Investing in energy tech with Philipp Emig (Senior Vice President @ Picus Capital)

Hello, everybody, and welcome back to podcast. It's me, Quentin. And this week, we're talking about how start ups get funded in the energy transition, but especially in our world of energy storage. So one of the things that I think is really cool about our sector is there is so much change.

You've got new technologies, and you've got markets being brute forced to look very different and new regulations. And then you have, of course, software eating the world. And because of all this, you have new business models and start ups being created. And most of these start ups need to get funded, and Pickers Capital is a investor in that space.

Now I've known Philip for a while.

He's not an investor in Modo, unfortunately, for him, but we have known each other for a few years.

And he thinks very deeply about investing in the energy transition. So I think you're gonna like this conversation. I certainly did. And if you get to the end of this and you thought it was worth listening to, please hit like, subscribe, and all those good buttons.

They really increase our reach and mean that we can do more awesome content for a wider audience. So without further ado, here's Philip.

Hey, Philip. Welcome to the podcast.

Thanks for having me, Q. Hey. How's how are things? How are you?

How am I? I am thanks for asking. I'm a little bit stressed. Tomorrow morning, I've gotta get in the car with two kids and a dog. Actually, just a dog for the first bit and drive to New York City, which is twenty seven hours drive without dog stops.

Oh my dear. Oh my dear. And that's that's your final moving over from from Texas to New York, I guess?

That is the final move the final move for now. Yeah.

So, yeah, if you're listening to this Fingers crossed.

Probably driving somewhere across Virginia while you're listening. And, hopefully, I'm putting my faith in Land Rover here. We got Land Rover. I'm hoping that they're not known for reliability.

It's two thousand miles, so wish me luck. But thanks for asking. Not many people ask me how I'm doing, so appreciate that. Well, a very warm welcome to the podcast.

We should probably tell listeners we've known each other for a little while, probably a couple of years. And today, we're gonna go down a different avenue than what we've done before on the podcast. So we're gonna talk all about how start ups get funding and, specifically, early stage funding for power and electrification and climate tech companies. So to kick this off, I think we should probably clarify some things.

What is what's early stage investing? Let's start there.

Yeah. So I think if if I pitch pickers or pitch pitch myself to to potential investment targets to start ups, I say, we're an early stage generalist. And you're exactly asking the right question. What is what is early stage?

I think it depends a little bit how you interpret it. In our interpretation, that's anything precede to series b, which is a quite wide spectrum. I think what is pretty interesting to to understand is what we mean by by true precede. And maybe you remember the good old days when you probably sat in the garage or in your whatever in your in your sleeping room trying to pre termination of your last contract, pre graduation or pre whatever incorporation of the next company, pre incorporation of Modo, we're thinking, hey.

What what can you do? What kind of avenue do you wanna move move down on over the next couple of years? This is a stage where we can start investing.

And that's why I spend the majority of my time either at that very stage where there is where it's all about, you know, shaping an idea into a proper business model or then a little bit further advanced. And I think if I look into our Spectrum series b, that's a company like Modo. Right? So this is a proper company. That's a grown up company, I would say.

But I think if you Oh, don't say that.

Don't say that. Well, I'm We never would argue.

Argue if I compare it to a to a garage band at a pre seed stage.

No. Just just kind of kidding kidding on that side. But I think that's that's a spectrum you could or we could call early stage. I think you can if you zoom out much more, and I guess we will probably speak about other sources of of capital later in the podcast, but I guess it's really the what the early stage really means is it's the very early innings of the life cycle of a company. So the questions are obviously different ones, either from investor perspective or be that from an operator perspective.

Well, can I ask you a question about this? Right? So it's not there, like I know we we're gonna talk about batteries and electrification and all that stuff. But just on start up funding. Yes.

So it feels like it's very different now to when I started in sort of twenty eighteen, twenty nineteen.

We back then, you really had to have a lot more okay. I hear these stories about entrepreneurs who pretty much had a a PowerPoint deck, and they go and raise a million dollars or a couple of million dollars in this pre seed thing. I'm pretty sure pre seed didn't really exist when we started with Modo. We had to I don't know.

I'm gonna I'm gonna paint this with rose tinted glasses, of course, because looking back. But we had to work a lot of hours without any money to get this thing off the ground. But it feels like it's got a bit a bit easier now. Is that right?

I I guess every successful founder right now would probably say the opposite. And, I would say that, again, I I oftentimes think about an investor also as we are also a product company. Right? We provide the product of early stage support, and capital is is one kind of spectrum or one aspect of that.

Would I necessarily say it's it's gonna be or it's it's now more more easy to to raise the pre seed round? I would not hundred percent say so. I would say, though, you have more choice. Right?

