LOOPED IN with Carl Warkentin

Investing in the Circular Economy with Regeneration VC partner Martijn Lopes Cardozo

• Carl Warkentin • Season 1 • Episode 3

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In this conversation, Martijn Lopes Cardozo shares his journey from a corporate career to becoming a successful entrepreneur in Silicon Valley, discussing the challenges and lessons learned along the way. He reflects on his return to Europe, the struggles he faced in replicating his success, and how he found purpose after setbacks. Martijn emphasizes the importance of focusing on purpose over traditional success metrics and discusses his role in the circular economy, particularly through his leadership at Circle Economy Foundation. The conversation also touches on the significance of the Circularity Gap Report and the ongoing challenges in achieving a circular economy. In this conversation, Martijn Lopes Cardozo discusses his work at Regeneration VC, focusing on the excitement of working with entrepreneurs in the impact investing space. He shares insights on the challenges and opportunities within the circular economy, the importance of a solid investment thesis, and the criteria for selecting investments. Martijn emphasizes the significance of geographical focus, particularly in the US market, and highlights innovative solutions to pressing issues like food waste (Orbirsk). He also addresses the need for measurable impact in investments and the challenges of scaling impact startups while balancing financial returns with social and environmental impact. 

Carl and Martin already met two years ago creating the first Circular Gap Report on city level with CIRCULAR REPUBLIC. In the conversation, Carl mentioned a circular economy database called Easy Match.

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Carl:

Today I'm excited to have a guest on the show who is a true force in the circular economy space. A serial entrepreneur, circular economy thought leader and passionate advocate for regenerative principles, he's helped shape global thinking and action around circularity. Welcome to the show, martijn. Thanks for having me. Karl Martin Thanks for having me. Carl Martin, you started your career in consulting, but then spent a lot of time as a successful entrepreneur in Silicon Valley. How was this time for you on the West Coast? And, you know, can you generally take us through your first career steps?

Martijn:

Yeah, sure, sure, yeah. So I mean, like I think, as many others, I studied physics. I spent some time with multinationals during my studies as internships with Shell, unilever, great companies but basically came to the conclusion I was incompatible to work at a corporate at that point in time. I, you know, like you know, in hindsight I think it was a bit obnoxious. I had opinions about everything, which is typically not that helpful if you're starting your career.

Martijn:

And there was this spinoff from McKinsey and there was one person in particular that I really liked, one of the partners. He actually later ended up being the Minister of Economic Affairs way later in his career the Minister of Economic Affairs way later in his career and joined him and really enjoyed exploring all kinds of different industries, as you do as a consultant. But I think, most importantly, he gave me some useful tips, like if you wear socks with Donald Duck on it, it may not be really helpful if you're in the boardroom. You know I argued that like it didn't matter what you wore, but so some of those things basically becoming a bit of a professional. So I think I got a little bit of education there and then, because I did my master's in physics engineering. I wanted to learn a bit more on economics and felt the US was the place to be, and then, basically, an MBA brought me to the US.

Carl:

And MBA brought me to the US.

Martijn:

Okay, wow, I mean one could argue Donald Duck, socks are part of a manifestation. Well, that's the case.

Carl:

I tried to make Carl, so you ended up in the US.

Martijn:

What exactly did you do there? Yeah, so initially business education. So I went to Harvard for an MBA. Great time, late 90s, you know we felt you know the whole world was changing. So I think, maybe similar if you're in the West Coast now with AI, this sort of you know, the internet's going to change everything. And we were sort of the happy you know ones to be at the right place at the right time to help change the world. I remember one of my professors saying in his first day of class the class of 2000, that we were the leaders of the new millennium. I thought it was crazy.

Carl:

Okay, wow. So MBA at Harvard. How did you then end up in the West Coast?

Martijn:

Yeah. So we came up with this crazy plan, to you know, with a group of folks to create this massively multiplayer game and found some funding for it and launched that show, but then quickly came to the conclusion that, you know, doing an online show in an era without, you know, smartphones, without Wi-Fi, that you know, we're probably not just a little bit, that's probably like 10 years ahead of our time. So we pivoted it to an interactive TV venture, which was also a non-existent industry, because you of course had TV, which you know was very big and you know, and still people watch anywhere between four and six hours of TV a day in the US and massive advertising market. And then you have this new thing called internet and our theory at that point in time was those things have to merge right. If people watch TV, tv is only one way. So our new slogan was TV reaches millions and we enable you to reach back.

Carl:

And how did that work out?

