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AI’s Role in Climate Tech: Podcast With Climactic
39 Plays1 month ago
Raj Kapoor, co-founder of Climactic, takes us through his journey from engineering to entrepreneurship and how he found his way into climate tech investing.
He talks about Climactic’s unique approach, focusing on early-stage investments and software solutions that help businesses reach net zero by improving efficiency.
Raj also shares his thoughts on the challenges climate tech companies face, especially with AI, and gives some practical advice for anyone looking to make a real difference in this space.
Guest: Raj Kapoor, Co-Founder & Managing Partner at Climactic
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Transcript
00:00:00
Speaker
Hello friends! You are watching or listening, depending on the platform of your choice, the Green New Perspective Podcast, a show where we give the mic to some amazing people from the climate tech space. Usually they're discussing their technologies aimed at combating climate change, but sometimes, like in this episode, we are discussing general trends and how they're impacting this industry.
00:00:25
Speaker
With AI being a game changer across all sectors, we are now exploring its impact on the fight against climate change. My guest today is Raj Kapoor, co-founder of Climatic Venture Capital, a company that is supporting some amazing c climate tech innovators. He's an expert on how they can use the AI to make some impactful change. If you're interested to learn more, stay tuned and enjoy the conversation.
00:00:50
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um
00:00:58
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Hello, Raj, and welcome to the Green New Perspective podcast. Thank you. For those who don't know you already, can you tell us a bit more about yourself and tell us how you got involved into climate tech?
00:01:12
Speaker
My professional path has been started out in the engineering world, and I was a mechanical engineer, and did robotics at Carnegie Mellon. This was back before AI was a big thing, but we were trying to do driverless cars and driverless robots to go through pipes and all sorts of things.
00:01:29
Speaker
And so I got hooked on technology early on. But then I took a detour because I started a few student businesses and fell in love with entrepreneurship. And rather than working at some boring chemical companies or other things, I went to a telecom company and there they gave me an option. They said, you can do capital planning or this thing called information services. I chose information services and it ended up being networked multimedia, which later turned into the beginning of the internet. And so I was excited and honored to be at that beginning stage, went to to business school and there started a club. There's one thing I learned, which is that if you, a club around the internet, which didn't exist. And so if something doesn't exist, you start a club at a school. and you say i'm the president and everyone thinks you you know what you're talking about. And so that was fun. Did that, got a few job opportunities in Silicon Valley. I knew I wanted to be out in Silicon Valley because that's where tech and entrepreneurship really meet, especially back then. And then i I joined a little startup that was doing
00:02:35
Speaker
broadband services over cable modem called At Home. It was funded by some good backers. Did that for a couple of years. Really learned a lot. Learned also people skills because I remember being denied a promotion where people said, wow, you are smart, but you may not be as liked as you think. and So I had to really learn about what is it like to bring people in and really make a connection versus just saying the smart thing.
00:03:00
Speaker
I started a few companies then. I started one called Snapfish. It was an online photo service that was a roller coaster ride. We had to sell the company for 10 cents on the dollar that I had to give back to friends and family and investors.
00:03:12
Speaker
but then bought it back and we turned it around and the market timing was better for what it was doing, which was around digital photography. And then we were able to sell it successfully to Hewlett Packard. And at that point I became a VC and I joined Mayfield who had backed Snapfish, but lost money. So I was surprised that they made me a job offer.
00:03:33
Speaker
and did that for seven years, made 14 investments. I really was a student of marketplaces, consumer, a little bit of enterprise, and learned a lot. Really got my Silicon Valley network much bigger because when you're an entrepreneur, you're really focused and it's harder to build a ah big network.
00:03:51
Speaker
And there what happened is in 2006, 2007, I went to Ted. Ted is this conference and Al Gore spoke. He was the former vice president of the US and John Doar, who was a partner at Kleiner Perkins and Kleiner Perkins is one of the most prestigious venture firms. So seeing him up there was inspiring and he was crying next to his daughter and saying that we are facing the most existential crisis we've ever faced, which is climate.
00:04:20
Speaker
Lots of challenges in this world are reversible. You can change them. This one is not reversible and it impacts every single human being in the world. So it really hit me that I've always wanted to work on something that was benefiting humanity. I thought capitalism and that have to be different. And it hit me that this is what I should be working on. This should be my pet project outside of being a VC. So somehow I came up with an idea which I shared at TED around creating a simulation game which showed the habitable world getting worse little critters little animals with beautiful eyes that were getting sick and dying unless you did something and the way the game worked was that you would take photos with at the time there wasn't an iPhone it was a camera phone this is like 2010 2011 and of you doing actions that reduce emissions
00:05:12
Speaker
So it could be walking, recycling, whatever it is, to build awareness. The game was really cool. Got a half a million from the EPA, but it didn't really work. People didn't take actions. And so I scratched my head and said, maybe I should.
