’ll see. Will be very telling.
Siobhan Montoya Lavender: Yeah. Well, cool. So at these conferences, how much do you lead in with, like, the science guy versus, like, I have the investment business side dialed in? Like, how do you kind of present at these? Because I feel like you have your feet in a lot of different corners there.
Marcius Extavour: Yeah. Well, thank you. I think that’s a compliment. I’d sort of tried to shape my professional life that way. At a meeting like this I’ll typically — I really look for places where people are talking about innovation. And somebody that thinks, if I work near and on innovation regularly, it might sound funny to go looking for that, but it’s a good reminder that innovation is not a normal topic at most professional gatherings necessarily. Maybe it’s a small topic, whereas for me it’s sort of my main thing.
I think I’m most effective at a place like this not representing that I’m an active publishing climate scientist, because I’m not, but I’m more like somebody who understands the science very well because I speak that language, and I’m good at translating it into other fields. So I sort of straddle — I understand innovation from the tech end, the policy and the business and the science perspective, and I can help you do that thing you’re trying to do, or maybe we could work together to do the thing together. So that’s, I think, where I could be most useful personally.
Siobhan Montoya Lavender: Yeah, I think bridging the gap is a really essential role.
Marcius Extavour: Yeah, I hope so.
Siobhan Montoya Lavender: [unclear]. You know, if we’re going to collaborate, then we need people like that bridging the gap and making the communication flow.
Marcius Extavour: Totally agree. I mean, sometimes when — you know, collaborations I’ve been involved in, you need to make sure you align on the high vision, but then also you just need to make sure of the basics, like, you’re speaking the same language. Literally, when you use this word, is the other party understanding it the same way?
Ross Kenyon: Well, we’re not great at it in climate in general. Like, the lexicon of climate is so muddled, is so complex. I also don’t know if you follow Rory Jacobson from Carbon 180, but he recently asked this question about language in different — like, how do you say CDR versus CCS in various languages? Since nobody had weighed in on Spanish, and I live in Mexico and I’m married to a Latina and we live here and have our life in Spanish, I weighed in. And I was just like, man, no language has this down. We’re all just confusing ourselves, and it doesn’t matter what language you speak. Like, nobody gets the difference between CDR and CCS. The terminology — direct air capture versus point source capture — confuses people. Like, we really have not nailed down the lexicon yet.
Marcius Extavour: Preach. I totally agree, and I feel like I’m personally out of ideas on how to help. I’ve been part of taking a few swings at this, either trying to sort of elucidate language, bring to the surface phrases people are using, or to maybe gently try to streamline it and say, you know what, how about we just all agree on this one and on that one. I can’t say that they’ve really been successful. And I mean, on the other hand, you know, more people are coming into — whether it’s carbon removal or carbon management, there goes another one of those phrases, you know — anything, or just climate solutions. I was trying to say climate tech, but maybe I’ll just take some — you know, the space is growing, great. That means new people are coming in, great. But new people are going to come in with the same questions that every new field does. They’re stumbling over the words just like we are, just like everyone is, a little bit.
So I think we’re muddling along, and I don’t — I don’t know what y’all think, but do you think it’s really holding the space back, or is it more like a minor annoyance? I’m not sure. I don’t know the answer. But what do you think?
Ross Kenyon: I don’t know that I have a clear answer either. [unclear]. I definitely think it confuses people, and so that’s holding us back to a degree, but I also don’t have, like, a clear solution.
Marcius Extavour: I’m also like, well, how confused are you? Because once I just tell you that if it’s between CDR and CCS, then we could just move on, right? You just have to remember that one term and then move on. I just don’t know. What are you guys doing?
Siobhan Montoya Lavender: Yeah, it’s a tricky one. It’s definitely an existential question.
Asa Kamer: I think for me, a lot of the people who don’t work in climate that I talk to about this stuff — like, the first barrier isn’t carbon capture versus carbon removal. It’s just that people are like, oh, climate change is scary, I don’t want to talk about it. Or not even I don’t want to talk about it, but, like, I’m not even necessarily going to enter this conversation. So I almost feel like there’s — I mean, it depends on your audience. I think for, like, various climate professionals and people you’d probably meet at a COP, they are probably definitely getting into the CDR versus CCS and those kinds of lexicon questions, and it does become really important. But that’s probably a small minority of actual people in the world that are involved. But I think for me, maybe just from talking to — when I try to get into, like, I’ve been working on carbon removal, so interesting — it’s like, you just feel people tense up when you say climate change. Like, people don’t want to think about it because they’re told it’s the end of the world, and you don’t want to think about that.