Martijn:

Well, quite painful, I have to say, carl. So you know, of course, like nobody had heard about this whole concept. So it felt a bit like we were selling into a non-existent market and convincing people. Interactivity on TV was a thing and at that point there were starting to be some initial shows, that sort of start to bake in, like I don't know if you remember, like Big Brother and American Idol, where you can sort of vote people off the island, and there were some forward-looking producers like Leo Burnett that start to integrate those things. So we got a little bit of traction and, like I would say, you know, marketing, testing, money, but because it was a $400 billion industry, we could actually build a company out of that and there were a lot of folks interested. So we started with sort of making shows more interactive. Then we added mobile, then we added built a whole software stack for setup boxes, got into 10 million boxes in the US and then ended up getting break-even over 100 people and sold the company to Ericsson.

Carl:

Wow, I mean, that sounds like a pretty good success story. When was it? Was it before the big crash? Internet crash?

Martijn:

So no, like basically when we launched the company, that was in like 99, 2000. And then, like in March of 2000, that's when the NASDAQ crashed and for all the youngsters out there there was actually like a crash in slow motion. So if you look at the stock markets at that point in time, it went like this for like a two and a half three year period where everybody thought it wouldn't get worse and got even worse and like, if you drove in the Bay Area basically no traffic jams whatsoever, you could sort of find a place everywhere. So it was really a big crisis on the West Coast and because we still had raised enough money, we could sort of work through that and did a couple acquisitions uh, free acquisitions during that period to do a bit of a roll-up, and in the end, um, you know, it became a market leader in a new category that in the end never really got adopted because, you know, uh, interactive dv never became a thing and in fact what happened is, as opposed to the internet moving to the tv, video moved to the internet and nobody at that point in time thought the internet could even handle that amount of traffic that you have on Netflix and other platforms these days.

Martijn:

So I think it's a really interesting lesson that if you have an ecosystem that cannot innovate fast enough, what happened to TV Other systems will take over your business. Because I think they had a real shop, because that's where people were, they were behind their TV. Business. Because I think they had a real shot because that's where people were, they were behind their TV. So if you could start ordering and had integrated that internet experience in the TV world, I think it could have had a real shot.

Carl:

Wow, okay, and I mean we see this nowadays in more and more industries right, so you have sold your companies at the time when you then moved back to Europe.

Martijn:

Yeah, I was involved in two other ventures. So we started one summer I was back in Europe and everybody was like texting each other and like these short codes and ringtones. I don't know if you recall that. And in the US, if you would be on Verizon and I would be on AT&T basically two carriers we would not be able to text each other, so you could only text each other if you were on the same carrier, which of course is silly. And you know, the fun thing was like Europe was texting andS were calling each other all the time. But then these interconnects happened. So I came back one summer I saw everybody texting and SMS and short code and we started up that business just before that happened and became, as a result, the number two aggregator on the SMS side and we were able to do some shows and sold the company within a year.

Martijn:

So there was actually you know the difference between really bad timing and like awesome timing and something very complicated versus something fairly, you know, technologically really simple. Good lessons for entrepreneurs, you know. And then there was another company we were involved in which was a video security company. So basically, inside video signals you can transport data. So it's called private data pits of video. It's things like subtitling that basically travels along with video. But cable companies were really worried about you know what broadcasters were putting in the video signal and wanted to control that typically cable. And so we bought, we built like a big hardware device 100K a pop that they could install in the cable head ends and basically could look inside the video signal and strip things out. We called it a virus scanner for video and we ended up selling that to Tektronix, a division of Danner.

Carl:

So three exits in a couple of years. That sounds amazing. What did you do after that?

Martijn:

Yeah, so actually we made a bit of a personal decision. We had three young kids and I always have cherished my European relaxed upbringing, going on my little bike to school and having independence and getting to know, getting to know my grandparents. So we really wanted to enable that for our kids. So, uh, you know, we picked up our stuff and and and moved back and, um, you know, of course, it felt pretty good, right, because, uh, you know, like I had gone, you know came back 10 years later with a couple of x, I mean mean not like unicorn, but they were like, you know, definitely some success. So I was like all right, netherlands, here I come. You know, let's replicate some some success here.

Carl:

Yeah, I mean, uh, must've felt like you know coming back as a hero. I also felt like you know coming back as a hero. I think in a TED Talk you mentioned coming back from the gold rush with a bag of gold. Yeah, and I really like that. And even nowadays, right, when you're in Silicon Valley and you come back to Europe, it's like it's really an impressive thing. So one should think, when you can make it in Silicon Valley, then it should be a piece of cake in Europe.

