My Climate Journey

Ep 18: Joshua Posamentier, Managing Partner and Co-Founder of Congruent Ventures

Episode Summary

Today's guest is Joshua Posamentier, the Co-Founder and Managing Partner of Congruent Ventures, an early stage venture firm that partners with entrepreneurs to build companies addressing sustainability challenges. We cover a number of things in this episode, including Congruent's focus, the investing landscape overall, and Joshua's personal motivations for why he does what he does. Enjoy the show! You can find Jason on twitter at @jjacobs22 or @mcjpod and via email at, where we encourage you to send any feedback or ideas for guests/topics to cover. You can learn more at

Episode Notes

Today's guest is Joshua Posamentier, Managing Partner and Co-Founder at Congruent Ventures. Congruent partners with entrepreneurs to build companies addressing sustainability challenges, investing early across hardware, software, enterprise, consumer, deep technology, fin-tech, and business model innovation.

Joshua oversees Congruent’s investments in PolySpectra, Sense Photonics, Energetic Insurance, TeleSense, Bellwether Coffee, Xtelligent, ArcByt, Fox Robotics, and Emergy Labs. He has rich experience in venture (Prelude Ventures, Intel Capital) and operating roles (Intel, National Semi, TI), and entrepreneurship (CEO of Blipstream). He was an integral member of Intel’s first wireless chip team, started and ran National Semiconductor’s EV, Energy Storage and Smart Grid business units and initiated investment in several new business lines. Joshua has over 50 patents issued or pending, holds a BA in physics from the University California at Berkeley, and holds MBAs from the Columbia Business School and the Haas School of Business. Josh is an avid cyclist, skier, sailor, surfer, and photographer and lives with his family in the SF Bay Area.

In this episode we discuss:

I hope you enjoy the show!

You can find me on twitter @jjacobs22 and email at, where I encourage you to share your feedback on episodes and/or requests for topics/guests to cover on the show!

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Episode Transcription

Jason Jacobs:                Hello, everyone. This is Jason Jacobs and welcome to My Climate Journey. This show follows my journey to interview a wide range of guests to better understand and make sense of the formidable problem of climate change, and try to figure out how people like you and I can help. Hello, everyone. Jason here. Today's guest is Joshua Posamentier. Joshua is the co-founder and managing partner at Congruent Ventures. Congruent partners with entrepreneurs to build companies addressing sustainability challenges. Some of their investment themes include urbanization and mobility, the clean energy transition, food and agriculture, and industrial and supply chain innovation.

Jason Jacobs:                We covered a number of topics in this episode, including Joshua's background and what led him to starting Congruent. We also talked about how he balances generating returns versus making impact through his investments. Some examples of some of the companies that Joshua and Congruent have invested in, and also his views on climate change and advice to others who are looking to have an impact against this problem. I thought Joshua was a great guest and hopefully you do as well. Joshua, welcome to the show.

Joshua P.:                     Thank you. Glad to be here.

Jason Jacobs:                Glad to have you. To keep on trend, I think the last several episodes I seem to start by saying, "You're one of the first people I reached out to when I was starting to learn about this stuff," but I think in each case it's actually been true. You are one of the first people I reached out to when I was getting into this stuff.

Joshua P.:                     Hope it's been helpful. It's always a good conversation.

Jason Jacobs:                It has, yeah. It's exciting to talk to you because my whole career has been in the venture back software world, and so when I first started looking at climate, I think the first place I looked was in the overlap of those two. I was a little disillusioned, to be honest, because it felt like kind of traditional VC with a greenish tint, versus really putting a problem front and center. With you guys, we haven't dug in deep [inaudible 00:02:07] the purpose of this episode. What I've felt from you is a little stronger mission pull than maybe in some places, and that makes me more intrigued and excited about the work you're doing, than maybe some of the other places that I've been.

Joshua P.:                     I hope so. We try to balance the returns part of the VC mission with the actual mission part of the sustainability investing world. I think we're trying to navigate a path that's halfway in between one and the other a little bit.

Jason Jacobs:                I think that's a topic and we should definitely dig into that. Before we do, maybe we should start, just for the listener's sake, of taking a step back and just talking a bit about Congruent and what you guys do.

Joshua P.:                     Sure. Congruent is an early stage fund we launched at the beginning of 2017, to focus on early stage venture in sustainability. It's myself and one other partner, [inaudible 00:02:57], who was at Rockport for many years, and has been in sustainability and clean tech investing even longer than I have.

Jason Jacobs:                I heard a rumor. Is he college roommates with Daniel [inaudible 00:03:07], or there's some Daniel [inaudible 00:03:08] connection there.

Joshua P.:                     I believe they were squash competitors.

Jason Jacobs:                Okay, squash competitors.

Joshua P.:                     Yes.

Jason Jacobs:                Daniel [inaudible 00:03:13], which of course, for any listener that's just coming in, was episode number one on My Climate Journey.

