SPEAKER_02: Hey, how's it going? This is Craig Cannon and you're listening to Y Combinator's Podcast. Today's episode is with Diego Saez Gil and Gustav Alströmer. Diego is the co-founder of Pachama. Pachama helps companies offset their carbon emissions through verified reforestation. Gustav is a partner at YC. You can find Diego on Twitter at dsaiasgil. And Gustav is a Gustav. All right, here we go. All right, guys, welcome to the podcast. How's it going? Thank you. It's going great. So today we have Diego Saez Gil of Pachama from the Winter 19 batch and Gustav Alströmer, who is a partner at YC. So today we're here to talk about Diego's company. Gustav, why don't you start it out? Sure. So I met Diego probably about a year and a half ago now.
SPEAKER_03: And our paths crossed in sort of like the interest for carbon removal. I don't know if you call it French science anymore, French sort of like area, but it certainly crossed in the area of trying to solve climate change and how you can use technology to solve climate change. And it's something that we at YC has spent quite a bit of time on. Back in about a year ago, we released a carbon removal request to start up, which is a way for us to inspire people that work on new companies, what to work on. And we present a bunch of ideas there of things that people can work on. Diego has a very interesting approach to his company and love to hear more. But he is, this is not his first company. So maybe before we get into Pachama, tell us about your background. Like you've been funded, you've funded a couple of different companies in the past. Maybe what's the journey? How you got here today? Sure. Thank you. And thank you for having me.
SPEAKER_00: Let's see. I grew up in Argentina, in the north of Argentina, always surrounded by nature where I'm from. It's, you know, the Yungas, which is the last tip of the Amazon type rainforest in the north of Argentina. And then I had this big curiosity to travel the world. I went to see what was out there. Argentina is so far away from everything that I want to travel and see. So after finishing school, I got a scholarship to do a master's in Barcelona, moved from Argentina to Barcelona, took advantage to travel as a backpacker all across Europe. And then that journey led me to New York City to do an internship. And there I decided to start a company, which was kind of insane because at the time I was broke. I didn't speak good English. I didn't know anybody in the US and I had no idea how to start a startup. But I did it. And the first startup was trying to solve the problem that I had at the time as a backpacker. So we built a mobile app to book hostels and bed and breakfast. And at the beginning it was really hard because I had no idea, but eventually we raised some capital and eventually we sold the company to a company called Student Universe that sold discounted flights for students. After right after that, I went to Argentina to visit my family and I lost a suitcase on the trip. And that led to the next idea, which was how come there is no suitcases that you can track. And with a friend in New York, we decided to, you know, launch a crowdfunding campaign and started BlueSmart, which is a company with which we applied to Y Combinator and got selected in winter 15. That led me to California and building a hardware company was a completely new adventure for me, really difficult. Did you have any background building hardwood before? Not at all. My co-founder told me he had been to China sourcing merchandising, but I had never been to China. And we moved after right after YC, we moved to Hong Kong. We opened an office there and we started going to Shenzhen every week. This company flew quite high. We raised a lot of capital thanks to YC and thanks to the attraction that we were having. You know, we're selling a lot of our products and grew the team to over 60 people. And everything was going great, although always with a lot of challenges, like every hardware company up until the airlines decided to ban lithium ion batteries because the Samsung phones were getting on fire on airplanes, which is something you cannot expect as a startup to be, you know, how your products banned. What was the vision for the company? Like what were you trying?
