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Leo Banchik


Voyager Ventures

May 7, 2024
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Ep 111: Leo Banchik - Director, Voyager Ventures
00:00 / 01:04

Host [00:00:56] Welcome back to the Energy Impact Podcast. Today, we're here with Dr. Leo Banchik, Director at Voyager Ventures. It's great to have you with us.

Leo Banchik [00:01:04] Thank you, Ben. Thank you for having me.

Host [00:01:06] Yeah, absolutely. Let's start off where we should. Tell us a little bit about yourself.

Leo Banchik [00:01:14] Well, I'm an early stage climate tech investor at Voyager. I'm an engineer by background and then a consultant. I left consulting for venture about three or four years ago and it's been a really fun ride. I was around when Clean Tech 1.0 boomed and busted in working in climate at that time. And so, it's a very exciting time for climate startups for a lot of reasons I'm sure we'll get into in the podcast.

Host [00:01:48] It looks like you've been in clean tech for a while. Looking at just your history, going DOE policy through some of the National Labs and all the way into venture. Especially on the Clean Tech 1.0 side, the earlier days and then to where we're at today. How did you dive in to that area?

Leo Banchik [00:02:11] What called me into sustainability? My parents are both immigrants from Argentina. And they're from the north of Argentina, so you might see me sipping mate occasionally during this session. But it was a combination of a couple of things. And I mentioned my parents because they grew up in a part of Argentina which isn't as wealthy as Buenos Aires. It's not a province that's particularly full of poverty, but there was a lot of hunger that I saw growing up, and I wanted to make a difference. I wanted to try and use my privilege as being born in the United States to try to make a difference. And that was Step One.

Leo Banchik [00:02:54] Step Two, I was born in California, but really raised in Las Vegas. And I was just stunned to see in the early 2000s how the city was living and how it was built and the status quo. Lake Mead was constantly drying as our source of water; it's even worse today. We had tons of sunlight, but we weren't using any solar. I'd seen An Inconvenient Truth. I think a lot of folks saw that. Thank you. Al Gore, way back in the day. And I just thought, "t seems like we're living out of step." Tons of solar irradiation, but no solar panels. HVAC systems on the strip that just are blasting cool air to get tourists to walk into the doors in the summer. And they leave the doors open to entice tourists to come and it just felt completely wasteful. Tons of food at the buffets that I thought was getting wasted. Later, I learned it goes to a pig farm. But it just felt like we were living out of step.

Leo Banchik [00:03:55] And so, I studied programming in high school. I like math; I like STEM. My parents are both civil engineers. I knew I didn't want to be a civil because I wanted to be a little bit differentiated from what my parents were doing, so I chose mechanical because I thought it was a general field that I could make a contribution in. And quickly, those two loves... Trying to make a difference plus Las Vegas lacking sustainable systems, plus this notion of "Can we make a difference using technology?" all fused together to become part of what I wanted to do in life.

Leo Banchik [00:04:31] So as an undergrad, I studied mechanical engineering. And as a freshman or sophomore, I knocked on the door of one of the professors who had a solar lab on campus. I worked on concentrated photovoltaics research. Plus, we had a Stirling engine on campus as well; we ran tests on that. So, that was my introduction to Clean Tech 1.0. I'm happy to keep going from there, but that's really what got me into this and I haven't really left since.

Leo Banchik [00:04:56] Even though multiple times I considered... During the Clean Tech 1.0 bust, "Should I just go into tech? I've got a programming background. Should I just go into something that people are going to care about a little bit more?" Before grad school and during grad school, it was Google or it was a Meta or something. But I just kept being obsessed with this problem about how do we reorganize our industries in our society around something that's more sustainable?

Host [00:05:23] It's interesting. I think a lot of the things you mentioned growing up in the Vegas region... I would argue you still see some of those things today but maybe we're a bit more cognizant of them. On that note, how have you seen the transition really around sustainability from growing up in a place like Vegas and maybe even Vegas specifically... How have you seen the transition in this whole sustainability movement? It really feels like it's only taking place in the past like five years.

Leo Banchik [00:05:54] That's true. I would agree with you. The climate wave, which I used to call Clean Tech 2.0 before I was corrected. "Hey, we don't want to talk about Clean Tech anymore. We want to call it climate. Not only is it broader, but it also just doesn't hark back the pain of the early days where a lot of investor money was lost." But now is a fundamentally different time. And the reason why is because during Clean Tech 1.0...

Leo Banchik [00:06:18] I remember when I was an undergrad, solar was $0.30 per kilowatt hour. Whether you're talking about concentrated solar power, CSP, or you're talking about PV. And nobody knew what was going to win, but the target was grid parity. We were talking about, "Can we get to $0.10 per kilowatt hour just to compete, to be able to sell on the grid at parity, without making much margin?" And since then, for reasons of economy of scale and economy of number, solar has come screaming down the cost curve. It's now, the utility scale, between $0.01 to $0.03 per kilowatt hour. It's the cheapest form of power we've ever made as humans on this planet. I think that's pretty cool. Wind has come down in cost, batteries have come down in cost. Electrolyzers on the fuel cell side. And we'll talk about hydrogen later, but those are beginning to come down the cost curve.