Marcius Extavour: I was in Europe last week, which was a treat, and I gave a talk to a room of maybe like 50 people, and they were maybe 10% from North America and the rest really from Europe. And I started the talk — it was about climate solutions, but I did talk about CDR — and I started by saying, show of hands, you know, please be honest, we’re all friends here: have you heard of the phrase carbon removal, and do you think you know what that means? And I was really surprised to see almost all the hands go up.
It’s funny, this conversation is making me remember. I won’t name any names, but I remember thinking, like, no way. There’s no way. I feel like they were — it’s an extremely educated and resourceful group, but I just thought, really? You’re like, well, name three methodologies, then. Yes, I didn’t — I bit my tongue. True or false, I bit my tongue. But I just thought — well, I had two thoughts. One was, wow, and that’s cool, great, you know, word’s spreading. But a part of me thought, like, come on. I mean, even I get it — I go against myself sometimes. It’s about, should we call it capture, or should we not call it — is it a form of mitigation, you know, these kinds of things that you’re probably familiar with. So I don’t know. But in any case, I mean, words are confusing, but there’s no doubt the word is getting out at least somewhere.
Siobhan Montoya Lavender: The word is getting out, as long as the words aren’t, like — without gatekeeping with them, you know. I worry about it, right? This is a term that [unclear] gatekeeping, and I was privy to [unclear] activist circles using.
And can we get into that? Let’s ground it. And I wonder, like, what do you think — you know, coming from quantum or from the investment side, talk to us about what you see as the landscape in investment. What are they talking about? And what are the key terms and buzzwords in investment when it comes to climate tech?
Marcius Extavour: Sure. I’ll start more broad and then we can drill back down into sort of the CDR part of the world. It definitely seems to me like there’s a huge influx of capital, so there’s just more money available and more people wanting to invest in the area. The public markets — you know, meaning like stocks and bonds — have kind of cooled off for the last eight months, so people with the money aren’t feeling as exuberant maybe as they were six months ago. But in general, there definitely seems to be a big boom in the let’s-invest-in-technologies-and-solutions-relevant-to-climate-change, or an energy transition. And I think, you know, I’m asking myself why?
That was because you might know that there was another boom like this in the late 2000s. Sorry — yeah, the late 2000s and into the 2010s, right up through the financial crisis. And a lot of people were exuberant about green energy, or cleantech, they called it, and a lot of investors lost a lot of money, because a lot of those cleantech companies did not take over the world in the 2000s the way people thought, and then the money kind of migrated elsewhere. But it’s coming back, and so, you know, a lot of people in the community are benefiting. It doesn’t just go to startups, it goes all kinds of places. Startups spend money all over the place.
So I think people are coming in a little bit more with eyes wide open this time about — the way you make money in this area is probably not the same way you make money in things like software or SaaS, which has come to dominate Silicon Valley. Those generally take a little less upfront money and they take a shorter time to mature, and that’s the dream if you’re an investor, because you get your money back and you think you’re going to get a lot more than you put in. But for quite a lot of climate solutions, they are — people are exuberant. They see that climate has transcended the culture and the political conversation, and now it’s not just scientists and activists talking about it.
It’s now — I mean, John Kerry is the U.S. climate envoy. Mark Carney used to be the governor of the Bank of England and the governor of the Bank of Canada, and now he’s an international climate finance leader. I mean, who would have thought? So people that have careers like those people, just to pick two more senior men on the scene — they are interested in climate, so that signals to a lot of other investors that there’s something different or more real this time. People are still looking for, where can I put my money and get money out? So I think the idea of investing because it’s a good idea — I’m always a little suspicious of that motive, versus, at least I can understand the profit motive, and I feel like no one is hiding anything.
We can argue about whether it’s the most productive — so that’s another question. Like, is it stable? Can you make money? But there’s definitely an exuberance, there’s definitely more capital there, more people starting funds. And some great people to ask would be startup founders. Like, how are they perceiving this from the other side of things? Lots of people like to announce, I’ve raised a lot of money — that’s cool and exciting. But then, you know, was that money invested into a group that could really use it and do something with it over time? That’s the more painstaking thing to check on, but definitely worth it.
So, I mean, happy to spend more time, but overall things are positive, people are excited. A lot of people that don’t normally think about the space are getting curious and asking questions and considering dipping in their toes, and that includes people that don’t normally care about technology or climate at all, which are, like, banks, pension funds, insurance companies. They are typically not part of this conversation, but they’re starting to indicate that maybe some of them are kind of interested.
Ross Kenyon: That’s pretty interesting. Do you see any other big levers we can pull to get to gigaton scale? How does one even begin to do such a thing?
