First Funders

Shaherose/Sundeep
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[00:00:00]

Shaherose: Welcome to First Funders.

Shaherose: Today we have Sandeep Ahuja, a long time friend. I've been having a few old time friends in the recent past, and Sandeep is now one, another one that's joining in who we can go way back into time. And I'm excited to share and hear more about his investing journey because it's in some ways similar to mine, but in many ways very different.

Shaherose: Sandeep has been a founder and operator and an investor, but here's how he's different. He's also been an actor. And an author. Uh, and that is the time that I met him. So he was switching around from eBay to becoming an actor in LA and I was like, who is this guy? What is he doing? And then before I knew it, he was back in tech starting a [00:01:00] company.

Shaherose: And then before I knew it, he was making investments into all sorts of founders. He has probably made more investments into more sectors than any other person I know, but now has a huge focus on climate and has for a long time. And it dates even back to his. Roots with his family, which is really interesting.

Shaherose: and so we have a really unique person on the pod today and someone who has been also part of my journey in becoming an investor, which we've talked about on the pod, but we can bring up again. So with that, I would love Sandeep to share a bit about yourself and share a bit about how you switched from all these different things into becoming the person you are today as a fund manager.

Sundeep’s journey from eBay to Acting to Impact
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Sundeep: Thank you, first off, just delighted to be here and yeah, we do go back and have the honor of, uh, recruiting you to be one of the founding partners of DVC. And it's just, that was a beautiful moment, um, and just allowed us to collaborate. So, so thanks for then and thanks for now. yeah.

Sundeep: Where do we start? Right? We can have the half hour version or the sort of, you know, one minute version. I'll give you the one minute version. you know, went to [00:02:00] Stanford in computer science, in, you know, the 99 98. Uh, timeframe and sort of got, you know, enamored with tech. Um, graduated into a market that was not very, uh, attracted to it.

Sundeep: a lot of startups failing, so I went banking, but I was like, just, I still wanted to kind of be, um, on this in the tech world. Um, so then, uh, ended up joining, eBay for a while, and I, I'd had this sort of flirtation with acting and, and decided after being in eBay. I was like, all right, I think I know this is what I wanna do for my life.

Sundeep: While I'm still kind of young-ish, lemme go do something fun. So I went to LA and it was, you know, uh, I am on IMDB. I've been in a couple TV shows and, and there's, you know, part of me that still wants to return to that world. But while I was there. Yeah, entourage. Hi. I met your mother. I was in some ads like State Farm, Microsoft and stuff.

Finding his purpose at Kiva and focusing on climate
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Sundeep: So it was, it was good times dance video, which is probably the highlight, shooting that in Beverly Hills at a mansion. So much fun. Um, so, uh, but yeah, then, then I was at MySpace for a while, new product and, you know, that's when I started realizing I wanted to kind of really get back into putting on my founder hat and left to co-found a [00:03:00] company with some friends.

Sundeep: Um, but along the way I joined Kiva dot org as a just one of the first people on the team. And that was like, that was truly life changing. That was where I was like, oh my gosh, I wanna be the intersection of tech and impact. And while I was kind of figuring out, okay, poverty is obviously this massive issue, but what's my issue?

Sundeep: What's my calling? I realized it was climate. My dad, um, you know, was putting to family, uh, spent 40 years working at California as a resources board. And of course he wanted me to be a doctor, but he was out there, you know, helping us breathe cleaner air. And so. I'm camping as a kid and backpacking and just had this affinity to climate and I realized, you know, working in climate, this is back in 2007, when I was trying to figure out what I wanted to do, even though I was co-founding this other company, I realized it wasn't my thing.

Sundeep: I was like, climate's gonna make everything worse. Right? Like Climate's gonna make poverty worse, which is the issue I was working on with Kiva. Poverty, it's gonna make health worse, it's it's gonna touch all these things. So when I was thinking about what I was excited about, it was not only just that, you know, impact in tech, it was also like, how much it was touching everything I cared about.

Establishing Silicon Climate and writing his first book
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Sundeep: So that's when I started. I wanted to work in climate, uh, left the first startup, co-founder, another startup, uh, left that one after some co-founder drama and finally found, [00:04:00] okay, now I think I can work in climate and started a company to introduce people to more sustainable and less toxic products. Which, for a while we were like, you know, number one at what we did and it was great. Um, I realized it wasn't venture scale and turned into a side business, but I was still. One thing I realized in that is like, well, no one really cares about climate. when we marketed things as sustainable and nobody cared, we market as non-toxic people cared, right?

Sundeep: Of course, people care about themselves first. And I did do frankly. Um, but I was like, well, there's still this important issue we have to raise awareness about. So we wrote a novel about a post climate change future, and it's so fun. Um, recently, like a month ago, Amazon let me publish it into Audible using their sort of ai.

Sundeep: So I'm listening to it for the first time in whatever, 12 years. And I was just telling my wife this morning, like, I'm at the part in the book where I'm so enthralled. I know I wrote the book, but I can't put it down. I literally had my phone in the shower this morning playing it, then my ear pod in while I was making oatmeal, listening to what's happening next and.