Joshua P.:                     I listened to it. He's a good guy. We focus here on early stage anything, from precede, first money in, to series A and beyond, with an early stage focus. We tend to be very involved with the companies we get into. We hope we add value. The sectors we tend to focus on within sustainability are energy transitions, so alternative energy and any technology that helps integrate more renewables into the grid, for example, or control the grid more efficiently. Food and agriculture. Feeding more people with less resource, less arable land, in a more carbon friendly manner. Number three, urban mobility, which is everything that's necessary to get capitalizing on the trend of people moving into urban settings from rural settings, and population growth. There's all sorts of challenges around housing people in denser environments, moving them around, feeding them, giving them electricity and power and environmental control. That's a bucket in and of itself.

Joshua P.:                     Then, supply chain and logistics, which is everything from basic logistics and software to novel materials, to added at manufacturing. Anything that makes that world more efficient. It's a really broad universe. I'd say we have overlap with much of the regular general VC world, but yet every one of our investments has a clear connection to sustainability.

Jason Jacobs:                Don't ruin it for me, Josh. You guys are different. You're not like everybody else.

Joshua P.:                     I think investing in a lot of these sectors requires a little bit of, maybe a lot of experience. These are frequently not fast growth, consumer friendly segments, and they require a different approach to building companies.

Jason Jacobs:                Do you self consider an impact investor?

Joshua P.:                     That's a challenging term in some ways. Not really. We never refer to ourselves as impact investors. We are returns oriented venture investors first and foremost, that are investing in this segment because we think there's massive growth potential, but also because it's a good thing to do.

Jason Jacobs:                If you don't like the term "impact investor," how do you feel about the term "concessionary capital"?

Joshua P.:                     There's a time and a place for concessionary capital. We have many friends and fellow travelers who are in that space, and there's great reasons and great opportunities to deploy concessionary capital. We just feel like one of the things we can bring to the table, given our venture background, is returns, and returns beget more capital, which begets more returns hopefully. The better we do as venture investors in this segment, showing that you can make money in this segment, we figure the more capital [inaudible 00:05:51] it will be a virtuous cycle [inaudible 00:05:53] effect.

Jason Jacobs:                Just so I can really frame both for me and for listeners how to think about you guys before we dive into some of the details, what I've heard from some people is while they're allergic to the term "concessionary capital," the reason for that is that you don't need to actually be concessionary on returns. It's more just concessionary on risk and on time. How do you guys think about that? Do those vectors resemble or mirror more traditional venture, or in either of those vectors is it different with congruent? What was the pitch to LPs?

Joshua P.:                     The pitch to LPs is we know how to actually invest against this sector and make money at it. That is first and foremost, we judge ourselves on our IRR, internal rate of return, and a better IRR means you're getting good multiple in a reasonable amount of time. You can't get a good multiple in an incredibly long amount of time because then your returns, your percentage IRR is going to be poor. You won't attract the institutional capital we think this sector needs to scale. Being able to make good returns in a reasonable amount of time to show a good IRR is the best thing we could do. That's one thing concessionary capital is not optimized for. There is a great place, and sometimes we try to find those dollars to help leverage what we're doing. Sometimes we route companies more towards those dollars first, because perhaps they're too early or the timeline is too long.

Joshua P.:                     We figure we slide in after that makes sense. By the time we are investing, typically there's some semblance of a real company, real business plan with a clear timeline to market. Honestly, not everything, unfortunately, will fit our venture grade return model. For those, we have a huge broad network we'll send deals off to that perhaps have different returns profiles, or different capital structures.

Jason Jacobs:                The markets you mentioned to me that are part of your thesis, how did you come up with those markets and what criteria did you use to evaluate which markets to go after?

Joshua P.:                     We started with a pretty broad scope. As people that saw our early pitches will attest to, we had I think maybe 30 something different sectors. Much narrower sectors. As we spent time talking about them, these are the ones that fell out. These are four roughly orthogonal sectors. There's always some overlap between them, but each one has its unique challenges. Energy, food and agriculture. They all intersect in different ways, but the way we think about them and the way see companies forming around them is pretty different. Within those, there's quite a few similarities typically.

Jason Jacobs:                What led you to starting Congruent? I know a bit of this, but for our listeners' benefit, talk a bit about the journey that led to where you are today.

Joshua P.:                     I've been in and out of venture and operating roles most of my career, pretty much all of my career. Spent many years in semi connector land, Intel, national semi and TI, a little bit of startup interlude in a location services company, which founded Bootstraps, got acquired. I have that fun journey. The journey to starting Congruent really started back when I was at Prelude Ventures and its predecessor, and focusing on similar sectors, although Prelude is exclusively greenhouse gas negative investing, which is great, but there are opportunities outside that are still sustainability focused.

Jason Jacobs:                Can you explain to me the difference? Greenhouse gas negative investing. What categories does that represent?

Joshua P.:                     That is everything from power generation to better transportation mobility, efficiency, and that sort of thing. There's limitless things you can do. Better on a carbon basis. There are many things that are good for the planet that aren't necessarily explicitly carbon. For example, increasing biodiversity, reducing pollution, things like that. We're producing non-CO2 pollution. Those are things that we will invest against as well, that perhaps fall outside of a carbon negative investment mandate.

