Posts from climate crisis

Flooding

I spent a good part of my childhood at West Point, the US Military Academy. I got an email yesterday with photos of the flooding at West Point.

My dad and brother used to work in that grey stone building called Mahan Hall.

And the same storms that did this to West Point did worse to many parts of New England, particularly Vermont.

USV’s climate thesis is to invest in companies and projects that provide mitigation for or adaptation to the climate crisis. Adaptation means accepting that we’ve made the climate worse and adapting to it.

Flooding is a great example of that. As the earth warms, storms are capable of carrying a lot more water and dumping it quickly. West Point took ten inches of rain in a few hours.

USV has made investments in two companies working on flood adaptation; Floodmapp and an unannounced investment in a company helping communities become flood resilient. Flooding will be more common and we are going to need better tools to mitigate and manage it.

Along those lines, NYC’s Partnership Fund recently announced a new accelerator program focused on water. Their partner on this accelerator is the NYC Department of Environmental Protection (DEP) which manages NYC’s water and wastewater treatment operations.

This accelerator is called the Environmental Tech Lab and they are looking for early and growth-stage companies that have products that could be used by the NYC Department of Environmental Protection.

If you are building such a company and want to apply, you can do that here.

Flood and water management will be critical in adapting to the climate crisis and, unfortunately, is going to be a big business.

#climate crisis

Bi-Directional EV Charging

EV sales in the US are on the rise, reaching 7% of all car sales in Q1 2023, up from 4.6% a year earlier. If that rate of growth continues, EVs will be 10% of the US car market by next year.

Most people who own an EV charge it at home, using an EV charger. Our family owns a few different models. Here are two of them.

The reason we have two chargers right next to each other is one charges our Tesla and the other charges our other EVs. It is like an iPhone and an Android. Each has its own charging cable. I expect that is going to get sorted out soon as the EV market will work a lot better with a standard charging cable.

But what is even more interesting to me is the idea of bi-directional EV charging.

Right now, EV charging is “one way”. Those chargers take power from our home (either from our solar panels or the grid) and send it to our EVs.

But it does not have to work that way. There are bi-directional chargers that can take the power from our EVs and send it to our home.

That would be very useful in the event of a power outage. But it could also be useful to supplement our solar panels at night. Imagine our solar panels filling up our EV batteries during the day when it is sunny out and our EVs powering our home at night when it is not.

This is a nice primer on the topic of bi-directional EV charging. I like this diagram from that primer.

That is the simplest version of bi-directional EV charging. That primer has a bunch more diagrams of more sophisticated versions.

As we transition from a centralized electrical grid to a decentralized electrical grid over the next few decades, storage on the edge (homes, etc) will become critical to making the transition work. And EVs are a huge source of storage that are mostly not connected to the grid right now.

That is going to change and there are lots of opportunities to build innovative services around bi-directional charging as a result.

The Gotham Gal and I make environmentally designed apartment buildings and the one we are making right now has eight parking spots in the basement. We will outfit those parking spots with bi-directional chargers so that the cars in the garage will be connected to the apartments and they can power them in the event of a power outage. We expect to be able to offer additional services to our tenants over time using this technology.

The forty years that I have worked in information technology have seen a remarkable decentralization of computing from mainframes to computers in our pockets. And that has unleashed an enormous wave of innovation. I expect we will see the same thing in the energy grid/market over the next forty years. I am really excited to witness that.

#climate crisis#entrepreneurship#hacking energy

Noya

Six months ago, I wrote about Direct Air Carbon Capture and ended with this:

I remember hearing that “we’ve spent hundreds of years taking carbon out of the ground and putting it into our atmosphere and we are going to spend hundreds of years taking carbon out of the atmosphere and putting it back into the ground”. I believe DAC will be a big part of how we do that.

I used that quote again on a blog post I wrote yesterday on the USV blog about Noya, a Direct Air Capture company that USV recently invested in.

Sometimes when I write about something here at AVC, it is a sign that it will end up on USV.com. This was one of those times.

