Bloomberg Wealth: Carmichael Roberts of Breakthrough Energy Ventures

Bloomberg Wealth: Carmichael Roberts of Breakthrough Energy Ventures

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We are laser focused on having huge impact and removing a lot of carbon. Only a second day. Climate tech, hazardous area to be at the idea of trying to build successful league technologies and products that help humanity. That's my life's calling. When Carmichael Roberts goes to work each day, his job is to save the world where at least the planet the entrepreneur turned venture capitalist runs investments for breakthrough energy ventures. Bill Gates climate tech investment firm focused on accelerating the energy transition. We look at technologies that could produce half a giga to remove half a ton of carbon a year.

If you can come up with technologies of different types and EADS take a bite out of what's going on in the fossil fuel, it make a big difference. And like many of Robert's investments, his own beginnings can be traced back to the lab. My first works and his I was working in the chemistry lab, didn't know anything about chemistry, but I knew how to wash dishes and my being in there. The graduate students taught me chemistry and I just stayed at Duke for almost nine years and got a field day. Since its founding in 2017, Breakthrough has made investments in more than 100 new companies, and Roberts is confident that delivering solutions for the climate is consistent with delivering returns for his investors. When I would describe to people that this is what I wanted to do, often they would think it was philanthropy and I'd have to explain to them, No, I am an entrepreneurial capitalist unabashedly. There's a tremendous amount of

opportunity to build businesses that are worth a lot, and Breakthrough isn't the only firm chasing both impact and upside. V.C. funds flowing into climate tech surpassed a record 70 billion dollars in 2022, according to Holon IQ. All the young folks want to be in it. So tremendous business opportunities. So, Carmichael, tell me what is breakthrough energy? So it's a breakthrough energy broadly is an organization that everything about it is addressing climate change. And so what is most known for is the venture fund. But it also has a policy group, has a

communications group, ISE things do with project financing. And of course, the venture fund is where all the portfolio companies. OK. So it was started by Bill Gates, is that right? That's correct. And he put up a lot of money at the beginning, as I recall.

And I invested in the fund as well. I should disclose and I going to make a lot of money on this. I think you will. I think you will. But at the time that it was put together, I thought that Bill Gates said, I'm interested in long term investing. The return is good, but I'm really interested in changing the world. With respect to climate change, as much slime and making a high rate of return. Is that fair?

That's fair. And it's not. Thank goodness it's not mutually exclusive. In fact, just the opposite is actually required. You need to do both. Now, Bill said at the beginning, I am going to recruit. And he did recruit a lot of the wealthier people in United States and around the world to invest in this.

Who are some of the wealthy people that are publicly identified already as being investors? Jeff Bezos is an investor. Richard Branson. Mukesh Ambani. Vino Khosla. John Dorr.

Ray Dalio, Michael Bloomberg. We're sitting in Boston. We're not far from Abigail Johnson's office of Fidelity. I'm almost nervous and I'm not. This is just a bunch of other names like who who are in but John Arnold. It's just a tremendous group of people.

So these are a lot of famous people. Do they call you up and see how their investment is doing all the time or they don't bother you? They don't bother. It actually was interesting. They care more about the impact and the difference that it's making than how the investments are going financially and how many investments have you made. So to date, there are now a little over one hundred and ten companies in the portfolio where just five years ago there were none. So let's talk about for a moment how you got this position. Tell us where you were born.

Born in the US, born in New York and actually in Queens, in Queens County. And you went to college where? I went to college at Duke University. And the interesting part of my story is I went to I went to college and Duke had a work study program. My work study job, my first works cities. I was working in the chemistry lab. I was 18 years old. And I was didn't know anything about

chemistry, but I knew how to wash dishes. And so you have petri dishes around bottom flask, urban Meyer flasks, spatulas, things that kind of look like what would be in sinks. So my original job was is actually was washing dishes in the chemistry department and my being in there. The graduate students taught me chemistry and I just stayed at Duke for almost nine years and got to be a dad.

What did your family do? What your father or mother do? Yeah. So. So I was the first to go to college. And my you know, my family, my dad, he never got a college degree, but he just worked. Did you actually work to chase Manhattan Bank? And so you went to a public high school or.

I went to public high school. In fact, if I back up, you know, in terms of my my background in education, I know most statistical anomaly beyond just being African-American. I was a period of time. I lived in the projects. I was on welfare for a period of time,

food stamps, the whole thing. And are your parents alive? No. Both of my parents have passed away and they lived to see your success. I'd say my father lived to see me get the PTSD from Duke. And I think I don't think anything after that mattered to him. I think he was blown away to see that.

