Ryan Grant Little: 0:42

Welcome to Another Climate Tech Podcast, interviews with the people trying to save us from ourselves. In this interview, I spoke with one of climate tech's fastest rising stars, Arman Anatürk. Based in Lausanne, Switzerland, Arman, together with co-founders Emily Dellecker and Camille Bossel, have been on a mission to democratize investing in climate tech, and you can count on me as an early acolyte and investor in their mission. This is a crossover episode with my other podcast, Sound Funding interviews with Europe's leading impact fund managers. If you're not familiar with it, just search for Sound Funding wherever you found this podcast. I'm Ryan Grant Little. You're the founder of Food Hack, climate Hack and Hack Capital. There's a lot of hacking to be doing at once. Can you talk a bit about what each of these does?

Arman Anatürk: 1:38

Absolutely. We see it as the Hack universe. The Hack universe is our little impact empire that we're building up, and it's encompassing three key things Hack Capital, where we take out the administrative burden for structuring impact investment products. Typically, asset managers, funds, syndicates, founders use us to structure their investment products. Hack Insights that's where we make it extremely easy for anybody to sound like the smartest person when it comes to talking about climate tech Typically VC funds, consultants, founders are reading our reports and newsletters every week. And then Hack Communities. Something which I think you'll know quite a bit about are global meetups across food and climate tech that happen now in 40 cities around the world, including Vienna, which you just hosted on Thursday. How did that go, by the way?

Ryan Grant Little: 2:27

That was pretty good. We had kind of, as expected, a smaller turnout for Europe in August, but a great group and decarbonizing the grocery chain, the grocery supply chain, which was actually a lot more interesting than it sounds like. So maybe I need to work on my headlines first.

Arman Anatürk: 2:45

Well, congrats on pulling off an event in August in Europe. You're right, everybody takes a time off. Things do slow down. I'm sure the people who were there were the most passionate and the most cutthroat of all the other founders and investors. So nice to hear.

Ryan Grant Little: 2:57

Okay, so that's through Food Hack basically that we're doing these kinds of investments. That was the first one, and then Climate Hack and Hack Capital emerged afterwards. Is that so you started with food tech and kind of moved out into ClimateT ech, where it's kind of the opposite of what a lot of people do, where they start kind of in climate tech specifically and then zero in on something specific like energy or food. What was the impetus to move from food generally and to go kind of zoom out into Climate Tech?

Arman Anatürk: 3:31

If you look at the sort of history of how Hack came to be and where we are today, none of this was planned. What happened was that we were running a successful business on the side, we were making our capital and we wanted to do an event about a topic that we were interested by Food Tech and so myself and my two co-founders, Emily and Cammy, we got together and we hosted what was meant to be a one off event here in Geneva, Switzerland, in 2018, where we got together about 100 entrepreneurs, enthusiasts, scientists, researchers in the room. That one event ended up going well. We felt a huge energy, a huge buzz in the room, and we kept hearing there's no other events like this elsewhere, and so we thought let's try and do them in a few other cities. We went from Geneva, Lausanne, Lausanne to Zurich and eventually people started coming to us saying, hey, can I do these events in my city as well? So now we did one in London, we did one in Stockholm, and this is all driven thanks to a group of now about 100 different ambassadors across the world who organized their events in their cities to foster their local community, much in the same way as we did four or five years ago in our first event in Geneva, and what we found is these community focused events. They're a great way, a great entry point for anyone who wants to learn about the worlds of food or climate to get together in a completely free event where they can brush shoulders with some of the most active investors in the space, some of the fastest growing companies, or just talent and operators who are operating in this space.

