Patrick Sieb, Climate Tech Partners: Getting into the weeds of VC due diligence and corporate partnerships

In this episode of The SAF Podcast, Oscar is joined by Patrick Sieb, Managing Partner at Climate Tech Partners, for a conversation on what it really takes to finance and scale sustainable aviation fuel. From Series A climate tech investing to corporate-startup partnerships and the infrastructure challenges behind SAF production, Patrick shares a practical investor’s view on how promising technologies can move from early traction to commercial deployment.

Climate Tech Partners investment model is based on deep due diligence, originating from his time a Macquarie, with focus in Transport, Energy and Mining sectors. 

We dive into a variety of topics including:

• How Climate Tech Partners approaches Series A climate tech investing and why that stage can be critical for SAF and other capital-intensive technologies
• Why bridging the “valley of death” remains one of the biggest challenges for deep tech and aviation decarbonisation startups
• How corporate relationships can help de-risk investments, including Climate Tech Partners’ work with Qantas and Airbus
• The practicalities of running a VC fund, raising capital from LPs and portfolio diversification
• What the dedicated sidecar investment vehicle means for aviation-focused climate technologies and SAF-related opportunities
• Why SAF scale-up depends on much more than strong technology, including the role of feedstock, infrastructure, energy and financing
• What investors are really looking for when assessing techno-economics, commercial traction and science risk
• Why climate tech is shifting from “moonshot” narratives to more pragmatic pathways focused on cost parity and bankability
• How Australia and the wider APAC region could fit into the future of sustainable aviation fuel production and aviation decarbonisation

Also another reminder that we are still accepting applications for the SAF Investor Deal of the Year awards. If you worked on a deal we would love for you to submit it via the following link: https://docs.google.com/forms/d/e/1FAIpQLScwrzV8VN8oqA6c-e0GMlgZmttTQ-U-1D9XxnOgeeQV-ITeiQ/viewform?usp=header

Transcript

Meet Patrick Sieb

SPEAKER_00 0:10

Just before we get into this episode, I wanted to remind everyone that currently we are accepting application for the Staff Investor Deal of the Year Awards. These are designed to celebrate some of the most innovative and significant financing transactions that have happened over the past year. We are still accepting nominations, so if you have worked on or been involved with any deals that have happened, please do nominate them. And self-nominations are not only allowed, they are encouraged. So do get your nominations in. I will leave a link to the form in the podcast description. We will be announcing winners later in the year. But for now, enjoy this episode with Patrick Sieb from Climate Tech Partners. Hello and welcome to another episode of the Staff Podcast. And this week I'm really excited to be joined by Patrick Sieb from Climate Tech Partners, who is very graciously staying up relatively late to do this with me because he's based in Sydney. So, Patrick, thanks very much for giving up your time and agreeing to come and join me.

SPEAKER_02 1:36

Thanks for the opportunity to talk on this podcast.

SPEAKER_00 1:40

So before we get into climate tech partners and the wider BCSAF conversation that we're going to get into, do you just want to give everyone a sense? I'd like to start with a bit of background in how you ended up where you are today.

SPEAKER_02 1:57

Yeah, so my background is I spend the last seven years in climate tech. Uh previously, Tom, the other partner, and I ran and set up, set up and ran uh Investibles Climate Tech Fund. That was more pre-seed and seed. Um and that really gave both of us a lot of experience in early stage uh startup investing across a number of the climate tech verticals. Um we left about three years ago. I then undertook a six-month global climatech tour, which was absolutely amazing. Um, and one of the key learnings was the corporate startup connectivity and engagement was done really well in some countries like US and Israel, and there's a real benefit in trying to bring that back to Australia. Uh so that became one of the core pillars of Climatech Partners. Um, and we took a whole bunch of insights from our previous funds. Uh, but part of that, I had a 22-year career in investment banking, primarily focused on large-scale infrastructure MA in project development, in a number of sectors like transport, water infrastructure, mining infrastructure. Um and so, yeah, I've had sort of deep exposure in sort of capital capital-intensive industry and sort of financing, um, as well as tech and startups.

From Infrastructure Banking To VC

SPEAKER_00 3:26

Awesome. And that investment banking, a lot of it or part of it was at Macquarie. Yeah, 15 years of Macquarie. Yeah. So um, what did your time at Macquarie, because they're known for being a very sort of diligent infrastructure-based investment bank, and you worked sort of around that on the sort of the energy side. And how did that inform you when you came to looking at Investibles, the pre-seeds, seed funds, and now at Climate Tech Partners, when you're looking slightly later at sort of Series A?

