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Sameer Reddy

Managing Partner, Venture

Energy Impact Partners

March 3, 2023
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Ep 78: Sameer Reddy - Managing Partner, Venture, Energy Impact Partners
00:00 / 01:04

Michael Crabb [00:01:00] Welcome to another episode of the Energy Impact Podcast. Super excited to be joined today by Sameer Reddy, Managing Partner of Venture at Energy Impact Partners, the other EIP, as we like to say. Sameer, great to have you on.

Sameer Reddy [00:01:13] Likewise. Thanks for having me. It's a real pleasure.

Michael Crabb [00:01:17] Well, before we get into all of the cool stuff that you're working on, tell us a little bit about yourself. Where are you from?

Sameer Reddy [00:01:23] I actually grew up in Gainesville, Florida. I effectively spent the first 21 years of my life there, which I never thought I would say when I was in my teens. But for me, it was a great upbringing. My dad was an environmental scientist; he worked at the local university there. Through that, I think I got a pretty good sort of inside track or insight into sustainability from a pretty young age. I wouldn't say that really kind of what drew me to this broader field, but a great place to grow up.

Sameer Reddy [00:01:53] Moving to New York in my early 20s was certainly mind blowing as a small town kid. That's where I call home for the last 17 years. I live in Brooklyn with my wife and my two kids. And if I sound sleep deprived, it's because I have a three month old who seems to be even more difficult to sleep train than our first.

Michael Crabb [00:02:13] Definitely okay with me. We've got a four week old, so I feel some of your pain.

Sameer Reddy [00:02:19] This is going to be a real riot then, this podcast.

Michael Crabb [00:02:22] Yeah, we'll have sound all over the place. That's actually super interesting because I don't think the environmental field really was what it was. I mean, there's not many people that can say this is a family affair. I mean, how much of that like actually impacted sort of your decision? Did you know what your dad did? Was it something that was talked about?

Sameer Reddy [00:02:40] Yeah, it's funny. I mean, so my dad's a water scientist. I remember as early as when I was five, my teacher went around the room and asked us all what our parents did. I told them my dad cleans lakes for a living. I don't think I summarized that quite as accurately as I would hope. But having grown up in India, water security was always kind of top of mind for him. From a very young age, this is sort of what he always wanted to do. Coming to the U.S., water, much like energy and electricity and every commodity we rely on, we just take for granted. It just exists and it shows up when you need it. So, I think it was sort of a fascinating perspective early on.

Sameer Reddy [00:03:20] Not only to hear his perspective, but also to make those trips back to India where you have to boil water for four or five hours when you want to use it. You have to experience three to four hours of blackouts throughout the day. So, sort of not taking these givens as givens certainly played a role in kind of shaping my perspective in what I might call my old age. You know, I'm on the precipice of 40, so.

Michael Crabb [00:03:46] How much were you aware of this sort of dichotomy between what you saw back in India versus the U.S.? I mean, if you were eight, is that something that you remember thinking about or is this more of like in hindsight, man, you were really seeing it first hand more than perhaps most in our field?

Sameer Reddy [00:04:07] I think it was much more the latter. I think those lessons, those values were probably instilled in me. My brother and I absolutely dreaded going to India. It was a 36 hour flight on incredibly painful circumstances, traveling with your parents. And as a toddler; my first trip was when I was two. I could say I haven't been back in 10 years so I'm also due for a trip. But no, looking back on it, I can see how it's shaped every aspect of my perspective. Especially now that I have two young kids, it kind of shapes how I want them to see the world. Even though they will probably hate me equally for dragging them to India, I will force them to go.

Sameer Reddy [00:04:48] And what's been interesting too... I mean, I went there 10 years ago, and every time you go back to India you hear from all your relatives there, "You have to come back. Things have changed drastically for the better." And while that's true, the middle class has expanded massively, there is just this massive infrastructure bottleneck. There are things that are sort of unsolvable with a growing population, with the water security issues that they're facing, with the brittle grid that they're facing, with extreme weather. There are some things that are solvable and there are some things that are not solvable. So, I think every time I go back, I'm just reminded by the progress that has been leaps and bounds, but we still have a long way to go.