Arman Anatürk: 4:57

And so, as the community continued to snowball and continue to grow, we kept asking ourselves what can we do? That's the most value add. What can we do? Where should we be taking this community? And I think there's three key things that we realized. One we need to broaden the focus. We need to make it more than just focusing on Food Tech, because we're operating in the silo of solutions that are being deployed across Climate Tech to be able to tackle some of our biggest climate problems. So we need to cover energy, transportation, biodiversity, buildings in cities, everything within the Climate Tech sector we should be speaking about and we should be hosting events, and the Hack brand should be there to essentially provide an entry point to anyone who wants to learn about these spaces. And then we need to focus more on how can we deliver the best insights that we're learning from this community. I mean, we're in 40 cities around the world. We get this year, I think, 10,000 people together. We speak to a lot of these different people, we collect a lot of data, a lot of signals, and we can be able to distill that into useful insights for an investor who wants to make an investment decision, a founder who wants to decide on which commercial method they should take or which technology they should do. And then the last bucket is capital. Every company at some point needs to raise money, even more so in the Climate Tech sector, where most of these companies require a lot of capital to be able to scale up.

Arman Anatürk: 6:14

And your question was specifically on why take the broader focus into Climate Tech. We felt that there was already a lot of crossover. You've been investing to food tech. You've seen the companies in the space. You just talked about decarbonizing of the retail supply chain. If you take this whole concept of decarbonization and tackling our food and agriculture usage is just one of those tools in the toolkit. We should be looking at everything more holistically and we should be deploying all solutions and just make sense of the national sense for us to go from food to the broader climate sector and be able to encompass all these different points at Hack, not just one of them.

Ryan Grant Little: 6:51

And indeed one of the things that I find with stuff that comes out of Hack is it feels very ground up right.

Ryan Grant Little: 6:58

So when I started researching the sector, that's kind of how I found your group and it became very clear that these are like you have this local presence and the information is bubbling up from the bottom, versus a lot of kind of these market reports that start from looking at the top and kind of like these more corporate type reports, and I think that that's kind of stuck. It's also giving you lots of access, I'd say, early on to deals and deal flow, and I guess that's part of the reason why you shifted from this more kind of just knowledge base through to working more on the capital side and one of the key principles for you at least you personally, as I've got to know you has been your sort of intention to democratize investing in the space more, make angel investing more accessible to some of the smaller ticket investors and not just the big VCs and angels. What's that about? Why is that important?

Arman Anatürk: 7:53

Definitely. I think that really comes from the three founders ourselves. You know we were hosting events for five years, seeing amazing companies like planted speak on stage or Redefine Meat , or these whole great organizations and we realize, if we had only written a check to them five years ago, how would I invest in being to be doing today? But we were uneducated about the space, we were not accredited. We have no option to be able to invest in these companies today. I'm sure a lot of other people would have enjoyed investing to them. You know who are speaking, listening to the founder speak, and we thought this doesn't seem fair, that the we have early access, we understand the space, we understand the risk of these companies and we're not able to invest as well. And so we start launching our own syndicate where we structure investments into companies that we were seeing through our events, the first one being the precision fermentation company MeliBio..

Ryan Grant Little: 8:48

I was before my time.

Arman Anatürk: 8:50

It was before your time. Well, we got a lot of other great investments together, but the whole point was how can we open up the floor to other people like ourselves Cammy, Emily and myself. People who are able to invest small tickets into companies understand the space very well, may understand the risk of investing into the sector today and the whole risk of the best early stage companies which let us to go out and start looking for solutions. So we looked at existing investment structuring products. We didn't like the way most of them are structured. They were either for the US market, the European market, they were expensive, they were complicated to deal with, and so we decide to build something in house really is a solution for ourselves first, and as we start to build out for ourselves, we're able to tweak around the parameters to make it so that we can also fulfill our mission of being able to unlock meaningful amount of capital into the impact market but also be able to give rise to a new generation of investors.

Arman Anatürk: 9:43

People like yourself and myself maybe invest smaller tickets than the traditional industry and typically would have been accepted to invest into funds or companies because I take a size to are too small. The climate sector is gonna have huge economic advantages. And why should we only leave the upside to a few people who are already wealthy? Why can't those people who are just as passion, just as driven, also be able to part take in this?