Martijn:

That's what I thought, carl. So what happened? Well, so I mean, like I basically said, I'm going to replicate exactly what I did in the US in sort of new media. So I started like what they call a T commerce venture, so basically ordering, you know, like ordering a pizza or clothes or something from your, with your remote control, and and and, and. So that was my first venture. And then I started another one and basically both failed miserably. I couldn't get funding, I couldn't get traction and, yeah, it left me quite frustrated because, you know, I hadn't had a lot of failures so far in my life failures, uh, so far in my life, um, and thought that you know, uh, if, if, if I would, you know like, you know, like if you had, because I didn't have a lot of failures. My logical conclusion was that, you know, if I did something, it had to be successful. Um, and that theory got proved to be wrong pretty painfully so.

Carl:

I know what you mean. Yesterday I had a lunch with a very successful entrepreneur from Germany who built Storage24, and I really liked it because he said one should do coaching and always work on himself and stay humble, especially when being successful, not only when not being successful. But I mean, okay, so you had that experience, and what happened after? Because I mean we met like a bit more than two years ago and nowadays you're still super successful, very purpose-driven entrepreneur. So what happened after those two experiences?

Martijn:

Yeah, I definitely would say purpose-driven, I think, successful. I think there's still a lot to be, a lot to be proven uh there in in. So the next leg uh definitely hasn't been as easy uh, and as, as the first step, uh portion. And then, maybe, referring to what you just said, I wish I I met this coach earlier about the humbleness um, because you know uh would have uh saved me quite a bit of uh pain and perhaps even uh avoided my uh mild midlife crisis. Um, because I had to learn a bit of the hard way, right.

Martijn:

So, two failures uh, I figured I had to reintegrate with the Nellins actually worked for a corporate fired within a year and start to ask myself these existential questions about meaning of life.

Martijn:

And it took me about a year, I think, after coming back about a year, back about a year, uh two, two, three years until I had found my new bearings, um, and I think what was really helpful in that process uh was a couple things. The first thing is to basically decide that I would up like I would optimize for purpose as opposed to success, um, and success defined, as you know, financial success, uh, you know uh rewards, external recognition, uh, and and and once I did that, my motivation changed very much, from being extrinsically motivated, you know, by those financial drivers and people applauding, and to be much more intrinsically motivated of, hey, what am I trying to accomplish with my life and how can I serve the world and be a bit more of you know, moving towards purpose-driven servant leadership. And what was the second thing that was really helpful is and something I would recommend a lot of people sort of going for a career change is putting yourself in a position where and I think you've done that quite effectively so, carl, also in the last couple of years where you are in the middle of a lot of things that are happening and you're adding value to a lot of different initiatives at the same time and get really into a growth learning mindset. And the way I did it is going back to my old university and, you know, made this little sign with. You know, West Coast entrepreneur with midlife crisis gives free advice.

Martijn:

I love it and as a result, I met a lot of early stage folks out of university, but later also from other sources, who I helped coach and work with and learn a lot from them, while I felt I was doing something useful for society.

Carl:

It seems to me, once again, we have to redefine what success is right, Because, as you mentioned, there is a certain definition of success that most people still have in their head, whereas, I would argue, actually maybe are now more successful than ever before. And we met, as I said, around two years ago, while you were CEO of Circle Economy. Before that, interestingly, you were on the supervisory board of Circle Economy, which is an interesting shift right From a board member to CEO. How did that happen and what inspired? In general, you move into a circular economy in the first place?

Martijn:

Well, so when I was coaching all these companies and a lot of them were in cleantech there were a couple of observations and the first observation was that the vast majority of folks were focused on the energy transition and moving away from fossil, solar, wind, batteries, those type of things. And you know, very importantly. So, right At the same time, when I started to do a bit of research, I discovered that almost half of the carbon emissions has to do with products and materials and how they're used. And few people were focused on that and how they're used and few people were focused on that. And if I did a bit more research, I found if you look at the other planetary boundaries like water, stress and biodiversity and toxics, and what have you that products and materials have a vast bigger impact on those than the energy transition.

Martijn:

So I figured let's sort of pick that topic and run with it and make that the sort of central theme of my next thing. And of course you know like then you have to think a little bit like what can you leverage, right? So in my case it was mostly entrepreneurship. So I started a new venture in the circular economy, but I also figured that I would reserve like 10% 15% of my time to help the movement Because, you know, perhaps I could get more people into the space or more funding into the space, and that led ultimately to a number of speaking engagements. You made the TED Talks. I became a technology pioneer with World Economic Forum and that triggered, and then I was asked to join the supervisory board of Circle Colony Foundation.

Carl:

I mean that sounds super interesting. How and when and why were you then at one point asked to step in as CEO?

Martijn:

Well, here's what happened.

Martijn:

So at Black Bear we went from the lab, then we did demo and then we built what they now call a first-of-a-kind factory, which I thought was easy but it was incredibly hard and after a lot of capex it started to work a bit and we had good customers, we didn't have a commercial issue.