Marcius Extavour: Yeah, I think growing the community is still really important. I mean, conversations like this hopefully will maybe inspire people to take more action and do more in their own ways to help grow the community. There just aren’t enough people working on climate solutions in all walks of life and different companies, in different aspects of society, different countries. I don’t think climate solutions generally are going to be a few gadgets delivered by a small group of people and then spread — so, like, iPhone, for instance. Not picking on iPhone, but, you know, small group of people develop a product, it catches fire, so to speak, and then spreads around the world.
I have a hypothesis that climate solutions are going to be a lot more diverse, meaning of various types. I think by definition, if they’re going to reach scale, they have to be developed in more than one place. I’m going to just sidestep the whole sort of geopolitical battle for technology supremacy and who gets to develop and export. It’s a real thing, but I just want to keep my mind free of that, if we could go there. So I think growing the community — and it doesn’t mean more engineers per se. I’m an educator, I like engineers, but what I’m trying to say is there are a lot of different roles to play for all kinds of different people.
And I think the community is actually still pretty small. Like, I’ll put this in context: the number of people working on what I would call climate solutions — never mind technology-oriented climate solutions — inside of the broader climate community is small. I think the climate solutions crowd is still small. The majority of people in the climate conversation are focused on activism, science, or developing adaptation-oriented solutions, which are all more than needed. But the number of people saying, wait a minute, I have a thing that I think can actively be added to our system and help — that’s my definition of a climate solution — it’s still a relatively small band. Just like the idea that innovation could be relevant to climate change, I think, is still a newer idea. So I’d love to grow that idea.
Siobhan Montoya Lavender: Yeah, well, I think you’re exactly right about the community needing to grow. What about the investment community? What about, like — you know, we talk about who’s at the table. We’re trying to create this massive, massive industry, climate tech in general and carbon removal specifically. Trying to create this massive industry within a capitalist framework, and so we have investors coming in. Are we seeing diversity of investors? Are we seeing geographic diversity? Are we seeing racial diversity? Are we seeing enough to kind of meet the challenge — that is, getting enough funding to get this off the ground, not just in the U.S., not just in the SF Bay Area, which I’m a fan of, of course, but all over the world? And where is the trick to kind of unlocking that potential in that capital?
Marcius Extavour: Excellent questions. There were a bunch of them, but I think the answer to a lot of them was no. Are there enough different types of investors? No. Are there enough founders from underrepresented groups? No. Are there enough managers from underrepresented groups? No. And funds growing around the world? No. So, in the same way that in climate science history a huge fraction of a lot of amazing climate science work was done in the United States and Europe — specifically coastal United States and Western Europe. Nothing wrong with those regions, of course, or people that work there and live there. I live in LA and I’m from Toronto, okay?
So in my opinion, when I was sort of getting into the climate thing as a graduate student in, like, I guess, the late 2000s, I was thinking, hmm, so this is really going to be a topic of global importance. We probably need more than England, France, Sweden, United States to care about this. It just won’t work, just from a geopolitical level. It’ll sound like another North versus South colonial, you know, schism, and that won’t work for all kinds of reasons that are way bigger than climate.
So I still think that in the investment landscape there are two big, big holes. One is there aren’t enough women and underrepresented minorities in the capital system. Why do we care? Expand the pool of people, better ideas, more ideas, but also equity. I think if climate is seen as something that’s for people, it to some extent needs to be by people. I know that’s extremely high level and trite, but I think there’s also some truth there. The more that it doesn’t look like a club for bros or tech bros taking over climate, the more it will be seen as — you know, a lot of activists use phrases like false solution or scam to describe a lot of climate technologies. Okay, I might agree or disagree with some of those characterizations, but the point is, the more it looks like an exclusive plaything of a certain part of the world, the harder it will be to digest.
The other thing that’s missing is the type of money, or the color of money. Most investors in climate tech — there’s a missing thing in the color of money. There’s a lot of early stage money, but there’s not a lot of capital for, like, okay, let’s build a factory, or let’s deploy this on thousands of hectares, or let’s work this up and down the coast, or let’s really do a deep ocean project, or let’s really do it at scale. And I’m using sort of carbon removal type of examples, but just think of any climate-oriented solution — it could be water, waste, metals, food, whatever. Getting it big usually probably involves manufacturing, it usually probably involves getting into the place where you can take out a loan from the bank.
You know, remember, this is how most businesses fund themselves — not venture capital. They go to the bank and get a loan. I forget that sometimes. I forget that. Right, these technologies are considered so risky that it’s a joke for the bank to be considered giving you a loan. We have to have this whole other type of risky capital that we call VCs, or angels, or grants, or other things, to invest in them, to get them to the point where maybe you could walk into, I don’t know, Bank of America and say, I’d like a business loan for my water treatment technology or my farming technology, and they’d say, okay, we’ll consider it.