Michael Crabb [00:05:29] Yeah, definitely. And we'll certainly dig into some of those things, perhaps both for India and in the markets that you're focused on here in a little bit. Okay, so you kind of grew up in this environment. You ended up staying... I guess the University of Florida, I assume, there in Gainesville. Then what was the impetus for New York?

Sameer Reddy [00:05:53] So, I studied in London for a summer then I did an internship the following summer in London, so I always got kind of big city exposure. I sort of knew that life just comes at you a lot faster in a big city. And being in a big city in your 20s when you sort of have the appetite to experience all the diversity and the culture and just the relationships that you build is something I always sort of knew that I was meant for. Also, conversely, when you spent 21 years in the same place, you're ready for a move, as much as I love Gainesville.

Sameer Reddy [00:06:24] So, I knew that I was meant to be in New York. I mean, I studied finance and economics. So just from a background perspective, I also knew that, naturally, New York was the epicenter of that entire ecosystem. I never really kind of considered that the intersection of finance and climate or finance and clean tech or sustainability, whatever you want to call it, would have been a natural path. But just through my research, I kind of discovered that GE, of all places, had this really interesting division of their business that really not many people knew about in the 2000s. It was called Energy Financial Services, which is really a $20 billion dollar private equity fund that GE built with their own balance sheet capital at a time where the market was still kind of very much in its infancy.

Sameer Reddy [00:07:12] And that division of GE did everything from scaling and investing in wind and solar infrastructure to investing in venture capital. Some of the earliest ones that we see today, companies like SolarEdge or TPI Composites. So it was a really interesting ecosystem. And the advantage that GE had at that time which got me excited about the platform is that they had insight... They had this unfair advantage. You could talk to Jim Lyons, the head of wind research at GE if you wanted to make an investment in the wind space. Conversely, in the solar space, they had just domain experts across the organization. And when harnessed correctly, that ended up being a really powerful advantage for GE on the investing front.

Sameer Reddy [00:07:55] So, I was really fortunate to start my career there. It was a three year program, basically straight out of college, and many of the sort of disciples from that platform have gone on to do a bunch of really cool things in the industry. And as somebody who didn't get my MBA, it was an unbelievable network for me of folks that I still call on today for advice and for expertise.

Michael Crabb [00:08:19] Yeah. And maybe to talk a little bit about the comment that you made, I mean, the kind of market in its infancy. I mean, deregulation was still kind of like being defined, right? I mean, this is what, mid 2000s?

Sameer Reddy [00:08:34] That's right.

Michael Crabb [00:08:35] You're probably seeing one of the first boom-bust cycles of the deregulated market. How much was wind and solar at that time really a thing? I mean, it was still pretty expensive and kind of niche, right?

Sameer Reddy [00:08:49] Yeah. Well, I joined in 2007, so that was really when the tax equity market was starting to take off. The economy was still relatively hot, and GE was really kind of a pioneer. They were a market leader and investing in wind at the time. Solar was still relatively immature, so we looked at a bunch of deals, didn't get anything done. And then really, two things happened over the next three years. One, obviously the great financial crisis. But then two, the loan guarantee program and the ITC and the PTC of the cash grant that was implemented. So you had these two sort of opposing forces at the time that did a couple of things.

Sameer Reddy [00:09:27] One, the financial crisis. Basically, at that time, clean tech investing was at an all time high. Every kind of generalist venture capital firm had a clean tech division. Once capital gets scarce, everybody goes back to doing what they're really good at. And most of those traditional generalist firms basically dried up from a clean tech perspective, so that entire market disappeared. But at the same time, we were putting record amounts of infrastructure in the ground, really off the back end of the cash grant from the Obama administration that just really enhanced the project economics for both wind and solar.

Sameer Reddy [00:10:02] So, we kind of continued to see, despite the fact that from an innovation perspective all kind of venture sort of dried up within the clean tech space, we saw a lot of capital going into actual infrastructure and assets. The cost curve of wind and solar continued to decline. And then in 2010, when I decided to leave, I sort of knew I wanted to be more in the venture ecosystem, but the challenge for me at that time was there were no venture firms to really go to. I think one of the things I saw at GE in my time there within their venture group is that so much of innovation in this space, it's unlike any other kind of segment of the market in which you have disruptors that have the ability to kind of circumvent the incumbents. If you operate in the space, you work with the incumbents; you have to. And I think the lesson learned from Clean Tech 1.0, if you want to call it that, is so many companies took this very abrasive stance in partnering and working with the incumbents. And so from my perspective, I just kind of saw that the incumbents had so much leverage and ultimately were the best positioned to not only scale decarbonization, but also to sort of enable some of these new technologies.

