Interview With Cleantech Investor Zack Bogue Of DCVC

Benjamin Schulz: Zack, you’ve been investing in cleantech a long time, and if you look back, what change have you seen between then and now? 

Zack Bogue

Zack Bogue: I became interested in the space around 2007 — that was during the first cleantech wave when a number of cleantech companies weren’t working out because they were too capital-intensive. At that time, I just became very excited and curious to explore: Can you use big data or other computational approaches to make cleantech less capital-intensive and not fall victim to the capital requirements of the time that sunk a lot of those deals? And I think that was a gradual progression. So I would say that was between 2008 and 2011 when I was undergoing that thought process.

Fast forward to today, what has changed? Now there is a subset of companies. Some of the biggest cleantech problems are a problem for government to finance or for PE to finance; they don’t lend themselves to venture capital. But now there’s a growing subset of companies that rely on modern computing approaches — AL, ML — just computational approaches to make things more Capex and Opex efficient and that is pretty exciting.

Benjamin Schulz: That would be something like improving the battery chemistry through machine learning? 

Zack Bogue: Absolutely. A good example, it lets you do a lot more experiments in silico when you’re trying to design, say a new anode for a battery. Rather than having to just do hundreds of thousands of real-world tests on new materials, you can do a lot more of that computation.

Benjamin Schulz: What is the backstory of the firm DCVC, what are the beginnings? Also, if you look back, how did you think the firm would develop back then and how is that different from how it developed?

Zack Bogue: Around that time when I was becoming interested in computational approaches to hard environmental problems, I met my business partner, Matt Ocko. It was at a mutual friend’s birthday party, Mark Pinkus, and it was at a club. It was way too loud, and Matt and I were the two guys in the back of the club. We met each other, and we were literally yelling over the music about our views on the emerging big data investment process.

The modern computational approach at that time was “big data,” a term that was not broadly known. Now if you say big data today, people’s eyes roll back in their heads. At that time, if you said big data and someone else knew what you were talking about, it was pretty exciting. Everyone’s databases were breaking. There were a lot of massive datasets emerging in a lot of the environmental fields, which were breaking those databases: the utility space, the building efficiency space, the energy space all had massive datasets. That’s why I was interested in big data.

Matt and I hit it off and we began co-investing together, which led to creating DCVC. Our first computational biology company investment was in 2011, our first climate tech investment was in 2012. A lot of what we were investing in was scale-out, compute, early database solutions, because that was the hard problem at the time – that technology needed to be perfected before you could go on and build applications to tackle some of these perditious environmental problems thereafter.

DCVC

Benjamin Schulz: What has it been like to build DCVC?

Zack Bogue: It’s been a great ride. As with all things, no complex system emerges spontaneously; it starts small and grows bigger. We began co-investing. Orst fund was relatively small, so it was pretty exciting to see the amplitude as it increased over time the way it has. We didn’t necessarily expect it to, and we weren’t setting out to build to where we are now — which is north of $2 billion in committed funds. We knew it was a possibility but it’s been really gratifying to see it play out this way.

Benjamin Schulz: If you look a bit into the future, where do you see DCVC hopefully in 5 or 10 years? Do you think about that at all?

Zack Bogue: With DCVC, we back entrepreneurs solving trillion-dollar problems computationally. And five or ten years from now, I hope we’re still doing that and at an even greater scale.

Benjamin Schulz: We’ve seen these big trends in electric vehicles, in batteries and alternative proteins, in renewable energy – how do you see those trends, which are already big and established, going forward? Is there anything in those fields that you find particularly exciting?

Zack Bogue: Absolutely. I think, for example, that the alternative energy space is sort of the flip side of the coin to electric vehicles, and we need to massively scale our energy from all dimensions. We need to scale our zero-carbon energy. I think that is the story of the next decade, where we need to significantly increase the amount of electricity we have.

There are two reasons why we need to do that. One, we need to electrify almost every area of our economy and be able to supply that electricity from zero carbon sources — nuclear, wind, hydro — and soil — are great examples. But in order to scale up, we need a massive expansion of all sources, largely supported by expansion of nuclear energy; it’s the only thing that can scale fast enough.

The other reason why we need it is for the folks who don’t have enough energy; to get energy to them so they can have lights to do their homework at night. So there’s sort of a dual imperative, both of which require a massive amount of zero carbon energy.

Benjamin Schulz: Do you sometimes have the impression that the topic renewable energy has been talked about for so long — 30 years — that sometimes people are sort of bored by it. They say it is important and we are way behind, but somehow let’s talk about something else because we don’t have the emotional appetite to speak about all the problems  that have been talked about so often?

Zack Bogue: I read a great essay recently that said all of the words that need to be said about the climate crises have already been written. They’ve just been rehashed and rehashed over the past 30 years.

