Template.png

Rokas Peciulaitis

Managing Partner

Contrarian Ventures

January 4, 2022
  • iTunes
  • Spotify
  • YouTube
  • Twitter
Ep 55: Rokas Peciulaitis - Managing Partner, Contrarian Ventures
00:00 / 01:04

Michael Crabb
Welcome to another episode of the Energy Impact podcast. Our guest today is Rokas Peciulaitis, Founder and Managing Partner at Contrarian Ventures. Rokas, welcome to the show.

Rokas Peciulaitis
Hey, great to be here. Thanks a lot.

Rokas Peciulaitis
Yeah, well we'll get into all the cool things you're working on at Contrarian Ventures here in a bit. But first, tell us a little bit about you. Where are you from?

Rokas Peciulaitis
So I was born in Lithuania. It's this tiny little country, 2.8 million population, which is around the Baltic Sea, which is now referred as the Baltic countries. I grew up there and basically then went to university in Scotland, did a year abroad in California - so basically left- departed home at the age of 18 - and then went to work later into investment banking. That was from the very beginning of my career.

Rokas Peciulaitis
Was that something that you want- you were like, I want to grow up and be an investment banker? Or that's- how did that?

Rokas Peciulaitis
It's an interesting story actually, kind of relevant to the current data, I think, in some respects. I kind of started intrapreneurial part very early on, I think it was age of 14. There was this kind of weird story. I was playing this computer game called RuneScape. It was like- it was a game basically similar to what features with NFTs are like now, so they had these kind of rare type of items that you can sell online. And I actually did quite well with that, being at the age of 14, 16, accumulated some wealth from that. And then I started investing at the age of like 16. And that sort of pursued me being interested in investing generally, I think at first public markets. So literally at the age of 16, I couldn't open a trading account, so I think I did on behalf of my mother and then traded that through when I went to university. That spurred me to start economics degree or broadly finance. And I think from that day onwards, the more interest was spinning around being trying to figure out how to be a good investor, a bit of a different construct. Then, I think at that point of time when I went to uni, I realized that trading was something as a career where you could basically make bets and potentially invest in companies, primarily in the public side of things. And that's how I pursued the career in sort of trading where I did internships through my university and in places like Morgan Stanley and then later Bank of America Merrill Lynch. That's where I landed with my first job. And that was sort of, kind of always from the age of 16 through university that was the dream. That was perceived dream.

Rokas Peciulaitis
What did your parents say to this? Right? Like, Hey, Mom and Dad, I made a ton of money trading stuff on a computer game. How did that-

Rokas Peciulaitis
Yeah, so that was pretty weird. I think it was- I was generally sort of really plugged into that and I think it was weirdly interesting. So what I was doing just arbitraging the market in a way, so I was buying the game currency and then reselling it to basically Chinese purchasers, which then they were reselling it to other people that are playing the game. Some people know World of Warcraft. You have like rare items or currency in that game. So I was just doing that and that did well. I think I was playing the game itself and at some point I realized, Okay, there's a market opportunity, so I might as well go after it. And I think it was an interesting experience at that point, because in a way the kind of features of that game are NFT market. There was like virtual owning some sort of like unique item, like a party hat in that context of that game. So yeah, I think it spurred my interest generally in technology. I think at that point, I was pretty immature, so it was more from a gaming experience. But generally, when I went to university, I think that spurred more interest subsequently than just trading publics, you know equities. Therefore, when I went to do my career, I was not necessarily in equities. I was actually working on one of probably the most complex products. I was trading inflation derivatives and swaps and inflation-linked bonds - which I guess in inflation context today matters as an asset class - but then it was very, very structured product and very much sort of a more derivative leaning product. At that point where I think the kind of knowledge and sophistication of what trading meant as a word was so much different from when I was 16 when I was just- and to be honest, one interesting experience from that - even though I was 16 or 17 - it was on- I guess I started university 2008, so it was on a verge of financial crisis, so obviously had my lessons and scars there as well, being a very immature investor and entering the market at probably almost the peak. So I knew at that time by age 18 what the margin call was and things like that. So that's-

Rokas Peciulaitis
You were leveraging early, then. You were just going long. This was- you were doing some unique things.

Rokas Peciulaitis
Exactly. So that was sort of a unique experience that led to sort of some interest to be more curious beyond just what's given to you. And yeah, that was a good foundation to be independent, which I kind of followed for my whole life to this date, I guess.

Rokas Peciulaitis
Cool. Yeah. Okay. So you leave home, you go to Scotland. How do you- I mean, inflation derivatives has to be a pretty small desk in the scheme of things here, right. I mean, why that?