You have VCs that are, like ourselves, very comfortable underwriting something on probably not even a pitch deck, but rather on kind of a scribble on a on a blank sheet of paper, on a scribble on a whiteboard. And I think underwriting at that stage is probably a bit different than what you might recall or what listeners might recall while raising a a series a or a CSB kind of round. Underwriting at precede stage is a lot of underwriting on the on the team. Right?

It's at the end of the day, as an investor, a question that you need to ask yourself, is that space interesting enough for a great team to build in there? And I think a picture that I try to that I try to emphasize sometimes, especially like in energy and climate, I feel like founding a a start up there is very complex. Right? It it kind of walking through a maze, and you you have to probably bring one of two things, I guess.

One is either you have to bring a map because you know the energy space so well. Right? And I guess you've done stuff in energy beforehand. We've been working with founders quite a couple of times that have been starting companies in energy space beforehand and therefore bring a very, let's say, unfair insight, advantage, or access to customers.

So that's something you can underwrite as an early investor. Or the other piece, I would say, you you you don't need a map. Right? You just kind of bulldoze through walls because you're a great entrepreneur or you kind of have this muscle of you can be thrown any issues towards, and you will just, you know, find a way to crack them.

You will find a way to tear that to tear down that wall they're just standing in front of. So, again, this might sound a very a little bit, like, philosophical or or probably even a bit esoteric. Back to your question, has it become easier to raise capital there? It's probably more accessible because the product of early stage investing still look at our funnel, right, like, we say, for better or for worse, we say nine ninety nine point nine percent of the times, we say no to a start up proposition even though it's a great market, a great product, a great team.

And only, like, point one percent of the times, we might say yes. So it's still that also early stage investors are very much cherry picking, very much kind of only picking a few outstanding teams or outstanding ideas to be then supported down the line.

Yeah. I was being a little bit facetious. I actually think it maybe there's, yeah, there's more options. There's more capital around.

I think if we'd gone out and just raised a load of money on us on our pitch deck you know, we we we built the wrong company for twelve months, and then we had to pivot hard. And then we didn't know what we were doing. It took us two years to figure out what else we were doing. So I don't know whether I could have handled the pressure of, you know, institutional money at that stage when we're still figuring out the market.

And we had a lot of luck along the way as well. We kind of fell into lots of sequential lucky things happened to us that we're very grateful for. Anyway, let's talk about climate tech. That's what we're here to talk about.

Let's do it. Let's talk sectors and technologies.

So what what are you focused on this?

Yeah. So I think you can you can cut it in different ways. Right? I think one where we sometimes think about it, and this is rather the, let's say, conceptual way of cutting it.

For me, climate or anti tech is is probably a spectrum that has two extremes. The one extreme is like ultra deep tech hardware IP related topics. The other end of the spectrum is pure software or data place where you don't have an asset on your balance sheet. And then there's this, like, a continuum in between.

And I think we personally, as as Pickers, we so far have been investing. If you cut it down into four sectors, we've been investing into the whole spectrum of you can have assets on the balance sheet. You can, like, leverage, you know, assets in the field to build a software product on top. You can have software data placed.

We haven't been so active on the on the pure hardware side or pure IP side so far. I think I wanna underscore so far because we so far made the very clear strategic decision not to do that. But that's, again, a choice that every fund has to make for themselves. We don't shy away, for example, from doing stuff that involves assets because we certainly believe in many sectors to bring an asset or to also facilitate the financing of an asset is the is the unique wedge in.

I think you might I guess you probably also were were hinting a little bit more onto what what areas or what kind of themes we we we like most. And I think there, it's it's a it's a truly broad spectrum. And I think I can I can come up with with a couple? I think first, you know, as an as an investor, for better or for worse, you can't get around AI these days.

And I think AI has also its right to play in in climate tech or in energy tech. But I think of it more of a, let's say, a technology or a a new tool in the toolbox to crack on difficult energy and climate problems. Right? So I don't necessarily see AI as kind of this is an investment topic.

It's rather an enabling technology. And that might fold into, you know, fine tuning manufacturing, stabilizing the grid, optimizing buildings, optimizing batteries, you name it. And therefore, if I if I trickle down, I think in a theme that we have been excited about and remain very excited about is is the whole spectrum of the of what people sometimes call grid tech. So all things that bring higher transparency, probably even real time transparency, things that you might summarize with smart grids, which in a sense means everything and nothing with topics that are related to the big interconnection issues that we face in many, many markets.

I think some markets in the US, we see that in Europe in many different aspects or nuances. So I think in in that space, we have been very active. We will probably also remain very active because we believe again, this is not a not a not a theme that I've been inventing, but many refer to the grid as, like, the biggest machine that humans have ever built. Right?

