The NatureBacked Podcast

Climate Focus Brings Best Results, says World Fund's Alexis Caporale

May 30, 2022 Single.Earth Season 1 Episode 14
The NatureBacked Podcast
Climate Focus Brings Best Results, says World Fund's Alexis Caporale
Show Notes Transcript Chapter Markers

The companies that will deliver the highest climate impact will also provide the highest financial returns, was the founding thesis of World Fund, said Alexis Caporale.
"And now we're seeing it, and it's just incredible. They just do better, they're more resilient, their customers are more engaged, and their teams are more engaged," he said.
World Fund is a 350-million euros climate-focused VC, which has unveiled seven investments so far, including Treecard, Juicy Marbles, QOA and Space Forge.

**
A few key takeaways from Alexis Caporale:
**
The companies that will deliver the highest climate impact will also be the ones delivering the highest financial impact - that was the founding thesis of the fund. And now we're seeing it, and it's just incredible. They just do better, they're more resilient, their customers are more engaged, and their teams are more engaged. I mean, talent is probably one of the most complicated things that a company faces when they need to scale and purpose mission-driven founders are able to attract better talent, and for that, they remain in the company. 
**
We see that those companies which focus on the energy transition, so basically, electrification and beyond, are getting lots of inbound from the market because everyone is trying to understand how to stop depending on Russian commodities. So for those companies focusing on electrification, there are more opportunities, but you have to you also have to be very careful because some of these opportunities can be just short-lived.
**
Everyone is gonna be tweeting about the economy, VCs, and how valuations were crazy, and how we're never gonna do that again.
**
For Barcelona, climate tech is really, really, really moving a lot. Spain has some characteristics in some industries, like food, for example, or agriculture. 
There are lots of things going on in Barcelona; you will see Barcelona becoming a hub for climate tech. Sooner rather than later.
**
Check out the following Barcelona-based climate tech startups: Wallbox, Heura, Submer, FlexiDao, Holaluz.com and TAPP Water.

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Tarmo Virki  0:07  
Welcome to the NatureBacked podcast of Single.Earth. In this podcast series, we are talking with investors about our vision of the new green world. My name is Tarmo Virki. And in this episode, I'm talking with Alexis Caporale from World Fund. But first, a message from our sponsor.

Merit Valdsalu  0:22  
Hey there, I'm Merit. I'm the CEO and co-founder of Single.Earth. And we are building a nature-backed currency to empower you to fight against climate change and biodiversity loss. Sign up at Single.Earth and be among the first to switch to a truly sustainable nature-based economy. And don't forget to join the discussion around climate change and biodiversity loss on our Discord channel. Enjoy the show!

Tarmo Virki  0:45  
Thanks, Alex, for joining us at the NatureBacked.

Alexis Caporale  0:48  
Oh, thank you. Thank you, Tarmo, for the invitation.

Tarmo Virki  0:51  
Tell us a few words about the World Fund. What do you guys do? I mean, it could be easily by name be confused with Worldwide Fund or any of the other funding agencies, but it's, in a way it's a VC, right?

Alexis Caporale  1:04  
It is absolutely a VC in every sense of the word. We are a 350 million euros climate-focused VC. So we invest in solutions that can help with a relevant, meaningful impact on climate change mitigation.

Tarmo Virki  1:26  
How was the World Fund founded? What was the beginning?

Alexis Caporale  1:32  
Yes, of course, the World Fund has a very nice founding story because, in a way, it has a lot to do with Ecosia. Ecosia is an independent search engine based in Berlin, already 12 years old. And it was born with a very beautiful idea, which is basically: do a search engine that as its profit just plant streets. That was the founding idea. Twelve years later it has planted, I think , it's already 150 million trees and the most relevant areas of the world in terms of climate change mitigation, but also in terms of community impact. So Ecosia was in a way where everything started with everything going together for the World Fund. Because Tim Schumacher is one of the general partners, he's the co-founder of Ecosia. And it was also a friend of Danijel Visevic savage. From childhood. And I was also helping out in Ecosia. And Daria shared the board of one of the companies. And, and Ecosia started having inbound deals, which was frequent, I would say for Ecosia, and so they basically they realize that what they had, there was an opportunity because there was a gap for companies that were doing something relevant for climate change mitigation, but also, were building great businesses, and didn't know where really to go for funding. That's what they realized. And that's how the idea started growing. Three years later, maybe I can say, We're all here investing and doing well.