SPEAKER_02 4:00

Yeah. So, you know, first it really gave me a strong understanding of a number of the industries that we now have as our core focus area, um, and gave us tremendous networks. So clearly, the selection of the focus areas that we have are aligned with our experience. Tom had more of a background in energy, um, so those are kind of the sectors that we're really focused on. And they also align with where Australia has a number of competitive advantages, uh, where we see a lot of RD from universities and where we see government support. So all that gave us a strong basis to where to focus on. Um, it's also helped significantly in the corporate relationships that have been critical in building uh climatech partners, you know, base of corporates. Um but yeah, as you mentioned, there's also like a big focus on rigorous due diligence that I've learned through my years of investment banking and in infrastructure in particular. Um, yeah, Macquarie is is very well known. Um I think you know, our reputation as a VC now and that thoroughness and sort of the deep due diligence we do. Um, I'm not sure it's always kind of loved by the founders, but it's it's definitely respected. Um and the other element is like a deep understanding of infrastructure project requirements, what it takes to get those projects up and running, which is massive and a limited risk tolerance of a lot of the investors in that space. Um and a lot of the portfolio companies that we'll invest into, even if ultimately their model is licensing, JVs, partnerships, et cetera, where they're trying to push all that sort of capital requirement, um, et cetera, to other people, they still need to understand how to structure things properly. And we help guide them on that path to make sure that you know, even if they want to be super capital-like, they think through how sort of the technology can be sort of then developed into infrastructure. Um, and then we have a lot of connection to you know those large-scale capital providers, whether they're infrafunds, etc. Um, and what's interesting is there's there's a lot of those, you know, whether energy transition, climate funds that have raised billions and billions of dollars. And they're kind of short of you know, technology that is is infrastructure scale ready. So they're increasingly interested in what we do to see what's the next tech that's going to become like the infrastructure wave they can invest into. So honestly, a lot more relevant than I thought initially. I was thinking it was going from the big you know beast of infrastructure to small startups, but um, it is very relevant.

Why Climate Tech Partners Exists

SPEAKER_00 7:13

You're actually the second person that's had a background in Macquarie that we've had in the last month. So it's the it's a it's a well trodden path, and you echoed many of the sentiments that you just um picked up on. I want to come back to the sort of the alignment of infrastructure, size investing, and these sort of new nascent technologies in the VC world and how you look at that. But tell everyone how climate tech partners came about. You mentioned the investables and how that was seed pre-seed levels, and now now climate tech partners are slightly later. You're looking at the series A round. So maybe just explain to everyone why, firstly, that shift in stage, and why sort of change on that on that side of things.

SPEAKER_02 8:11

Yeah, so a number of reasons, like um pre seed seed is you know a different focus. Like in as a portfolio construction, you need to make sure you have a lot of diversification, which means that the velocity of deal flow needs to be much higher. So, you know, we're targeting it investable around 40 investments. Um, and you know, it means you need to see a lot more startups. It means the ability to do that level of deep due diligence you want is harder. The ability to then really sort of engage with those startups meaningfully and help them once you've invested in them is also harder because you've got 40 of them. So it's just sort of a very different dynamic, and the amount of information you have is much lower. So for us, you know, we really focus on series A and we have flexibility, right? Like we call out series A, and first of all, series A means different things to different people in different geographies. Um, so we can go from C to early series B. Um, but the key element is that they're sufficiently mature to engage with corporates, right? And that tends to mean that the technology is largely de-risked, so there's no more science risk. You have a strong founding team in place with like the right structures, they tend to have a mature product. Then it sort of depends on what kind of tech you're looking at. It's quite different from software to sort of deep tech and saf. But you know, for the purpose of this podcast and the SAF focus on the deep tech SAF companies, you want an early commercial traction. Usually the companies are entering a scale-up phase where they need to build sort of preferably a small commercial scale um pilot or demonstration plant or one of those things, which once proven will really allow them to get to the next level, um, which you know will be a first-server client type thing. So, really, it's kind of being at the point where we and our corporate partners can add the most value and where the corporate partners can really engage. And typically, you know, if you're too early, the corporates you know won't won't know how to even sort of work with the startups. Um, but our goal is to not only bridge the gap between the startups and the corporates, but also get them towards that infrastructure capital for the capital-heavy uh ones.