SPEAKER_00: Yeah, I mean, the vision was to use technology to make travel better. But there wasn't like this grand vision to improve the world, to be honest. Were you the first company to like embed a battery
SPEAKER_03: in the suitcase or? We were. Yes. We were. And now it's like standard every single. Yeah. A lot of, you know, other great companies came afterwards, you know, bringing innovation to
SPEAKER_00: luggage, which, you know, by the way, to me, the biggest lessons that I got from that startup was that you can introduce a new idea into the world and this idea can spread as a meme. And then you have a new category in the planet. A conversation in a coffee shop in New York City can turn into a multi hundred million dollar category. And I was like, wow, OK, we have that power. Why don't we put it to good use to solve one of the, you know, biggest problems that humanity faces today? So anyways, that company ended up in this, you know, very difficult situation. We were able to sell the assets of the company, the technology and the IP. But the company didn't end in a good exit. So after that, I decided to take some time off, did a lot of soul searching, went with my two brothers to the Amazon rainforest, spent some time with some native communities that are got incredibly inspired by the power of nature and also got incredibly heartbroken, seeing deforestation happening there in the border of the Amazon and civilization. Then move here to the Santa Cruz mountains where I live now among the Redwoods. And from there, started researching and thinking what I was going to do next. And climate change and the environmental crisis was my biggest concern. And at the same time, I had this this inspiration by the forest where I had been in reading a book I discovered or I learned the potential that reforestation and forest conservation has to capture carbon at scale in the planet and is one of the most important solutions to climate change that nobody is talking about at the time. This is two years and a half ago. And so then that led me to research, you know, how technology could enable that solution. And I decided to come back to the road, even though I was, you know, quite, you know, still, I guess, broken by the previous experience. But I was like, okay, everything I learned, I need to put it at the service of this, which I think is the biggest problem of our generation. And then I went and talked to you and you received me and I drew in a whiteboard the idea and you told me this is a really good idea, go for it. And I can tell you what the idea is now with that introduction. But that's the background of how I got to Pachama.
SPEAKER_03: So tell us what Pachama does. I mean, there's a lot of people have ideas of how to solve climate change. I believe that technology will be absolutely the core of solving it. Like most big problems humanity faced in the past, technology have somewhat helped solve. So maybe tell me about Pachama. What does it do? Sounds like a good idea to plant trees, but like, in what way do you change that? So the first question that we asked was, okay, if reforestation and forest conservation
SPEAKER_00: is such a big solution and such an easy solution, we know how to plant trees, why we're not doing it. And the answer to that is, okay, somebody has to pay for that. You know, we were not driving funding to it. There is not an economic incentive to do it today. And the mechanism that was created by the United Nations to create an incentive to drive solutions to climate change is carbon markets. Carbon markets work in the following way. The companies and organizations that are emitting CO2 into the atmosphere should take responsibility for those emissions and should compensate those emissions. And the way to do it is through an instrument that was created called carbon credits that are given to projects that reduce emissions or recapture carbon from the atmosphere. Now, that's a market that had some growth at the beginning, and then after the financial crisis kind of crashed, but after the Paris Agreement, the market is growing again. And according to the World Bank, last year over 80 billion dollars went into carbon market initiatives around the world. And yet, when you look at the percentage of that funding that is going to forest conservation and restoration is less than 2 percent. So, then the question that we ask is, okay, why does it case? And we learned that there were two problems. Number one, if you want to certify a forest project today, let's say that you want to plant trees, you have a land and you want to, you know, do reforestation or do forest conservation, you have to do a certification process that takes two years and it costs between 100 and 400 thousand dollars because you have to get all the tools sent to your field to count trees and measure the size of the trees every certain period of time. And that is very inefficient. So, as a result, there aren't that many projects. In the US, there are less than 50 projects that got certification for carbon credits. In South America, there is less. And, you know, the only projects are very large projects. In the other hand, buyers of carbon offsets in a way stayed away from forest because of a lot of lack of credibility about the projects. You know, how do I know that someone's planting a tree? How do I know that the calculation is being correct? How do I know I'm not going to get in trouble if there is a problem in the project? Was fraud common? It's not common,
SPEAKER_00: but it happened sometimes. And there were people that took advantage of carbon credits because they're such an abstract concept. And there were some problems with projects in which illegal deforestation happened. Maybe, you know, not under the awareness or control of the project developers, but something that happened and were problems in the past. Was the problems related to,
SPEAKER_03: it was hard to track things or was the problems related to that the system was broken? Yeah,