And my mother lived to see me in a magazine or two after you got your P HD at Duke in chemistry. Then what did you do? So I came to Harvard to work for someone who I felt I could try to emulate and my academic career. A guy named George Whitesides, who today is like one of my closest friends is George, just 30 something years older than me. All right.

So you got off the academic track and you went to the dark side. You went into venture capital. You know, before I went to the venture, I went into what I really turned out to be my core as an entrepreneur. So if I go kind of go back to high school, anybody who knows me in high school, even before high school, they would all say, you are always destined to be an entrepreneur to create and build stuff.

When I was at Harvard and working for George Whitesides and looking at being a professor, what I realized is a lot of the things I wanted to work on when I talked to these people called venture capitalists who I'd never met before, they would tell me all the time. Carmichael Those ideas and some of these things you want to do. They're not fundable. And I didn't really understand that. Like, how is it that I could come up with things that would I think would potentially change the world? And a lot of the topics that you would look at today in climate tech, very similar type of topics. And yet, you know, there would be no way

to translate them out of the lab with these venture capitalists. You became an entrepreneur? I became an entrepreneur and you started some companies in the Boston area. I started companies. I started working very closely with George Whitesides, who was a prolific academic entrepreneur. He and a lot of his colleagues

effectively built the basis of biotech in Boston, and I got a chance to work with him on some really cool, interesting companies, learn how to be a startup CEO founder and really found myself. I mean, who I really was and still am more than anything is an entrepreneur, a company builder that you eventually did go to a venture firm, right? I did. One of my one of my largest investors, who is extremely, extremely loyal to me, recruited me, a firm called Northbridge Venture Partners that came along and and said, hey, you know, we're looking at you starting companies, building companies, teaching other entrepreneurs how to be entrepreneurs. You're you're sitting on different boards. You're founder of multiple companies. If you squint really carefully, look, you're kind of so to would have venture capital. It should be, except you don't have a fund. You should come and join us and build

your platform around what you do. All right. She did that for a few years and then you decided to start your own fund material impact. And it was an easy, I assume, to raise the first fund. It's never easy to raise a first fund, right? No, not at all. My partner, Adam and I know the two of us, it took us two and a half years to raise that first fund. All right.

You raised that fund. And while you were raising it, I think you're starting it. I remember you were telling me you had an opportunity to maybe work for something, that Bill Gates was putting other breakthrough energy. And I said, well, how can you do both?

Right. And you said you could. And so what was the interview process like to get the job at Breakthrough Energy? Do you go to the interview with Bill Gates himself? I did. So. So that was my that was my final

interview. And we sat down and it was very unstructured in terms of the interview. And it didn't feel like an interview. It felt like a stream of sort of two people in a stream of consciousness around technology, business ideas, really trying to figure out how we could do something. How how would one do something different

to get a different outcome? Had you ever met him before? I had never met him before. So have you spent some time with him at the end of the session? Did you say? I got the job or I don't have the job. I had 20 minutes technically scheduled with him and 20 minutes turned into over an hour. I was walking in to get in line to fly back to Boston.

And I looked down and all of a sudden I noticed a phone. My phone is ringing and I saw this 2 0 6 area code. So I realized I recognized that area code. That's that Seattle area code. And I answered the phone and it was Roedy Good Arrow. And Rodi said to me, hey, my boss called

me. You did pretty good. And that and that interview, I know your goal is to make society better, but some people like to make money, too. What kind of rate of return you can you realistically get? I mean, couple of breakthrough energy and material impact together a little bit, because when you when you look at the bottom line, both of those two firms have one thing in common. They're mission oriented, focused on generating technologies and products that are going to change humanity. And when I would describe to people that this is what I wanted to do, often they would think it was philanthropy.

They would wonder, is this philanthropy? I mean, this is what you're doing. And I'd have to explain to them, no, I am an entrepreneurial capitalist, unabashedly. There's a tremendous amount of opportunity to build businesses that are worth a lot today. I would say perhaps only second to A.I. right now, which is a ISE got so much going on. Folks are so excited about it.

Only second, a climate tech hazardous area to be at all. The young folks want to be in it. Professors want to invent things that make a difference. So tremendous business opportunities. When you look at the Inflation Reduction Act, when we look back at that act 30 years from now, we're going to see it as a pivotal piece of legislation for climate. The dynamics that have come from it. States are starting to collaborate that you would never imagine collaborating.

