Rob Day, Partner and Co-Founder of Spring Lane Capital on Catalyzing Sustainable Solutions
Rob Day is the co-founder of Spring Lane Capital where he is also a partner. He has been a sustainable resources private equity investor since 2004, and acts or has served as a Director, Observer, and advisory board member to multiple companies in the energy tech and related sectors. Rob also serves on the Board at the New England Clean Energy Council and the Investment Committee of the Clean Energy Trust. From 2005–2016 he authored the column Cleantech Investing, which appeared on GreentechMedia.com, and co-hosted several conferences with that group on the topic of new investment models for the sustainability sector.
Formerly a consultant with Bain & Company, Rob has worked with companies and evaluated private equity transactions in the energy/utilities, telecom, IT, medical/pharmaceutical, and retail industries. Earlier in his career, Rob was a member of the World Resources Institute’s Sustainable Enterprise Program, where he co-authored the report The Next Bottom Line: Making Sustainable Development Tangible. Rob received his MBA at the Kellogg Graduate School of Management (Northwestern University), and his BA at Swarthmore College. A strong advocate for youth sports, he also serves as the President of the Marblehead Youth Soccer Association.
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Episode 153 with Rob Day
Excerpts from a conversation on the Bigger Than Us podcast.
An Early Passion
Growing up, my father worked on the Senate Environment and Public Works Committee as a staffer, helped write key pieces of legislation, worked at EPA. And so it was always steeped in me to care about environmental things. And then as you get older, and start paying attention, I think I saw recently, there was some seminal work that was done back in the early 70s, that people were already publishing about the likelihood of pretty strong damages from climate change. So it was always something that I identified as something that I cared about, even if a lot of other people just in day-to-day, just thought about the environment as only being a pollution issue. But climate change has always seemed like it’s something we need to try to address.
I tell people all the time, I’m an environmental sustainability guy who stumbled into an investment role rather than the other way around. And I am admittedly an outlier here. I’m that former kid who, back in high school, was at my local election precinct stumping for Al Gore because at the time he was the only presidential candidate who was talking about climate change, talking about like, 1988. And so I’ve always had a passion for this.
I did think that the direction I was going to go was more policy than finance. And so for me, going into college and getting recognition of the power of economics, not just you know, political science was instructive and led me to want to go work in economics, around specifically environmental economics, but discovered to my chagrin, that I was a highly mediocre economist. And so, you know, while I was able to find a really fun and interesting role within an environmental economics think tank, the World Resources Institute, my job was going out there and working with big companies, helping them figure out how they could make more money and how they could add to their bottom line by viewing the world through an environmental sustainability lens.
I’m an environmental sustainability guy who stumbled into an investment role rather than the other way around
Spring Lane’s Catalytic Project Capital
I’m one of the co-founding partners of Spring Lane Capital. We’re a team that’s been working together for over a decade now, actually, although Spring Lane isn’t that old, we spun out of a previous effort that we were doing to form Spring Lane Capital. At Spring Lane Capital, what we do is provide what we call catalytic project capital.
There are so many opportunities out there, where innovations over the past few decades, sub-utility-scale imports innovations, in particular, are addressing some aspect of sustainability, whether that’s energy, food, water, waste transportation, and these can be very attractive growth markets. But a lot of the entrepreneurs and project developers operating in those markets have a hard time getting their first two to three years’ worth of project equity. And that’s our role. We step in, we partner with somebody who has a compelling solution and compelling project pipeline, and one of those verticals or sub-verticals. We stand there not only with their initial two to three years worth of project equity, that they need to be able to roll their systems out into the world, but we also bring expertise to help them and relationships to help them.
For instance, we’re partnering with a company called Cambrian Innovation. If you’re thinking about a food and beverage processing plant, there can be some highly organic waste streams that can create some real challenges for the local sewer treatment authority or disposal for the actual processing plant. So there’s often a compelling need for them to be able to pretreat their waste as it were. One of the things that Cambrian can do is end up fully recycling the water and turn the wastewater into useful water back on site.
When we do our job right, what we’re doing collectively, in partnership with those companies and those teams, is we’re teeing them up for being able to access mainstream infrastructure capital after us. Once those companies get those successful few projects, once it sees some revenues in a proven financial structure, that is exactly the recipe that we and others cut our teeth on in terms of the rooftop solar market, and third-party capital for that. So that’s really what we’re doing is we’re taking that model that we learned there and applying it to the other 99% of the sustainability universe.