Leo Banchik [00:07:06] And I think also... I think COVID had a little bit to do with our reset. Folks thinking, "Hey, we're out of balance. We need to think about how we move forward." I remember when I was at McKinsey... We can get to that later as well. There were a lot of jurisdictions and cities, municipalities, governments around the world that were thinking about a green restart. "If the whole world stopped because of this pandemic, how do we restart in a green way?" And I think that had a lot to do with it.

Leo Banchik [00:07:34] Greta Thunberg as well, out there saying, "Hey, we don't have a lot of time. Words are not really meaningful. Let's actually have action." Policies starting to come into place. Consumers demanding this, board's demanding this. The ESG movement, even though it's sort of rebranding, I should say, definitely had way to spark this, Larry Fink's letters, for instance.

Leo Banchik [00:07:57] But this is a fundamentally different time because the cost curve reductions and the policies in place and the hunger for change. There's an economic argument to be made now that these aren't feel good technologies and feel good businesses. These are businesses that will make money. It's not a concessionary or impact space. This is a space that is lucrative. And we're seeing that with some of the startups out there that are raising a lot of money and have a lot of customer traction. Some have even exited, although it's still early days for climate.

Leo Banchik [00:08:38] Already in Las Vegas, there are some new startups that are helping to decarbonize some of the city. Water is a different story; Lake Mead continues to dry. Regardless of what technology or business model comes in, I think that's more of a problem that requires a political lever. But I think now is a different time. There's an economic argument to be made for the transition to a more green status quo.

Host [00:09:11] Yeah, that's taking place super rapidly. I would argue the government has helped a lot in terms of some of the funding that they've put towards, whether that's just for research or project development, or just in general, grant subsidies to get these things off the ground.

Host [00:09:31] I am super curious... You mentioned Clean Tech 1.0, 2.0. I haven't heard these phrases before. I'd love to hear your breakdown of how we've gone from stage to stage. Are we in 2.0 or 3.0 today? What's the new classification?

Leo Banchik [00:09:45] It's a great point. So just shorthand, I usually call Clean Tech 1.0 as the period between '07, maybe '08 and 2011. Those are companies like Solyndra, A123, some of which didn't succeed. Tesla and Sunrun were also there; they went public and they're doing well. And so, you could call that the second wave, right? Because during the Carter administration, in the '70s, there was a big push for solar at that time, but the costs weren't there. The price of solar was still too expensive. So, you could call what we're in technically 3.0.

Leo Banchik [00:10:20] Hydrogen's a different story, too. Hydrogen's gone through its own hype cycles. And I do think there's an important need for hydrogen, it's just not this panacea that can solve everything. But there are needs for hydrogen where we're going to need green hydrogen in order to decarbonize our GHG stack, one of those being ammonia, for instance.

Leo Banchik [00:10:39] You could technically call this a 3.0, but it's been sort of rebranded, and I think properly, as climate tech because it goes broader than just clean tech. We're getting into semantics here, but there's a lot of carbon removal now that has legs. And carbon removal needs to be a big industry.

Leo Banchik [00:11:02] And for those that don't know on the podcast, we need to both stop the tap of CO2 emissions going into the atmosphere. That includes electrifying our transportation, our built environment. It includes electrifying our chemicals production, etc. But then we also need to actually remove CO2 from the atmosphere. And that's something that did not really exist in Clean Tech 1.0 or, in the '07-'11 period, but is a big focus for investors now, and corporates as well that want to reduce their Scope 1 to 3. And that's going to be a big business.

Leo Banchik [00:11:43] I mean, if you follow the IPCC projections, we're going to need 10 gigatons per year of carbon removal by 2050. I've written about this on my blog, but the head of Carbon Direct once said on a podcast, "It struck me that the oil and gas industry moves about five gigatons worth of stuff." So, if you think about that, we need to remove ten gigatons of emissions per year. We need to basically create, from scratch, an industry that's going to be two times larger than the oil and gas industry in terms of the amount of stuff we're moving in 25 years. It's a huge task for humanity. But we need to do that because we've put too much CO2 and methane into the atmosphere and we actually need to remove it.

Leo Banchik [00:12:30] It's going to be very difficult to get to net zero without carbon removal. And that's just because you can't completely stop the tap. They're going to be some things that are going to require fossil fuels. At least for a long time, it's going to be really hard to wean off of them and hard to decarbonize sectors like industrial heat and shipping and maybe even Class 8 trucking and freight. So, yeah, I think that's one difference, I should say, pulling back. Today, we're focused on a broader set. It's not just solar, wind and batteries. It's a broader, more holistic set that includes carbon removal as well that folks are focusing on.

Host [00:13:12] There are a ton of things you just mentioned that I'd like to touch on, and hopefully we do, over the course of this episode. I think hydrogen's a really interesting one. I want to get to that later. I have maybe my own reservations with hydrogen, with both that and carbon removal. I'd maybe want to dive into your experience with the National Labs versus the private and public ventures and those spaces, how they're going to drive innovation. Because I think techno-economics really need to improve for both those things.

Host [00:13:40] One question I have for you... And really on the venture side from what you're seeing right now, because there is a slew of technologies that are coming out. A lot of just really early stage things. On the carbon removal side especially, how do you get to a point where your energy input is less carbon intensive than the carbon you're actually removing? Because that's one of the key issues, right? Regardless, you'll have to put a significant amount of energy into that carbon removal asset. How do you make sure that's carbon-free to some extent?