SPEAKER_00: hard to track, hard to process that information in real time. It's just, you know, sort of like a technology problem, not an intentional problem in the most part. So here's where we come with a technological solution to all these problems. What we're doing is two things. First, we are using the latest on remote sensing and artificial intelligence to do our verification and monitoring of how much carbon is there on a forest and how much carbon the forest is going to capture. What do you mean by remote sensing? Remote sensing includes satellite images, lidar data, and any form of data that can be collected remotely and then analyzed with algorithms. And then we use machine learning algorithms, and I can go later into specifics of how we do it, to analyze those data points of the forest. And you can be incredibly precise today at estimating carbon storage and carbon capture by forest. So those tools will help facilitate the certification of projects. They increase the credibility of the projects. They allow for constant monitoring and they bring a whole new transparency and efficiency to the onboarding of new projects. And then the second part of what we're doing is we are trying to connect the parts in a more direct way because today companies that want to purchase carbon offsets, they generally have to go to brokers. The brokers get their craze from a trader, the trader maybe from a retailer, the retailer from a lot of middlemen along the way. And if we are going to be onboarding these projects and doing this data analysis, why don't we connect directly the projects with the buyers? So in a way, we're building a marketplace as well that allows for companies and organizations that want to offset their carbon emissions to directly access trustworthy carbon credits coming from forest restoration and conservation around the world. And your platform allows me to know exactly what forest that I am, where the carbon credits
SPEAKER_03: is stored? Exactly. You can enter the platform, you can see different projects around the world,
SPEAKER_00: you can see exactly where it's located, you can see satellite images that get updated on a frequent basis, you can see photos of the forest, you can see how everything was tested, description of the co-benefits. Because by the way, one important thing about forest is that not only they capture carbon, but they are holders of biodiversity, wildlife, water conservation, community impacts, you know, job generation. So it's a very holistic solution to many ecological problems. And all that is described on the way that we display the projects on our platform. So I think one thing that might be interesting to kind of give this a little context
SPEAKER_02: is to talk about magnitudes. So for an average, I mean, we don't have to talk about specific customers, but like, for an average company, how much land are we talking? What are, how much carbon are they trying to offset? Yeah, so for, it's a good question, because there are many
SPEAKER_00: companies that are for the first time evaluating, you know, becoming carbon neutral, offsetting their emissions, and turns out that it's not that expensive. It turns out that for certain companies, for example, service companies or software companies, their emissions are mainly the electricity consumption in their offices and their travels of their employees. There is an estimation that, you know, for a company like that, it's about six tons per employee per year, the emission. And today, you know, prices, prices of carbon credits range between five and twenty dollars. So it's not a lot of money to per ton. Okay, yeah. So offset an employee, you know, all of its
SPEAKER_03: emissions, it's 50 bucks or it could be $100. Between 50 and $150 per employee per year for
SPEAKER_00: a service company at that price level. And how much land is that just for context? So let's see,
SPEAKER_00: one hectare of land of full grown forest contains about 200 tons. Now, you know, the carbon credits get issue in terms of how much additional carbon a forest project captures. So that depends. There are different type of projects I can explain, but yeah, we have projects that, it's interesting, the question, because we want to start presenting this as, you know, by offsetting your emissions, you're protecting 10 soccer fields of forest, right? Or, you know, 50 soccer fields of forest. And we have, in fact, we're working on presenting trenches so companies can choose, okay, I want to participate in this trench that is going to offset even beyond our footprint and focus on the protection that we're doing and not just on the carbon offsetting. Got it. So we talked a lot about
SPEAKER_03: tons of CO2. So that's typically the unit that people are using to measure carbon emissions. The world is emitting 35 or 40 gigatons a year. That's enormous amount. Can you talk about just like the opportunity of foresting? Like how big is this opportunity? Because I remember there's a venture firm, Bill Gates investment firm, breakthrough in any ventures. They say they would only invest in things that have a minimum opportunity of, I think it's like one gigaton or one and a half gigaton or half a percent. So some large number, which means that everything you have to go after has to be really large. How large is the opportunity in forests? Yeah. So there was a
SPEAKER_00: paper published recently by a university in Switzerland that did an estimation of the potential for reforestation. And the numbers are like this. There is about 1 billion hectares in the planet that are available for forest restoration without competing with agriculture. In that land, you can plant about a trillion trees and that trillion trees has the potential to draw down about 200 gigatons of carbon, not of CO2, of carbon. So CO2 is, you know, times 3.6. That is about two thirds of the emissions that we put in the atmosphere since industrial revolution. So we're talking about probably the most meaningful solution. And this is not counting forest conservation, which is the standing forest that we have today, especially the rainforest that capture a lot of carbon, right, in Amazon, in Borneo, in Congo, that we should stop deforesting right now because these forests continue to capture carbon over their entire lifetime. So, yes, these are meaningful numbers. And the main problem is missing is that the incentives aren't there.
