Why We Co-Led Paytrix’s Series A
The UK-based fintech is working to solve one of payments’ biggest problems.
Welcome Dilly Sanborn-Marsh as our first Fellow focusing on climate tech! Dilly has been working with us since September, initially to support our investing efforts in climate tech, working closely with our investing team, and now as she works on her own company at the intersection of fintech and climate tech.
We created this hybrid program specifically for Dilly because her expertise and passion in climate tech directly overlap with our interest areas at BCV. We first met Dilly through the startup ecosystem in SF; we knew she’d be an incredible addition to the team based on her leadership experience, voracious curiosity for climate tech companies, and deep network of entrepreneurs in fintech and climate tech.
At BCV our main focus is on investing in four core domains: commerce tech, business applications, infrastructure software, and fintech. We’re eager to bring our years of experience as operators and investors in these four core domains to the climate ecosystem. We are excited about climate tech today because it’s an area where we’re seeing great entrepreneurs build, where there are significant technological changes enabling new company formation, and where there are strong demand tailwinds among businesses and consumers. We see climate tech as a lens that can be relevant to companies spanning across our four core domains; in other words, climate tech companies can be marketplaces (within commerce tech), vertical SaaS companies (with application software), developer-focused infrastructure tools (within infrastructure or security), financing companies (within fintech), and more.
Together, Dilly, and I have been meeting and developing relationships with other industry leaders and founders, mapping the climate tech ecosystem to identify our core areas of focus and relevant theses, and meeting many talented entrepreneurs building exciting companies. I’m thrilled to share this interview with Dilly. First, it is exciting having more women with influence in venture capital and climate tech in general. Second, I’m eager to have more people across the industry get to know her and understand how they can work with us and BCV.
SH: How did you initially become interested in climate tech? What drew you to the space?
I’ve always loved spending time in and studying nature. In high school, I worked at an aquarium, where I learned to scuba dive. Exploring the underwater world remains one of my favorite things in the world. At Stanford, I wanted to study the effects of climate change with the rigor of an engineering degree, so I helped start a new major, called Environmental Systems Engineering. Initially, I planned on pursuing a Ph.D., but at an annual United Nations climate change conference, I realized I needed to go into tech. At COP21, I saw Google Ocean present a tool that took satellite data and identified which ships were fishing illegally or violating human rights, around the world, in real-time. The elegance of solving a very focused problem, and applying it at a global scale, satisfied the specificity of a Ph.D. from a more extensible and solutions-oriented angle.
To me, building software to mitigate climate change had a greater likelihood of impact, on a shorter timescale, than anything I could study and publish. But, when I graduated from college, it seemed like there were very few high-impact applications for software with climate. Renewables were still too expensive to deploy at scale, and the US still lacked robust climate regulation. I decided to take a brief detour into fintech and learn everything I could about building software tools while looking for opportunities to get back into climate. And, in the last couple of years, the climate community has made some pretty incredible progress. Hardware companies and policymakers have successfully made renewables cheaper than relying on natural gas, and now a wave of founders are able to build amazing software tools to optimize and deploy climate solutions.
SH: How do you define climate tech? What is it, and is it not?
To me, climate tech is any technology that combats or facilitates combating climate change by mitigating global greenhouse gas emissions and their effects. Interestingly, the scope of the definition is dynamic, and over time, more and more companies will be classified as climate tech companies. There are two core dimensions that will expand the scope of climate tech over time: climate change severity and regulation. Today, climate tech includes everything from electric vehicles, to synthetic meats, to freight carbon sequestration tools, to carbon accounting. As the effects of climate change worsen, climate-agnostic businesses will need to become climate companies, expanding the scope of climate tech. For example, insurance policies will have to factor in climate risk, and the gig-workers of tomorrow will get paid to offload energy from their EVs to the grid during record-breaking heat waves when energy demand spikes. Similarly, future climate regulation will increase the scope of climate tech: just like the Inflation Reduction Act’s tax credits increased demand for renewables, regulating carbon markets would incentivize decarbonization businesses.
We think of climate change as a scientific phenomenon—and it is—but in the context of society and markets, climate change is a systems-level, multi-disciplinary risk accelerant. This can be anything from a devastating drought to business disruptions from repeated power outages, to a flight to a vacation getting canceled due to extreme storms. When risk increases, there are more problems and therefore more demand for solutions. We are going to face increasingly systemic and severe threats, and a lot of amazing people and teams are going to step up to the challenge and build some pretty incredible solutions.
SH: You also focus on fintech. Why do you like fintech and climate tech? Where are the most exciting points of overlap between fintech and climate tech?