Sundeep: it's just fun, right? Um, yeah, I know what happens, but it's still so fun. Uh, we [00:05:00] had a nonprofit we co-founded called Silicon Climate, where we were accelerating companies that are now unicorns. Um, we, uh, went to the Maldi to shoot this pilot about, uh, the rising sea levels called Last Glimpse.

Sundeep: Uh, circle back to that in a second. 'cause my collaborator there and our and I are,reuniting. Um, and then, um. so I started doing a lot in climate and at the time started investing. It was early to AngelList platform. They had this thing called Syndicate that they launched and then Unal.

Sundeep: And he, uh, was like, ah, I wanna be the impact syndicate guy. And he is like, dude, just bring me deals. Uh, we just launched this thing. So I was like, all right. So I brought two of the first few deals and it was funny 'cause uh, because I did that and he had like Tim Ferris breaking of deals. Like he had like names, but in this Fortune piece that he was, talking about, he was like,

Sundeep: Sandeep Ahuja is bringing deals. And the reason he said that is 'cause like no one knows who I am. Right. And the point he was making is you could be a nobody bringing deals. He didn't name drop Tim. But, you know, I'm grateful for it. 'cause after that I was in business after that, people were like, oh, Sandeep's investing.

Sundeep: Uh, and I got LPs, I got deals, and I was sort of off to the races. And climate wasn't an investible category back then. So yeah, to your point, I was investing in [00:06:00] a lot of different areas, um, and enjoying it. Um, so anyways, fast forward, um, uh, needed to get a job, Amazon Web Services and along the way kept syndicating deals, uh, kept sort of working climate and left Amazon to kind of really double down on this career in investing, uh, and have been, um, in there ever since.

Sundeep: And started off, uh, sort of leaning more into the non, uh, climate world 'cause that's what was investible. But in 2018 I was like, okay, this feels investible. I actually bought climate capital as a domain in 2015, uh, but didn't do anything with it 'cause it wasn't anything to do with it. And then in 2018 I'm like, okay, I think there's a, there there now.

Sundeep: And so that's when I actually recruited you all to take over what I built in the non climate world. And then we sort of launched DVC so that I could launch climate capital. And fast forward 2020 21, I really focused on climate and that was more than, uh, the one minute. But here we are. I.

Shaherose: You deserve more than one minute. You're a Renaissance man, uh, and was not trying to make it a minute because the journey you've been on is so, uh, tied and yet diverse. You know, like everything's [00:07:00] tied to. Each other. And yet it's all very diverse. Like anything from a pilot movie to a book to, I'm sure even acting has some thread through to what you do today.

Shaherose: Uh, and I think it's incredible to, you know, see people of. Of your sort of tenacity, uh, and risk taking capability and it just, there's a comfort with risk that you have that I sit with too, that I don't think a lot of investors actually are comfortable with. I don't know how they do their job, but they do it in a way that's actually constantly mitigating risk.

Shaherose: But you see opportunity and, yeah.

Sundeep: Three, three comments. One, you it took my dad a long time to get comfortable with this risk, right? Like, uh, he of course, you know, being the traditional, south Asian father, my mother, uh, so there's a little bit of this dance with my parents for them to kind of, um, trust that it was gonna be okay, which, you know, uh, I think hopefully has finally happened.

Sundeep: Uh, second is, a lot of smart investors will say, look, we don't take risks. it's all calculated. and the third thing I'll say is, and this is I think, [00:08:00] uh, it's difference between an early stage investor versus later stages. I say early stage investors invest in possibility and growth stage investors invest in probability.

Sundeep: And it's just a different calculus. It's a different math. And so yes, it is riskier. Um, but so much of what we do with the early stages, like is this the right founder is just the right market. There are numbers, but frankly it's so early, it's hard to really invest in those numbers. It's really about, you know, team market up, you know, et cetera.

Shaherose: Yeah. No. Having actually invested with you, I can, I can say that you do do that, and I. Was doing that on my own, in my own like small way. And then when I joined you all I felt validated that like, oh, this is about betting on people. Yes, there's a thesis about the opportunity andthe industry or the trends or whatever, but what we're really betting on is this person.

Shaherose: And it was so fun to, to see you in action and learn from you. So, um, thank you for having sort of done that journey on your own and then sharing it with us. As we all came together. Um, so today [00:09:00] you're investing primarily in climate. I guess tell me a bit about the, like what you focus on. when you talk about climate capital, I know it started in, there was also an accelerator, so like it's been many things, but today, what are you focused on?

Shaherose: What would make a company like a climate capital fit?

Sundeep’s work founding and scaling up Climate Capital to an 400-company portfolio
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Sundeep: Yeah. Uh, and, and it was Silicon Climate. That was the nonprofit accelerator that, uh, story arced, uh, to, to closure. And, and then climate capital, the firm began in really in 2018. Uh, the hopefully quick version of that. Story is we started off as a syndicate, AngelList, uh, and then AngelList launched something called Rolling Fund, which allowed LPs to invest as little as, uh, you know, 5,000 bucks a quarter into this fund.

