An OG climate investor on the value of storytelling
A conversation with Congruent Ventures co-founder and managing partner, Abe Yokell
Look around the climate space and you’ll find people who go against the grain. They’re innovators, they disrupt the norm, they refuse settle for the status quo.
Abe Yokell, managing partner at Congruent Ventures, is one of these people. He’s been investing in climate since before it was en vogue. After the initial wave of cleantech investment slowed in the early-2010s and most of his fellow investors fled the space, Yokell stayed the course. Now, he’s known as one of the top investors in climate.
Yokell has helped raise over $300 million for climate ventures in the last year alone. Over the course of his career, he’s touched EVs, nuclear fusion, solar, and all kinds of cleantech. One thing that has remained central in his work is storytelling. The Cooler sat down with Yokell to learn more about how important climate storytelling is to financially mainstreaming cleantech solutions, and how climate investment has evolved over the course of his career.
You've been doing this for a long time—you call yourself an “OG climate investor” in your Twitter bio. How did you get started?
I grew up in Boulder Colorado as a tree hugger, talking about energy economics around the dinner table. My old man was a PhD in energy economics and my mom was a PhD botanist. In college, I was studying economics, chemistry, and biology having no idea what venture capital was, and was introduced to one of the original cleantech venture firms, RockPort Capital Partners. I interned there between my junior and senior years, as the “weird intern” in the corner. When I tried to get a job there out of undergrad and got completely rejected, I went off to do consulting for a little while. But then when their associate left, they called me and I relocated myself out to Boston. That was about 20 years ago.
I spent 13 years at RockPort, with the first few years in Boston. I was responsible for opening the Sand Hill Road (Menlo Park) office in 2007 when all of the mainstream venture firms were piling into the space. My job in ‘07 was to help bridge the gap from a climate venture firm to the mainstream venture firms that were coming in, and to syndicate with mainstream firms. That worked fine until 2008 and the global financial crisis and then all the wheels came off.
What was the industry like in those early days? What was happening when, as you say, the wheels came off? And how have things evolved to today?
It was a sleepy little industry and kind of a sideshow in venture. I say that because there were only four or five firms that were dedicated to cleantech venture. I joined full-time in 2004 at RockPort. If you recall the timing, this was post-dot com where everybody had lost money in venture.
But you still had a lot of brilliant venture investors who were sitting around with actual semiconductor and biotechnology expertise who had nothing to do. All of a sudden, The Inconvenient Truth showed up. Al Gore started telling the story, and it became the next hot sector. As the venture community went into the new thing, RockPort went from being a sideshow to the mainstream. Every mainstream venture firm tagged in a partner or two to chase cleantech.
That was true for a couple of years. Then, when the wheels came off, mainstream venture retreated wholesale from the space. From then through about 2018, LPs had no interest in looking for financial exposure in climate. So the landscape changed dramatically from being a stepchild, to mainstream, to being avoided at cocktail parties with a significant amount of giggling about what you're doing, to now. In the last three years, it seems to be mainstream again, which is great until it gets over-hyped. At the moment the climate is, I think, a very happy place.
You founded Congruent Ventures in 2017, where maybe the tide was turning but there was still very little interest in investing in climate. What got you started there, what is your mission?
The landscape and context is very relevant. From the 2008 to ‘16-’17 time period, the industry experienced a massive brain drain, particularly in the investment community. There was also a short-term brain drain in the entrepreneurial ecosystem. But the reality is that most of the GPs—not all, but most—really couldn't go out and raise another fund. So those who were GPs/firm founders were sitting around managing out their existing portfolio, and it takes many years to do so. There was not a new crop of investors in training. You can count on your fingers and your toes the individuals in North America who were actively investing in traditional venture models in pre-2008 and are still doing so today. They're all gone. Those that survived are almost all focused on mid- to late-stage investing.
The theory of operation behind Congruent was Josh [Posamentier], my co-founder, and I wanted to refocus attention and help rebuild the sector from the bottom up because there was no early-stage venture activity at the time. So the whole theory of operation was: how do we refocus on climate and sustainability investing in that pre-seed to seed series, typically first institutional rounds, to help rebuild the sector over time? And how do we do that with a genuine focus on climate impact, while also using the best-in-class venture model to invest? That's been our mission from inception.
If we don't have a financial motivation for scaling these solutions, they will not scale. We have to have a financial motivation to crowd in capital to help scale these companies. If we don't have that, we are not going to win.
From an LP perspective what we have told folks is every investment we make should have a significant, positive impact on the climate ecosystem at scale, but our underwriting is all financial. We want to be benchmarked against other venture firms. It’s not about cleantech, it's about doing venture in the best way, and we happen to focus on climate. Similarly, our hope and expectation is that we will be able to attract both climate venture firms but also mainstream venture capital into our climate companies. The theory of operation is that if we don't have a financial motivation for scaling these solutions, they will not scale. We have to have a financial motivation to crowd in capital to help scale these companies. If we don't have that, we are not going to win. That has been the theory of operation since the get-go.
