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Fred Wilson and Albert Wenger Interviewed by Erin Griffith | Upfront Summit 2020

Fred Wilson
Managing Partner at Union Square Ventures
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Upfront Summit 2020
January 30 2020, Pasadena, CA, United States
Upfront Summit 2020
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Fred Wilson and Albert Wenger Interviewed by Erin Griffith | Upfront Summit 2020
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About speakers

Albert Wenger is a managing partner at Union Square Ventures. Before joining USV, Albert was the president of del.icio.us through the company’s sale to Yahoo and an angel investor (Etsy, Tumblr). He previously founded or co-founded several companies, including a management consulting firm and an early hosted data analytics company. Albert graduated from Harvard College in economics and computer science and holds a Ph.D. in Information Technology from MIT.

About the talk

Topic: Business

Union Square Ventures partners Fred Wilson and Albert Wenger talk with Erin Griffith (The New York Times) about the firm's investing thesis to solve the climate crisis. Topics covered include:

- The firm's entry into climate technology and recent portfolio investments

- What the firm looks for in climate technology sectors

- How capitalism can co-exist with climate solutions, and the role for government

- Why there's reason for optimism

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Hiram I'm Aaron Griffith and the writer for the New York Times and I have with me Fred Wilson Albert Wenger from Union Square Ventures. We're going to 00:00 talk about climate. So I start with Fred every year you write a blog post 00:10 predicting what you think's going to happen in the next year and this year. You're number one prediction was about climate and you acquainted the 00:19 climate crisis to bigger and more impactful than the two World Wars. So that's pretty dramatic. You start by explaining what you 00:28

mean by that? Well, I think I equated them to the two World Wars. I'm not sure I said they were bigger, but we can go back and look at that. I was I 00:38 was trying to be dramatic. I was trying to say that I think that the climate crisis is to this Century book thing. 00:45 In the future when we look back at the Centre that'll be the defining thing that the humanity did to do. 00:57 If your venture capitalist you have to be an optimist and what about it in particular? I mean, like I just think we have we have to solve 01:05

this problem, you know, we built the modern economy on carbon and we have to stop 01:15 and we know how to stop and we just have to do it and it's going to be it's a it's a political problem. It's a technological problem and I think that 01:24 It's also a fantastic investment opportunity. 01:36 I'm going to get a lot of people liked it. You know, I think I I think being controversial. People like that like 01:47 saying things that you know get people's attention. I think that that's generally a good thing to do. 01:56

So Albert when you talk about when did you 02:04 personally wake up to the climate crisis? Weapon giving all these talks about attention Yuma detention and how we have this 02:13 problem that we're paying attention to all the wrong things and I were spending all the time growing our Facebook feeds and explain all the time New 02:22 Wave all these phds optimizing ass so we look at things and by think that we don't need 02:31 a doctor and so I kept talking and I said, well, there are two examples of things that 02:38

were not paying enough attention to individual purpose. Like what's my purpose in life example to its climate crisis and I kept 02:48 up 02:55 on it and it's the kind of topic that more you read the more you realize. Oh my God is so much bigger and so much more severe and so much more 03:05 imminent then we all play. Our kids worship off three other 03:13 things. I feel like a little bit like I kind of dragged them into this you'd still like your generation is 03:23 ruining the world for my generation. By the way, I do think that the younger you are a perfect example 03:32

of this the younger you are the more pissed off you are about this, right cuz I think there's a chance like you look at this thing like it's going to 03:42 be really bad by 2050, right? You know, you're doing the math 90 then you know, I could have dead by then. 03:49 So I think that this is the younger generation in my in my family 03:57 is really pissed off about this. When did you guys needed to be part of the solution? 04:06 We had a big conversation in the partnership about what are the kind of think we invest in and is this an opportunity we could invest in and it's not 04:16

like the first time we did that we had our first 10 years ago in a company that was called Amy, which was an acronym which stood for avoiding mass 04:25 extinction event. And what's that company did was help we didn't tell anybody what it's good for. What that company did was it helped 04:34 other companies track carbon in their entire supply chain so that he could serve say this product represent this amount of embedded carbon and it was 04:44 really interesting than 10 years ago. Everybody wanted to talk to this company and nobody wants to buy these people had other priorities and what 04:53