Martijn:

We raised the $60 million growth round to internationalize the solution and then, unfortunately, the factory burned down, which was, of course, my and a lot of other people's baby and was devastating and set us back quite a bit devastating, um, and and set us back, uh, quite a bit, but also came to the conclusion that I was no longer the right ceo because it really needed somebody who had a lot of industry and factory experience. Um and uh, with the board, decided to step down, um, which was very, I felt, very difficult and painful but needed to be done and was planning to do you know, take some time off and, you know, spend time in nature. But then the CEO of Circle Economy suddenly left and, conveniently, the other board member said, hey, it sounds like Martijn has nothing to do and he's CEO and he knows the organization, so maybe he can just sort of step in and be the interim and, you know, recruit a new one and take it from there.

Carl:

So that was originally planned for a couple of months but ended up being a four-year job oh, four-year job in which we also met. Can you share a bit about the mission and what Circle Economy is all about?

Martijn:

Yeah, absolutely so. Circle Economy Foundation is an organization that is focused on accelerating the transition to the circular economy, right? So that's sort of the overall theme, so from the linear make-take-waste world into the circular regenerative one. And there's, of course, more organizations. Of course there's the well-known Alan McArthur Foundation, who has done a lot of great, great research and work and convening, and Server Economy Foundation was a bit more.

Martijn:

How can we make that practical? So, or sort of you know headline was practical and scalable solutions to make that happen. And the way we did that was to typically convene a lot of different players. So, for instance, in textiles, we did a lot of work about resale, you know, get a couple of brands involved and almost develop these playbooks of how that could be done in a pre-competitive setting. But also sometimes with financial institutions.

Martijn:

So we ran a whole program with EIB and World Bank and you know, how can we measure circularity, how can we create a common understanding and also how can we increase the allocations towards that market. So yeah, it's actually grown quite a bit people now out of Amsterdam and has programs in textiles, built environment, finance, electronics, some food. So it's really interesting that they've done a lot with cities as well, and they're most well known for their circularity gap report. So you know a typical opening speech for circular economies. The world is only, you know, nine or seven or 8.6% circular. That's basically the number that Circle Economy Foundation has come up with every two years and that they sort, they present in Davos or at the World Circular Economy Forum.

Carl:

Exactly, and I mean it sounds like Circular Economy Foundation is doing a very similar job to the circular public, the non-profit initiative that I'm also part of. We have three pillars focusing on enabling, acting and inspiring. And especially the acting part right Like building these pilot projects and, yeah, toolkits on how to scale circularity and bringing all stakeholders together. It sounds like very similar, and even though Circular Republic is part of Europe's biggest entrepreneurship center, we're still, I mean, focusing on Europe, but actually a lot also on Germany and Munich as an ecosystem, which is also why we ended up making the first I think it was the first circularity gap report on city level. That's right.

Martijn:

Um, that's how we uh, that's how I think I we met and how I met the whole founding team. Uh, yeah, Uh, from a circular Republic.

Carl:

Yeah, which which was interesting because we in Munich thought always that we are very sustainable city, which I'm not even sure how many percent it was. It was like embarrassingly small.

Martijn:

Yeah, and I remember even like when we got closer to publishing that number, some politicians got a bit nervous about it.

Carl:

Yeah, I remember the same. It's definitely less than the global number, yeah for sure, which is also shockingly small, right? I don't know what the latest gap reports stated, but I think we're still below 10% Absolutely. We're 7.2, I believe.

Martijn:

Yeah.

Carl:

Oh, wow, it even decreased. Yes, it did. Wow. That's really, really alarming, but I think it's a great tool that you created there, because it allows you to really put it down to a number, right Like to an KPI, that you can somehow measure.

Martijn:

Yeah Well, and I think I mean like, I think it has pros and cons right. I think the beauty is it simplifies this very complex topic that's extremely hard to measure in one metric, which is easy to communicate and talk about and is a good sort of conversation starter. But it's, of course, also very non-nuanced right, because it's very hard to define circularity in one number, because circularity has design components, use components, end-of-life components, regenerative components. So it depends a bit who you speak with, carl. If you talk to real experts, they will say ah, you're butchering the circular economy and making it sort of oversimplifying it. But then millions of people pick it up and then my response is always like well, you may be more nuanced and maybe you're even right, but we're a very small audience.

Carl:

Yeah, I hear you Beautiful enough. That gap report was not the only thing that brought us together around two years ago, but also last year, after I have been in Los Angeles meeting Dan from Regeneration VC. I then sat down together with you and Michael, the other founder from Regeneration VC, and I think back at the time it was like a bit yeah, around a year ago, and we were both venture partner.