Jason Jacobs:                Was Prelude the first professional experience that you had that was directly related to climate change?

Joshua P.:                     Immediately prior to Prelude, I ran an energy storage and smart grid business unit, a big semi connector company. That was my entrée to the pure energy space, both on mobility and on the grid technologies.

Jason Jacobs:                Was it more opportunistic that you've fell into sustainability and then just stayed, or was there a pull?

Joshua P.:                     It was a strategic direction. Wanting to have more, call it more personal value alignment with my day to day work. What I'd done fresh out of school-ish was building many of Intel's early wireless chips. While that is an amazingly technically satisfying thing to do, just more communication is good, technical challenge is hard, there's not a lot of "do good-ing" to be done with designing wireless chips. There's a limit, whereas putting the same energy into, pun intended, into the energy world and sustainability, I think there's a far more personal satisfaction I get from that, beyond just the technical challenges or business challenges.

Jason Jacobs:                You were with Prelude for how long?

Joshua P.:                     End of 2011, early 2012.

Jason Jacobs:                The typical stages that you guys were coming in at Prelude, what did that look like?

Joshua P.:                     Prelude's multi-stage, so it can come in seed stage to large growth rounds. I was lucky enough to be able to invest across that spectrum while I was there. I personally, just given my personal preferences, I prefer the early side of things. I like getting involved when there's great opportunity to help guide and help grow. Once companies are at a certain stage of growth, they don't really need the outside investors' help anymore because they've built complete teams, and they're much more autonomous. I really enjoy looking at the technology, looking at the markets firsthand and learning about them, which really is the pull towards early stage side of things.

Jason Jacobs:                What made you think it was the right time to go out on your own?

Joshua P.:                     A little bit of watching the first clean tech implosion, and then seeing a rise in higher quality, more likely to succeed startups kind of coming out more and more. It felt like we've turned a corner and now there's enough macro trends and macro tailwinds driving the sector to justify more input, plus just because of the fallout from the last bust, there were not nearly as many early stage venture investors in the sector as there once were. One of the things we observed back at Prelude is the quality of early stage deal flow was just not where it needed to be to sustain later stage funds. If you run out of the broad end of the pipeline funnel, it's not going to look good for the other stuff later. We figured that's a great opportunity. We noticed it, so now was a good a time as any.

Jason Jacobs:                Did people think you were crazy when you stepped out and said you were going to raise a clean tech early stage venture fund?

Joshua P.:                     Yeah. Some people certainly thought that. I suspect this is probably true for many entrepreneurs, but I feel like there's never a graceful time to step away from a well-paying, high quality job working with people you really like to go start something new. When I left Intel to go start by last startup, it was the same thing. I was an Intel capital. I was incubating companies and investing in companies, and walking away from that to go start a startup with one other guy, that's a pretty big step off a cliff kind of moment. I feel like I had a similar situation here, but opportunity knocks and sometimes it's good to control your own destiny.

Jason Jacobs:                I could ask you what objections you heard and how you overcame them, but I think there's a more fundamental question, which is that the first clean tech bubble was big and painful, and I think it scarred a lot of people, and those scars are still very visible and acute even today, so I'll ask you a different question, which is how did you build the internal conviction that now is the right time, and that it wouldn't end up in the same bloodbath that the first bubble brought about?

Joshua P.:                     Hopefully the second mouse gets the cheese is the right metaphor here. Best thing you can do is study history and understand what exactly were the root causes of the first generation's failures and what did not work. You can't throw the baby out with the bathwater. The macro trends for sustainable investing are huge, probably bigger than anything short of maybe medical and healthcare investing. Every major global macro trend leads towards sustainability. There must be a way to invest in that, was our original thesis. Both Abe and I spent a ton of time walking through the detritus from the last go round and the deal flow we'd seen in the last five years subsequent to the bust, and fell like there are ... Given the learnings we had, given the evolution of the ecosystem around sustainability, there's more than enough opportunity that's venture viable, to take a swing at it.

Jason Jacobs:                When you thought about the LP base, were you focused on people that invest in venture funds and the pitches that this fund is going to out-return, or were they people that were kind of climate oriented first? How did you think about that demographic makeup?

Joshua P.:                     I'd say it was full spectrum. I know some of our LPs started the conversation climate first, but most of them, especially those where they're allocating capital for others or they fiduciary responsibility to a bigger pool of capital, they had to get over the returns hurdle as well. While climate opened the door, we had to convince them that we were capable of making venture grade returns to fit into that bucket. We're certainly not compromising on that, because at the end of the day, we hope our compensation is driven by the returns from the portfolio. Most of our investors, I would say, came in through the climate channel. A few came in through, this is an opportunity. We think there's an opportunity for outside returns here, and we believe that too. Absolutely. We believe that this is an underserved segment, so pricing will be relatively good, because the competition will be less, and given our broad focus outside just the Bay area, we'll invest across North America. We believe that gives us a little bit more of an edge. I think two-thirds to three quarters of our portfolio is outside the Bay area. We're not local centric at all. Again, everything compounds, plus our history in the segment, and our experience through the bust in different flavors, I think those things all together give us enough of an edge to provide outside returns hopefully.