Ryan Grant Little: 10:12

It feels like the really higher returns have kind of undefined insider's game for a long time with the c in private equity, and so it's great to be able to break it down and get more people into the tent. So let's get into the weeds a bit here. Hack capital is a platform for sustainable finance, so it's not a fund itself, but you've got a number of sort of product offerings and I want to get into them because some of them are I mean, some of them have been done before, as you mentioned, by kind of different groups that tend to focus more geographically. So UK, Europe, US, where is you tend to work more on a global I'm a global perspective and definitely, if I look at kind of the people who invested through your syndicates, they tend to be everywhere around the world. What's the you have kind of?

Ryan Grant Little: 10:56

If I look at it correctly, you've got four different types of products. One is a roll up vehicle for startups and syndicates that wanna bring multiple investors Into, onto the cap table as a single line, and this I've I've led three of these, so I know this one pretty well. Then you've got feeder funds for fund managers who want to roll up multiple investors as one LP into a fund, micro vehicles for emerging managers who are looking for an alternative option to quickly set up and raise investment vehicles, and then other kinds of custom structures that you do for corporate venture capitals, family offices and asset managers. So that's the kind of the custom. That's the everything else bucket, but if you could talk a little bit about the first three and maybe in a bit of detail, because I think it's this is interesting stuff to learn about as offerings that are out there for Investors and startups that are listening.

Arman Anatürk: 11:53

Definitely. Thanks for summarizing the products. Nice that you know them well and, like you said, you've used a roll up yourself. And I'll start with that product, because that's really our core. The reason why we launched that is we've been helping founders to put together their fundraisers for for years.

Arman Anatürk: 12:09

Thanks to the global community, we were introducing founders to VCs pretty much on a daily, weekly basis and one thing we found is that they occasionally want to bring together smaller ticket investors investing 5, 10, 50 thousand dollars, and the issue with doing that without a roll of vehicles you eventually have. You know, let's say, target company name and the cap table is a complete mess. There are 20, 30 different names because that founder took every investor Indirectly. What that causes in the future? A lot of cap table tidy up Work that you have to do as a founder because one VCs don't like to see a crowded cap table. Why is that? Because governance is typically takes longer. Founders need to check with every single investor in their cap table for governance questions and actions and requirements, which can delay decisions. You know, for that should take 24 hours to maybe a month long and you also just the cause and administer burden for yourself Having to deal with many small-tick investors into your round, having to ensure all governance goes through them. Even just the cost of converting multiple small-tick investors is just not something that founders should pursue without the a special purpose vehicle.

Arman Anatürk: 13:20

And a special purpose vehicle is the same thing that we do with our world vehicle.

Arman Anatürk: 13:23

We make it incredibly easy for founders to take in an unlimited number of Accredited investors through one vehicle and close them, issue their signing documents, manage them and make sure that they proxy.

Arman Anatürk: 13:38

The voting of the group has one single vote to make it far easier to raise capital from small-tick investors, and this just means that Everything moving forward from that point on is much easier if you're in a special purpose vehicle than if you're not, and that's what our core product is today. Founders about 50 different founders have used us to structure these investment vehicles. You've led three, as you said yourself, and founders seem very, very happy, especially when you're doing a multiple jurisdictions, which is something that we do. You know US investors, European investors, you know investors from Germany and Switzerland coming together. We take care of the full process to close them and it really saves the founders time and a lot of money. That's the key thing is that it can be very, very expensive very quickly when you have to convert everybody and set up proxies it's really change the game in a lot of ways, I think also.

Ryan Grant Little: 14:28

So back in the old days, when I was a founder, we would not want to take in, you know, smaller checks for some of the reasons that you mentioned. And these days I kind of council the opposite where, if you can put, I mean I think that every company should do this right now because it's basically a way of getting free advisers who bring money into you. So if I look at some of the deals that I put together, you know we have anywhere between, say, eight and twenty five small investors in there and the thing is these are people who are like individually selected because they know the space pretty well and they're gonna basically act as champions for the company going forward. Right, and it doesn't cost anything. They've actually helped to fund the company, but they've got this vested interest always. So the old advice of kind of no small tickets, no small players involved in the company is completely out the door now from a governance perspective, because you can do it. Are there any situations where you don't recommend it?