Martijn:

That's right. I had just moved on from Circle Economy Foundation because we had, like you, I had also partnered with Michael and Dan and then, as a result of that partnership, michael moved to Amsterdam. And then, after four years, I left the foundation because I wanted to get back a bit to my more entrepreneurial roots. And Michael said, hey, why don't you become a venture partner? And I had no clue what it meant, but I accepted nonetheless.

Carl:

And now you're sort of saying, not only a venture partner, but you're now a full-time partner of the fund, right?

Martijn:

Yeah. So what happened is basically I asked, asked like, what's the time commitment? And and michael said, like you know, it's uh, it's half a day a week, um, but after three weeks, uh, I was basically spending full time on the, the, the fund, with deal sourcing and fundraising and developing the ecosystem, um. So at some point, uh, michael invited me for lunch and said like, uh, you know, maybe we have to have a little chat because you know, it may not be, uh, very sustainable to do it this way. Um, and then you know, we agreed I would sort of uh join full-time September, I think, yeah.

Carl:

That's really exciting. What excites you most about your work at Regeneration VC and can you maybe you know share a bit of Regeneration's philosophy?

Martijn:

I would love to Carl. Well, I mean, the thing I like most, quite obviously so, is working with entrepreneurs, and you know both my US as well as the circular experience in Europe. A lot of mistakes have been made and hopefully I can avoid, can help other people avoid, some of these mistakes. But also, of course, you know, like venture capital is not philanthropy. So you know our goal is to make a lot of money and make sure that our investors have above market returns. So also picking the opportunities that you feel can deliver against that and then helping those companies grow and prosper and leverage your sort of unique geographical footprint. So also bringing companies to the US and helping scale them there. So that's what I really like.

Martijn:

The other thing I like is regeneration is also a bit of a startup scale-up phase, right, so you know, we went from a handful of people to around 10 now. I mean still not massive, but we're in LA, new York, copenhagen. We acquired recently, we acquired a fund in the UK. We just added our chief impact officer and partner in Amsterdam. So building a bit of our own organization or platform, or you know, our core values, and making sure we are also building a platform, not just for one or two funds, but for a lot of other things we could do.

Carl:

Thank you for sharing that, and I totally agree. It's very exciting to work with young entrepreneurs and I think your lessons can be really helpful. Impact investing is currently a challenging field to be in and, at the same time, very exciting. Finding the right investment becomes, I guess, more crucial nowadays where capital is especially in sustainability, uh less accessible than it was some years ago. At the same time and you mentioned it you want to make money. You're not a non-profit, but you want to do it the right way.

Carl:

I always and I think I mentioned this in the in this podcast several times what excites me about circular economy is that it's a business model right, and someone who I love to quote is Andre Hoffman, who said it's not about how we spend our money, it's about how we make our money, and I think he even wrote this in one of his books. And then, maybe the third anecdote to the same thing is I believe it was one of the former chief sustainability officers from H&M who said, like you know, I have to look after profit and after growth and after sustainability. Why do I have to do this in three segments? Why can't we combine all of them? So in the end, it's about making money and growing, and I think that's important, obviously, but at the same time, doing it the right way, which I believe is also a bit of your investment criteria right, like how do you define which investments you want to do?

Martijn:

Yeah, that's a great question. I think the first question is does it actually fit into our thesis? And our investment thesis is, of course it has to be circular economy. But then we're narrowing it down a bit. Where it also has to be circular economy in what we say consumer value chains so think about textiles, electronic food, beauty, fast-moving consumer goods. And then we have another sort of requirement is that we want a corporate, you know, or consumer brand being able to, that we can partner with, either as investors to co-invest in the companies or who is involved in the transaction with a offtake agreement or a joint development agreement. But it's sort of a meaningful what we call pull through the supply chain and because in our experience we've seen, of course, a lot of innovative technologies and a lot of cool things and a lot of small pilots and tests and things like that. But we feel the biggest hurdle for circular economy ventures is to get that real serious, scalable commercial traction. So that's, I would say, the investment thesis.

Martijn:

And then, of course, there's quite a bit of Now. We also launched or became an Article 9 deep green fund. There's a lot of focus on the impact, where we don't only look at climate but basically look at the impact on the other planetary boundaries, like biodiversity, and that has to be meaningful, like biodiversity, and that has to be meaningful. So the way we look at it is you know, a company within six years, has to easily get to 100 million of revenues, but that, like every euro of revenue, also has a meaningful impact story behind it. So, and like you know, I think I've said like a couple uh simple things, but this already eliminates over 90 to 95 percent of the companies we talk with, right, even before we have to go into sort of deeper, uh, deeper, diligence. You know, competitive advantage team, a lot of the criteria that you know you would look at in order to evaluate if something is investable.