Tarmo Virki  3:40  
How many investments are today in the portfolio?

Alexis Caporale  3:43  
We have announced seven investments so far—hopefully, a couple more to be announced soon. And yeah, we are. We're active. We see lots of exceptionally good deals. So I would say maybe the complex thing right now is the macro market condition. And like, yeah, I guess nobody knows exactly. How is this going to play out? But the quality of what the founders are building is, it's impressive. I can just say that it's impressive.

Tarmo Virki  4:24  
It's probably one of the interesting topics also to the listeners, how the macroeconomy, how the May crypto crash which has spilled over to everything really, how it is kind of playing out for the VCs investment decisions and, and all the logic on that side. How do you guys see the situation at the moment?

Alexis Caporale  4:46  
Absolutely. Well, I mean, our focus, our, our filtering, when we go for investments, it's pretty long term because we aim to invest in solutions that have the potential to mitigate at least 100 megatons of co2 per year, which is pretty substantial. So we basically believe that over the next couple of decades, those companies that have a larger contribution to the regenerative world will also be the ones who had, who are gonna have better financial performance. So from that perspective, every company we are investing in has a necessarily long-term vision. So if we're lucky, at the moment, our portfolio is not really affected by the crypto crash and so on. Of course, interest rates ...  there're macro characteristics that affect everyone. Everyone in every industry, but really, we are safely in for the long term.

Tarmo Virki  6:07  
Yeah, I mean, I think many kinds of climate change mitigation. Company strategies are so long term that, you know, during their, before they become something really big. You kind of expect that to be a few cycles on the way.

Alexis Caporale  6:26  
Yeah, absolutely. It's also very interesting. We have a very broad sector focus, right. So we have this climate change mitigation potential threshold. But beyond that, we are sector agnostic. And it's very interesting to see how each and every sector is evolving; it's completely different. If you look into energy, food, or manufacturing, each sub-sector is going through its own cycle. And I think one of the most important things that we've been doing, I've been personally mapping that for the last several years before climate tech was a thing. And it's, it's to me, it's fascinating to see how different it is if you're building alternative proteins, IT for the building and recycling that if you're building. I mean, I think one of our toughest but most important jobs is to deeply understand that. Right.

Tarmo Virki  7:27  
Absolutely. Then you said that basically beyond the kind of the underlying demand of the climate change mitigation, you're sector agnostic. I mean, how is it today out of those seven companies? How do they go across the sectors?

Alexis Caporale  7:45  
Yes. Well, of course, in VC, despite being thesis-driven, you always invest in those companies that are there in the market fundraising, where you can deploy the capital, right. So we are seeing a lot happening in the food and agricultural land use in Europe. That's why you have two companies already in the portfolio there. One is Juicy Marbels The other is QOA. 
We also see a lot happening in space, as you can imagine. So that's, that's why I invested in Space Forge, space manufacturing. 
So then, there's a lot happening in finance. That's, that's why we invested in Treecard, which was actually a company where Ecosia invested at the beginning. So it's, it's pretty diverse. I can say the companies that we're looking into now are from different industries. It's amazing. 

Tarmo Virki  8:55  
It must make your work also fun as I can see. You said in the introduction that World Fund is a classical VC - does it mean that you have a kind of classical 10-year lifecycle for the fund or not?

Alexis Caporale  9:11  
Yes, we have the classical ten plus one plus one. Also, the standard return expectation, yes.

Tarmo Virki  9:20  
So if the world around you goes into recession in the year one or two for the fund or where are you at the moment must be a bit tricky.