00:05:25
Speaker
go to investing in this thing rather than creating games. And I met a few other people at Mayfield. I was there as a venture firm. And we decided to go deeper into climate and look at the time. It was about energy and how do we disrupt the energy system. And we didn't have a fund to put hundreds of millions of dollars into companies. So we thought, let's look at software. Let's look at the that the supply chain going into the energy transition. And what are the other ways we can make things more efficient? I looked at transportation. My partners looked at solar. We did SolarCity. I ended up finding this little transportation company trying to make ride efficient with ah a ride board, like a job board. It was called SimRide. I led the Series A, and it turned out that we pivoted into Lyft, and it was an amazing journey being a part of that.
00:06:12
Speaker
In fact, so much that I left Mayfield because I wanted to be an entrepreneur again. I took a little detour into fitness, started a company which is now part of Class Pass My Body. And after that, I realized, wow, the climate situation is worse and it's beyond awareness, we need to go into action. And so I had some ideas around what I could do in climate and I went to meet with John and Logan, the founders of Lyft, and they said, forget all those ideas, come join us.
00:06:38
Speaker
And I joined them from being an investor to being the chief strategy officer. My job was to move us to an electric self driving shared future. So that's what the future of lift and Uber is. And I did that for four years the pandemic hit was challenging even though we were able to hire hundreds of engineers to create self-driving cars. We were creating electrification plans, but we had to pause everything because of the pandemic. And at that point, I said, look, I think we should be pausing this indefinitely right now and really focus on profitability given the pandemic.
00:07:12
Speaker
and i want to go off and i got inspired by a good friend of mine josh felzer to work in climate back again back as a bc because now it wasn't about clean tech it was about climate tech every industry needs to be decarbonized And so we formed a thesis, we made some investments out of our own money, and then we raised Climatic, which is a $65 million software focused fund really around enterprises and how can we help those 8,400 businesses go to net zero.
00:07:42
Speaker
And how is climatic strategy different from other climate tech focused venture firms? When we started this, there was hardly any and the investors would tell us back in 2020, this is interesting, but there's, what is is it really going to happen? Is there a lot of demand for it? Who else is doing this? And then fast forward to now and there's 200 plus climate tech funds. There's tens of billions of dollars going into the ecosystem.
00:08:12
Speaker
And now the question we got towards the tail end of raising our first bond was how are you different? Because there's so many of you. So it's a good question to ask. The way we're different is that a couple of things. First of all, we focus on seed level investing and we're founders. My partner and I both have started and sold to successful companies each. And we've been through really difficult times and being a founder along the journey, as well as an investor.
00:08:42
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is an advantage, especially at the early stages. And that's a big reason why we partner. Secondly, is that our thesis is different. So we're not doing as much deep tech. We're not as focused around consumer. We're really focused around software companies that help businesses go to net zero.
00:09:02
Speaker
And in this first fund, it's really focused around efficiency tech. How do we help companies gain efficiency? Because the carbon markets are up in the air, and there's not a lot of trust in them. And just reducing carbon for the sake of it is a challenge. And it may even be more challenging after this election in in the United States. But what really matters is when, if you could reduce cost and reduce emissions, which is what efficiency does, companies will make the investment. We're seeking startups that help companies do that.
00:09:33
Speaker
And one of the ways that they really focus on is the supply chain. Supply chain is responsible for the vast majority of emissions in a company. So we focus a lot of our efforts around finding companies to help supply chains get more efficient.
00:09:48
Speaker
And since we here at New Perspective Marketing, we work with a lot of climate tech companies and we know ah how big the role of the marketing is and when we talk about the growth of the climate tech company. And considering your work with early stage ventures, what do you think, which kind of marketing challenges do they typically encounter, and what advice would you give them to overcome those challenges?
00:10:11
Speaker
So it's interesting because first of all, when you look at the founders that are getting involved in climate tech, typically they're out of passion and mission. Typically they have a technical background and they're less about understanding marketing. So first and foremost is really building an appreciation towards it.
00:10:34
Speaker
And when we're dealing with the enterprise, people can sometimes jump to sales. And the first thing they'll do is usually founder sales of trying to sell to the customer. And what they realize is that selling the basis and the foundation of it is actually marketing, which is what is my ICP, ideal customer profile? Because you could waste a lot of time selling to a customer that doesn't really care about it.
