Investing in the climate fight pt. I
Metta talks to Pippa Gawley, Founder and Managing Director at Zero Carbon Capital, about backing startups that address the hardest problems of climate change.
Massive increases in atmospheric greenhouse gas concentration are fundamentally changing our climate.
Shifting weather patterns, rising sea levels and increasingly frequent severe weather events (not forgetting increasing prevalence of novel diseases like COVID-19) — these changes are already having a huge human and ecological impact. But we’re only just starting to see the changes that will happen if we don’t reverse the trend of greenhouse gas concentrations.
However, there are routes to fixing this very real, very global challenge.
I recently had the opportunity to discuss investing in early-stage businesses who have the potential to tackle climate change with Pippa Gawley, Managing Director of Zero Carbon Capital. ZCC is an early stage investment fund that backs businesses who have the potential to reduce, avoid or capture half a gigatonne of carbon dioxide at scale.
As always, the interview below has been condensed and edited for clarity, but if you missed the chat, you can find it on Spotify. You can also find it on Apple, Amazon and Google (+ all other good podcasting platforms while you’re at it). If you enjoyed the podcast, feel free to give us a follow or leave us a rating!
The journey
I asked Pippa about her route into tech, investing and ultimately climate change.
I love talking about this! I think, especially when you’re starting out in your career, you think everything’s going to line up in a trajectory where you get into this university, then get this job and then it all leads in the same direction. For most people, it doesn’t pan out like that! Life is a journey of discovery — what you’re interested in, where your passions are, and what you’re good at.
I studied engineering and I really enjoyed it. But the end of the 90s wasn't a great time to go into manufacturing engineering so, like many other scientists, I kind of got sucked into retail finance. It was a fantastic grounding in how to run a business — the company I worked for prided itself on its analytical skills. Selling credit cards, and making money, is actually a very pure type of business. Understanding what the different levers are that you can pull to make a business profitable was a great grounding, a bit like starting off your career with a practical ‘MBA’.
I ultimately didn’t love some of the seedier sides of credit cards, and left to go work in ‘internet technology’ in the early 2000s. It was a really fun time to be working in that field! I enjoyed working mostly in management positions, working with experts who were developing research to inform the design of websites and services and then marrying that with commercial practicalities as well and kind of being that synthesis.
I didn’t realise at the time, but I think that skillset is actually perfectly fitted to investing because what I’m doing now is very much that: looking for the expert technical opinion, while also thinking a lot about the commercial side. Taking a read on the human side of this story, and the skills are needed to deliver a business. Synthesising that into a decision about ‘is this a company that we think can deliver that impact to the world?’.
That was how I found my way into investment. It wasn’t an obvious route for me at all! I’ve long believed in technology and business being powerful forces in the world that that could make the world a better place and not just be a source of evil. But the idea of doing early stage investments to make that happen, hadn’t really occurred to me. And at this point, we were living in California and Silicon Valley in the heart of venture capital. It hadn’t occurred to me that an early stage investment could be a way to get involved in the climate fight. But eventually the penny dropped!
I also talk about this a lot, because I think there are a lot of people out there who would make great angel investors, and it just hasn’t really occurred to them — that it’s something that they could or should go look at. It felt like I had instantly found this tribe of people who thought the exact same way as me, that they wanted to make the world a better place, and they believed in business and technology as being a mechanism to make that happen. They were smart business people who also were very purpose driven, and didn’t see any conflict between those two things.
It was such a relief to find all of these people, because up until that point in my life, there’d always been this emphasis on business and professionalism being one thing and caring about the world being a totally different thing. Those two things couldn’t really meet.
I love that the world has now kind of woken up to the fact that if you let people bring everything they care about to the workplace, they’ll do a much better job of it.
From family to investment
I had taken a few years off when our family was small. I was really looking for ways to get back into the working world, but not wanting to compromise on that desire to have an impact in the world. I was really looking for the best way to achieve all these different goals, while wanting the intellectual stimulation, the social side, and the purpose driven side as well.
I tried various things like volunteering and studying, while I was trying to work out what that next step could be. One day my husband said to me, ‘why don’t you take some capital and invest in some of these companies that you’re always banging on about?’. My first reaction was, ‘Oh, don’t be ridiculous, I’m not Melinda Gates!’. But I then realised that it was something that people did, and found those people and realised that it was a great match for my skillsets with my financial analytical background and a technical engineering background.
I really loved it from that point on, and tried to figure out how I could learn the most about that world. I’ve taken a ‘learning by doing’ approach of finding likeminded investors who are more experienced and piggybacking on their due diligence and their deals and really learning by observing them. Once I had started to get more confident, I was branching out and finding my own deals and bringing other angel investors along with me. When the family moved back to the UK, I wanted to scale that to have more of that impact, to be able to help companies more significantly beyond what an angel can can achieve.
So we set up the Zero Carbon Fund.
Zero Carbon Capital
The fund is an early stage investment vehicle supporting companies based in the UK who are developing transformative scientific innovations that have the potential to reduce, avoid or capture half a gigatonne of carbon dioxide at scale.
We’ve been knowingly messing up the world for 50 years and, unknowingly, perhaps for another 100 years before that. I feel that we can’t look our children and grandchildren in the eye and say, ‘we knew about it, and we just kept going’.