What gets me excited as a venture capitalist is, there is a small subset of these near-term opportunities that I can back with venture scale dollars that can have a tremendous impact on the environment in the near term. So I think I agree with your statement there. Also, part of the problem is that over the past 30 years there’s been a big expansion of classic renewables — wind and solar — without much impact on the amount of carbon that the world is producing. So I think that’s the other fatigue in that equation.

Benjamin Schulz: Talking about some new trends, what are the topics in cleantech and climate that are new that your firm finds very exciting?

Zack Bogue: There’s a handful. So one, I would say, is methane abatement. Human-caused methane accounts for about a fifth of all global greenhouse gas emissions. And the nice thing is that methane is relatively ephemeral in the atmosphere. Over a 10-year period, it is 99 times as potent as CO2, and about 80 times as potent as CO2 over a 20-year period. But it only lasts in the atmosphere for 10 years. On methane emissions, it will have a very positive impact as that methane degrades, turns into CO2, and becomes much less of a potent greenhouse gas.

Not only that, there is a big imperative behind the major sources of methane. There’s installed fossil fuel infrastructure, which is sort of inherently leaky, but there’s also real intent behind the owners and operators of that infrastructure to stop those leaks: One, it’s their product that they sell, and two, stopping those leaks can have a tremendous impact on the planet.  This is a problem that’s being tackled by our portfolio company, Kairos Aerospace.

Benjamin Schulz: They discover leaks?

Zack Bogue: They have advanced methane sensors that can pinpoint leaks in oil basins and allow the infrastructure owner operators to quickly fix them. And one of their customers has publicly said there was a 5-day ROI on this, which is pretty exciting and a pretty good testament.

And the other big source of anthropogenic methane is from enteric fermentation, from cows. If you feed cows a small portion of bromoform, found in a specific species of seaweed, it can reduce their methane emissions by up to 90%. A company in which we invested, called CH4 Global, is working on this. So those are two things that are incredibly exciting that can have a real near-term impact. They also have  a very large and attractive market they’re selling into, with real customers, which is also exciting from a venture capital perspective.

At DCVC, we’re a for-profit fund. Our investors are folks like college endowments and big charitable organizations that run hospitals. So they give us their money and regardless how good the cause is, I need to give them back a return on their capital so they can operate their hospital beds and heal people.

Benjamin Schulz: Otherwise they will probably disappear as future investors. That could happen. 

Zack Bogue: That’s also true.

Benjamin Schulz: What was the best investment, however you define it, you ever did, and what was the best one you missed, you would have liked to do?

Zack Bogue: One of our investments that I’m most excited about is a company called Oklo. This is an advanced nuclear fission company that is well on its path to building small advanced nuclear reactors to produce a material amount of electricity in the US. The other exciting thing is that they can burn existing spent nuclear fuel. A lot of people are worried about spent nuclear fuel; Oklo has won an award from the Department of Energy to be able to use that spent fuel for their reactors. The reactors are much safer and they do not consume a material amount of water, like many other reactors. It’s a very exciting space and that’s one of my investments that I’m particularly excited about right now.

One that I missed was way back in the day, in the solid days of the big data movement. It was a company called Dataminr, which is still around, and doing great. I met these guys, we had a mutual affinity, and I was tracking them. We were a small fund, they had to do a big strategic round, and there wasn’t enough room for us. I was inexperienced and I didn’t know that I should have been more pushy or more persistent. I could have stayed engaged with them and invested six, twelve months down the road, and instead I just kind of forgot about it. I missed it. I still see Ted Bailey, their CEO, around and I think about it. So that’s one that got away back in the early days of big data.

Benjamin Schulz: And does he sometimes appear in your dreams?

Zack Bogue: Ted Bailey does not haunt my dreams. I’m still a big fan of that company — these guys read massive data signals out there that can predict events as they are happening in real time. It’s very exciting stuff.

Benjamin Schulz: And one question, the nuclear fission company Oklo — if things go well, how much would a reactor cost to build to give readers an impression? Is that a 500 million reactor or is that 3 billion reactor, or what are they aiming for?

Zack Bogue: They have started small, which is really useful for applications like military bases, small off-grid communities, or power data centers. They can also scale up to a 50-megawatt reactor, which is modular, meaning you can stack it up and build it as large as you want. The power they give off takes into account all of the Capex for building the reactors. Rates are extremely competitive with grid electricity, as well as current rates from select wind and solar installations.

Benjamin Schulz: When do you think their first or next one could go online? 

Zack Bogue: We expect this to be well within the decade.

Benjamin Schulz: Speaking about decades and timeframes, if you could enact one policy, what would it be?

Zack Bogue: The simple one is carbon tax. So I’m an environmentalist. I studied environmental science at Harvard back in the 90s, and at that time, there were so many different environmental problems we were thinking about. But now, fast forward to today, in my view there is really only one, and that is CO2. If we don’t get CO2 under control, the planet will heat up and the climate will become increasingly unstable, and we don’t actually know what will happen. That’s really scary and why a carbon tax is kind of the most exciting thing for me in that branch.