You’ve said that we need to mainstream climate to scale it. Does that play into what you're talking about? Mainstreaming it from a financial perspective as well as focusing on that climate impact side?
Absolutely. To have climate solutions scale gracefully, the solution has to be better and cheaper than the alternative. That is an underpinning to effectively all of our investments. It's also an underpinning to decarbonizing the entire economy. Things like the Inflation Reduction Act (IRA) will help shift dollars toward these decisions. That is very real, but ultimately there is some customer—whether it's a corporation or an individual—who has to make a buying decision. There's always going to be a less climate-friendly alternative. Not all companies are going to pay a premium for a green product or service. Some will, but that doesn't scale. That is not mainstreaming.
What role does storytelling play in mainstreaming those climate solutions?
Storytelling is incredibly important. It's not just climate, it's true for the venture business writ large. If you take a big step back and look at what the venture business is, a small team of entrepreneurs will come together and tell a story to attract capital. They then have to go out and tell a story to recruit people, and then they tell a story to get somebody to buy whatever their product or service is. It is all storytelling.
Then at the next round, they have to go out and convince a bunch of people like me to go and give them more money, presumably at a higher valuation. And the only way that works is a narrative. From our perspective, the hazard of doing the pre-seed, seed, and early Series A, which is what we focus on, is that we often have a clear-eyed view of a market and the potential for product-market fit. Sometimes we are blinded by the fact that we can tell the story in our own mind's eye better than an entrepreneur, which creates a separate set of challenges.
Having a very clear, distinct narrative and story around why it matters, who it matters to, and how something scales is incredibly important.
Sometimes we will end up investing in a team that is doing amazing work but is bad at storytelling. What we found over time is that it can work well if the company delivers the results. Without that narrative development, it never works. So storytelling is a key component of venture and more specifically, it's a key component of climate.
The reason that it's a little harder in climate is because climate is everywhere and it is wonky. When you get into talking about utility models or the esoterics of EV charging and siting level 3 chargers across the US, it's really easy to put people to sleep. Having a very clear, distinct narrative and story around why it matters, who it matters to, and how something scales is incredibly important.
What’s an example of a company in your portfolio that has communicated its story well?
One of the fun ones is a company called Span—you're probably familiar with them. Arch [Rao, Span founder + CEO], we had known for 10 or 12 years from his original company. He was at Tesla for many years and he was one of the product leads behind the Tesla Powerwall 2. So, very intimately familiar with both the Tesla way of operating, but also very deep in product. What he came in and told us about, shortly after leaving Tesla, was a problem that if you understand the way that solar is installed in homes is a very real problem related to battery backups. It's a very wonky problem. You have to understand a host of components around solar storage, UL standards, and the National Electric Code.
Arch’s ability to simplify the narrative while going deep into the details of the product is just phenomenal. He also understands how it impacts the broader ecosystem. So the ability to deliver the broader context on a very specific product is second to none and he's gone on to raise a good bit of capital and ship an amazing product out the door which you can go buy from your local electrician or solar installer.
You’ve mentioned the word ‘wonky’ a few times— can you talk a little bit about the wonkiness of climate storytelling? What makes it so challenging and what do most people get tend to get wrong about climate tech?
The easy answer is that everybody knows what climate tech is, but each idea is different. It’s like, “Oh, you're talking about the grid”; “Oh, you're talking about EVs”; “Oh, you're talking about recycling.” Our perspective on that is that what people get wrong is that climate and decarbonization are the entire economy. We must decarbonize the entire economy over time.
That doesn't mean that every business is a climate business. It does mean that every aspect of the economy has some climate impact. So as you think about decarbonization, being able to push products and services towards those decarbonizing technologies and solutions is incredibly important. This idea that there is one silver bullet that is going to solve climate change is just not accurate.
There's a big, silly debate between hardware and software in the climate ecosystem. It's not relevant, we need it all. We need hardware, we need software, we need services. Everything has to get decarbonized. I think a lot of people don't get that right. I think a lot of people are like, “the right way to deploy venture capital is only in software,” or “this is a hardware problem; software is useless.” None of those things are true. It is all true.
Many early-stage companies follow the Silicon Valley mindset to building companies that say to go fast and break things. But in climate tech, you need to methodically engage local communities, government, and labor. For example, Fervo Energy is in your portfolio—they’re engaged in a massive project, Cape Station, in Utah that will create something in the order of 6000+ jobs. How do you think about these ecosystems and engaging them?
It’s a good question. We have historically not done much in project development. But the reality is, for many of these first-of-a-kind projects like Fervo, you have to be in that business. You start with the technology solution, you can't actualize your technology dreams unless you are good at development. What you're describing is a very traditional project development exercise. It happened in real estate, it happens in solar, it happens in traditional power. It's usually not the DNA of a company that is focused on a new technology solution.