Rokas Peciulaitis
I think my journey wasn't as easy as that as well. I mean, I went to University of Glasgow, which interestingly COP is happening this week. Unfortunately, I'm not going because I'm too busy, but I would have liked to have the pleasure to go there back after 10 years after I graduated. But interestingly, Glasgow was not necessarily a target university, so I had to get my way through to get into that job eventually firstly, like doing internships. And Morgan Stanley and then subsequently going in landing a job offer and internship in Merrill Lynch, I think at that point of time, I think it was just an ambition to sort of get to the job that I was- at that point thought was my dream job. And I think when it works, it's usually very sort of generalistic how you enter it. From the… background of technical knowledge and just generally the team that I liked, I ended up getting a job there and started there. I think through time, what you mentioned is only a few people trading that. To be honest, I think it's more like 30 people globally trading that product. It felt that not necessarily my skillset was best suited personally and I didn't find it rewarding. So at some point when I was sitting at my desk, looking at eight screens and stocking for a squawk with eight brokers, I realized maybe not- that's not something I want to do for the next 10 years. And maybe I felt that at the time when I was reading more TechCrunch than looking at Bloomberg Terminal that was the time when I should do something about it. So I kind of have like a background history to how I found myself into venture generally, more broadly technology. A while back before I started with Merrill, I did this unique program which is called Create Lithuania, which is back home. I actually did came back to Lithuania for like nine months after I graduated from university and I got invited to this program. I was one of the first 20 people who did that. And what's interesting there was like that was the first time that I got to meet, to work with ecosystem as such as a startup ecosystem. And one of my projects worked on like three projects for three months was to basically invite investor community to Lithuania and just basically create what now is called Startup Lithuania. And basically, I got to meet some cool people from Israel and one of them became quite a good friend and now sort of mentor whose name is…. Through my career when I was in Merrill's, I would frequently fly to Israel and I think that's what spurred my interest to somehow be involved more in this ecosystem. That was my playground to learn and meet people that were very successful in that. And I think as that kind of bug in my head was scratching me to do something about it, eventually I kind of pulled the plug and said, Look, this career is not for me and I want to go after something that I felt very exciting and in a nutshell, I felt even my job was going to be challenged by technology, given that it was so manual and so OTC in nature - over the counter in nature - and there was more human interaction for a middleman. That implied that would have been disrupted at some point. And I think where we are now, if we're looking even like four or five years back, this destruction is really getting unparalleled speed. Really, that was the first step to see from the grounds up of what it is, what that ecosystem looks like, and more granularly leaning towards- so when I left Merrill's the first idea at which - at that point, I was 26 - was pretty delusional, I would say, to do my own fund. And obviously, naturally, what came to your mind was like FinTech, because that was something that was really, really kind of natural for me as an extension of what I was doing before in my career. But I think when I started to look, I knew two things in a nutshell: one, that you could never compete as a generalist, because firstly, I wouldn't have probably even landed a job in venture which I wanted and tried to do for a very short period of time, maybe a month or so. I sent a few CVs and realized that I don't have a chance. Maybe there was pretty close knit a small community. So I thought, okay, if someone is not inviting you, probably as well might as well create your own. So what happened is, I really thought it's a unique opportunity to go after something, but it was always- my knowledge was always that I'm going to go after something sector specific, because you can go deep into the subject matter and build some sort of remote knowledge and just understand the market. And again, you can create a differentiation, right? And that matters for either to any company or even any investor. And so when I looked at FinTech, I got to meet a lot of people. Funnily that summit is happening. Now, when I think back in 2015, I went to Web Summit which was in Ireland and I got to meet a few investors. And I realized that already at that time FinTech and Stripe was already there and a bunch of new investors, someone like Mosaic ventures in London who were there who were primarily FinTech focused - Revolut was raising Series B. N26 was raising Series A or Series B at that time - I realized that there's already that emerging category and I'm too late probably into that. And I kind of went on to look for a sector that was not disrupted yet. And I think that parallel, when I start to sort of look at it, it was like, Okay, so Telco was kind of in 2000 really disrupted by a smartphone. Everyone got a supercomputer in their hand and the business model completely changed. 2008 I think you have Bitcoin to one part. To the other part, you have like the whole stack of finance being disrupted through FinTech and that kind of went onward. Then the natural next kind of industry that I looked at was energy. Okay, that looks interesting. That has not been disrupted. It's sort of monopolistic in nature. It has interesting features of not being digitalized enough and it has this weird thing that is called fossil fuels attached to it. And there are suddenly these four Ds that people refer to about disruption in energy mobility or generally climate tech that are decentralization, deregulation, digitalization and decarbonisation. I think I was pretty sure of the three ones that were going to be driving this sector like decentralization, digitalization deregulation. I underestimated the kind of speed of light that we are in currently today and which was the decarbonisation part. I felt that was necessary. I felt that will happen eventually, but that shift is not necessarily going to be as fast as we are seeing today. So with that thing in mind, I went- we went on with a few partners who were my venture partners at the time in 2017 July to raise our first fund, which is- the initial stage was relatively small fund. It was 6.3 million. Later, it final closed at 12 and a half million and we've been investing since. And then later, I was joined by my partner, Thomas, who I've known better 15 years, from my school to university. He went on to do a bit of different career. He was doing M&A and corporate advisory working in large cap deals. We joined forces in 2019 and yeah, currently have investments in 18 companies. What I told him was I'm not just building a firm, but building a community and platform to help climate tech entrepreneurs. It's sort of early stage to get their first- get goals to build these businesses that are transforming what we believe the largest opportunity over the last 20, 30 years.