Benjamin Schulz: If you look 3 to 5 years into the future and you see the dangers of rising carbon emissions, or other things, is there anything that you think is not talked about enough?

Zack Bogue: The scariest thing 3 to 5 years out that not very many people are aware of is water scarcity. We’ve seen zero days, meaning when a city is going to run out of water and have zero days’ supply left. We’ve seen zero days almost happen in Cape Town, South Africa, and Chennai, India. The southwest of the US is in a large secular trend of decreasing water, as well. Sensor technologies and our ability to monitor have increased pretty well over the past 10 to 15 years, but we still don’t have enough technology to be able to create a real watermark, and there are also hundreds of years of water traditions and laws to consider. So water scarcity will become a bigger and bigger issue over the next five years. There’s a saying, ‘if climate change is a shark, water is the teeth.’

Benjamin Schulz: Do you think atmospheric water generators — which can extract water from the air — have some promise? Is that something that could become interesting, in your view?

Zack Bogue: We’ve looked at a number of these. They’re interesting on a very small scale. This is for an individual home out on the frontier. I don’t think that the cost is such that you could do that for a municipal scale of water.

Benjamin Schulz: Would you personally describe yourself rather as an optimist or pessimist with regards to humanities’ and also the US response to solving these issues, and solving the CO2 problem?

Zack Bogue: I’m a little of both. On the technical side, I am almost by definition of investing in the space, an optimist. There are technological solutions to a handful of these problems that can have a huge impact. So another one that I haven’t mentioned is our portfolio company, Pivot Bio. Pivot Bio is replacing synthetic fertilizer with microbes so there is no harm to the soil, nitrous oxide emissions, or nitrate runoff into waterways. Synthetic fertilizer, created through the Haber-Bosch process, causes around 9% of global greenhouse gas emissions, and it consumes about 2% to 3% of warm energy, a hugely energy intensive process. They say that 40% of the nitrogen atoms in our bodies are from the Haber-Bosch process. Additionally, about half of the fertilizer that a farmer applies stays on the field, the other half washes off and creates a massive dead zone for Mexico and other oceans around the world. So synthetic fertilizer basically enables us to feed a planet of 8 million people, but it’s incredibly polluting. It just pollutes the existing water we have, which is already at risk of becoming scarce . The other thing that’s nice about Pivot Bio’s microbes is they are user friendly and they boost yields. Farmers like to be better stewards for the land, to be able to pass it on in better shape for future generations. It’s a huge win all around. So that’s a good example of why we’re excited for technological solutions.

Another one is the company Twelve (read CleanTechnica’s interview with Twelve CEO Nicholas Flanders here). It’s the answer for what to do with all this CO2 when you capture it, and then make useful industrial chemicals and fuels. So they’ve announced partnerships with Procter & Gamble to make certain elements of household products on a CO2-negative basis. I have a pair of sunglasses in my office with CO2-negative lenses.

Benjamin Schulz: When I tried to get some they were already sold out! 

Zack Bogue: Twelve also makes plastic car parts with Mercedes-Benz on a CO2-negative basis, as well as CO2-negative jet fuel with the US Air Force. This is why I’m an optimist — all these great examples of how we can achieve a secular economy and continue to operate our economies with the fuels and chemicals that we need, while massively reducing CO2.

I’m a pessimist in that so many of these cycles in the environment will play out over decades or even hundreds of years. And so, even by addressing all of the problems immediately, we’ve waited too long and I think it will take a long time to work through the system. I think we will have all of the great solutions, but not quite enough time and there will be sort of a rocky transition period — not perfect and a little bit ugly. We’ve gotten a glimpse, with the extreme weather events and the fires over the past year. So I think it’s going to be a combination of both, but the nascent and emerging technologies I see do give me reason for optimism.

Benjamin Schulz: Speaking about optimism, what organization, what person is a motivation to you and your firm? From any field. 

Zack Bogue: Two things — one, people like Oliver Stone and Al Gore who are telling narratives to the general public about climate change, nuclear energy, and ways we can solve this problem, that is crucial. Part of our problem is a public awareness, public consciousness, and a public will problem, so their message is  incredibly important to solving this problem.

Another aspect is folks like Stripe and their investments into direct air capture. I feel like direct air capture is still decades away from being cost competitive. It’s a little bit like using teaspoons to bail out the Titanic. But people with the vision like Stripe are paying to iterate on these incredibly nascent technologies, because we are going to need that technology eventually. I think they are doing good work.

Benjamin Schulz: Lastly, if you weren’t working at DCVC, what do you think you would be doing?

Zack Bogue: I would be a nuclear energy advocate. There’s no clean energy technology on the planet that has scaled up fast enough. There have been at least two times when it’s scaled up in incredibly fast ways in Sweden and France. This is on the scale of an industrialized nation, a society-wide scale-up that can produce the amount of clean energy we need to electrify our entire economies and begin removing and doing other remediation and adaptation for the planet.


 

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