#climate crisis

What Will Happen In 2023

I want to focus this post on the macro environment for tech, startups, web3, and climate because that is where my head is at right now.

I believe that sometime in the first half of 2023, the central banks around the world will start backing off the tightening that they have been engaged in as inflation continues to ease and the economy continues to cool. Interest rates will level off in the first half of 2023 and I think there is a good chance of a “soft landing” or a very mild recession in 2023.

With that macro view in mind, what would that mean for tech, startups, and web3?

The largest tech companies will emerge from this downturn leaner and more profitable and growing more slowly. They will be mature businesses that behave like the blue chips that they are. I think these companies, like Apple, Amazon, and possibly Google, will see their stocks come back into favor ahead of everything else in tech. I am hedging on Google because I believe the massive advances in AI/ML that we are seeing right now may be a threat to their core search franchise.

Startups are going to have a tough year in 2023. While many have gotten their burn rates way down, most startups still are losing money and will eventually need to raise capital in 2023. Because most startups avoided raising in 2022, there will be a glut of startup companies in the market for capital this year and while there is plenty of venture capital sitting on the sidelines waiting to be deployed, VCs will be much more selective, instead of funding everything that moves as we’ve done over the last few years.

Good businesses with product market fit, positive unit economics, and strong leadership teams will raise capital although it will be at the new normal in terms of valuation. I believe that “new normal” is more or less where we were in 2015 where seed rounds were done around $10mm, A rounds were done around $15mm to $25mm, B rounds were done around $25mm to $50mm, and growth rounds had a cap at 10x revenues. This new normal will lead to many flat rounds, down rounds, inside rounds, and rounds with a lot of structure on them. None of that is good, but the worst of those options is rounds with a lot of structure. I believe founders and CEOS and Boards should take the pain of a new valuation (flat, down, whatever) over structure.

But there is a huge number of startups out there that have not really found product market fit, have not created positive unit economics, and have unresolved issues in their founding teams and leadership teams. These startups will struggle to raise capital at any price and most of them will fail. This has already started to happen but because so much capital was raised in 2021 and the early part of 2022, it has taken longer for these companies to fail. I think we will see a lot of startups in this category go under or taken out in fire sales in the first half of 2023.

While all of that sounds gloomy and downright horrible, I do think the startup sector will end the year in a much better place. The good companies will have gotten funded, the bad ones will have shut down, and VCs will be back to competing with each other to win deals, which is where founders always want VCs to be.

I think web3 will behave similarly in some respects but different in others.

I think the large caps in web3 (BTC and ETH mainly) will start to attract more interest from investors and should do well in 2023. I am more bullish on ETH personally because it has the best underlying economic model of any web3 asset.

Like the startup sector more broadly, web3 will go through a triage of sorts in 2023. Projects and protocols that have found product market fit, have real token economics, and ship new features quickly will attract new interest and rise in value. But many web3 projects have not found product market fit, have weak or no token economics, and do not execute well and I think we will see many of them continue to flounder and fail in 2023.

There is a much larger overhang in web3 right now when compared to the broader startup and tech sectors. There are entities that are insolvent but have not been restructured. There are funds that are so far under water that they may be forced to liquidate. These kinds of activities will produce ongoing sell pressure on web3 tokens for at least the first quarter of 2023 and maybe for much longer.

While there are compelling values out there in web3, I am not convinced that it is safe to go back into the water just yet unless you have a very strong stomach and a very long time horizon.

Climate, where USV has been actively investing for the last three years and now has two funds dedicated to the sector, has mostly been spared the carnage that has hit the other parts of USV’s portfolio. 2022 brought largely good news to the sector in the form of the oddly named Inflation Reduction Act (IRA) that will flow billions of dollars of capital into the sector over the next decade. Many leading VC firms have dedicated climate funds now and we see huge amounts of capital available for climate startups with strong teams and novel approaches.

Last year I predicted 2022 would be a big year for carbon credits and while we saw a lot of growth in the market for these credits, particularly among the large tech companies, I was way too optimistic about how fast the market would grow. That said, I think 2023 will bring more growth in this market which provides the underlying business model to many of the new climate startups VCs are funding right now.