Rokas Peciulaitis
Yeah, that's a lot there. A lot to unpack. But I do want to go back to something that you sort of glossed over, maybe unfairly or maybe not giving yourself enough credit. So you looked for a job and then decided just build your own fund and 6 million or final close at 12. Pretty damn good for that transition. I mean, walk us through that process a little bit. You've done this mapping. I think the listeners to this podcast appreciate the thesis and the comments you made about the four Ds, but there's a lot to kind of identifying that opportunity and going out and raising your own first fund.

Rokas Peciulaitis
Yes, I think Contrarian Ventures, just generally people will come across as- contrarian is a very strong word. I think, in a general nature to live up to that expectation, only a few people I think which I find is a very- people that I would like to call someone that I would follow in my life, I'm just thinking, someone like Peter Steele that has definitely been contrarian for his part whole of life. So I think to deliver that, that is a tricky one. I think the way I defined Contrarian at the very beginning was that it was contrarian to the thesis of the fund in 2017. It was personally, because we're going to raise the first time fund with the thesis that everyone looked at and said, energy really? Climate? What does that even mean? What are you guys doing here? So I think it was in nature not easy. I think fortunate enough we had an LP was an anchor LP in the first fund, which is actually a corporate, which is one of the vertically integrated utility companies called Ignitis group who is publicly listed in the Baltics. And they back that because they realized that the opportunity existed there. That was a bit of an easier play, because we obviously had this anchor LP, large LP that gave this opportunity and again bet away on the young team, including myself and others in the team. But I think the timing was really great. I think at the very beginning, I think there were two types of investors. There were investors that survived this FinTech 1.0 and kind of did okay or well for that time and then kind of continuously invested in the sector for the last 10, 15 years. And there were just a few funds that were a bunch of corporate funds. There were a bunch of some new emerging funds, way less than you can see today, right? This is really expanding and we're obviously super, super excited that this is expanding, because we feel that there needs to be more capital. But what we really saw was that, unfairly, there was really a lack of capital in seed stage. At that point of time, when you set up a firm when you're 26 - I would say still relatively little experience and I would say still really little understanding of the sector - I think the way we approached this was twofold. It was very collaborative. We went in the industry and what we said by community, we meant by it. And what we said by platform, we meant by it and we tried to be helpful there so created different initiatives that now kind of grew into something substantial or at least meaningful for us and hopefully to some other people that are in this industry. We really went with that approach to be open, to be collaborative, and then also trying to really go deep in the subject matter, given that for the first, we felt that we want to pick a subject. And going deep in it was the reason why we thought we could get a competitive edge by being that partner for entrepreneur versus a generalist. And that was always in our minds, that we want to be that partner that first institutional capital for seed stage entrepreneurs. And we felt that all the corporates were not necessarily going that seed stage where there's no product market fit or companies not necessarily can work with you or do pilots or doing full commercial rollouts. We wanted to be that notch earlier and build those relationships earlier and eventually become top of mind for that particular stage in that particular category. And so we did from sort of day one with that thing in mind. I think a lot of things sometimes in life just happens for whatever reasons, but we felt that, even back in 2017, where this decarbonisation or net zero, let's say goals, were not necessarily that obvious, we felt that this will eventually happen and gladly, with everything, the sooner the better. It seems that now it's- and it's amazing to see it. But I think every stage of it has different challenges and we feel that it's still just very beginning of this. I think very much grateful and kind of really, really I think- it's amazing to see how you got this opportunity. But I think what matters is what you can do with that opportunity in the next 20, 30 years. For us, we feel like we're just going to a seed or series, like a bit of a product market fit there with the timing and other things. But there are still a lot of things to do, because we still run the small team and partnership and really want to scale now that we have some knowledge and credibility in the industry and we have a portfolio that can vouch for us, which at the end of the day, I say our LPs and our portfolio companies are the best evangelists for us, because I can preach whatever I want here. But what reality, they're the ones who tell the truth. So I think it's just a mixture of a lot of things personally that kind of came together - for myself personally, for our team - and gratefully to have partner. It's almost to work aside. So I think it's interesting timing. I think things from there onwards from 2019 kind of accelerated. I think COVID is one big also milestone that really accelerated this. I think it's both top down and bottom up, both from I think the consumer to top down from a government or if you want to flip that the other way around. And I feel like now this is sort of what people refer to as kind of… for this particular industry and it's great. A I feel it's still not enough what can be done and we're happy to be a very, very tiny and small part of it.