And I think we believe By the way, that is MODOenergy bingo.

That is the third time we've had this mentioned on a podcast in I don't know. How many episodes is this? Hundred and fifty? So whoever rings the bell somewhere, ring the bell.

Ring the bell. In German TV shows, you have to you have to put a few coins into, you know, a savings savings box if you if you do bingo. But, well, I think I can I can get around get around that? What I what I try to say is we believe there's big transition happening on on that machine or with that machine.

And therefore, we we see a total right to play for for tech topics to to help there, to help facilitate. I think probably a a few more just to to to to mention them. A bit more under the hood and probably even a a bit of a wild card that has been out there for a while is we've been talking a lot about energy now or about how to manage that transition. We've been talking a lot about, let's say, how can we prevent climate change from happening?

I think the other side of the core of the same coin probably is how can we, like, live with the risk or live with the consequences of it? Right? So how can we ultimately adapt to a unfortunately quite sad new normal of or and I don't wanna make this a political discussion, but I guess we everybody who might be listening to this is probably waving goodbye already to one point five degrees as a climate warming target, at least in the middle long term, because there is probably an unstoppable kind of continued pollution happening. So for that reason, I think we have to also switch gears in thinking, and we see that as a more and more emerging investment theme also.

Some refer to that as adaptation or risk management and mitigation. So I think also in there, there are and again, this is typically citing the very that they said examples over the last couple of of days, weeks, or years. Look at the wildfire wildfires in in California. Look into several heat waves that happened all around the globe.

Look at kind of the insurance rate of houses that are in flood prone areas go shooting up. I think all those are are problems that are, let's say, that are waiting for tech disruption. And maybe let me let me close because that list could go on forever, But let me close with why I'm stating problems instead of solutions. This is, I guess, the true spirit of kind of early stage or precede investing.

Right? You invest in a team having a first idea or bringing a first, whatever, version of a key to very difficult key lock to unlock, if that picture makes sense. So I think that's a little bit what is the combination of a couple of the questions that you were asking. What is interesting for us from an early stage perspective and what is, let's say, the concrete topics or the concrete verticals that we find most attractive.

And I think the overlap of these can go on. I think we can speak about data centers. We can speak about mobile baseload technologies. We can speak about another data place, but I wanted to just kind of leave that with with everyone that true precede investing means you have to kind of chew on these topics, on these problems because you have to find a solution that is right for the market in one or two or three years' time to then kind of at scale confront it.

Yeah. I mean, there's there's there's so many awesome problems that you just talked about there. The one that I can't I mean, I'm biased. I really care about power grids and transmission, but the one that I just keep on coming back to is any startup that it may not be a good problem for a startup to shot to solve.

But we we have this massive interconnection problem across the world. And what's the root cause of that is that we're actually the way that we're operating grids, we're limited on the amount of steel and cable in on the planet, and it just takes so long to get new transmission assets built, you know, overhead lines and cables and whatnot, that we've gotta do something smarter. And the the problem set relating to getting more out of the existing assets, so getting more, you know, dynamic line ratings companies, for example, love that business model. It's tricky because there aren't that many buyers of it, but it's an incredible technology, and there's there's it can scale.

So these kind of companies that are saying, okay. Power grids everywhere are under extreme stress, and we've gotta get another thirty to fifty percent out of them. How do we do that? Companies that are working on that problem, I find very, very exciting.

But let's talk about trends. Right? So you you've been doing this a while. It's a bit of a naughty question.

But in the last few years, what's worked and what hasn't? I know you don't wanna talk too much about your portfolio and sort your own shot, but the whole point of venture capital is that you make some bets and most of them don't work out. Right? So what things have you bet on that haven't work worked out, and what what have you learned from that?

Which trends or company types or problems in our space have you have just not been right for venture?

Yeah. Yeah. And I think I make probably a bit of a statement on what what I've seen also in the market not working out or remaining a question mark and and probably can also touch on the portfolio a little bit. I think what is what is the sad truth or just the the reality is that if you take energy or climate tech or clean tech as a category, as a broader category, like, the funding levels have dropped down significantly.

Right? So we have probably gone with the entire venture market also. We have gone through probably a bit of a of a cycle of a lot of capital flowing in there. So we've seen, like, hundred fifty billion flowing in there around twenty twenty one, and we are now down to fifty billion, which is still a very high number, which is still a very significant share of the overall venture market, but it's certainly, like, it's the third of, like, the peak times.

So, certainly, there are there are topics, there are models that have worked and that haven't worked so so much. I think the ones that that stand out, I think let's start with with that. I think we've seen a lot of kind of success stories on the on the battery side, on the home energy control and flexibilization side of things, be that, again, grid scale or home scale technology.

