Albert Bielinko, General Partner at Titanium Ventures, shares his perspective on investing in climate tech.
Norton Rose Fulbright 00:03
Before we get to this week’s episode, I wanted to mention that you should stick around until the end, or for that matter, skip to the end of the episode first, because as in past years, we’ve pulled some of our guests and my colleagues here at Norton Rose to ask for their picks on who will win this year’s World Series.
Last year we didn’t do so well. I think last year my son was the only one to correctly pick the Texas Rangers, but we’ll try again. Welcome to Currents, a Norton Rose Fulbright podcast. Today we’re joined by Albert Bielinko, General Partner at Titanium Ventures.
Albert focuses on climate tech investments and led funding rounds for Open Solar, Pexa Park, and Samsara Eco. Albert, welcome to the podcast. It’s great to be here. All right, so most of the time we focus here on this podcast on project financing, which generally is much later in the game than venture capital, and more akin to what, or the investors are typically more what people call PE or infrastructure investors.
So just for people in the audience who might not be so familiar with the difference, what is, from your perspective at least, what’s the difference between a VC investor and somebody who’s an infrastructure investor or just a PE investor?
Albert Bielinko 01:23
Yeah, it’s a really good question because they’re quite different asset classes and venture capital is much, much smaller than infrastructure, for example. But it plays a really important part. So basically venture capital is a business where you go out, you raise money from limited partners, and then you go out and try to finance new companies that have some sort of innovation and a shot at creating a significant outcome.
So actually a huge percentage of the fortune 500 that exists today, many, many years ago, they were funded by venture capital. They probably looked completely different back then, but in the early days, that’s often what happens.
And so really it is a hits driven business. So we are trying to pick big winners early, often well, well before it’s obvious. And so it is not a safe asset class at all. It is an asset class where you might make a huge amount of money on your winners and then you might lose or just recover your capital on some of the others.
In contrast, as I think a lot of your listeners know, PE is a much bigger asset class. So you’re, you’re generally buying or investing in companies that are much bigger. There’s slower growth. Often leverage is a big part of the picture, which we don’t really see too much of in venture capital.
So generally because the companies are much earlier stage and often they have quite small revenues, but growing faster. So there’s not, not a ton of leverage typically used. And then infrastructure, obviously it’s, you know, massive developments like toll roads and airports.
So those investors are seeking very stable cash flows, you know, often inflation protected, often locked in or contracted revenues. So very, very different from venture capital, not enough, almost nothing we invest in has, you know, locked in or certain cash flows, but what we’re, what we’re backing is really some sort of disruption that could make a small company today become a big one in the future.
Norton Rose Fulbright 03:11
So to put more numbers around it, I think you gave us a relationship among the three, but what’s a typical check size for a VC or maybe for your fund? I’m sure it’s not exactly the same for everybody, but in comparison to what you would get if you were doing a check size for, you know, a PE or an infrastructure, what’s the return threshold, what’s the MOEC, you know, what are you guys really, I know you guys are, you know, shooting for the moon here.
Albert Bielinko 03:42
Yeah, so I mean, check sizes in venture capital. So typically we might see a pre-seed or a seed round kind of raise a few million from one million to a few million dollars. And then, you know, a series A might be roughly the, you know, slightly, slightly bigger than that.
So maybe a 10, 15 mil. And there’s been real inflation in those numbers in the last three years, which has come back down to earth, which I think is a very healthy thing. But I mean, usually a series A round or a series B where we often invest, you know, the companies might be raising somewhere from 10 to 40 or 10 to 60 million US dollars.
So those are, you know, they may sound like a lot of money. That may sound like a lot of money to a normal human being, but compared to capital markets, generally it’s very small. So, I mean, my friends in infrastructure write billion dollar plus checks pretty regularly.
So it’s a much smaller check sizes individually. But the whole aim is that your 10 million investment to buy, say, 10 percent ownership of a really promising startup could one day, one day be worth billions, you know, if you’re if you if you made that if you had the right thesis and the team executes really well.
So it’s a it’s a really different ballgame. It’s a really different part of the capital markets, but it’s really, really important to foster entrepreneurialism. It’s really important to have new businesses that actually solve problems and deliver better outcomes for consumers and for businesses.