Rokas Peciulaitis
Yeah, you know it's interesting. One of the things that- we get to talk to a lot of different folks at different parts of corporate growth and different parts of the capital stack. I think there's a lot of momentum. We're seeing a lot - you're probably seeing other folks enter that seed Series A, Series B stage - a lot of software, taking this SaaS business model and applying it to energy around the digitalization and decentralization themes that you described. And a lot of people are talking about how that enables decarbonisation, but there's this sort of hard tech versus software mix that still feels like the hardware side is fairly underserved. And maybe that's just perception from my side. I mean, do you guys prefer one versus the other? Or maybe that's too generalized of a difference? Talk us through that a little bit.

Rokas Peciulaitis
Yeah, I think generally we're sort of agnostic to both. I mean, we're sort of doing both hardware and software and what we call hardware-enabled software. But I think one thing to step back from this is, surely this transition requires solutions that both enable users, enable companies, and then enable certain things from just generally - let's put it this way - from them happening at the first place, not necessarily reaching the consumer first. So in any hard tech problem, you're actually trying to solve the the core of the problem, right. And there are certain companies that will embedded not have a software element, and not necessarily in the distribution part or just because what they're trying to solve is a chemistry or physics problem that has been- it's been solved for the last 40 or 50 years, something like hydrogen, for example. Hydrogen exists there for better 50, 60 years and there are a lot of people and a lot of dollars that went from corporate world to solve it, not necessarily that there was a timing or technology that was de-risked at that time, that could be commercially viable. At least certain elements like with solar or wind that there will be some subsidies to help that to get into de-risk and to get that economical efficiency to a point where it's feasible for industry to adopt. But I think every part of it, the way you look at it and deconstruct the sector, what will lead us for this net zero goals to be reached encompasses all these solutions. so both the hardware, the hardware-enabled software and the software. And on the software side of things, there are definitely business models that will be equally similar to any enterprise software business in general in the space and where generalists invest, but I think there will be some business opportunities that not necessarily generalists will look at and see that there is that type of scale or TAM opportunity. And I think, for us, the way we look at it, I think one thing is very clear. In order to be a good investor in the hardware space, one needs to have fit a team for execution of that strategy, especially if you want to lead round and especially if you want to come like way earlier, so TRL 2, TRL 3 when companies are just like being constructed, when it sells out of research. I think folks like The Engine are doing a really amazing job as part of MIT. They take companies out of MIT, fund them, they have incubators, and then only later at Series A or beyond, the funds can step in because then they sort of have certain de-risking element as part of what- and everyone has their own sort of spot in that stage of development of the company. I think the way we look at it from a portfolio construction, we usually say that we invest around 60% in software businesses, around 20% or 25% in hardware-enabled software businesses, where we feel that there is a requirement hardware component to scale software eventually, in the next like three years. So we aim that these companies have at least 50% of revenue coming from software in three years when they start the business. And then there's obviously a pure hardware place like hydrogen, like carbon capture and storage, and maybe some instances in battery technologies, where you will not have embedded software elements in it, but they still benefit from enabled technologies, like machine learning and optimization of the process to de-risk these hardware technology. I would say software eventually is still kind of eating the world as underseen margin, underseen refers, but I think it is crucial to not forget that it's a bit of a different type of transition that requires vastly different technologies to be enabled. And we feel we need to look at all of them and not discriminate against another. Of course, hardware businesses tend to be more dilutive. And especially if you're a smaller fund, that will eventually, in some instances could be more dilutive business models, because they require just way more capital, again, takes more time to liquidity for the fund manager. But at the end of the day, the big ones that are being target are in parallel like way bigger TAMs, like they address, really crucially, like in a hydrogen case, if you get it right, that's like a $10 billion plus business implied, because it's going to address like what 20- like 15 to 10% of total emissions by industry, like steel, cement, oil and gas, ammonia, fertilizer. So that implied becomes a balance of the portfolio, because we still, again, while the impact is a very important part of it, we still are there to make your return for our LPs a financial return as a matter of fact and we want to be smart about how we balance these bets. I think in a hardware context, it's- a lot of these are moonshot bets, right? But again, and sometimes not necessarily at the very early stages, you can actually assess them to a full extent you then still put a lot of weight to the team, to their execution capabilities, to the quality of the research, which is validated by peers and the research that becomes more, not necessarily whether that technology will work - because time will tell if you made a good bet, but I think you always bet on people at that point. So I think there are groups like BV that are amazing investors, especially that are putting priority to de-risking these Harvard complex problems. But they also have a vast, bigger team to do that. We're obviously always seeking to co-invest with partners like that and we have a few, like one or two investments with parties like that. And it's great because every different party brings different value add from that point to that team that we back and different aspect to that journey of that team. We tried to position ourselves for a bit of different value added rather than kind of de-risking the hardware, because I think that's not necessarily our strongest point.