Sundeep: And that gave me, uh, reserve capital. Actually, I, I did two sort of micro funds and I did this rolling fund and check size was 10 to 50 K and still did 10 to 50 K from that. And then, uh, a couple years ago, uh, we as a firm launched our first fund, fund Climate Capital Bio, which has since spun out and they're now called Juniper.

Sundeep: And then last year, uh, I guess. End of the year before we launched [00:10:00] Climate Capital Seed, which is sort of our next traditional fund. Um, and, uh, spoiler that we're actually spinning that out as well into a new firm, partially because one thing we've realized is today climate capital, which for those of you don't know us, we're one of the most active investors in the world.

Sundeep: We have one of the largest founder communities. We have over 400, uh, 50 I think, portfolio companies. Uh, we have over 3000 LPs, uh, you know, in our community. We've done events at now your climate weeks, LA Climate Week? SF Climate Week.. We're very active in the ecosystem and we look at ourselves as a sort of connective tissue, uh, not only from founder to capital, but founder to founder and and founder to other investors.

Sundeep: I. And because we've done so much, we have our own podcast. We have newsletter. We, have an angel program. people when they were encountering Climate Capital Bio, they're like, what is this fund amidst everything that you do? And, and we sort of hit the same thing with Climate capital seed.

Sundeep: And so we've realized that the, the proper funds, uh, probably should sit separate from the brand that is climate capital. Um, so that they can each sort of do what they do best, right? Fund, maximize returns, small [00:11:00] portfolio, et cetera, et cetera. Platform is different, right? We, we have a different goal with different aims.

Sundeep: Um, uh, I'm not sure if that answered the question, but that's kind of where we are now is, uh, reconfiguring. Where we are to be, not just, um, for this new administration and sort of terminology changes and focus changes, but also just like in the market, how the market perceives us. Like shifting things to be, I'm not gonna say future proof, but at least, you know, good for the next several years until we iterate again. I,

Shaherose: Yeah. So what do you, what kind of deals do you focus on now? Is there certain industries you tap into? Is there a stage that you guys, uh, sort of as your sweet spot and check size, tell us about

Sundeep: so we do have these different vehicles and they each have different areas, right? So I'll put, um, Juniper aside. Uh, we still have the syndicate. The syndicate. We have a group of folks who just like we recruited you, we, uh, for DVC, we recruited some incredible people to run SPVs and they have different backgrounds, right?

Sundeep: So we have someone who's, um, deep in ocean. And so I don't know anything about the ocean, but she is, this is what she owns and knows. And so we've done some ocean [00:12:00] SPVs, for example, right? Or, um, someone else on the team, their expertise is, um, resi residential. So he runs those. So, so every person on the team has their sort of domain of expertise and they run deals in those areas.

Sundeep: And it's, it spans a gamut, right? Anything that climate touches, we've probably run a deal on at least one. Um, the micro fund is the same broad thesis now, for the SPVs check size. It is about a hundred. I mean, it's 50 to, I mean, our largest was almost a million. Uh, but in this market, let's just call it a hundred, average, um, for the micro fund, it's still kind of in that 10 to 25, very rare 50 k check.

Sundeep: Uh, and. Spans the gamut. Those same syndicate partners who have areas of expertise, we'll lean on them for diligence, right? If they're running an SPV, we'll be like, okay, this is your area. How bullish are you? How much are you investing personally? Why should the MICROFUND invest? And so the microfund, from an activity perspective, we do 10 to 20, uh, checks a quarter.

Sundeep: Um, and sort of each one is its own little basket in a little portfolio. The seed fund. [00:13:00] Uh, check size is about a hundred, 150. You know, we've only done eight deals in 18 months. Um, this is sort of like much stricter on valuation cap, you know, much strong preference for, for nothing north of 50 post. Um, the pre-seed as much as we look at those, we often are not investing from the C fund into prese.

Sundeep: We'll do that micro fund to build the relationship, uh, just because we're, we're trying to design the fund in a way that maximizes returns like funds should. Uh, so we're just a, about. How we approach deals

Shaherose: I love that. Um, are there any areas that you have been, you found that you're investing more in or less in, in the climate Through the seed fund in particular, or even the bio fund? Just on focusing on the climate conversation. What are areas that you guys have been seeing Opportunity.

Why technical founders and defensible IP are now at the heart of their seed investments.

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Sundeep: I think, uh, short answer is it changes, right? Like right now, like if you look at our seed fund, it's very not to use an overused term, deep tech oriented. Uh, and I think the that is while we've invested across categories, uh, from energy generation to [00:14:00] energy management, to ag to home electrification, uh, the theme through them all is that they're very technology oriented.

Sundeep: The founders are technical. The solution that they're bringing to market is technical. Um, and the one that is through the exception, you know, which is copper, it's a technical founder and they're sitting on some ip. So even though it's. You'd think of it as, oh, that's not deep tech company. Like behind the scenes it kind of is.

Sundeep: And even then they've got, um, other things that make it, uh, defensible. I mean, that's probably what sort of pushed us to focus on deep tech is is defensibility. One of the things, you know, zooming back, like when we, I was first investing in climate 2015. And 2015, 2018, I still did climate. I just sort did it via as just a deal in o dv.