Sameer Reddy [00:11:12] So from that perspective, when I left GE, I wanted to get a better understanding of how the utility sector worked, specifically. I spent the next five years of my life at a firm called Evercore. They were one of the leading investment banks really focused on the utility sector. And through that experience, I got to work with a lot of the largest mega-cap utilities. I got to work on some of the first renewable energy yield cos. So, I really got a diverse set of experiences that kind of rounded out the perspective I got at GE. And then in 2015... I don't know, when you work 80 to 100 hours a week in banking, I think I lost a lot of friendships, so I just thought I'd take some time off and repair some of those relationships. I can still call myself a late millennial. I think I did the late millennial thing of traveling for six months, clearing my head. I really kind of determined back then what I wanted to do next was start a company in the space.

Sameer Reddy [00:12:07] I initially kind of dipped my toe into the water. I was advising a few startups in the space, neither of which I think exists today. But it was a great experience for me. I remember pitching our founder, Hans Kobler, on one of the ideas, and he convinced me why that idea would never work and that I should join him and help him build EIP and what they were building at the time was really its own startup story. And like any good founder, he probably convinced me within within 12 seconds. We had several weeks of discussions and I joined and the rest has been history.

Michael Crabb [00:12:42] Awesome. Yeah, I definitely want to dig into that journey in pretty good detail. But there are two observations I think you made in that story that are worth highlighting. I think the first that is intuitive to me, but I had never actually heard described this way, is that there was a bit of a clean tech bubble or pullback in that general VC space around that '07, '08, '09 time. I think it's sort of forgotten about or not talked about, right? I mean, everyone says Clean Tech 1.0 and they generally mean early 2000s. And then like, Clean Tech 2.0, or like, are we in a bubble now? But I guess that makes sense, right? There's a flight to safety, in general. Like, you have to focus on SaaS or whatever makes sense. So, I think that's a super interesting observation. I don't have a question, so it's poor host on my part, but hearing something new, I think, is always worth highlighting because there are a lot of the same word points.

Michael Crabb [00:13:38] And then, you started that by saying you knew you wanted to get into the venture side of it. And it's almost like you went the other way in investment banking. So is that like really strategic? Like, you really said, "Okay, where is the path that I get the most at bats in the broadest perspective?" Or was it just like, you were young, you had everything New York had to offer, it was a great opportunity you just jumped on?

Sameer Reddy [00:14:04] So, there were two elements to it. One, there really were no venture opportunities within this broader space. I didn't really want to go be a generalist kind of VC. That just wasn't where my skillset was or my interest lay. I really kind of wanted to bet my entire future career within this category. And then second, the venture kind of path is really atypical. I mean, there really is no playbook for how to break into venture. I didn't have enough confidence in sort of my capabilities. I had a lot of confidence in my domain expertise that I developed at GE, but I think there was just kind of business acumen or foundational understanding in corporate finance and just really kind of foundational elements of kind of the overall skillset that I felt like I was lacking. And there's just no better place than investment banking to really kind of develop that skillset.

Sameer Reddy [00:14:53] And again, not everyone takes the same path if they're trying to get into the broader venture space. But for me, I sort of knew that leaning into my strengths was going to be around financial acumen, so I knew that's where I wanted to dig in a little bit deeper. And then lastly, as I mentioned, I think the incumbency piece was... I don't know how strategic that was at the time or whether that was sort of blind luck, but that perspective is probably some of the most helpful perspective I've gotten. I've had the chance to sit in on utility board conversations or C-suite level meetings. You just hear how... I think oftentimes, especially back then, utilities were looked at as the slow moving incumbents who don't want to innovate. But then you actually hear it from their perspective and you hear the challenges they're facing. They have to manage... How do you keep rates low? How do you maintain reliability? And then, how do you simultaneously decarbonize the grid? It's this really complicated formula. And from the outside, you're like, "Oh, you guys are just slow moving," but nobody's really giving them full credit the 99.99% of the time the grid is working well. It's like we all just kind of accept that the lights are working.