We are also seeing a noticeable movement of tech and startup talent into the climate sector in search of new problems to solve, more meaning in their work, and many more job openings too. I think 2023 will be a big year for this talent migration.

There is a pattern to much of this and it is that 2023 is going to be a tough year for most but those that get through it should find themselves in a good place, with leaner cost structures, less competition, and healthier employer/employee dynamics. Surviving is thriving in 2023.

So to everyone who is reading this, Happy 2023. Buckle up, hang tough, and be smart.

#blockchain#climate crisis#crypto#economics#employment#entrepreneurship#management#stocks#VC & Technology#Web/Tech#Web3

Direct Air Carbon Capture

There are many efforts underway to reduce carbon emissions in order to get to “net zero”. But most climate scientists believe that reducing emissions won’t be enough and we will also need to engage in removing carbon from the atmosphere.

There are natural ways to do this like reforestation, soil carbon, biochar, etc but there are also “engineered” approaches to removing carbon from the atmosphere.

One of the most promising of the engineered approaches to removing carbon from the atmosphere is direct air carbon capture (DAC).

In DAC, air is run through a device which captures C02 and air is returned from the device with less CO2. The captured CO2 is then sequestered underground or used for fuel or something else.

DAC facilities exist and are removing carbon from the atmosphere but the total carbon removal rate from DAC is currently only around 100,000 tons of CO2. It is estimated that by 2030, DAC facilities around the world will be removing 1.5bn tons of CO2. And that number will grow in the decades to come as our planet works to get to net zero and beyond in this century.

I remember hearing that “we’ve spent hundreds of years taking carbon out of the ground and putting it into our atmosphere and we are going to spend hundreds of years taking carbon out of the atmosphere and putting it back into the ground”. I believe DAC will be a big part of how we do that.

#climate crisis

Demand Response

At USV, our climate thesis is about both mitigating and adapting to the climate crisis. One way we can adapt to the climate crisis is by building a more resilient energy supply system. Demand Response is one of many approaches that will be necessary to do that.

Demand Response is when consumers of energy voluntarily cut back on energy consumption in reaction to peak demand situations. There are many different ways this is done, and energy companies will often offer economic incentives for their customers to do this.

A great example of this is what happened in the recent heat wave in California in early September. Our portfolio company Leap aggregates energy consumption devices across a partner network via their API tools. They recently wrote a blog post about how their demand response network performed in California during the early September heat wave.

Leap aggregated 21,152 energy consumption devices (smart thermostats, EV chargers, etc) across 24 participating partners in California.

As Leap wrote in that blog post:

On September 6th, the California power grid peak demand hit 52,061 MW, a new all-time record for CAISO. Demand-side reductions were instrumental to preventing rolling blackouts as extreme temperatures caused demand for electricity to spike across the state.

Leap’s network of 21,152 devices was able to curtail about 115MW of that demand at peak. That is about 0.22% of the total peak demand in California and represents the equivalent of a small traditional power plant or large solar farm that would cost tens of millions of dollars to construct.

Leap’s network is not the only Demand Response network operating in California. There are many of them and the total amount of demand curtailed by Demand Response networks was certainly a big factor in avoiding brownouts during the recent heat wave.

If you have smart energy devices in your home or office, you should look into how to connect them to a demand response network. Helping to curtail energy consumption during peak demand situations will be an important part of adapting to the climate crisis.

#climate crisis

Changing Public Perception

Nuclear power (both fission and fusion) has the potential to provide much of the energy the world needs without the damaging effects of carbon emissions which are warming our planet.

And yet nuclear power is politically unpopular in many parts of the world and that has led to a massive underinvestment in nuclear power over the last fifty years. It will take a much different attitude about nuclear power among the public before nuclear power can remerge as a major source of energy for the world.

That is but one example of very promising technologies that suffer from negative public opinion.

Web3, which will usher in a different way of engaging with web services also suffers from a negative public perception. And yet a web3 that allows users to control their data with web services that will need our permission to use it offers a radically better model for the web as we know it.