Jason Jacobs:                You mentioned that this is an underserved segment. I feel like there's a bit of a chicken and an egg, where a lot of the top talent from Silicon Valley, let's say, I think is hesitant to start companies in this area, given that it's underserved. At the same time, a lot of the capital that could be deployed in this area look and they say, "The top talent ..." Of course there are exceptions, but largely isn't there yet. How do you think about that? Do you see that similar chicken and egg, and how do we get that virtuous cycle rolling in a more accelerated way?

Joshua P.:                     I think that problem is probably the core problem, both on the entrepreneurship side, but also on the GP side within funds. A lot of the GPs that were investing in this segment in the last go round, back in 2008 to '10, a lot of them have left and have just gone back to whatever investment they were doing, so we lost a lot of the high quality investors that were trying to be active in the segment due to various flavors of fallout. We would love to make others in the segment successful. On the investment side, we are totally pro-syndicate. We are pro-cooperation. We lead most of the rounds we do and we make an effort to bring in as many diverse investors as we can, hopefully to reinvigorate the market and repopulate it with people predisposed to the segment, that actually like it and are good at investing.

Joshua P.:                     On the entrepreneurship side, that's a tougher one, because if you're an enterprise software person, do you go and build the next B2B sales tool software, or do you build something that en electric utility is going to buy? From a straight up returns perspective, it's not a really hard conversation yet. There's also opportunity with experienced entrepreneurs like yourself, which has always been tempting, to drag people into other companies, either at a board level or potentially encourage them to start something, or to help spin something out of an academic environment. There's a little bit of matchmaking that goes on there.

Joshua P.:                     In reality, most of our portfolio, maybe not most of it, probably at least half, is comprised of people who have never worked in another company, who are spinning ideas straight out of the university or national lab or some other group, and who are relatively young. We do our best to foster that generation of entrepreneurs because we believe if they're successful, they'll cycle back into the segment again and again and again. Combine that with trying to recruit successful entrepreneurs from the outside into types of companies in the sustainability sector, we figure that's our best shot at repopulating it, but it does not have the deep bench that a lot of other sectors do.

Jason Jacobs:                Is the pitch that fun one is fertilizer, but the real fruit is going to be on funds two through 10?

Joshua P.:                     No. They're all going to yield fruit. It's a point in time. It's not so much anything in particular to Congruent, but it's a sector challenge.

Jason Jacobs:                I want to come back to something you just said. You said it's tempting because I'm an experienced entrepreneur. I want to talk about that for a minute, because I feel like entrepreneurship, for better or for worse, it's in my blood, and it's how I have historically self-identified, and it's where my experience is. The logical thing for me to do if I want to join the climate fight is to start a company or scale a company, but I can't get myself to do it. One of the reasons I can't get myself to do it is that it not only feels like being in one company working on one solution is not the highest leverage thing I could do in the climate fight, but I actually question if innovation is the highest leverage thing that we can do in the climate fight.

Jason Jacobs:                The last two weeks I was in D.C. I just went out a couple days ago and I bought two suits. I didn't even have a suit. These are things I never thought I would be doing, both spending time thinking about the political landscape, or playing dress up. The difficult thing, though, is that some of the things I feel like that are high impact on the climate fight are things that it's a lot more of a struggle how to figure out how to have a livelihood. How do you think about that and what advice do you have for me or anyone else that's listening that might be trying to sort through that similar conundrum?

Joshua P.:                     I'd say in general, people should play to their strengths. While driving change into public policy and legislation is probably one of the highest leverage things anyone can do, if you mandate something you've crafted a market, perhaps. I know for my own self that I have no tolerance and no patience for politics, so that's a terrible fit for me. I love technology and I love innovation, and so I personally gravitate towards this segment. I think you need everything from what we're doing, which is fairly high leverage. It's not as deep, but it's broader than say, straight up entrepreneurship, and to each their own. I have a solid case of professional ADHD, so I need to be looking at lots of things all the time to be happy. Some people like to go super, super deep on one thing, and they're probably fantastic linear entrepreneurs that start companies, build them, and exit, so playing to your strengths.

Joshua P.:                     The other thing, within the investing side of the spectrum, is different people, again, gravitate to different parts of the spectrum. We love to drive innovation. We like to get new thoughts, new concepts, new businesses into the market to compete, to hopefully displace and disrupt existing businesses. Be it waste management recycling sorting, which we have companies in, to food and agriculture, which we have some investments in, we're all about disruption and fast growth and innovation. There's a whole different class, which is all about, we've got a bunch of companies with technology that can do good for the environment. How do we fund that stuff to scale? It's the lending, that's the debt, that's the structure finance world. That's as important as what we're doing, in terms of getting things deployed. We can invest in novel companies all the time, but there's never going to be enough capital that we're going to invest in equity, to drive these companies to scale deployment, so having folks around the table that are capable of driving mass amounts of capital to scale deployment are just as critical.

