SPEAKER_01 0:02

Welcome to the Future Ventures Podcast. I'm Scalian with Clarity. Today's guest is Sam Hasty, our partner at Active Impact Investments, Canada's largest climate exceed fund. Sam is a Fulbright Scholar investor and board member who focuses on infrastructure and carbon solutions innovation. His investment experience spends sectors including energy, logistics, agriculture, advanced materials, and climate resilience. At Active Impact, he works with early stage founders building scalable businesses designed to address some of the world's most urgent environmental and industrial challenges. Sam, welcome to the stage. I'm super excited for today's conversation. Especially because climate is continues to be an urgent need for um us as the as the world to solve, but it seemed to have waned a little bit in its uh uh kind of last year. So I'm looking to get your perspective, but before we jump into kind of like who is Active Impact, tell me who is Sam Hasty. How did you come to venture?

SPEAKER_02 1:10

Yeah, I appreciate the question, Maxime. Um, I've got a weird path to venture capital. Um I uh I started my career teaching seventh grade math. Um and I yeah, I really enjoyed teaching. I miss it even today. I taught for five years. Um, I taught in uh in a city in Memphis, Tennessee. I don't know how well you know the state of Tennessee or the city of Memphis. Um, it's the home of Elvis, uh, is what is most best known for. Um but uh it's um it's a really interesting place economically. And the reason I bring that up is while I was teaching, um it became really clear to me that some of the underpinnings of our school system are not preparing kids for the workforce of tomorrow. I'll just spend a minute on this because I think it's a like a particularly interesting topic. Um, in in 2001, uh there was legislation passed in the US called No Child Left Behind. It might have been 2000, early 2000s, No Child Left Behind was passed. And the idea behind it was basically any education institution that gets public funding K through 12 um should hold teachers accountable. And the way we hold teachers accountable is by testing students at the end of every year, starting at starting in third grade, starting at eight years old. Um, and so the idea is we can test the kids at the beginning of the year, and then we can test the kids at the end of the year, and we can figure out how well the teacher did. Like, is the teacher teaching effectively? So, like intuitively that makes sense. The problem is if you have to grade millions of tests in time to make an assessment on a teacher before the next school year, those need to be really easy and quick to grade. So the only like test type that works is a multiple choice test.

SPEAKER_00 2:57

Yeah, right.

SPEAKER_02 2:58

Now, here's the problem with multiple choice testing. It promotes something called convergent thinking, right? Which means there's one pathway to one right answer. And when you think about the workforce of the 20th century, we were we were training people to be cogs in larger systems. How can you be one person on an assembly line that does a task repeatedly exceptionally well? Um, increasingly, those tasks, whether that's a like a cognitive task like accounting um or legal review or a physical task like working on assembly line, like those are getting automated away by AI, right? Convergent thinking is what AI does really, really, really well and has been doing well. Like algos have been doing this pretty well for a while now. Um what we need to promote for people to be ready for the future is something called divergent thinking, which means there's multiple pathways to multiple right answers. Um, and that's really the world we live in. We live in a world of a lot of ambiguity and there's a lot of judgment calls in professional work now. It's not just like, hey, here's the right answer, just do it. Um, but the problem is, again, going back to this legislation and testing, it's really hard to test like sort of a more socratic method, right? Like it's it's tough to test sort of like open-ended, creative, cognitive, compare and contrast tasks. Um, so this was a problem that we saw. And uh we I ended up working with a friend of mine who started a nonprofit uh that helped uh students launch businesses in Memphis. And there's lots of there's lots of programs that do that. This wasn't created to build the next Microsoft. What we did was we built an accelerator program, we invested in each of these businesses. Um, and then the goal was to build some of these 21st century skills and these divergent thinking skills through the prism of building a business. Because there was this really cool research that came out of Yale in 2010 that was showing that when uh students had ownership over what they're learning, their skills growth and retention skyrocketed, right? And anybody that's been an entrepreneur will tell you that, right? Like when I build something like I learn a lot and I learn it quickly and I hold on to it because I care about it, right? And I and so that program ended up being very successful. We got very lucky with amazing students. Um, we ended up getting funding from some big national foundations, we got funding from Steve Jobs' family office, and you know, uh, we started to license it out to a few different areas around the country. Um, and then around the mid-2010s, um uh as uh the the politics in the US got a little bit more complicated, um, I started to believe that this political divide that we were seeing grow was a result of an opportunity gap between rural and urban. So when you think about like we, you know, Memphis is a really interesting place because it it's a it's a dense urban city um with almost a million people in the urban core and then over a million people in the metro area. But if you go two hours outside of Memphis into northern Mississippi, you're in like one of the poorest parts of North America, right? Like it's a it's a pretty intense place to live. Um and uh and those rural areas are seeing brain drain like faster than anywhere else.

SPEAKER_01 6:11

Urban areas, yeah.