Michael Crabb [00:15:58] I think there's been increased specialization across the space of people, coming back to your point around partnering. Yeah, that's fascinating. And you saw at least one commodity price, major commodity price cycle, and maybe another blip or two in that. So, that was probably a really good time to have that perspective. So yeah, you said investment banking was no longer for you, took some time. Tell us a little more about the startups. Did you create some of your own theses during this time that you wanted to test, or you just had good connections? You're like, "I want to see what it's like in an operating environment." Walk us through that, up to the EIP pitch.

Sameer Reddy [00:16:44] Yeah, I mean, I did. There were two or three specific ideas that I was pursuing. One was in the microgrid space, so I kind of believe in the future microgrids. I was thinking about it much more from like a city perspective and how public-private partnerships work. I had a lot of colleagues in the U.K. while I was at Evercore who were mentors to me and gave me a lot of perspective around how that sort of public-private partnership model worked in the U.K., and I thought that could work here. I quickly realized that's a really hard model to scale. Since then, it did inspire me to invest in one of the microgrid companies that we invested in here at EIP. But that was sort of one idea I was looking at.

Sameer Reddy [00:17:21] And the other was the C&I space around brokerage. I won't sort of belabor you with the long boring story, but I think what I saw back then is deregulation or adoption of a deregulated electricity plan is much more common in the C&I market today. Brokers control a lot of the cards or the relationship with those big C&I brokers. And if you want to decarbonize the building footprint, which is a massive kind of untapped opportunity, the wedge is around kind of what is the most seamless path into those relationships and what is the easiest way to acquire those customers. And brokerage was the most established channel to market, so I was thinking through kind of a marketplace idea there. And I actually found there are a couple of interesting companies that have been doing that since. So it's still something I haven't given up on.

Michael Crabb [00:18:12] Yeah, those are both... You were very early in both of those. So regardless of the outcome of those specific ventures, I think those are two... Well, you tell us as we get into the EIP experience, I think those are two verticals that have quite a few tailwinds.

Sameer Reddy [00:18:28] Absolutely. I mean, I think timing is certainly everything in this business. We talk about this a lot in our investment committees. You can be right on the thesis, you can be right on the team, and you can be wrong on timing and you're wrong. But right now, I think we're as optimistic as ever that the timing is certainly right for a lot of these ideas that we've been kicking around for the last seven years.

Michael Crabb [00:18:49] Tell us about those seven years. So you met the EIP founder, he pitched you on it. What was the firm like at that time and how has that evolved during your time there?

Sameer Reddy [00:19:01] I've never worked in a startup before, so this was my first experience in a startup. I think we often think of ourselves not as a fund, but as an operating company or just a company with a really unique business model. And when I joined, I think I was the fourth outside employee. We were literally working out of a basement. So there was that sort of just cool, kind of romantic startup feeling that you got, an energy you got in those early days. The first day on the job, I had to literally go to Best Buy and, the good banker that I am, I had to buy the two monitors because I need the dual monitor setup.

Michael Crabb [00:19:36] You've got to take the F1 key off too, right?

Sameer Reddy [00:19:39] Oh man, I feel seen right now. Yeah, exactly. We were very much fighting for our own existence, which was like a really exciting place to be. At that time, we had core backing from three of our anchor utilities, really spearheaded by Southern Company, and they've just been incredible partners. And like the entire utility industry, once you sort of can prove validation with two or three anchor companies, we were able to successfully launch our first fund, a $500 million dollar fund, really on the back of 15+ energy and utility companies across the ecosystem. And for us, this might have been just fortuitous or good luck, but those anchor utilities were just invaluable in helping us broadly understand the sector. I think Hans, who also came from GE, saw the perspective of corporate venture capital and what works well if you do it well. If it's really functioning well, you can leverage the power of these big corporates in your network and you can get really differentiated insight, which should theoretically allow you to make better investments. And then once you make the investment, you should theoretically be able to better help these companies grow and scale through facilitating commercial relationships.

Sameer Reddy [00:20:54] So that was really kind of the aspirational goal of what we were building in the early days of EIP. That anchor core of 15+ utilities, they really took a bet on a young firm at the time and I think it was a really symbiotic relationship. We've grown the firm, in those early days from four people, we just hired our 94th person today. And that group of 15 utilities has grown to 65+ corporates, which really run the gamut from tech, you have Microsoft and Amazon, to major built environment real estate players to major fleet owner-operators.