SPEAKER_00 10:44

And what sort of TRL level are we talking? Sort of eight, nine, totally Drisk, or you're going a little bit earlier than that?

SPEAKER_02 10:51

No, we go we go a bit earlier, and again, it it depends on the technology and sort of the corporate partners we have. Um, some of them are a bit more focused on having a product that is directly implementable and ready today, so that will be more software or hardware that's like more of a commodity hardware with like a software component. In deep tech, it probably will be more at sort of you know TRL 5.6. Um, you know, a lot of the startups will call it 6-7. We think it's more 5.6. Um, so so it kind of depends.

SPEAKER_00 11:30

Is it a rule that whenever a startup comes to you with a TRL number, you minus one or two? Is that just a BC rule?

SPEAKER_01 11:38

It's not a rule.

SPEAKER_00 11:39

It's just how it tends to happen. The unwritten rule, then we'll say it's an unwritten rule. Um's the and what so what sort of geographies are you? Are you just sort of looking at Australia, APAC, or are you really following where the where there's strong corporate? You mentioned you've you've been on the world, the grand tour of the world looking at. Are you looking at sort of Israel and American the US where there's strong corporates as well? Is that really driving the geographies that you're looking to invest in?

SPEAKER_02 12:09

Yeah, so like we invest globally. Um, we'll have a preference to invest in Australia where possible for a number of reasons, including, you know, it's it's easier practically to work with them. Uh but no, we will invest globally. And the key for us is that it is the best technology solution that sort of fits what we're looking for. Um and and you know, like they need to be able to either want to come and work in in Australia, work with our corporates, um, that we can add value. So it's it's you know, that's fundamental to us that we're not just a check and that we can bring value and we can sort of help validate the technology through our corporate partners.

SPEAKER_00 12:55

Yeah. Where does SAF fit amongst the other verticals in which you're you're looking to invest? Is it a big part, uh sort of equally sized part against the rest? Is it a small side piece? Like where's the emphasis on specifically?

SPEAKER_02 13:11

Yeah, and sort of, you know, big picture, our focus areas are energy, transport, industrials, and mining. And because our core differentiation is sort of deep corporate relationship models with like 17 corporates, um, and we have Quantus and Airbus as sort of two of our key corporates, SAF is clearly a very important focus area for us. It sits across transport and energy sectors, depending on sort of which tech we we look at. Um, there's also a whole bunch of intermediate products and sort of feedstocks, so it can fit in other pieces, like you know, there's chemicals that can get involved. So it tends to be quite um complicated and interconnected. Um, and and we'll look at all the key elements of you know, whether it's feedstock tech improvements with genetic engineering to hei enhancement or co-processing type technology, alcohol to jet gasification, FT, you know, electrolysers, PTL. Uh I feel like I'm uh doing the self-bingo. Um, but um, you know, yeah, we have a sidecar which we may discuss in more detail later. That's their core focus. For the main fund, we want to keep diversification, right? So it is an important part, but we also want to avoid over concentration in either a sector or subsector, whether it's hardware, deep tech, and software. So we've you know we've been able to have sort of the mix of the fun, which is diversified, and in the sidecar that's that's more focused.

SAF In The Fund Strategy

SPEAKER_00 14:49

We'll come back to the the sidecar with Qantas and Airbus in a bit. And I also want to touch on the the corporate relationships that you've already mentioned a few times. But before we get there, where do you guys sit on getting involved in follow-on rounds and do you lead rounds, or are you sort of more just part of the investment package for a Series A or sort of early B? How do you guys look at where you sit in the capital stack for these rounds?

SPEAKER_02 15:20

Yeah, so we'll typically try to lead if it's in Australia, New Zealand, and Singapore, so APAC region just broadly, um, because it doesn't really make sense for us to lead a deal in the US when there's a whole bunch of US investors or European investors in Europe that that are probably better placed and sort of closer geographically to the startup to do so. Um but um we don't have to, so like we'll tend to lead, but we don't have to. In terms of full-ons, we've kept 40% of the fund for full on. So it's a quite meaningful component, and certainly we want to be leaning in, but it'll be very much a selective top-performing portfolio companies that we will reinvest into. Um, with kind of decision factors, you know, will depend a lot on the technology. But as much as possible, we want a number of the key risks retired in terms of technical scaling and commercial. Want to make sure there's you know, the technoeconomics is really validated. Um, there is evidence of commercial traction and customer demand beyond sort of just the corporate partners that we've brought in. Um, a key element is just being able to execute against you know what the start the founders have promised. Um, you know, they can be pivot and things can change, and that's startups. But you know, we like to see people who have like a plan and tend to execute on it. Um and so and the other big thing is that there's continued kind of growth and acceleration trajectory, preferably where it aligns with our corporate partners and where we can add a lot of values.