SPEAKER_03: Is it the incentives aren't, that don't exist or they're not available to most of those landowners? Exactly. They're not available because, you know, the carbon market, you know, the flow of capital
SPEAKER_00: going to carbon markets is growing 50% year over year since the Paris Agreement. And we hope that we'll continue to grow as more regulations come into place. For example, all the airlines starting in 2021 will have to offset their emissions. This is by regulations, right? This is called the Corsia framework. And we are talking about 160 million tons per year that are going to be demanded by the market. So the demand for carbon offsets will continue to grow. And our intention is to make it easier for that funding to go to reforestation and forest conservation, and in the future, other nature-based solutions because beyond forest, there is, you know, what's called blue carbon, which is restoring coral reefs and, you know, kelp forest and mangrove forest in waters. There is regenerative agriculture, which is another form of land-based carbon capture and so forth, right? So we hope that in the next few decades, hundreds of billions of dollars will go to solving climate change as we realize the importance of this and the urgency. And there will be a need for a platform that transparently, efficiently, and effectively transfer that capital to the right solutions. And we hope to be that platform. Stay Forever Maybe we can dive in on the trust question. So
SPEAKER_01:
SPEAKER_03: there's a history of people not fully trusting carbon offsets. Why do you think that happened? And so like, what is the difference between a carbon offset and a carbon credit? And how do you make sure that you build and trust in your system so that we can change that narrative? Dr. Josef Marchegiani Yeah, I mean, the reason
SPEAKER_00: people didn't trust them is because lack of transparency and lack of data, right? It was a very paper trail type of industry. And we are trying to change that. We're trying to make it a digital asset in which you can trace digitally everything from how a credit was issued, how it was calculated, how it's monitored, and how it's traded. That should happen online, like every other industry that received the internet treatment, right? Stay Forever So kind of like Airbnb,
SPEAKER_03: you can go and find every single place around the world. And as a homeowner or landowner, I can figure out what the value of my land is on the carbon markets. Dr. Josef Marchegiani Exactly. Yeah. So the lack of trust was
SPEAKER_00: because of lack of transparency and data and information. And that's going to change. Stay Forever And just a specific question,
SPEAKER_03: how do you make sure that something isn't double counted? How do you make sure that someone isn't on your platform and another platform at the same time? Dr. Josef Marchegiani Yeah, well, there are these registries
SPEAKER_00: and the registries are in a way cross accounted. But there's definitely a need for more transparency tools and more technology tools, frankly, for these registries to assure that everything is uniquely accounted. There is also the issue of the national contributions to the commitments towards the Paris Agreement in which a country can claim the carbon capture of a forest. And maybe inside of that land, there is a particular private project that also got carbon credits. So you have to assure that you account for that. And again, it's just about data and making the data accessible and standardized. Stay Forever Got it. So one follow-up question here. So
SPEAKER_03: what's the difference between reforestation and afforestation? And also one common concern people have about forest capture and carbon is that forests eventually die or eventually burn or whatever natural costs of carbon being reemitted into the atmosphere. Dr. Josef Marchegiani Yeah. So okay, there are four
SPEAKER_00: type of forest projects and more probably, but there is forest conservation, which is you have a standing forest and what you do is you commit not to cut it down. That's what's needed in the Amazon rainforest, for example, right? We need to pay people not to cut down the forest because there is an alternative that is cutting down the forest to do cattle ranching or to do agriculture and that's a big economic pressure on the Amazon rainforest. Secondly, there is what's called improved forest management. That's very common here in North America. These are forests in which timber logging was done and basically a commitment is to do a more regenerative type of harvesting in which you harvest every couple of decades. You replant trees, you re-enrich the forest and you can continue harvesting timber, but with a more sustainable practice. Number three is reforestation and it's just planting trees in a place where there used to be a forest in the past. And afforestation is to plant trees in a place where there wasn't a forest in the past. So you have to prepare the soil. It's like basically decertifying or, you know, sort of like converting a desert into a place where a forest can exist. Way more difficult to do and we kind of, you know, don't need to go there because there's a lot of, you know, places available for restoration. But at some point we could, you know, we have an engineering capacity to, you know, geo-engineering and modify, you know, environments, you know, so powerfully as we did with civilization. We could, you know, easily forest, you know, for example, I don't know, the Sahara Desert. Wow. So in terms of differences between these methods,
SPEAKER_01:
SPEAKER_02: are there certain benefits to log sustainably? For instance, like, is a new tree giving off more or like capturing more than an old tree? It depends on the species. It depends on the
SPEAKER_00: climate of the region. It depends on a lot of things. But all growth forest continue to capture carbon. The Borneo forest that has millions of years continues to capture carbon. And while a forest like every living ecosystem and organism dies out and regenerates and when a tree dies out, yes, it releases some carbon. The net result is actually carbon capture. And there is a lot of data that supports that claim. That being said, wood is a very sustainable material, way more sustainable than concrete or other materials. So we should continue having tree plantations and harvesting for wood generation. And I think that doing improved forest management on timber areas is an important practice in which we are optimizing for both for carbon capture and for wood production. So to that end, a question Gusev had written down. Sometimes are the
SPEAKER_02: incentives misaligned in the sense that farmers just want to create monocultures of crops? Like, hey, here I can generate the most lumber with this type of tree. And yeah, do they go for that? Yeah, yeah, that's been the case definitely in agriculture and in the timber industry.