Arman Anatürk: 15:24

Yeah, I'm just touching on the point that you said. You know we raise our own around with angel investors. I can tell you one small to investor two thousand open up the way to five hundred thousand small tickets. Really, can you know, if you're picking the right people who are mission aligned, who know what you're working on, they can make a huge difference. And we have a group of about hundred angel investors who I'm constantly in discussion with, some of them specifically on the finance side, some of them on the market opportunity side, and it's a shame if they can't be able to invest.

Arman Anatürk: 15:52

When do we not recommend setting up a visa? Well, today we don't work with non-accredited investors. So retail investors the reason why typically most people stay away from working retail investors is they might not be educated about the space and they might put too much capital than that they're comfortable with to be able to lose. And so maybe if you have a lot of family friends who don't understand the risk and they haven't worked in finance and VC, you have to really ask yourself am I doing the right thing by them as well to get them to invest into this company? Are they investing the right amount of money? That based on how much they make and what the portfolio looks like.

Arman Anatürk: 16:25

But typically rollups are used quite commonly these days and what we're able to build is thanks to the generation of companies have come before us to pay the way to make these special purpose vehicles and rollups much easier, much cheaper, because they've always been possible as long as there's been lawyers and accountants around. They just traditionally been so expensive to set up that nobody structuring you know when to 10 million dollars was using them. And this generation of companies that's come in digitize the process has meant that you can structure these world vehicles for 25 thousand dollars investment, which is game changing for founders. You know, at a pre-seed Stage, 25 thousand dollar check and make all the difference. And if that 25 thousand dollar check comes from five investors investing five thousand, you know amazing good for you. And from there where you can grow and how you can take it is really down to you.

Ryan Grant Little: 17:20

And a lot of it's also because technology is made it easier with it basically become a Saas program that you can build. This on yours is indeed set up like that, I guess. Then it's kind of copy and paste on some of the regulatory side. Or you choose the right domicile and then you're using the same subscription agreements and stuff like that over and over with modifications, kind of as necessary, but you get to kind of templatize the process a little bit.

Arman Anatürk: 17:43

Exactly this is the beauty of the ones you set up one investment and make sure to set up the right way, which is what we've done.

Arman Anatürk: 17:52

So the setup is always expensive and that's why a lot of people Syndicate, typically try to structure themselves in house and realize the whole administrative work in itself, and usually they're small teams. They don't take this internally. They come to us and today we support a number of different syndicate in impact who essentially say look, I wanna just do what I do best, which is pick the best founders, raise capital, work for the funds to help grow their business. Everything on the admin side I don't have the time with the money or the patients to be able to do this through. We take out all that burden so that banners, syndicate funds, as managers, can essentially raise capital, do what their best. That without having to worry about all the back office, which is the things that we seem to love and seem to do quite well today.

Ryan Grant Little: 19:31

Yeah, that's not my favorite thing, so glad you're not gonna do that are all the SPVs, which stands for special purpose vehicles, all of them registered, domiciled in Luxembourg.

Arman Anatürk: 19:41

Yeah, so Luxembourg is our jurisdiction. There's usually a few favorite jurisdictions Delaware, Gernsey, Jersey, Luxembourg. We like Luxembourg because the proximity to where we're based as a Swiss company and the fact that it's the second biggest fund administrator in the world, so they have a very strong ecosystem of some of the smartest administrators accountants, lawyers who are very familiar with the stuff and also the Luxembourg name is something that investors typically, like you know, we deal with some transactions that are several million dollars or tens of millions of dollars, and in these cases, investors want to be putting the capital into a jurisdiction that they're familiar with, rather than jurisdiction that maybe they haven't come across.