Global Weirding & Shaping Opinion
I forget who came up with [global weirding] first, but I’ve always enjoyed it because I think it gets the point across that a lot of the most pressing threats from climate change over the next decade or two is probably not the relatively hard-to-notice-on-a-day-by-day basis rise of ocean levels.
But instead what seems pretty clear is that climate change is driving a lot of higher variability in weather systems. And that causes a lot of disruption. There was just a report that came out earlier this week that billions of dollars of damages were added to the cost of one of the major hurricanes last year, because of the exacerbating effects of climate change on that storm. So you get stronger storms. That’s one example of this. We’ve seen around the world more prevalence of droughts, more prevalence of flood conditions, things like that. It just seems like scientists are pointing the fact that that weather patterns are becoming more extreme and stickier in their extremes. And that’s what’s going to have a major impact.
We end up with a number of conversations with very large financial institutions, global financial institutions, where to them, the question is more around, “Okay, this seems to be a megatrend. What should we do about it from an investment standpoint?” What I’ve always found, when you’re talking with folks who are coming at things from that mindset is, it’s just really important to frame things for them in terms of why they should care about the downsides, and why they should care about the upsides.
What seems pretty clear is that climate change is driving a lot of higher variability in weather systems
In the course of our days here at Spring Land Capital, we end up having a lot of conversations with people where that’s exactly what we’re trying to show. For me, a key piece of philosophy that I’ve had for a long, long time, is that if you want people to do a lot more of something, show them how they can make more money by doing it. And so if we want to see more climate change solutions propagate out there into the world, it’s really good to be able to point out the ones that are profitable, and could use a lot more capital.
The Plan for the Future
I don’t think anybody’s going to be writing headlines about Spring Lane. We’re able to identify partners, like I said, we give them their first two to three years’ worth of project equity. We hopefully send them on their way. So while, I don’t think there’ll be too many headlines about our fund, but I hope those headlines would be about the companies that we partnered with.
A headline story about what a fast growth we’re seeing, among the wastewater treatment industry of this, this WEPA phenomenon, for instance, the Water Energy Purchase Agreement phenomenon, you know, and we’ve faded into the background because our role has been largely complete at that point as financial partners and as catalysts. But still, if we’ve done our job, right, we’ve helped get these companies on a really strong growth path.
If you had asked me a few years back whether we would be seeing a way of very large companies and countries and regions declaring that they were going to go carbon neutral, by a date that would be within my lifetime, I would be surprised to hear that.
If you want people to do a lot more of something, show them how they can make more money by doing it
It’s hard as somebody who has been doing this for a few decades now, to feel too much optimism ever, but at the same time, I’ve just never seen so much seriousness of action. There’s still more talk than action. But still, there’s a great deal of seriousness of action as well now. And the headlines that I would hope we would be writing in 2030, would be around how much progress we’ve been able to make towards these net-zero goals that are now being announced.
We’ll still have now stockpiled way too much carbon dioxide and other greenhouse gases into the atmosphere, the climate, unfortunately, is still going to be getting worse at that time. And so the headlines are also going to be probably dominated by even more extreme weather events and the like. But I do feel like this decade is going to be a decade of action, not only because it has to be but because we’re starting to see real signs of it. And that at least is the encouraging side.
Balancing Teams & the Two-Year Idea
My one piece of advice is, don’t agonize over whether the choice you have today, in terms of the next step in your career, is the perfect one for you. Pick one that you are going to be excited to tackle every day for the next two years. And then at the end of those two years, reassess and look at your choices at that point.
One of the things that I’ve learned is that everybody’s got strengths and gaps. And it’s really important to find a team that you work well with, and partners outside of your team that can help facilitate filling in those gaps. And also that can leverage your strengths.
For instance, at Spring Lane Capital, the three co-founding partners, as myself with more of a background, frankly, in growth equity than project finance. Then there’s my colleague, Christian, who’s got a background — he’s got a nice fun journey of his own. But one of the key points along the way for that journey is he became quite an expert in management, team evaluation, and coaching management teams to high execution. Then my third partner Nikhil. Again, he’s had a lot of different hats over the years, but for the past decade and a half, he’s been very focused on project finance and structured finance.
It’s really about recognizing and just being sober about recognizing your strengths and your gaps, whether that’s as an individual investor, or whether that’s as an organization, and purposely seeking to leverage one while filling in the other.
The Full Transcript
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