SPEAKER_02 6:13

Um and uh and and the other thing that's interesting about globalization and the rise of sort of like our internet economy is like when you think back 40 years ago, if you bought groceries, that money had to stay in your community. You went to the local grocery store, you paid your local grocer for the groceries that they sourced. Um now you can buy groceries on Amazon, right? So, like the the like the the money is flowing outside of these areas and these communities faster than it has. So basically, like my Fulbright was focused on okay, how do we uh research the money like to take what we were doing successfully in urban areas with some of these like skills development and business building skills into rural areas? Um, and I went to Poland. Poland's a really interesting place for a bunch of reasons. I've talked for a while, so I don't I don't know if I should go too deep down that rabbit hole. Um, but the short version is Poland had a really successful education reform in 1999. A guy named Mirsaw Hanki took over as the Minister of Education, and they went from one of the lowest performing countries in the OECD in terms of education quality to top five. Um, and then uh all these really skilled Polish workers started leaving, right? Like they would they would get educated in Poland, they'd get a great education, and then they went to Germany, and then they went to the UK because there were higher wages and more job opportunities and more like big multinational companies. And then the Polish government basically said, we don't like that, right? Like we want to keep our our uh our talent here. So in 2015, a guy named Lucas Dudo was elected president. Um, and they really focused on um entrepreneurship in Poland. So they they uh they were taking some of the funding they were getting from the EU and driving it towards entrepreneurship programs. So I went to this tiny little town in northwest Poland called Kosholin. Uh it's about four hours east of Berlin, just to give you where the city is. Um, and I was researching like, are these programming, are these programs helping to start businesses? Like, is it working? Um and as part of that program, I got to go to startup competitions all around the continent. You know, Fulbright basically, you know, I had a budget to go to these different conferences, and I started to see really cool startups in the impact space. Um, and so I started to send deals to family offices and foundations that had supported my nonprofit because they cared about impact and they were doing some impact investing. And I would say, hey, I don't know anything about this, you know, microgrid company in Uganda, but you like this stuff. Do you want to take a look? And as they started to invest, I would write small angel checks alongside them. Um, and that's why I got into angel investing, and now I'm in venture capital. So that's a long-winded answer, but that's my very weird, windy path to the seed I sit in today. And I've now been in venture capital for eight years.

SPEAKER_01 8:51

Love it. Uh, I mean, this is an unusual story, but it's definitely a uh a story driven out of passion and interest and and purpose. Uh, you were already doing the work, so it just kind of became a natural evolution of what you were already doing. Um, yeah. How so I'm if if you started in venture capital, I'm assuming that Active Impact is your company. Uh I'm assuming it's the emerging fund manager. Kind of like how how easy or hard was it to raise the first fund? Or was it because you already were you had a relationship with a lot of family offices, a lot of investors, uh, through the foundation, uh, the not-for-profit, that it was like, hey, you already know who I am. Uh, you know what I'm capable of. Write me a check.

SPEAKER_02 9:36

Um, so my partner, Mike Winterfield, founded Active Impact. Okay. I joined I joined Mike um about halfway into the first fund. It was a $10 million fund that he'd raised. Um and uh and I joined him and our other partner, one of our other partners, Tom Bodes, at the time. Um, and uh, and in in terms of that, like the first fundraise process, um, the first fund is always a grind, right? Like it's it's a battle. Um, I think uh I think Mike's better suited to talk about you know how deep the battle was. Uh, but I'd say there were a couple things that I would credit um our our team for in the first one. One is Mike comes from uh he has a recruiting background. Um, but as he grew up in recruiting, he ended up becoming president of Canada's largest recruiting agency. Um and as as he rose within, and that actually turns out to be a super valuable skill set in venture capital. So we'll talk about that later. One of the first things any of our founders do after we invest in them is hire people, right? So like Mike's been involved in thousands of hires. So that sort of like seeing around corners and and what to look for in some of those early hires is a really valuable, you know, um expertise set to have for our early stage founders. But uh as Mike grew up in that uh recruiting uh organization, he started to get more involved in the sales side of the organization and was leading very large sales teams in this recruitment business. A fundraising process is not dramatically different from an enterprise sales process. You have to build the right volume of funnel, you have to manage the funnel effectively. Um, so that was a great skill set on one side. And then my other partner, Tom Bodez, um, he was the managing partner of um one of the most well-respected tax law firms in Canada. Um, and the interesting thing about tax lawyers is it's very complex legal work. It it certainly attracts a certain type of lawyer. But once you get to a certain level of expertise and um recognition, you start to know where all the money is, right? Like you need and those are the people that need the legal help. And so when you put uh like a well-run enterprise sales process and leader, yeah, someone who knows where that money is, it's a it's a pretty good combination, even when raising a first fund is really, really hard. Um, and so um I got much more actively involved in our second funds fundraise, um, which was an oversubscribed fund we raised in 2021, and then we raised our third fund in May of this last year. It was a hundred and dollar fund. Yeah.

SPEAKER_01 12:16

Wow. Wow. Oh, so you went from 10 to 110. What was the fund to in the middle? 60.

SPEAKER_02 12:22

So the target was 50 and our hard cap was 60. We hit our hard cap of 60. Actually, I mean 2021 was a crazy time, right? So um we we launched our fundraise. I think it was January 4th of 2021 for the second fund. Yeah, um, and we closed on I want to say 42 million. It was 41 or 42 million seven weeks later.

SPEAKER_01 12:49

Oh wow, wow.

SPEAKER_02 12:50

Like this, you know, it was a very, very different world. That was a really expedited process. The whole thing was over subscribed in six months.

SPEAKER_00 12:58

Um and mostly institutional LPs, excuse me. Mostly institutional OPs.