feels very different today so they can get other investors excited about it. No because we couldn't get customers to pay 05:00 customers were like, this is really interesting in the CSR department or some other department would meet with the company. But then when it was time 05:10 to write a big check to subscribe to the software people like, you know what it's not that important 05:17 now and in 2020 is that because of 05:23 Greta at other people because of these movements because of Alton with the climate is actually done this just a much bigger awareness and also much 05:33

more play. Will to do things like carbon taxes, if which there are bunch of Europe already 05:41 climate-tech without 05:46 bringing up the word cleantech and talking about those sort of cleantech boom and bust of the early 2000s. I mean, that's a huge black. I think a lot 05:56 of people lost a lot of money on that including a lot of LPS and you know what lessons have we learned from that and more in depth about what is 06:06 different now into the climate crisis and it's becoming ever more apparent that something needs to be done. I would say, you know, if he's separate 06:15

out individual benefit from social benefit benefit for a moment what people did at the time was the right thing to do and it has the gave a huge boost 06:25 to think that we not benefit from so if you look at their career for example on photovoltaic some p d panel a lot of that kickoff happen from Take 06:34 Investments investment, which may not have returned money. But which got the technology going so that now we can put in a community solar and it's one 06:42 of the fastest way for now meaning guess today. Yes. Thanks. You can make electricity from the Sun solar electricity 06:51

much much cheaper than a decade ago or so the huge telkom boom and bust in the late 90s, 07:00 right? Most people lost money on steel Axe and all those kinds of big Telcom bill down, but that's really what built the commercial internet in like 07:10 that's what we've been benefiting from that now for 20 years because all those people lost all that money. So I actually think that that is his butt, 07:19 but I think that's almost every technology cycle is that there's this Early enthusiasm this way too early people get way too 07:27

excited to put way too much money into it and is losing money, but they did feel something and then we can I get the free uses all that or big enough 07:37 for free, but we get like basically does the financial benefits of that investment do accrued to society overtime. Do you think people know more 07:46 about LPS 07:55 climate and thank God. No, please. No, 07:59 we've not heard that we pretended to be meeting in November and I think everybody understands 08:08 that this problem is really just massively severe. I think they'll gross give this analogy yesterday. So some of you may have heard it before but the 08:18

excess energy that we're trapping in the atmosphere above the pre-industrial Baseline is for Hiroshima size nuclear bomb every 08:27 second. And so once you wrap your head around that have an absurdly large number if you serve imagine for a moment that you had these alien spaceship 08:37 hovering and dropping her for nuclear bomb 2 seconds to the atmosphere. We would literally drop everything else and just try and get rid of them. This 08:46 is what Independence Day the movie is about and so I think people are not recognizing that that's what we need to do. And I think because again this 08:54

earlier Investments were made now. We have a whole set of Technologies available to her cell phone battery storage tube at the cost of battery storage 09:03 per kilowatt-hour I think coming down and then ink amazing rate. So now it's no longer question. Do we have the technology is more of a question. How 09:12 do we get this much more widely deployed and how can we accelerate the broad deployment of the thing ology 09:19 the climate space which way which is how we rebranded cleantech or Green Tech 09:25

lost money. All those failures like they just paved 09:34 the way like, this is the this is a good it's part of our skill set. 09:44 Cc's are great at narrative. So why don't you call about the story? The story is 09:54 with big humans Tech read that book. We like a good story. 10:04 Give me a little hope. It's very 10:09 gloomy out there so that you guys you guys recently made a 10:19 place. Where are you as an individual can buy offsets for carbon that you 10:24 are admitting and that you're not going to be able to do much about so freak sample at 3 seeds. We travel a lot like we came here on their planes 10:34

those airplanes are not going to be carbon neutral anytime soon. And so when you know that you have a certain amount of carbon footprint, we know how 10:40 to take carbon out of the are the most effective way to take carbon out of the areas to plant trees. One very effective way and so will on Project 10:48 Grand you can so stay here to my carbon footprint and I want to give money to this specific project. So often some gotten a bad reputation large part 10:57 because it's a wizard of a very almost Shady industry where people were spending money and it wasn't clear whether that money was actually doing 11:05