Ryan Grant Little: 20:24

And if anyone wants to hear from one of those Luxemburgers, they can listen to Sound Funding, episode nine, with our no gillen of impact, where he really geeks out on some of the regulatory stuff there. So, yeah, interesting if you like to get into the weeds on that as well. Feeder funds so feeder funds for fund managers looking to roll up multiple investors as a single LP into their fund. Is this basically the same thing, except for a fund instead of for a startup? What's that about ?

Arman Anatürk: 20:52

Exactly, same mechanics.

Arman Anatürk: 20:53

The only thing is that when funds are typically dealing with multiple capital calls, no capital isn't drawn, usually all at once, is shown over a different time horizon, or when you invest into companies, typically all at once.

Arman Anatürk: 21:04

And then the other differentiation is that a fund might distribute returns In your five, six, seven, eight, nine, multiple times, versus a company, which is a single distribution, unless you're doing dividends, so to say mechanics apply for funds.

Arman Anatürk: 21:17

The beauty of our community was that we had so many VCs on our network and we thought how can we service them? They came to us actually a first customer came to us saying can you structure an SPV for our own fund raise, and that gave us the way to start working with them, which allowed us to launch our Feeder fund product. It actually took us about a month to launch that product and I think we're the fastest and first company to officially launch a Feeder fund European domicile structure today. And yeah, we've had quite a lot of success with companies, especially with funds, especially now when maybe the LP market is a bit slower. If funds are looking to maybe bring in smaller investors usually the minimum is five million or one million for smaller fund Now they can essentially take in investors that are doing 10k checks, who build up a Feeder fund of 500,000 and pull together their fund like that.

Ryan Grant Little: 22:04

Interesting. Okay, so and so then you're doing the capital calls, you're managing capital calls and the repayments as well within that vehicle and to? Okay, that's interesting.

Arman Anatürk: 22:13

Exactly so. We have a very flexible structure so that we can do multiple capital calls, we can hold the capital, we can do distributions on the as the fund wishes and whatever they prefer, and I think that's why a lot of funds have been choosing us today is that we have extreme flexibility is the best way to put it, so we can work around their different terms.

Ryan Grant Little: 22:31

Micro vehicles for emerging managers. How micro is micro?

Arman Anatürk: 22:35

We like the sweet spot between 3 to 30 million. So let's say, Ryan, you've been Angel investing for a while now. You've done about 20 investments. You've led three investments. You bring that up to five, you've got a bit of a track record.

Arman Anatürk: 22:48

People are saying, hey, this Ryan guy knows what he's doing, he's able to diligence companies in an appropriate way, he's able to win allocations at some of the hottest companies, like an RQ on biotechnologies, and he provides value to these companies. So I want to put my money behind Ryan. You think, hey, look, the game of pulling capital every single time into a new deal. It's great, but it's also slowing me down. I'm missing out on competitive rounds because I'm not able to deploy checks fast enough or big enough. Let me find a way to essentially bring capital together from a trusted group of investors who believe in my thesis and my alpha and let me start deploying them to companies without having to check with investors every single time.

Arman Anatürk: 23:27

And typically, when you go to set up a structure like this, especially in the Luxembourg jurisdiction, you're looking at paying costs that are usually 300,000 upfront, 300,000 annual, and it doesn't make any sense to structure investments that are under $100 million. And so what we do is we take that cost down to about a tent typically about 30,000 set up for us in 30,000 annual, and now you can raise a 3 to $10 million investment vehicle and start deploying into companies that match your thesis, with a group of investors behind you. We just make it radically easier and radically cheaper, because we truly believe that emerging managers pave the way to funding breakthrough technologies and more emerging managers should come into the space and hopefully, when you launch your fund, we'll be up to work with you on that as well.

Ryan Grant Little: 24:14

And so you mentioned you use two ranges of numbers there 3 to 30 million, but then also three to 10 million. Would you really consider something between 10 and 30 million, a micro fund?

