The NatureBacked Podcast

Building GreenTech Ventures with Brainforest's Leo Caprez

February 21, 2022 Tarmo Season 1 Episode 2
The NatureBacked Podcast
Building GreenTech Ventures with Brainforest's Leo Caprez
Show Notes Transcript

We spoke with Leo Caprez about the urgent need for innovation in the climate tech sector as the world is facing increasing challenges from accelerating climate change.
A few key takeaways from Leo Caprez:
**
"A lot of also very smart and driven people have woken up to the issues that we are facing: we have very, very little time to solve a massive problem. The decarbonization that obviously has to happen first, is so massive that nobody knows how we actually can get there. So we need all the innovation that we can get right now in a very short period of time. It's a frenzy right now."
**
"Lots of those technologies are available now that can be used in this space,  just think about remote sensing with satellites and drones and machine learning capacities that only since a few years are available, and the costs are coming down. Actually now it's viable economically, to analyze vast areas of forests on their carbon content. It's still pretty tricky. Actually, there are lots of startups that are attracted to tackling this issue right now."
** 
"For any kind of VC player, it's not easy to navigate this space, because there are lots of shiny things also."

Tarmo Virki  
Welcome to NatureBacked podcast of Single.Earth. In this series, we talk with investors about their vision of the New World and how they are investing in the green tech sector. My name is Tarmo Virki. In this episode two, I'm speaking with Leo Caprez from Brainforest venture studio on the essence of a venture studio and how they are looking on the investment scene in the green world. Enjoy the show. 

Hello, Leo. Tell us a few words about what is Brainforest.

Leo Caprez  
Brainforest is a mission-driven nonprofit venture studio for forests and climate. So we create solutions to bring more capital to forests.

Tarmo Virki  
Nonprofit venture studio is probably the first time I hear that phrase. Is that common in the world or are unique?

Leo Caprez  
We're not the only ones. But it is quite a special model. And I think that's exactly what we need now to bring the different worlds together -- the philanthropic, nonprofit world and the VC world and kind of take the best from both and bring it together in one model. They pop up now. There are a few others that we're also looking at and trying to learn from each other. But it is indeed a pretty new approach.

Tarmo Virki  
How does it work in practice? I mean, when there is a company needing help, or a project needing help or how do you function?

Leo Caprez  
Yes, actually, the interesting thing is, it's not that we started as a venture studio. We stumbled into that model because we really came from the problem side. So we saw that this whole market now is kind of booming. There are lots of corporates that are committing capital for reforestation and general nature-based climate solutions. And this market is not really functioning; it's very intransparent, very inefficient. And we wanted first to say, Okay, we are building some infrastructure elements so that this market works. And then saw that there were so many missing pieces that we came to the conclusion that we needed to build many of those. And how does it work? We were able to attract philanthropic funding to analyze what's missing and how we can build solutions. And then we are building the solutions until to a point where it's okay - this can be a standalone business. And then we spin them out, and they attract their investors, their own team, etc. Really, it's a venture by itself. So we come from the problem analysis. What's missing? How can we take innovative technology to create a solution that helps with that problem? And then bring the solution to market.

Tarmo Virki  
Is there some typical project you could describe - how you have worked or reached results?

Leo Caprez  
One is building on what I said before: that there's billions now that are committed from the corporate side for reforestation, restoration of ecosystems. And they say, Well, where are the quality projects we need? And the quality projects on the other side hear about those billions. And they were - where's this money? We need it. We are here on the ground, doing the work. 
So one of the ventures that we created, Xilva, is a global marketplace, a digital marketplace, where the money finds the projects, not the other way around. Think of Airbnb. You want something in South America. So now thinking about forests, you know, you want the forest in South America. For you, carbon and water are important. So you have a filter system you put in, and then you get the projects that actually are on the ground; they're looking for capital. And then we bring the two together. So that's one concrete example of what we were building.

Tarmo Virki  
How would you describe the kind of today's climate tech world? I think what I'm seeing a huge amount of projects and companies and startups popping up everywhere, probably because of those billions, which you mentioned. At the same time, it's probably, especially for the venture firm, it's probably rather difficult to estimate their value or their potential because there are just so many of them

Leo Caprez  
It's surely the early, exciting days. I agree with that. And I would say yes, it is obviously because there is a huge market opportunity. A lot of very smart and driven people have woken up to the issues, and we are facing very, very little time to solve a massive problem. The decarbonization that obviously has to happen first is so massive that nobody knows how we actually can get there. So we kind of need all the innovation that we can get right now in a very short period of time. So yes, it's a frenzy right now.
There is another reason: because actually, lots of those technologies are available now that can be used in this space. Just think about remote sensing with satellites and drones and machine learning capacities that only a few years are available, and the costs are coming down. But actually, now it's viable economically to analyze vast areas of forests on their carbon content. It's still pretty tricky; actually, there are lots of startups that are attracted to tackling this issue right now. So there are a lot of things that are ripe now that can be applied to this. And yes, finally, there is a market that demands that. And yes, of course, for any kind of VC player, it's not easy to navigate this space because there are lots of shiny things also where the things are not really built behind, but that's this world. I mean, people are used to that. They're here, they have, we also have to due diligence processes, we had actually a bank, a European bank that invested in one of our ventures that we created, there was an intensive due diligence process. And it's interesting because it needs a mix of people, people who understand technology. There are people who need to understand that, well, technology is not a silver bullet. It doesn't solve all the issues. You have lots of land ownership issues that you need to take care of. And it's very easy to think, okay, we create a smart contract. And then it's a payout if the tree is still there, the algorithm checks satellite pictures, but then if you actually look at the execution, okay, the money has to go somewhere. Where does it go? Does it go to the right person? It gets very, very tricky. If you ask about the space, there's also, I think, lots of potential in bringing some of those ventures together, actually, and creating solutions that link. Yeah, those different, those different aspects.