Sundeep: Um, mosaic was my first deal in 2015, but there were so few climate, um, founders, uh, and so few climate investors that, um, it wasn't very crowded. And so there you could sort of see, you could invest in a software company and not. Overthink defensibility because no one else was doing it. Then what happened is you had this flood of [00:15:00] capital and flood of founders that came in and it was amazing.

Sundeep: It's, it's, you know, amazing for the world. Uh, but all of a sudden things that felt defensible a year ago were no longer defensible. And so from a sector perspective, it really narrowed, um, what we were able to focus in from a type of company. You know, so, so today like. Not that we won't invest in a software company from the seed fund, but we haven't yet.

Sundeep: Right. Because, uh, we just find that there's just a lot of capital and founders and, and we're really struggling to sort of see that defensibility to break wave velocity. Right. so, for the seed fund specifically, again, in, you know, on our website, we still invest across categories, but what's, the thread through them all is technical, uh, solutions, um, to, to opportunities that we think are big and growing.

Shaherose: mm I wouldn't have known that. So that's super helpful. Um, are there examples of some deep tech, deep tech climate, uh, deals that you've done that, that, you know, it's kind of represent the type of deal that you, you might go after?

Sundeep: I'd say just check out the portfolio. Uh, look, I'll, um, talk about one that's on our website that's public, right? So. [00:16:00] Uh, near Space Labs, right? They are, uh, geospatial intelligence. There's a lot that you can do and with imaging, there's a, you know, planet and some other sort of, I think multi-billion dollar businesses and sort of the imaging space.

Sundeep: Um, but once you get out into space, like there, it's expensive to get up there and there's sort of challenges. And so there's, you know, near space, right, where you don't quite go into space. Um, the challenges. Date. It's how do you get things up there, you know, in a, in a cost effective way, in a way that, uh, is repeatable and that you can kind of have the accuracy that you want and need.

Sundeep: And so they've been at it for years. Uh, and we're just lucky to come in on, on this most recent round, um, where they've, they've solved for that, right? They have now a, a technology that gets you that like. You know, the, the cost to deploy is much less than to get into space. The accuracy is higher than space.

Sundeep: They have a repeatable way to do it. They can deploy quickly, they can recover, um, the devices. And so, um, you know, there's a lot of technology behind that, right. What you think is a [00:17:00] crowded space of imaging, right? You've got planes over here, you've got satellites over there, and they kind of sit in between with this sort of unique approach that has, you know, broadly failed previously, but they've figured out a way to make it work heck of a lot of tech, right?

Sundeep: And so, I don't know if that's deep tech, uh, but it's, it's definitely technology oriented,

Shaherose: yeah, yeah. Hardware.

Sundeep: From the device to the imaging, the ai, like everything around it, right? So that's, that's one example. Um, you know, there's another one, uh, called Avelo, which is in the, ag space.

Sundeep: it's advanced crop evolution through, and this is, you know, AI is, it's, it's a gene platform. how do we make crops more resilient right in, in sort of a changing climate? Uh, and this is one where, you know, it is kind of AI based, but it is, there's a real world. Application. Right.

Sundeep: So it's not just software that's sitting that maybe someone else can rebuild, right? It is, there's a lot of atoms involved as well, which we think more defensible. so those are just two examples of, of the eight.

Shaherose: and as you think about the future of ag, like you just described, or just like better imaging in, in [00:18:00] this, all of this in favor of a better planet. Like what is the future that you wanna live in? Like, what does it look like when your portfolio companies have achieved success in the next.

Shaherose: 10 years. I, 'cause I want it to be sooner. Right? I don't want it to be longer than that. Um, like what are the things that are solved? What are, things that are truly different? Because you guys put a check in.

Sundeep: Wow. So I'll answer specifically to what we put a check in because the more broad question, there's so much happening. Uh, you know, if we talk about climate capital, right? Specifically, uh, we are, um. Word that, again, is overused, but resiliency. Right? Like,

Shaherose: Okay.

Sundeep: you know, energy resiliency now means something different.

Sundeep: It's, it's, uh, had with, with sort of growing demand for energy, how do we make sure that we have enough energy, sort of do the things we need to do in, you know, but clean energy, right? Not just, let's go burn some more coal, right? Or, um, you know, adaptation for food or, uh, you know, it's, the thing about climate is it is so broad [00:19:00] and so, uh.

Sundeep: What I want is a world where we're just doing less harm to our planet and to ourselves, right? And so we're hopefully investing in companies that are enabling us to do less harm.

Shaherose: Um, awesome. Thank you. Uh, you know, I too wanna live in that world, and so when I see you making these investments, like for me, I'm just constantly like, thank you. Right? Like, thank you for committing your time, committing your resources, your energy to this because man, we're moving in a direction that isn't, isn't healthy and isn't gonna, we're not gonna sustain.

Shaherose: And we, we all can't. Get on a spaceship and go to another planet, or maybe we can, um, is there anything about today, you know, for me, primarily investing in also deep tech, but not specifically climate, but software, et cetera, like I am sucked into this world of ai. I'm curious for you in where you invest, you know, are you having the same sort of, exuberance [00:20:00] around the intersection of climate and ai or is it kind of like business as usual?