Alexis Caporale  9:35  
Well, that really depends on the type of companies where you've invested, right? Because let's take Space Forge is doing space manufacturing, and they are focusing on a very, very high complexity industry in particular on a very high competitive process. So honestly, a recession is just, it doesn't apply to them. Because if they are able to succeed in what they're doing from a technical perspective, they have decades of growth ahead of them until they hit the limit. Because of the recession, if you're doing more consumer-focused consumer-driven, you might take a hit if you're doing that. So I would say it, of course, depends. Some industries are hit very hard by supply-chains constraints. Exactly. And some of our some of the companies we're talking to are doing exceptionally well. And then what you see is that they are not able to grow as much as they wanted, but they're still able to grow.

Tarmo Virki  10:53  
Exactly. So, you grow 100% instead of 200%. And that's what I mean; in the bigger picture, it might not be such a big deal, even though it has a direct impact on the company. Absolutely.

Alexis Caporale  11:04  
It is exactly what you said.

Tarmo Virki  11:07  
How do you - maybe more generically, not so directly linked to this current macroeconomic situation around us - put climate tech and the 10-year lifecycle of the fund together, when in the climate tech, some of the startups will probably proliferate or succeed in 10 plus years. What's the logic? How can you make it happen?

Alexis Caporale  11:38  
Of course. And that really depends on each sub-sector. I can say that we can invest in a different tier TRL for each sub-sector. Right. So different levels of readiness to go to market. There are industries where, let's say, in seven years, you're able to go from an idea to big success. And there are other industries where you have to start from, from late in the life of the company. So that's why we're very careful when we say we invest from late seed to Series B, but late seed on energy is completely different from late seed on chemicals. So that's one of our toughest and most important jobs to understand in which moment for each industry and each market we can enter as a fund.

Tarmo Virki  12:39  
As you mentioned energy, have you seen the kind of current European Russian energy situation impacting the energy startup field?

Alexis Caporale  12:51  
Yes, of course. I mean, there's nothing positive to be said about the Russian invasion, right. So, we see that those companies focusing on the energy transition, so basically, electrification and beyond, are getting lots of inbound from the market because everyone is trying to understand how to stop depending on Russian commodities. So for those companies focusing on electrification, there are more opportunities, but you have to you also have to be very careful because some of these opportunities can be just short-lived. Yeah, yeah. One of our partners, Craig Douglas, has been investing for ten years in the energy transition. And he has seen all the cycles, and I think he has a very, always a very cautious way of understanding this market. And yes, the company has to follow the best possible trajectory and has to take advantage of any change in the market. But still, the energy industry is a slow-moving one from a regulation perspective. And it's absolutely key to have that in mind for every startup.

Tarmo Virki  14:23  
Exactly. It's probably one of the slowest moving ones because of the scale; the projects are big.

Alexis Caporale  14:33  
yes, and it goes this bite Europe being one market for many things, energy-wise is still country by country,

Tarmo Virki  14:44  
Very much so. In Estonia, for example, we have one company that defines itself as a startup and is working on a nuclear project. So it could be that we see a startup building a nuclear power plant in Estonia at some point.

Alexis Caporale  15:06  
I think that it's incredible to see the ambition at some companies in a good way. Right. Nuclear fusion or fission. I mean, we might have nuclear power plants on ships being delivered across the world by startups.

Tarmo Virki  15:31  
Exactly. And, kind of related is hydrogen. Clearly, there's so much hydrogen and hydrogen hype going on also simultaneously. 
We've kind of touched upon the macroeconomy and how it is having an impact on the decisions -- that's probably the big theme of this year going forward, right?

Alexis Caporale  16:04  
Absolutely. Everyone is gonna be tweeting about the economy, VCs, and how valuations were crazy, and how we're never gonna do that again.

Tarmo Virki  16:17  
Until the next cycle, right?

Alexis Caporale  16:19  
That's right. That's right. If you invest in companies that have fundamental potential advantages, that's the best you can do. I mean, you always invest in technology and not market dynamics. You have to take market dynamics into account, but there has to be a technological advantage that a company is building. So that's the safest bet you can do, but then...