Rokas Peciulaitis
Yeah, really great color. Kind of the theme there, right, is that you have- the Ds that you described are all sort of separate major transitions and they're all sort of happening at once, right? I mean, it's just a crazy, frothy environment, which I guess is exciting for you and exciting for all of us really. Talk a little bit about how you evaluate people. It takes take some different backgrounds to create new and different solutions, but there's some value of sector specific expertise and execution. How do you balance those things and are there other attributes that you look for as part of your management team diligence?

Rokas Peciulaitis
Yeah, I think to the people's point, which is probably the most crucial one for any seed investor, I think it's funny that still no one shoe fits all. I think we- stemming from experience from our current portfolio is the best reference point for me to make that comparison. I would like to have this conversation with you in 10 years, how that changed my thinking. But I think what we tend to see is there are different successful teams, some that come from the industry and solve a peculiar problem that they face when they were in lets say a different fragment of the market. For example, …, one of our portfolio companies - one I think of the fastest growing solar engineering software companies out there - David, who's the founder, basically had a problem when he was a consultant, when he was consulting the large enterprise clients like Volvo or Google when they were implementing CNI projects. And he realized that this kind of process was cumbersome of designing the system. And then he went on to create this new company … and build the product on the back of his experience. That is the best one, because they frequently say it's software from engineers to engineers. The funniest part when I kind of- when I see product market fit is when you look at the videos of them talking with the clients where the client goes, Oh, my God, where has this been my whole life? In that you see that he touched the point that it was obvious to him at that point and that it was obvious to everyone else in that community. You can build a successful business and the metric speaks for it that he nailed it from day one, because they were sort of cashflow positive in month four and they never looked back. And they built a product that was required in the market. Or in other instances, where a company like H2Pro, we have a super successful founder, Talmon Marco, who has built two- three actually successful companies before he sold. He built Viber and then sold to Rakuten and then built Juno, a ride hailing business. And then his third company was something completely different. It was always software B2C type of businesses that he built before. And then he said, Look out, I've been successful, frankly, in my previous life in the software only businesses. I felt like I want to do something that is really making a change in the world and kind of disrupting what's called a hard or tough tech problem. And he went on to give his best skills that are fundraising and people management and hiring people and basically being that resource for the technical team that he pushed out, basically pulled out of technical university that was working on de-risking the hardware technology for 10 years. I think what we look- what's common between these two, it's not necessarily that they have the industry expertise, but they either are successful repeated entrepreneurs or people that deeply care about the problem that they're trying to solve and are able to attract the best people on that journey together. And convince investors, as a matter of fact, especially when we touch tough tech. I think people underestimate how important is to be able to raise money at the early stages of these businesses. And I think the frequent mistake that a lot of entrepreneurs do is they kind of go and rely on the early stages of the business to grants and various like government funding, which not necessarily give you speed. And I think in this transition, especially, and this transition being climate or net zero transition, speed is really of the most importance, right? It's not that we're going to go and disrupt the bank and we have five years to do that, because I don't know what's going to happen after. In this case, we do have a deadline in a way and that deadline is pretty much not necessarily set in stone, but it's actually even evolving and dynamic, so it could even be worse than you expect. So in reality, I think what's amazing is to see people that really can go in the market and on their own, not necessarily rely on government funding, and de-risk these technologies in step by step and make this a reality. I tribute them and I think you can see where people that can attract teams and build partnerships and have a big vision attached to it. And I would say- I wouldn't say that I know a secret sauce to how to detect these type of people. I think you sometimes- that's the beauty of investing. You need to do a lot of trial and error to understand, but I think implied you- hopefully with the brand that you're building and what you stand for, for that openness, you get across these people and it's a mutual feeling. It's not just, Hey, I want to take your money. It's actually a mutual feeling for what we're trying to do here together, both from our side and from their side. And that vision leads to that partnership that hopefully is fruitful for the next five, seven, 10 years and built a really category defining business that has both financial return and an outstanding impact to division that the company's trying to build, which leads to this reduction of greenhouse gas emissions or really solving a problem that enables virtue of a new marketplace emerging in this category. So I would say there's no one answer. I'm still learning. Like everyone else, I think it's in the industry, given how dynamic it is. But I think, surely, there's still a common denominator between these people when you see them and it's not usually about the product, necessarily, at the early stages. It's really about the people that are trying to build that product and what vision they have for that product or problem that they're trying to tackle.