Carl:

So you're industry agnostic, right Like. You invest in all different kinds of industries, but always with a consumer focus and, I assume, not too early stage when you're already talking about offtake agreements and industry interest.

Martijn:

Yeah, that's interesting, carl, because I think if you would be in the energy space you would really be in a B or in a C round at this phase, whereas we actually find circular economy ventures who have that sort of at late seed and definitely at series A stage. So our ticket size is between one and five million Typically, you know, one, one and a half for seed, around three for series A and no, there's actually quite a lot of companies who are not indeed, like a pre-seed or seed investor. There's typically a bit of revenue, but we don't really have a minimum revenue threshold sort of a, you know, a minimum revenue threshold it really depends on, you know, could be a really meaningful offtake. That, you know, may take a bit of time to um before it really starts to generate real revenues, right, and, do you like, how do you invest globally?

Carl:

are you having a lot of focus still in the US? Being an American VC, I mean you also have, as you mentioned, different offices as well here in Europe. How's the percentage? How do you invest in general?

Martijn:

Yeah, so we have mandates in the US and Europe.

Martijn:

We're not investing in China, india, indonesia, that sort of region of the world.

Martijn:

Personally, I believe there's a lot of opportunity in Europe right now and I think, given the big focus of universities of European Union with the Circular Economy Action Plan, a lot of subsidies for doing research work, it creates a really nice ecosystem and base for companies to get to product market fit and we believe there's a real opportunity to take those companies and help them scale in the US markets and specifically in California, because we have a lot of good connectivity to the big brands there and just California alone is the fifth biggest economy in the world in the world and it's much easier to scale in than you know, going to Belgium and to Denmark and all the smaller countries in Europe, one by one, innovation happening within europe but certain scalability, like startups always look towards the us for, obviously for capital, but also for the market, which I think is really interesting, and I have the feeling maybe it changes a bit with current you know the political environment, but it regardless, actually it's, there's still that space for innovation and the market is still huge.

Martijn:

No, I beg to disagree on that last point, actually that the geopolitical makes it difficult, because all the companies we invest in also have profitable business models, because otherwise we wouldn't invest. So let's sort of take the last investment we did and the first investment that I led with from regeneration. It's a company called Orbisk, and Orbisk basically helps reduce food waste in hospitality, so in hotels, restaurants, catering, and if you take a step back in the world, one third of all food gets wasted. I mean, it's a staggering statistic if you think about people being hungry and one-third of all the food is wasted and 20% of that number is actually in hospitality, in hotels, restaurants, catering. So what they do is they basically put a device, so the company is called Orbisk, so they cutely call that the Orbi, so they cutely called that the Orbi no-transcript.

Martijn:

And the reason I'm bringing this up, carl, is that this company can reduce food waste within six months roughly by 50% on average, and by doing so they sell it on an annual subscription. The hotels and restaurants and cruise ships and caterers get their money back within three to six months, so they make a massive return on investment while they're also creating these environmental benefits, which, especially for hotels is very marketable and they can sort of talk about it similar as the towels that you shouldn't throw on the floor. And these hotels now start to have environmental policies about not having food waste and great marketing stories for their guests. So there's a real ROI-driven opportunity here, and we don't really present them as circular solutions in the US at all. It's about you know who likes waste. Right, get rid of waste, save money. You know, save money. Put some real storytelling behind all your green marketing efforts and that resonates extremely well.

Carl:

Yeah, I totally agree with you, which is why I'm also not too concerned about any government's political situation, because circular economy, as we said, is a business model and all of these innovations need to be a profitable business model, and then where is a better market than the US to scale these kinds of things? I find it very interesting that you brought up this example of your latest investment. I just talked last week to the owner of one of the world's biggest hotel chains and she talked exactly about the same technology, maybe the same startup um reducing, um, reducing food waste, and I think that's one of the major issues. I think up to 70 percent of food is being uh, is waste in the hotel, and not because of the chefs, et cetera, but more like the buffets and yeah.

Martijn:

Well, yeah, I mean I'm going to send you some materials right after the meeting, carl.

Carl:

And I mean out of scope of today, but I mean we talked before recording about two founders that you're going to meet next week, that I met this week. They are also working in the hotel business. So I think there's a lot that can happen and a lot of exciting business models in the field, and I'm really excited about that. Do you have like a scoring system or ranking system, or how do you assess circularity regeneration in your due diligence?