I think the the big question marks that remain out there for me, and, again, this is also touching on the portfolio, are topics all around, call it carbon accounting. I think a bit of the poster child of a typically regulations driven or regulations ignited market, which can probably add a lot of business value. But if you only sell into people that are buying it to get a bit of a regulatory check mark, certainly, it's probably not a category that is really taking off, especially not these days. So that coupled with, for example, voluntary carbon markets, it's another probably clean tech or climate tech category, I would cite, where there are lots of great companies popping out of the popping out of the ground, a lot of great founders trying to build good models.

I think just the overall volume has not kind of picked up as it was forecasted probably a couple of years ago. Might be a combination of of reasons why that's the case. I think also tightly connected to that called carbon capture. Carbon capture is another category which has, you know, big promises facing reality on costs not coming down to the extent expected, at least originally.

Same with green hydrogen.

I think that has been a promise over years in, in the EU, for example, with a lot of task forces being built around that and still You're gonna stop me off now.

Come again?

Sorry. The the amount on recording this podcast, the amount that I've had to be edited out over the years complaining about green hydrogen. And now, of course, everyone knows it was mostly stupid. But, like, for years, every time someone's been like, Q, you you really shouldn't say that on the podcast. And now it's it's common sense. Anyway, sorry. Carry on.

Well well, now now now I'm saying it. So green green hydrogen has been, I guess, one very high hopes facing also yet yet another reality. And, again, I would put a question mark behind all of these because I think those are not that markets or that technologies. I think it just is a bit of a where we see a discrepancy of, let's say, the timings of such markets and then, like, the reality or the technical complexities of it.

And I think that's also grouping it back to, like, the venture ecosystem or to what it is to do also early stage bets. Like, if you have placed bets in these markets five years ago, you might have expected a different stage of the market of the respective companies. And I think even the climax of that, I would put into the categories that I see almost being beaten up over the last couple of years. Like many people call micro mobility or green micro mobility a climate tech or energy tech company category.

I think that has been one which has been beaten up badly. Lots of kind of merging happening in in the markets now. Similarly, with vertical farming has been a key thing that has received or has attracted a lot of capital over a couple of years, kind of offsetting or replacing kind of near shoring agricultural production. Same with alternative proteins.

And I think the ultimate climax, which is also why some people might call it or might have called these times bit of a clean tech or green tech bubble, like, if we see some of the kind of stack deals that got into public markets on the energy and climate side, and, again, I might cite EVgo or or Nikola as as two examples. Well, let me put it that way. I'm I'm happy I was not holding any stocks shortly after the IPO because that would have not been the best investment to make over the last couple of years. So I think this is a bit the picture that I that I see or that we see in that market.

Yes. It is a venture category kind of it is a venture category. Let's put it that way. Because you see the winners and the ones that are rather on the on the losing end, and you see kind of lots of capital being flowed into categories which then afterwards almost implode after a big peak of funding.

So I think that's at core what what the trend was that I or that we observe over the last couple last couple of years if you look into, let's say, the uses of capital in the energy climate clean tech ecosystem?

I'll tell you what. The thing that I miss the most is venture capital dollars going into e mobility because used to be able to get on a LimeScooter or a Bird or a whatever. There were so many competing scooter companies. It was basically venture capital sub subsidized transportation around London and LA and whatever.

It was brilliant. And now all the money's for now, and it's like ten dollars to get a Lime bike a mile or whatever. Yeah. All good things come to an end, unfortunately.

What about okay. I've gotta ask you about this. So Climate Tech VC has had a bit of a battering recently. There's been op eds in, you know, big publications, all folks on social media saying you know, basically making the argument that venture capital flooding into the climate tech vertical was valuing things, you know, intangible things way higher than it should.

And, actually, the thing that ultimately matters is a return on on the capital invested. Right? What what do you think about that? Because Climate Tech's had a bit of a a tough ride recently.

I think you you preempted the last question that you typically ask guests on the podcast, which is kind of what is what is a bit of a contrarian view? I guess if if I preempt the answer to that, I guess there's there's this kind of wide statement, be that among VCs or be that also, like, at energy and climate conferences that climate tech and climate tech investing is is dead and that we kind of we see all these kind of grave graveyards with rest in peace climate tech. And I think one aspect of that is indeed the kind of some investors being beaten up badly by having made investments and have overvalued kind of certain assets with multiples or with kind of valuations that were not substantiated by, let's say, the tangibles or the potentials of the respective companies.

So, again, my my contrarian view would would argue climate tech, I see more more alive than ever before. And I think one of the reasons is because finally, we have understood that on the climate tech investing side, you have to think also the climate tech capital stack a bit more differently. Because I perceive it's it's more of a team sports than a pure venture capital category. Because I think what you will see is probably two things.