Arman Anatürk: 24:24

Yes, in typical qualifications or typical, we know what's most known in the industry is most funds are over 50 million 50,000,000,000 dollars VC.

Arman Anatürk: 24:35

We always love to share a lot of news about 10 million, 50 million, 100 million, 200 million dollar funds, but realistically, when you look at the investment world, 100 million dollar funds are peanuts compared to what most of these wealth firms and what most of these fund administrators are used to, and anything under 100 is typically considered quite small in the traditional financial sector. What's the shame about this is, because they're considered small, they're often looked upon as bad and administrators don't want to work with the smaller fund sizes, which is a shame, because a lot of capital that could get invested is essentially just not getting invested. When a founder can benefit from a 50,000 dollar check or 500,000 dollar check through a 5 million dollar fund, just because of the structure and cost and complexity, that capital is not being invested and that means a founder is not going on to raise their preceed round and that means that a technology is going to die. And that's why we're really, really focused on these smaller stages 5 to 30 million dollar transactions.

Ryan Grant Little: 25:32

Indeed, and that's where, as a fund manager or someone involved in the fund, you can play a much closer role with the entrepreneurs or with the founders Versus, once you get into the pension fund kind of money larger amounts, and there's this huge kind of separation, it becomes much more of a machine, right? So you don't have this kind of cross pollination of skill sets or knowledge, but just the fact that you can't have that kind of closeness and it's more like you're junior analysts that are working and connected and through quarterly meetings and stuff like that. Is this also why some of these smaller funds by your definition small as under 100 million are looking at mostly earlier stage, up to kind of series A and not playing in the series B and beyond.

Arman Anatürk: 26:13

Exactly. I mean typically early stage companies need less money to be able to get started. That can vary depending on which sector you are. You can sometimes see $12 million seed being put together, but smaller funds focus on smaller companies that have less capital needs from the get go, and what we typically see is that breakthrough technologies that come usually at pre-seed seed, series A. These companies are being funded by VCs.

Arman Anatürk: 26:40

The job of the VCs is to essentially invest into risky technologies and get them to price parity before growth and retail investors now start investing into them to really scale them up and that's the critical role that VC plays, especially when it comes to Climate Tech solutions is giving those first checks for companies to go and do their first pilot, to set up the first facility, to do their first research project to really de-risk the technologies and show this can be commercially viable.

Arman Anatürk: 27:08

And a $5 million check though it sounds maybe small to some, enlarge to others is just one stepping stone towards getting a company in the climate sector to commercial and break even. And there's a lot more capital raises that come after that that include a different group of investors. You typically see grants, angel investors, family offices, VCs, and then in VCs we have early stage, mid stage, growth stage and then, once you finally get past that growth stage, now you're looking at larger institutional investors. Maybe you've already had some CVCs. Eventually you go public and now you open up the world to a lot of different types of investors. So the whole investment universe really changes depending on how big you are and which sector you're in.

Ryan Grant Little: 27:51

On your last point about kind of the custom structures you mentioned CVCs, corporate venture capitalists I'm curious if you've been seeing a lot of activity there. This for me feels like an opportunity where there's lots of money available. Increasingly large corporates are setting up VC arms, but I have not in my experience seen a whole lot of activity, or I've seen kind of the presence but not as much deal making as I would kind of expect. Am I missing something or is this kind of still a gap?

Arman Anatürk: 28:21

I would say they're more hidden in the background. If you look at who are the most active LPs and investors in these Climate Tech funds, you'll typically find it's the past oil and gas industries or more high-polluting industries that actually make up the bulk of the investment volume into Climate Tech funds today, and so they've been there from the start, or at least the start of when they realize that they have to be there, whether that's from a regulatory perspective, commercial perspective or just because they see that's where the world is going. These large corporates typically do invest into a lot of these funds that you're seeing out there in the Climate Tech space. And on top of that, one thing that we're seeing more of is M&A activity, because there is regulatory pressure from corporates to decarbonize and reach certain thresholds of carbon emissions. It means that the M&A activity within climate tech companies is being propped up by these corporates, who are willing to write massive checks to buy them over, because they know that they're going to have to at some point.