SPEAKER_00: And hopefully this creates an incentive not to do that. In an improved forest management, biodiversity is tested as well. And with data, we can, like for example, with remote sensing data, with satellite images, we can determine markers of biodiversity that then can be accounted into the system. So as a buyer of carbon, if I, is that a choice I have to say I want to make
SPEAKER_03: sure that the forest that I buy to capture carbon is diverse, have biodiversity? Is that a choice I make or is that a choice that you make on your platform? I mean, right now, the protocols that
SPEAKER_00: are out there to issue carbon credits have tests for biodiversity. It's one of the questions that you have to answer for. In the future, we hope to present proposals for new protocols that we can talk about in which all the available data gets accounted on the amount of credits that the project gets and biodiversity should have a weight there. But also, yes, buyers can and they do prefer projects that protect wildlife that have biodiversity benefits because it's not just about carbon upsetting, right? Got it. So your co-founder Tomas is a machine learning engineer from
SPEAKER_03: Bastion National, like a lending company. Talk to me how you guys use technology. So like, there's a lot of tech and so like the data sources that you get. Just talk to me basic of the platform. Yeah, absolutely. Yes, Tomas is a machine learning engineer and we're,
SPEAKER_00: you know, building an amazing team on machine learning. We have a forest scientist with expertise on machine learning and we just hire a PhD in math that solve an unsolved geometrical problem that, you know, made his name on the math world and he's a machine learning engineer as well. And what we do is we are using a deep learning technique called convolutional neural networks that basically analyzes lighter data, clouds of points of the forest that were collected by airborne or by drones or by satellite and in a way takes account of the shape of the forest and based on that can know how much biomass is there in the forest. We train the algorithms with ground truth of plots that were measured by, you know, forest services, you know, measuring the trees and then you train the model and the model learns to detect, you know, given a certain shape how much carbon is there. And we demonstrated, this is the work of Elias who's the PhD that works with us, for four years he was working on this and he demonstrated in New England less than 1.5 percent error at predicting how much carbon is there in a forest comparing by looking at lighter or looking at satellite. So you train the model with lighter and then you apply to satellite. I'm very curious, like, how do you account for the biodiversity in the model? Because I understand,
SPEAKER_02: so if you're mapping like altitudes that's one thing but, you know, just, yeah, how can you tell different types of trees? Well, tree concentration, for example, is a market of
SPEAKER_00: biodiversity, you know, where, you know, where there are many trees concentrated and there is there's more wildlife, for example. I'm not an expert on that but, you know, this is, you know, some things that I'm picking up. So you can train the algorithm also to learn where there is more biodiversity and more, you know, canopy shape also tells you species group. Okay. So we can determine whether it's conifers or non-conifers, things like that. But ultimately you still kind
SPEAKER_02: of need a little bit of ground truth to know it's like, okay, in this type of environment, you know, these types of trees might be there. Yeah. Okay. What are the big technical challenges
SPEAKER_03: right now for you guys? So I mean data collection, we partner with the two largest satellite companies
SPEAKER_00: in the world and we're, you know, sourcing really good imagery from them but we also you know benefit from collecting LiDAR data that's already out there, you know, in ground truth, you know, again full field plots measurements. So yes, we're very hungry for data. The more data we have the better the algorithms become. We're very excited about a NASA program called Jedi. They sent a LiDAR to the International Space Station and they've been collecting LiDAR cloud points of forests around the planet. They're going to be releasing this data now in November. We're going to be the first to jump into that data. If the data is good, we can expand our model to the entire planet. Wow. So yeah, from a technical perspective on the verification and monitoring side, it's just data. But we are... And data is available equally around the world?