anything today. And they were literally examples where people were collecting money that they said was going towards the plenty of trees that just 11:13 went into their personal pocket weather examples of people saying we do this methane capture and it was actually happening. So project rent Ames to 11:23 bring transparency to that and the second is can pick up leap energy. Do you want to play something super important? It 11:32 makes the energy grid accessible through apis to the software developers can build applications that do things like the man responds to man 11:42

response is basically when you are Energy company says to you I'll give you a lower energy bill if you promise not to use a lot of energy between 11:52 10:09 and 5, right? So any software applications to help people like us actually, you know, you know deliver on 12:01 that promise and that's one example, but the energy Grid is not that programmable, but it's kind of you know, fifty-year-old, 12:11 you know technology and so leave makes does all the hard work leap does to the world of the energy 12:21

grid to build the apis a software developers need to make applications solution. We're going to back 12:30 new technology that's going to help us with all this time of Crisis where there are a lot of exciting opportunities out there or were you kind of 12:40 casting about like we need more know there's a ton of activity in one of the things we did is when we announce those Investments, we also completely 12:48 open first all of our research, so we wrote a blogpost in the blocks with links to all our research because we believe that this there's tons of 12:57

activity entrepreneurial activity there. A lot of people would talk about the generational shift a lot of people like this is the problem that I want 13:06 to tackle and so Lots of other funds should invest in this be a lot of other funds are investing in this field. And so we wanted to share the work we 13:13 had done so that other people you don't conserve built on top of that. Not yet. I think there's a 13:22 Survivor rapidly. This is a topic that I think lots of funds are coming to very quickly now 13:32

cuz of companies like leaf and others more more solutions to me. 13:39 Yes, we need the basic fundamentals of better ways to produce energy and you know store energy in hard technology, but 13:49 also I think software is becoming more and more a piece of the solution set and that's something that we know how to investment. So I think you will 13:58 see most of what we do in climate will be software based businesses, but it sounds like it 14:07 has kind of deals are there other funds that are very well set up to 14:14

invest in deep take for example in next-generation batteries, and we absolutely need that also and and What's at the hundred billion dollar investment 14:24 in a battery company announced? So I think it's very encouraging that we need both these vectors. We need to sort of take the stuff that already works 14:33 and deployed much more broadly. I mention community school earlier. So one of the great ways to deploy solar isn't for every house to try and have 14:40 their own panel. They cause your roof probably doesn't face the right direction and so forth. But if you get a bunch of people in the local community 14:50

together and they say we're all going to buy solar electric power from this new solar field, then you can put a feel like right outside of town and 14:56 you can power the entire town or big part of the top that is the fastest growing deployment of solar in the u.s. Today, but that need software support 15:06 and that needs skin people need to sign up the need to connect ammeter and so there's infrastructure that needs to be built to accelerate that type of 15:15 deployment the only area of the cleantech that actually did make money or software company. 15:21

I guess we'll just take a little bit of a hardware 1/2, but it'll be interesting to see what kind of people come to fill that void. So excited about 15:31 and what areas do you plan to avoid as far as Writing checks in inclimate. Well, so because our friend is relatively small 15:40 is a $200 early-stage fun. We tend to stay away from things that are going to be super capital-intensive. So for example, we won't make an investment 15:50 in nuclear fusion, but as a personal investment, I've made a person so there's things that we can do 15:59

with the fund and then they think that we can do personally in there but they're quite different because every fun is set up and structure to address 16:09 a specific type of problem in the blog post that Albert rhoton usb.com where we serve announce that we're doing climbing investing. There's a link 16:16 to a deck and in that deck it list all the different sectors that we think are interesting and there's like seven or eight but also draw 16:25 through a nice old box around here thinks that USV isn't set up to do Well, first of all, we have a commitment to our 16:35