Joshua P.:                     We look to some of our LPs that have different pools of capital that can serve those markets. Different returns profile. Different risk profile. The other early stage, early-ish stage investors like [inaudible 00:21:52] for example, which can do project, debt, and structured finance around early stage projects that are still pretty risky, versus the bigger banks like Wells Fargo or something, which really can't go A, that small, or B, that risky. There's a great spread of people and groups that fill out the ecosystem, and each one is populated by different people. You need them all. I'm not being very helpful in narrowing it down.

Joshua P.:                     In terms of what people can do to affect change, I think understanding what your strengths are. Maybe your strengths are actually just communicating and spreading the word and making it seem more accessible. My strength is focusing on innovation and the early stage investing side of things, but there's knowing what you do well and enjoy is probably the best thing you can do to align yourself with. There's something out there that's going to be a good fit.

Jason Jacobs:                How do you think about science risk?

Joshua P.:                     We like to say we're generally not okay with science risk. We're okay with engineering risk. As long as there's some ... Again, this comes with the early stage territory. We're okay with a fairly high loss ratio, which we haven't had yet, but we expect it. We're willing to take a lot of engineering risks, but if it's new science, there's other avenues to incubate pure science. Concessionary capital, government funding, universities, national labs, that sort of thing. By the time it gets to us, we hope that science is at least proven at its core. Something works and then it's a matter of taking that something that works and turning it into a product and selling it.

Jason Jacobs:                Is it a stage thing, or do a large percentage of your companies have science that has been proven out, that are then ready to scale when you guys get involved, or do you tend to shy away from the more science-driven companies?

Joshua P.:                     Oh, no. We're perfectly happy with technical risk. We're very careful with the depth of the science risk and quantifying whether it's really science risk, or it's just engineering risk. Engineering risk is, you throw enough resources at it, eventually you will probably overcome that and get to an economic situation that makes sense for a company to operate at. Again, we hope we have some flavor of line of sight to that. I'd say half of our companies have really deep technical chops. Some technical innovation has it at their core.

Joshua P.:                     In many cases, in the other ones it's a business model. It's sector expertise. It's building to sell, but for half of it, there's a core differentiator down there. That being said, there is a class of technical challenge that is not a good fit for us. Those are the technical challenges where there's no core science risk, but there's economic scale risk. If it's the type of technology that you don't know if you're ever going to be economical in the market until you've built $100 million dollar plant, that's just not going to be a fit for us. That was one of the downfalls of a lot of the first clean tech bust. People who had amazing biofuel related core technologies, say you're making a cellulosic ethanol or something, it works great in the lab, it works great on the slightly scaled up bench model, and then you make the leap from a company that had five million or 10 million in funding, to a company that now needs to build the first plant on equity at 100 million dollars. You literally don't know if those economics are going to pencil until you build the whole plant. That binary risk for that amount of capital is jut not something we're comfortable with, and I don't think something that probably makes for great returns overall, especially if you get it wrong, which is mostly what happened.

Jason Jacobs:                I don't want this to turn into a pimp the portfolio kind of thing, but I do think it'd be helpful from an illustrative standpoint just to talk about some of the bets that you've made and why you're excited about them.

Joshua P.:                     We could talk all day about the portfolio because we love it.

Jason Jacobs:                I know. That was just a softball right down the middle. For our listeners, not for you.

Joshua P.:                     Right. Because I mentioned the waste world, we have a company called AMP Robotics out of Denver, and they are trying to solve the recycling problem. Right now, most of recycling in the U.S. is having massive issues in terms of where it's going to go. China has stopped accepting most of our recycling because it's not pure enough. In terms of using those materials, those waste streams have to be pretty pure. Those plastics one through seven. They have to be pretty pure in order for people to effectively recycle them. There are some non-optimal paths to use those materials, but in many cases across the U.S., they're being burned in co fire plants because there's no offtaker right now.

Joshua P.:                     AMP Robotics was started by a guy who spun out of Cal Tech, machine vision expert. Fresh off his PhD, started this company using machine vision and machine learning to literally use cameras, off the shelf cameras, looking at a trash conveyor belt filled with recycling. When you have your single recycling bin, you throw all your plastic and your paper in there, that goes to a mixed stream recycling facility, where it's sorted through different tools. Paper and cardboard are pulled out early. Metal is pulled out through different kinds of separation tools, and then the plastics are literally sorted by hand. There's an army of people, 30 people down a conveyor belt, plucking plastic off the line and chucking it into the appropriate bin.