But anyway, so capital at the later stage — and I think the reason there’s a gap is that it starts to look less like the things technology people are familiar with, and it starts to look more like the things that banks and insurance companies and pension funds and the institutional investors, so to speak, university endowments, that they are familiar with. I was just speaking to somebody today about, like, these two worlds are kind of inching towards each other. Pension funds and banks are starting to take an interest in climate tech and climate solutions, and the tech community has been yelling at them for years, like, you need to fund us, you need to fund us. But I think they are inching toward each other, and I think that will be a real interesting unlock.
If we could get to a place where we can speak the same language, people can understand projects, we get over the language that we spoke about before, and we can say, like, okay, this is a 500 million euro project, or a 500 million dollar project, or a 2 billion dollar project — what does that look like? How do we set it up? How do we do everything from community engagement through permitting, through engineering and building and blah, blah, blah, whatever is required. So that’s what’s needed to get to scale, and that’s a type of money that’s really missing from the ecosystem right now. So if anyone out there has that, you have a warm audience waiting for it.
Ross Kenyon: I’m curious why. Part of it is chicken and egg here, for sure. If there were more carbon removal companies that were medium- and late-stage, deserving of this level of low-risk money, it would exist. The market would just alight — here it is, here’s the money that you need to grow, because it looks safe and profitable. And I’m wondering too, if part of this is because so much of carbon removal is so hardware-focused, and I think early stage money has been spoiled to some extent by software, where they’re expecting, in 10 years, orders of magnitude of growth, which is way easier to do in a digital environment than a physical one. I think maybe, Marcius, you can disabuse me of that notion if you don’t think that’s true. Do you think any parts of what I’m saying make sense, or is there more to it than that?
Marcius Extavour: Surely there must be. I think you’re onto something, and I think I agree with you. So I got invited to an investor meeting earlier in the year, which was — you know, I’m not exactly an investor, but I guess I think about it. You know, XPRIZE — we’re philanthropic, so we’re giving away money, so we’re kind of like investors in a way, if you squint. Point is, I was in a room with other real commercial investors, and the topic was, like, what’s wrong with climate tech investing and how do we not make this like the bust that was cleantech 1.0?
And one of the themes that came out was, yes, these technologies, these solutions, whether it’s agriculture or a machine, they rely on the physical world. What is it — atoms, not bits, some people say. It’s a physical object, or it relies on physical processes like biology and chemistry, and those are messy and hard, and they are therefore more expensive and harder to just replicate and whip up. So therefore, all the things you said, true. Like, it takes more money, it takes more patience upfront.
And most venture capitalists got to their position — it’s a homely way, but a very common way — a person was part of a successful startup, they had some kind of exit, they got a pile of money through that exit, and they decided, you know what I could do, I could help other startups in this path with this bag of money I have. And they start a fund. And most people that have had that path have gone through software. So they’re familiar with software, and I love software, it’s an incredible thing, but the challenges aren’t quite there. So I think there’s that.
But I think there’s one other thing, and that is what you were saying, Ross — like, if there were these investable companies at that scale, the market would just come toward them. I think two things. One, there just aren’t that many companies that have reached that scale yet. But two, there is, I think, kind of a market failure. Like, somebody has to change their behavior to fill in that gap. Either the technology or the solution companies need to sort of change how they operate to make themselves look like what the banks and the pension companies recognize, or the pension funds and the banks need to sort of adjust their thinking and sort of crawl a little deeper down into these sort of technology risk [unclear] to figure it out.
So I think we actually are at a moment where something structural is slightly broken, and it’s not — I don’t want to phrase it as if it’s a staring contest, but something’s got to give. Somebody has to change their view a little bit to decide, you know what, I’m going to take on slightly more risk and just go into that gap and fill it.
Ross Kenyon: Who’s farthest along in terms of capitalization? Is it Carbon Engineering or Climeworks? I feel like they’re the easy ones to think of, but is it one of their latest rounds where they showed us a private equity [unclear]?
Marcius Extavour: Yes. So, Climeworks — I might get some details wrong, but we can look it up. Climeworks famously raised a 600 million dollar, or maybe 600 million euro, round. Massive sums of money, right? So that’s probably money they raised last year or over the past couple years and they announced it this year. I forget who the lead investors were. I think some of that might have been advance purchase agreements. I know Swiss Re was involved with a deal with them, but I’m not sure if they’re part of the 600. I don’t know for sure, I should actually know. I don’t know if they’ve published other investors. I’d be shocked if it was all just venture investors, but maybe. You know, there are VCs throwing millions, hundreds of millions of dollars, because — like fusion companies right now.
