Dipender Saluja is the Managing Director of Capricorn Investment Group, a venture capital firm with $9B under management. He was an early investor in Tesla. Today Dipender leads Capricorn’s clean tech investments effort and is betting on nuclear fusion, next gen batteries and electric aviation as the next moneymakers in decarbonizing the economy. Dipender has worked in Silicon Valley for 35 years. This week, Akshat talks with him about why he got interested in venture capital, climate tech, and how his start in the semiconductor industry informs his investment strategy.
Listen to the interview with Rebecca Shirley of World Resources Institute and Makthar Diop of International Finance Corporation to learn more about clean energy financing in developing nations here.
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Zero is a production of Bloomberg Green. Zero is a production of Bloomberg Green. Our producer is Oscar Boyd and our senior producer is Christine Driscoll. Special thanks to Kira Bindrim, Venkat Viswanathan, and Dashiell Bennett. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
Welcome to zero. I'm Akshatrati this week, luck, location and lots of risk. Last year, venture capital firms invested seventy billion dollars into climate tech globally, and a lot of that money came from one place, Silicon Valley. But how did a place better known for investing in social media and silly internet companies start investing in heart tech designed to solve real world problems. That's what we are going to talk about today with my guest, the painter Saluja. He's one of Silicon Valley's early venture capitalists and a veteran climate tech investor.
Transforming energy is probably the biggest opportunity in the history of the world. I think in testing for financial returns and social good is not only possible, I think it's easier to do than not.
The pain there is the managing director of the Capricorn Investment Group, which has some nine billion dollars under management. The group was created in two thousand and four to manage the money of eBay billionaire Jeff's goal. But it's not all skulls money anymore. Capricorn's success as impact investors has attracted money from wealthy families foundations and even institutional investors. The pain There made handsome returns on his early bets on Tesla, SpaceX and Twitter. He now leads Capricorn's Technology Impact Fund, which focuses on climate solutions. Through that fund, he is invested in battery recycling company Redwood Materials, electric aviation startup Jobe, and even in nuclear fusion through Helion Energy. These are not household names yet but could become so one day. There are a few people as deeped in valley culture as the pain There, so I wanted to learn from him about how climate tech got started, why he continues to think like an engineer rather than an investor, and what responsibilities venture capitalists have for the things they fund. Welcome to the show, the pain There.
Thanks, It's great to be with you.
Now you've been a VC for a very long time. Perhaps we can start by just having your story. How did you get into this business? What has kept you here?
I grew up professionally in here in Silicon Valley, and next week we'll be completing thirty five years here and came here mainly to study and work in the semi conductor industry three decades ago, and it was a lot of fun, you know, because it was this exciting period where the semi connector industry was getting disaggregated from where the only railway to do semiconductors and those days was to be part of a vertically integrated company that had it all, that had their own design, that had their own fabs, that had their own software, their own IP and they would build these systems that were very expensive and needed a lot of capital, but were changing the world.
Semiconductors are made with silicon, and they are what computers run on. It's that material that gave the region its nickname Silicon Valley, the pain that arrived in the Valley, and a moment when the people who had started out in big semiconductor companies like Texas Instruments and Intel were taking their experience and getting creative.
Anybody with a good idea anywhere could design a product and not have to be part of some large institution or company, and create a description of what they had built in a language and ship that description to a fab in most cases in Taiwan at that time and even today, and just take that description and put it onto silicon, and you would get a silicon chip, and you could iterate on it. You could work on it, and then you could then take that chip and write software on it or build a system out of it, and ship it to various parts of the world predominantly Asia at that time, and get a full product, you know, whether it was a phone or a computer or a desktop box or whatever electronic product you wanted. So that was a beautiful thing because it really led to the explosion of the electronics industry. And as that started exploding, you know, we all was starting to think what impact were electronics and semi connectors having on the rest of the world. You know, we were building technology for technology's sake, and that can be a lot of fun. But we would look at some of these other industries, like you know, I remember in our semiconductor days, for some reason, I have no idea why, but people started picking Caterpillar as an example as sort of the metaphor for a company that had such a large footprint and had made real products.