Vaccines, which are one of the most important public health innovations of the last hundred years also suffer from negative public perception. Way too many people don’t trust vaccines and don’t avail themselves of them.

So what can those of us in the business of creating and bringing these important technologies to market do to reverse these negative opinions?

I believe that getting these technologies into market and showing people their benefits is the very best thing we can do.

For nuclear, that means smaller, safer, and more “personal” nuclear power. There are pacemakers that have nuclear batteries in them. Why not put way more nuclear powered devices into our lives and show that the benefits massively outweigh the risks?

For web3, that means shipping applications that mainstream users will use and see the benefits of controlling and provisioning their data. I think gaming and social applications are likely to be the first mainstream web3 applications because not everyone is a trader or investor. Mainstream means our parents and our children.

For vaccines, it means better and more effective vaccines. It means easier delivery (like nasal sprays). And it means less side effects. It’s hard to be enthusiastic about a wellness benefit that makes you feel like shit for a day or two.

All of these industries have large public policy organizations and spend lots of money on changing public perception. I’m absolutely in favor of that.

But there is nothing better than putting amazing technology in the hands of ordinary people and changing their lives for the better. That moves public perception more powerfully than anything else.

#climate crisis#crypto#health care#Politics

Regenerative Finance (ReFi)

I’ve always been interested in tapping into the “crowd” to fund things that need to happen and that our current institutions can’t figure out how to support. Our investment in Kickstarter back in 2009 is an excellent example of that. In the last thirteen years, Kickstarter has helped direct $6.2bn towards creative work that would not have been funded by the legacy institutions that support creative work. That has led to all sorts of interesting projects which are too numerous to mention here.

Our interest in web3 which started back in 2011 was also grounded in the idea that new forms of funding are necessary to finance innovation and creative work. I am not sure if anyone has tracked how much funding the web3 sector has directed towards new projects over the last decade, but I am certain it is in the tens of billions, if not more. And the vast majority of this funding has come from individuals, not institutions.

As we turn our attention toward climate and the existential threat of a warming planet, these ideas are top of mine for me. And that is why Regenerative Finance (aka ReFI) is so interesting to me. ReFi is an idea, like DeFi, based on a set of web3 technologies and economics, that suggests that efforts to combat climate change can and will be funded by the crowd.

Here’s a great example:

https://twitter.com/ReFiDAOist/status/1568512879703498756?s=20&t=H4GSbrCClrLKh9RWc-da2g

My friends Gordon and Courtney built the New Atlantis DAO to create open public datasets about the evolving ocean climate and funding mechanisms to support work that moves the data in the right direction. If you click on the tweet I posted above, you can learn more about that.

But that is just one of many different ReFi projects that are being started right now.

USV is invested in the Toucan Protocol which is building the web3 infrastructure to bring carbon offsets on-chain and to allow them to be traded/invested/etc using DeFi protocols. There has been some negative press about Toucan, but that reporting misunderstands what Toucan is doing and why it is so important.

It is ironic that many in the environmental justice and climate movements are so anti web3. Because web3 presents a set of tools, technologies, and economics that can and is being used to bring badly needed innovation, innovators, and funds to the fight.

It is my hope that ReFi is the movement that brings all of these folks together and aligns us all to fight the good fight, the necessary fight and that we win this fight.

#climate crisis#crypto

The Case For EVs

The Gotham Gal and I own five EVs and have been driving electric-powered cars since 2014. I don’t drive gas-powered cars and haven’t for a few years now. We have purchased two Chevy Bolts, two Tesla Model Ss, and one Rivian truck.

I love the instant acceleration you get from an EV, I enjoy driving mostly with just one foot due to the fact that EVs accelerate and brake using the accelerator pedal, I like that I can charge my car every night at home (using solar panels on our roofs) and don’t have to go to the gas station anymore, and I like that the maintenance costs and hassle are much lower with an EV. There is certainly an environmental benefit from driving EVs, but in my view, EVs are also better cars (and trucks).

But EVs remain expensive and “risky” for most folks and only 9% of global car sales are electric and that percentage is smaller in the US (more like 5%).