SPEAKER_03: Yeah, but sometimes it sits on, you know, the forest service of a country, right? Here the
SPEAKER_00: US forest service has been very, you know, open sharing data with us. We obtain a lot of data from Mexico. We're in the process of obtaining data from Peru and Brazil. So yeah. Got it.
SPEAKER_03: So your company is less than a year old. You scale up pretty fast. Where are you today? Just give us sort of like roughly an idea how far along you are and sort of like what are the bottlenecks from growing even faster is a common question we ask YC companies when they're in the batch. But there's always something that prevents you from growing even faster. Yeah, I mean, we did accomplish a
SPEAKER_00: lot in just one year. At the same time, I feel that we should go faster. We should be accomplishing more. But that's always a sensation, I guess, for an entrepreneur. We built this model that works very well in North America. And starting to expand to South America, we partner with some of the largest forest project developers in these two regions. We onboarded over 10 forest projects in the US and Brazil into our platform that we analyzed, validated, and listed on our platform. We have closed over 10 customers. And we are in the process of closing some very big companies that are already purchasing our own assets and that they loved our approach. I cannot say names yet, but these are very recognizable companies that have a high standard on everything they do. And who generally are the buyers of this? Like you mentioned the compliance markets are $80 billion.
SPEAKER_03: Like is this mostly corporations or is it countries or individuals? Who are the buyers?
SPEAKER_00: Countries purchase current assets at scale, but it's mainly corporations. Corporations that are regulated in this market are energy companies, for example, transportation companies. But then there is a big and growing voluntary market of companies, technology companies, brands that sustainability is a big part of their value proposition. And then they decide to take responsibility for their carbon emissions. Being carbon neutral is a thing now. And all the sustainability departments on these companies are talking about it. Maybe talk about how the
SPEAKER_03: voluntary and the compliance kind of fit together. Because I imagine that the more volunteer the carbon officer is, eventually that will lead to the compliance or like, yep, this is something that we should be doing. Or how do corporations think about this? Is this something like we got to do is now because eventually it will be compliance, we got to get ready for it. Or they're like, this is what our customers or employees are demanding. What are the big ones? Why are they doing this? Yeah, for example, airlines are in the case that they are going
SPEAKER_00: to be regulated in 2021. And yet many have started already offsetting their emissions and even offering their customers to offset their trips. For example, Delta and United have the option to offset your flight. It's not super easy to do it on their website. Hopefully we can help them with that. But that's the case. And then, yes, here in Silicon Valley, employees, customers and investors are asking companies, what are we doing about climate change and offsetting your emissions? Of course, first you have to reduce, try to use, you know, renewable energy and then offset what you cannot reduce. So is that what you think the future of
SPEAKER_02: the market is? It's just going to be companies like making bulk changes versus individuals saying like, you know, I'm going to offset one flight at a time? I think it's going to be
SPEAKER_00: everything. It's going to be governments, regulated industries. It's going to be voluntary companies and it's going to be consumers as well. I do think that consumers will have to vote with their dollars and we'll have to also take care of we have to all take responsibility for our footprint. At the end of the day, companies are just creating products and services that we consumers consume. Right. So, yeah. Yeah. Makes sense. So one thing I want to talk about
SPEAKER_03: is fundraising. So after we put our request to start up, we got lots of people reaching out to YC. It was a combination of it was founders that want to start companies. Not that many of them, unfortunately. A lot of people wanted to work for these companies. It was like dozens of engineers at big companies that were like, which of the companies you fund this year will go work for? And like we didn't have that many for some years at the time. And then there was investors and who wanted to learn many of them. And then there was people that from the press and there was like, this is one of the, I think that probably the request for startup, like generally the most amount of press interest of anything we've ever done still are getting pings about this. Maybe tell us your experience on the fundraising side. So like you went out and fundraised, you had fundraised in the past and you kind of knew a little about how this went, but you're raising money for a company that's fixing climate change. It's like, what categories are like, do they put you and do you put them, the investors? And what did you learn about fundraising through the process? Yeah. I was surprised by the fact that this time was my easiest fundraise