Martijn:

Yeah, Well, that's actually a very timely question because we just updated our whole measurement framework and it may be a bit late when this podcast airs, but on April 10, there will be a webinar and it will be recording later, and that's something we have developed together with circle comedy foundation and I think it's actually one of the first full measurement frameworks used by a vc on circularity, by a VC on circularity, and what we've tried to do is there's a new initiative right now called the Global Circularity Protocol, and I'm sure a lot of people are familiar with the Greenhouse Protocol.

Martijn:

That's basically where all the CO2 equivalents and science-based targets and scope one, two and three are based on based targets and scope one, two and three are based on, which is now being developed by WBCSD and the UN for circularity and Circle Economy Foundation is quite involved in that initiative. We don't know exactly because the official standard has not published, but we try to align it as much with the latest thinking that has emerged there and we'll, you know, of course, adopt anything that sort of gets agreed within the next couple years and I think if we can make circularity more tangible and more measurable, it will also be an easier asset class for investors to invest in, because I think the measurement piece is really what is holding people back do you have like specific kpis or a way of measuring?

Martijn:

so yes, in a way I mean like like uh, I'm going to tease the uh, the webinar again, and there's also some information already on our website. We've called it the CRISP protocol. Yeah, so it's the circular regenerative. Well, I actually forgot the rest of the piece for protocol Investment, I don't know what. The S is Sustainability yeah, circular regenerative, and we had to come up with a good word, right. The P is for protocol investment and the S is sustainability yeah, circular regenerative, and we had to come up with a good word, right, so crisp it is.

Martijn:

And the way we think about it is. You basically have a couple of things we measure at the fund level, and then our three big themes are design, use and reuse. So a lot of people think about circular economies, recycling that's only a portion of the reuse space, but we feel design and use may actually be the two most important things, I agree. And then there's what we call enabling technologies, you know, like platforms for traceability and material passport that help throughout that whole chain. So that's sort of the taxonomy we've adopted and we measure a couple of things on the fund level, but then, depending on which buckets they fit on, we actually track very specific KPIs that work really well for those specific business models and then make them comparable at that level, and in that case you avoid a bit of comparing something that is, design versus use, which can be completely different, and you also need to track different KPIs.

Carl:

Very interesting. I think we should tell the startups within the ecosystem of regeneration to sign up also for a little advertising here for the Easy Match platform of Circular Republic. I don't know if you had a look at it, but it's obviously for free. So startups can register their startups within the Easy Match platform and that allows investors and industry partners to really sort for startups exactly how you mentioned it, because we have this startup landscape report that we launch every year we even did it for textiles only as well where you can really screen I'm looking for a startup within this industry and then, as you mentioned, either digital enabler or like in the, in sorting, collecting, recycling, design and then really then compare. You know all different kind of textile recycling startups, for example, as far as I'm concerned, at Regeneration, are really at the forefront when it comes to putting these kind of tools out there. This protocol, as you said, is really my contribution was quite minimal here.

Martijn:

So we hired a new chief impact officer and she has like 20 years of impact investing experience, starting with setting up UN PRI, like 20 years ago, principles for responsible investment, which was almost like the first initiative to start measuring this across asset classes, and her last job was actually running impact investing for UBS Asset Management and she went from UBS to the little regeneration, so hopefully we'll be the next UBS Carl.

Carl:

I mean, the second fund is also not that small anymore, is it?

Martijn:

Well, our target is 150 million. We had our first flows just before the summer, anchored by the Dutch Sovereign Wealth Fund, investnl and some families, and our goal is 150 million. So you know, we're still open for folks who are interested.

Carl:

Yeah, big shout out on everybody who's listening. I know there are a couple of LPs out there. I hear a lot of investors telling me they miss scalability and profitability within impact startups. What I think is preventing that scale like is it the demand side? Is it the regulatory side? I mean I I even talked on this podcast about it, um, previously that regulatory should never be the only reason for a startup to be successful. But what do you believe there is for a strong business case? What is lacking sometimes in terms of scalability?

Martijn:

Yeah. So I mean, in all fairness, I think in 21 and 22, climate investing became a bit of a height, right like the industry has tried to apply the venture capital model on all kinds of innovative companies, and my personal opinion is that venture capital works in a quite a limited subset of cases, because you know the economic model is that you need to, you know, really get, you know create some really big, you know unicorn type of companies in at least a couple cases in your fund, in order to get the economics to work right. So that's what people talk about, these 10x returns, um, and I think some of these companies just don't lend themselves for that. They're a bit more, you know what I would call nothing. I don't think they're, they're the wrong companies, but they're more small, medium-sized companies that do, you know something and you know could definitely get some level of financing. But it's a different type of money and I think we're learning that a little. And, of course, if the market goes up and there's always more money to be spent and new rounds at higher valuations, then the industry can keep itself going. But then when the music stops, and I think that's a little bit what you're seeing now, I think Warren Buffett said, then you can see who is swimming naked. I think I used music and the sea here interchangeably. Any case, I think you get my point.