Rokas Peciulaitis
That's really helpful color. I'm curious, is it something that you feel like - I know you're learning and it's evolving and I'm sure you'll make mistakes, if you haven't already - but do you feel like you know? You kind of meet someone and is it like an instant thing? Or is it something you have a few meetings, you go through the material, you kind of walk through the economics, maybe a blend of both?

Rokas Peciulaitis
Yeah, I think obviously, it's not as easy as that. And I think now that we're getting this flux of capital and a lot of probably people entering the space to build businesses there, it's harder to assess that. But I think genuinely, when you start going in details in business, especially in the hardware space, you just know which people have spent hours thinking about that problem and people that just said, Oh, this is a great idea, I might as well do something there, but they have no fundamental basis knowledge of that. The beauty of being specialists is that we do get usually more knowledge than someone that just starts to look at some specific topic when someone bounces by their desk with a pitch deck. We usually have done both top down and bottom up analysis, like identified all the company's investments that we do become from as part of our research, where we go reach out to the companies kind of compare them each other and see who are the best teams out there where the best, most advanced technologies, de-risked technology is out there, and who has the best commercial traction or whatever aspect that we assess. And I think, I wouldn't say that it's easy to just have it as one conversation, but that's the beauty. We never invest out of- I think you get these crazy stories and you get it before when someone writes some napkin term sheet or someone does close the deal in three days. In reality, a majority of the partnerships that we do eventually lead up from someone that been speaking to for like half a year or a year have been tracked closely, tracking their progress. I'm not saying that sometimes deals happen very quickly, but I still fundamentally, we've already done the due diligence on the sector as a whole. And we have some sort of view. And there's just a matter of if there's a fit with a team with their mission and various other things that we test as part of technology, for example, due diligence. But it's never a feeling type of decision. It's always a very rational decision. But I think with some people you could tell, I think with some people you could tell. It's just how confident they are and how certain they are what they want achieve. They like- there's a mutual- I think one important thing and underestimated thing that people don't take into account when they speak about what makes a good, both investor or both entrepreneur, is that coachability. You ask questions, you challenge them, and you see how they react to it. Do they rethink? Do they come back to you? And these interactions matter a lot of how that relationship will go, if it's going to be each one of us speaking about our own things and not paying attention to anything or is it going to be a collaborative discussion that will lead to a better version of ourselves eventually post that discussion, whether that's a positive or negative one. So I think I value that a lot. And I value both that within our team and within external, how we speak with these entrepreneurs. The most important part of like the new talent that is coming in the industry, I think is that a lot are trying to enter the space. It's not just because it's a quick buck like in some places other, like crypto. Sorry for that, but I think there is some of that. But I think it's just there's a new crowd that feel truly passionate about the problem that we're trying to solve here and they are just trying to be really helpful in bringing their own different experiences from different industries, like even FinTech, to be applied in this. And I think that cross discipline teams that are being kind of put in one place truly have more chance to solve the problem versus someone that has been in industry for 50 years doing the same thing and they have, in a way, already a stigma to challenge something that has been there for quite a long time. So I feel the positivity around why Larry Fink said the next 1,000 unicorn companies are going to be created in climate tech. The reason for that is primarily not that because we have a big problem and we need to solve them before we run out of time. It's just because the interdisciplinary amount of different people coming into this industry and applying those skills to actually solve it through completely different solutions one imagined. So I think I'm very, very bullish on that. And I see that over the last couple of years the quality of people entering this space is really phenomenal. And I think that creates an opportunity for us as investors to be able to back these types of entrepreneurs. I think this space is really exciting. And I think the kind of setup of teams is going to be way, way different to what it was even like three, four years ago where a majority of the people that were entering to the industry were primarily people from that industry.

Rokas Peciulaitis
Yeah, super interesting. And maybe a great segue for you to share kind of some of the other parts of this ecosystem that you're building out and how you sort of foster that collaboration. Share some of those efforts and what you've seen there as result.