So, and there are some VCs with enormous assets under management, so the idea of a 100 million, 200 million dollar venture round is not insane from, like, front and foreign investors. Carbon Engineering — I don’t know this for sure, but I believe they’ve gone through a slightly different route. Like, the thing they’re building in the southern USA is financed by BHP, Occidental Petroleum, and Chevron. And I don’t know, this is just Marcius speculating, but if I had to guess, I would say it’s not entirely a venture deal. It’s probably — somebody owns the project, somebody’s the project developer, somebody owns the technology. In other words, it starts to look like a real engineering project, not a venture project. That’s how you build a factory, that’s how you build a bridge, that’s how you build a fish canning factory. You know, somebody owns the IP, somebody owns the project, somebody finances the whole project, you agree to split the revenues XYZ, and away you go.
Let’s see, those are two of them, sort of the most mature, and they also have, you know, installations in the ground. But [unclear] is another one. They do mineralization, a lot of carbon utilization in that path, and they are quite far along. They raised several venture rounds. I think they’re sort of into the we-want-the-investors-that-can-help-us-grow, not just write-us-checks round, you know. People call that strategic investing — like, how can you help us? You know, we’re past the point where we figured out how to raise money. We can raise money. And now we need to raise the right type of money with the right partners to help us go to places we don’t know how to go ourselves. I just bring them up because they’re one of the more mature companies out there.
Ross Kenyon: Are any of these companies going to become public companies so that you could buy their shares on — you know, Ally Bank is what I use to buy basic stocks here. I don’t work for them, I don’t know why I brought up their name, but anyway, whatever things people use to buy and sell stocks, right? Would one of these companies be listed there?
Marcius Extavour: I’m not sure. But yeah, back to your question. I definitely think it’s the bias of software — the wild, incredible success of the software world influences the way we think about how to nurture companies. I’ll close by saying I was trying to explain how I saw the investment landscape to a person, a stranger that I met, and he says, oh well, I work in infrastructure, I don’t know anything about climate or any of this stuff, but what you just described sounds like infrastructure to me. Go tell all your friends that what you do is organize the project. It’s like — they’re infrastructure projects, like railways or bridges or hospitals or pieces of public infrastructure. It’s a whole other way to finance those things.
I wish I was smart enough to know what that means exactly. I haven’t sort of figured out and researched that, but it sounded credible. And I’ve heard a couple of other people allude to things like this, like, you should look at infrastructure models if you really want to scale these climate solutions. So maybe somebody out there already knows what that means, but it’s on my list of things to try to research and learn about.
Asa Kamer: Yeah. So when you’re talking about, like — that’s an interesting viewpoint, like infrastructure projects, or a different kind of lens and pathway to finance. And I think that’s interesting to me about the idea of, like, it’s kind of a staring contest and one side has to kind of mold sufficiently to adapt to the other side’s approach. Is this something that needs to happen now, or, like — Ross has brought up, like, you’ve been talking — is it just that we still just need to rely on the early stage, the VC funding, the grants funding? Is that still there, like most of climate tech is right now, or do we need to be going big and really looking at these kinds of more infrastructural changes to how we finance major projects?
Marcius Extavour: I think it’s the second one. So I believe where climate tech is and where climate solutions investing is now looks closer to what the traditional tech world knows and understands, and has used to great success: venture capital, angel investing, relying on some public grants. But, you know, VC — and they use phrases like series A, series B, series C. The one piece of jargon that I’ve learned is people in, like, again, the institutional capital world, they refer to all of that world as small cap, meaning tiny, barely commercial, barely profitable — maybe they are profitable — more risky, early-stage investments, as opposed to something like treasury bonds, pension funds, government bonds, ETFs, mutual funds, the more traditional financial stuff. You can see I’m out of my depth a little bit.
Ross Kenyon: That list all together is just, like, perfect for a sleep podcast. If you’re having trouble sleeping, just have Marcius name off something like assertive investment opportunities for you.
Marcius Extavour: I like a good — thank you. Thank you. It was infrastructure as a model for development.
Siobhan Montoya Lavender: I think we’re making it sexy, guys.
Marcius Extavour: If I can’t sleep, I listen to sports talk radio. Puts me right out. But maybe financial press is something — no. But I really think, look, if I were a finance person and I wanted to see a huge opportunity, I would go from the world of structured finance and figure out how to go towards the technology world. I really think that’s the play. If you work in private equity, if you understand hedge funds, if you work at a big bank, if you work on pensions — understand something about the climate world, because there’s a huge opportunity for you to go finance projects in that world the way you know how to do. You just have to figure out how to adapt your skills to a climate thing and then get to know some of these technology startups.