And so basically it’s backing founders and helping them create really significant businesses. So in our fund at at titanium ventures. So we have invested over a billion dollars in a hundred technology companies so far.
So our typical check size is five to 15 mil USD. So on average, we’re writing a 10 mil USD first check. And we’re really backing companies that have achieved some level of product market fit. So they’ve created a product often it’s software, not not always.
Sometimes it’s it can be hardware and software combined. But it’s a they’ve created a product that customers really want. It solves a problem or has a has a strong customer ROI. And we’re helping them scale that basically helping them hire the talent to make sure the market knows about what they’re doing.
They can acquire customers, they can acquire technical talent to scale the solution. And so we really work with them to achieve that outcome, especially in the early days and beyond. So so far as a fund.
We have we have invested in 19 unicorns, hopefully including some companies that your audience members use often. I mean, that’s kind of the aim. So we’ve invested in companies like DocuSign, Box, CrowdStrike, Snapchat, GitLab and many others.
We recently raised a third fund at 350 mil USD. And we’re investing that capital at the moment. And and so, yeah, we’re building a business, investing in founders and really helping them change the world, ideally in and one of the big areas is climate tech.
Norton Rose Fulbright 06:39
Until before we get into the climate side of things, just focusing more on the VC. You know, if I talk to a P investor and they say, oh, we’re looking for a whatever, you know, 10% return, 12% return, 8% return, and minimum, you know, MOEC of whatever, four times or something.
How do you guys think of it? Because I would assume that the returns are very variable from zero to, you know, 50 times your money. How are you guys looking? How do you do something like that? How do you analyze whether the investment meets your credit profile?
Albert Bielinko 07:17
Yeah, so we’re typically aiming for five to 10 x cash on cash, money, multiple returns, which ultimately is what what matters in the long run. So what that means is we’re investing 10 million dollars and trying to turn that into 100 mil plus.
And so that in that is basically an assumption that the company will scale their revenues really significantly during the investment period, which is usually five to 10 years time. So, I mean, you really need the companies to achieve some sort of critical mass.
Often investors talk about VCs talk about 100 million of revenue to kind of get to an outcome like that. And so a five to 10 x. So, I mean, for us, a early stage series, a company that that just has started generating revenue for an investment like that, we would definitely seek to earn more than a 10 x return.
So we really want to see a reasonable shot at a really, really large outcome like a 10 x return. And then in contrast, if we’re investing in a company with 10 million of revenue, very happy customers and really strong retention, we might be at a 5x return for that business because it gets de-risked over time.
And so the return, the valuation of the company that you can invest at increases and therefore what you might aim for decreases over time. So typically we are earning returns by ultimately listing our businesses.
So we’ve had many of our companies, including all of the ones that I mentioned earlier, achieve listings. We’ve had 43 exits in total as a firm. And so we’ve also sold many of our portfolio companies into acquirers.
So we recently had OpenGov and Masuni get acquired by private equity and by Cox. And so with situations like that, you’re the money multiple that you ultimately earn is obviously a function of when you entered.
So how early stage are you willing to invest and what risks you’re underwriting? And so venture capital is all about retiring different risks from the start where literally nothing exists at all. And your founder is creating something from scratch through to helping them build a really scaled business where there’s the level of risk is much, much lower.
And it’s much more about market, you know, whether whether we have a global downturn or not, for example. So so that’s that five to 10 X that we’re aiming for. I mean, that typically translates into I’d say 25 percent plus gross IRAs that we’re seeking.
And our firms have achieved really strong return so far. I mean, I think what I can share is that we’ve returned over a billion dollars so far to our limited partners. And there’s a lot more embedded value to come across those 43 exits.
Norton Rose Fulbright 09:59
How long, give or take, is the investment period that you can—how long can you hold on to the asset before you need to harvest something?
Albert Bielinko 10:09
Yeah, it’s a good question. So typically five to 10 years, we have some, the ability to extend the fund length and one of the things that is occurring, one of the, one of the key trends, I guess, in venture capital is I think you’ll see that that period of time gets stretched with some optional extensions and that’s simply because of where the exit markets currently are at.
So at the moment listed markets are, you know, in a very difficult position. It’s very hard to float or list a new business that hasn’t, hasn’t, isn’t well-known by the capital markets already. And so that makes it very hard for venture capitalists to exit their positions and raise new funds.And yeah.