Leading Rounds And Follow-Ons

How Corporate Diligence Really Works

SPEAKER_00 17:07

Yeah. And with the the corporate partnership relationships, can you just sort of give us a sense of how they work? Are they very much sort of symbiotic and you're not going to do anything if the corporate partners don't want to go there? Or are you sort of sort of deciding, okay, this is where we see value, and sort of you bring though you sort of convince them and bring them along with you? How does that sort of balance that relationship work? So I can imagine with so many corporate partners, there's a lot of juggling going on.

SPEAKER_02 17:37

There's a there's a fair amount of juggling, but we have a pretty good process, and across all the corporates we have, we really start with C-suite alignment, so making sure they're you know they're wanting to do things in the space. Um, and whether that's through the sort of their own decarbonization journey and what they're trying to achieve internally, or because it's a new opportunity for them for growth for you know new business areas. And then what we do is we deep we go deep at the operational level and talk to the relevant people to really understand what are the key parameters that are important to them, like how does it need to integrate with their existing system, existing infrastructure, how much they're willing to pay, which is something you you know generally never get out of a potential customer. Um feedback on the types of technology they've tried, what's worked, what's hasn't worked, what you know, all those elements like really, really important to get a good sense of what is required. Um, we also use them to talk to their internal experts, but to the broader ecosystem of people they have connections with, uh, which tends to be quite broad. So university, research department, governments. And then from that, we built sort of a map of the key startups that are relevant in that space. And um we identify the best fit, and we use the corporates actively in our due diligence process. Um, but we tend to be sort of patient in our engagement with the startups. So, like if we've identified a really good startup, but they're only raising in a year, we'll be patient, we'll wait for that. Um, and then post-investments will sort of do a lot to really drive that corporate engagement with the startups, preferably becoming a customer or at least pilots, off-take agreements. Um, so it really helps us both kind of validate that there is, you know, where is there a real need for technology and and sort of help accelerate the startups because you know, we've seen too many really good ideas on paper that we think are really interesting, but they just can't get traction because there's no corporate demand. But all that is is key, but it's still at the end of the day our decision. So none of the corporates decide what we invest into, they're not on RIC. Um, so it's really sort of ultimately a pure investment decision that we make based on the merit of it, but really, really well informed by all of this kind of background from the corporates and with the real strength and benefit of adding value through those corporate partners. So, yeah, that's that's kind of the interactions, which is is quite symbiotic. And at the same time, we also recognize that corporates can be busy, right? So we like to do this onboarding, which gives us a lot of uh information and a lot of knowledge, which means that if at the time that we're sort of looking to invest in a startup, they're busy, they're distracted, you know, there's been a change internally, the person's left, which you know, all those things happen with corporates, you're not reliant on sort of that happening. It's you know, it's really welcome and really useful, but not essential.

SPEAKER_00 21:01

Do they bring you startups and investment ideas of companies that are like their their cousins, brothers startup? Do you get a lot of that?

SPEAKER_02 21:12

There's a bit of that, but but obviously, you know, like any startup in like you know, Quantas and Airbus, any quant any startup in aviation and Seth and those spaces, they're gonna go to them, right? So we get a lot of most of those startups that reach out to them. And we've also part of our onboarding is like which startup have you looked at and which ones have you liked and not liked, and and so we get an amazing amount of information from that, and you know it's um it's pretty valuable. So it's more time, more work, but it's it's this more valuable.

The Qantas Airbus SAF Sidecar

SPEAKER_00 21:45

Yeah. It's the just talk to us about the the Qantas and Airbus, the sidecar as you as you put it, and tell us yeah, sort of how that came about, what that is, and how that sort of works with those two partners. Because they're quite sizable partners.