Leo Banchik [00:14:18] It's a good point. There are many different types of carbon removal. You've got, enhanced rock weatherization. You've got BiCRS, which is biomass carbon removal, sequestration and storage. Then you've got DAC, direct air capture, where you're pulling the CO2 out of a very dilute atmosphere. And so for some of those, you're going to want green electrons, otherwise what's the point? You maybe don't want to hook up your DAC into a grid that has mostly coal on it, for instance, otherwise, what's the point? So in that particular case, relying on solar buildout or having a DAC system that can ramp up and down quickly and use curtailed renewables, for instance, is part of what startups are trying to solve.

Leo Banchik [00:15:05] We invested in a company... And I invested in them at my last fund as well, Global Founders Capital... A company called Arbor, which I think is very exciting. They don't need energy in to do what they're doing in the form of electrons. It's a BiCRS startup, like I mentioned earlier, biomass carbon removal and sequestration, of which there are several subsets like biochar, bio oil. But I had a thesis around BECCS when I was investing out of GFC. And Arbor is this phenomenal team; they're ex-Space-X and they're phenomenal engineers.

Leo Banchik [00:15:41] And the idea is if you dig biomass, that's the feed. That's the feedstock, that's the input. And the biomass is more concentrated in carbon than what you find in CO2 in the air. And if you burn it the right way... They're doing a form of power cycling called oxy-combustion. If you burn it in the presence of oxygen, you only get two outputs. You get CO2 and water. The water can be easily condensed; the CO2 is ultra pure and can be stored in classic injectional.

Leo Banchik [00:16:10] Where I'm going with this is you take in biomass, you make the CO2 in water, but you also provide baseload power. In this particular case, you don't need to necessarily green the electrons. Maybe you need to think about, "Oh, do the trucks need to be electric, the ones that are bringing the biomass in?" Or, "Does the rail need to be electric?" But if you do a life cycle analysis, an LCA, you'll find that you're still removing more CO2 than you put into the system. So, there are those cases where you don't necessarily need green electrons to power that carbon removal, and Arbor is one example.

Leo Banchik [00:16:43] Another example is a company called Andes, which makes a microbe that can not only improve crop yields, but can also sequester carbon at the same time. We're very excited about that company as well. What we try to focus on at Voyager, I should share... Our carbon removal thesis is one that isn't wholly reliant on the voluntary carbon market. Which is still growing; you could say it's maybe between $1 to $1.5, $2 billion today. And it needs to grow larger. But really, it's driven by corporate altruism. Companies that have a lot of profit, a lot of balance sheet. Your Googles, your Microsofts, I laud what they do. Your McKinseys, your Shopifys; they form the Frontier Fund, your Stripes. It's fantastic what they're doing. They're doing these advanced market commitments.

Leo Banchik [00:17:30] But at least for the time being, because DAC's a little too expensive, in my opinion, and there's no byproduct, Arbor has the byproduct of baseload power and Andes has the byproduct of yield improvements. And so, for the time being in Voyager, that's what we look in carbon removal bets. Are you doing more than just CO2 removal and have another stream to monetize your business?

Host [00:17:57] I think the tough part with the carbon removal side of things is occasionally, the business case for it, especially on the sequestration side, is you can use that for maybe additional enhanced oil recovery or other things like that. And that's where you get into this game of... You're trying to work through the clean tech side of things and it's just falling back on itself, which is difficult.

Leo Banchik [00:18:22] Yeah.

Host [00:18:23] It's tough, right? It's like trying to use good technologies and just spurring those fossil fuels still.

Leo Banchik [00:18:31] I agree. The EOR stuff is challenging. And it's challenging to hear that's the case. That you're just using the CO2 to pull out more fossil fuels is challenging. There's another thing that I'll say... And I'm not trying to hate on DAC. It's very important what the DAC startups are trying to do. But you also have to think holistically about the system. If you're producing green electrons that are going to power a direct air capture facility, I would argue... And I was just talking to another investor about this two weeks ago.

Leo Banchik [00:18:59] But I would argue that there are better uses for that green electron. Could you use it to charge a battery that's going to drive an EV? Could you use it to drive a heat pump that's going to decarbonize industrial heat? Could you use it to maybe drive a new chemical process to produce, green ammonia? So, I do think that removal of CO2 using those green electrons is perhaps not the best use of those green electrons.

Leo Banchik [00:19:33] At McKinsey, we would do these supply curves. And you think about on the y-axis, the economic cost of providing a certain good. In this case it would be CO2 removal. And on the x-axis you have, sort of as the width, the amount of carbon you could remove in this particular instance. And if you fill that curve, you're going to find DAC on the far right hand side, and I think it's going to have a small sliver.

Leo Banchik [00:20:05] If we need to remove 10 gigatons, you're going to be filling all the other things first. Nature-based solutions, I think enhanced rock weatherization, ocean CDR is probably in there as well because the carbon dioxide is more concentrated in ocean than it is in the atmosphere. I think you're going to find BiCRS there for sure. And then, DAC's going to be the last resort. But again, because I mentioned this 25-year race to get to 10 gigatons, what these startups are doing is important. I just have trouble seeing it as venture scale and being able to return our fund within our 10-year lifetime. So, don't want to be a DAC hater. It's very important what these teams are doing, but we just have to think about our financial returns and our fiduciary duty to our LPs.

Host [00:20:49] Absolutely. Let's touch on that a little bit with Voyager. You mentioned Arbor, you mentioned Andes, but touch a little bit more on the investment thesis and the parts of it that resonate with you, especially.