And the reason I think that is, there’s a structural problem with venture capital: it’s too impatient. Generally — I’m not the first person to observe this. A lot of people lament, man, if only we didn’t have to pay back in seven to 10 years, and if only the expectations for returns weren’t so high, because the failure rate is high, and if only there were another way. And so venture capital is limited in some ways in scaling climate solutions. I don’t mean it’s misplaced, but I think it has broadly recognized the limits, and the question is, how do you get into that other world? I think it’s the other world deciding they want to play. So, like, in my little staring contest analogy, I think it’s sort of traditional finance that has the biggest opportunity to make a small move. And, you know, maybe that’s happening already, maybe some people are thinking about it already. I’m sure it’s not a novel idea, so I’m sure people are thinking about it. But that’s how, if I could wave a magic wand or jump into the arena, that’s where I would throw a jab.
Ross Kenyon: How even would they? I’ve seen some talk of green bonds and things like that. I mean, bonds also have a reputation of being much safer, except if you don’t look at the last six months or so, and I think you have the bond market at so much. But I know they’re looking for much more conservative types of well-vetted instruments, on things that are maybe only a couple percentage points a year, and that’s okay. The real risk here is losing — pensions will lose huge amounts of money — and just making sure you’re beating inflation and making some kind of return. Is that broadly correct? And if so, what kind of investments might appeal to groups like that?
Marcius Extavour: So I think what you said is correct. And sometimes we think it’s big finance — or maybe a younger version of me thought of that world cartoonishly, as a bunch of greedy people sitting on giant piles of gold. Okay? Okay, that’s how I used to think of it as a child. Now that I have children and think about, I’ll retire one day, and, you know, do I need to take care of them now, I think about giant pools of money as, yeah, still some of that, but also it’s like, you know, a tiny fraction that is actually mine, and I really don’t want it to go away because I’m relying on that for something that I really need in my life.
In other words, the idea that, like, a hospital foundation, they really can’t lose that money. They really need it to keep facilities open. Or, like, the Ontario Teachers’ Pension Plan — Ontario teachers, and that happens to be a giant pension fund in the world. That’s regular working teachers’ pensions. They don’t want to p*ss that money away on some risky technology, okay?
To answer your question, I think project finance is something I’m really trying to get smarter on, and I think it’s an opportunity. There are many money managers that aren’t trying to finance technologies. They’re not trying to bet on teams and they’re not trying to pick founders. They are making specific loans to help build specific types of projects — again, infrastructure, like bridges, something involving a lot of concrete and steel, thousands of workers, and many months or years of time, and all kinds of different subcontractors. Somebody has to come in and say, we will do the financing — in other words, the loans to make all this happen. We’re going to lend money and expect repayment on certain terms.
I’m greatly oversimplifying, partly because I don’t know all the details, but I’ll give an example. The Carbon Engineering facility that’s being put together in the U.S. — there was a project finance piece that stitched that project together. Jim McDermott’s company, 1PointFive. They created a kind of — just to do that thing, and they were the ones that said, we know how to structure this deal financially between Chevron, BHP, Oxy, and Carbon Engineering, and we know how to put this deal together in a way that makes sense for everyone. And 1PointFive profits off of that arrangement. Their expertise is sort of arranging these complex financial transactions for a big project, and I believe that kind of stuff is pretty commonplace in infrastructure and agriculture and manufacturing, in hospitals and a lot of other parts of life.
So I have this notion that maybe people that know how to do that can — that’s a place to start. Bond issuances — that’s actually where my head — I don’t know how to tell what’s a good idea or make a recommendation there, but that’s, I think, one place. And 1PointFive is an example because I feel like I can understand that. Like, okay, somebody kind of put a project together. I can understand what the inputs and outputs are. I could guess how you actually make money doing that. I’ve heard of one or two other groups trying to do this in the carbon world, as project developers or project financiers. And so for me that’s promising, because again — if I believe this is true, you don’t typically see this in the software world, right?
We put an app together, or a software package, so we ship it. We put it on the internet, we put it in an app store. We don’t need to build a special facility to deliver our service necessarily. And so it’s one reason it might not be on the radar of Silicon Valley, but it is more on the radar of other financial centres, and I’m sure there’s a whole universe of people that know how to do that. Maybe they can start applying that knowledge to climate solutions. This is with full respect to people that actually work in this area, who actually understand the details, but that’s my sense, kind of as an outsider coming into it, that there’s a big opportunity there.
Siobhan Montoya Lavender: Well, what about the opportunity — so that sounds like, you know, we’re doing some, like, some founders, people that really understand investment in structural mega-projects. What about for listeners who are like, hey, I’m interested in climate tech solutions and I don’t want to be a VC, I’m not a founder? Yeah, like, where do those people play? Is it policy-based? Is it all about kind of, like, how we affect government regulation? Like, how do those people play in?