Arman Anatürk: 29:21

I think that's something we didn't have in the clean tech 1.0 bust is that investments didn't really have an offloading activity.

Arman Anatürk: 29:29

There wasn't as much M&A activity.

Arman Anatürk: 29:31

Investments were taking too long to come to fruition coming too long to get acquired and therefore investors sort of saw this clean tech 1.0 bust where they thought these investments aren't going anywhere.

Arman Anatürk: 29:43

No one wants to buy these, they're going to take another 20, 30 years to scale. And now we're actually in a great position where corporates want to and have to buy these companies earlier on, which essentially means that breakthrough technologies like enhanced rock weathering or even some different types of proteins they can get acquired. Their early investors can get liquidated, capital can come back to LPs and now the technologies have a chance to be able to scale and grow within a large corporate firm in the time frame that it typically takes breakthrough technologies to essentially grow 15, 20, 30 years. We saw what happened with solar and wind in the past. These technologies took ages to be able to reach commercial viability, but today investing into solar and wind is seen as low risk. So we're to answer your question we do see a lot of corporate activity and it's great. We need it to continue, because that's the best way that these breakthrough technologies have a home, to continue to grow without having to have the pressure of distributing returns to early investors.

Ryan Grant Little: 30:40

Okay, so I'm playing at the deal level, which is why I'm not seeing them, because they're at the fund. They're investing in the funds that are doing the deals. They're one level above me.

Arman Anatürk: 30:48

Also in the deals that we've done together. You'll see on the cap table some of the companies that you've invested through Hack. They have corporate investors now. Usually they come in around C to Series A if they're ambitious and if not they'll come Series B and B and onwards.

Ryan Grant Little: 31:02

And you've touched on a really important topic as well, the liquidity topic, because indeed, if I look at my portfolio, I have no idea when these are going to cash out and I'm ready for the kind of long haul because I'm mission driven with this as well, whereas if it was B2B, SaaS or whatever, I would know that kind of three, four years and then it's going to be acquired. At one point you said that you believe that the private markets will play a critical role in solving climate and health in the next decades, but the lack of liquidity is one of the major factors that prevents more capital from flowing towards meaningful innovation and impact, especially in deep tech fields, where the innovation cycles take longer than the typical 10 years fund return and, of course, cost more. And I wanted to ask you kind of how to solve this. But I think you've just answered that, that it's going to be these corporates who are the white knights in the liquidity events here. Is that right?

Arman Anatürk: 31:54

I mean it's a great point. Essentially, hard problems require hard solutions to be able to fix and usually these hard problems, like decarbonizing energy or creating alternative proteins to meats that we love, are extremely expensive and they take a long time to get to price parity, to get to the levels of performance that we need, and usually that's longer than the 10 year fund cycle that most funds are typically built upon. Seven to 10 years is a typical fund. Anything longer than that is considered longer than the average and therefore LPs might not look into that space as nicely. And what we're doing is we're actually working on structuring our investment products so that we can open up a secondary market down the line and essentially early investors yourself myself into a pre- seed round of a Alt Protein company in Israel.

Arman Anatürk: 32:42

Maybe they're at their growth stage now and we want some liquidity.

Arman Anatürk: 32:45

They want to continue to grow privately. It's easy for us essentially sell our position in the company to a second buyer, versus having to wait till the company gets bought over or IPOs in maybe five to 10 years down the line from that point on, and so we've structured our investment products to make it extremely easy for liquidity and essentially what we're looking to set up in the future would be a secondary market for impact investments so we can get liquidated employees, early employees. Why does someone join a company? Why does someone get an employee stock options and take the risk of working the startup? Because not only the mission, they also think they're going to get some financial benefit from that. If a company stays private for many, many years with no liquidity event, those redemption events can take a while, employees can get demotivated and it's important to think about how you can design different investment products and different investment rounds so that employees and early investors can actually get liquidity and move on and start reinvesting that capital into other areas.