Leo Banchik [00:21:07] Yeah, absolutely. I mean, what I love about the fund is that it shares a lot of theses alignment between where I was previously leading our global climate tech practice at Global Founders Capital. I co-invested with Sierra and Sarah, who are the founding partners of Voyager when I was at GFC, in a couple of companies. So we invested in a sustainable aviation fuel company called Lydian, which uses thermochemistry to make syngas which then can be put through Fischer–Tropsch to make sustainable aviation fuel. We invested in Arbor. Well, I invested in Arbor at the seed and then Voyager came in. And so, there's an appetite for hardware.

Leo Banchik [00:21:50] Software is important too. We have lots of great software companies that I might be able to share on this call as well. But if we're talking about atoms versus bits and we want to decarbonize the globe, the bits will only get us so far; we really do need to decarbonize our hardware, the built environment and everything around us. That appetite for hardware, the discipline around believable techno-economic analyzes... Like, the unit economics need to work out. That's why Solyndra... and there were other reasons too, but that's why a lot of startups went bust in the last Clean Tech 1.0, because the unit economics weren't there. So, we need to see...

Leo Banchik [00:22:34] Maybe your first plant isn't going to be better than the fossil fuel status quo, but by the third, fourth, fifth, within our 10-year lifetime of the fund, we want to see that you're going to get to a green discount if possible. It's going to be cheaper to make this thing in a green way than using fossil fuels, and that's going to really spread adoption for these technologies. So, it's appetite for hardware. It's a real focus on unit economics. It's a focus on what's actually going to return the fund rather than investing in technologies that might take 15, 20 years to really materialize.

Leo Banchik [00:23:11] And it's also, I should say... I believe it fits here in this segment, but a real vision around portfolio services. Now, there are some investors who may write a check and walk away. "Hey, we're going to invest in the best founders who we think can do it themselves." That's our view at Voyager; we try to invest in the best founders that we find as well. But we love rolling up our sleeves. And that's something that I loved doing at GFC as well. Working with the founders outside of the board meeting as well. Setting up recurring meetings with the founders, helping them think through strategy, helping them make introductions to customers, hires, new investors, getting new investors excited about... Sharing your excitement for the company and their progress with new investors ahead of their next round. These are all things that I think a good partner should do, a good investor should do.

Leo Banchik [00:24:03] A lot of us at Voyager are former founders and operators. I started a company when I was in grad school. I was an operator at a company after grad school. At McKinsey, I had a couple of projects that put me into operating-like roles, even though we were doing advisory. But it felt like I was operating alongside my clients. And so, we try to take that "roll up your sleeves" attitude, and I think that makes a big difference when these companies are going to market feeling like they have a partner that is truly a partner.

Host [00:24:39] Well, and I applaud you guys for jumping in on the hardware side, especially. That's one of the things I can resonate with, right? We see a lot of software coming out in the climate space and it's fantastic; we'll need it, right? Any sort of grid integration software, grid optimization, balancing those electrons. Fantastic, but at the end of the day, we need hardware. And it's a tricky space.

Leo Banchik [00:25:06] Say more, say more. I'd love to dig in.

Host [00:25:10] I think one of the difficult things with hardware... And I'd actually love your opinion on this also on just the research and the lab side of things, because I think one of the difficult things is taking a concept... ORNL has fantastic concepts and technologies that they're working through, especially on the storage side with just gas compression and things like that. But getting them to the point on that small scale in the lab, maybe at a 50 kilowatt basis, up to megawatts and then up to hundreds of megawatts...

Host [00:25:39] When you talk about the economies of scale, you need to hit with some of these technologies and it's really hard to break through. I think you see a lot of venture funds that, in the climate space, dive into software. And the hardware is just a longer, more capital intensive game, right?

Leo Banchik [00:25:58] I somewhat agree, but I do have counterpoints. I should share another part of the thesis that I share with Voyager is that we don't invest in science experiments. So, TRL... And there are some conversations around why TRL may not be the best metric, but I still think in this way. TRL 3/4 means that you've demonstrated in the lab and there's some clarity on how you're going to commercialize it. You're going to get it from the lab to pilot or demonstration, and then you're going to get it to commercial. And you can kind of see what the steps are.

Leo Banchik [00:26:36] If there's material science risk, if you haven't fully demonstrated the process, I think that's an area for... A TRL of less than 3, maybe 1 or 2, you're still proving the concept out. There's a lot of grant funding for that. There's ARPA-E, NSF's SBIR. There are some pre-seed investors who are willing to take those bets. But at Voyager, we need to see it more or less working at the lab scale before we can even envision commercializing it.

Leo Banchik [00:27:02] So, we start with something that that works. And then scaling it up... Yeah, there's going to be CapEx needs, but if you can... And I work with a lot of my startups on this; we do that together. We help them think through non-dilutive funding sources. A lot of your listeners may know or are maybe hearing about first-of-a-kind financing, project finance, infrastructure finance. And there's kind of a checklist that you need to be able to hit that financing. But if you can demonstrate that your facility works at a pilot or demonstration scale, then the next step up, your commercial scale, is less than 10x the size of your pilot or demonstration scale...