Tarmo Virki  
It was interesting: you said that, basically, you guys come from the problem side, in a way to this field, but solving the problem first. And at the same time, we're seeing the world (at least optimist in me) seeing the world is slightly waking up to having the problem. After watching Lookup film on Netflix, I somewhat, of course, started to wonder how much the world can actually wake up. But to kind of combine this, you know, solving the problem with the world, waking up to the problem is probably kind of golden moment in a way where a lot of things are happening.

Leo Caprez  
I fully agree with that. And then I also have this question, are we really waking up, and is the right amount of people at the right places waking up, and you know, it's late, even if it's not too late. Hopefully, it's not too late. 
But the good news really is that when I was at WWF, I worked with lots of international companies and still now also we interact obviously, with lots of companies. And there are lots of smart, dedicated people that realize - in lots of positions, also very high up in international organizations, international companies, multinationals - that something really fundamental needs to need to shift. Those supertankers, they're difficult to steer, obviously, but they're moving, they're really moving. I've been now 15 years in this space, climate, and sustainability, and it's a totally different conversation today. You have huge sustainability teams in all major international companies that are touched. There's lots of brainpower in this space now that will shift things. It will take time to get the critical mass also from all the thinkers within the companies will take awhile, but I'm quite optimistic that lots of people are aware now, and people with money and people with the right positions in big corporates, as well as startups, obviously.

Tarmo Virki  
It's really comforting to hear your optimism, but of course, if you were horribly pessimistic, you wouldn't be probably doing the job that you're doing, right?

Leo Caprez  
Yes, I have two daughters as well. And I think that, you know, throwing the hat in the ring is not really an option. I think that we have a lot of elements that are objectively positive. And there's enough of the others, and especially my time a WFF has a lot of the other reports that really, you know, make a question, well, can we actually make it and that was actually the starting point of Brainforest as well. I went to Singularity University in Silicon Valley on the search for exponential solutions, because we have a lot of exponential problems in this space. The innovation technology that is there and is ready, that can be used. It's just amazing. If we get that mix right now to bring them into the space, I think there is there is reason for optimism.

Tarmo Virki  
Is there a reason for optimism looking into the 2022? What's your Northern Star? What are you looking for this new year?

Leo Caprez  
I think now for us at Brainforest, it is about a lot about scaling because we have this proof of concept now that we were able to incorporate ventures to get them funded. I mean, to get investors that we didn't know before is also an important part of the proof of concept that we had, you know, this bank, as I mentioned, with a few family offices. 
Now it's really, for us to continue, how to scale this model, how to actually make a contribution, we need to stabilize the climate. And that means that we need to scale fast and not for just the sake of scaling fast, but because actually the problem is so huge, and we have very little time. 
Personally, I can maybe share that for me, 2022 is also about execution. And it's about discipline and creative execution. I think this really, again, also reflects what's important to bring together what we need - we need the business, the business drive, we need this the business discipline. Also, we need creativity and new thinking in this space. And we need philanthropic NGO thinking as well. Combining this all together is tricky. This is what I want to continue in 2022 and really scaling the sales model.

Tarmo Virki  
What's the biggest challenge? Lack of time?

Leo Caprez  
Well, I mean, for us right now, to be very honest. Unfortunately, funding also is an issue. So during COVID, it was quite tricky to meet people and get new backers. For us philanthropic capital is something that is of utmost importance now to build our model solidly for the next few years. And yes, of course, time, lack of time, is a crucial one. We are trying, I mean, on personal, but also on the problem side, we are trying to identify where are the leverage points, kind of acupuncture points, where we can do an intervention. And then there's the ripple effect that really moves the market. 
One of those that we identified is the whole, you know, carbon standard area where there is a lot of innovation needed because it's very expensive and complex. And we can use technology there. And that's the other venture that we created. That rolls out now in Germany as a first geography new, fully digital standard from the outset designed to have as little cost as possible, while having the necessary quality, obviously, social and environmental, but also to enable small areas to join this market, because globally, eventually it will be all about bringing lots of small areas together. And today, under the current standards is not really possible to do. It is not economically viable.

Tarmo Virki  
Exactly. It's not really viable. The basically the new standard, it's like the alternative to Gold and Verra standards or?

Leo Caprez  
Eventually, it has to happen in collaboration. So in Germany, there's no other standard active right now because of exactly that problem. There's lots of small land ownership. So with the current standards actually it's simply not possible really to apply them. And that's one of the reasons why we went to Germany first, and now we will try to build those innovations and ideally, then some of the other standards take up some of the innovations that we can prove there. Eventually, it will be a combination of different standards that are out there like it is today. And I think it's healthy to have a few different approaches, some of them might be perfect in one geographic location for a certain type of project. We'll have to see how that whole space evolves.

Tarmo Virki  
It's a really, really interesting industry this year and probably for a few years to come or probably until the end, right? Until the end. Obviously. There is this beautiful, I think English, saying that -"In the end, it will be all beautiful. If it's not beautiful, it's not the end." 
So thank you for your time, Leo.

Transcribed by https://otter.ai