existing investors to do the thing that we do and we think there's plenty of opportunity to do that and other people have raised funds, you know, dcvc 16:45 Lux capital a lots of people with big funds to do hard tech investing and so, you know, I think the way to think about the climate 16:53 crisis is of a problem that is a huge proportion that if we all do a little bit that's how we make progress has its I think how we fail it 17:02 if we go up that's somebody else's problem. I don't don't need to do anything here. There's nothing I can do with whatever like we can do lots of 17:12

things with individuals. We can offset our carbon we can contribute to climate activist and we can vote really important thing vote for candidates to 17:19 take climate. Seriously. I'm so everybody can contribute. I think that's part of the message here. Even if on that small like humans Ventures confined 17:29 areas where we can make an important contribution. So there's no excuse for some reason. Well, I don't know how to invest in this. If you are an 17:38 investor, you put your mind to it. You will find interesting things to invest in 17:45

anybody 17:48 but Trump candidate out there anything you like 17:59 except that you guys are 18:09 and I'm thinking like I would like to do something. I would like my business to be contributing to the solution. Do you think that Founders and 18:19 investors need to have some kind of experience and expertise in this field? It's it's very technical and a lot of parts or do we need more disruptors 18:25 with completely fresh thinking who can you like completely turn things around? Thrift Lawton who started to believe 18:34

it had no background in Communications. He started twilio because he was frustrated that he could couldn't get good telephony for his prior business. 18:44 So I think obviously it takes take a logical know how but also take people who have passion who are who want to solve the problem 18:52 and who bring you perspective to it who would like 12 I'm going to try something new and different. So I think it takes the Confluence of all of those 19:02 Preparing for this was a lot of critics to her kind of saying that this sudden VC and trust and climate is kind of a cynical cash-grab. What what 19:17

would you say to them? In what way can ascribe meaning death over fear? Over here 19:25 over an opportunity. Don't understand the complaint. Yeah, it's just that like, okay. Well, this is a visit of moral 19:35 emergency and here are a bunch of money people coming into sort of profit. I 19:45 think that as Albert said government's got to be a piece of this and Society has to work to 19:54 to change the way we do things. There is a role for capitalism to play there is a rule for investors to play and you know what I think 20:04

you know, do we feel badly that you on musk made a lot of money proving to the world that electric cars are viable. I don't I think you know, he's a 20:15 hero in that way. You know, I think that if we had waited for the existing automobile industry to get this electric cars were so wouldn't have them 20:23 so, you know, I don't want to no. No, we did not I 20:30 don't want to be like, you know, a rabbit celebrating capitalism because I don't think of capitalism solves all problems, but I think capitalism 20:38

can solve some problems. We need it and it's diffuse mint and we need regulation and we need both. Something that happens in 20:48 climate a lot as few people wind up getting locked into these either or discussions. It's like, you know them people like we should only build nuclear 20:58 reactors because we know how to build those until work even at night when the sun isn't on and so forth and then people like never built in a nuclear 21:06 reactor who should only do solar and then if people like it should all be the government and we should, you know not have any it's just it's too big a 21:13

problem we need to do all of the above and we don't have any kind of luxury of picking here and I don't think there's any kind of moral failing 21:21 for people to allocate capital and make money on something if it's also a real problem. I think there's been a lot of debatable investment. Like 21:30 let me put exhibit a juul for example, like it's very debatable that that is a moral way of making money right to basically get a lot of new people 21:40 addicted to nicotine who weren't previously addicted to nicotine, but I do think there are not every investment. Can take a high ground, but if you 21:50

can invest in something that clearly solve the problem and then people make money, I think that's totally okay. This idea of like have 21:57 I'm calling it a purity test essentially that if you want to speak out on an issue like climate than you yourself can't fly in a private jet or you 22:07 shouldn't be eating me use your metal straws all of that. I love to hear your thoughts on that. 22:16 I don't buy private out of moral. Yeah, I just have a hard time. I mean, 22:27 I've done it a few times and you're sitting in a plane. And there's two pilots up there, right and you're flying and you're the only person in the 22:37

plane in the more that you know, you read about how the the meat industry 22:46 is one of the you know, biggest, you know Critters of issues. You know, it makes me think twice before going out and eating meat. I haven't given up 22:56 me but I will tell you that my New Year's resolution this year is to try to eat meat only 20% of my meals, right? So I'm not saying I don't feel it 23:06 was a purity test. I just feel like it's like I need to behave. Consistent with what I believe and 23:14