SPEAKER_02 13:05

Uh no, so the the first fund was pretty much, I mean, it was uh evenly split between high net worths, family offices, and foundations. But the truth is, all three of those are basically high net worths, right? So like the first one was pretty much all high net worths that had their own that had their own decision-making power. There wasn't a lot of investment, you know, intense investment committee approval. Yeah, the second fund was uh that that first 42 million was filled almost completely with individuals, high net worth family offices, and mostly repeat from our first fund. But then the last chunk was taken by a few institutions. Okay. And so this third fund that we just closed in May of last year, May of 2025, um, that was the first fund that we've had that was anchored by institutions. So they were the first commitments, and there was a pension fund in Quebec and then a fund of funds in Toronto that led that were the co-anchors for our third fund.

SPEAKER_01 14:00

Fantastic. So you we went in 50 million increments. I'm assuming the fund four is going to be at least a hundred of the 60.

SPEAKER_02 14:08

Well, it's interesting you say that actually. I think this you talked about Climatech um losing some of its sexiness in the last couple of years, right? Yeah, so I think uh there's a really important conversation every GP needs to have with themselves, which is um what's the ideal fund size for me to be greedy with carry and not with management fees? And I'm not just saying this, like I think 110 is the right number for us. And the truth, and part of that, like I have lots of belief in climate, and we can talk about that. We have not yet seen evidence of $10 billion outcomes in climate, right? And so if once you start raising $300 million or $400 million or $500 million, the outcomes you need to triple that fund start to get bigger, right? That's just the basic fund math. And so I I actually think fund four, if if you know, if I had my drrothers, like I think fund four is gonna be pretty similar to this size because this is by far our highest performing fund so far. And it seems like a really strong sweet spot for us so far. Um, so we'd have to see something change to convince us that like changing the number makes a lot of sense.

SPEAKER_01 15:22

Sam, what makes fund three the highest performing fund? Is it that you guys have a lot uh more rigor, higher deal flow, quality of companies, the the climate companies or the have evolved significantly in terms of technology? Kind of like what's driving the higher performance?

SPEAKER_02 15:41

In a sentence, it's founder quality. Okay. And so I think we've always had the ability to assess founders really effectively. Like one of the cool things about Mike's experience in enterprise recruiting for 15 years, he's actually built up his own proprietary system for assessing a couple of key variables that we see as pivotal to founders. So there's this really interesting two by two that we put every founder through, which is a matrix of intelligence and accountability. Um, and uh, and there is a very common pitfall in hiring and investing where people end up investing in high intelligence, low accountability people. Because those people are the most sophisticated at tricking others in the interview process, in the diligence process, right? And it's not, you know, I'm not I'm not making these people out to be frauds, right? Like it's not um ill-intentioned. Um, it's just like there are ways over a series of conversations that we have where we ask the same exact questions to every single founder over this period to get a sense, and and you can actually pull out some really interesting insights on intelligence and accountability. So we ask like very basic questions like, have you ever taken an IQ test? How is your intelligence compared to others like numerically, quantifiably? What are some examples of that? Like we get into things like SAT scores, literally. Like just understand, like just from a like a strict quantitative perspective, what does your intellect look like? How are you learning things and how quickly you learn them? But then the accountability piece is really an interesting point, right? And I think what's what most where this is getting more momentum recently, which is really good. Yeah, value and importance of references, right? Like you get so much more from 10 references than you do from 10 conversations with the same person. Um, and so we like one of the rules we have is in the process of diligence, we ask founders for quantifiable accomplishments that they've had in previous roles, and then we seek in these references will anybody else say this independently without without prompting. Like, if I don't I don't say like, hey, Maxime said he took the business to 50 million ARR, is that true? Because like that puts the reference in a tricky spot. You just say, like, walk us through every accomplishment you felt uh Maxime like, you know, was able to accomplish working with you, and um, you know, and tell me what would have happened if Maxime wasn't there, right? Like, if Maxime was gone, how would the how would the outcome have been different? And so that that combination with the sort of strategic questions we have can pull out some of these things, anyway. So I think the reason I bring this up.

SPEAKER_01 18:22

Can I just double-click on the two-way two matrix? Because I'm curious. I mean, like, um, do you place equal weight on intelligence and accountability? Um, like, I mean, at the moment, high agency is so highly regarded and valued. And in essence, it's it's accountability, doing the things you're gonna say you're gonna do and finding ways to do them. Um, yeah, so you you place equal importance on both.

SPEAKER_02 18:44

Yeah, we place equal importance on both. And I'll tell you, like the magic in this is not just saying intelligence and accountability, it's how do you ask the right questions that don't lead the witness, right? Like high intelligence people by definition can think through what the answer the other person wants to hear is. Yeah, so you have to come up with creative questions. So I'll give you a really weird example that we're brainstorming right now. If I were to ask you, how does someone catch a cold? What would you say?

SPEAKER_01 19:16

I mean, cold is a virus, so it's transmitted uh perspiration, uh droplets. That that's what I'm assuming that is is the answer. Uh it's not, I mean, it's not the old wives' tale of like, you know, you sit in a draft, breezy place and you catch a cold.