SPEAKER_02 22:02

Yeah, yeah, very, very sizable. So it's public, they've put 15 million into this sidecar. Um, so yeah, basically, initially we said, you know, why don't you come into the fund? And they said, well, your fund's a bit too diversified for us. We want something very specifically focused on aviation decarbonization and SAF in particular. Um, so you know, it it actually took quite a bit of time to structure something and align it with the right incentives. So they basically now they have this 15 million sidecar, which is focused on sort of investments that are interested for them, and the fund co-invests. So basically, the two vehicles, when we do an investment in the SAF startup, two vehicles invest. The proportions are kind of predetermined, so there's no sort of guessing on that. Um, but it's it's absolutely a fantastic partnership with you know two of the most relevant players in aviation decarbonization. So um it it definitely provides us sort of, you know, what I said earlier, deep industry validation and insights and access to internal technical and commercial expertise, like you know, being able to ring up people at Airbus and understand what it takes to have a new SAF pathway go through uh the ESDM process is like super, super valuable. Um, and we get a lot of the deal flow as mentioned. Um and so that's you know, that's amazing. The other thing that's really interesting is they've made us realize that you know, particularly SAF, to get that market up and running, it wasn't just going to be tech and off-take contracts. You need a whole ecosystem. You need feedstock, you need energy, you need infrastructure, you need construction, you need financing. And so part of what they liked in our model and having a whole bunch of other corporates is that we could leverage those corporates to better understand all those different elements. And so, with them in our other corporates, we do regular workshops on specific topics, and we get you know the corporates that are relevant to chime into those workshops. So, for example, we did one on electricity, which you know, essential in sort of PTL, um, bunch of other sort of pathways, and and clearly sort of super important for a whole bunch of other startups and and investments that we look at. But that was really helpful in helping shape the decisions and how we think about the electricity market in a space that's really complicated and has a lot of moving parts. So um, you know, it's really helped us develop not only a good structure with the with the sidecar, but the whole fund itself benefits from it.

SPEAKER_00 24:56

And it's sort of they sort of align because the corporates can also act as the scope three certificate buyers. So if Airbus signs an off take with a startup, they're ready and waiting to take that scope three aspect. So it kind of helps Qantas and Airbus if they're signing off take agreements, and it helps the corporates because they are strategically engaged in order to get first serve these on these scope threes if they need to for their ESG requirements. So it helps both parties like that as well, further down the line when you get to to the op-tech stage.

SPEAKER_02 25:32

We hope there's as many value ads across the system as possible, and that's that's part of what we do, and that's why we see it as a bit of a club in like everybody's under NDA, everybody has the same agreement. So there's no, you know, there's there's there's a real opportunity to be transparent, to be open, and to cross-share ideas. Um, hopefully a bit of cross-selling as well.

SPEAKER_00 25:53

Yeah, is there a climate tech partners clubhouse then?

SPEAKER_01 25:57

Not yet.

SPEAKER_00 25:58

Coming, coming soon.

SPEAKER_01 26:00

Hopefully, corners can give us access to one of their allowances for that.

Crossing The Climate Tech Valley

SPEAKER_00 26:07

Um so how does corporate engagement and the deep diving due diligence help with crossing the valley of death? Because you're coming in at series A, which is sort of which is at the beginning of this very long and very deep valley that climate tech startups have to have to cross. So how does that help them get through series B growth growth stage and finally getting up to to FID and debt financing as well?

SPEAKER_02 26:43

Yeah, so as I mentioned, like once we invest, we really try to get as much support we can get from the corporates in any way, shape, or form that is useful. Again, preferably becoming a customer, if if that's uh uh depending on the technology, but at the very least, technical support, um, understanding you know what has worked in the space or not, um, commercial support of you know how they need to sell their product, um, connections to governments or other entities, and and really help accelerate the growth. Um, and if you're on that trajectory, it just makes capital raising much easier. Having those corporates, even you know, through us, indirectly through us, and or kind of involved as a corporate, as a partner, uh commercial partner of some kind, also gives a lot of validation, um, which later stage capital sees as a real positive. So, in a lot of ways, it's trying to reduce the perceived risk or the actual risk for full-on investors. The other element is the capital they have themselves. So, Quantas Narabus have a 200 million fund, which is already active and doing investments, so I think it's public. They've done uh investment in JetZero and Hammer. Those are more project developers that aren't kind of developing their own technology per se. Um, but you know, there's no reason they couldn't invest in sort of either the technology at later stage or that they couldn't invest in um projects with those technologies. So that's also really important. Um, and you know, at that stage, they can even be more helpful with kind of those projects in terms of potential off-take contracts, etc. Um, there's also a help in connecting the startups to international investors. Australia, you know, great market, but still relatively early. That later stage capital, Series B, etc., is is still thin. And a lot of startups need to go to US, Europe, etc. And again, the connections they have with people there, the connections we have with other VCs, really important. Um, there are strong links, again, they have and we have with Australian governmental entities like Arena, the Australian Renewable Energy Agency, NRF, the National Reconstruction Fund, who are really focused on sort of helping some of those industries get access to grants, concessional debt, uh, project support, or equity. Um, and we have some of our other LPs. So we have a pension fund called Australian Ethical. Um, we have the Green Bank of Australia called the Clean Energy Finance Corp, or CFC. They're also sort of big players that are looking to invest capital in projects, later stage projects. So we've been very cognizant of this value of death, and in Australia, in particular, sort of the lack of capital. And we want to help them as much as possible through our follow-ons, through our corporate partners, through our other LPs, um, or their their networks.