Leo Banchik [00:27:45] And you have multi-year offtake from a customer that's willing to buy it. You have somebody on the team that does structured finance. You have a reputable EPC. You have all your permits, all your regulations in place, it becomes easier to raise project finance. Now, the interest rates may be a little bit higher than what you might find for something that's completely off-the-shelf and established; this is new tech, after all. But if there's really just engineering and execution risk left and there's no science risk and you've demonstrated at the right scale, I would argue that there's a lot of funding that's coming on board right now to help companies through what people typically call "The Valley of Death," Series B, Series C, and being able to scale up.

Leo Banchik [00:28:26] And I think now is a pretty special time because there are a number of funds. I can count on both hands, maybe plus, that are going to crop up this year and you're going to start to see more of this. Not only funds that do strictly project finance and infrastructure finance, but also other funds that do hybrid. They'll do an equity check and then they'll also help you out on your debt. And it's just good for everybody. It doesn't dilute the founder too much, it doesn't dilute the investors too much, and it funds CapEx that sometimes is off-the-shelf and shouldn't be paid with equity dollars.

Leo Banchik [00:29:03] The other argument I'll make is that some of the companies that we see out there in the public markets, or even in the privates that are very late stage, even if they're software, they've raised billions of dollars. That goes to, I guess, personnel, data centers, cloud costs. And so, I think at the end of the day, we might find that even some hardware companies may be able to get to IPO or get to acquisition without having to raise as much.

Leo Banchik [00:29:31] So, I do hear you. Software has its advantages in certain ways. If you've got a team and they're trying to work towards something and it's not working, it's not finding product-market fit, they can pivot a little bit easier if they're just writing code instead of having to retool their entire manufacturing line. That's why you have to get it right at the beginning. You have to think about are they on the right path? Is this the right product to build?

Leo Banchik [00:29:54] I should also share that software is less defensible than hardware. Usually with hardware, you have pretty enforceable IP and it's not this race to get your network effects and to really become entrenched in the market. It's like, "No, you've got the IP. If you build this and you get that green discount and the customers are there and they want it, it's a more sure market and it's a more higher probability outcome." So, I do hear you on software and hardware and it's a good point that you raised, but I think there are a lot of mitigating factors in today's environment that are there to support the startups.

Host [00:30:27] I'm super curious on the science experiment side. I love that's the baseline you start out with. Maybe past TRL 3 or 4 and finding something that's worked in the lab and now we need to scale it up eventually reaching that commercial level. And I'm sure there's a huge variation here, but what kind of demonstration sizes do you guys tend to shoot for? Is that low megawatts? What's that range that you would consider the demo pre-commercial?

Leo Banchik [00:30:59] Yeah, that's a good question.

Host [00:31:03] There may be way too much variation in there to answer.

Leo Banchik [00:31:06] Well, because because they're not always producing megawatts. I know this is The Energy Impact Podcast, but like for instance, we just invested in a company that... And maybe I won't share the name until it's public; the announcement hasn't been made, but we're very excited about it. They use proteins to separate out rare earth elements. And so, the output in that case is in grams per hour or grams per day. And it actually came out of a National Lab. It came out of one of the National Labs here in California.

Leo Banchik [00:31:36] In that particular case, there was a precedence in the literature, about four years of work and $8 million in federal funding that went into this research. The team found it, licensed the tech. Built a great team around bringing this to market, riding down the cost curves. We were able to see, "This is TRL 3/4. It's not a science experiment anymore." Engineering to bring the cost down, which seemed feasible after talking to a number of protein experts, and so we were willing to take a dive.

Leo Banchik [00:32:09] For Arbor, they hadn't yet built this plant, but there was no science behind it, per se; it's all thermochemistry that we know. And so, there wasn't necessarily a kilowatt that they had produced, or in this case, maybe a mole of CO2. But in this particular case, you had the right team, the right plan. Clean sheeting BECCS. When you think BECCS, bioenergy carbon capture sequestration which is what Arbor does, you may think Drax which is in the UK that emits CO2 and they've been having trouble with their CCUS, their carbon capture, utilization, sequestration and storage technologies. It's been difficult. This is a clean sheet oxy-combustion tech. And the team had the right talents. They came from GE; they came from Space-X where they designed turbines and heavy machinery.

Leo Banchik [00:32:54] The other thing I should share... It fits sort of into the threads we've been talking about for hardware. There are a number of advancements that have made hardware easier to make. Additive manufacturing, digital design... In some cases, AI-enabled design, right? You're able to build new heat exchangers and new reactors in a way that's more effective and more space efficient by virtue of perhaps doing a bit of biomimicry, and combined with additive manufacturing, you're able to get some really interesting designs.

Leo Banchik [00:33:25] So, this is a way of saying even if you haven't built the thing... I might have some dissenters come after me, but you might still be able to say it's TRL 3/4 based on all of these subcomponents that have been demonstrated elsewhere. And if you're going to integrate it together with a process patent, we could still potentially invest.

Leo Banchik [00:33:49] What's difficult for me to see is something like... And again, I don't want to be the fusion hater. I wanted to do fusion research when I was in MIT for grad school. But back in 2011, everybody thought it was just going to be dead. They were going to close down... The team was thinning at the Plasma Science Fusion Center. Today, it's a completely different story on fusion. But I do think that's one where it is a bit more of a science experiment. It could be argued, maybe, that it's an engineering risk.