SPEAKER_02 19:35

Yeah, so that's that's it, there is no right answer, just to be clear, right? Like what we are looking for is data points. I'll give you extreme examples on either side. On one hand, you'll hear someone say, Ah, you know, I was on a plane and this person was sneezing next to me, and like I got it from them, and you know, and that's how you catch a cold. You just like sit next to someone who's sick. Um, and then you have someone else who says, you know, actually, like if if I have three or four days in a row where I'm not sleeping enough and I'm not taking my vitamins and I'm not taking care of myself, uh, then I expose my body, like my immune system's and I so like and both are true. Like the point isn't to say there's a right answer. The point is you can actually pull out a little bit of someone's thinking about their own agency in their life, right? And like that ties into accountability here, right? Like, how much do because then you you fast forward five years and you get founders that say, Oh, my investors just don't get it. You know, that like they're they they should be giving me more money, they're not giving me more money, it's therefore, right? And like that's get really tricky because we've had good businesses where you have a founder that has that mindset and then you get a suboptimal outcome, right? So, so that's really the magic of that. Um, is the is the question framing in a way that doesn't give away what the right answer is. Because you're a super smart guy, and I think you didn't, you know, it wasn't immediately obvious to you obvious to you like what's Sam trying to get at by asking me how someone catches a cold? Is he looking for my intellect? Is he trying to assess, do I understand how viruses work? Is he, you know? Um, but going back to your first question about what's changed for fund three, yeah. I I felt we've always had a pretty strong radar for assessing founders. But um we've I'll tell you one thing that's different for us, and this ties in directly to getting access to better founders. Our first fund is only 15 companies. Our second fund is only 17 companies. They're very concentrated funds for seed stage, right? Like common wisdom is at seed, you should be getting 50 to 70 shots on goal because that's what you need to get access to a unicorn to get to sort of like power law upside. Um we are very active post investment. Um, I'll tell you, there have been several times where a company's been in trouble and no one will write a check, and we're the only one who writes a check. I don't You try to check every time and every bridge because that's not the case, right? But we really like to fight with founders to the very end, right? Not what I mean by that like we want to stay them. Like we have an example of a portfolio company just in the last quarter where they were struggling to raise money, they had seen some growth, but not aggressive growth. So we worked with this founder to get to cut headcount to get the company to cash flow positive, which is a painful process. You know it. Everybody hates doing that.

SPEAKER_03 22:30

Yeah.

SPEAKER_02 22:31

Um, but we got aligned. We worked with, we were, we like, we supported them in the HR process of like terminating a big chunk of the staff, doing a meaningful riff. And then we financed out of our pocket um a new hire that was a president to work alongside the CEO. And since then we've seen revenue growth increase, and they just got a term sheet for a $4 million round. So um, I'm only saying that to say no one else was willing to write a check there. And we said, we'll write a check, but it's got to go to this specific hire because this is the hire that we saw that will change your trajectory.

SPEAKER_01 23:05

It's the gap.

SPEAKER_02 23:05

Yeah. Right. And so how that ties into better deal flow and fund three is we are now seeing when we get into competitive situations now. And I talk to a founder who's on startup number four and has sold a business for 500 million bucks before. I can say, you know, stuff gets hard. You've done this before. You know, like there are some deep dark moments in the venture building process. Go talk to one of our founders that's having a hard time. Ask him how we show up. And that reference wins us better founders now than we were able to get access to in fund one. And so we have five founders. We've made 13 investments so far. We have five founders that have an exit for at least $100 million in this fund. Um, and so that's been the biggest delta in terms of the you know the increase in revenue.

SPEAKER_01 23:56

Uh so for the second fund, uh for the third fund, uh, what's kind of like I know I know there isn't necessarily a target, but are you going to cap out at 20, 25 uh uh investments?

SPEAKER_02 24:08

Yeah, right now we're looking at between 20 and 25. We we believe we need to go slightly broader than the 17 we did in fund two, but we still what's most important to us is that we're still able to be very active when things get hard, right? Um, and so you can only do that with a certain number of companies. You can't be very active when things go get hard with 50 companies, it's just it doesn't work.

SPEAKER_01 24:32

Um how big is how big is the team? I mean, obviously her three three GPs, three partners, but how big is the rest of the team?

SPEAKER_02 24:38

Yeah, so we now have four partners. Sophie on our team just printed just a couple months ago, so we're we're thrilled that uh bring her into the partnership. Um, and then we've just added two more people, so we're nine full-time with with a part-time person as well.

SPEAKER_01 24:52

Okay, fabulous.

SPEAKER_02 24:54

Sorry, eight full-time with two part-time people, ten, ten total, eight full-time, two part-time.

SPEAKER_01 24:59

And and and that feels like just the right size um for you guys.

SPEAKER_02 25:04

Yeah, right now that feels like the right size. Um, it's always a tough balance. What we did in fund one and fund two was we all of us basically took yeah, effectively lower pay to expand the team so that we had a team that could handle the next fund size. Yeah, yeah, yeah. So like when we were raising the 60, we had the team in place before we'd raised it to deploy the 60. Um, when we were raising the 110, we felt the same way. Now we actually feel quite like as I said, I we think this is a good number for us and a good fund size. Um, so we feel like this is the right size team for what we're doing in games.