SPEAKER_00: and I was able to attract the best investors in my entrepreneurial history. And I think the reason was that smart and accomplished investors see that climate change being one of the biggest challenges of humanity is also one of the biggest opportunities of value creation for society. And therefore the opportunity to create valuable companies. I think that the vision that we described resonated with many investors and yeah, I mean, we ended up raising almost twice as much as we wanted to raise initially from an amazing group of people. Our lead investor is Ryan Graves, the co-founder of Uber. He has experience building a global marketplace. We got investment from Chris Sacca who, you know, funded Uber at the beginning, PG invested and we got, you know, investments from social capital, global founders capital, and even some small checks from, you know, funds like Accel and Atomico. And all those investors, I guess, saw on us that we have first a strong technological component on the machine learning verification and then strong network effects on the platform, on the marketplace and the potential to scale to be a very large platform provided that humanity awakens to this. And the reality of climate change and the need to act on it. So I guess what I learned from that fundraising experience is that there is a lot of interest of investors on climate change startups. Did you have to educate them about the solutions? So like through
SPEAKER_03: the fundraising or where did they come with a lot of prior knowledge? No, no, definitely. I mean,
SPEAKER_00: I had to, you know, share all this information that I didn't have myself, you know, at the beginning of this process, how carbon credits work, you know, what's the potential of forests and so forth. But they saw it quickly. And I think that so, yeah, I validated there's a lot of interest. Many of the investors I talked to keep asking me, do you have other companies working on climate change? So there is a lot of interest. You have to have a business model that is scalable. I think in that sense, YC was super useful for us on putting the Silicon Valley playbook lens into this company and avoid us to be trapped into a science project or a nonprofit project. You know, so we're a technology startup. We had to be scalable. We had to be defensible. We had to, you know, be a product that people want, make something people want. So this is
SPEAKER_02: funny. So it kind of boils down to the exact same thing as before. You aren't pitching this in any way differently than BlueSmart. Sure. Yeah, exactly. Yeah. Yeah. Because I think the,
SPEAKER_02: I don't know, the overwhelming notion is that you have to pitch something differently if you're like trying to save the planet. Right. But you're not. You just made a good business. I mean, I have to say something to every investor that entered the company. I told them before accepting
SPEAKER_00: their money, look, okay, now you're convinced that this is a good business. I want to tell you, this is a long term company. It's mission driven. Always the mission is going to be before profits. And it's going to take time. You know, we're trying to build, you know, solve a big problem. So if you're not okay with that, don't invest. And some people didn't invest, but the majority love that because they saw the commitment that we have. And, you know, really good companies take time and really good companies are mission driven. So, yeah. So I mentioned after the request was
SPEAKER_03: started from YC, we got a lot of engineers pinging us or like, what can I do? And there was mostly software engineers. I'm curious what advice you have for I'm sure there are lots of people like this who work in a big tech company. They're a data scientist, engineer, designer, product manager, and they want to work in climate change. Like, what do you typically advise them when you meet them? I have met many of these people and I struggle sometimes with sort of like where to point them because the number of software companies isn't that large. Yeah. Yeah. I mean,
SPEAKER_00: the number one thing I advise them is to apply to Pajama. But we're not hiring that many people yet though. Yeah. I mean, I agree with you. I wish there were more companies to point people to. I do encourage people to start their own companies. I encourage people to look for, you know, the few startups that are out there and go and help. And I think that also within big companies, you can try to find your place in an area that is working on climate change. Big companies like Google and Microsoft and Apple all have an area of focus on climate change. So go and work there, right? Learn there or contribute there. And even from governments, from nonprofit organizations, there's a lot of places in which we can contribute. Maybe a follow-up question there.