Sundeep: Yeah, I think it's, it's definitely something that's, uh, being discussed and being invested in, uh, and there is defensibility, right? I don't wanna sort of write off a whole sector. Um, but I. So my AI cred, which is weak, you know, I started working in IN 97. My Stanford, you know, computer science project was, I actually got to email with Tim Burners Lee.

Sundeep: I was working on like intelligent agents in 1997, uh, and then, uh, at Amazon. Oh, the first company I co-founded was an AI company,

Shaherose: That's

Sundeep: 2007,

Shaherose: the rich, was that rich? Relevance? Yeah. Personalized shopping.

Sundeep: Yeah, yeah. I mean, with my co-founder who helped build people that, bought this, bought that at Amazon, we kind of rebuilt it in a way, then deployed it to Sears and Target and all these other Walmart, I think, uh, companies.

Sundeep: And that was, you know, machine learning. Uh, and then, uh, at, at Amazon Web Services, I was, um, you know, bridging the startup team and the AI team. And, um, uh, actually [00:21:00] led, uh, our involvement with OpenAI. Sam stopped me, um, at an event, was like, I'm gonna talk to you. And was able to kind of lead sort of our, our relationship there back in the day.

Shaherose: Sam. Okay. Just checking.

Sundeep: Yeah, yeah, yeah. Uh, so, my point being like, I've been in AI for a while and I do worry about a lot capital being deployed as. I don't know. I think there's a lot of, unfortunately, companies that are just not gonna make it right? 'cause things are moving so quickly and I think it's really hard to sort of get to that brick wave velocity.

Sundeep: That, and then, and in climate, I think that's true as well. That said, uh, of course it's exciting, right? Of course. I talked about Valo, um, you know, NewSpace Labs using ai, like AI is. There, there's, there's two ways to look at it. One is, it's embedded in everything, right?

Sundeep: All the companies we're investing in are using AI to help them do what they do. And that's, that is AI and climate, right? Uh, and then there's companies that are leaning more into what AI can do, and they're considered a climate slash ai company. Um, are we looking at it? Yes. Uh, do we find ourselves like.

Sundeep: Oh my gosh. Climate AI is, we gotta focus No, right, because, uh, [00:22:00] there's still a lot of stuff happening in atoms, um, uh, you know, that we get excited about as we talk about defensibility. Um, again, we do worry about, hype cycle around ai. Uh, uh, but the good news is, and this is one thing I'll say about climate capital, is we're very collaborative, right?

Sundeep: There are a couple firms we work with who, who are leaning into that thesis. We've actually hosted event with one of them around this topic because again, there's a, there, there. Uh, and so we collaborate, we talk, right? We, especially when a deal comes in and we're like, why is this gonna work? Why is it not?

Sundeep: And so it's not just us in a vacuum trying to decide, is this the climate AI company to bet on? It's these conversations with these investors that we co-invest with who have developed, uh, more of a thesis. In fact, I think climactic has. It's a map, uh, you can kind of Google on like the AI climate landscape, uh, to give a plug. Yeah. And I've given them a lot of credit for leaning in because it is exciting how AI can accelerate our solutions to this opportunity and problem. Um, but I personally, and we as a firm don't, um, put a flag in and say, this is what we're most excited about because it's, it's one of several categories we look at.

Shaherose: Yeah. [00:23:00] Uh, and my understanding too is you're founder first investor.

Sundeep: That's right.

Shaherose: Talk a bit about that. What is the ideal sort of founder profile or you know, what do you look for when you say I'm leading with the founder in mind?

Sundeep: Yeah. Uh, you know, it's, um, it goes back to that, uh, possibility and probability, right? Like, you know, we meet a founder. Is this the founder for this opportunity? What is their background? Why are they the founder to build this, uh, you know, uh, do they have the right temperament? Right? And sometimes they don't, but do they, we think they can grow.

Sundeep: Uh, do you think they can attract the people to sort of round out their skillset? and especially since we're we're talking about technical solutions, like not just were they working at the company, but what did they do? Like what is their technical ability, uh, in the domain that they're executing in?

Sundeep: Um. You know, your standard reference checks. Um, and we have them meet multiple people on the team. Uh, because so much is a, is this, is this the right person to build this? And that's, you know, that's the possibility, right? It's hard to really quantify it. [00:24:00] Uh, it's more just, um, looking at their background, hearing them talk about their solution, poking, prodding, and seeing if they really have the depth of knowledge we think, to execute on their idea.

Shaherose: Yeah. Um, I'm gonna go back 'cause I wrote this down and I was like, what's he talking about As someone who's not in climate, you said there's a lot going on in Adams.

Sundeep: Yeah, I mean the concept of the real world, right? Bits and atoms,

Shaherose: Okay.

Sundeep: Yeah, yeah, yeah, yeah, yeah,

Shaherose: Okay. Nothing, nothing to talk about there. Is that correct?

Sundeep: Just, just real world, right? Real world. It's harder to build stuff in the real world, but that also is, makes more defensible

Shaherose: For sure. For sure, for sure. Yeah. And okay, so on that point, if you feel like you're leaning more into atoms over, over bits, um, do you find that your deals are more capital intensive, take longer to realize outcomes and or have a different set of co-investors? Because everyone that you and I know from the beginning of our career are software investors.