So for companies like Fervo, the way we think about it is let's make sure that you get the actual technology right. But in the meantime, you have to bring in some of that development expertise in-house. That expertise is about talking to city councils engaging participants talking to landowners and talking to local politicians. It is a different game.
Do we do that on behalf of our companies? We do not. Have we seen that movie before? We have. We're going to say, “You should have a development team in-house and we can help you think through what that might look like.” But we're not going to recruit them.
Fervo has been exceptional with this development exercise. Some companies don't need to know what they need to do next. Fervo, because the team originally came out of the oil patch, understood this at the founding. In a traditional venture, you're not used to having to do this work.
We don't need to be experts on everything. But you see the movie again and again and things begin to rhyme. In our world, sometimes you have to thread in alternative forms of capital. Fervo’s facilities are not going to be funded exclusively with venture capital. What does that look like? How do you derisk first-of-a-kind projects? How do you fund it first? How do you pass the baton to the next stage of capital that may not be venture capital? It may be project finance, or it may be some kind of debt hybrid. It may be Jigar Shah and his team at the LPO. So there's a lot of path dependency on that.
The climate space sees a lot of disinformation. How do you define your team’s role in contributing to a more positive narrative around climate?
There is an amazing output of disinformation today versus 20 years ago. This aspect of information flow is a whole world that I haven't fully digested and it's showing up everywhere. At Congruent we're a team of 12, and we don't have a communications person. We don’t have the ability to change the narrative.
So most of our leverage is through our portfolio companies. Each of them operates in their ecosystem and each of them has their personalities. Some of them are very good storytellers and communicators and others are not. So when we have a crew that is quite good at storytelling, we actively encourage them to tell their story and oftentimes that is setting the facts straight, but it is very difficult.
There are a lot of vested interests out there. There are also a lot of misinformed people. It's a little hard to distinguish one from the other. I've had some very well-informed conversations with people who are talking about the quantity of mineral extraction necessary for renewables or the kind of energy payback for EVs vs. fossil vehicles, and most are simply misinformed.
For example, it takes more energy/carbon to create an EV than it does a fossil-fuel-powered car—that is accurate in isolation. What is not highlighted is the life cycle analysis. When you present the full picture people respond. “Oh, well, of course, I should have thought about that. Why did I think that that was something else?” I've had that conversation like six times. The reality is the TikTok world and every other social media platform is algorithmically designed to show you what you're attached to and you don't get both sides of the story.
There is a massive amount of capital out there. It is going to come into this ecosystem. It is going to support innovation.
What are you most excited about or hopeful for in the next year?
I think the underpinning of the quantity and quality of capital-seeking exposure to climate-positive investments is massive. We're experiencing this. The challenge at the moment is that there just aren't that many venture firms that have been around long enough for institutional capital to invest in given the historical context. I call it emerging manager jail. It takes at least two to three funds to emerge from emerging manager jail, which is typically six or seven years.
There is just a massive amount of capital out there. It is going to come into this ecosystem. It is going to support innovation. I'm very gratified by the quantum of capital that seems to be pointed towards decarbonization.
I never thought I would see the IRA passed in my life or anything like it. That helps send a signal to these large pools of capital that there will be returns in these areas. So, I'm quite optimistic that the whole ecosystem will mature to the point where we can absorb this quantum of capital.
(Water) Cooler Talk
🙏Give the people what they want
Research published earlier this week provides insights into how people around the world consume information and news about climate change. It builds on a 2022 survey of individuals in Brazil, France, Germany, India, Japan, Pakistan, the UK, and the USA. The 2023 report surveyed the same eight countries, and compared these findings year-over-year, between individual countries, and among regions (i.e. northern versus southern). The researchers found that in most of the countries, climate change news consumption has increased slightly. The average across the eight countries found individuals are interested in consuming news that suggest solutions and positive news stories above other types of climate news. These, among the report's other findings, are worth a close look to see what resonates with audiences worldwide on the tough subject matter that is climate. And check out Covering Climate Now for more ideas and resources about driving informed conversations about climate stories that engage the public.📋In case you needed more convincing…
…the time for action is now. The Fifth National Climate Assessment released this week underscored what we’ve been seeing and talking about all year: everyone is beginning to feel the effects of climate change. The report shows the rise in extreme weather over the last year, and outlines current and future economic and health impacts on the U.S. It also shines a light on the disparities in these impacts so far: some geographic locations are seeing more extreme weather than others, and minorities and marginalized communities continue to experience outsized impacts. The contents of the climate assessment will hopefully serve as fodder for policymakers to start making decisions to mitigate these impacts as quickly as possible. “Every 10th of a degree of warming we avoid, there's a benefit to that,” climate scientist Katharine Hayhoe told NPR.
Abe is a legend! Love what they are doing and couldn't agree more. Keen to see how climate founders get better at storytelling. We sure hope we are doing our part (#shamlessplug for CleanTechies PodLetter)