It's called the Inflation Reduction Act. But the 2022 law has also been billed as the most significant piece of climate legislation to date. It's chock full of energy initiatives and includes at least 374 billion dollars of incentives for carbon free industrial development. The U.S. government will now double research and

development tax credits for small businesses, and the law is brimming with provisions aimed at nurturing early stage technologies into full fledged companies. Now big money is rushing in to fund the next generation of climate startups. Renewable power developers have funneled more than one hundred and fifty billion dollars into clean energy projects between August and April alone. That's more than the past five years

combined. In 2022, global investment in clean energy crossed the trillion dollar threshold in a record year. And now, with the Inflation Reduction Act luring both public and private dollars in the climate tech investing, that record could be broken before we know it. Now, the United States Congress passed a bill last year called the Inflation Reduction Act, right.

Some people made fun of the name thing that's really going to reduce inflation. But in there were lots of incentives for climate change investments and so forth that made it easier for you to make these kind of investments and more attractive financially than before. It's helped substantially. And it's interesting, you know, when people ask me how is it helped? It's still too early to know, you know, where which technologies are going to be the winners or losers. Lots of these companies are doing really well. Real businesses being made, real products being sold already. But you know, where it made the hugest

impact is just the signal. The signal that comes from this country saying, look, this is important enough that we're putting our money where our mouth is and we care about things like manufacturing related technologies. And what that does is that just further about what we need both public and private union, and that since sent a signal that I can't I can't tell you just how many years have heard that signal inside this country, outside this country. And the collaboration among states and so forth. Do you think it will make a big difference in the overall impact on climate change generally because many incentives are in there, but do you think it's going to have that big an impact? I think when you look at the Inflation Reduction Act, it's when we look back at that act 30 years from now, we're going to see it as a pivotal piece of legislation for climate. States are starting to collaborate that you would not never imagine collaborating. So what I'm saying to you is like to

bring it to life a little bit. You have a set and you see a maybe in one state for lack of a better term as a blue state. Say, where the technology has been developed. But that's not the perfect state to manufacture this other state over here.

That's a red state code, so to speak. That is phenomenal. These folks are phenomenal at manufacturing and building things. You're starting to see these states collaborate even outside the US. I mean, we had companies who had plans to manufacture outside the US with deals in progress that literally after that legislation was passed, the countries outside the US simultaneously with the little company in the US said, wait a minute, let's manufacture in the US. And maybe it should have been called the Inflation and Carbon Reduction Act. I hope that's true. So when doing your mission at Breakthrough, is it making it making it easier? The Inflation Reduction Act is that in terms of easier is a relative term. This is a hard job to do what we're

doing. But absolutely it's made. It's made a difference. Like I said, it's it's allowed a person like me to to really be able to offer to all around the country a way for people to participate based on their expertise that they can bring to the party. So many people say the only way to really deal with climate change is kind of eliminate oil and gas, essentially stop producing oil and gas and then have more clean energy. Is it realistic to eliminate oil and gas

in the foreseeable future? So first, let me back up on the supposition that you have to eliminate all oil and gas. I think you guys actually have to at least mitigate it. I think you have to bring a lot of it down and replace a lot of it. But you also have to you can also have a huge impact by trying to do things like carbon capture and so forth right around it. And it's going to take both approaches even today graded an 80 plus percent of the way the world operates around energy right now is still fossil fuels. You know, when you kind of look at it and maybe it was more striking is the fact that the demand for it is going up every year.

So we need to get that to go in the other direction. And so we've got work to do, things like solar or wind. It's nice and environmentally friendly, but really it's not going to produce enough energy to really replace oil and gas in my lifetime. ISE. Right. Well, not by itself. So let me just say so solar and wind and critical components you need. This is going to be sort of a collective

effort with a lot of different technologies that are each going to come in and take their piece. But we do it breakthrough. We look at technologies that could produce half a giga to remove half a ton of carbon a year. And the way to think about that number is we have to remove, say, one hundred half a gigatons, you know, a year in terms of what we have to replace. And so if you can come up with technologies of different types, whether they fall into solar or wind or we can name a bunch of other areas and each take a bite out of what's going on in the fossil fuel, make a big difference. A lot of the large energy companies, the biggest energy companies in the world, they like to be seen as being. The environment, so they're now saying we're putting money into renewables and so forth. So if I wanted to participate in that

and say I want to help the energy companies with their renewable energy efforts, then I'm going to buy their stock. Would that be the best way to take advantage of trying to do something for climate change? Anna Edwards invest in BP or Chevron or Exxon? Is that a good way, in your view, to help climate change? So you said two different things. So let me dissect it a little bit. Let me take your lighter question, because that's an easier one. So is that a good thing? Absolutely. So I believe I was been talking to some