Norton Rose Fulbright 10:48
So let’s talk now that we kind of got the idea of what you do as a VC in general, that’s probably almost generic across the VC spectrum. Focusing on climate tech seems to me, although you mentioned software, which wasn’t what I thought you were going to say, or climate tech, which obviously software is part of climate tech, but a lot of the deals that I work on are very capital intensive, and a lot of the technologies are very capital intensive, which to me always seem like it’s not so conducive to venture capital, because the amount of money you need even to build a pilot project can be 40 million dollars, and if you’re just raising 10, 5, 10, 15 million dollars, it doesn’t do you, you might as well raise zero.
You can’t have nothing to show for it. So why climate tech?
Albert Bielinko 11:40
Yeah, it’s a you raise a very good point. So, I mean, I think a lot of venture capitalists are struggling with this question of to what degree they are willing to fund capital intensive projects that are very sorely needed by the world and actually quite likely to create products with a very large customer base that’s achievable, given decarbonisation is such a critical phenomena.
So in short, I mean, we we like climate tech because we’re greedy people. We we think it’s a it’s an industrial revolution that’s occurring. And we think that the you know, that the transformation of all aspects of the physical world in the coming decades will be on par with the changes brought about by digital technologies and actually just be far more significant than most people expect.
So we think there’s going to be a very large economic opportunity to invest in projects that and companies that manage the consequences of climate change. And they are significant. We’re seeing that really clearly at the moment with things like wildfires and floods.
And we’ve made investments in in some some of the spaces like that. So ultimately, we you know, you are absolutely right. We have we’ve had success investing in capital light software businesses that that don’t require, you know, 40 or 80 million dollars just to show that they can bring a product to market.
And so for us, we are we are. We still think that we have a role to play. There are still lots of companies in the space. I mean, especially the software and data companies that exists around climate.
And I can talk through some of the ones that we’ve invested in. Clearly, they are a really strong fit with our thesis and what we’ve done, what we’ve had success in in the past. And then also, I do think that there’s a range of different companies that are material science or physical products that don’t require two billion dollars for a battery recycling plant, like some of the companies that have raised money,
but maybe they require two hundred million dollars. And so in that in that phase, maybe a twenty million dollar initial raise actually lets them de-risk quite a lot and prove to the world that they have something.
So I do think it has a role to play. But I mean, picking which areas you think are a fit with venture capital, I think is an important job for for all the VCs that want to play in the space. And then also we you know, VC is collaborative and it’s competitive.
So sometimes we compete with another investor and you know, one of us gets scaled back or all of us do. And then other times we collaborate and most often we collaborate. We you know, there’s multiple venture capitalists on the boards of some of the top scale up companies.
And so it is a it is a game where it’s you know, you actually assist the companies with capital formation. It’s not it’s not just one round and you’re done. You you can actually help bring on board much deeper pools of capital over time.
And we’ve done that many times with our portfolio companies where we’ve helped them raise hundreds of millions of dollars in the past. So so for us, it comes down to the level of capital intensity and what you can prove with smaller amounts.
So we will tend to work more with companies that can show distinctive progress, you know, without having to raise two hundred million dollars. You know, they can show strong progress, real innovations, real breakthroughs with a lot less.
And that’s what we’ve invested in so far.
Norton Rose Fulbright 15:08
So let’s talk about the types of climate-related investments that are well suited for VC, and if you want to talk about specific deals you’ve done. One thing I noticed or heard you say a couple times was founder, so one thing I’m interested in hearing about is the types of deals you’ve done, but also what attracted them to you.
Is it the founder, the management team, or the specific founder, or the technology, or both, and then what types of areas, you know, if somebody’s got an idea in the audience of a specific type of technology, you know, how would they know whether it’s well suited for a VC investment?
Albert Bielinko 15:48
Yeah, so I’ll give some examples. So we led the first institutional round for Open Solar, which we think is the most widely used solar design tool in the world. So, Burchi and Adam, the founders have done a great job.
They’ve scaled the solution to 23,000 solar installers in 160 countries. So it’s very widely adopted, almost like an industry standard. And basically what they let installers do is run their business more efficiently with Open Solar.
So they’re able to create proposals and using using AI that can instantly have the most optimal PV installation for a particular roof, which is a very strong source of value add, and then they can create proposals to sell faster.