We see it as the the challenge of our generation to fix. We are going all out to try and do everything we can to fix the way that we produce things, the way we travel, what we eat, how we live in a way that will preserve the earth as being viable for human life for for future generations. Because the way we’re going about it right now, it won’t be. I can’t really think of a more important challenge to face.
But it’s interesting — I see this as a humanitarian crisis, I think the earth will be just fine, right? It’s us that we’re wiping off the surface of the planet here. We feel hugely optimistic that the climate ‘supertanker’ is kind of slowing down and perhaps turning a little bit, but there’s still so much more work to be done. We focus on investments on areas where we’re hitting what Bill Gates called the ‘green premium’. It shouldn’t cost more to have an electric car, it shouldn’t cost more to have green energy. And in a lot of cases, right now it does. So technology and innovation are sources of equaling that playing field so that there isn’t a trade off, and that everybody can afford to make the right — or good — choices. There’s such enormous scope to make this new world more efficient, and cheaper and better on every single metric one could choose. We see there being a world where making these good choices is easy, because the cheapest ones are the best ones.
Due diligence and investing in the bleeding edge
My husband’s my business partner on the fund, and we both have scientific backgrounds. But we’re not PhD chemists, and we’re not trying to make out like we are, but I think we know enough to be dangerous in most areas. We really love learning about the technology. That’s kind of our first test for the entrepreneurs: if they can explain their technology to us and that we can understand it. Getting across to them that being a CEO in this space will mean learning to be a great science educator as well, because that’s what they have to do to get investors on board. That’s the first stage of that journey.
Then we work with various technical due diligence experts in different spaces. We’re looking at investing in businesses in direct capture or alternative proteins or battery chemistries — nobody’s an expert in all of these things. We’ve identified a number of specialists that we can go to, who help us evaluate these opportunities. We work with other investors (both in the US and in Europe) as well, who can help us with with their perspectives, and the challenges that they see in the technology. It’s quite a collaborative community!
Establishing a climate fund, and other VCs in the space
We discussed what it’s like setting up a fund in a particularly challenging, resource-intensive area like climate change.
I think we were lucky to start off in the US with our investments, because there are many more hard climate tech funds there at various different stages of that capital spectrum. I think we came to the UK just believing that they would be here, and then we couldn’t find them. Now there are many more climate-specific funds, and, climate-specific parts of more established VC funds in the UK.
However, all of them are focused on digital opportunities — SaaS, AI, websites, apps. They’re looking more at the software side of things, which have lower valuations, lower risk and a quicker time to market. So we’re seeing better EV chargers or things like that, which is not to diminish how important those are — technologies that we absolutely need, but it’s not the innovation that are going to get us to net zero, fast.
It’s part of the picture, and I guess we’re focused on that sort of 10 years out kind of horizon to say, ‘we know how to make EV chargers, we know how to make solar panels, we know how to do these things that we should just get on and do right now’. And there are investors who are willing to take on those lower risk areas. But we’re focused on that higher risk, potentially much higher return, slightly further out type of technology investments.
Advice for the next generation
Do you have any advice for either aspiring fund managers, or for entrepreneurs looking to build the next big thing in climate or sustainability?
Being a fund manager can be a difficult journey! And I think, unfortunately, a lot of people get put off because you need money to set up a fund. Whether it’s an EIS vehicle, or an LP/GP fund, generally investors are looking for you to have a personal commitment.
You’re also going to be looking at a fairly large amount of time when you’re fundraising where you may not be able to have any salary or and you will be on the hook for costs and fees. So generally you’ll need to have your own money or have somebody that’s willing to bankroll you. That does make it quite hard for people to get set up! I wish that there was a way around that, and perhaps some kind of accelerator for fund managers — which supports them to develop their thesis and spinouts. That would be a great offering to the world! Just keep going and make sure you’ve got a really clear investment thesis that is differentiated and viable.
It’s actually quite similar advice to the entrepreneurs. I do think there is more support out there for entrepreneurs in terms of accelerators and grants etc. that will help you get off the ground. But again, it can be a long and difficult (and badly funded!) road. Keep going, make sure you’re really clear about what your value proposition is and really develop that story. If you’re not clear on your story, then you won’t get investment and you won’t get customers.
If you can’t explain your business or product to your nine year old son, or your grandmother, then you’re probably not ready to talk to investors either! If your story’s not clicking with people, you probably need to go back and rework what you’re doing until it does fit.
FiveThirteen
Any final thoughts or shoutouts?
I just wanted to give a shoutout to a side project that I’m doing with other female cleantech investors called fivethirteen.
It’s aimed at supporting women cleantech entrepreneurs; there are fairly appallingly small amounts of venture capital that end up in women-led businesses. This is something that we’re trying to correct, that network bias by circulating information about female-led cleantech companies. So if you are female entrepreneur, please go check us out at fivethirteen.org. And if you are an investor who’s interested in finding more women-led companies, please go and sign up to the newsletter!
For more information about Metta and the work we do, head to our website. If you have any questions about today’s episode, or suggestions for future shows, our Twitter handle is @mettatalks.
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