But the industrial manufacturer Caterpillar.
That category right, which was that they were devoid of technology as we call technology in Silicon Valley. I have no idea why. I mean, I'm sure Caterpillar had a bunch of technology in it, but you know, you use something for language, and Caterpillar was example. So that whole category of these industries that were very large, and I would say energy in general could be one industry that you know came up, but agriculture, food, healthcare, and transportation. You know, thinking through that and thinking about what next for my career, I really felt excited about the opportunity and energy to make things better, cheaper, faster, But it was also representing a very large problem, which was forms of energy that we had grown up using were literally out of the Stone Age as far as Silicon value was concerned. As one of the well known vcs in Silicon Value would say, is it's not a good excuse to use stones just because there are lots of stones around, right. So this was a way to think about getting out of the stone age? How do you combine tech with some of those energy technologies.
What I'm hearing you say is that you didn't start out as investing in companies that would solve the climate problem. You were just looking for companies, energy companies that would be better off were they to be able to use the value technology coming out in electronics and software.
Is that right? So your observation is correct that the majority of the companies that we've done have been around climate, and we've had a thesis around that and have gone looking for opportunities that have a positive impact on the climate problem. But we haven't been exclusively focused just on that. We've done a few things outside of climate. They're all in that category of a deep technology problem and deep technology solution that improves an industry like energy or transportation, agriculture, food, health care, etc. I would say, I don't know, maybe seventy eighty percent of what we've done has largely been aimed at climate and clean tech or renewables.
So if you were to distill your investment thesis now having done it for a while, or even if you want to talk about how your investment thesis might have changed over the time, how would you distill that.
So we're looking for large problems in the world like climate, and that is the area of focus right now, and then differentiated technologies that move the needle. And one of the important things we look at is doing it at large scale. Now you hear that all the time, so it's question of what does that mean? A great example, because we can do it in hindsight as well, is is cars. You know, for the longest time, electric cars were a bit of a joke. I remember top Gear doing videos fifteen seventeen years ago where they would essentially make fun of electric cars as being essentially golf cards. It was always viewed as this was going to be a super niche and it was not something that could really compete and do much in the world.
It's twenty miles back to the garage, and I know I'm going to run out of juice and I'm going to run out of juice in my Evy one, and the gangs in Los Angeles would get me and company of me into little places.
We all in Silicon Valley knew that automotive was the industry you stayed away from because it was just the opposite of what we were used to hear from a speed point of view, from a profitability point of view. I used to joke at that time, the one thing you have in common with startups and automotive is they're both losing money all the time, right, So that's something we knew that you're constantly on this edge of bankruptcy, right.
And you were an early investor in Tesla. So what convinced you at that time to bet on it?
It was simple science and math, right for all of us who've been electrical engineers or electrochemical engineers. The math was pretty clear that the way power electronics was evolving and the way batteries were evolving. At that point in time, lithium ion batteries had started making their moves out of the power tools industry that they had originally been developed for into consumer electronics. At that time, our laptops had started getting litheumine batteries.
Yeah, moving on from nickel cadmium match right exactly.
And so when you looked at those curves and where they were headed, and you applied even just a little bit of Moore's law to all of that, you could see that those would converge.
Very nicely named after Gordon Moore, one of the founders of Intel, More wrote a paper in nineteen sixty five noticing that the amount transistors you could put on a chip doubled roughly every two years, and he depicted that on a curve continuing for the next ten years.
That was a wild extrapolation of very little data, and amazingly enough that ten doublings in complexity that I predicted turned out to be nine doublings actually pretty close.
A remarkable enough prediction that people still reference it today.
It got the name Moore's law, which is stuck there everything that changes exponentially ever since.
And back in two thousand and six, the pain there after coming up in the semiconductor industry, where this curve was well known, looked at lithiumine batteries in laptops and thought there could be a similar curve to drive down the price of lithemine batteries if you could just make enough of those cells.