Marcius Extavour: Yeah, great question. So I have two different money pathways to suggest, and then some knowledge on finance pathways. So one of them is, they say that people of roughly our generation are drawn to retail investing, you know, buying a couple dollars of stock here or there, or whatever we can afford, and there are all these apps to make it a lot easier. So one way to do this is, if you’re interested in that kind of thing, consider whether you would start to become active as a shareholder in whatever companies you like to buy, and helping to agitate to steer the company in a direction that’s positive climate-wise.
I don’t want to be naive — like, just because you have two shares of Apple or something doesn’t mean you’re going to get voting rights at a board meeting. That’s not how it works. But sometimes by grouping together, or connecting with other, you know, regular people investors who actually have an interest, you might even be able to do things like start to study their public documents. Even if you can’t go to a shareholder meeting, you can read — like, if you’re inclined, read their quarterly reports if they’re a public company, and then write a blog about it. Like, you know what they say in their strategy, and I don’t think it’s right, and I want to encourage them to do this other thing. So that’s one way to take action even as a sort of tiny investor.
The other money path — before we move off of that for a second — is that regular people often don’t have access to investing in early-stage startups, or even a lot of financial instruments that accredited investors, which are trained and-or wealthy people, might have access to.
Ross Kenyon: For the listeners: to be an accredited investor, you have to have a million dollar net worth or make over 200,000 as an individual income, and so that’s the hurdle. And then if you want to participate, you may take a [unclear] test to allow you to invest your money in that way. That’s relatively arbitrary, I would say, in terms of other high-risk industries. [unclear]. Something I don’t know is, I don’t know how those rules vary from country to country, but what we’re talking about now is the United States.
Marcius Extavour: Cool. It was designed, I believe, after the market crash in 1929 and the 30s, to protect regular people from speculating on stocks. The idea was basically, if you’re too poor and dumb, you shouldn’t be in the stock market, it’s only for wealthy people and smart people, and what we need to do is protect people. And I think there probably is something to that. We saw a little bit of that with, like, GameStop last year and crypto mania. On the other hand, there’s no doubt that it’s exclusionary.
But I’ve had a couple of people tell me that they were trying to make climate solutions or technology companies, or the kind of thing we usually talk about in the VC world — make those accessible to regular people through creating kind of like a new financial product. I don’t know if any of those things exist, but I think that would be really interesting. I think there is such a groundswell of interest among people that aren’t necessarily quote-unquote accredited investors, or check those boxes of wealth or expertise or whatever, but are passionate about the topic and want to do something. I would love it if there were a way to marry some of the power of crowdsourcing with the enthusiasm we have in some communities about climate solutions, and towards helping people support specific solutions or projects if they want to. I think it could be a huge win, and I don’t exactly know how to do that, but I think it’s a win.
So this is another — I’m just putting an idea out there that’s not mine, but I think it’s a good one. Yeah, somebody else can take that ball and run with it.
Siobhan Montoya Lavender: That sounds like something I want to participate in.
Ross Kenyon: Yeah, there are things like that out there, I’m sure. There are the JOBS Act provisions. You can run Reg CF and Reg A and Reg A+ raises that are open to non-accredited investors. Harder on companies, though — there’s a lot more requirements, they’re more expensive to start, the amount of money you can raise is a lot more limited. But it does allow more participation in a more egalitarian fashion. In some cases you’ve protected people out of their best chance at an upside potential for their net worth, which is not good.
Marcius Extavour: I’m sorry, people have lost their shirts on some of these deals too.
Ross Kenyon: That’s right. That’s right, you’re right. Nori did one of these rounds years ago — we did a Reg CF round several years ago. Have there been any others that you can even think of in carbon removal?
Marcius Extavour: Don’t know of any.
Ross Kenyon: It’s funny that — you haven’t? No one has?
Marcius Extavour: It wouldn’t surprise me if there were some, but it might be that it’s tens of thousands of dollars, I think, just in lawyer fees just to get started. So if you’re trying to raise a small amount of money, you can, from individual non-accredited investors, but your money might be better spent elsewhere with a longer runway.
Ross Kenyon: I just have to say, one of the redeeming things that I noticed in the Web3 or the crypto world was that the spirit of collective action and pooling resources was very strong.
Marcius Extavour: Oh, yeah.
Ross Kenyon: And a lot of people were trying to pool their tokens, right? And I know there are a lot of legal hurdles there — is it a security or not, blah, blah, blah — but I thought that was really interesting, and I was sort of like, how can this be applied to climate? Can it be? Is this the ticket for people to throw $20 towards a project they care about, and then come away with something, even if it’s just a good feeling or knowing that they contributed, or whatever?
