Victor Pascucci of Energy Capital Ventures joins Nick to discuss The Trillion $ Opportunity in Natural Gas, Building A Strategic LP-Base, and Creating a Strong LPAC. In this episode we cover:
Give us an overview of the data and the opportunity within the natural gas sector for tech disruption. What percentage of our energy consumption is natural gas based? Why focus on natural gas? Why is now the right time for a natural gas focused venture fund? Let’s talk for a moment about the digital transformation of the natural gas industry. Where can we expect to see the most change going forward? Exploration, development, or production? Any concerns about the volume and quality of dealflow in this specialized sector? What kind of founder do you look for to change this legacy industry? How may these founders differ from the Silicon Valley stereotype? 5 large publicly-traded LPs — Talk a bit about how you plan to work with the LPs as you make investments, manage the portfolio? How do you avoid the tail wagging the dog? How do you handle a situation where the tech you are investing in is highly disruptive and margin eroding to LPs in the fund? Many talk about the importance of carbon neutrality, yet it’s a very opaque and difficult thing to measure. One company’s carbon footprint extends beyond just what happens within but all the partners, suppliers, distributors and, at times, customers that they interact with. How can we appropriately assess carbon impact in the pursuit of carbon neutrality? Tell us a bit about learnings and best practices in building an advisory board. I’d suspect that, much like a startup, there is a point where a well-constructed board can really amplify efforts, and a bloated or not well functioning board can kill momentum and progress. How have you structured a board for long term success?
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Transcribed with AI: 0:00 Vic Pascucci joins us today from Chicago. Vic is the Founder and Managing Partner of Energy Capital Ventures. He has led and managed investments in numerous unicorns, including Coinbase, ID.me, MX, Extend, Personal Capital, TRUECar, Next Insurance, Care.com, and Clearcover. Mouthful there. And he has over 20 years of experience in venture capital and financial services encompassing over 750 million in venture capital and m&a transactions. Vic, welcome back to the show. It’s great to be here, neck, it’s good to see you as well. And congratulations on the clothes. I saw the news. What was it 45 million for Energy Capital Ventures? 0:42 Yeah, we had our first closed on 45 million from five great strategic LPs. So we’re super excited, it’s good to be in business again. And, you know, get that fresh clothes done. As you know, 0:57 I know, I know. And I always like talking to folks on the show, you know, after this very challenging year, we’ve all had and hear a bit about the race process. Hopefully we can get into some of that today. Absolutely love to dig into it. So you’re a bit of an outsider, right? The the tagline here at New stack is investing in outsiders. And you’ve said before that, you know, you were at the wrong schools with the wrong degrees in the wrong area of the country to become an investor. You know, give us a quick refresher on your path you’ve been on the show before, but I think it’s been a few years. So I’d love to hear kind of, you know, the refresh on the backstory. 1:35 Yeah, you know, I think the way I got in venture is just a lesson for everyone else that’s out there that wants to get in venture that you don’t have to go the traditional route, right? We we’ve talked about the past, like, I went to school, and Ohio went to a bunch of state schools, for Christ’s sake, I ended up with a law degree, I mean, not the traditional path. You know, it started out as a trial lawyer of all things. And you know, spending my early career going fighting with people screaming and yelling. And at night, I go to these networking events, which Chicago had plenty of back in the day and the technology scene. And you mean all these billion people that were super excited about what they were doing, and they were building while I was tearing things down. I said, you know, I’d rather do that than what I’m doing. And so I made the switch, wanted to get into technology, but the only way I knew how to get in was to be a lawyer for technology companies. So coming from trialogue didn’t know technology, so I had to build up a whole law firm. So started being a law firm, I’ve invested build up a client base of technology executives, investors in those companies, and just started my career that way, and got my first job, actually, in tech through that. One of the guys that I tried to get as business from for a law firm for a years finally said, Vic, you’ll never see a dime for me. But I will hire you as my first general counsel. And that started me out raising capital and working with startup. 