A, you will, for many models and I've made this kind of analysis or they made this overview of the spectrum of climate tech, of, like, super asset heavy to super asset light and only only software. As soon as you touch assets, you might have very different beasts in your beast is a bad term. You have very very different investment professionals in your board meetings around the table because you might all of a sudden tap into infrastructure investors. You might have, venture you might have private equity investors.

You might have corporate venture capital. You might have all sorts of utilities all of a sudden being active in the energy tech space. You might have the oil and gas majors living there, you know, deploying a lot of the the the money that they've made on on on their oil and gas basic business, pouring money into clean tech companies. But that's why I believe, yes, maybe we see as a category is not the only one shaping, let's say, the energy and climate innovation bracket or the energy and climate innovation markets, it's different pockets of capital where we have seen rises of them in the past years and where, again, if I look into the boards in which I'm sitting, we do have a different set of folks sitting around the table.

It's not only the kind of software we see type of folks that sit in New York, in the Valley, or in in Europe. They would sit London, Munich, or Berlin, or or or Paris. It's kind of infra investors, as I said, that look into probably a little bit more of a risky category of infrastructure, but still think about that as a platform and provide the capital, the resources, the, let's say, knowledge also how to scale a company when it's a bit more mature. But when that and other structures of or other pockets of climate capital become more important.

Again, same about strategics. Sometimes strategics can be very valuable additional investors on top of it. So very very long argument, but I think my my view is climate tech is more alive than ever, but it looks differently. It looks differently from a capital stack perspective, and I truly believe that this is rather a long term positive effect because, again, these very early risks I was describing it.

Right? Problem to solution to kind of getting a business model on the ground, well, you probably need venture capital. You would have probably a hard time raising from kind of an infra fund back back in that days. But later on, there might be very different pockets of capital that you can tap into, And I think those are the necessary and also very beneficial building blocks later in the journey or later in the project in the with the journey growth story of a of a company that is building in the energy and climate space.

Yeah. I've got this longing in my heart one day to work in a hardware business. I'd love to work in a hardware business. I'd love to work on a manufacturing business. I just think they're, you know, they're not they're unsexy by many folks, but I I just I love it and, you know, real engineering problems. But, yeah, I I'd love to do a b to c business, but you only have one life. So I'm quite happy doing this for now.

At least for now. Let's see in another life.

For now. So let me let me ask you about batteries specifically because over the last ten, fifteen years, we've seen a load of business models that sometimes have come and gone in different types or different names to the same thing. We had DSR that turned into optimization. There's some terrific businesses out there doing optimization and market access. There's battery management and battery cell analysis. Again, some awesome companies are doing that. But there's some of these things repeats over time, and I'm just interested to know, in the battery space, what are you excited about?

I I focus it on, let's say, the grid scale side of energy storage for a second because I think there's also a lot of stuff happening in the more distributed side of energy storage. Think homes or think commercial industrial solutions. But I think on the grid scale, just to run run home the argument that I've made also earlier, I think what we and this might be a very European perspective as I'm sitting here or standing here in in Munich, Germany. I think in in Europe, we see a lot of integrated battery platforms almost.

So companies that don't shy away from taking some of the development risk onto their balance sheets, holding even some of the batteries onto their balance sheets, and kind of then build a platform around that. The platform could be on the aggregation and then kind of trashing it out and kind of tendering it outside of things. And we have a portfolio company in that space. We do see also quite a few other models popping up in in that space.

So not only kind of leaving it to normal, quote, unquote, developers and normal operators, but really building a bit more of an integrated one. I just came off a conversation with an indeed an infra infrastructure investor.

They have such a platform also in their portfolio, actually competing company of a portfolio company of ours. And this is where I come back to my argument of there is a diverse stack of capital coming in. To kick such a platform off, to kind of do a bit of the groundwork, the incepting work, yes, you might need software VCs or very kind of risk seeking investors. And that's again why venture capital is such a such a risk prone, zero everything kind of category when it comes to investing. You you might need these pockets to kick things off. You might need the infrastructure capital to come in at a bit of a later stage when, let's say, the deployment, the structure of the platform is proven out to a certain extent, and it's much more on kind of the repeat development risk, which is something that some core plus infra investors are very happily underwriting.

Towards a bit of even a later stage, you might see even buyout funds on the private equity side coming in with kind of a large minority or even majority stake into such companies. So I think that's a little bit an example of how I see batteries as just one of the most capital rich richest categories in the energy climate space being kind of an very good role model poster child, call it however you want, for this diverse stack, these diverse pockets of capital that come in into this market. And I think I will put that forward as one of the prime examples, and then there are certain derivatives to it.