Leo Banchik [00:34:21] But I think one of the big problems in fusion... It's dependent on which path you're talking about, but if you're talking about tokamaks and Stellarators, you get these neutrons that fly out and sparge the surface of your first wall. And that's a material science problem. And material science, that's a very difficult, long science. I mean, props to the material scientists out there, but if you're going to design new materials to prevent the sparging... Or, maybe you can control the plasma in a way or figure out how to limit the sparing. But that still, to me, feels like something that's not yet TRL 3/4, won't be commercially viable within our fund's lifetime.

Leo Banchik [00:34:58] And I love reading about all the great fusion bets that are being made, but at least for our fund, I think we all agree that it may be a category that you should be receiving more public funding to get to the right milestones where they can then take on venture investment. I could be proved completely wrong, but the joke about fusion is it's always 15 years away. But it is a beautiful technology; a star in a box. I still read about it and I'm fascinated by it, but I haven't yet seen the right thing that we would invest in out of Voyager.

Host [00:35:34] Fusion, especially, is one of those things where if it's 15 years away, it's fantastic. And if we can find that in 15 to 20, 30 years, it's great. The issue is, even on the carbon sequestration side, a bunch of different methods; I think we've agreed to that. But let's just say it's something like DAC and you want to suck out all of that carbon, you need 10 million metric tons just flowing through.

Leo Banchik [00:36:01] We need a lot of air. You need to push a lot of air through.

Host [00:36:05] On the fusion side, you need that action now. And so, it's a question of what technologies can we quickly advance in this climate space, in this clean tech space. What can we push through? How long is the life of your fund? What are you guys looking at maximizing?

Leo Banchik [00:36:20] We're a 10-year life fund at the moment. And there are other funds that have a longer lifetime. And again, I don't want to be portrayed as the fusion hater or DAC hater; they're important technologies, but they may be better fits for funds that have longer lifetimes, 15 years, 20 years, or an evergreen fund potentially.

Leo Banchik [00:36:48] Another one for fusion, it would be baseload, but the cost is still going to be something that we're going to have to think about. What's the levelized cost of energy going to be? I don't think it's going to get down to two-and-a-half cents anytime soon. There's a paper on that out there. I think it's going to be more expensive. Fission is way more expensive than that, and this is more complicated than fission. Albeit you don't need all the regulatory wrappers around the technology, right? I think the costs go up for fission on LCOE a lot because you want to prevent meltdown, and you don't have that problem with fusion. But still, you have to think about what are the unit economics if you do get it to commercial viability.

Host [00:37:34] I am curious... One other question on the 10-year lifetime. Is there a reason it's 10 years? Is that going out to your LPs and the 10 year was a good time frame? Is there any logic behind on the climate side of why you're focusing on that?

Leo Banchik [00:37:50] Well, I think there are a lot of opportunities that fit within that 10-year time frame. And it is more standard in our industry, so we may revisit it at a future time. But I think there are a lot of opportunities that that do fit within that 10-year time frame. And as we work to find great companies to fill our Fund 1 and our Select 1 fund; we're a $200 million AUM fund...

Leo Banchik [00:38:13] I should maybe give a brief introduction to listeners. We precede the Series A out of our Fund 1. We use our Opportunity Fund to double down on our winners. Each of those funds are $100 million, typically investing in North America and Europe. Comfort with hardware, as we're clearly talking about, but we've also done lots of software. Also supported a lot of founders bringing great software businesses into market. But I would say we're focused on returning capital to our LPs within that timeframe because we see plenty of opportunities within that timeframe.

Host [00:38:53] And also, sorry we never actually did a true introduction of Voyager, so thank you for covering that. I was going to touch on this earlier. With your work in the National Labs... And I guess I briefly touched on that you see a lot of really cool technologies coming out of them. Where do you see the responsibility in commercializing that tech?

Host [00:39:12] And this is asked from the angle of there's a lot of government funding flowing into different demonstrations. And you mentioned a few of the options around, SBIR and things of that sort. Where do you see the responsibility in driving those technologies forward? Because the National Labs are... You're right, they're conducting the research. But ultimately, the goal is to commercialize those things, right?

Leo Banchik [00:39:36] Yeah, you're right. And a lot of the National Lab researchers... I can't generalize, but they're very good at research, basic and applied research. And there may be exceptions here, but it usually takes a founder to come along, license that patent... For which there are great resources available through the DOE, but also through the National Lab Technology License Transfer Offices to license that patent. I mentioned one company that's done that through a California National Lab.

Leo Banchik [00:40:11] There are patent tools online that you can use to search for what patents have been made by these National Labs. And it usually takes a founder coming along and finding those patents. There's another one... There's a DAC company run by a couple friends of mine that found a patent coming out of Oak Ridge, a company called Holocene. They claim that they can get to very low levelized cost of carbon removed using that technology. And so, there are instances where founders come along and take those patents, license them, and commercialize them. And in my experience, the National Labs are happy to have this tech go out into the world.

Leo Banchik [00:40:54] So, I would encourage the founders to look at the National Labs and find great patents to bring to life and make that a reality. And I've shared that with founders in the past. "Hey, you want to start a company? Take a look at the patent search tool online and find something that you think has legs."

Host [00:41:18] Yeah, because it's really an all-around incredible resource. It's just finding what you can take to the next level, right?

Leo Banchik [00:41:25] Exactly, exactly.