SPEAKER_01 25:41

Have you seen any kind of shift or in in in terms of expectations from fund one to fund two to fund three in terms of kind of like what the um the investors in the fund are expecting and what it's reporting or outcomes, returns, uh, focus. Um, anything that has shifted from fund one to fund three?

SPEAKER_02 26:03

Yeah, I mean, I'd say there is uh I think there it's pretty similar, right? Like at the end of the day, our investors want uh top decile returns from our funds, um, and we're gonna continue to drive towards that. And they want a meaningful, quantifiable environmental impact uh on on climate specifically. So our North Star is emissions reduction. Our target for this fund is to reduce 10 million tons of CO2. Um, now for content direct or indirect. When you can you tell me deeper on that question when you say direct or indirect, like what's an example of direct versus indirect?

SPEAKER_01 26:41

I mean, if uh emission reduction for me is like either carbon sequestrations or like uh something that uh prevents the the emissions from occurring in the first place. Yeah, indirect is like maybe you're sequestering, but it's the steel reduction, or you have technology that drives awareness around kind of the footprint, so makes companies uh forces different behaviors on the the part of emitters kind of like so. If I was to take this into scope one, scope two, scope through, kind of emissions got it.

SPEAKER_02 27:12

Okay, so uh I'm gonna answer the question. We we look at impact, we have uh three different buckets that when we initially diligence a company, a company can fall into, right? So one is direct quantifiable impact. So, as an example, one of our fund three companies is a company called Rototherm. They do um uh EGS, enhanced geothermal systems. Um, and uh and uh so it's a closed loop system, it's the first waterless geothermal system, which is very exciting for a bunch of reasons. Um that is a direct impact on the emissions profile of the grid because every electron they produce is a zero emissions electron. Yeah, that is immediately bringing down the carbon intensity of your grid, right? Um, also I said EGS, it's AGS. Sorry, there's enhanced geothermal and advanced geothermal. They are advanced geothermal fervo, which is going public, which you might be tracking, is enhanced geothermal. We don't need to go get to do that.

SPEAKER_01 28:13

Yeah, that's just on the on the enhanced on the enhanced side, we work with a company and they use water and they strip out rare earth minerals or from uh from the water circulation.

SPEAKER_02 28:25

Yeah.

SPEAKER_01 28:26

Okay.

SPEAKER_02 28:26

And there's some really cool applications for enhanced geothermal. I'm really excited about what Fergo is doing, and I look forward to seeing that continue to grow. Um, we could talk about Rototherm in a lot of depth. There's some really interesting reasons that investment makes a lot of sense for us. But the reason I bring them up is just like that is a very clear direct emissions impact on the grid the second they're producing. And we quantify it, you know, it's something like 800,000 tons for their first uh 100 megawatt facility. Um and um and then so so bucket two is an enablement layer. Uh so I'll give you an example. Um, there's a company that we just invested in called Peak Energy. Um, right now, 90% of the of the interconnection queue, so projects waiting to be connected to the grid are renewables. Um this is a a platform that helps expedite permitting and uh effectively it it expedites the process of working through the interconnection queue. And all their customers so far are renewables customers.

SPEAKER_01 29:31

So And DC operates across all of Canada, Peak Energy? Well, Peak Energy is in the US. Okay. Oh, sorry, okay.

SPEAKER_02 29:39

Um, and so the reason I bring them up is uh that is an impact that we feel clear about and aligned on, but that's really hard to quantify because you say, okay, you speed up, you know, uh let's call it a hundred megawatt so utility scale solar facility, and it and it gets connected six months faster than it did before. Like, how do you quantify that? You can quantify it, but there's a bunch of assumptions, right? And it starts to get clear. So the enablement layer is bucket two, and then bucket three is we believe in this impact, but quantification is kind of impossible. So an example of that company would be something like Metafold. So Metafold is a company, it's a group of PhDs out of the University of Guelph that have created uh this topology optimization engine that creates lattice structures that have the same structural integrity. So uh basically you can use 90% less input material and have the same structural integrity because their materials have a bunch of holes in it, right? So it's like, how do I create this like porous structure for a structure that used to be just like solid metal? Um and I can lightweight a bunch of stuff too. So like a Ford F-150 lightning, which has been discontinued, unfortunately, like that's almost 2,000 pounds more than a regular Ford F-150 because the batteries are so heavy.

SPEAKER_00 31:00

Yep.

SPEAKER_02 31:01

So you say, okay, that means we need to lightweight other stuff in the truck to make the like to enhance range, or lighter batteries, exactly. And it's it has lots of ex like lots of applications for things like electric, like uh dump trucks, right? And electric H wheelers and uh a lot of aerospace applications, this lightweighting with the same structural integrity. So that's really cool. And we believe there's a there's a meaningful emissions reduction potential for a business like that, but we're like we're never gonna be able to quantify it, right? And so when I talk about that 10 million tons, that is just in bucket one, right? Those are just the companies where we can quantify clearly the emissions that this company will reduce. Um, but we also make other investments where we believe the impact is very clear, but we also acknowledge to ourselves and to our investors that quantifying that is is tricky.

SPEAKER_01 31:51

Makes sense? Makes sense, yeah. Um what um um I kind of want to go back to my initial statement. Um I think that uh this is really important work. There should be more of it, there should be more innovation, uh, there should be more investors underwriting this innovation, but at least from my vantage point, I've seen less interest in investing in climate. Is this a fair observation or not?