And I think, again, this is like like the one that that you're building is kind of benefiting from the market kind of taking off increased transparency, better data flows, better connection to the the other sources of of data also, better forecasting, better bankability, all of that, I think, are aiding technologies where after a layer of assets has been established in the market and I guess you also follow the assets in the ground. Right? Texas is a very kind of battery rich kind of state in the US. You might now move to other markets again where where there is more often kind of boom coming in.

I think then on top of that existing infrastructure, you can build these software only models or these data plays, which, again, enable that industry, enhance that industry even further. So I would probably put that as a bit of a different spectrum, but still a very, very interesting pocket in the broader battery battery space. And, again, we've been just speaking about grid scale batteries now. There's a whole shebang around the, let's say, smaller applications, but you tell me whether you wanna you wanna dive into that repertoire also.

Well, when I think about this market okay. So there's gonna be fifty to a hundred trillion dollars of new energy assets this century, right, probably before twenty fifty. And if you imagine they're all held in the same fund. So they're all gonna pay a two percent management fee. Right? One to two percent, something like that.

That's a one to two trillion dollar amount of money that's gonna go to managing these assets.

And I think so much of my asset management will end up being software driven. A lot of double work. What is asset management? There's a physical aspect to it.

There is a there's a reporting element, which is important. There is a governance element. You know, all these things, apart from the person out there that's replacing the rack on the battery, you probably maybe a robot will do it, but you probably not wanna replace that person. But a lot of the you know, the back office, it's a huge amount of capital.

We need to turn some of those jobs into software, I think. Alright. Let's let's talk about international. So you operate globally.

Can you just share your thoughts on the differences between or examples of how the market's different in Europe versus North America versus Southeast Asia?

So I think we we can we can do a whole episode on on on the differences probably only within one category. So I try to to trim it to a few things. So I think it's it's probably the most exciting piece about about my job or about the investing side of things in energy and climate if you have an international exposure. Because you see markets developing at different speeds.

You see some markets leapfrogging then all of a sudden. And I think a lot of that, and I guess you will you probably confirm that in in the way you build the business, a lot of that is if you speak about energy, is so driven by its regulated nature and the way it's set up and the way rule makers, let's say, at least provide a a frame or a framework for how to operate within that within that field, within that industry. And I think a bit of the a bit of the the way we called the US, for example, when we looked a bit more into into US opportunities is you sometimes call it the the non united energy states of America because, again, it's it's so different when you look into different markets.

We were telling about batteries. Look at battery penetration, and you probably have the numbers more top of mind than I do. But Texas, one of the front runners. California, one of the front runners with, like, gigawatts and gigawatts of capacity in stock and being added at very high speed.

Some other markets, look at the northeast, way less capacity being added, but also in stock so far. So I think that is a bit of the let's say, that's the tip of the iceberg that is kind of branching or reaching out, showcasing that underneath there is such a immense complexity and variety on how you can run and how you can build energy tech models in different markets. And, again, I just make an example about the regulation in in different states in the US. Right?

If the two of us now decide to, whatever, become a a retail electricity provider, we might we might have a good chance to do so in in in Texas, in the airport market, and we might in some markets, like California, we might be prevented to do so for for better or for worse reasons. But what I try to say is, as an investor, cutting through that complexity and kind of speaking to teams that have understood these specific complexities, sort of the most exciting pieces.

On top of that, it's also an additional challenge in kind of making models truly scalable because starting a new country or starting a new state or a new ISO area might almost be like starting a new company. And, again, this is probably driven by some of the complexities.

I think that is the thing that's not talked about enough. I think for our our business model, for example, we have to have such local domain expertise. You know, you have to hire such niche knowledge and skills and, in some cases, reputation.

The idea that I think in power markets, you know, the idea it's not like you're not building Notion or Zoom or it's not a SaaS.

It it might be a SaaS business, but the model and the the cash flows do look different because there's there's so much special specialization you have to do for each market, especially if you're something like we are, which is a a trust product. And I think that's something that isn't talked about enough from start ups. This is there's this assumption that you kinda build it and just scale it internationally.

And I I actually think that's a feature, not a bug. Right? Because if you can get really good at a playbook of entering new markets and adjusting your you know, creating a a little startup within a startup, another startup within a startup, and then build your technology so that it's adaptable to each market. I actually think that's a massive technical moat or, like, an execution moat.

Absolutely.

I think that there's a bit of Kool Aid being drunk about total adjustable market for some startups that their their cost profile will end up looking very different, and they have to you have to keep on investing in each new region.

Yeah. Yeah. Yeah. It needs to be talked talked about a bit more, I think.