Sundeep: It's a great question and a question that I think, uh, often [00:25:00] comes up and scares away some people, right? When you're talking about real world. It is definitely cheaper with our margin to scale a software, you know, pure software company. Uh, but then again, that's also why you have a lot more entrance and capital and competition, et cetera.

Sundeep: Right? Um, uh, the good news is there are capital sources stepping into the void, uh, to help these companies. Now. For a while you had government stepping in. Um, you have now, other institutions kind of stepping in that are expanding into, look, there are, you know, and they're not doing it as charity.

Sundeep: They're, they believe it's a, they're profitable ways to, you know, debt, finance or otherwise, um, project finance in, in unique ways. Some of these companies that are at that sort of proof of con, they've, they've proven the concept. Uh, they're not quite ready to go out and raise a massive debt round. They like scale, but they do need to sort of cross the chasm from like, okay, we have something we think that works.

Sundeep: Sometimes it will raise some more equity, right? Which is expensive to get to that next level. But sometimes it's a mix, right? It's like a little bit more equity than there's a grant involved. Maybe it's not a government grant, maybe it's something else. [00:26:00] Um, and that's that capital, uh, area. It's, a well-known secret.

Sundeep: Like everyone, uh, knows that we do need non venture capital available to help some of these companies that are operating the real world, um, execute to the point where then they can go and raise the massive debt to really scale. Um. Whereas five years ago there weren't a lot of options, or at least I didn't see many.

Sundeep: Now there are more, you know, government, um, funding outstanding.

Shaherose: One conversation we had with Arian who was part of our crew at DVC was that, you know, everyone has this conception that hardware takes a long time to get to market, but specifically right now, because it's actually the cost to create the software that goes along with the hardware is calmed down and hardware components are easier to come by, uh, just because of pure innovation that the cost actually has come down and so has the time.

Shaherose: And I'm curious from your perspective. Does that, I mean, he's in the, you know, ar, vr, immersive space from a [00:27:00] hardware standpoint, and you're obviously in a different perspective, but does that apply to you? Have you seen that shift? 'cause you've been in the space a long time.

Sundeep: Yeah. You know, I think one of the things that, uh, there was a sweet spot sort developed in the last few years, at least from my perspective, where folks are using a lot of off the shelf hardware. And so there is innovation at the software layer about how that hardware interacts or some innovation at the hardware layer, but it's not like you vetting the thing soup to nuts.

Sundeep: You know, it's like there's a hardware innovation and there's a lot off the shelf, um, hardware that comes along and that, that has helped a lot of companies become venture scale, uh, uh, and, and are some are doing quite well, uh, you know, raising Bs and Cs because Sure they are. It's a hardware piece, but there's so much of it is actually software, right.

Sundeep: Uh. So, yes, short answer is we are seeing,hardware doesn't necessarily mean a long time, uh, these days,

Shaherose: And, it's more cost efficient in your mind too. Yeah. I think like my, view has been the same that I feel like we're coming actually to a hardware renaissance because to your point, [00:28:00] software has become saturated and I think we're gonna have more things, physical things that are smarter and more effective and more useful in our lives than ever before, which.

Shaherose: But hopefully that doesn't lead to more waste. Uh, but side note on creating physical things though, the other complexity is supply chain. So I'm curious, in your portfolio, have there been, you know, complete like rundowns of companies because of supply chain in terms of getting components, or is that mitigated in ways that I don't know about?

Sundeep: Yeah, not yet. And, and again, while we have a massive portfolio, I don't know them all right. We have people who run syndicates and I don't even know some of the companies we're invested in, and we have micro funds where they're owners who I didn't really talk to the founder or someone else led so. You know, the ones that I'm most focused on are, um, uh, our seed portfolio and some of the more recent checks that I wrote, and for, for of them, I haven't heard any,

Sundeep: companies shutting down because of supply chain, right? If there are issues that are being addressed, um, they're being thought through. Uh, you know, I was actually moderating a panel a [00:29:00] couple days ago, with, someone from Galvanize, which is a well known and,massive climate investor at the growth stage, and they were talking about, look, what's happening in the world is just causing founders.

Sundeep: Uh, the ones who won't, who are uh, are hopefully setting up to win, to just do a lot of scenario planning, right? It's not, it's not necessarily freaking out, it's just like, okay, how do we start scenario in a way to just make sure that if this happens or that happens, we're prepared. And what's what's happening is, um, you know, borrowing what he was saying, uh, 'cause I haven't seen this myself directly, is you, some of these founders are realizing like there are other markets that perhaps they were gonna not go into for a while that are maybe more attractive.

Sundeep: To expand into sooner, right? Because of, you know, maybe supply chain or market changes or, or tariffs or what have you. And so there is sort of in this. Uh, you know, to the extent you're talking about supply chain disruption and, and tariffs and what, you know, there is like opportunity as well, um, in you amid the chaos where founders are like seeing, oh, okay, things have changed.

Sundeep: My execution path is needs to change, so let's do matic planning. And oh my gosh, I didn't realize 'cause I didn't think we [00:30:00] had to look in here. This actually may be a better way to execute in the near term. And so, and that's.