SPEAKER_02 32:21

Yeah, I think it's a fair observation. I'd love to put the question back to you. Have you done any investing in climate tech directly? Like how how well would you say you know some of the underlying technologies in the ecosystem right now?

SPEAKER_01 32:35

Um probably not well enough. Um, I'm an advisor with uh a climatech company here out of Calgary called Arbor. And Arbor.

SPEAKER_02 32:46

That's cool.

SPEAKER_01 32:47

Oh fantastic. Okay, so you know what they do with LC uh like lifecycle assessment, product carbon footprint assessment. Uh they do the calculations all the way from scope one to scope three. Uh really cool company. Uh I used to be responsible for ESG assurance at um um Parkland Corporation, which was recently acquired by uh Sinoco, as well as at Husky, which was acquired by Sunovas. So, from that perspective, I know some, but I I can't say that I'm an expert in ESG and climate.

SPEAKER_02 33:20

Yeah, I actually it's interesting you mentioned Parkland. I just met Bob Espie. Did you and Bob ever cross over at Parkland?

SPEAKER_01 33:28

He was sitting, that was the former CEO. He was sitting three cubicles away from me.

SPEAKER_02 33:33

Unbelievable. Small world. Yeah, no, Bob's doing some really cool stuff in clean tech right now, actually. He was oh interesting. We spoke because um he's focused, uh, he's getting more active with a company called uh EN Zig, um, which is uh a new battery chemistry that's that's quite interesting.

SPEAKER_01 33:48

Okay.

SPEAKER_02 33:49

Um, so you you know the space relatively well, right? Like, I mean, I think you can you can speak intimately to this. Um the you're I I would say from a venture capital perspective, you're right, right? Like the early stage and sort of more importantly, that sort of series B stage financing for climate um has taken a hit over the last couple of years. And I'm happy to you know pull up the data even on the screen if you want to look at it, but the data is pretty clear on that. What's interesting though is that um we are in a very interesting time for infrastructure. Uh and there are climate technologies that are now getting access to infrastructure finance that is actually skyrocketing the number of dollars, like net dollars going into these technologies. Like they're they're listing publicly kind of as we speak. But I can list a dozen companies right now that are getting multi-hundred million or billion dollar project finance facilities from organizations like Brookfield and like ClearGen and like, you know, these different financiers that specialize in renewables. Um, and those dollars in terms of total dollars available are significantly larger than the amount of venture capital dollars available. Um, and so all that's to say, from a venture perspective, yes. Uh, but this is like this actually goes back to why we made an investment in Rhodatherm. Uh I'm sure you've heard of the valley of death, right? Like you build a pilot and it works, but getting through to a commercial scale facility where you can actually actually like access non-dilutive competitive rate of return capital, like true bank financing, like true bankability, that's a big gap. And in 2021 and 2022, our ecosystem funded a lot of founders that had built something cool, but those founders were not proficient in the commercialization. Well, they just you know, I can't tell you how many times I've heard once I build the first one, everyone's gonna want to finance it, right? Like I'll build the first one and then it's rinse and repeat. That's not how debt financiers think. It's not how they should think, right? They're very risk-less. Every project is a snowflake. I don't care how modular you are, I don't care how repeatable you say you are, like it's in a different region, it's in a different place, there are different inputs, different workforce. And so Curtis is an exceptional example of someone that we bet on because he had built two very large fracking businesses. So the skill set is similar in terms of drilling, but more importantly, one of those businesses attracted over half a billion dollars of non-dilutive capital, of debt financing. And so he knows how to think like a debt provider because he has serviced debt, large amounts of debt over a long period of time. And that is super important for early stage equity investors. Because if we have to finance all this stuff with equity, we're gonna get crushed from a from a dilution perspective, right?

SPEAKER_03 36:56

Yeah, yeah.

SPEAKER_02 36:57

And um, and so it's not just that maybe like it might be harder to get capital at series B because there's not as much of it, like that matters. But more importantly, even if it works out, it's tough for us as early stage investors if we get diluted like crazy from all the equity, even if the equity does write the check at series B. So we're increasingly working with founders to assess their fluency in project finance and in non-dilutive capital. And if they if they're not fluent in it, that's okay, but just like there's gotta be a plan. Because if the person at the top, if the CEO is not able to speak the language of a debt provider, it's tough to like embed that in the culture, even if you hire a great CFO one day.

SPEAKER_01 37:38

Yeah. But I I mean, in many ways, this is extremely uh there's a uh uh almost like perfect alignment between the early stage investors and the founders because they have no interest in getting diluted. So focusing on commercialization, focusing on revenue, focusing on venture debt is is it's in their best interest because they get to keep a bigger proportion of the company.