Fintech and climate tech power every aspect of our lives, often in invisible ways that we take for granted. When you swipe your credit card or flip a light switch, you’re executing a series of interactions within a network of players, which miraculously deliver a seamless end-experience to you. Each new advance in fintech and climate tech improves core aspects of people’s lives. When you close your mortgage from your phone instead of signing a stack of papers in front of a stranger, or when you charge your EV instead of buying gas for the first time, you’ll remember the feeling forever.
To truly build fintech or climate tech that’s 10x better than what exists today, you have to deeply understand the political and economic systems upholding outdated technologies and business models. Often, if we take a step back, we realize we still use outdated technologies and approaches to solve problems, even when we have faster, cheaper tools. Ultimately you need to disrupt the structural systems that entrench the existing solutions, in order for new solutions to get traction. In my opinion, the best founders know they have to deeply understand the full history and incentive structures of a problem space before they can derive a 10x better solution from first principles. For example, the grid started as a centralized network built around power plants, out of fiscal and technological necessity. With the rise of distributed energy technologies, we can open our minds to more, better possibilities, but it will take rethinking the regulatory and economic dynamics of our energy infrastructure.
When you take the literal overlap of fintech and climate tech, you get to the very core of the political and economic infrastructure. I’m excited that the Inflation Reduction Act has made it more affordable than ever for consumers and businesses to leverage renewables and effectively participate in energy markets. Energy has locational value: a surplus of energy in one location on the grid is irrelevant to another location with a dearth of energy without the necessary transmission infrastructure. The load from intermittent renewables (ie. solar, wind) is not consistent like historical power sources’ (ie. coal plants), but it can be stabilized with storage applied in the right areas (ie. EVs, stationary batteries). We’re well on our way to a decentralized grid, with localized mismatches of supply and demand, leading to electricity price spikes. We need climate-fintech tools to facilitate consumers and businesses not only helping power a more decentralized grid, but also profiting from it.
SH: At BCV, you have a dual role as both part of the investing team and working on your company thesis as a founder. How does being a founder yourself influence your investing decisions?
Helping out on the investing side and working on my own company have been highly complementary. At least right now in my career, I skew towards operating over investing, and that absolutely frames my investing decisions. Especially with early-stage companies, it’s all about the founders, the market they’re going after, and their plan of attack. I know it’s a special team if by the end of the first calI I want to meet up and start solving the problem with them.
As an investor, you get to meet dozens of teams working on the same problem from different perspectives. You build out a multidimensional mental model for problem spaces, and you get to see how each approach plays out, up close. It’s reminded me as a founder to stay objective about strategies and to always be validating that I’m addressing a problem in the most impactful way possible.
SH: What’s the makeup of the current pipeline of founders in the climate tech space? What are their background and goals?
It’s been so encouraging to see folks coming from every industry, from around the world, to work on climate change. As an investor, you get to meet the people who are possibly the most passionate and most knowledgeable about a particular problem in the world. That is incredible. Because the umbrella for climate tech is so broad, it’s a very wide range of people and problems. I’ve met first-time founders inspired by helping loved ones impacted by Hurricane Fiona, and I’ve met serial founders from pure-play fintechs joining the fight. Given the multidisciplinary nature of climate change, this is very good: we need a wide range of people to build a holistic suite of solutions.
SH: What guidance do you have for others interested in becoming a founder or investing in the climate tech space?
Find an area to build where you have unique, deep insight and have so much passion that you can’t sleep at night thinking about the problem. Many times, especially in climate tech, you’ll find that these areas aren’t obvious or rational. I say especially in climate tech because, as mentioned above, the definition of what’s possible and commercial in climate tech continues to expand as the severity of the effects of climate change increases and regulation marches forward.
For example, the Inflation Reduction Act offers tax credits for all kinds of renewables, like electric vehicles. With it, there are new opportunities to help households and businesses lower energy costs and decarbonize. But we don’t have a regulated carbon market yet, so all carbon measurement standards and carbon offset markets are voluntary and relatively unstandardized. There’s still clearly a market— many companies have rushed to solve for this—but there’s also a lot of uncertainty. Eventually, regulators will pass standardized practices and laws, and not everyone will fall within those bounds.
We don’t know how long it’ll be until the U.S. passes more regulation, to formalize, for example, carbon markets. But we’re already feeling the effects of climate change, and climate tech is a highly multidisciplinary space. I would urge founders to look at the industries whose existing problems will worsen as climate change gets more extreme and build a business around that (hint: every dimension of infrastructure: logistics, financial, security, etc.).
The UK-based fintech is working to solve one of payments’ biggest problems.
At BCV, we work closely with founders on their most difficult decisions. So when we recruit, we look for people who bring new perspectives to these questions, based on their domain expertise and first-principles thinking.
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