Shaherose: Yeah, I love the idea that there's opportunity and chaos. 'cause you know, when things get hard, the people who don't have it in them, they, they fall out. And so you're left with the soldiers that are ready to fight. Speaking of challenges, tariffs, you are in a space that is in the crosshairs of the current administration.

Shaherose: Um, what does this mean for you? What are you thinking about? Is there opportunity in the chaos? Whatcha seeing?

Rethinking the language we use to talk about the climate
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Sundeep: Yeah. So, uh. I think the word climate, uh, is not as, um, attractive as a word, for, investors, and as it used to be. Uh, but what we're investing in, the companies we are investing in are still solving important problems in massive. Areas. Right. And that's, and that hasn't changed, right? These, these problems still exist.

Sundeep: The opportunity's still there and it's [00:31:00] just, you know, maybe there's a rebranding, another panel is on. Um, or at, for, for Climate Week, SF Climate Week just, just, uh, is going on right now. You know, van Jones uh, spoke and he was talking about like terminology, and actually Paul Hawk was saying the same thing.

Sundeep: They're both, um, saying that, you know, terminology matters, words matter. And, and Ben Jones was talking about like. We just need to rephrase some of these things and not be so like college education vocabularylike, don't talk about resilience. What does resilience mean?

Sundeep: Right. Talk about like, uh, we have dirty water and we need to clean up the water. Right. Just, just say the thing you're doing. Just Yeah. And, as basic terminology and just be specific and then no one's gonna argue with like, cleaning up dirty water. Right. No one's gonna argue with like, Hey, we have too many fires and we do a poor job.

Sundeep: Like, like. Fancy words like resilient and frankly, you know, maybe even climate. In other words, drop those and, and speak to what you're actually building. And so point being is like, look, not much has changed. There's still incredible founders building incredible companies. The problems are still there.

Sundeep: It's just [00:32:00] a little bit of shifting around how these problems are framed, uh, and the solutions are discussed. That's it.

Shaherose: I could not agree more. I think we also have to acknowledge that the way this system we're in right now is full of a lot of, um, chaos creation, but not necessarily like it, that it lasts, right? It's just there to create some noise and then we move on. And so I think, I think irrespective of that. Like disruption.

Sundeep: Using the right language I think is super important and I love the idea of simplifying for reality. for the acute, you know, listener. I shouldn't say that's it. Like, yes, there's a lot of disruption happening around like, you know, funding drying up grants because there is a lot happening and that, and that is undeniable and unfortunate. And certain sectors are less investible, right? Because they're more cloudy.

Sundeep: But, uh, a lot of the sectors, uh. We're still going, we're still executing. It's just some reframing that that's, and, and you know, the vast majority, I would argue, so that's kind of what I [00:33:00] was saying, is like the vast majority, it's just, just reframing and let's go. Despite these massive changes around potentially financing from the government and certain categories, frankly just not being attractive with this new administration.

Shaherose: Are there more private sector solutions for the funding drying up? Is there any other things that are happening that we should know about that are hopeful?

Sundeep: Um, a lot to be hopeful for. Uh, you know, one of the things being a lot of these investors raise money before the administration and so we have a lot of funds that are sitting on lot of capital that needs to be deployed. And, uh, the investors I talked to, they're not changing. I literally,asked a question 'cause I was monitoring the panel.

Sundeep: I'm like, is anything changing by your thesis? And, you know, it was sample size of three, but they're like, no, not at all. Right? and I, imagine that's the case for the vast majority. You have some generalist firms that are backing off a little bit, uh, who were maybe attracted to climate for whatever the reasons were.

Sundeep: But the folks who've raised a lot of money specifically to investing climate are still investing in climate. And that is hopeful, right? Because that means [00:34:00] no time soon to my knowledge, is, is capital gonna be drying up for, you know, venture investments? So, hey founders. Bring us your ideas. There's still a lot of capital to help you build what you're gonna build.

Shaherose: No. Yeah, totally. And to speak from someone who's not a specifically climate investor, but a generalist, two of our climate ish companies, one that does energy storage called cash, and one that does alternative protein called plantable. Both successfully raised Series Bs at. Perfect, wonderful valuations.

Shaherose: Yes, it was hard, but they did it. And so I think you're, right, like out there, things are still happening despite the challenges. Okay. Uh, I have two last questions. One is. You've made a lot of investments. Is there one in particular that stands out as like the worst investment that left you with a lot of lessons that you want the listeners who might either be investing or looking for investment, uh, know about so that you know they don't make the same mistakes?

Lessons from the worst investment Sundeep has made
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Sundeep: Yeah, I think, uh, [00:35:00] I'm not gonna name the company and this one was borderline climate. I think the worst investment that I made is, is where I felt misled by the founder around how the round was coming together. And they shut down like three months after I invested. And I was like, what are you talking about?

Sundeep: Like, didn't you just tell me all these investors were coming in? And he, and he just, uh, and I thought I'd asked maybe, I don't know, like when the capital came in or how much was being invested. And that's just a burn, right? it's like, that's on me, right? Like clearly I didn't do the diligence.