I do agree a lot on that. And, again, as we can do a bit more later stage investing also, one of the key things that we would look into at a whatever series a or b stage energy tech company is indeed have they made or have they developed that internal playbook of going into another market? Because it's very different. Again, we are per se a generalist, so we do have models that you can scale very, very easily.

And international expansion is, yes, it's always a challenge because you might run into some local restrictions. But I think scaling across different markets and, again, I mean, different markets can be different states in the US, can be different countries in Europe, it can be different continents, whatever you want. But scaling across that, if you have mastered that, those will most likely be the outstanding energy tech companies in the future because only that way you can unlock a truly global or truly large total addressable market. Because it's not that just because you have built it in Texas or just because you have built it in the UK or you've built it in Germany, you will now kind of conquer the rest of the world or the rest of Europe or the rest of the United States.

It's probably exactly the opposite. Like, the further you've kind of went down in that rabbit hole and the further you believe you have won that market, the harder it might get to kind of drag yourself out again and kind of implant yourself into a new market. And I guess that's exactly what you're doing now with kind of moving to to New York. Kind of it it's you have to make this a a conviction bet to start a new market.

This should be a conviction bet for every startup at any scale. However, I believe in energy, it's probably like a two or three x of that compared to many, many other models just because and you named it. The local domain expertise, the local network, and the trust that you have built that you have to build again with all the respective and local stakeholders. It's just a very different ballgame.

What's mad is the what they call in in cycling a false flat. Right? You know, when you are cycling up a hill and then you get to what you think is a flat, and and it's not the top of the hill and you've got another big climb. For for us, I mean, man, run running a startup is or just being involved in a startup that's growing quickly is a very humbling experience in many different ways, and you constantly get your all of your opinions handed back to you. But one of the things that we thought was n n plus one regions.

And once we've done, you know, Great Britain and then we've done Texas, then, you know, once you've done n plus one, then you can do n plus two, n plus three. That's not true, actually. You have to go we're at, like, n plus five now, and it's starting to feel like we really have got this playbook nailed down. But n plus one, you know, just doing Texas and then saying, oh, okay.

Now we're gonna do Australia. I mean, you you have to have so many bites at the cherry or whatever the phrase is to to figure out how in a general way to enter new markets. And we haven't got it all worked out. It is so much harder than we thought.

I look at other companies, you know, successful companies in our space, even some of our competitors that have scaled across, you know, twenty or thirty regions. And it just blows my mind. I take my hat off to them. They they they must be able to execute because it's an execution problem.

And so much of your business starts to really you know, you have to really test. Do you have true principles as a business? Do you really know who you are as a company? Do you know what your culture really is when you're operating across, you know, so many different time zones and and regions and cultures?

It is it's an incredible experience, but whatever you think you know, you find out you're totally right pretty soon.

So alright. Let's get to do you have something you wanted to plug? You haven't talked about your portfolio companies, which I thought was very restrained. Do you wanna talk about some of those guys? And then we'll ask you a contrarian question.

I think if you if you're asking me what I wanna what I wanna plug, I haven't been speaking about portfolio companies. That's right. It's also because I don't wanna kind of always put them, let's say, in in front of me because I think the the teams are doing the great work and and not necessarily me or us standing at the sidelines. I think I wanted to plug we've been chatting now about the US, the European energy markets. I wanna give a quick nuance on on emerging markets. And we have, for example, today announced an investment in in Vietnam on on rooftop solar for mom and pop shops, for small, medium sized businesses, and they will very soon add batteries.

I think, again, interesting piece in that market is that they fight kind of unreliable they fight an unreliable grid when it comes to energy supply. So it's a cost benefit that they would get similar to one of our further developed portfolio companies in in Europe, which is called NPAAL, which is kind of a integrated rooftop solar installer in the German market. So they have kind of developed over the last over the last eight years. I think the business in Vietnam that we've been backing probably looks like NPAAL probably three years ago, but they have a very different starting point because this market is a different different stage of development.

That's what I try to say. Similarly, we have done an an investment also in the in the rooftop solar space in in Mexico, which again is a very different market where there is just the the verge of, let's say, early strides of flexibility markets being being established. So this is kind of a completely different ride than what we see again in markets like Texas or the UK where you kind of rather have a complexity of cutting through so many offerings on the flexibility stack to tap into. There, it's on kind of pushing the boundaries of kind of getting things started.

So I think that's another, like, aspect of the the international perspective or the, also, emerging markets perspective that investing there is yet another ball game or different ball game. I think what we see in these two markets is that they they leapfrog or they develop much faster because it will not take take them, like, twenty years to move from whatever simple manual demand response to a bit more accessible kind of decentralized energy resource management and and flexibility on the home side. They probably jump over a lot of these steps because they might not look into such an established grid or not into such an established and sometimes, allow me that side note, rusty regulation setup.