Ryan Grant Little: 33:42

You talked about the bust of Climatech 1.0. Are we in Climatech 2.0 right now?

Arman Anatürk: 33:47

Climatech 2.0 or 3.0? I think we're on the fence of the two. I think what we're seeing is that there's a lot of activity, a lot of engagement, a lot of investor interest, and sometimes the naysayers will say, yeah, but look at what happened at ClimateTech 1.0. I'd argue the regulatory and consumer demand for carbon neutral and decarbonized companies is far greater than it was 10 years ago, and I think we're in this new transition phase where I think there have been a lot of ClimateTech companies that have been around for the last 10 years and they're coming to fruition today and moving into less risky assets, and now we have another phase of even more ambitious, even more breakthrough companies that are coming since 2020 onwards, especially in the biotech sector, the heavy industrial sector, and so I'm extremely excited about the companies that we're going to build right now and what it looks like in 10 years time.

Ryan Grant Little: 34:38

Yeah, it really feels like the beginning of something big right now. I was in the internet space in the late 90s and early 2000s and after the dot-com bust, people kind of called at the end of the internet and while that was an interesting trend, but that's over and then you know, if we really look at kind of since the iPhone or kind of the B2B SaaS stuff that starts around 2010 and how that's grown, it feels like we're in a similar stage, kind of a maturation stage of ClimateTech. So you're an investor yourself. What are you most worried about in the year ahead? And it's corollary what are you most excited about?

Arman Anatürk: 35:14

I actually probably group those two questions today. I'm extremely excited about the time of period we're in right now. At some point in the bull market, it was just too easy to raise capital. We were seeing great teams let's say, 10 researchers put together, where two of the researchers the team members would say, hey look, I'm going to go out and build my own thing, it's so easy for me to raise money. And what that was causing was that great teams were getting split apart and great companies, great technology, great emissions were essentially getting diluted because it was just such an easy time to raise capital. The same thing happened with funds as well. So what we were really seeing is that companies were essentially it was so easy to raise capital. Everybody was going out and raising capital and starting a new business. And the same thing on the fund side. It was so easy to pull capital that everybody wouldn't become a manager and start deploying investments into companies that they thought made sense.

Arman Anatürk: 36:02

I think that abundance of capital made it a bit the entry point too easy and therefore allowed some actors who maybe didn't have the best interest or didn't have as much alpha in the market to be able to invest and build companies. And now what we're seeing is consolidation. A lot of companies are being grouped into one larger player. Capital is going through managers who shown a track record of discipline and alpha and thesis, and I think it's an extremely exciting time to be investing or building, because it's much harder as well, and this additional barrier of difficulty to access capital means that the companies and managers that are coming now are going to be extremely formidable and tough, and what I think is going to be interesting to see is, in 10 years time, what are the managers and founders of today being able to achieve and what, in fact, will that have? My bet is that it will be some of the biggest impact created in the next two years than we've seen in past let's say 10.

Ryan Grant Little: 36:57

That's, I think, a great place to leave it. Armin, where's the best place for people to find you online?

Arman Anatürk: 37:02

People seem to like following me on LinkedIn. I put out some lists about climate tech. That's probably the best place to follow and I'll happily accept everybody and get a discussion started.

Ryan Grant Little: 37:11

Join the 35,000 who are already there. Armin, thanks a lot. It's been a great conversation.

Arman Anatürk: 37:18

Ryan, I appreciate you having us and hope to see you around soon.

Ryan Grant Little: 37:21

Thanks for listening to another Climate Tech Podcast. It would mean a lot if you would subscribe, rate and share this podcast. Get in touch anytime with tips and guest recommendations at hello at climatetechpodcom. Find me, Ryan Grant Little, on LinkedIn. I'll be back with another episode next week. Bye for now.