I think I don't want to hear it's 23:24 Marshfield Behavior change is going to require government regulation. So if you 23:29 look at smoking, for example, it was when government started to really tax cigarettes that we made a huge sentence how many people smoke so I think 23:39 everybody needs to make their own decision what they think is hoof behavior that there are personally okay with but if we want large-scale Behavior 23:47 change, we need a carbon tax, and we need to maybe band some forms of omission all together. 23:54

Actually creates this false sense of having done something when in fact, there's no systemic change happening and I might want to add one thing. It's 24:07 okay to be concerned about plastic. The Plastics are complete rounding error Plastics are not the problem CO2 and methane in the atmosphere of the 24:15 problem. So there's a lot of stuff that can be done in sustainability and it's all good and important. But if we don't solve the greenhouse gas 24:24 problem that will kill us all That's kind of Graham. I like to see when we saw the 24:34

greenhouse. We will work on the cross. Yeah, I mean, 24:43 I think you can kind of feel helpless about it and it's like not going to make a difference. So what are 24:52 you think about the cause for optimism here is that we don't need to invent something magical that we don't have 25:02 today. It's taking everything that we already know we know how to build electric vehicles. So we need to retire 25:12 gas-guzzling Carson replace them with Eevee's we know how to make homes built homes that have a much smaller 25:20

energy need so we need to build new homes that way when you can retrofit existing home. We know everything we need to do. It would be great. If we had 25:30 Fusion will be wonderful for many reasons. We probably won't have it for a decade or so, but we don't actually need Fusion to solve this problem. We 25:39 can solve it. We also know how to get carbon back out of the atmosphere. We spent the last two hundred years to can carbon underground burning it and 25:48 put it in the atmosphere. We know how to get it down. We can plant a lot more trees this people planting trees from drones. Now, 25:55

there is lots of effort to serve say can we take biomass and put it back into the ground through something called by which are you grow? 26:04 Grass and instead of feeding at the cows. Can you put it through a process called pyrolysis? And what comes out it's a black glue that you can put in 26:14 the ground. It's actually good like fertilizer but didn't keep the car in the garage or you can do on Fritz with built a place. I would like you can 26:22 substitute word for concrete to we know everything we need to do. The problem is with doing it not at school yet. So it's all about taking the things 26:30

that already work and stealing them up and that's where I think digital technology can play a big role where online can play a big role on but we're 26:38 still going to need regulatory changes. I mean, you know, what would be the best thing for the planet would be for every country in the world to put a 26:47 price on carbon tax would be the most efficient simple way to do it. But you don't New York City in New York state in California have required 26:55 businesses and landlords to get to zero carbon by 2030 or 2040 or 2015 if they don't they going to find I took 27:04

that is at another way of putting a price on carbon. Those are really good thing. They're good things because they will force people to change. I know 27:14 it one of the largest landlords in New York City went to lunch the summer with and he said, you know this new law in New York City is completely 27:22 screwing us and I said, so what do you do about it? He said we can't retrofit are buildings. There's no way we're going to meet the requirements in 27:28 time. So what do you do about it? He says we bought a piece of property in Upstate New York, building a massive solar farm and we're going to bring 27:35

that energy down. I'm going to power up buildings with clean energy, but it sucks that 27:42 you have to do that. Right? So I think that government has to do this 27:51 government has to force the issue and once they do very very 28:01 Can somebody throw them in diagram for that place? I'm speaking of the part of me. That's a human be 28:13 there be there 28:22 be dollars there to solve these problems for people that's a huge amount of innovation that will get unlocked or will get deployed much more broadly 28:32

the second we text carbon and the proper carbon tax would work in a way where you have to pay it if you admit and where you get to earn it when you 28:41 remove And we got any more controversial thoughts. You want to share. All right. 28:48 Well in that case, I think we'll just wrap up tax carbon government intervention. Maybe everyone can make money. Please join me if they got the wisdom 28:58 isn't all bad. 29:06

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