SPEAKER_00 30:05

I want to touch on LPs because one thing that potentially a lot of people that aren't VCs don't realize is how much time you actually spend fundraising as well. Because there's one thing deploying capital that's a very different thing, actually raising capital to be deployed. So, how much time do you spend? Have you spent with LPs trying to get capital for your fund versus deploying capital into startups? How is that balance?

SPEAKER_02 30:32

Well, 18 Yeah. So before reaching first close, basically 18 months fundraising without doing any investing, because until first year first close, you can't do any investments. Now that we're in this middle stage period where we haven't reached final close, we're probably 60% investing, 40% in fundraising. Um and until we get to final close, that will probably be the mix with sort of bursts of action just before we reach to close levels. Um and you know, unfortunately, we were going really well, and the war and geopolitical uncertainty has been quite disruptive on that front. Yeah. Um and once we reach final close, we'll shift a lot of that time to helping the portfolio companies rather than sort of doing the fundraising. But yeah, it is a massive, you know, like hundreds of investors you talk to for, you know, probably one in a hundred that that invest in you. But in a lot of ways, it's like the reverse, you know, it gives me a lens of what it is for startups raising capital. So it gives me great appreciation of difficulty in raising capital in general.

SPEAKER_00 31:48

And how many sort of LPs are you looking at when you're talking about raising? Is it I mean, you don't need to give me specific, just sort of rough numbers so that we can so people can understand the amount of different stakeholders and LPs you're balancing across the fund.

SPEAKER_02 32:13

Yeah, I I suspect we'll end up with you know 30 to 40 investors, but there is a you know, there's there's big investors with big amounts, um, like generally institutional investors, um, or some of the corporates. Um, and then you have sort of family offices that do sort of pretty big checks, and then there's a bit of a tail of smaller checks, so it's it's a bit of a mix.

SPEAKER_00 32:45

And where is the you mentioned you're still raising, and that has been made challenging by global geopolitical events? So, where is the interest in investing in a climate tech fund from LPs? Is there a lot of interest to get involved in this still, or is there a bit of hesitancy given all the uncertainty around the world that we've seen, not just in the renewables market, but also in just global politics as well?

SPEAKER_02 33:16

Yeah, I think anytime there's a spike of kind of geopolitical instability, it just freezes things. But the fundamentals are very strong. Um, I think fundamentally there's like a widely accepted theme, or at least to the investor we're speaking to, that this transition means there's a reallocation of capital, and that's a massive opportunity. And and we're very much kind of returns focused, returns first focused. Um, obviously, everything we do has to have a climate-positive lens, but it's more of a filter, if you will, like then all our investment focused on on returns, and that really resonates with people, and so we get like a broad set of interest, like clearly strategic um corporates are interested. We've got institutional money, very interested. You know, we are a first-time fund that tends to limit sort of the check size they can put, and therefore makes it um more challenging. So it's almost like we're too small for a lot of big institutions, but you know, we we were able to attract a number of them, which is which has been a great validation. Um, and then family offices, and obviously we love when people are also mission aligned, but they don't have to be.

SPEAKER_00 34:35

And given the the volatility we're in, and I think that we're getting to the point now where people just have to get used to the volatility that we're living in. There's a point where volatility just becomes the norm, and because we've had this for two years with various different shock waves, would you agree that actually people just need to get around and get used to this new state of the world in which we're living in and what we have to deal with rather than waiting for this what's previously been considered a good time to deploy capital, invest, or develop startups. That's we're not really gonna get to that period again. We're actually just going to have to adapt to where we're at now.