SPEAKER_02 38:02

Yeah, yeah. Venture debt's a tricky topic. Like let's let's put it in the venture debt point you made. But no, but the other ones are so true. I think what's what's tricky about Climatech though is that there are some technologies that can't get revenue, any meaningful revenue, you know, revenue to cover their costs in the first couple of years, right? Like if you're building an SMR, it's hard to get revenue that covers all your costs in the first, you know, 48 months, right? Like there's a so uh so that's where I think a lot of people have run into challenges in climate tech. And so we try to either find businesses like Jetson is an example in our company, they're a heat pump business. Um and they've it's the fastest growing company we've ever been a part of. Uh we invested in in 2024. They started selling heat pumps at the end of 2024 in Q4. Um as of this last quarter, uh, their run rate is at $100 million. They're selling, you know, that that's in 18 months. That's without any, you know, that that is not inorganic growth. That is building a vertically integrated business that had strong unit economics from day one and could sell right out of the gate. But then there are other businesses like Rototherm that are going to take some time before those projects are built. So if we're gonna invest in those, we need people that really understand the path of lowering the cost of capital over time.

SPEAKER_01 39:30

And is is this one of the biggest challenges to why more uh companies, uh more climate or impact companies are not getting the funding they need. There's a significant off-run investment to get to the point where they're commercially viable and um sustainable, self-sustainable.

SPEAKER_02 39:54

Yeah, but I think it's actually deeper than that. I I think that's a point. I think the deeper point though is evidence of significant exit outcomes and capital returned to LPs. Um you know, like we uh and this is where as a venture investor, it's our job to look forward more than it's our job to look backward, right? So I think this is part of why we're so bullish on investing in climate right now, is the demand for some of these technologies is so significant that we think DecaCorns are coming, right? Like Fervo's IPO listed price, I think it's around 7 billion, right? So you're you're flirting with the DecaCorn status there.

SPEAKER_00 40:39

Yeah.

SPEAKER_02 40:39

Um, and and we've seen you know, other companies in the nuclear space, like Oaklo, you know, list on public markets and get, you know, very receptive audiences. And so I think the deeper problem is for many technologies, it is still on the operator, the CEO, and the founding team to tell a compelling story about the upside. Because that's what all of us are after, right? Like all of us are about upside. Open AI raised a ton of money before it was generating significant revenue, right? Like it's not, I don't think it's just a revenue issue. Like, it's not like, oh, we need revenue faster. I don't think that's the only problem. I think the deeper problem is more people, because they have to see to believe, need to see evidence of the person next to them making exceptional returns, investing in some of this stuff before they say, okay, like I gotta put my money in this too, because I'm falling behind.

SPEAKER_01 41:30

That makes sense. Um based on kind of like what you've observed so far, do you think that the next decade of climate winners will come from software, infrastructure, industrial innovation, deep tech? Kind of like Jetson is a hardware company. Uh kind of like where where do you see um the biggest winners coming from?

SPEAKER_02 41:54

Yeah. I want to answer that, but before I do, I'm curious your answer to the last question I gave, right? Like you asked me about how the funding landscape is changing. How do you think the climate the the landscape and climate is changing?

SPEAKER_01 42:08

Um I would uh I would completely agree with you. I mean, we recently uh had a conversation with a uh climate company out of Singapore, and uh the pivot that they had made was to shift away from product revenue to services revenue until they build out this. It's it's not from my perspective, it's not a matter of if, it's a matter of when. Um, we um we had a conversation two weeks ago with a really important climate fund out of Switzerland, um and uh very well researched with a whole bunch of PhDs, and so everything now is predicated instead of like two degrees of warming or four degrees of warming. So, kind of like what does this mean? How are we going to drop down like manage manage to this level? And what is the impact, the downstream impact of now? Hey, the Paris Accord, we were like trying to cap at two, now we were trying to manage at four. What does this mean? So I think it's yeah, like we have no choice, we just need to find ways to get to market faster to make it more commercially viable, to your point, have more successes because it's the same thing. Like, I'm based out of Calgary, and so we've had lots of conversation around how do we build a driving ecosystem in Calgary, and there's been a lot of energy, yeah. And so I was working with Eric Middise, who is the community architect for Dechstars, and so we're kind of looking at Techstars and their most successful communities being Border Colorado being number one, New York being number two, uh Seattle being number three. And the the key there based on again, uh, Deck Star has 265 startup companies that have invested in Canada. And so what they're seeing is uh where you start to see success is where you start to see exit, where you start to see uh Other company scale where you see the stories where you can relate to, and that's kind of like what drives the momentum. So to your point, if we start seeing some of this happening, it's gonna flock in, uh, especially if if they see that the returns are equal or better than what they can unlock in other industry verticals.