Rokas Peciulaitis
Yeah, I think when we sort of - I think I recently joked about this - but when you're- I called ourselves the smallest fund in Europe, entering the space being 26 years old in an industry that is really heavily dominated by long-standing oil and gas people and someone like being usually an average like 50 plus years old. You're not necessarily, at the very beginning when we started, taken seriously, especially when this was not that obvious, like in a venture context. So I think we stopped and said, Okay. We went to a bunch of conferences at the very beginning, just start to understand how the ecosystem works. And we sort of said, Doesn't feel like there is a community there, it doesn't feel like- there's the oil and gas community, there's a utility community, but there wasn't really a tech community attached to it. I think that was one part where we said, instead of- we organized firstly and back in 2019 our internal sort of LP type of day where we would meet our LP and our portfolio companies and then would invite our other co-investors. And that true couple of years grew into something that was unmanageable for a team of four that we had. And we said, There are two choices to be made here: we either go and build the biggest energy tech conference out there or we just scale it down to just our LP. And so we did the first bit. We said, Okay, let's go and build something cool and for the community, embedded to it that will give an edge for our portfolio to be able out to be out there and talk about their solutions, to be able to meet all the industry and get to invite people that matter to that discussion, not just everyone. Just people that clearly see and care about the innovation and foster more capital into it and build better relationships with other VC funds and corporates. And so we did. Now, in a couple of years we built one of the largest conferences in Europe. The aspiration is to build one of the largest actually in the world hopefully one day. And build with a twist of Southwest by Southwest meets Web Summit in terms of that type of vibe. And then aside of it, we did some sort of a thing where we said, Okay, we need more presentation for these entrepreneurs to be in front of investors. So what we did is we created this competition that goes aside of the conference, which is called Energy Tech Challengers. And these- we get like 400 applications from companies and we have 70 plus investors that are working as sort of a framework like X Factor where everyone pitches and go through different stages, the reason being they're not about winning, but getting feedback. And we felt that that's important. And it's important, especially from industry where everyone has not a lot of time and can not necessarily dedicate a lot of it for giving feedback, so crowdsourcing feedback from investors and serving entrepreneurs to get that and ability to maybe then partner with them. Then the latest initiative- so everything that we've done so far was always driven by extending our small team and creating value for entrepreneurs beyond our 24 hours that each of us have in the day and do it in a way that is systematic and can scale. And I think the next one was same way. We run- we're very active to help our portfolio given that we invest in seed to fundraise. We think that fundraising is something that they lose a lot of time. Some fundraising is something that really they spend a lot of time instead of building the business, so we said, we want to be as helpful for fundraising and kind of build from day one, everything around building relationship with later stage entrepreneurs, building with peers, because we did a lot of co-investment as part of Fund One, given the fund size was relatively small. So we build an initial list on our table internally which would use our company to basically select the best investors and we build it as a database so we know what other companies they invested in so there's no wasting time for them. And we would then give them that list and do introductions accordingly. And we said, Okay, that works for our portfolio, that should work for anyone else. We went on to build Climate 50 which was an initiative like a ranking. And we have 190 plus investors now on that list and eventually created a tool, which is called Check the Fit where any kind of company can go up there online and basically answer five questions and they will get a customized list of investors that are appropriate for them in terms of geography, stage, and what type of sector they're in in the climate tech context. So again, that became sort of an addition to that conference where ability for companies to fundraise better and take that asymmetric information, which we felt was basically- there was a lot of asymmetric information when you go to conferences. There was a lot of asymmetric information when you went to approach VC funds. The last one, given we're fundraising for a new fund, we felt, Okay, so now go to LPs. So we need more LPs to have more funds, therefore, more entrepreneurs creating more investments. The last one is part of Climate 50. We're going to have actually a list of LPs that we'll see how much they're devoting of their capital to climate. So that's the last bit. I think that serves more the venture community, because we feel we need more funds, even though there's a new fund every week, which we're very, very happy. More competition not necessarily is worse. I think there are more opportunities still that needs to be funded, especially in the hardware type of space. So definitely trying to build some- trying to give back to that community as well, being grateful that we can exist and invest in these great companies and be part, a small part of this journey to net zero and in contributing our way in an open source approach where we feel that, if people go and update information, add people, we're just going to have it for the community. We don't necessarily want to make money off of it or have an added value. But we have the value embedded, because we obviously get more deal flow and people approached us. And that's part of a grand vision of what we want to be as a firm. I think a lot of it still zooms out to building a brand, building really a reputation, and doing it- again as I said, the biggest evangelist of our business is really our entrepreneurs and LPs. So serving them serves us. And we feel by doing that, in that way, it creates some sort of a network effect and it scales. And that's most importantly for us, is we suddenly say that we invest in businesses that scale and have a network effect. I think organizing yourself as a firm is equally important to not forget that you're a startup yourself. And I think that's how we approach it. And even though with scrappy budget, we build things that I think corporates can build with millions of dollars. That's the most rewarding part for me, being a founder of the firm. Because in the respect, you're also building a company, you never forget. It's not just the fund you're building. You're building a firm that lasts for the next 20, 30 years. And that's how bullish I am on the sector that this will be as a category and I feel it's just an emerging category today. So yeah, that's how I think we approach new things and I think we'll continue to do so.

Rokas Peciulaitis
I assume you sleep occasionally?