Host [00:41:27] So, on that... We've stayed away from hydrogen so far. I look at hydrogen as like the Golden Goose. It's the thing that's maybe a little bit less far-fetched, for lack of a better words, but a little bit less far-fetched than fusion. It's something that everybody's chasing. It's like this ultimate solution. If we can get hydrogen, then we can solve the storage issues. We can solve industrial manufacturing on the steel, ammonia, clean cement, everything. We just need to figure out how to make green hydrogen.

Leo Banchik [00:42:03] I would love to hear how you view that industry and how you view it coming along. We talked about Clean Tech 1.0, maybe 2.0 or 3.0, depending on how you define it. It seems like hydrogen has gone through waves as well. And so, I would love to hear where you think progress is being made in that field. Not to back you in a corner on any opinions here, but yeah, I would love to get your opinion on it.

Leo Banchik [00:42:29] I'm happy to share my thinking. You know, it consistently evolves. I'll start with this... What are the best use cases for hydrogen? And those may shift as hydrogen costs become cheaper due to either cost downs in electrolyzers or due to something that a lot of folks have been talking about, a different color than green. White or gold or maybe turquoise. So, white or gold are equivalent; people have been talking about it in the same way. It's naturally occurring hydrogen. Which, for hundreds of years, we've been putting a straw, effectively, into the ground and pulling out oil and gas. And what would change if you could put it in and pull out hydrogen instead? Perhaps with a bit of cleanup as well and if you can prevent leakage, as hydrogen is a very small molecule, H2... If you can do it economically, if you can do it in the right places, there are a lot of folks who have been pretty excited about this space.

Leo Banchik [00:43:36] And in the context of venture, if there's also some unique technology, perhaps, or some kind of a moat, because it can be a little bit more of a development play. Plus the competition with the oil and gas companies like Exxon and and Chevron who are probably thinking about, "How do we tap into natural hydrogen? How much is out there." But if there is a lot out there, you may be able to produce sub-dollar per kilogram hydrogen, which is still the target for a lot of these electrolyzer companies right now.

Leo Banchik [00:44:07] That would change a lot. I think if you could do it and it was cheap and plentiful, you'd probably end up finding these industrial hubs popping around these well sites, because transportation of hydrogen is still an issue. You have to either compress it or liquefy it. There are a couple of cool startups out there that are doing liquid organic hydrogen carriers. But transportation still adds costs.

Leo Banchik [00:44:29] So, the world I envision if natural hydrogen ends up being a big thing is... Perhaps we're going to find new types of chemical manufacturing facilities that pop up around these hydrogen resources. That could include steel; it could include ammonia, perhaps, where you're using this white or gold hydrogen and putting it directly into these systems on the spot. And then you're transporting something else out, like ammonia or steel. Remains to be seen. The jury's still out on whether that's a big thing, but we've heard about a few startups that are tackling that in the news.

Leo Banchik [00:45:09] Now, up until that becomes reality, we do have proton exchange membrane electrolyzers, anion exchange membrane electrolytes, a few different electrolyzer classes. And as those ride down the cost curve, there are use cases for where the hydrogen makes sense and doesn't. And I frequently like to quote Michael Liebreich. He's one of the Bloomberg New Energy Finance founders. Many of your listeners may be familiar with Liebreich, but he's got this thing called the Hydrogen Ladder, which is like a framework for thinking about where hydrogen makes the most sense. And largely, I kind of adhere to that; I agree with it.

Leo Banchik [00:45:45] I think passenger vehicles that are running on hydrogen, I think they're near the bottom in addition to hydrogen for home heating or for office heating. That's a place where green electrons make a lot more sense. You've got the infrastructure already for EVs in place; it's getting bigger all the time. You don't have to deal with the hydrogen transport issues. The well-to-wheel efficiencies for EVs are a lot higher than hydrogen. Turns out, motors and batteries are pretty energy efficient on a First Law of Thermodynamics basis, and the electrolyzers and fuel cells, which you need to make cars go with hydrogen, are still relatively inefficient. I think they're about 50% or 60% each. And when you multiply those together, it doesn't look great on a well-to-wheel, and that changes the total cost of ownership.

Leo Banchik [00:46:36] So look, without getting too much into the detail, this is why the Mirai... Toyota has done great things. They started the Prius. I still have an old one from 2010 sitting outside. But the Mirai has been challenging for Toyota to push out into the market. And the Shell station that I have right next to my house... Here in San Francisco, Shell just shut down its H2 refueling stations for passenger vehicles. There's a place where hydrogen makes sense and a place where it doesn't.

Leo Banchik [00:47:05] Where it makes sense... Some of the ones at the top are replacing gray hydrogen where it's used today. Gray being hydrogen produced by steam methane reformation, which is coming from methane. And a lot of the SMR-based hydrogen is going into ammonia. It's going into other kinds of chemicals production where the hydrogen is a feedstock. And converting that to green is going to help tackle the GHG emissions a lot more. You're going to have more impact per dollar spent. And so, that's where my bet would be.

Leo Banchik [00:47:36] I think green steel falls under like a Class A or Class B according to Liebreich. I think sustainable aviation fuel is higher on the list as well. I think there are a lot of uses for hydrogen, but it's not a panacea that's going to open everything. There are places where electrification is going to make a lot more sense.

Host [00:47:56] It's pretty impressive you were maybe one of the few Mirai owners. I've only met two or three.

Leo Banchik [00:48:02] I have a Prius outside. Sorry. A Prius, not a Mirai.