So how do we change that?

With gas prices sky-high, policymakers are looking to do something about the cost of driving. They are talking about short-term solutions like gas tax holidays that will do little to reduce the price of gas. I believe they should spend that money on longer-term solutions that will accelerate the conversion to EVs and reduce our reliance on the fossil fuel industry.

So what would those things be? Here is a list:

1/ A government-backed loan program (like student loans) that makes buying an EV less expensive to the average car and truck purchaser.

2/ An incentive program for merchants (think Starbucks or 7-Eleven, but it could be any merchant) to install and offer fast-charging stations.

3/ Subsidies to build battery manufacturing facilities (80% of EV battery manufacturing is in China).

4/ Policies to produce more cathode materials (which are roughly half of the cost of an EV battery).

Most automobile manufacturers are making EVs now. They understand EVs are the future. But there remain real impediments to consumer adoption of EVs. We need policies that work to reduce those impediments and speed the adoption of EVs and we need them now.

#climate crisis#economics#policy

An Earth Day Message To The New York State Legislature

It is Earth Day, a day to celebrate our planet and rededicate ourselves to saving it. I plan to walk and ride my bike, avoid cars, and enjoy being out and about in NYC today.

But I’d also like to talk about something that is bothering me.

The New York State Assembly and Senate are working to pass a bill that would put a two-year moratorium on “proof of work” cryptocurrency mining. Here is the most important part of the bill:

1. For the period commencing on the effective date of this section and
    25  ending two years after such date,  the  department,  after  consultation
    26  with  the department of public service, shall not approve a new applica-
    27  tion for or issue a new permit pursuant  to  this  article,  or  article
    28  seventy  of  this  chapter,  for  an  electric  generating facility that
    29  utilizes a carbon-based fuel and that provides, in  whole  or  in  part,
    30  behind-the-meter  electric energy consumed or utilized by cryptocurrency
    31  mining operations that use proof-of-work authentication methods to vali-
    32  date blockchain transactions.
    33    2. For the period commencing on the effective date of  this    section
    34  and  ending  two years after such date, the department shall not approve
    35  an application to renew an existing permit or  issue  a  renewal  permit
    36  pursuant  to  this  article  for  an  electric  generating facility that
    37  utilizes a carbon-based fuel and that provides, in  whole  or  in  part,
    38  behind-the-meter electric energy consumed or utilized by a cryptocurren-
    39  cy  mining  operation  that uses proof-of-work authentication methods to
    40  validate blockchain transactions if the  renewal  application  seeks  to
    41  increase  or  will allow or result in an increase in the amount of elec-
    42  tric energy consumed or utilized by a  cryptocurrency  mining  operation
    43  that  uses  proof-of-work  authentication methods to validate blockchain
    44  transactions.

I believe this bill resulted from an application to fire up an old coal-powered electric plan to power a Bitcoin mining facility and I will be the first to admit that is a horrible idea. We should not be firing up old fossil fuel plants for any sort of economic activity. It is time to retire fossil fuel-powered plants and replace them with nuclear, hydro, wind, solar, and other clean energy sources.

But the idea of targeting a specific industry for this moratorium and leaving all other economic activity in NYS free to use fossil fuel is just absurd. Is it OK to use fossil fuels to power bowling alleys, movie theaters, car washes, sports stadiums, data centers, banks, homes, cars, etc, etc? Is it just not OK to use fossil fuel to power a network that secures our next-generation technology stack?

And at the same time New York State is doing this, the State of California is preparing an Executive Order that will be extremely friendly to the emerging crypto/web3 industry. New York State is already fighting an uphill battle with the crypto/web3 industry with its god awful BitLicense law and now they want to do this.

New York State should just put signs up on the Holland Tunnel, the Lincoln Tunnel, the George Washington Bridge, the Peace Bridge, and everywhere else people arrive in New York State that says “Web3 Is Not Welcome Here.” And save themselves the time and energy of doing nonsense like this.

We get the message loud and clear.

#blockchain#climate crisis#crypto#Current Affairs#NYC#Web3