Joshua P.:                     A, that's a terrible job. B, it's got horrific turnover, and C, they're not that good at it so the accuracy is not great. If anyone takes a bathroom break, everything that goes by when they're on break goes into the landfill. We figured this was a terrific place for automation and robotics. With off the shelf machine vision, off the shelf robotics, they have developed a tool that literally can roll up to where a person was standing in a sort line, and sort a plastic. Pick them off the belt and chuck them in the right bin. It does it more accurately, faster, and at lower cost without having to worry about the turnover and the safety issues.

Joshua P.:                     They've been growing rapidly across mostly North America at this point. The output from their sorting systems and their robots is high enough quality to sell to China. With broad deployment, we could drive impact, to use a fun word, across the recycling sector. There's a lot of other transformational things you can do with that technology that further reduces the cost of recycling and improves the quality of the output. That's a mainstream core technology. It's machine vision. It's AI, but it's in a sector that we took the time to learn about, and that's something we see as a little bit of a competitive edge. There's one example.

Jason Jacobs:                It's a good one, because it's something I've personally been struggling with, is you hear about these funds, for example, that say, "If it doesn't have a giga ton of CO2 removal potential, we're not going to touch it," and things like that. I do feel like we are in the midst of a serious existential crisis and it might be playing out over a prolonged period from an individual life standpoint, but a very compressed period from a human species standpoint, and thus, that combined with the venture world of moonshot, moonshot, and you kind of think that the moonshots are the sexy things, but what I'm sorting through is that there's definitely a significant role for just base hits and a lot of them. I don't mean base hits from a financial returns standpoint, I mean base hits from a company that's getting on a better course standpoint. It all helps, and we just need more density of work going in the right direction.

Joshua P.:                     That's the virtuous cycle. Having a few solid exists of any flavor in the sector is going to just help immensely with reducing people's concern about lack of returns, lack of success. I'd say it's pretty obvious that recycling is a problem. The recycling situation in the U.S. is a problem, so that's a pretty linear thing. Like, "Oh. Let's go solve that problem with technology." There's others in our portfolio that are more like that, but there's others that are sort of outliers. I'd highlight the guys you just met in Boston, the Energetic guys. I'm not sure if you heard the full story, but they're solving the-

Jason Jacobs:                Jeff Binge is on this podcast, so he is going to be giddy when he hears the shout out that you're giving him.

Joshua P.:                     Totally plugging those guys, especially since we just did that round. We were lucky enough to partner with them for a pre-seed round, and then led the seed round. Energetic Insurance, Jeff [inaudible 00:29:43] and Jim Bowen out of Boston are doing something really innovative on the Fintech side. Talk about places where there's potentially a whole lot of leverage. Energetic Insurance is really solving a key part of energy finance, so right now, I assume most of your listeners know something about how solar is financed. Individually, if you're putting it on your house, you finance it based on your FICO score if you want to finance it. My FICO score is 700 or above, I have cheap solar financing. It's plentiful, lots of sources.

Joshua P.:                     If you're a Fortune 500 company, you can get debt. You've got your own credit rating. You know exactly what your debt is. That's how you'd finance solar. If you're a giant developer and you have high quality PPA offtaker like Google or Facebook or something, again, there's easy sources of financing. If you're a small business that just wants a small system by commercial standards on your building, you have a small bakery or a food processing plant, that wants a 50 or a 100 kilowatt system, you have no source of financing. You have recourse loans, maybe you have commercial pace opportunity if you're in the right, specific jurisdiction, but generally speaking, there's no good source of financing. Energetic Insurance has an insurance product to solve for that problem.

Joshua P.:                     They have partnered with a reinsurance company, one of the top five in the world, that provides reinsurance that allows a lender to look through that small business, which is probably profitable and healthy, it just doesn't have a lot of cash or a strong balance sheet, and it allows the lender to look through that business to this reinsurance in the backend. That enables much lower cost of capital or friction lending, and just sheer access.

Joshua P.:                     Small and medium commercial businesses in the U.S. are easily as big a solar resource as all the houses in the U.S. We are doing, presently, almost no business in that, in terms of solar. The economics are better as well. A small company with a very clever insurance policy and a strong partnership with reinsurance and with lenders has the ability to just transform that multi billion dollar segment relatively rapidly. That's kind of the other end of the spectrum.

Jason Jacobs:                You mentioned when you came in that there was a gap in early stage capital, and so you guys are trying to fill that, which is great. One of the reasons I've heard that there is a gap in early stage capital is that there's a gap in downstream capital, which is scary to people investing at the earliest stages. What are you seeing out there? What's the state of the state in that regard?

Joshua P.:                     There's wide variance. With our current portfolio, one of the things we try to do, especially upfront, is bring in ... Especially in deals we lead, we try to bring in as much, call it general venture as we can. General venture dollars. From mainstream shops up and down Sand Hill Road and South Park in the city, we try to bring them into the fold so that A, they can learn that this is a perfectly good segment that looks functionally like other investments with the same kind of returns profile, but yet is in this sector. By exercising our knowledge of the sector and sharing some of our expertise, we can bring more general purpose investors into the fold. I think that mainstream is what we're doing a little bit, and brings more downstream capital by having the imprimatur of higher quality, more reputable firms engaged earlier. I think that puts the stamp of approval on it that a lot of later stage firms look for.