Sundeep: Um, uh, I needed to, to avoid that. Um, thankfully it was a small 10 k check out of a micro fund that made a lot of other investments that quarter. So, you know, LPs will be just fine, but. That burns the most. Right? And so, you know, not just asking about runway, um, uh, there's, there's some lessons around that, right?

Sundeep: Like from a diligence perspective to how to avoid that. Because you sometimes, right, you get so caught up in the founder, I get so caught up in the founder, I. And they come in their trusted thing and they're, you know, there's all these, all this signal around why this founder is gonna build something massive.

Sundeep: Uh, [00:36:00] that sometimes a question, a very important question doesn't get asked, or a very important detail around like, when capital was actually raised, doesn't get asked, or, um, what have you. Um, that's, that's probably the, the one that stings the most, you know. Beyond that again. Yeah. To your point, like, you know, as a portfolio we have over four 50 companies, DV plus DVC.

Sundeep: So, I did this math in early February 'cause someone asked, uh, at the moment we had 4 39 portfolio companies. Uh, we had, uh, you know, early February seven exits and only 17 shut down. And of the 17 two return majority of capital, uh, because the founders quickly realized they weren't building something venture scale in return.

Sundeep: So just call it, you know, 15, uh, you know, zeros. Uh, and so of the 4 39, 415 are executing like somewhere on the ropes to be clear. but you know, we've been investing since 2015. Um, I think those are numbers are decent. and, for, again, most of those, 15, um, you know, the two that return a lot of capital aside, like I can, tell youwhy we invested, [00:37:00] who we invested with, what the founders are doing now.

Sundeep: You know, I've actually reinvested in some of these companies as the founder. Is on their next version. And that's kind of like the, the founder wasn't the founder, didn't fail, the company failed. And now let's back this founder one more time. Right.

Sundeep: Appreciate that.

Shaherose: Yeah. Wow. No, you are special. That is a very, um, strong, uh, statistic that I don't think a lot of investors with that size portfolio can speak to. So, good job. Uh, let's, let's wrap on your most proud investment to date. Maybe one where you've had an outcome or one where you didn't, but you're just like, this is the one that I'm most proud of.

Reasons why Sundeep is hopeful for the future of climate tech

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Sundeep: Yeah. You know, it's, it's, my answer to this is always Mosaic. Uh, not because, you know, I still don't know how that story's gonna end. Uh, if you don't know Mosaic, they are a, um, a capital, uh, it's just lender in, in [00:38:00] solar. Uh, and the reason is, is because my first SPV. Uh, which was Mosaic in 2015. Uh, because, when I left Kiva, I'd had an idea around, like, I had a couple of videos 'cause Kiva's a microfinance platform where I was like, what about Microfinancing Green job training?

Sundeep: Or what about Microfinancing Solar panel installation, dealing with it? 'cause I was co-founding Rich Relevance. But them, when I met the Mosaic team, they were microfinancing solar panels. I was like, this I, I, I love this. And the team was great. And so it was just perfect. Like I had something of a similar idea.

Sundeep: You guys were way more qualified and smarter than me to execute on this. How can I be a part of it? I got to be an advisor there before I became an investor. And just to this day, love Billy and Dan so much as humans. And you know, I, again, I still dunno how the story's gonna end. It's not like my favorite investor for me, like I made a lot of money or whatever, whatever.

Sundeep: Like they, you know, they've gone on to do quite well, but have also hit some challenging times. Um, but just like my personal relationship with that idea, that experience and them being my first actual SPV, like, that's, that's why it's always my, my [00:39:00] answer.

Shaherose: I love that. Oh my gosh, Sandeep, this was awesome. Uh, I wanna keep talking with you, but this is a wonderful time together. So many stories that I hadn't heard, so thank you so much for your time. Hopefully we'll see you soon.

Sundeep: Absolutely. Thanks everyone. Bye.

All right. Welcome back. That was another great episode. Hope you enjoyed it as much as I did. So typically, I listen to the episode soon as we record it. Take some time to reflect, do some thinking, do some writing, and share back my takeaways. Many of you have said how much you enjoy the takeaways, which I appreciate because this is why I'm doing this.

I'm doing this too. Take the time to think and reflect and have my own thoughts about what other people are saying. So it's, it's, the real reason for doing all this is to have some takeaways. However, I'm gonna change the format of how I share my takeaways, and there's two reasons [00:40:00] for that. One is. I wanna hear from you.

Uh, I love recording my thoughts, but it's also great to hear what you all think the listeners. So whether you're an angel investor, a venture capitalist, or a founder, I wanna hear your thoughts too. If you agree or disagree or have new thoughts or have questions, I'd love to hear what those questions might be.

Um, so that's one reason is I want to be in conversation. I want to be in community with all of you listeners. The second reason is things are changing. In a good way for me, which is gonna make it harder for me to take the time out to come back on to record. It's gonna be much easier for me to spend time writing and thinking and putting that out via our newsletter.

And I'll share more about why things are gonna get busy in the next week or two. But it's all good stuff and I'm super excited to let you all know. So with that, if you have not joined the newsletter, and I know some of you already have, thank you for that. Please [00:41:00] join. And once you do join, you'll only get messages after every episode.

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