friends who, you know, will leave their names out, have gone as far as do more than just invest their money, but go on the boards of some of these companies to be helpful in there, you know, in their energy journey in terms of their, you know, 2.0 version of themselves. So I don't think we get there without the large companies doing what they're saying there. They're going to do it starting to do. I think that's really important. So supporting the large companies that are been key for all these years to our to our energy survival, I think that that's going to be really important, however, was also critical. All the new technologies. So depending on who the human being is, where they came to me and said, hey, I don't really know how to do participate in this private market cutting edge stuff. I'm really frustrated.

What can I do? I think I want to try to help. Maybe the big public energy oriented companies that have started have historically not been about renewable. Should I? I'd say absolutely. And the opposite is true as well.

If someone had something to bring on the private sector on the cutting edge side and some people can do both like you. So is it too early to say whether you've accomplished your mission of either making money or solving or helping to solve the climate change problem? It's just too early for for both of those. I'd say the one that we'll be able to describe the earliest we'll be making money. It's not too early to say that that portfolio is considered by most to be one of the dominant portfolios in climate tech. So from a financial standpoint, but from an impact standpoint, you know, we're early period. There's no at speed that up as promised. The idea of trying to build successful league technologies and products that help humanity. That's my life's calling.

How many invest professionals do you have now at Breakthrough Energy? So right now. Breakthrough energy has just a little shy of 30 investment professionals. Well, I would say people who would actually be able to not only source deals, meaning find these deals, but also and companies and entrepreneurs, but also sit on the board and help guide these companies. Do you invest outside the United States?

Breakthrough energy ventures, investors all over the world. I know from the early stage investment world that not every deal works out right. So have you had somebody have said goodbye to already? We have. So we've had some. We no. Sadly, we have had some that we've looked at and said, you know, we got that wrong sometime. This is important for breakthrough

energy. We're not just looking at whether we got something wrong in terms of what is a potential financial return is we are laser focused on having huge impact and removing a lot of carbon. So, you know, it could be that the thesis of a company changes, whereas not quite on the mark in terms of removing enough carbon, but it's still a really good company. And in that case, we support it. But, you know, we let it kind of go. So we've had some of that as if a deal doesn't work out, as Bill Gates call you up and say, you know, I thought you were very smart. And how come this didn't work out?

No, no. He tends it tends not to do that. I think he he knows like a lot of them won't work out. In fact, he's kind of just the opposite. He's sort of looking and wondering if everything is working out. Are you taking him big enough risks? So it's in that direction versus if something doesn't work out, you're disappointed. You know, you pointed out that in some things you've done before, you were the only African-American who might have been there at that time. Right.

The world has changed a fair bit. Not as much as maybe it should. It's changed somewhat when you are involved in energy technology investments now. Are there many African-Americans sitting alongside you in the various discussions you have? I wouldn't say many. I wouldn't say many.

So, you know, we still like you said, we've there's been progress made in different dimensions, in different areas. But you'd be hard for me to say many, but I would say that climate tech is an area that lots of African-American folks and Latinos are really interested in participating in. So I myself make sure that I spend a fair amount of time mentoring being a role model, talking to loads of folks who have been overall underrepresented in some of these categories that are really important. And we need we need as many people all hands on deck here. So a couple of final questions. What's the best investment advice you've ever received? Focus on those things. You know something about because for two reasons. Like, did you know a lot about meeting

subject matter with your subject matter expert? So for one reason, you'll know when things go wrong fast and everybody else, you'll know you're like, oh, and the second you have a chance to fix it. What do you think is the most common mistake investors generally make following other people into things where you really don't know what you're doing and you leave yourself sort of exposed in that case, too? Not to be lost a little bit. Does that sound like gambling? Where would you put one hundred thousand dollars and recommended somebody put one hundred thousand dollars today in this environment? I'm totally biased here on this regard. First of all, I would say pick a topic that's going to make a difference that you're really proud of. That way if you lose all your money. You're okay with that.

And I would say by definition, pick something that's early states. This is a great time to be investing in the early stage to early stage technologies and entrepreneurs. So how much long you want to do this before you do something else? You're going to do this for another five years, 10 years, 15 years? Or what do you think the idea of trying to build successfully technologies and products that help humanity? That's my life's calling. And so and so this I'm going to do for as long as I'm standing there breathing.

2023-06-18 09:50

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