SPEAKER_02 44:19

Yeah. Yeah, no, it's um it's a it's a really interesting, interesting time. Um and I uh I think Calgary is actually a really amazing place for innovation right now, uh, for a whole bunch of reasons. I know we could go down go down that rabbit hole. Um, but you mentioned uh a question about what types of businesses will win over over the next you know five to ten years. Is it hardware, is it software, is it services? Um I uh I think this is a question every venture investor is wrestling with, not just climate investors. Um, and and some of the very successful AI companies like Anthropic, like investors in that company are wrestling with this as well because they are becoming increasingly becoming infrastructure businesses, right? Like they Meta is building out huge infrastructure, AWS is building out huge infrastructure. Um, and so these businesses are not strictly software 90% margin SaaS businesses anymore, and everybody's talking about SaaS pockly. So I think the question is uh, where are you identifying um large share of wallet? And where are you identifying hair on fire problems? And that's where the biggest returns will come from. I know it sounds like a basic answer, but uh I think we're gonna see lots of you know AI-enabled services businesses do very, very well, right? We're seeing lots of these like roll-ups that have an AI foundation get real momentum and get lots of venture funding right now. And I think those businesses have that business model has a chance to be very successful. So I'm pretty bullish on AI-enabled services over the next several years. And some of our portfolio companies are actively engaging in that and winning in that by taking that larger share of wallet. Because in off, you know, many cases, the budgets to people for services are are much higher than the budgets for strictly software. Um I think we've seen like we continue to um watch climate software closely to see what exceptional looks like. We haven't seen lots of evidence of like a climate software just blow the doors off. Um, and and actually, one other point I want to make on this, which is related to the point you just made. Uh we go back to these problems that are really significant. There's a company called Pano AI uh that's doing uh early detection of forest fires. Um they they you know strap a little widget on a piece of infrastructure and then they use their uh machine learning to say, like, there's a fire there before anybody knows it, in 10 words. Um last year they raised $50 million on very aggressive pre-money. I don't think I should share exactly what the numbers are. I'm I'm not in the deal, right? But like I'll just say the multiple, and this is a hardware business, right? Like, this is not a strictly software business. They have a software component, but like they have to install infrastructure here. They raised something like a 20x multiple. Um, and um and there were great investors in that round. That's not an AI company, right? Like, that's not just a hype-based company, that is a company that's solving a problem that is becoming an increasing pinch point for communities all across the western half of North America. So, to your point on this four-degree potential like tipping point now, there will be more problems like that that will be solved by solutions that are addressing climate change. And those businesses are going to have appetite from financiers.

SPEAKER_01 48:21

Um if I can offer some input from talking to a lot of climatech investors, um the I guess the the one thing that's uh that they're looking for is like that's great. Like we're working with a cognitive-based company that does something very similar to what you described. Um, in is early detection of fire using AI, um, and how to combat them. Uh, the one thing that uh what what I'm hearing from investors and and I've talked to climate tech investors all over the world, from Singapore to South Africa to uh Switzerland to Canada, um, they are looking for outcome, outcomes being driven from from the technology. But if it's software, that's fine. Yeah, they want to see the outcome. So it just because you calculate uh carbon footprint, that's great. Go figure out a way to reduce it. So that's kind of like the the missing piece that I'm hearing from other climatech investors.

SPEAKER_02 49:20

And that and I think that's what's so interesting about the question you asked is that it's not whether it's software or hardware or services, yeah, it's who can demonstrate outcomes-based value, right? Because a lot of businesses are moving from a seat-based model to an outcome-based model, whether that's usage or right. And so um, I think we will continue to see that momentum build, right? Like as corporates that are procuring these things move closer to outcomes, it's the business models that can demonstrate outcomes um that are that are well suited to succeed over the next five years.

SPEAKER_01 49:54

Sam, I could talk to you forever. Any kind of uh parting thoughts of wisdom? Um, where can where where can people uh follow you work? Um, is it going on the active impact investment websites? Reach out to you on LinkedIn. Somebody, if an investor wants to pitch to you, kind of like how do they get in touch with you?

SPEAKER_02 50:12

Yeah. Um, so uh I'm active on LinkedIn. Yeah, you can find our website active active impactinvestments.com. Um, you can reach me at uh my initials, sh at theactive.vc. Um if you wanna if you want to connect with me. Um and uh yeah, Maxime, I'm I'm really grateful for the time. I want to pick your brain more on these topics because you're obviously pretty deep on them as well. And so maybe we should do uh round two sometime in the future.

SPEAKER_01 50:39

For sure. What I would love to do is like I'd love to do a pitch competition just focused on on climate tech and just round up 10, 15, 20 most promising climate tech startups and just have climate tech investors score them, give them feedback. No money to be allocated. Well, maybe we can find a sponsor for it, but I think that would be a really good, really clever idea in terms of driving visibility because in some cases it's visibility because the visibility may create some serendipitous connections or somebody coming and helping the founders.

SPEAKER_02 51:09

Well, I'll tell you, Maxime, maybe in collaboration with that. So we just did our first Canadian climate capital summit on Monday. Okay. And um, this was um a collection of some of the largest climate tech companies in Canada, many with over 100 million in ARR, a couple with a billion of contracted revenue. Um, and uh and the purpose of that was twofold. One, Canada is an exceptional place to build a climatech company, especially if you're using the systems in the way. Um and uh and two, uh, we're really punching above our weight. I mean, of the 25 largest exits in climate tech history, four are from Canada. Um, so we make up almost 20% of the climate exits of the largest climate tech exits uh globally. Um, and uh, and so I think it would be really cool to continue to highlight those exceptional stories, uh, but also show them as examples for some of these earlier stage climatech companies that you're describing, right? So that they can see even just three, four, five years in the future. You know, some of these companies are companies we passed on five years ago, and it hurt me to see them on Monday saying, man, you guys are just knocking it out of the park, right? So we should we should collaborate on that.

SPEAKER_01 52:17

Yeah. I I are looking back on the grid and seeing like what do they score a low on the intelligence slash accountability?

SPEAKER_02 52:24

Exactly.

SPEAKER_01 52:26

Sam, absolute pleasure. Um thank you so much for coming on um on the podcast. Thank you. I appreciate it. See you next week.