Tarmo Virki  16:51  
the rest is up to them. You are based in Barcelona. How much do you see the kind of local startup sector booming?

Alexis Caporale  17:06  
Yeah, no, it's? That's a very good question. Actually, we are a distributed fund, which is very special. We are, at the moment, in Berlin, Munich, Amsterdam, Cologne, Barcelona, and Madrid, and also someone in the UK. And it's super interesting how we, of course, all compete to push our local deal-flow. But for Barcelona, climate tech is really, really, really moving a lot. Spain has some characteristics in some industries, like food, for example, or agriculture. So you can imagine that already very dynamic. And the climate perspective is adding, I think, very good ingredients. So there are lots of things going on in Barcelona; you will see Barcelona becoming a hub for climate tech. Sooner rather than later, it's, yeah, I'm very happy about it personally,

Tarmo Virki  18:13  
Of course. It's so cool to see new regions coming to the European startup map. It's not London, Berlin, and Stockholm only. New towns are popping up, new ecosystems are born, and capital is coming to the new towns, which means that there are more companies being born again. And that's such a cool development.

Alexis Caporale  18:41  
It's also because from the climate tech perspective; there is no one solution. So every hub can bring to the table their special skills based on the local ecosystem, universities, the industry, the customer, whatsoever. So it's also for us very important to understand where to go for what solution.

Tarmo Virki  19:07  
We've seen in the north a lot of battery technologies and that kind of stuff. I assume in Barcelona; it must be something to do with heat mitigation, right?

Alexis Caporale  19:16  
There's a lot of I will Foodtech there's a lot of well, actually one of the most relevant players on heat mitigation for that data center season Barcelona Submer. Yeah, well, Barcelona has always been a very relevant place for travel tech, as you can imagine.

Tarmo Virki  19:44  
Just to wrap it up, what makes World Fund special? Why should all climate tech startups from the world contact you guys?

Alexis Caporale  19:54  
Being a fund that can deploy capital across several stages is important for climate tech. We have detected that the biggest gap is there. So many times, companies that are deep tech, we are a deep tech fund, which is already not so common. For deep tech companies, sometimes they struggle to raise the following round, and we want to be there for them. That's why 60% of the fund is reserved for follow-ons. So when we talk to a company in the seed stage is because we want to be with them on the following steps as well. And that for climate, we believe is super relevant, super, super. And we are also very thesis-driven. So we try to have a deep understanding of each sector and sub-sector and help the founders. We are trying to be thought-leaders in the actual quantification of the potential climate change mitigation of a startup. There are other funds in the world which we are collaborating with. But we want to be part of that, we want to be a traditional VC that also shows the numbers and the impact and that takes pride and also the responsibility for what we do.

Tarmo Virki  21:32  
Do you see a challenge between the balance of the changing the world mission of the climate tech and at the same time delivering at least traditional VC industry returns to the investors?

Alexis Caporale  21:51  
Absolutely not. It was, of course, the founding thesis of the fund that we see an opportunity that the companies that will deliver the highest climate impact will also be the ones delivering the highest financial impact - that was the founding thesis of the fund. And now we're seeing it, and it's just incredible. They just do better, they're more resilient, their customers are more engaged, and their teams are more engaged. I mean, talent is probably one of the most complicated things that a company faces when they need to scale and purpose mission-driven founders are able to attract better talent, and for that, they remain in the company. So no, I mean, we're not seeing this as a problem, but rather as an advantage. Yes.

Tarmo Virki  22:49  
I think that's a good point to wrap it up. Thanks, Alex, for joining us today.

Alexis Caporale  22:55  
Thank you so much, Tarmo,

Tarmo Virki  22:58  
Join us again for the next episode. Thank you for listening. If you like the show, please give us a good rating and leave the feedback in your podcast player so others will find it too. We will be back next week. Turn on to the NatureBacked podcast.

Transcribed by https://otter.ai


(Cont.) Climate Focus Brings Best Results, says World Fund's Alexis Caporale