Cleaning Up Episode 127 Edited Highlights - Emily Kirsch

This week’s guest on Cleaning Up is Emily Kirsch, Founder and CEO of Powerhouse. Powerhouse, based out of Oakland, California, is an innovation firm that pairs startups in clean energy, mobility, and climate with some of the world’s largest corporations and investors. Emily is also managing partner of Powerhouse Ventures, directly backing seed-stage start-ups innovating on decarbonization.

Michael and Emily spoke about building Powerhouse and adding value to its huge startup database, some of the hits from Powerhouse Ventures' first funding round, and ended with a wider discussion about the role of VCs - and pioneering women - on the path to net-zero.

Michael Liebreich Emily, what is it that you and Powerhouse do?

Emily Kirsch So, Powerhouse is a company and Powerhouse Ventures is a venture fund. The company works with leading corporations, and we connect them to startups that have the technology that those corporations are looking to become a customer of, or invest in. So, we basically connect the two sides of the ecosystem: big players, energy, tech, utilities, to startups, and we make it efficient and effective for them to collaborate. And then Powerhouse Ventures is a seed-stage, software-focused climate tech fund. We're backed by some of the world's largest energy, automotive, utility, financial services and tech companies. Powerhouse works with clients like Google to help them in achieving 24/7 carbon-free energy, and with Enel, the Italy-based utility, we've done everything from autonomous solar O&M, to turbine de-icing, to infrastructure risk solutions. So, those are just a couple of examples of the types of climate solutions that we're able to bring to these massive companies. The foundation of our services is a database of thousands of climate tech startups that we've built over the past six or so years; we think it's the country's, if not the world's, most comprehensive database of climate tech startups.

Michael Liebreich So, at the core of the service, you've got the database. What are your actual services that you deliver to your clients?

Emily Kirsch One is workshops, that's the flagship product. Each quarter, the client selects a topic that they're interested in, and we come up with a list of usually 20 to 60 initial startups based on their criteria. And then we meet with them to narrow it down until we have a group of about half a dozen startups that could actually be a source of technology for the client. Then we bring the startups in to meet directly with the heads of the business units and then we track those outcomes. So, we're not taking it all the way through, but we are enabling the connections that result in those transactions. That we call Catalyst. The second product is Conduit. And Conduit is connecting clients, mostly corporate venture capital firms, to deal-flow. So, they say, we want to make direct investments into startups, here's our criteria, here's what we're looking for, tell us who we should know about. And then the last two products, one is called Capacitor, and this is top-of-the-funnel management for corporations, or CVCs, who are just overwhelmed and inundated with inbounds; we take that burden off their shoulders, and we say send us everything; we love it because it's good for the database. And then the last one is called Compass, and that is trend analysis. So, because we have all this proprietary data, we get to do all this interesting data analysis in terms of what sectors are growing most quickly, what's happening with fundraising rounds etc.

Michael Liebreich Okay, so you've got these four services. Tell us about Powerhouse Ventures. You closed your Fund One in 2018; what were some of your favourite investments from that fund?

Emily Kirsch So, the first is called TeraBase, and they provide an interconnected digital and automation platform to reduce the cost and increase the scalability of utility scale solar. They've done 30 gigawatts of large scale solar projects and they've raised over 70 million dollars. Another very different space but related, they're called Leap, and they connect Distributed Energy Resources, or DERs, to wholesale energy markets, and they've raised $30 million in equity. They're managing about 70,000 devices, and thus they're aggregating about 700 megawatts of authorized load. And then the last one also in the solar space, they're called Raptor Maps, and their whole thing is advanced analytics for solar O&M, and they have analyzed more than 75 gigawatts of solar across 45 countries. The overall thesis of the fund is we can get to 90% decarbonisation of the electricity sector with existing tech; most of the tech we need, we just have to get it to scale. And those are the types of bets that we make.

Michael Liebreich  Emily, let’s move on to some quick-fire questions. There is this huge debate between research versus deploy going on. Where are you on that?

Emily Kirsch The reality of climate science, and the timeframe that we have is, we have to get what works deployed globally as quickly as possible, and you do that with software and financial technology. We've had government backing for things like wind, solar, batteries, EVs for decades, and that's why solar is the cheapest form of electricity in almost every energy market globally today. We will get there with other tech; Department of Energy is playing the role they should play supporting those breakthrough technologies that do have that ten to twenty-year path to commercialization. We need both, but let's buy ourselves time to get those longer-term solutions to market. If we ignore what's working today, or don't focus on deployment, I think we're making a mistake.

Michael Liebreich Inflation Reduction Act or carbon price?

Emily Kirsch In an ideal world, we have both, and we do; we have the Inflation Reduction Act, and there are many markets, a few in the US and more in Europe, that do have a price on carbon, and we've seen the impact of it. There's research showing that pricing carbon in the EU led to a 10% increase in the number of clean tech patents and innovations. And the fact that IRA is now giving Europe FOMO, the fear of missing out of, on-shoring these jobs and keeping them there? That's great, that's the way these policies should work, is that we're trying to one up each other in addressing the climate crisis, but also creating incredible investment opportunities.

Michael Liebreich Software or hardware? And on that topic: when you have a company that fundamentally at some point has to go and build a hell of a big plant, does that company fit the VC model? Yes or no?

Emily Kirsch There are so many types of startups in climate, and VC works for some, and it doesn't work for others. And this idea that VC works for all climate tech or no climate tech - I think it's not that black or white. Venture capital, to your point, it requires high reward potential in a specific timeframe, and there are certain startups, certainly those that we've backed, that we think will enable that. But there are others that, like you said, just take more time, take more capital, take different types of capital. But there's also entities in the US that provide first-of-a-kind project financing for when they start to scale up that project finance, before you can get more traditional investors to take that risk.

Michael Liebreich Climate is a global problem. Can you address decarbonization in the developing world in any meaningful way from where you sit?

Emily Kirsch I think we can; we're software investors, we don't have to be on site to analyze an opportunity. The fact that at Powerhouse the database is already 40% outside of the US; at Powerhouse Ventures, the fact that our portfolio companies are working in every market in the world, including those in Latin America, and Africa and Asia. We have made bets for companies [outside of the US.] We want them to be incorporated in established markets, but they can be operating anywhere in the world, and we do have companies whose first market is Nigeria, other parts of Sub-Saharan Africa. And the question we ask ourselves is, can we support them meaningfully? And if the answer is yes, then we will make those bets.