Joshua P.:                     That being said, we spend a lot of time helping our companies raise money. It's full spectrum, whether we've had snowball rounds, which get over subscribed very rapidly, because it just happened to hit a touchstone that happened to be popular today. There's others for which it's a real slog, but this is one of the things we can do as experienced early stage investors, is put our shoulder behind those companies and help them raise.

Jason Jacobs:                How do you think about regulatory risk?

Joshua P.:                     This goes to my sort of dislike and allergy to politics. I don't like regulatory risk at all. That being said, there's some kind of regulatory risk that we're generally okay with it, and there's some that we're not. For example, we are generally ... Famous last words, right? We are expecting the investment tax credit to roll off on schedule and we are totally fine with that. We expected this last time round also when it didn't roll off. Surprise, surprise. We're okay with that, and we're okay with, generally speaking, the very state level rules and regulations around solar. Between net energy metering and financing, and third party ownership, we're okay with those things, because the markets that are good are big enough to make anything successful, and if we could open it up everywhere, that'd be fine. That'd be gravy. We're okay with those kinds of very granular restrictions. We're okay with Energetic with insurance regulation. We consider that as a barrier to entry as much as anything else.

Joshua P.:                     Where we are a chicken is where subsidies are required today to make economics work. Say you're a biofuel vendor selling to California, business is in California. The renewable fuel standards and renewable fuel credits are often required to make those economics work. When you look at a business plan that has that integral to their economics indefinitely, that becomes a risk that we're generally unwilling to take, because we don't know where the government is going in a few years. That could be rescinded. That could go away. When your long term economics don't pencil in the absence of subsidies, we consider that a huge risk factor that's hard to overcome.

Jason Jacobs:                Do you see the worlds of investing and lobbying or advocacy converging as we get into these thornier problems, that do have such government involvement required?

Joshua P.:                     We kind of tend to steer clear of that as much as possible. The preference is to invest in either sectors and in companies that can get to competitive economics on the basis of the technology and scale without subsidies. We consider subsidy as maybe a segue to profitability without subsidies. Long term, every business we invest in, we expect them to all be profitable, or be able to get to profitability on the backs of whatever their core business is, without subsidy. With a solar company, we firmly acknowledge there are subsidies. We'll take advantage of them as long as they're around, but long term, those businesses have to stand on their own without those subsidies.

Jason Jacobs:                If you take off your Congruent hat for a minute, are there technologies that could be immensely impactful in the climate fight, that will not be viable without subsidies?

Joshua P.:                     I would expand that to say subsidies and direct government support of some form or another. Yeah, absolutely. I think if we cannot figure out how to build more transmission, especially in places like the U.S. where it's really challenging for NIMBY reasons and other reasons, if we can't get more transmission, our energy system is going to become rapidly uneconomical as we have higher and higher penetrations of renewables. Unless you can get geographic diversity through better transmission in your renewable generation scheme, the cost will just go up because you'll keep having to add storage, and having to add storage, and having to add more storage to compensate for inefficiencies elsewhere.

Joshua P.:                     While it's not specifically a dollar subsidy, if we could figure out ways ... We're working on this on the technology side too, solving this from a technology perspective, but if there were ways to figure out how to deploy more of that kind of infrastructure more efficiently without all the red tape and the years and years of delays that have killed multiple companies in the segment, I think that would be massively transformative. That is a clear place that the government has to step in if it wants to make a change. There's only so much private enterprise can do, as we saw from the example of Clean Line Power, trying for many, many years to drive transmission in a way that made good sense. At the end of the day, if they'd just had the government's shoulder behind them pushing them along, not for any kind of profitability or subsidy reason, just to get over local challenges to something that's providing a global good, I think that's a good place and a place that government help is required.

Joshua P.:                     The other place I think it's totally legitimate and helpful to have government assistance in the form of subsidies is to get technologies to scale that will clearly be profitable and pencil at scale, but have no path to get there. California has a good habit of doing this at the state level, and thankfully the state's big enough to drag national policy around, so with the zero mission vehicle credits that drove effective subsidies to Tesla and now is encouraging others to energy efficiency standards that just drive efficiency up and down, but those are all profitable things to fuel efficiency standards that save consumers money in the long term, even if the car has become slightly more expensive as a result.

Joshua P.:                     Those are the things that make sense for there to be government subsidies on in the short term. Long term, continue the subsidies or don't, but technology has to pencil against conventional alternatives one way or the other.

Jason Jacobs:                This last question I'm not asking to Josh, the partner at Congruent, I'm more asking to Josh the human. I've shared a little bit of my views and feelings about the climate crisis, but what's your view? Where are we in that and how much is it weighing on you? How do you think about it?

Joshua P.:                     I spend my day job working on this.

Jason Jacobs:                You do, but on the periphery, it doesn't give you enough credit to what you're doing. If you were optimizing for impact on the climate fight, you might find that you would be doing different things.