SPEAKER_03: So let's say I'm a software engineer and I wanted to start a company working on this. Do you have any specific areas that you think software is very needed on right now when it comes to climate change? I think that AI plus X, there is a lot of opportunities to solve climate
SPEAKER_00: change. I actually made a list. I'm planning on writing a blog post at some point. But just to give you a few examples, AI plus optimization of shipments, AI plus optimization of travel and, you know, air travel, AI plus safety of nuclear plants, AI plus smart cities, AI plus smart electric grid, AI plus... Because these are such complex things that humans aren't good enough to
SPEAKER_03: actually make decisions there. ...efficient agriculture. We should be being way smarter
SPEAKER_00: about how we produce the food that we produce. So I think there's a lot of software opportunities on making the use of resources and plant earth more efficient. And so related to
SPEAKER_02: researching ideas to potentially starting a company, you know, you don't have deep domain expertise. You know, you kind of got excited about this and you went off on your own. How would you suggest someone begin their own research process? Like, how do they start reaching out to people? Where do they go? Where do they find this information? Yeah, definitely. I think
SPEAKER_00: that, well, the first thing I did differently in this company was I took longer on the research phase and that was super important, to be honest. I think in the first companies it was okay to just jump into the pool because, you know, that, you know, that naivety also helped me get started. But I do think that taking about a year to just research and read books and talk to experts and discard ideas is super important. That's what happened to me this time. And experts are incredibly open, you know, to talk with, you know, people that want to contribute. Are you talking like public sector, private sector, professors?
SPEAKER_02: University professors, researchers at labs, even executives at companies. My experience being
SPEAKER_00: that people want to, you know, want to help. So, yeah, I mean, just come out with ideas and go and talk to people. And you don't have to be an expert. That's the thing about entrepreneurship. You just have to be good at attracting, you know, resources, right? Absolutely.
SPEAKER_03: So I have one last question I want to ask on here. So most startups don't have to spend too much time thinking about policy and governments. There's sort of like, there's not really a parity for them. I'm sure this is something that is important for you because such a lot of this is regulated and policy and government decisions probably go in your favor in the future. There's probably more of this, not less. Just what do you hope to see sort of like in that angle? Yeah, I mean, definitely we are acting as if there's not going to be any change in regulation.
SPEAKER_00: And still this is going to be a big market. Yet we do think that there should be more regulations that many, the big polluters, energy companies, transportation companies, industrial companies should have an obligation to offset their emissions. And that's going to be an incentive for them to transition out of fossil fuels, right? So yes, I'm always paying attention to the different initiatives like cap and trade markets or carbon tax initiatives in different places around the world. And my opinion is that yes, this is what happened with aerosol, right? And the ozone hole, we fix it with regulations and also we fix it with regulations, slavery and torture and genocide, right? So things that are wrong had to have a regulatory framework to fade them out. So I do think that free markets are great, but at the same time, the role of regulations on a capitalistic society is to bring society to where everyone wants to go.
SPEAKER_02: Awesome. So just a couple quick questions from Twitter before we wrap up. Sure. So Guillermo asks, what are some of the most important things you've already learned about the problem space since starting the company? Hmm. Yeah. Well, I think that we learn a lot about
SPEAKER_00: the importance of all the different players that are out there in the market. For example, there are these registries that create standards and protocols and they're super important because they've been studying this for many years. So we are going and partnering with them, trying to make them improve their protocols or put our technologies at the service of their protocols and standards. We learn, I guess, that the importance of education, frankly, this is a market that's very confusing. So I didn't have as a part of our strategy to have a content strategy, but now I realize that content is going to be super important. We need to create more awareness and more clarity. And definitely we learn a lot about the data part. We learn about how remote sensing is exponentiating the possibilities of capturing data or ecosystems. That's something that gets me really, really excited because one vision that we have for Pacham is that we can become this kind of like a platform for understanding deeply all the ecosystems of the planet. And this idea that Buckminster Fuller had of having an operating manual for Spaceship Earth, imagining a data platform in which you can know down to the genetic composition of every organism in a forest in one platform. So these are the kind of things that we geek out in terms of data and we learn a lot about the possibilities. Yeah, that's super cool. One more question. So related, I asks, can food forest grown via
SPEAKER_02: permaculture methods be a better way to perform agriculture?
SPEAKER_00: Yeah, for sure. I mean, agroforestry is a very important practice that I think we need to do more. If we are going to feed 10 billion people, we need to find more regenerative forms of agriculture. And it turns out, according to data I read, that agriculture inside of a forest can actually produce more yield than traditional, you know, monoculture agriculture. So permaculture is another practice that has enormous potential. And these are things that, by the way, can also obtain carbon credits. So we hope to help also those projects get additional income through that. Awesome. Diego, thank you so much for coming. Thank you so much for having me.