So when I did, you know, what you asked me, what attracted me. So, I mean, one of the figures that really stood out to me when I started speaking to installers was I had installers tell me that they could double the amount of proposals they could issue to customers in a month because they adopted Open Solar.
So before then, when it was kind of much more manual, everything was much more manual and not data driven, it’s a much slower sales cycle. It’s much harder to also just keep track of your customer relationships because Open Solar also has integrated CRM.
And so it’s a strong value proposition and it really solves the problem of the soft costs of of solar remaining quite high, especially in the US. So whilst we whilst we just passed the really exciting threshold where solar panels have dropped to 10 cents a watt for the panel, which is awesome.
I mean, it’s so great to see how cheap panels really are. A lot of the other parts of that job are are actually extremely expensive still in the US, certainly a lot more expensive than Australia, which is where the company was was created originally.
And Australia has the highest per capita adoption of solar in the world. So we thought it was a very, very apt place to build a solar design software suite, where you have really strong adoption and a healthy kind of solar installer market with lots of different players.
We were also very much attracted to the founders themselves. So the founders, Bertie and Adam, they previously created Sungevity, which was the third largest installer in the US market. So they created a significant business.
They were their current customer, basically. They lived through the pains, the ups and downs, and they could see the actual product features, what’s actually required to help their past selves just do a better job and have a better shot at building a really strong business in the installer space.
It’s also really integrated with other parts of the ecosystem. So they’ve got financing and hardware ordering. So it’s really pulling together the entire market into a integrated fabric, I think, which is really great.
And then finally, it’s a very inherently global product. So I mean, one of the biggest learnings from that business is how hungry the world is for solar. And that translates into really strong demand for their product and a company that pleasingly beats their own plan, which is a really, really rare thing.
So that’s a good example of the type of business that we love to back in the space, so a software and data business. We also backed Pexapark, which is a European green data company. Out of Zurich, and they have over 200 subscribers to their data and software.
They’re also backed by S&P and they’re building a significant data business out of Europe and also into the US and globally. So again, a capital-like business. I mean, when we invested in the quarter that we invested before, they were actually cashflow positive, which is pretty amazing given they not raise very much money.
And so that’s a business where they are becoming an authority around pricing. They publish prices that are used by everyone else in the ecosystem. So finances, independent power producers, developers, even investment banks.
So it’s quite broad. So, you know, that’s another example of a capital-like business that is really needed to basically help more green PPA transactions occur. And then on the other side of the spectrum, another example uses Samsara Eco, so they are more on the capital intensive side.
So what Samsara does is they have created, they use AI to create synthetic enzymes that react particularly well with particular plastics. And so they can break down plastics into its monomers, which can then be re-polymerized.
So for the first time, that’s enabling an infinite plastic recycling loop. And they really got a lot of fame because they were the first company in the world to recycle nylon 6-6 with Lululemon, so enabling textile to textile recycling for the first time.
And so they have raised over a hundred mil USD, and they will build a significant plant at some point soon. So that is much more, you know, much more a company that requires a lot of capital. But one thing I will say is that they were able to show that development before they’d even built a significant plant.
So, so yes, they will require a lot of money to create billions of dollars of revenue down the track and really create a textile to textile industry with their partners. But they were actually able to show really significant progress even even without a huge amount of capital.
Norton Rose Fulbright 21:12
One thing, which is a little bit beyond your purview, so if you’re not so comfortable commenting on it fine, but you mentioned that the US installed per KW is higher than Australia and many parts of the world.
Are there areas in particular, one, that you think are a reason for that, and two, do you think there are climate tech opportunities to help levelize that cost with the rest of the world?
Albert Bielinko 21:39
Yeah, so you’re referring to the higher soft cost in the U.S. market than other markets? Yeah. Yeah, so I mean, that’s caused by a lot of different factors, but mainly it’s around the installation costs.
It’s things like, you know, I think they still require kind of much higher bar in terms of government approval for a resident to do an installation. I believe sometimes they actually need a physical check by a government official.
So just the soft cost to getting an installation done are really, really high. Like there’s a lot of barriers that really don’t need to be there. Like long term, fundamentally, it should decline significantly.
So I think that’s what we will see. I mean, the panels themselves are really cheap now. If you look at some of the biggest, some of the listed companies in the space, I mean, they’re operating at 15 percent gross margin.