00:10:59
Speaker
So finding that niche that's really the go to market is important. How do you think about pricing the cut to the customer? And is it durable? If you price too much later on competition, if you price it too low, you're leaving value on the table and they may not even value it that much because if it's if it's not that expensive, they think there's less value. So there's a lot around pricing. When you start doing sales and you hire a sales team, they realize they need tools.
00:11:27
Speaker
They need scripts. They need answers. They need awareness support. How do you build the brand? And then the customer needs to trust. And part of the trust is what's the brand image of the company? What's their position? Do people talk about them? Do they create content that people respect? And so marketing is enveloping a lot of that. It typically comes, in my opinion, there's product creation,
00:11:54
Speaker
There's evangelical sales and then they say, ah oh, we need to do some marketing. And it's a challenging one because it can be more of an art than a science, even though if it's direct marketing for a consumer, that's a little easier. But for enterprises, it's a little bit more of an art. It's hard to measure. So it's hard to know whether the person they hired is working.
00:12:14
Speaker
And if the founder doesn't have experience in marketing, it's hard to find who isn't a player that they should be hiring. So one of the things I recommend that they do is find a great advisor that you respect in marketing that has done successes and done failures, and then have them help you interview, since you may not know how to hire that person. But it usually comes after there's some semblance of product and some semblance of product market fit. Or if there's no product market fit, they really need to invest in it to figure out what is product market fit. You've mentioned how quickly this whole market is evolving. And now we have AI becoming a game changer across many sectors. has so So how do you see AI impacting the fight against climate change? When I say about efficiency, usually what you need to do with efficiency is to first of all understand where you are inefficient.
00:13:08
Speaker
And that is done usually through data. Data could be coming from sensors. Data could be coming from your supply chain. Data could be coming from your finance department, whatever it is. There's data. What's happened prior to AI is that we've created a lot of data. We've analyzed only some of it because it's hard to understand. And sometimes it's actionable. Sometimes it isn't. And it felt like a one-time scenario. That's a lot of effort.
00:13:36
Speaker
You need to hire a lot of data scientists, et cetera. This is less about generative AI, which we can talk about, which is exciting, but more about just the concept of what AI brings is the ability to take in a massive amount of data points and not fully understand how they're all correlated. Weather is a great example. There's so many factors going into weather for a supply chain exemp as an example. To utilize the latest models around neural networks that can infer patterns and make predictions far better than we've ever done before. And then you can continuously monitor whatever you're doing to continually make those predictions so it can help you make the right investment decisions. So we have a company called climate.ai as an example, and they help the food ag business that may be thinking about investing in a five-year contract in potatoes in Idaho, in particular areas of Idaho.
00:14:33
Speaker
And they can do better forecasting of weather and climate risk using AI, using some of the prediction models that I used to do when I was doing self-driving cars to help understand what are the likely weather patterns and where should they not invest and where should they invest. Maybe there's a whole different region of ah the country that they should be investing in five years, or maybe they should stay away from certain areas than doing. So that's just one example ah that's there. There's also around whatever you've invested in.
00:15:02
Speaker
could be machines, what have you. Making that more efficient through predictive maintenance is another example. Then, of course, the running of the company. So this is where generative AI gets really interesting, which is, okay, you're and you're selling solar and you're trying to convince residences or businesses to convert to solar, which we really need to do. It's one of the most successful forms of new energy, and the math is working now. but But there's a lot of barriers there around cost and understanding. If you could, as a company, let's say a large company like a solar city that we invested a long time ago, which is now part of Tesla, go and get their thousands of sales reps, which they used to have. Now it's mostly automated.
00:15:41
Speaker
and look at their call logs and understand the objections they're getting, and then use generative AI to create the most powerful salesperson who knows, who has all that information, is able to assimilate what is going to work best. That's going to be better than any salesperson that you have, just like we're finding that AI doctors can diagnose better in many cases.
00:16:03
Speaker
than a human doctor. I think we can accelerate sales. We can accelerate marketing because we can understand and have that loop of engagement much faster ah because of generative AI and creating words, creating images, creating videos, all of it's there. I would say there's just a ton of opportunity and especially around creating of efficiency. And we're just starting to scratch it. We created a market map.
00:16:26
Speaker
of climate AI companies. And when we did this about a year and a half ago, there were less than 100. Now there's over 200. We'll be revealing the update of that in September. We had climate AI here as guest on our podcast. So I'm definitely going to link that episode here with this one so that people can get more introduced to what they're doing. But where do you see challenges with climate tech companies adopting AI?