So I think that's that's what, again, is an exciting aspect of also looking into, let's say, the markets that are a bit off the beaten path. And I think another another great privilege of being able to invest in emerging markets is to have companies like that that really, again, have a bit more of a level of a level playing field.

So, Philip, does this mean we don't have a contrarian view? Did you give it you gave it away already?

We we had it already on the on the kind of climate tech debt side. So we stumbled a little bit into it.

You must have another one. Come on.

I was I was reading a lot of on the contrarian side. I was I was reading a lot of kind of reports that, you know, we are all we're all doomed because kind of the load on the grid will whatever triple or quadruple or increase five x because of data centers electrification and all of that. I think I I do agree on the on the fact that it will increase.

I I disagree on the fact that we might be doomed because I have a lot of a lot of trust actually in technology in creating new efficiencies. So for example, again, if a forecast goes three x in total, that is oftentimes driven driven by, you know, data centers becoming as energy intense as entire countries or, and it our our dear friends from Ireland sitting on a country on an island, which is gonna see thirty percent or even more of its local national energy consumption being driven by the data centers. So I think I I I agree that we might have these effects very locally. I do have a lot of trust and believe probably even more in that we find ways to run data centers more efficiently, run AI more efficiently, kind of have as as little as it gets power waste when it comes to kind of cooling or other adjacencies, when it comes to also cross linking that with other sources of heat or power.

So I think I'm very bullish on any solution or let let me put it that way. I'm even more bullish on solutions that drive down the actual energy consumption per unit, per calculation, per chat t b t request than I am kind of fearing the insane increase or further increase on, for example, the intensity of loads coming from data centers. And I think a similar story is to be told about EVs. And I think, again, there, we will see battery prices tumbling further.

We probably even see Quadrant leap innovation on higher energy densities.

We'll probably see better charging deployment and also better usage of respective energy generation. So I think also on that front, I'm more, like, likely to see or I I do expect it to be more likely to see more efficiency gains on that side than increases on the overall loads. So I think while this is often a nice burning platform to explain to everyone, well, we have to do something, I do believe that we as hopefully smart as a smart specialist are able to also counter that with, again, the efficiency boost that we will see in the areas that are touched upon.

But don't you think that that that compute will end up being used for something else? So I I've been thinking about this a lot. Right? What happens if all this data center build out happens?

And then, essentially, you can run whatever your compute requirements are for let's just put it in brackets.

Well, AI of some sort. Right? What if you don't need all these data sensors? Well, you've got all these GPUs in data centers in Texas and Ireland and other generally low tax places, right, and low power cost places.

What are you gonna use them for? What are you gonna use them for? I mean, I'm a bit extreme. I'm a big Bitcoin bull, Bitcoin maximalist.

I think it I think it's hard money, and I think all governments will end up using it at some point in the in the future as a reserve currency as a minimum, but maybe as tender. And so you end up overbuilding all of this all this GPU capacity for AI. Turns out, actually, you don't need all those GPUs GPUs, but now they're stranded assets, and they all get switched on for as hash power for Bitcoin.

And then pretty much all of the countries in the world who went hard at AI, firstly, you don't need that power for AI anyway, so you get the benefits of AI in those in those countries. Secondly, you reuse all that stranded asset all those stranded assets to mine Bitcoin, and the Bitcoin accrues to those countries that went hard at AI in the first place.

So the base load might still be there. Who knows? But I'm aware that ninety five percent, maybe ninety nine percent of the world disagrees with me on my Bitcoin thesis.

So Well, I guess that is then it's your contrarian view, so you counter mine with another contrarian one which which which which I like.

And, again, I I I feel or I fear that we will also, as a human species, if we have built it, we we we have we will find use for it for better or for worse, and everybody can decide for themselves whether Bitcoin or creating nice pictures of cats as we both figured that we are dog people. We can say that. Like, as I'm I'm sure we will find as human species, we will find use for it. I think I might have a little bit of trust in the, let's say, in the principles of the investors that have racked up all that money and kind of this probably being a bit more of low value return use. But, again, I might also be wrong on that front.

Yeah. I agree with you. But think about fiber network build out. Right? Fiber network build out in the late nineties and noughties in the in the dot com bubble.

You know, you you you ended up with total overbuild out of fiber. Everyone, every man and his dog, basically, was underwater with with stranded assets that were ahead of their time. Let's hope that doesn't happen again. But, anyway, we've gone miles over time.

Wanna say, Philip, massive thank you. Always a pleasure to talk to you. Thanks for coming on and making this one a lot of fun. Really appreciate it.

It was a pleasure, Q. Thanks so much. And again, have a safe travels to New York.

Thank you.