Rise and shine, Grove!
As I type this, somewhere out there is a VC saying "I love what you're building, but can't fund it."
Abhi Desai runs his family office, Desai Ventures, writing pre-seed and seed checks into climate tech across Europe and the US.
In his experience, an investor can genuinely love what you’re building and still be the wrong person to back it. As a founder, what do we do about this?
That’s just 1 of my 3 favorite takes from our episode.
Let's dive in.
In this week's issue
- Fcoused 'Climatech' thesis
- Plant first, contract later
- Good company, wrong money
Was this email forwarded to you? Subscribe here 👇
Fcoused 'Climatech' thesis
Famous Grove question: What is your definition of climatech?
For Abhi, his family has been investing out of India for over a decade across sectors from fintech to logistics. An engineering degree led to roles in renewables development across solar, battery storage, and EV charging, followed by a master’s in climate finance and time in strategy consulting for banks.
In 2023, he joined to direct some of that capital toward early-stage climate. From the start, every company has to clear two basic filters:
- can it reduce emissions at scale?
- is the technology genuinely new?
Plastics pollution, local air pollution and water are all important environmental problems, but you do not make the cut if you cannot quantify your emissions reduction at scale.
Climate is a lens more than a vertical.
The novelty filter is both about what makes a company hard to copy and about where a smaller check can go further.
Climate will have no shortage of software and marketplace companies. He would rather put his capital behind new technology that few others can build, where the climate impact and the investment both have a strong case.
Plant first, contract later
Raising funds has a lot to do with traction. Traction, though, is different for companies running a 100-meter dash and those building a rocket.
Founders that don't categorize themselves correctly can assess their 'slower' progress through an incorrect lens.
Take something like turning biomass into fuels; these are first-of-a-kind plants.
You have to prove the process works at real scale before customers will sign commercial contracts, so you cannot expect those contracts to exist yet at pre-seed/seed.
Now compare that with a sensor that costs less than $10,000 per unit.
You can have it made by a third party and deploy it without building a factory, which means you can reach commercial traction much earlier.
At pre-seed, contracts and LOIs are not the bar. The first step is understanding what kind of company you are building and what traction should look like at that stage.
From there, his advice is to give yourself more time to raise.
Valuations are lower than they were a few years ago and even his portfolio companies are planning for longer fundraises.
Good company, wrong money
The kind of company you invest in matters just as much as the quality of the company.
Abhi mostly stays out of pure energy generation because there is already plenty of money going into that space. The tech is often further along and needs much larger checks to scale, while his capital is smaller and earlier.
When he does invest, he likes to stay involved.
Abhi’s backed 22 companies over four years + two rounds of investment. He sits on half of those boards as a director or observer.
Everyone in the room genuinely cares about impact. DON'T FORGET THOUGH, these are still venture funds with return targets and timelines.
As he puts it in the episode, most of the equity capital he sees is not willing to trade returns for impact. Impact-focused VC money is not patient money.
For anyone that needs the reminder: only take money from investors that understand the growth of your business.
The founders who succeed are the ones who know what kind of climate company they are building, what traction should look like, and what kind of capital fits the journey.
Feedback
Have any thoughts about what you'd like to see? Let's build together
Podcast Guests
Would you or anyone you know like to be a guest on The Grove? Reply to this email to get the conversation started.
With love, Blake
See you next week!
Member discussion: