CleanTechies Podcast

The Future of the EU Climate VC Landscape, Transparency, & Challenges: Exploring Climate Tech Investing w/ Heidi Lindvall (Pale Blue Dot)

July 19, 2023 Silas Mรคhner - ClimateTech & ESG Headhunter Season 1 Episode 111
CleanTechies Podcast
The Future of the EU Climate VC Landscape, Transparency, & Challenges: Exploring Climate Tech Investing w/ Heidi Lindvall (Pale Blue Dot)
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Show Notes Transcript Chapter Markers

In this episode, Silas Mahner (@silasmahner) speaks w/ Heidi Lindvall (@HeidiLindvall) a founding partner of Pale Blue Dot (@PaleBlueDotVC). This is Heidi's second time on the show and in today's episode, we focus on what they are doing to level up.

They are a 3-year-old fund now, and we cover what they are doing to continue maturing their network and processes. A lot of value in those parts of the conversation for new-ish CT VCs.

Another really interesting thing is their perspective on ensuring they only invest in startups that can get funding from generalist funds in the future.

A lot of really great insight was packed into a slightly shorter episode.

Enjoy the Episode! ๐ŸŒŽ

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Want to be part of the community and engage further? Check out the Slack Channel. https://tinyurl.com/mwkn8zk5

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Topics:
**4:25 State of CTVC in EU
**8:13 Ukraine War & CTVC
**10:46 Public Term Sheet
**18:25 Supporting Founders
**21:10 Fund Size
**25:05  Future Goggles
**29:45 Measure Themselves
**32:37 Market Challenges
**39:00 R&D & Commercial
**40:47  Common Mistakes
**43:03 What's Next

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Links:
**Heidi on LinkedIn: https://www.linkedin.com/in/heidilindvall/
**Pale Blue Dot: https://paleblue.vc/
**Check out our Sponsor, NextWave Partners
**Follow CleanTechies on LinkedIn
**HMU on Twitter: @silasmahner

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Other episodes you might enjoy:
Most Recent Episode: Redefining Waste through 3D Printed Clay Containers | Earth to Earth w/ Sanjeev Mankotia (GaeaStar)
Similar Topic: ClimateTech Investing w/ Valerie Shen (G2 Venture Partners)
Something Totally Different: Endings, Endineering, Circular Economy, & the Customer Experience w/ Joe Macleod
Last Episode with Heidi: ClimateTech VC Investing w/ Heidi Lindvall (Pale Blue D

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Silas Mahner:

Welcome back to the Clean Techies podcast, where we interview climate tech founders and VCs to discuss all things building and investing to solve the biggest challenge of our generation climate change. Today, I'm super glad to be able to welcome back to the show, as our first return guest, Heidi Lindvall, one of the founding partners at Pale Blue Dot. We spoke with her last in October of 2021 and since then they have just recently closed their second fund and, as a reminder, Heidi started her career as a humanitarian making documentaries, eventually got into the tech space, spending time in London, Silicon Valley and Berlin in those startup ecosystems. From there, she saw that a lot of companies were not investing in or building companies solving the most important problems. So she decided to get into climate and she did that by starting an accelerator, eventually went on to build a micro fund and then eventually helped build and establish Pale Blue Dot. So in today's episode it's very much like the first one in that it is highly packed with a lot of value. Heidi really knows how to get to the point and share the core information without all of the extra fluff and, in particular, today's episode has a lot of information shared about what are the next steps that once you start your VC, especially for a lot of the new climate tech VCs, there's kind of a maturing that needs to happen, as you. You know, you launch the fund, you prove the, you prove the concept and then you go from there. She shared a lot of information that I think should be helpful for those exact VCs, which are many. So, with that, enjoy today's episode with Heidi Lindvall from Pale Blue Dot. All right, welcome back to the show, Heidi. How are you doing?

Heidi Lindvall:

I'm good, thank you. Thanks for having me again.

Silas Mahner:

Yeah, absolutely. This is pretty exciting. We're actually the first returning guest, so I guess, congratulations on that. I'm super excited to be able to have a follow up conversation. I've told almost everybody who's left the show hey, we'll have you on again. But you know it has to be the right timing, so I'm really glad to have you guys on. Can you talk a little bit about the recent news as to you know why you're on again and why I reached out?

Heidi Lindvall:

Yes, so we just announced that we've closed our second fund, which is a 93 million euro fund. So it's very exciting. As maybe some remember, we did our first fund in June 2020, which was a 87 million euro fund, and now, just yeah, three years later, less than three years later we were able to close our second fund. So it was very exciting and, honestly, it just means that we were able to continue doing what we love and what we've hopefully been pretty good at. So it's exciting to see that it wasn't just a one time thing.

Silas Mahner:

Yeah, absolutely. I think it is great to see a continuation of these things. I guess I am curious is that a typical timeline for somebody to raise their second fund, kind of three years later? Is that pretty typical?

Heidi Lindvall:

It's a great question. I'm not entirely sure. I do know that one thing that is not so typical is that we still have tickets left from fund one. We are still investing from our first fund and we will be doing so probably until around the end of the year and then we'll kind of continue from fund two just after that, and that is something that people are very surprised by. If I'm totally honest, we weren't planning to disclose the news before we started investing, but it somehow leaked and it got out, and now that we decided, all right, let's just tell people what the truth is about our second fund, but yeah, I think for a first time fund to raise another one within three years and actually do final close, I would think it's not so likely, but I don't have the full data on that. I can't confirm.

Silas Mahner:

Yeah, I mean, the one thing I've noticed over the past couple of years with the people on the show is that usually the first fund is not as big as what you guys had raised, so I think that that's unusual. Usually it's maybe like $20 million is what a lot of people start out with. But no, it's very interesting to see. You guys have done really great work and invested in a lot of companies since then. But I guess the first thing I'd like to kind of pick your brain on is on a macro level. Could you speak a little bit about the state of climate tech venture in Europe? And that was a pretty big focus of our conversation last time. I'd be keen to get an update.

Heidi Lindvall:

Yeah, it's interesting because I'm still very bullish on climate tech of Europe, but it has been a tough few years, and we've definitely seen some dips in the kind of growth from where it was probably kind of 2021, which was a relatively good year but, yeah, saying that in total climate tech, in terms of total investments, climate tech, is still taking more and more percentage of that. So it is, all in all, growing, but, yeah, there was a height in 2021 and there's been a bit of a dip since then, but I'm very, very confident that I will recover from that, and I think the thing that perhaps we discussed last time is still true we still have these four parts with net zero goals. We still have these governments realizing that they need to be fully carbon neutral by 2030. And then we still have more and more founders coming in, as well as more consumer awareness. So all of these things are still essentially leading to climate tech being a growing sector. And one thing as well to mention, though, is that what climate tech is varies a bit. We definitely tried to set up our own definition of that a few years ago, but now people are coming out with others, and it can be a little bit confusing of what's meant with climate tech. So just to clarify for us climate tech is reduce, reverse and prepare for a new world, essentially and I would say that others might call it just any planet positive investment. So it's not just carbon, it's also biodiversity, it's also oceans, et cetera, and it's a pretty wide category. But all in all, if you look at that category, I think it's definitely still growing and I'm very confident that by, hopefully, the end of the year and if not by latest 2024, we'll start pick up pace again in terms of the growth in the sector from where we are right now.

Silas Mahner:

Hey there, quick break to remind any founders or VCs listening. If you are looking for deal flow, seeking to raise funding, looking for partners to help service your needs, or perhaps you're looking for corporate investment partners, feel free to reach out to us through our Slack channel, which can be found in the description, because we meet a lot of people in this space. We set aside time each week to make introductions to the various people that we encounter. This is something we do free of charge in order to help these incredible companies solving climate change to scale. Looking forward to hearing from you in the Slack channel. Yeah, I think it is quite interesting. I remember you mentioning how you guys look at things and how you define them, and it's true that there's not exactly. I still argue about it with my boss sometimes about how we divide up climate tech within our recruitment firm. I'm just like, well, this is what I consider it, and he's like, well, this is how I consider it. And it's been two and a half about two years since we spoke and it still hasn't gotten very, very clear. The dotted lines between the spaces haven't gotten drawn better, but it is interesting to see. I think that there's at least good to know there's a lot of people investing, even if the definitions are a bit muddy for outsiders Sometimes, it's still getting better. At least One thing I want to ask about I didn't actually prepare to ask this, but I just realized I probably should is if you're willing to chat about this. How is the war kind of, in a way that, affected people's outlook on investing in climate tech? Because I've heard mixed opinions that some people it kind of caused them to want to be, especially in the energy side, more energy independent and different things like that. I'm just kind of curious if you have any thoughts or macro, macro thoughts on that.

Heidi Lindvall:

Yeah, definitely. I think there's multiple factors. I mean, like you said, energy independence has been a very big thing and people really realizing within their national borders as well how they can essentially having sufficient energy, as well as looking at food supply chains and understanding how those have been affected and what can be done to optimize that. The one thing that I would mention, though, that I've seen a bit of a trend where a lot of companies that before used to really build ambitiously, to say we're building a European company from day one, or sometimes a global company from day one have really started by saying, hey, we need to solve this problem within Sweden. Sweden needs to be energy independent, for example, and of course, that sometimes doesn't lead to unicorns. It's great business and it's great national thinking, but sometimes doesn't lead to the same unicorn. So that is one trend that I have seen that has come from the war as well, that people have said that let's actually start small and start looking at what we can do within our nation first. But yes, definitely has had a huge impact on how people build businesses and the dependency on others and perhaps a little bit less collaboration, which is a little bit sad.

Silas Mahner:

Yeah, I mean it probably causes a tad bit of uncertainty. I would assume right, and it's a little difficult, but I don't know. We'll see how it goes. I think that at the end of the day, hopefully there's some positive effects, with people understanding the need for energy dependence, but hopefully still collaboration, because I think that that's the biggest thing I'm concerned about is that kind of going backwards and trying to do everything on your own right, each country trying to do it on their own. Maybe it works in the US, but it might not be very good for other countries, right? So one thing that is I thought really really fascinating as I was researching before we jumped on is you guys made your baseline term sheet public, so I'd be kind of curious to understand just why you did that. You know, is this a common thing at all? I've never seen this before, so I'm assuming not. But could you just talk a little bit about that decision? Hey, there are you building a climate tech business and looking for very specialized talent? Consider reaching out to our sponsors, next Wave Partners. Next Wave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally. So if your team is growing or you're looking to make a career change yourself. Feel free to reach out to Next Wave at Next-WavePartnerscom, or reach out to one of their consultants directly via their LinkedIn page.

Heidi Lindvall:

Yeah, well, first of all, I would say that as a fund, we always aim to be pretty founder-friendly and transparent and you know we want to make it very clear for what we stand for and we're trying to really stick to that and be very easy to work with. On the term sheet specifically, it was our general counsel, ladee Gard, who joined us almost two years ago now actually, no, a year ago Now, who has just over a year ago now who actually came up with this and wanted to do it. We discussed a lot of just first about just making a term sheet which you know we an explanatory term sheet which we essentially send them with the real term sheet. So there's like the term sheet and then you almost have like a lexic on the tell-as-you. This is what we mean by this and this is how we think about it. But then they guys said why don't we just make it public so that everyone can read? And we're super transparent with it? And he has been driving that process and done amazingly on that. And of course he is, you know, general counsel. He is a lawyer by training and he's been doing this for 15 years, so he really knows what he's talking about. And yeah, it is. I know a few funds have done it before. I don't think we are the first, but I'm all for making things easier to understand and more transparent. And I think it's great for founders to be able to read before they decide to go with us. You know what we are, what we stand for, and they have some expectations of what they're going to get from us. And the other thing is, I think it's great to just be transparent because you're also willing to be challenged. If people start saying that, hey, we don't want to see this type of clauses and Pabllo has this clause, then you know we're always open to discuss and we, you know, we try to stand for what you know, what we've said in there, and we can, we can justify everything that we put in our term sheet. But if, after a while, we actually feel like you know what, it's not really standard anymore. This is something that we used to ask for, where you don't need anymore, then we're also open to changing that. And I think it's nice to put yourself out there and just allow yourself to be challenged and to truly make sure we maintain a good kind of market. But found a friendly version of the term sheet, which of course, also works for us as investors, and you know the more of us, since we do, the more we learn. We might also change it a bit, but we'll try to do it transparently when we do so.

Silas Mahner:

Hey, there are you building a climate tech business and looking for very specialized talent? Consider reaching out to our sponsors, next Wave Partners. Next Wave are experts in talent acquisition, recruitment and retention across the climate tech, renewables and ESG spaces globally. So if your team is growing or you're looking to make a career change yourself, feel free to reach out to Next Wave at Next-WavePartnerscom or reach out to one of their consultants directly via their LinkedIn page. Yeah, I really like that. I think that, obviously, with climate tech kind of being very, very, I guess you would say, in line with ESG generally, there's a lot of people talking about transparency. It's something I'm a big fan of. You know, on that topic, what are some things that you think VCs maybe especially well, specifically climate tech VCs could do to be a bit more transparent? Are there any other, you know, aside from a term sheet, for example? Are there other ways that you notice? Hey, we've had this. You know some of these portfolio companies looking for co-investors alongside us. They're, they're frustrated by this or that. What are some of those things that you're seeing that you would kind of hope to see in the future?

Heidi Lindvall:

Yeah, on climate tech specifically, I would say, just talking about the expectations in terms of reporting and in terms of targets. So I know some funds ask for full life cycle and assessments on a regular basis. Some want to set up, you know, calculate impact on a very granular level in terms of, you know, co2 avoided, for example, and some of them have, you know, very heavy reporting requirements, for example. And I and I think it's sometimes we find this really challenging because we tend to invest at a very early stage. It's, you know, pre-seed and seed stage. It's normally, you know, two to five people when we invest, sometimes up to 10, but we sometimes find that it's it's hard to have a lot of reporting requirements and we don't want the founders to spend too much time on it. So so, you know, we try to be as lean on that side as possible. So that's something that I think that would be great to just be transparent about that. This is what we require and this is why we require it. And also, this is where we can help if we do ask you to report on XYZ or if we do ask you to set certain targets, and this is how we can help on it. And yeah, just having better and more transparent conversations around those just to compare different climate tech funds would be great.

Silas Mahner:

Yeah, that would be. That's interesting because it's hard, especially if it's something where, depending on what they're building, they might need to kind of build it into their processes right, and instead of doing it later on when they're trying to build a company, they should have it maybe set up prior to getting that funding. That'd be interesting. What with the, you know making the term sheet public, has that helped with the, I guess, getting more aligned portfolio companies to reach out to you to apply, you know, to say hey, we're interested in getting funded by you. Has that helped at all with them being able to see up upfront, kind of what things are, what to be expected?

Heidi Lindvall:

I guess it's early to say I don't think I've had companies that have specifically said that that's why they applied, but what I do know is that, for example, other co-investors have pointed out that they really appreciate it because if they're looking to fill the round and they kind of know what we stand for and know what we think is standard, I think they have really appreciated. So perhaps helpful on that side, and I do think that if the founders read it previously, I think it definitely would help them choose us if they have an idea of what the expectations are. Saying that, I do think one of the challenges that, again, when we invest so early, a lot of times they haven't raised VC money. So our term sheet will be the first term sheet they see, which means they read it and they have an idea of what it means, but they don't know if it's good before they've spoken to lawyers or before they've compared it to other term sheets. They don't really know what a good term sheet is. So it's only once you've got a few other term sheets that you come back to ours, that you might be able to start comparing and have an idea of where we stand. So that is of course a bit of a challenge, but no one so far has said that they specifically came to us for that, but hopefully they'll be more in the future.

Silas Mahner:

Yeah, I mean I could see it being helpful, though I mean if maybe they've not raised money before, but I'm sure they most likely have friends who have, so they can say, hey, this is what the company we're looking at. Can you have a look at this? I always love how collaborative entrepreneurs are in general, but especially in the climate tech space. I love to see people helping each other out In terms of so, I think one thing we talked about last time was and you mentioned it today again that you're very you try to be very founder focused and founder centric. You now have, I believe, 30 investment, 30 portfolio companies, and I guess now that you've that's a pretty good number, I think for three years, like 10 a year. I think that, if I'm not mistaken, I've seen other funds that I don't think have been able to hit that number especially early, like first time funds. What are you doing to try to maintain that relationship with each company as you've grown? The team is, I think, seven of you now, if I'm not mistaken, seven or eight.

Heidi Lindvall:

Eight of us now.

Silas Mahner:

Yeah, so could you just talk a little bit about how you're maintaining that as you grow, because having that close relationship is important to you and you've mentioned that before. And how are you, how are you kind of going forward from that?

Heidi Lindvall:

Yeah, so we still have meetings with all of our companies that are early stage every two weeks. So, and that is the kind of those are the booked meetings that are always there. Then I would say that I speak on WhatsApp to most of my companies every week and, of course, myself, joel and Hampus we all have our own companies, so we don't speak to 30 each, we speak to max 10 each, but, yeah, we discuss with them on WhatsApp on a regular basis and I think it works in the sense that we don't have specific things that we offer and specific things that we help with, but we really are there to answer their questions, and sometimes it's fundraising and then we end up spending a lot more time with them. We do a lot of intros a week and we try to help with strategy, et cetera, and sometimes there's times that their heads down and we spend less time with them. They just don't need us as much. The other thing I would mention is, of course, a few of those have already folded and a few of them have raised so much more money and are like Series B plus already. We then tend to spend less time with them, so it's not going to be 30 that are active and that we actively work with. Of course there's always some things to do with even the Series B plus companies, but once you're no longer on the board and, yeah, they have multiple other investors they don't necessarily need as much from us and early stages must, or anymore. So we kind of evens out and at this moment I think it is still manageable and we are able to help our companies. And I would say that I myself I put every Tuesday I put aside for only portfolio, so I very rarely take any other meetings. So I talk to half of my portfolio that are active every week and then I spend the other hours helping them with intros or looking at their material or giving comments or just thinking about their markets or whatever it is that I can help. So I try to set aside time, even when I don't have specific tasks, just to really think about how I can help the portfolio each week.

Silas Mahner:

Yeah, I like that. I think it's good to have these kind of ongoing thought processes. Usually there's some kind of problem I'm trying to figure out. It's not like a one-time situation coming back to week after week after maybe something else has influenced you and you're thinking about things differently. I really love that aspect of basically just being human, being able to kind of connect the dots. So that's interesting to hear. I know we talked about size last time in terms of, hey, we don't believe that it's good to have huge funds. It's better to have a lot more mid-sized funds that can help and be more active. How are you thinking about that now, Because I know you mentioned that it's kind of up for discussion in the future. How are you looking at the growth of PeerBluecom?

Heidi Lindvall:

So the interesting thing is now, of course, we have a research fund and it sticks million bigger, so it's not so much bigger. So we did end up staying at the same size. But there are multiple reasons to that. I mean, first of all, we're still the three same investors. So, as you said, we work with all of our companies so we can't scale too much. We kind of want to stick to a manageable size. We also want to do the same science. So Pre-Seed C suits us very well because then we can help at an early stage and we can work very closely with those companies. And, yeah, we don't want to have too big teams and management fees either, and I think that just becomes a very different type of firm. So we definitely feel like this type of boutique investment firm of under 100 million euros suits us very, very well. I think the challenge when you try to raise a really big seed round is that, yeah, it just becomes a different type of beast, a different type of machine. It's very hard to keep those personal relationships, it's very hard to have that kind of same structure and you need a lot of investment professionals, which means it's harder for everyone to be involved and challenge each other, et cetera. So I still think that for us this is definitely the best way of doing it and we didn't have as an ambition to raise more. We kind of put 100 million as the max that we'd raised in this instance and we were very satisfied with 93.

Silas Mahner:

Yeah, I think it's quite interesting. I mean, there's a lot of talk in just the general venture community that I've heard, especially with regards to AI and how some of these really, really massive funds, they have so much money they need to deploy in a short period of time that they can kind of get a bit irresponsible, just the same way that a startup, when it has too much money, can be a little bit irresponsible with how they spend it, and you know the kind of the lack of restriction, if you will. So I do think there's something to be said that the certain size is manageable, but it's also, you know, not too cushiony where you're like, oh, we can afford quote unquote, afford to make a few mistakes, right, you don't want that mentality because then it's a slippery slope, right?

Heidi Lindvall:

And perhaps perhaps you go ahead. No, sorry, I was just going to say that everything is a is a decision on focus. Right, like, what are we focusing on? And, of course, we understand that we can't do everything, we can't offer the same type of platform that a lot of bigger funds can, but we have decided to focus on, you know, high quality relationships and really being there for the founders and really trying to get our hands dirty and help them where we can, instead of building really good products and services that they can help and that they can use. Sorry, and hopefully you know they will then get those from following investors if needed. But for us, you know, I think that relationship early on and just having someone that you trust help guide you with their network and their contacts and their, you know, previous experience is, I think, what we want to offer startups, and that one is harder to product as well.

Silas Mahner:

Yeah, one thing that comes to mind right now is there's a lot of new climate tech funds. I think you guys are probably one of the earlier ones, right One of the big group of funds that raised in the past couple of years. So maybe a lot of people listening would be keen to hear how you're looking at, especially since you're an early stage investor. How are you building relationships for your portfolio companies for those next round. Are you building certain partnerships with trustworthy funds that share the value system that will kind of also help in a similar way, kind of, as you said, graduating essentially from your program? How are you looking at that? What would your advice be to other funds in the space, you know, kind of coming up on this, this first, finishing the first part of the race and going to the next, next section for their portfolio companies?

Heidi Lindvall:

Well, one interesting thing is that when we first started three years ago, as you said, they weren't really many climate tech funds around, and that means that we had to ensure that anyone who ends up raising a full one round will need to raise from generalist investors. So, even though this is a climate tech company, it is also, you know, a SaaS company. It is also a you know, marketplace or or you know whatever it is right Like. It's also part of fintech, it's also part of part of transport, et cetera. So we had to make sure that it would essentially appeal to anyone else. It couldn't. They couldn't be something strange about a climate tech company that doesn't work for a generalist investor. And then we also feel like our job is partly to you know, we help on the, we're very, very value aligned and we help to make sure that that impact is integrated into your business model. But then you are being judged based on your SaaS numbers, for example, or that, what anyone else is being judged on, and, of course, with climate tech companies we are. A lot of them are in markets that are growing very, very fast, and that is, of course, works in their advantage. In general, I would say that that, yeah, that's been an important. Important point in what we do is that they're appealing to those audiences. So saying that that still applies now, even though there are more climate tech investors out there, it still applies. That we want to make sure that, you know, we bring the climate alignment early on and we help them make sure that impact is again built into the business model. So it will. It's not something that we have to add on top, it's not a byproduct. It's very much built into what you do and then it will be investable by any follow on funders. So then we build, we build sorry then we build relationships with those series A investors, or sometimes seed investors, who are the best for them. So if it's a SaaS company, then we would say who's best at SaaS. If it's, you know, a consumer product, will say who do we actually rate on consumer? And then we go to them. It's. There are definitely some companies that will be more appealing to other climate tech investors based on the markets, for example, still being so immature that only a few maybe have an idea of how they believe they will mature, etc. But I think it's majority of our company will be more than fundable by any generalist investor and those relationships have been the most important for us and probably will be going forward.

Silas Mahner:

Yeah, that's, that's good, that's, that's fascinating. What about the corporate partnerships? I know that there's a lot of companies I've talked with in the past year and a half that I've said at a certain point, getting an investment from, you know, corporate VC that specifically has partnerships that will help them have you I don't know if there's any particular theme within the portfolio companies that you have where you've said, hey, let's build, you know, let's build relationships with these corporates, so that way it'll be really helpful when they go to raise their series A.

Heidi Lindvall:

Definitely. We have some of those. For example, in the transport sector we work with some bigger corporates where they get access to a huge market and huge expertise. Again, generally I still think that we want more of a generalist fund to do the next round because we think that is the highest likelihood that they will continue on the VC path and continue raising. We don't want an early acquisition from one of those partners, but having them part of the round as a kind of strategic co-lead or just follow an investor into that round, I think makes a lot of sense a lot of times in order to just kind of just help them work closer to their customers.

Silas Mahner:

Yeah, okay, that makes sense. One thing I'm curious about is how I heard some comments this past week from another podcast I was listening to talking about how it takes. What do they say? It takes 10 years to prove that you're a good investor, but it doesn't take as long to prove that you're not good From somebody who's in the seat doing investing. How do you I guess you say measure on how you think you're doing? How do you determine, hey, are we doing it? Are we doing pretty well at what we're doing? Are there certain milestones for other people? Again, there's a lot of I've talked to a lot of first-time funds that do not have the kind of experience that you and your partners did or did when you started. How can they measure how they're doing?

Heidi Lindvall:

Honestly, I think it's really, really hard. I mean, there is the moik and how you measure on paper. Of course, that's what the LPs often look at when they invest in the second fund. I can say that we've been pretty good on that. I think on paper it looks pretty good. Of course, that's just based on following rounds and valuations et cetera. But then in reality, I think the only thing we can measure it on is how do we feel like our portfolio is doing? What insights do we have about their revenues and the markets? How do we believe they will develop, how do we believe they will do when more competition comes in, et cetera. So I think in reality, three years on, it's very, very hard to have a good measurement. But at the moment I'm super proud of our portfolio and where we are. When I look at just the kind of diversity in terms of what type of founders, sectors and technologies we have, I think it's looking pretty good. We have another five to seven, maybe five to 10 tickets to do from this fund, so I'm so hopeful that we'll have a pretty solid portfolio and fund. But yes, like I said, it's impossible to say I think three years on. So I agree with that it's only 10 years. You know if you're actually a good investor. But if the portfolio think we're good and they would choose us again even if they fail, they would choose us in our second fund or, sorry, in their second venture then that is some form of success that I also would be very proud of.

Silas Mahner:

Yeah, absolutely. And how do you manage? I mean, I don't know if it's pretty standard in Europe, but how do you manage in kind of keeping your LPs up to date, because I've heard some people criticize that LPs don't really have a lot of access to understand what's going on, like other specific ways that you keep them updated, aside from just kind of like a, you know, maybe a monthly update?

Heidi Lindvall:

We have our quarterly reports and we do go pretty granular in terms of what we share about all of our companies, both in terms of impact but on other metrics as well, and then we always write a bit of an update but honestly, we don't do very much apart from that. Like, of course, you know, some of them we spend more time with just informally and kind of answering the questions and give them more insight. But, yeah, the quarterly updates and trying to just make sure that we've built an update, taking all of their requests and the concerns into account and building that is kind of the best that we do right now.

Silas Mahner:

Okay, interesting. And then I guess, over the past, you know, two or so years since we last spoke, what has been the biggest challenge, would you say broadly speaking.

Heidi Lindvall:

I think, broadly speaking, the market and what happened and what happened there, you know we did have. You know, we saw really big seed rounds. We saw seed rounds of three to five million at one point. We saw climate tech growing at a very, very fast pace and then suddenly, you know, we had all of these companies that had a really hard time raising their series A. So it has been challenging and really just trying to keep up with what is happening in kind of climate tech and a lot of, of course, funds stopping to deploy new tickets has been very challenging. The other thing is, I would say, is what we touched on in the beginning in terms of it being pretty hard to define what is climate tech and what is VC-fundable within climate tech. You know we're a lot of talk about whether we should do more hardware or more software, and do we think you can return a VC-fund within, you know, within or with these type of investments within a specific time? That is something that I think is challenging to constantly try to reevaluate, essentially and we're definitely still working on it trying to think are we going to be a bit braver, do a little bit more hardware? And then we realize but this is certain sectors where we don't think it's going to be doable from this fund, etc. Yeah, so those are some of the things that I think have been very challenging and probably will continue to be so for a while.

Silas Mahner:

Yeah, that makes sense. One thing that's become very popular, obviously especially recently, is AI, and I'm not necessarily curious so much about AI and climate tech, but I'm kind of curious if there's specific ways that you leverage AI in your deal flow management or workflow management on a daily or weekly basis.

Heidi Lindvall:

No, not really, and honestly, this is a constant discussion. I think we've been just very manual with everything we do so far, and we're now at a place where we've started to formalize a lot of things and add a lot more structure to what we do, and we are discussing what you know, what can become, what are people, what are processes and what are products essentially. So we haven't really built a lot of products, but we're starting to get better at building some better processes. So I think there are definitely ways we could use AI just to make our own processes better, but we haven't really gotten there yet. But hopefully now it's fun too. We have a little bit more resources, maybe a little bit more time and maybe we'll be able to think of something there.

Silas Mahner:

Absolutely. And then also on this topic of you know you just raised recently, just finished, the second round. What are your thoughts? I don't know how this works in Europe, but in the US there's a lot of criticism around. How you know it's very exclusive in terms of who can invest because you have to be an accredited investor. Sometimes those are very difficult to reach when you have competent people who could certainly be part of it. How you know what, first of all, what are the restrictions for who can invest into a fund, lay into into private equity in Europe, and do you have any thoughts about you know, kind of how that could be changed or something like that?

Heidi Lindvall:

I think it's. You know, I think even for us it's a tricky thing, like we have a Swedish structure and it's a little bit different for each country. I think what you can do first of all, and then there's also hard to kind of manage things like if some minor investors etc. So I am not super up to date with what the restrictions are, but I do think you know that if we were to take very small checks, we would have to do it through some kind of you know, crowdfunding platforms etc. So I don't actually know what the minimum is right now in Sweden, but we actually ended up having to raise it slightly just because of how tough it became to to to manage. So, yeah, I think that's something that needs to be worked on to get more people to be able to invest in funds in general.

Silas Mahner:

Yeah, I think it's difficult. I mean a lot of people you mentioned something last show, I believe around getting people's money out of their 401ks, for example, into it, and I think there's probably a lot of people who, given the chance or given a choice, would certainly change there where their money is sitting and being kind of helping other companies grow, but they don't have the ability to do that right. They don't have the, the authority or the the legal ability to do it. So that's that's something I think I really hope that people can work on. It shouldn't be so exclusive, right. I think the people should have the opportunity to learn and to understand what, what's required and know the you know the decisions they're making, so that they can make informed decisions, because that's what everybody does, right. In order to try to make their life a little better, they try to take risks.

Heidi Lindvall:

Yeah. I agreed, and I have actually heard some rumors of some funds that might be investing or might be fundraising part of their funds through crowdfunding platforms, essentially. So I think that might be happening. And then you know, for example, a sphere as I mentioned last time with the 401k. You know they're up and running in the US and you can do something there. We also have an investment in a green banking platform called the GreenGOT, and through that one, for example, you can also decide where you invest your money into. So you know we're investing in solutions that enable those type of change in control and behavior as well.

Silas Mahner:

Absolutely. One other thing that I am always fascinated by is the ability or the way of getting kind of technical or research type people connected with business people and how to work them together, how to help them work together and you had mentioned this a little bit last time around the advice to entrepreneurs early on who are researchers to pair with business people. Have you seen any development in that space, or are there any specific things that you're doing to help foster kind of that researcher plus the business mentality so you can find a technology and then also commercialize it rather than just being like wow, look at this really cool widget I made.

Heidi Lindvall:

Not so much. To be honest, I think we have almost worked with less researchers than I would have thought I would say a few years ago, if we look at the amount of an portfolio. I know there are some funds kind of working on that and really trying to come in in that intersection and setting up almost these incubators where they pair researchers together with business people as well, but I think we've done the less on that in general. Yeah, we've been maybe a bit more just reactive to kind of responding to the type of founders that have kind of come to us, then kind of proactively working with researchers and trying to help them and prepare them for that.

Silas Mahner:

Yeah, okay, yeah, I think it's. I do think it is interesting because there's so many. I struggle because if you're focused, I think most of the, a lot of the investments you make a large year kind of standard business models with software et cetera. But some of the hardware stuff that I've seen with some of the people on the show is very, very difficult to have. Some of these technical, very, very talented engineers understand the kind of the milestone system on how to get funded and do one thing to the next, or sometimes they want it to be perfect before they release it. So I do think there's some strides that could be made there. In terms of just a couple more questions here, in terms of when you're looking at the startups that you've either invested in or who are coming to you to try to get to raise from you, what are the typical mistakes that you see startups making?

Heidi Lindvall:

One thing is that they spend so long on the impact potential and I think for us, a lot of times, the reason we don't invest this because we don't see this being a billion dollar opportunity. And I think we are a climate investor, which means, of course, we will only invest in a company that has a climate impact. But quite a lot of times you don't have to convince us that a new way of making cement or a new way of building sustainable buildings or changing the green energy is good for the world. We know that. We just want to make sure that you can build a billion dollar company in that area. So I think a lot of people, when they go to any kind of impact of climate investor, they try to go all in on the impact or the climate side, but our questions will always be on the same things, as we would ask any other question that would be non climate. So we would say you know, is this a team that can build this product? Do they know how to scale it? Will this scale to 100 million ARR, etc. And so I really would say that this is not different than any other general company and again goes through what I said earlier they have to be able to raise from generalist investors as well. Hopefully they choose us because we're value aligned and we understand the space and we understand the impact. But it should appeal to journalists, investors as well, Because otherwise we're in a strange situation where we invest and we can't find full on funding for them. So and we can't really do that, sadly, we still have to kind of fit into the system and what it looks like today.

Silas Mahner:

I think that that's a that's quite, quite fascinating, I think I believe I've had one other person mentioned something similar from the VC side. It might have been slightly different, though in terms of you know, the they were focusing on the problem rather than the impact, but very good. So I guess maybe just to close things off here, you know what are you most excited about in terms of new technologies coming down the line. My biggest thing I'm always fascinated by is, once we solve certain problems, there tend to be kind of next problems that have to be solved. Are there any things that you're very, in particular, you're very, very bullish about right now, or that you think, hey, there's got to be. I'm really looking for some really cool companies in this particular space to solve this problem that I'm seeing.

Heidi Lindvall:

Yeah, I think one of the things is there's been so much focus on carbon emissions and, and you know, carbon accounting, but also things like ESG reporting, for example, and I think, if we broaden that, I think it's super interesting to look at nature based solutions, like you know nature, biodiversity, oceans, etc. What else fits into that essentially? And, yeah, that's what I'm really excited about right now. There's so much more to it than for us to just remove carbon from the atmosphere. So I really love that we have that wide lens essentially when we look at climate and when we look at planet positive in the last month, so there's a lot more that fits into it. That's super exciting.

Silas Mahner:

Yeah, absolutely. I think NBS is something that has popped up for me in the past probably six, seven months, and I think it's really really fascinating. Especially interesting to see some of the business models coming around it. I'm very keen to see how it continues to develop. But anyways, this has been really a pleasure, as always. Heidi, Thank you for coming on. Any final thoughts or where people can reach you?

Heidi Lindvall:

No, thank you for having me. Anyone can reach me just on my email, heidi at palebluevc. And of course, you can read more about us on our website, and we'll try to be better at sharing even more about what we do and who we must send.

Silas Mahner:

Absolutely Very good. Well, it's again a pleasure and we'll hopefully have you on maybe a year and a half. Maybe have some of your portfolio companies on, but really looking forward to seeing how you guys continue to do what you're doing.

Heidi Lindvall:

That would be amazing, thank you.

Climate Tech Venture in Europe
Transparency in Climate Tech VC Funding
Maintaining Relationships With Portfolio Companies
Climate Tech Investing
Investment Restrictions and Fostering Research-Business Collaboration