Sameer Reddy [00:21:29] And what's been pretty cool to see, I guess, over the last seven or eight years... I mean, our growth is really kind of a function of the evolution of this sector over that period of time. When I joined EIP, I think 40 public companies made some form of a net zero commitment. Today that number is 4,000. And I think we really saw that within our limited partner ecosystems, that the folks that are investing in us and the diverse set of corporates that we were eventually able to attract was really just a function of everybody taking climate much more seriously.

Sameer Reddy [00:22:00] And then just the last thing I would add there is, I don't think in the early days we really appreciated how valuable it was to get that sort of electricity perspective. But I think now as we look at... If you're trying to decarbonize data centers or fleets or buildings, it all runs through the grid. The grid is really the platform for decarbonizing every major industry. If you're going to decarbonize pipelines with hydrogen, that goes through the grid. If you're going to decarbonize your data centers, that goes through the grid. If you want to electrify buildings, homes, transportation, it goes through the grid. So, the core group of utilities that we have has really given us really differentiated insight into where we think the market is heading.

Michael Crabb [00:22:45] Yeah, really interesting. Yeah, I'd love to understand that evolution because, where we sit today, it's like you said, 40 to 4,000, right? When you were out talking to these utilities in 2015, I mean, gas prices had been holding steady at $3 for what felt like forever. I guess oil was still pretty high, but electricity was relatively cheap. I think it was pretty forward looking of those utilities and perhaps very different, an LP based mostly of strategics. Has that been like a core principle for your platform over time or just sort of how it worked out?

Sameer Reddy [00:23:29] Yeah, absolutely. Back to the point I made of getting exposure to some of those C-suite conversations, I just don't think that the executives in this industry are really given enough credit for how forward thinking they are. And I think you just illustrated the perfect example of where they were just leaps and bounds ahead of the rest of the market and leading from the front. I think from our perspective, corporate venture capital is always something that got a bad rap. It was viewed as "this is not the smart money," or "this is unsophisticated money." And I think that conversation has completely shifted within our sector because I think every single startup out there in our space realizes that corporates can bring something that no traditional, pure financial VC can bring which is, they can help bring insight, they can help bring scale.

Sameer Reddy [00:24:23] You look at our sector, corporates are leading major investment rounds in a way that would never occur in enterprise software or any other segment. We've got a team of 94 folks that we think are brilliant across technology, regulatory, go-to-market entrepreneurism. But as brilliant as our team is, our true secret sauce or true advantage is really harnessing and leveraging this corporate ecosystem to help these companies scale. If you're building a company in this space, congratulations, you've chosen probably the most difficult problem to solve. It's a really tough technological problem to solve, it's a really hard regulatory problem to solve. And on top of all of that, if you get those two things right, it's still a very challenging go-to-market. So, it's really that last piece where we lean in big time and hope to sort of alleviate some of the constraints to scaling the space.

Michael Crabb [00:25:20] Yeah. I guess I didn't realize that it was such a strategic LP base. In the best way, it sounds so obvious when you say it. I mean, I think you're still pretty unique in that sense, which is super cool. So what are the verticals then, over the last six, seven years? Maybe tell us about the different funds, at least what you can share publicly, and how the VCs have evolved and the different trends that you guys have invested in.

Sameer Reddy [00:25:52] Yeah, so from a vertical perspective, we really run the gamut of the broader kind of climate ecosystem. So the way we sort of define the world is anything that decarbonizes the supply side of the equation. So whether that's the clean electron or the molecules that flow through pipelines, investing in technologies that can help accelerate our path to decarbonizing the supply side. And then we also look to the demand side. So, what are technologies that can make the demand side more sustainable? Whether that's energy efficiency or electrification. Electrification is a massive theme for us, whether it's within the home and investing in the next generation of heat pumps or within the building. We just invested in a company last year called Moxion which is displacing the broader diesel industry, which is $100 billion dollar a year industry. You wouldn't think of that as a natural path to electrification. So, that's kind of a second theme for us.

Sameer Reddy [00:26:43] And then third is, if we're really going to scale electrification on one end and we're going to decarbonize the grid on the other, those two forces have the potential to be inherently destabilizing. You layer on top of that extreme weather and then grid resilience and climate adaptation, whatever you want to call it, and that becomes increasingly important. So that's also a major theme that we're focused on, how do we ensure that we can do all this reliably? So, we've invested in micro-grids. We've invested in companies that are building composite T&D poles to make our above ground infrastructure more resilient. So that's kind of a third vertical for us.

Sameer Reddy [00:27:21] And then lastly, there is just this digital underpinning to all of that. There is a software stack that sort of underpins all of that. So how do we make sure that all of this can be deployed more seamlessly? Whether that's software that better integrates DERs, whether that's technology that makes the grid inherently more cyber secure, that's really the fourth pillar of what we look at.

Michael Crabb [00:27:44] Yeah, I think there's a pretty interesting and at times heated debate between the software and hardware folks. But it's so symbiotic; it's such a silly, artificial conversation in my mind because the software needs the hardware to scale and the hardware needs the software to scale.

Sameer Reddy [00:28:01] Totally. It's a great point. We try to stay out of that debate or most of these public debates in general, but I would say the learning for us is there are going to be multibillion dollar pure play software companies in this space. I think there are going to be a lot more multibillion dollar hardware companies in this space, but I think the really successful hardware companies in the space are going to have differentiated software and hardware is really going to be the wedge into that customer to then get them to adopt the software. So I think in a space that is as capital intensive as ours, I think staying away from hardware is incredibly challenging.

Sameer Reddy [00:28:43] You take McKinsey's estimates of whatever, $9 trillion dollars of annual spend that's going to go into decarbonizing the economy by, pick your year, 2050. That's not going to be software spend. I mean, most of that's going to be hardware spend. So, software is really going to be the enabling layer. Especially as we see massive deployment of infrastructure, renewables, fleets, EV charging, that's really where software shines and managing the deployment and the optimization of those assets. So, I do think we still need to get more infrastructure in the ground and we'll see more and more software business models evolve.

Michael Crabb [00:29:17] Yeah, I think you sort of articulated this. If we need to electrify and increase demand and we need to decarbonize on the supply side, all of that is a very physical problem, right? So, you can't get ChatGPT to like software over it.

Sameer Reddy [00:29:35] It's funny, we were talking about ChatGPT at a board meeting recently. There's a company that's building physical infrastructure, and I was like, "I'm pretty confident you guys are going to be around in 30 or 40 years." But yeah, I'm terrified of ChatGPT and I try not to use it as much as possible.

Michael Crabb [00:29:51] Some time over a beer we could dig into that layer of AI and everything. Yeah, so do you have like a favorite deal in all of that? I mean, there are so many verticals and so many things, we could probably talk for hours. But is there like a specific deal or transaction that you're most proud of or you're most bullish on? Maybe that's like picking among children, but is there one that you want to share a few more specifics on out of those verticals?

Sameer Reddy [00:30:20] Yeah, you actually are making me pick among children, so I'm going to avoid that trap. One company we just recently invested in is a company called Mill. They operate in the broader kind of food waste space. And really what they attempt to do is to really reduce a lot of the friction from composting. So, this is personally a challenge that my wife and I have faced. We've tried to compost. It's disgusting; it's not good for our marriage.

Michael Crabb [00:30:49] It's probably tough in Brooklyn.

Sameer Reddy [00:30:50] It is tough in Brooklyn. And what I love about Mill... So the founder, Matt Rogers, he came from Nest. He was the founder of Nest. And the reason I bring this company up, specifically, is decarbonizing the economy, and really at a consumer level, just really making it easy for consumers to do the right thing is the easiest path to decarbonization. And really, what Mill is trying to do is they have a device that goes within the home, dehydrates food, heats it up at a really high temperature so it doesn't stink, doesn't attract bugs, and then they close the loop. They've got the end-to-end logistics that picks up the food waste and recycles it into chicken feed, so it's incredibly carbon negative from that perspective.

Sameer Reddy [00:31:35] I just love the idea of companies and business models, whether it's at a consumer level, at a building level, or even if you're serving the utility sector or industrials, just really deploying a solution or a business model that makes it easy for whoever your customer is to really do the right thing. That's really a winning formula in this space. You have to take as much friction out of the buying experience as possible. And Mill is just one example of that on the consumer front.

Michael Crabb [00:32:04] Yeah. Again, it's something that's should be kind of obvious, but is so refreshing to hear in this space. Like, that's just generally good business, right? The less friction your customer has in buying your product, the better. And here with the same model just applied to carbon negative businesses just makes all the sense in the world.

Sameer Reddy [00:32:27] Totally. So if you look at pre-COVID, we would jump on a flight to San Francisco from New York to go see a climate company for a board meeting. It would be a six hour board meeting and dinner, and you would fly back. And the whole board would do that. That was the expectation pre-COVID. And it's a ton of emissions, literally, from that single flight. Today, one in four of those board meetings will be in-person. Three out of four will be on Zoom. I could even argue that Zoom is one of the most kind of underrated climate companies in that they've taken all the friction out of having that comparable experience in-person. I think sometimes those examples are just less obvious as well.

Michael Crabb [00:33:13] Yeah, super fascinating. Okay, so what are your predictions then, moving forward? Out of those four verticals, where is the firm spending its time? What are you telling LPs? What are your LPs telling you on what they're most excited about?

Sameer Reddy [00:33:32] I wish I had some brilliant insights here. I think for us, it's really just more of the same that we've been focused on for the last seven or eight years. From an EV charging perspective, we're still at sub-5% penetration. So we're going to see a massive inflection. Whether it's fleets, whether it's at the passenger level, whether it's aviation, whether it's shipping, it's still TBD on who wins some of these categories between hydrogen and electrification. But broadly speaking, I think we're super bullish on the electrification of transportation in general. But also, we're thinking about the second and third order effects of that. So what are ways for us to get ahead of the impacts of that?

Sameer Reddy [00:34:17] Our head of research, Andy Lubershane, likes to think of the world in terms of Whole Foods. So if you take your average Whole Foods, which has roughly 500 kilowatts of load today, and then you want to put DC fast charging on that site, you're basically 10 or 20 or 30 X-ing the overall load profile of that site. So, what does that mean for the grid at large? What are technologies that are going to help us get there? I think there are these foundational technologies that are less obvious. I think everyone is kind of rushing towards hydrogen and electrification. Those are kind of the obvious place. But what are second or third order ways to kind of play that theme?

Sameer Reddy [00:35:00] So for us, resiliency is one that we're super bullish on. We're invested in a company called Enchanted Rock. We see the demand that they're seeing through their business for microgrids, and really they deploy microgrids as service to data centers, to cities, to water utilities, to electric utilities. And we're at the infancy of seeing the adoption of many of these more resilient technologies. So, I think that's a theme that will continue to play time and time again.

Michael Crabb [00:35:31] Yeah. And you mentioned throughout the conversation sort of that regulatory angle and that macro angle. I mean, how much time do you guys spend thinking about that versus saying, "Look, we'll just make first principals bets and know that the timing won't work out on all of that."

Sameer Reddy [00:35:50] Yeah, that's a great question. You cannot play in this space without taking regulatory risk. I think you have to just sort of accept that as a truth. If I look at the broader space, there's technology risk. You can put technology and science risk in one bucket, you can put business model risk in another bucket, you can put regulatory risk in another bucket and you can put go-to-market risk in another bucket. In general, it's very hard for us to invest in a company that hasn't solved at least two out of four of those challenges. Ideally, three out of four. So, that's kind of how we frame the conversation at RIC. It's just a question of what risks you're willing to take. If there's a company that has a really established technology, there's clear customer demand, but really the risk you're taking is with the regulators, I think that's a leap that we could take. You know, especially if we think we have unique insight around what the adoption curve might look like there. So, I think it's just really situation dependent.

Michael Crabb [00:36:56] Yeah. Some of my background is involved in merchant power markets here in the U.S. And so, I've learned a couple of commodity lessons, and those are sort of market lessons. But as the ISOs sort of tweak the rules, independent system operators tweak their rules and sort of back solve to things, that was a real learning for me on what should be an easy economic calculation. It's actually a regulatory bet whether you like it or not.

Sameer Reddy [00:37:25] Totally. It's a challenging thing too because you can... We try to be as patient as possible. We are long term investors; our fund lives are 10 to 12 years, so we have the ability to really sit back. I'm also on the board of one or two pure play enterprise software companies. The level of patience that you see at an enterprise software company versus a climate company at the board level is just kind of an order of magnitude different.

Sameer Reddy [00:37:52] If you're building hard assets and you're doing it in a regulated fashion, as you pointed out, you're relying on the rules from whatever the local ISO is, you could be directionally right on a theme, but you're going to experience a lot of intra-month, intra-year volatility, and you just have to be okay with that as a board member, as an investor, and really as a founder. Founders live 100X volatility days compared to me on the board, so I give full credit to the founders that are solving really hard technical problems. Obviously, you guys are choosing to solve the hardest technical problem in SMRs. But I give full credit to the founders that have chosen to go down that path because many of them are directionally right. At some point, we are going to have SMRs; it is just a matter of time. And there are a lot of roadblocks we have to get over to get there. But it does take a lot of patience and alignment from your board and your investors.

Michael Crabb [00:38:53] Yeah. I mean, volatility is both risk and value, right? So, you can't have one without the other. Yeah, really cool. Well, I know we're kind of running up on time. Anything that we didn't talk about that you want to make sure we cover?

Sameer Reddy [00:39:09] Yeah, I think maybe one thing I want to talk about. There was a question in here just about recent initiatives that we're working on. So, just a couple of things that I'm really excited about that we've announced recently. We announced the launch of our Elevate Fund. If you look at kind of previous, whether it's the Industrial Revolution or the Digital Revolution, in all of these major technology revolutions, a very specific set of folks were the ones who really capitalized on that and all of the wealth accumulated to a very small minority. And the purpose of the Elevate Fund for us is really how do we make the energy transition, which is going to be a massive transfer of wealth, how do we make that as inclusive as possible?

Sameer Reddy [00:39:54] So, that's an initiative we just announced recently. And really that enables us to invest in underrepresented founders at much earlier stages of the funnel as well. So getting in early, providing capital early and the guidance and the strategic network early on to help those businesses scale. Also, are backing founders that are serving underserved communities as well. So, that's a recent initiative that I'm really proud of.

Michael Crabb [00:40:25] Yeah, that's really cool. How did that come about with your LPs? Is that a separate fund? Is that a portion of existing funds? Tell us a little more about the fund itself and how that came about.

Sameer Reddy [00:40:39] Yeah, that's a separate fund. It's led by my partner Anthony Oni, who's a rock star. He actually joined us from Southern Company. This is another one where many of the LP's, the utilities, were very forward leaning on this. This is a topic that's deeply, deeply important to all of EIP and kind of the internal culture we built here, but also equally important at many of these utilities that we partnered with. There was just a lot of cultural alignment from day one there. And the fascinating thing that we're finding... When we first launched it we were thinking through how many companies sort of exist that fit this criteria. And I think now that we've really opened up the funnel, we're finding it's a whole hell of a lot more than you would think. The founders are incredible and we're just really excited about the ecosystem that we're building there.

Michael Crabb [00:41:26] Yeah, amazing. Yeah, I know, I buy that there's a huge opportunity there. I mean, it's just a simple supply and demand problem, right?

Sameer Reddy [00:41:33] Totally agree.

Michael Crabb [00:41:34] Yeah, fantastic. What problems aren't you guys trying to solve?

Sameer Reddy [00:41:38] Yeah, that's a good question. I mean, we're trying to stay really focused right now. We've got a lot in front of us and there's a ton of opportunity. We get asked this all the time, like, "So where are you guys going next?" But if you think about what we've done in the last seven years, we've launched a European fund. We launched our Frontier Fund, which allows us to really go after some of these harder to access deep tech bets. We launched the Elevate Fund that I talked about. We launched the Credit fund. So, we really are building a full stack ecosystem to serve this broader community. And from that perspective, we feel really good about the scope of what we're covering. We've got the team to do it, we've got the strategic partners to do it. So, we're just laser focused on execution.

Michael Crabb [00:42:19] Incredible, incredible. Well, awesome. Can't wait to see the other deals you've got coming up. And yeah, we've got other AI and other things to discuss next time we chat.

Sameer Reddy [00:42:29] That's right, that's right. Thanks, Michael. Thanks for having me.

Michael Crabb [00:42:30] Thanks so much.

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