If I remember correctly, HP and IBM were like the leaders in the laptop business, and the entire capacity that they were using was probably good for a few thousand tests less at that time, right, because you were going to replace a device that needed nine cells with a device that needed six thousand cells. Let's say, looking at it from this high technology side, a software problem or a semi connector problem. To one person from one vantage point, working with six thousand of something can be a huge problem or can be a huge obstacle. But to a simple computer, whether it's six thousand or four, it's nothing. Right. I mean, you can handle millions of decisions in a second, trillions of decisions, and so that was hardly a problem. And just bringing that thinking from two different industries has made such a big impact. And it sounds simple now, but the whole world at that time was obsessed with how do you get away with the smallest battery possible? And along came this company that said, how do you build the biggest battery possible that you can fit into a car? And people said, you're crazy. That's the toughest, most expensive part of it. Why aren't you building the smallest. Well, it's very simple. If you have a bigger battery, you end up with, let's say generously at that time, a couple of hundred miles of range instead of forty miles of range, which means every time you cycle a battery you get two hundred miles instead of forty miles, which means a number of times you cycle those cells is five or six times less than the smaller battery. And you've solved for a big part of the problem, which is cycle life.
It's something we've all experienced. A new phone battery just doesn't provide the same level of charge two years later. That's because lithiumon batteries are complex chemical boxes where small things keep going wrong every time you charge the battery. Teslas solution was to build a bigger battery with many individual cells in it.
You have a much better way of managing the pack. If a couple of cells out of a forty mile battery go out of whack versus a three hundred mile battery, gotto whac, it's a non event. And these problems were not even considered because the fundamentals of how do you deal with six thousand components was like an obstacle. Right.
Many of your recent investments are in the space of electric aviation, are in nuclear fusion. Now. Both of those technologies so to speak, aren't in the scaling decarbonization now moment. They are ten, twenty, maybe thirty. I mean, fusion has been talked about for so long, but you think because they are better products. An electric plane would be a better product. Nuclear fusion would give us infinite power forever, and they also happen to have decarbonization. That it's a good bet to make. Is that fair?
You know, our role is as investors is to invest in things that are significantly better that are solving a problem that has not been solved, that are riskier, I mean to some extent. You know, risk is always considered a bad word. Everybody wants to avoid risk. For venture the role really is to invest in those risky companies. In fact, as odd as it sounds, there's a problem if you're not taking enough risk, because then you're not solving an important enough problem or a problem that deserves to be solved, or that really deserves this kind of capital. The role of this capital is to solve that kind of risk, and it's reflected in the returns that are expected from this capital as well. You know this is it's you've got to return a lot to keep up with the expectation of the SASSA classes, So you need some risky media ideas. Transforming energy is probably the biggest opportunity in the history of the world. I think investing for financial returns and social good is not only possible, I think it's easier to do than not. And that one to me means more in energy because one of the things in venture capital that people have not asked is like, is it possible to invest in things that are profitable and do good for the world. I find it harder to pick things to invest in which really have no obvious good for the world. I mean, to be able to look into a crystal ball and say, you know, selling pet food on the internet is going to be a big deal, it would be very hard for me to do. But on the other hand, if I look at what are the big challenges in the world, what are the kinds of things that the world can't do without, and if I can find a company to build that addresses that, that to me is like actually quite easy.
After the break, we talk about what the pain there has learned from past failures and the investments he thinks are going to change the world. The pin there and I grew up in India. It's a country that has massive potential for scaling clean technology, but it's been hard to unlock. I wanted to know how the painter thinks about the challenge of getting innovation from one part of the world to another.
So, I mean, this is one of those interesting problems where if you just solve it in one area of the world, it's not going to make a difference, right. It's also not a reason to not solve it in one area of the world. You just have to solve it in as many areas as quickly and as well as possible. You don't ignore the most populous countries in the world because by definition, that's where the consumption is going to be.
That's where the impact is, that's where you could make money.