SPEAKER_02 35:25

No, I think that that's absolutely the case, and I think the sector will always remain volatile. Um, that's in part why we still want sort of good diversification because that volatility can affect some sectors and some subsectors more than others. We hope there's going to be more tailwinds and sort of more positive news, but you know, um, and and one of the silver linings of this war is that with fossil fuel prices increasing, fossil fuel kind of shortages, there's like renewed interest in, you know, and that's more of a longer-term thing, but renewed interest on sort of low-carbon fuels, on electrification. So a lot of those thematics are becoming even more important for investors, for governments, for policies, for all those things. So really, really sort of important, valuable long-term tailwinds. Um, so you know, we all need to make sure that that's more of a focus for us, uh, as opposed to the volatility.

Why SAF Pricing Tracks Oil

SPEAKER_00 36:29

The energy security arguments certainly got a lot more credence over the last few weeks. But on the flip side of that, the there's been a lot of discussion around Saff pricing and how Saft pricing's done, the fact that it's tied to oil pricing and the strange behaviours that SAF prices have because it's tied to that, which in turn has knock-on effects for off-takes, which has knock-on effects for where investment goes. So it's all very interconnected in one way or the other. So there's definitely the give and take with where we're coming at, and a lot of complex things that need to be balanced that on the one hand is a good thing, on the other hand, becomes price risk becomes incredibly more challenging now because of where we're we're at. So I think we'll probably have to just see in a few weeks and a few months, hopefully, when this and it all dies down, what what happens on that side of the equation as well.

SPEAKER_02 37:31

Yeah, completely, completely. But I think it's just re-emphasize the benefit of of trying to have more control on things. So, yes, the pricing can be affected by macro elements, but frankly, if you're producing it here and you know your feedstock is not going up in price, um, yeah, maybe somebody's gouging and trying to make more money out of it, but um, there is a fundamental element that should enable you to have better linearity and certainty on sort of price.

SPEAKER_00 38:03

Yeah, I think it's that's more a question for pricing agencies about why it's linked to um to Jet A. So I'll we'll leave it there and I'll go find one of them.

SPEAKER_02 38:12

Yeah, and I think it's also a question of size, right? When the market becomes big enough, like at some point, you know, if if it was 80% staff, then that becomes the market. It's gonna be commoditized eventually. Fossil fuel is no longer sort of the commodity, right? So we're because it's so nascent, it is normal. And because the buyers tend to buy fossil fuel, I think that's the reason why it's it's so correlated and so linked. But it doesn't have to be in the future, is really the key point.

How Founder Pitches Are Changing

SPEAKER_00 38:39

Yeah. I want to touch, I want to go back, take a step back and look at founders and startups. Have you seen the strategies or the models that founders are using in order to pitch their companies for funding change over the last few years? We've just spoken about how we're living in this new world of volatility. Do you think founders are actually adapting to this very well or not? Massively, massively.

SPEAKER_02 39:09

So there is, you know, all the kind of terminology has changed and sort of been more focused on energy security, on um, you know, the the benefits that it can bring to all those geopolitical uncertainties and sort of change in policies, etc. Um, but you know, there's there's also a broader change that's happened, which is a lot of the startups are more pragmatic and more market aligned. Um, there's really more of a shift towards technoeconomics and sort of focus on achieving cost parity in SAF, you know, maybe more focus on cost parity with Hefa. But there's less of this focus we saw at the early stage of, you know, like a couple years back, where there's really how fast can you go and sort of you know moonshots and those kind of things. Whereas now I think people much more pragmatic.

SPEAKER_00 40:09

And have they sort of got more of an understanding of the ecosystem approach? Because that is one of the big themes I think that's come from the last six months, is that it's going to require vast partnerships across various different aspects of projects in order to get them to scale and actually commercially producing. Are they aware of how important that is at the Series A stage? Or is that something that you're bringing to the table and making them understand just how many stakeholders are going to be required to get this off the ground?

SPEAKER_02 40:49

It very much depends. Um, so you still sort of get the founders that I'm like, I'm like Tesla and I'm gonna build everything by myself.

SPEAKER_00 40:58

And you know how many Teslas have you have you spoken to the next Tesla?