Joshua P.:                     True. If returns had nothing to do with it. Honestly, if returns had nothing to do with it, I would probably be trying to figure out how to play in politics and how to affect legislative change through a variety of mechanisms. I spend my day job working on it, but I feel a fair sense of urgency. Local, week long things here and there are not indicative of climate change. Those are local effects, but you spend a week over 90 degrees in the Bay area in June, that's not a good situation. Between the droughts and more and more extreme environmental conditions, and the fact that this morning, or actually yesterday morning, I got a notice from PG&E that they may cut off our power for up to two days with no notice if the winds get high and the fire conditions get too extreme.

Joshua P.:                     Those are immediate personal impact things that concern the hell out of me. While there's a lot of data that show that there's a window in which we can keep it under a certain amount of overall global warming, it seems like this is a 10 year horizon issue, not a 50 year horizon issue. To the extent I can do anything beyond what I'm doing now, besides voting people into office that understand that this is an issue, and we would like to see this addressed on a continual top for priority basis, it feels like an urgent issue to me.

Jason Jacobs:                Do you wrestle with whether you're doing enough personally?

Joshua P.:                     Not particular, to be honest. I do my best to not only make Congruent successful, but make the ecosystem successful. Be it something that is entirely passive, like give money to politicians who have climate change as one of their primary planks, to helping other investors figure out how to work in the space, to mentoring people still in school or thinking of careers in this segment, I try to do all. There's not much time left for sleep.

Jason Jacobs:                I don't mean to poo poo your contributions, by the way. I think what you're doing is great. I think the thing that I'm trying to sort through publicly is how to have the biggest impact you can, but also be in your power alley, and also have a livelihood. Those are three different things, and they all kind of need to align or get as close together as possible, and so talking to people that are hitting it from different angles with different perspectives and views of the world, honestly is helpful to me hopefully helpful to listeners. There aren't right answers. Most people aren't doing anything, so the fact that you've got a day job that is at least hitting some base hits and playing a role is better than most, so I'm pressing you a bit, but I don't want that to be lost.

Joshua P.:                     Selfishly, I think I've found my global optimum here in early stage venture, in the segment I like, with exposure kind of all around to the different segments. I'm super lucky for having found this and enjoying the hell out of it. First of all, there's no coming to work, because I work all the time anywhere. It doesn't ever feel like work, work, generally speaking, except maybe categorizing expenses or something. Generally speaking, the work of investing in this segment, learning more about it and making companies successful, that doesn't feel like work and I think in an optimal world, everyone can find something to do with their lives that's similar. This is entirely personal. I don't think there's anything I'd rather do.

Jason Jacobs:                Last question, I already said last question, but this is the real last question. I've been asking this of every guest, but if you keep doing all the things you're doing, but someone just gave you a free 100 billion dollars that you could put towards anything, to put towards helping combat climate change, what's the highest leverage place you could put it, and how would you allocate that money?

Joshua P.:                     I'd write bigger checks into the companies we're already investing in, for one, because I think they all have massive potential. If I had a bunch of money, though, and I had to allocate, I would say, I think venture is ... You can't not invest in venture, because you need an innovation pipeline to bring new ideas to market full stop. I would also absolutely in deployment. Driving deployment of these technologies with low cost to capital, to get them deployed faster, and to be willing to take a risk on new technologies in the market, with an understanding that some of them are going to fail, but being willing to take a risk in financing those, I think it's great to an innovate, but you got to deploy. Those two things.

Joshua P.:                     Then, to the extent that I could figure out how that universe works, do something in politics using other people in money. Clearly, people have been successful in the opposite direction, reducing climate's impact in politics. I think to counterbalance that would take quite a bit of capital.

Jason Jacobs:                I think what you're saying is, if anyone out there is going to try to do more in politics to help with climate change, that you will fund it.

Joshua P.:                     I'll be very encouraging.

Jason Jacobs:                You will interview them for your podcast.

Joshua P.:                     Yeah. That's right. Anyone. Politics is super important at the end of the day. Unfortunately.

Jason Jacobs:                Anything I didn't ask you, or any parting words for our listeners?

Joshua P.:                     No. I think this is great what you're doing. It's entertaining to listen to a bunch of the ones you've already done, so hopefully there's a terrific list in the future. We'll all keep listening.

Jason Jacobs:                We're working on it. We can add one terrific guest to that list today. Josh, thanks a lot for coming to the show. You were a great guest.

Joshua P.:                     My pleasure. Thanks so much for having me.

Joshua P.:                     Hey, everyone. Jason here. Thanks again for joining me on My Climate Journey. If you'd like to learn more about the journey, you can visit us at Note, that is .co, not .com. Someday we'll get the .com, but right now, .co. You can also find me on Twitter at @jjacobs22, where I would encourage you to share your feedback on the episode, or suggestions for future guests you'd like to hear. And before I let you go, if you enjoyed the show, please share an episode with a friend or consider leaving a review on iTunes. The lawyers made me say that. Thank you.