Marcius Extavour: So again, I’m not sure, but I think there’s something there for sure. And I think — I hope that that sentiment and that opportunity doesn’t go away. Yeah, you think some more about that one. I’ve actually not even thought about this in several years. So, like, how much money could you raise five and ten dollars at a time for a climate project? How much? Ten thousand? [unclear], right? They raised a bunch of money in this crowdsourced kind of way.
Ross Kenyon: But I wonder if you even have a positive impression of such an endeavor, or would have a negative impression. I could imagine the psychology of — there’s no risk in executing the task. I have high confidence that if someone says they’re going to plant a tree, they could do it. I guess they could choose to deceive me, but there’s no technology risk, not to put it in those stupid terms, but you know what I mean. Whereas if the four of us say we’re going to do this spreading crushed rock on farm fields thing to reduce — you know, how much carbon — you, as the person that’s going to throw 20 bucks into that, is it going to work? Is it not going to work? Maybe you have more questions, or maybe it doesn’t — it’s not a known quantity to you. So I’m just going to express that maybe there is a barrier to crowdsourcing, but I don’t know.
Marcius Extavour: I tend to be optimistic, but I think if it could work — like, again, the climate thing has crossed over into culture in a way that it never has before.
Ross Kenyon: We’re certainly banking on that already. We certainly try to go for the culture angle with a lot of the content, I think, we make. You know, we’re trying to bring in humor and satire and make it kind of fun and accessible from a culture angle. But I don’t know how much it’s — so, I forget. I think it’s crossing, maybe. I think it’s crossing, I don’t know. What do you think, [unclear]?
Asa Kamer: Isn’t that the [unclear]? Like, yes, we get all this climate humor and climate nuance and we want to be in on it. [unclear].
Ross Kenyon: I think the next project should be setting up some sort of contest, like, trying to deceive Marcius into whether or not you planted a tree. Some sort of contest about the best way to lie to Marcius for tree planting.
Marcius Extavour: I’m too lazy to check. That’s the truth, and I should have said so.
Ross Kenyon: Okay. [unclear]. The problem is the first piece of it that’s crossed over is: the world is ending and there’s nothing you can do about it. That part, I feel like, is the super successful part.
Marcius Extavour: That’s exactly — galvanizing everyone, right? Exactly. So that degenerative meme has crossed over, but it’s taken hold. Like, I literally think this is the driving force behind 90% of the climate desks that I see at major media outlets. Not going to crack on media, but I am a little bit. I think you see it in — you see a lot of fear and anxiety among really young people, like children, teenagers, really young adults. And so I think I’m hoping that the kind of stuff we’re talking about — not the boring finance stuff, but I mean the idea that solutions are possible, it’s up to us, we have the agency to do this, it’s achievable with work — those things, the idea that, yes, we screwed up and created this climate problem, but we also have the agency to fix it. That’s my personal belief, but I think it’s also true.
If that idea spreads, or at least is considered or discussed, I think that’s a big win. So I’m hoping that other part of climate culture, or climate, makes it into culture. I mean, I think it kind of has to be for us to have success. So let’s make it happen.
Ross Kenyon: We agree on that, and we should wrap it here before anyone jumps in with some context that takes away from the beauty and the optimism there. One of these — actually, people surely would have jumped in. Marcius, is there anywhere you want people to go to follow your work, to learn more about the XPRIZE — even though I’m also glad we gave you a chance to talk about non-XPRIZE things today?
Marcius Extavour: Thank you. Thank you. Love it. XPRIZE — a lot of talking about climate in general too, especially solutions. Look at all things XPRIZE, you can find it at xprize.org. I try to get on Twitter sometimes. I think [unclear] there. And let me just give an unsolicited shout out to the CTVC newsletter — I was just reading it again today. I have nothing to do with it, but it’s a fantastic piece of curation and everybody should read it. So that’s a rant, an unsolicited shout out, but I think they’re great.
Ross Kenyon: You’re shaming me. I feel like the two unread ones, the last ones I have in my inbox. It’s okay, they’re very good and I learn something every time I read them.
Marcius Extavour: No, but look, I’m just thrilled to have this conversation with you all. Thank you for inviting me, and, you know, keep up the good work.
Ross Kenyon: Thank you. Thanks, Siobhan and Asa, for being here as usual. Thanks for listening. If you like what we do here, please give us a great rating and review on a podcast app and Spotify. Thanks for listening, send it to a friend, and have a great day.
Thank you so much for listening. If you could please subscribe and give us a great rating and review on Apple Podcasts, or a rating on Spotify, that’d be much appreciated. It helps us get our content out to more people. You can sign up for our newsletter at nori.com. Follow us on social media. We will catch you next time.