That's right. And there's a really cool graph that I used to use fifteen years ago in the early years of when we were evangelizing this, which is a graph of progress and energy consumption. It plots the countries that are well recognized in the modern definition of industrial progress, like per capita GDP and their per capita emission. You learn a lot from there. One thing you learn is all progress was proportional with energy over time, and you look at the time curve. There's no mystery there. You produced more if you had more energy, and that remains true today. Obviously, the good news from those graphs is because some of those populated regions couldn't afford it, their per capita consumption has remained low. But what's clear is if they take the same path, that's going to be a disaster for a variety of reasons.
Right, there's a goal versus solar for a.
Very clear example, right, we've gone from conversations ten years ago which was complaining about how the cleaner way, the better way, was more expensive and that it was a burden on a bunch of communities and countries to have to take that path of cleaner energy because it was more expensive while the rest of the world had prospered and developed through cheaper energy which was not as clean to now today, ten years later, where those cleaner options are actually cheaper to your example, solar versus goal almost anywhere in that part of the world. If you're building it today, it's going to be much cheaper if you build a solar power plant. Yeah, So then it comes down to what's the right focus. Obviously, we would all love for innovation to happen everywhere in the world, and innovation is not anybody's birthright or exclusivity, right, and innovation comes from all over, But you can't ignore the fact that there are certain regions in the world where innovation happens faster and comes to fruition better. And definitely here in these four or five zip codes around where we are sitting today, that innovation has come a lot more, but deployment is not limited by any means to hear. In fact, if anything, there's very little deployment. In fact, one of the big complaints of this region is that all this innovation happens and then when it comes to scaling and manufacturing, people leave. I think the short answer to your question would be, we have to focus on deployment to begin with, and deployment is something all of these technologies and companies that create them crave for. I know there's a lot of interest in solving that, and I think something like that would move the needle a lot further in the bigger scheme of things than necessarily trying to to just say how do we replicate Silicon Valley? But I don't find enough going on yet to say how do we do the simpler stuff, which is enable cheap capital to flow from parts of the world where chief capital is plentiful to parts of the world where that chief capital can be put to work to deploy some of these forms of energy.
The high cost of capital, or put crudely, high interest rates, is a big problem across developing countries for financing clean energy. It's something we talked about in our episode with Rebecca Shirley from the World Resources Institute and mark their d'op of the International Finance Corporation during COP twenty seven in Egypt. We'll link the episode in the show notes. The issue will come up again in a big meeting in Paris in June, when Barbados Prime Minister Mia Mottley and French President Emmanuel Macron bring together world leaders to discuss how to form the global financial system to solve problems of the twenty first century, including climate change.
But at the same time, I also don't feel bad about the fact that focusing on innovation where it's happening well is not wasted because that innovation, when you are building forms of energy, it's a lot more applicable to global markets than something, let's say that would be in fashion or even food for that matter. Right, energy is pretty universal, so all the advancements in solar have pretty much gone global. All the advancements in batteries have gone global and will continue going global. It's just tipping points at different states. So I don't see anything in our fifty sixty companies that we've done over the last decade and a half that are exclusive to just one geography or the global North or global South. I think they will get everywhere, and we want them to get it everywhere. I mean, talk about our new exciting companies. Well, not so new as Redwood Materials, the battery recycling company. Yes, it started, you know in California and Nevada, but it is one of the biggest looming problems and opportunities in the world. Batteries are consumed everywhere, Electronics are consumed everywhere. Today they're shipped to get recycled and taken care of. In the future, they will be recycled where they are and redeployed everywhere, right, and it will be a very large industry around the world. It won't be just limited to where it was developed or invented.
There is a view of venture capital which fair and fair, you can decide, but they've bet on companies that have also caused more problems than they've solved them. Take the troubles that Facebook is going through over democracy issues or freedom of speech, or Twitter, which is facing similar problems in parts like India. When you think about venture capital, what is it that is doing well and where is it feeling?