Martijn:

So, and I think that's, I think, we're getting a bit more disciplined about you know what is really a venture model and what we see is that you know there's some things that inherently are scalable right. So software scalable, ai scalable, you know, biotech right, sort of the. You know it has a scalable model that we're applying. Some of those, like an Orbis right is a company that uses a hardware, software, saas model with AI to deliver a scalable platform to solve scalable platform to bring a circular solution to the market. So you're levering some of these scalable elements and applying that to a market you're interested in. So I think, and there might be new markets that develop right. So AI wasn't around, at least as a venture model 10 years ago, and I think we'll see more of these innovations. But climate as such is of course there's not an inherent scalability factor in it. The problem is big. There's a lot of money needed, but that doesn't mean you can also create venture type returns thanks for explaining that.

Carl:

How do you balance financial returns and impact, or do you balance it at all, like or do you just like look at it separately? It has to bring, obviously, scalability, profitability, growth, um financial returns, whereas at the same time as you mentioned before um, it has to create a certain impact yeah.

Martijn:

So we don't balance right and that's sort of a bit of a choice. Uh, so the way I view view it is you. You basically have two sort of concentric circles, right. So you have, you know, really profitable, successful, above market return opportunities and then you have impact and there is some overlap and, of course, if you're willing to take bigger returns, lower returns and do a concession, there's bigger overlap and there's more opportunities to invest.

Martijn:

We're basically in that sort of narrow section so we have to source a bit harder for the right opportunities. We don't compromise returns in any way and our philosophy there is a bit that if you find something with a really attractive business model that makes a lot of money, it will scale easier. And if it scales easier you will have more impact. And if we're more successful as a fund, we'll be able to, you know, maybe raise a you know, 400 million fund next time and get more money to work. So we strongly believe it's sort of hand in hand. But I totally respect other approaches and you know you could make a combination of philanthropy and investing and there's definitely hybrid models, but we're very much for profit.

Carl:

Yeah, absolutely. Last question I want to pick your brain, like given given. Maybe your idea of how the future should look like could look like, if we imagine a regenerative circular economy. What do you see? Like what do you? You have three kids right like what do you tell them when they come to you and ask, like, what is the biggest opportunity? If I built now a startup, like, what advice would you give them? What would you say? This is the area, the industry, where you see, there, we really need a solution. This is it. Go for it. Yeah, tricky one, huh.

Martijn:

So my, my last question. You asked me to predict the future, um, um, well, the first thing I do, uh and, by the way, I always do that also when I I give uh, um, uh, when I coach companies, uh, that give me advice is don't take my advice too seriously and feel free to ignore it. Uh and um, to some extent, you know, we are living in a different world right now, right? So I'm actually wondering how helpful it is to give my kids, steer them in some direction. You know, I remember the movie out of the fifties about, like plastics, plastics, right, you know that's the future and maybe, arguably, that was a good advice because, you know, like, commercially, I think plastic has been indeed a booming industry since the 50s, but at the same time, it has massively polluted the world and created a lot of horrible things and is, in my view, a bit of a design flaw, right? Or it's the perfect example of, you know, a superior material that performs extremely well for things that humans want, without pricing in any of the externalities and drama that you'd create on the back end, in the oceans, but also in recycling. So I actually would go back a bit to, in answering that question is I try not to give my kids very tangible advice.

Martijn:

I, you know also, I don't really feel my kids would take my advice, to be honest, and maybe even do the opposite and maybe even do the opposite and I much more talk about, you know, values and what's needed in the world, right? So I ask them like I ask them more questions, like you know, what do you feel would be a problem worth solving, and have a conversation about that, and my hope, of course, would be that they're motivated not only by creating a comfortable life for themselves and achieving their personal goals, but also doing something that would be helpful, and it can be on the environmental side, but it could also. I spoke to a founder who is solving, you know, mental health problems and loneliness lately, which is also you know. He told me some of these statistics. He said loneliness is the new smoking, you know which? I hadn't really thought about it and I hope they make that part of their um, the way they live their lives, um, but they have to make their own choices I, I love it.

Carl:

I love what you say. My wife is an executive coach, so she always tells me you know, don't tell people what to do, rather ask them interesting questions, and I firsthand, also working with a coach, know that that's probably the best way. So your kids are in good hands. Martin, thank you so much for taking this time. It was a really exciting conversation, one of many. And, yeah, thank you so much for being here today. Thanks, karl, I really enjoyed it.