00:16:49
Speaker
So I think there's two layers layers of challenges. First of all, for the average company to adopt AI, there's a big understanding gap. So they could be adopting AI for a lot of things internally in the and for engineering development. You don't need as many developers. There's co-piloting to make your existing engineers more efficient.
00:17:08
Speaker
There's legal services so that you can save a ton on legal and just bring in the lawyer at the kind of last mile. There's finance about automating a lot of what you're doing on the finance side. Just the knowledge base I think is challenging.
00:17:21
Speaker
If you're targeting a particular climate problem and using AI for it, there's also an expertise issue, which is that to understand how the latest transformer models work to utilize the largest LLMs to understand efficient prompt engineering and nested prompts and creating agents.
00:17:39
Speaker
It's so new and cutting edge that a lot of people don't have familiarity. But I've seen this before in mobile. When mobile came, web engineers had to learn mobile. And this may be a little harder, a little different, but the principles are similar. And you will see a lot of engineers, software engineers converted to AI engineers over time. But this gap that we're in now is more challenging because you do need enough people to seed and to help teach others. So education is going to be really important early on.
00:18:07
Speaker
That's one layer. The second challenge is really the AI industry and its energy use, which is massive. So our belief is that data centers over the next two years are going to count for about 6% of the US's total energy consumption.
00:18:21
Speaker
which is quite a bit and large model training runs. And so there's training and inference in AI. Training is gathering lots of data and you're training a model of teaching it what's right and what's wrong. Inference is there's a trained model and now you're actually deploying it. So you're asking a prompt in chat GPT, it's using a model using inference. The challenge is that the bulk of the energy use is going to come from for A lot has been training because we've just been creating massive models with 175 billion parameters. GPT-4 has 1.7 trillion parameters. And so the that training has taken it, but we are not even close to the peak that we're going to hit on inference. And the way that a lot of of AI works right now with large language models is that just to do simple calculations, like three plus five, it goes out and analyzes the entire web and comes up with what it infers is the answer.
00:19:16
Speaker
where you can actually do it more efficiently by using calculation. And so we're going to see more efficiency on the models. It's going to be important around lowering the energy use. But the other piece of it, it depends highly where it's done. So if there is a significant energy consumption, if, for example, I think it was, there's an example that was given recently, if GPT-4 was trained in the azure Azure cloud region, Microsoft Azure, Canada East,
00:19:43
Speaker
recently because of the renewable energy that came out of that region at that particular time, the carbon footprint would about 13 X smaller than what it was training in another region. So being able to figure out which regions you go, but if everyone's trying to use that region, then you run out of renewable energy too. And so you have to solve that. So we have to solve problems on all layers of the stack, put data centers closer to generation.
00:20:07
Speaker
increase renewable generation. You're seeing Microsoft that did a deal with a fusion company for future use of fusion for their data centers. There's also making the chips more efficient and that's happening. So like new versions every two years are like 30 plus percent more efficient than the last version in terms of energy consumption, making the model architecture more efficient. So there's a lot that we can do. The question is, can that efficiency that we're gaining outpace the growth of AI in the use. And that's a big, interesting question that we're going to be pace facing over the vette next four or five years. Yeah, I have to say we talked about this issue in our podcast a couple of times with multiple guests. And my question for you is, what a advice would you give to climate tech companies to keep in mind when they want to incorporate AI-driven solutions that are both effective and environmental environmentally responsible into their tech cloud? The ideal scenario is that there's some net
00:21:05
Speaker
reduction calculation that what this company is working on in terms of creating, let's say ah a climate tech company has created a new way to bring efficiency into agriculture using precision irrigation as an example. And they're utilizing AI models to predict where to put more water and where to put less water and to save water as a result. There's going to be some savings of water. There's going to be some reduction of crop destruction. All of the societal benefits, whether it's emissions or water reduction, in an ideal scenario, you compare that to
00:21:39
Speaker
okay the input is energy use and to create those models and to maintain it does that come out positive now that is easier said than done because it's it's not always quantifiable so at this moment in time i think what we need to do is all flowers need to bloom we need to not stall the innovation around AI for efficiency to reduce industry's carbon footprint. And if it uses AI, you've got to continue on it and then also put pressure on the AI industry, the data centers, all of the associated companies, the chips, to continually move their footprint down. And the fact that a lot of AI is being clustered in a few companies in terms of the large scale models,
00:22:23
Speaker
is actually beneficial because it's a little easier problem to go after of a few companies that are there. yeah it's not just i just have to mention and It's not just emissions, it's water usage for cooling of this of the AI centers, things like that, that we have to consider as well when we talk about the sustainability of AI.