Host [00:48:05] Not a Mirai, okay. Well, maybe not a fantastic, but a Prius is great. Yeah, I've only met a couple people with the Mirai and they were kicking themselves after a couple of years because just not that many fueling stations, unfortunately.

Leo Banchik [00:48:19] Yeah, I mean, it's cool. It just emits water, but it has its challenges, right?

Host [00:48:29] As we're somewhat nearing the end of time... With Voyager, how do you see yourself making an impact in this space?

Leo Banchik [00:48:40] I mean, Sarah and Sierra, and the other team members as well... Matt, Nare, Jake, and Melissa, we see this as our life's work. And truly... I gave you a bit of my background at the beginning. Since 2006, I've just been obsessed with this problem. How do we completely recreate the foundations on which we live, the structures surrounding us to be green? And to be able to do that using cool new technology and to be able to do that in a way that can make money and be lucrative for everyone. Create jobs, make the air cleaner around where we live.

Leo Banchik [00:49:22] It's not just the GHG emissions, it's also the pollution. I mean, you look at climate justice. A lot of communities that are sitting around these petroleum refineries and the rates of cancer and the rates of these terrible long-term effects are awful. And so, it's not just saving ourselves from pending ecological doom, it's also pollution and the health effects from that and how certain communities are disproportionately affected.

Leo Banchik [00:49:55] So, there are a lot of reasons why I get out of bed and get up to help founders and find great companies and help them in any way I can to succeed. You asked me about how I can make an impact in Voyager. I think a combination of my background plus maybe my my extroversion. I like meeting new people and discussing ideas. It makes me feel comfortable and happy to be working hard in this space. And so, it's finding the new technologies that are going to make a difference and helping them scale, whether it's with our capital in addition to non-dilutive funding, additional follow-on funding. I just want to find these big... Some folks call them "gigacorns," unicorns that have gigaton-level impact and help them as much as I can.

Host [00:50:52] I think this is my favorite question. What's the future of investing for you specifically around clean energy? What is that looking like?

Leo Banchik [00:51:06] I see myself at home here and continuing to support startups however they can. For the next foreseeable future, it's going to be through pre-seed to Series A investing, because I think the early stage is a very important place to find new innovations to bring to market. Eventually though, I do think growth equity is going to be very important. Once some of the startups in these verticals are bringing the right technology to market, it's going to be important to push them through future financing rounds, and there are a lot of funds that are doing this right now and a lot of startups that are raising these rounds.

Leo Banchik [00:51:49] But also on the non-dilutive side, right? Opportunities to provide infrastructure financing, project finance, asset-based financing. To provide debt, I think, is going to be very important. And so, we'll see how Voyager evolves over the years to be able to potentially support startups in growth or in that non-dilutive. But for the time being, there are plenty of excellent founders with business models that have advantage unit economics that are meriting early-stage equity investments, and that's what we're here to do.

Host [00:52:25] I love it. I love it. You guys are partially making those founders' dreams come true and then absolutely just changing the world in the process. It's fantastic. Last but maybe not least, do you have any upcoming announcements or milestones you'd like to share?

Leo Banchik [00:52:46] Yeah. We have made a few investments in the space. I mentioned one in rare earth elements that I'm very excited to announce shortly. We've made another investment in long-duration energy storage that I'm excited to announce shortly as well. So, stay tuned. I suppose listeners, stay tuned for new investments that we'll be announcing.

Leo Banchik [00:53:08] We're also working on... Or, haven't yet started, but we'll be raising our Fund 2 shortly. And we're very excited to have even more capital to back excellent founders, globally, that are working on these advantage unit economics, innovative technologies across software and hardware. So yeah, stay tuned. Lots of exciting things coming out on Voyager.

Leo Banchik [00:53:29] I had mentioned chemical decarbonization a few times. By the time this goes live, we will have already made the announcement, but I worked on a letter. Voyager, we like to be thought leaders in the space and we like to think deeply about which verticals require decarbonization. What are exciting areas for the founders to pursue? What are some of the challenges that those founders may find? What are advantaged pathways? And so, we have a new letter coming out on chemicals decarbonization which I'm pretty excited to share with the world. So, stay tuned for that one as well; I think it's coming out towards the end of this week. So yeah, lots exciting things happening for us and for the space in general.

Host [00:54:13] Awesome. And where can people find maybe more of your ideas? You mentioned a blog before. Anything else on the Voyager page?

Leo Banchik [00:54:21] Yeah, yeah. The letters are listed on the Voyager page if you go to And you can find me on LinkedIn. Feel free to add me on LinkedIn. Maybe add a note, "Heard you on the Energy Impact podcast." We'd love to friend you. And I've got a couple of blog posts there on why Clean Tech 1.0 died and I'm digging into a little bit more around carbon removal in my thesis there. I've got a few more blog updates that will be coming in the next few months on economy of number versus economy of scale, my thoughts around how to make things either using thermochemistry or electrochemistry or in some cases, synthetic biology. So, yeah, I like to put my thoughts out there. Voyager, we like to be the thought leaders in the space. And so, feel free to reach out and we'd love to hear your thoughts.

Host [00:55:19] Awesome. Yes, sir. Fantastic. Appreciate it, Leo.

Leo Banchik [00:55:23] All right, Ben. It was a pleasure. Thank you for having me. Enjoyed the conversation.

Host [00:55:26] Likewise.

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