So I would say, you know, venture capital has been just such an amazing tool in creating the essence of what silicon value is. You know, everybody's obsessed with replicating this, and one of those critical ingredients for that perfect storm is venture capital. And it's that mindset that venture capital comes from. Now, having said that, there are very few rules, so I can't paint it with one broad brush, but the aspects that are common is it is, at the end of the day, about investing in very very early ideas, to take very high risk and to go after you know, making sure that these companies can come to life. Now, I would say that at that stage of the company, you're not thinking about what problems could it create fifteen years from now. We've not observed any discussion where people sit around and say, you know what, this product's going to really go stir the part in the political hallways of the world, right, I mean it's like, in fact, if anything, the initial reactions to this was kind of ridiculed, right, I mean, initially these were pretty simple ideas of sorts, Right, they were like, hey, maybe this is just a nice bite sized way of communicating. So who would have thought. So whether everybody comes out and says, let's simulate every possible outcome and try to avoid something I think that would kill the innovation, right. I mean, that's the responsibility that you can't put on anybody right now. Fifteen years down the road, when a company evolved into something, yes, of course people have to think about it and say how do you do it? By then it's well out of venture capital.
You said, one of the things that is excellent about venture capital is that it allows for failures, because having failures, or at least some of it or enough of it, is a sign of success. Just talk us through some of the failures that you've had in your career, specific examples, and what have they taught you about clean tech and how we scale.
The biggest failure in a single category for us has been in doing the transition from innovating in solar PV technologies to having commercial success with those PV technologies. And the failure in that case was not recognizing that for a very long period of time, most of the world, except for China, would have no appetite to manufacture solar or to adopt new solar technologies. That was a very important observation and lesson.
And that's not something you could have predicted.
So yeah, I think, I mean, if you can predict a failure, you would hopefully avoid it, especially in an opportunity rich environment like Silicon Valley right where there's so many ideas. I mean, we do six seven companies a year new we obviously have to support the thirty forty fifty that are alive. There are a lot of companies you say no to, and many that you say no to the first time, but then you know later on for a variety of reasons, you decide it's a good idea. But there's a lot of no's. And I joke with our team all the time that if you're saying no, you're likely to be right because you're more correct when you say no that when you say yes. And in our business, the only thing that really matters is saying when you can say yes, because saying no is easy, and you'll be very smart for saying no, because most of those things that you say no time going to turn out to be failures. The most satisfying way of failing is when all of that that you assumed comes out correct, but somebody else does it better. That's the best way to fail, because that means the best product is winning, and it's winning for that reason, and you know, the people that were working on what you failed at did their best and did what they set out to be and were able to achieve what did they just somebody else did it better and so the product comes to life. It's still a good idea, but somebody else does it and somebody else reaps the benefit of it.
Wonderful. This was a fascinating conversation. Thanks for coming on the show.
Thank you, it is a pleasure.
Thanks for listening to zero. Each week, Bloombergreen publishes hundreds of stories about the climate crisis and its solutions, including an investigation from my colleague Leslie Kaufman looking into the greenwashy claims of recyclable plastics.
Terror Cycle is a favorite partner of consumer goods companies looking to make plastic packaging, such as chip packets seem more environmental friendly. Items like car seats, cigarettes, and baby food pouches are very difficult to recycle, but TerraCycle says it can do it, and so if a company pays TerraCycle of fee, they get to put a recyclable label on the package and claim all as well. In twenty twenty one, TerraCycle earned seventy one million in revenue this way, but I wanted to know where do all those baby food pouches, snack wrappers and bubble wrap really go. To find out, I put trackers on all three of those items and followed them online and then literally all the way well to landfills. I was talking to two waste sorders and a founder of TerraCycle for this article, and it turns out that recycling plastic the way TerraCycle promises is far more dirty and uncertain than consumers and companies are ready to face to.
Read Leslie's article and see the photos of the investigation follow the link in the show notes. If you enjoyed this week's episode, please share it with the or someone who recently mentioned Moore's law. Zero's producer is Oscar Boyd and senior producer is Christine Driskell. Our theme music is by Wonderly Special thanks this week to Kira bin Rim and Venkot viz Vanathan I am Akshadrati back next week