00:22:43
Speaker
That was something that we often hear during our podcast. But when we talk about innovations, AI or overall in climate tech, what are you most excited about? So I would say I'm really excited about utilizing AI to make energy storage happen.
00:23:03
Speaker
so renewables are happening solar wind even nuclear longer term maybe fusion i'm really hopeful but it's still longer term and so we have yeah we're all hopeful we've got great energy creation The issue is the intermittency and reliability ah of of a lot of these, especially around solar and wind. And so it necessitates the need of batteries. putting Whether it's large-scale batteries or putting batteries closer to the edge, for example, putting a battery in an electric appliance so that it can have a more efficient use of electricity at peak times, all of those things are starting to happen now.
00:23:43
Speaker
And frankly, a couple of years ago, it wasn't cost effective because the cost of batteries was too high. And there wasn't enough intelligence to make those batteries efficient and to make whatever the end use is efficient. We're now seeing a lot of innovation at large scale batteries, mid scale, small scale, and networks that are being created to create efficiency.
00:24:06
Speaker
And we're seeing that the energy industry is starting to price in real time, not everywhere, but like, especially around California, Texas, the UK, Australia, the energy markets are coming to life, which makes a battery ah ROI potentially 30% or more effective because now not only is it for outages and for lowering your everyday use, but you can tap into it real time.
00:24:33
Speaker
And it almost becomes every battery needs to be an AI trader of energy. And so we think that opportunity is super exciting. And what advice would you give to someone who is new to this clean tech space, climate tech spaces? You are in it for quite some time and you were really successful in it. So if someone wants to start their own company within the climate tech space, what would you tell them?
00:24:56
Speaker
Yeah, first of all, I don't know if I'm really successful. We've started climactic and we're very early. I didn't know I was a good venture capitalist until 10 years after being an inventor. So that's the challenge of venture capital is that it takes a while to know whether you're successful. And to me, I have a philosophy to not think about success as much.
00:25:17
Speaker
Maybe it's easier said because I've had some sexes, but I've also had some failures too. And it's about the, if you're tied to the outcome, the challenge is you can't control a lot of the outcome. The truth is you can't control anything except your reaction to the outside world.
00:25:33
Speaker
Whether it's you're in a relationship, whether you're starting a company, even your health, things are going to happen to you. And what you can only control is your reaction to what happens. And sometimes people get really stressed out and say, I don't know if I can work in climate because what I'm doing may not work.
00:25:53
Speaker
or it's just it's too stressful to think about where the world is going and I don't know it's just too much. I think from my perspective there is what matters is the intention that you're putting forth and the results are not really up to you. There's the universe that's at work.
00:26:12
Speaker
And so if you're coming in with good intentions and you're making good action and good effort, that's all that can be asked of you as an individual. And I think people have to keep that in mind and and cut themselves a break and not feel like they have to solve the world's problems. Whether or not the companies we're investing in, the entrepreneurs that I'm advising, that I love advising, are going to have a big difference in the world is not up to me. All I can do is make the effort.
00:26:36
Speaker
and feel a sense of satisfaction that I spent my time wisely. ah So that's, I think, my biggest advice for them. There's a great resource called climatedraft.org. If you're new to the space, it has educational content on what is climate tech and climate tech is broader now than clean tech was about energy. Climate tech is every industry and we need to decarbonize everything.
00:26:57
Speaker
And so climatedraft.org is a great resource. So there's ways to learn and then it also connects you to jobs that are available in there. If you are interested in the early stage of technology, if that's an interest area of a reader or of a listener, we have about five years for these early stage companies to make a difference towards the net zero goal of 2050. There is no time better than the present to get involved and to set intention and take action.
00:27:23
Speaker
Oh, thank you Raj. I think this is a great place to end this conversation. Just one more question, where people can reach out to you and find out more about Climatic and what you do there. Sure. Best approach is our website climactic.vc. We're also followable on LinkedIn and we'll post content and our views on the world as well at that. And then finally, if you want to email, reach out Raj at climactic.vc.
00:27:52
Speaker
um a j Thanks, Raj. This has been great. Wonderful. Great to talk to you too and wishing you and the readers the best wishes and all the luck and all the happiness.
00:28:11
Speaker
Thank you for tuning in to Green New Perspective. This podcast is proudly sponsored by New Perspective. We are a Boston-based marketing agency working with clean tech clients only for over 20 years now. And if you want to check out how we help our clean tech clients to grow, you can click on the link in the description of this episode. If you like what we do here with the podcast, giving some amazing amazing people from all over the clean tech space of place where they can showcase their innovative tech and economic climate change, you can support us in so many ways. You can leave reviews, comments,
00:28:46
Speaker
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