SPEAKER_02 41:03

Uh still quite quite a few, still quite a few. Um, well, they think they are. Um, whether they become is another question. But yeah, you see a lot of those, like I'm gonna do everything from from scratch. And yeah, it's you know, um good on them. But yeah, yeah, I think there's a mix. There's a mix of particularly at Series A, people are starting to realize it's not gonna be as easy to be in control of everything, and you need a whole bunch of other elements, even if it's just kind of getting access to power, uh, and you need a power upgrade for your pilot plant, and it has to be much harder than you thought it was. Um, so all those dynamics are definitely starting to hit a whole bunch of the Series A startups. Um, and again, I think that's where we can help them because we bring them that sort of vision of all the elements and and what it takes if they haven't already thought about it. And frankly, we prefer the ones that are clued in and already are kind of five steps ahead and and have started having the conversations because those things are hard, right? Like it's easy to go, well, until I've got a proven product, nobody takes me seriously, and therefore you don't engage with them. But I think what you have to do is be progressive and um engage with people and tell them what you're doing and show that you're sort of delivering on what you said you're gonna do, and you build credibility, which at the point that you want something from them, something tangible, whether it's contract or off-tick, whatever it is, you know, you've proven that you're you're going in the right direction, you're delivering on what you said, uh, and they should take you seriously because you're you're the next kind of producer of SAF or or other sort of technology company that is relevant to them.

Making VC Fit SAF Timelines

SPEAKER_00 42:52

Yeah. Does the venture capital model work for SAF in the sense that SAF is very commonly spoken about as having venture risk but with infrastructure check size requirements? And balancing those two things is very challenging, particularly when you're investing at the earlier stage. You've got your LPs have got a return horizon, however many years that is, they want to see a return on their investments. Making that align to when a SAF project or technology developer actually starts making returns is very difficult, and aligning that can be very challenging. So, how do you square that circle?

SPEAKER_02 43:37

Yeah. Um, yeah, I think partly it's one investing at the right level. So we only invest in tech companies. Um, preferably they're capital efficient, right? And they'll look to license or JV or another kind of way to get that capital. Um often though, they will. Need to do the first demo and maybe even commercial uh plant themselves that will be capital intensive. That's where we can help them do it smarter. And partnership with corporates can be sort of a really good way to do that. Um but sort of the other element is that like we love to invest in technologies that can go through either intermediate step or products that can give them a level of revenue, profitability, etc.

SPEAKER_01 44:32

Yeah.

SPEAKER_02 44:33

So, you know, one of the startups we've invested into, their first product is more on the chemical side where it's lower volumes, higher margin, right? And that gives them a way to have revenues, to prove themselves technically, and then sort of the next layer is drop-in fuel for the maritime industry, which is a step easier than their last step, which will be SAF, which will need sort of new ASCM pathway, much more complicated, much more time, but it's a multi-step process. And we also prefer technologies that are modular, as opposed to you need to build like the billion-dollar plant for it to really prove it at scale. And you know, only when you turn the key do you know if it really works at that scale.

What Success Looks Like By 2035

SPEAKER_00 45:20

Yeah. Yeah. I want to end with uh a positive, a positive question. We're gonna end on a positive note. So we're gonna fast forward to 2030, 2035, and we're gonna say the the first fund that you've just raised has been wildly successful, and you're raising another one. I just want you to go into describing what that success of the first fund looks like. Is it simply we're doing another fund? Is that is that the marker of success, or have you got an idea of what?

SPEAKER_02 45:54

Well, definitely if you can raise another fund, it's it's it's kind of a marker of success. But um, no, like hopefully we have multiple portfolio companies that have scaled massively and become major successes, you know, preferably had had exits. Um the technologies are are deployed into real projects in SAF in particular. There is kind of production in Australia bringing large volumes at competitive prices, uh, and we've created a lot of values for value for investors along the way. Um, so yeah, and I think our our next fund will probably be a bit later stage. Um, you know, our next fund will be the same, but we'll also do a later stage fund because we think there's there's a real need for capital at that stage.

SPEAKER_00 46:42

Is that gonna be the the thing then? Every future fund you get, you're just gonna get later and later into the capital stack, and you're just gonna keep keep going where you can find gaps to fill.

SPEAKER_02 46:53

Well, it's where there's gaps to fill. I think that's gaps to fill that we think we can add value. That's that's kind of the key two elements, um, which is what we've done with this fund, and you know, we'll try to keep doing. And and importantly, we'll try to grow with like an equally fantastic team as what we have now, which is which is another element.

SPEAKER_00 47:16

Awesome. Patrick, thanks so much. Best of luck with the the rest of the raising, and anyone who's got a brother or a cousin who thinks they're the next tester at Tesla in climate tech, I'm sure Patrick would love to hear from you. Absolutely. Well, thanks a lot.