Rokas Peciulaitis
This has been- yeah, my wife could tell you that she's not happy with this timeline that I'm operating around. But yeah, I think I'm grateful. Yeah, it gets harder before it gets easier, or the other way around people would say when they get the later stage. But yeah, I think it's just you need to be passionate about what you're doing. If you end up, if the end of the day you wake up and you're not motivated to do what you do, not a lot of good things gonna come out of it. I think that inner energy is very much correlating with the inner sort of passion for what we do. And surely, beginnings are always harder than sort of when you get things up on ground. But I think equally, as I said, that community element helps us to outsource that. And a lot of people are giving their share part of it as give back if something helps for them what we're building. And I think that helps us and eases our life. But surely, yeah, I think it's a dynamic nature of this business is amazing. I think the only thing that keeps us awake at night is just competition. How do you stay relevant? How do you compete? And I think that's why we're still over investing our time in brand. I think at this point we're certainly joking internally that our brand definitely outgrew our AUM, so now I'm working on that to get that in line with the brand with my partner Thomas. That's the next part for us.

Rokas Peciulaitis
That's next. Okay, so here kind of wrapping up, is that 5, 10 years from now, is the brand still outpacing AUM, but they're both much bigger? And what does Contrarian Ventures look like? What does this community that you've created look like in your vision?

Rokas Peciulaitis
I think we still want to be true to the stage that we are in. I think we certainly say were super laser focused on the stage that we invest. I still find- you know, I'm still a young investor. I've been in the industry for four and a half years, so it felt like way longer.

Michael Crabb
You're gonna count some of your-

Rokas Peciulaitis
I think the way I look at it, it's still very early journey, both in terms of where the industry is as a whole and where we are as a firm. But I think one thing certain for where we're going next forward, at least in next couple of funds is that we want to be focused in truth to the seed stage and we will be really single focused on that. And I think that there's where the least capital is available. And I think that's where the most opportunity in terms of return and impact exists. So coming these two together, I think it's a winning bonus for us. And we know how to help these companies at this stage. And that's where we want to be really focused for next few funds. I think what's expanding a bit is probably with the fund here, we're still going to be implementing similar strategies, so still Europe and Israel focused and still a seed stage or maybe we'll do some seed plus or A rounds if we miss something that we'd really love to be a part of. But in reality, I think it is just geographies focus. That will expand. I've studied a year abroad in California at some point and I still would love to get some Californian sun at some point in my life and maybe even go to compete in there. And I think, I've certainly given a comparison to basketball. And especially because in Europe, there's like a regional kind of focus. You have like inter European and you have global, so it's like playing in national league, then playing in like European League, and then playing in NBA. I think eventually it still boils down to US where the competition is the biggest. And I think ability in Fund 2, Fund 3 is going to be just expanding from a geography angle, rather than stage. But surely, I think one step back how I look at generally, what climate tech stands for it and more the cap- or like the stack of finance available in there, people underestimate how important the infrastructure is there. People underestimate how important venture debt is, which is still not there. So I'm sure there will be categories that will be interesting for us to look at potentially as investors to get involved. For example, venture debt is something that is very interesting, because we see some of the companies that harbor element that needs to finance that. And we are pretty strong on those technologies. Or even something like hydrogen. If those technologies work, they will become eventually like solar. It was a technology, then it became an infrastructure. I'm less bullish in going through late-stage growth stage, because I think there's so much capital there and there's just- it's just too competitive. And when you compete only on price, it becomes a bit of zero sum game, eventually, in the long run. And we're not here for a few three years, four years. We're not going for a gold rush. We're going for a long-term impact. And I think with that in mind, I think our sweet spot where we can be competitive is most at seed and maybe some A rounds where we have the first hand of knowing these entrepreneurs before and building relationships earlier. But I think there's definitely equally interesting places of venture debt and infrastructure at later stages, whether we get involved directly or indirectly for someone as part of collaboration. That's definitely something I would love to approach and see later down the road.

Rokas Peciulaitis
Cool. Well, super exciting. What a- how many options you have in front of you is-

Rokas Peciulaitis
Actually, one thing I didn't answer what you asked. Where do we see ourselves in 10 years? I think, very simple answer: top of mind, top three firms for early-stage entrepreneur. So I would like to see every deal. I would like to be top three for every entrepreneur that goes raise a round in seed stage. That's my goal. And that feeds into whether your brand can stand for that. And that will be to be seen.

Rokas Peciulaitis
Awesome. Super exciting. Yeah. I mean, aim for the stars. Be the top dog

Rokas Peciulaitis
Yeah, that's the goal I guess.

Rokas Peciulaitis
Well, really excited to see how it plays out. Thanks so much for joining.

Rokas Peciulaitis
Thanks a lot. Thanks a lot. Pleasure speaking to you.

EIC_Logo_Final__Primary Icon Medium .png

Shownotes