So, you know, pretty thin net margins. So it’s definitely not on the panel side that’s causing that. It’s much more around the regulation and the process, the time it takes to actually get an installation is quite high in the U.S.market, sadly.
Norton Rose Fulbright 22:49
But switching gears a little bit, what are some of the areas that you feel are under-invested? Where’s the opportunity to apply VC money to bring down costs, improve market penetration?
Albert Bielinko 23:04
Yeah, it’s a really good question. So, I mean, I personally believe adaptation is very significantly under invested in. I mean, I, you know, overall, sadly, I do think that climate change is a much bigger problem than most anticipate.
And we’re not dealing with it as effectively as we should. So temperatures continue to rise and we just achieve record after record on that front. So, so I think there is a really strong need for the world to adapt to a hotter world, a drier world, a world with more, you know, more climate events that ravaged the world, sadly.
And I don’t mean to be a doomer. I think, you know, I think, I think it’s, I’m very, very bullish on the ingenuity of human humanity to solve these problems. But I do think that that space seems to get less interest or less dollars than it maybe should.
And so one of the companies that we invested in in that space is a business called Rethought Insurance. So they use climate change data to price flood risk, to actually issue binding policies for flood insurance.
And so we think that’s businesses like that will do really well in the coming years, where they’re able to actually price the level of climate risk and really differentiate between properties that have a significant level of flood risk and those that don’t.
I think that there’s probably been, you know, maybe this is a controversial statement, but, you know, I was surprised how much money went into the offset market early on. I mean, yes, it’s still a small market in the scheme of things.
I think the voluntary carbon market is about two billion per annum with the last figures I saw. But I mean, I saw a lot of venture capital investment going into that market and often at quite high valuations.
And I guess that surprised me given the size of the market. And then also just the fact that a lot of the, you know, a lot of the, you know, that market does not directly decarbonize it. You know, it could have a lot of benefits if it has integrity.
But I was surprised by that. And then lastly, I’d say geothermal is an area that probably is not talked about enough. I think there’s a lot of promise in next generation geothermal as a 24, seven clean baseload power.
So I’m quite excited to see what happens in that space.
Norton Rose Fulbright 25:19
All right, so just in terms of wrapping up here, I’m sure you get hundreds if not thousands of proposals for people looking for money, probably thousands. If you could be on the other side of the table to people submitting proposals to you, what’s kind of the biggest thing you wish they knew that you see either in a mistake or they’re highlighting the wrong thing to you, or how do they get your attention?
What are they doing wrong that makes you turned off that you don’t give them attention?
Albert Bielinko 25:50
Yeah, I mean, you would be surprised the number of people that reach out and don’t really clearly state what they actually do. I mean, they don’t actually state like why what they’re doing is important or has, you know, is likely to result in a, you know, in a great business long term.
So, I mean, that that’s just kind of basic hygiene. And I think the stronger founders won’t have that problem. But I mean, if I were on the other side of the table again, and I mean, I was, I was a founder many, many years ago.
I was hilariously unsuccessful. So don’t listen to anything that I say. But if I, if I was in that boat again, I mean, I would just really focus on explaining the with clarity, the problem that the customer has and why it’s a, it’s a burning problem and why your solution really fixes that problem for them.
And then the explaining the commercial opportunity and why you’re different. So, I mean, probably the biggest challenge I have as an investor is the number of proposals, as you say, that sound nearly identical.
So the number of pictures I hear, you know, that, you know, that any investor, not just me, you know, has heard 20 times already, you know, that’s problematic. So, I mean, figuring out how you’re different, like actually being different and then figuring out how you can convey that level of difference.
Because I mean, venture capital is all about investing in the quirky. It’s all about investing in something that isn’t isn’t kind of widely already adopted. I mean, if it was, it probably wouldn’t be novel enough.
So they’re always ideas that are a bit out there and, you know, smart people can disagree on whether they’ll work. But, you know, ultimately, there’s something just very different to the status quo. So I’d really embrace the difference and I’d highlight how what you’re doing is really different than anything that’s been done before.
Norton Rose Fulbright 27:41
And with that, Albert, I’ll let you get back to reading your thousands of proposals. Thank you.
Albert Bielinko 27:46
Thank you so much.