2:55 Well, I love it. So I gotta ask why natural gas? 3:01 You know, again, it’s kind of going for a little bit from that outsider side, you know, when we started looking at this opportunity, with energy capital ventures, you know, what, first and foremost, I think, you know, it’s like the same thing we ask entrepreneurs to connect, right? Why are you why this and why now. So when it came to natural gas, that’s what I was asking myself. And, you know, with a background in financial services, and FinTech and a lot of insure tech, that’s where I thought I was gonna end up going. And I sat down with a good friend of mine who’s a partner with me in this fun Rick Fatone. And I said, Rick, I think it’s time for us to do a fun together he said, Absolutely. But it’s not gonna be insure tech. It’s not gonna be a FinTech. So what are you talking about? Because I need you to look at the energy space, I need to look at these utilities. Give me a bunch of analysts reports introduced me to a bunch of the CEOs for the bigger utility companies, and valsugana. It was financial services 15 years ago, right? It was that same thing. You’ve got a large conservative industry facing a regulatory burden, customer satisfaction issues, new technologies that are going to either enable or disrupt them. They’re competing, it’s companies they never thought they’d ever compete against. And they’re wondering what’s going to happen to the future, their business. Same thing bank presidents were doing 15 years ago, insurance company presidents were doing 15 years ago. So I realized, you know, with my background, working with corporates and knowing how to be their partner and be their true partner in innovation, this was something that we can do. And it got even deeper than that, because there’s no shortage of funds thinking they’re going to electrify the world and going after electric companies and using them as strategic LPs, which is great. electrification is a piece of the story, but it’s not the entire story. Right. And spending more time as industries, you realize that the President’s these natural gas companies want to decarbonize, they want to have the ESG impact They want to solve to their imperatives. And like, again, you know, go back to what we saw in financial services. You remember early on in the FinTech craze, no one wanted to do insurance, right? Everyone wanted to do banking and asset management and Robo advising lending. And like insurance was just this thing that now who would do insurance? That’s boring. Right? Now, we can’t swing a dead cat in town without hitting an insurer tech investor or an inshore tech fund. Right? So I’m looking at what’s happening in natural gas is similar to what happened within FinTech. 5:29 Lots of legacy infrastructure in natural gas, you know, how does that factor into developing tech and disruptive technology maybe rooted in software? 5:40 Right? Like, it’s the same thing, right? All the banking infrastructure is broken, right, how to learn how to do, how to score people’s credit worthiness, how to score their ability to pay back a loan, right? How to really underwrite an insured risk, all that infrastructure is broken, all of it, right. And now with natural gas companies, it’s not broken, but they’ve got billions and billions of dollars invested in the infrastructure. And that infrastructure is hugely important to the energy mix for this country. And kind of one of the things we can talk about, too, is if you want to decarbonize, right, if you want to make an impact, you do it by working within the industry, you don’t stand on the outside of it and throw rocks at it, right? You sit down with the people that are responsible for quote, unquote, those carbon based molecules that are going through this infrastructure, and say, How can we harness the innovation of the technology of the entrepreneur ecosystem to help you decarbonize? And that’s what we’re doing? Right? They’ve got the infrastructure, but their infrastructure, unlike a lot of other things out there, it’s safe, it’s reliable, and most importantly, and as important, it’s cost effective. And now we’re helping them on their clean journey. 6:51 So give us an overview of the data, right? What’s the opportunity here within natural gas, you know, what percentage of total energy consumption is? is natural gas based, you know, give us a sense for some of the numbers. 7:03 I mean, the The opportunity is in the trillions, right? Because it’s going to be in this part of the energy mix for this country and for the world. I mean, if we saw what happened in Texas, when they started over index on solar, right, and then they got a cold snap? What happened in overseas, what happens in South Dakota when it’s 41 degrees below zero? electrics not solving all that, right, you need safe, reliant, cost effective energy? And that’s the trillion dollar mark and the trillion dollar opportunity that’s there with a natural gas. So then how do we transition them to a clean energy? How do we introduce hydrogen? How do we introduce green hydrogen? How do we bring apart carbon capture at scale, to make sure that the future of natural gas and the local distribution companies who we’re fortunate to have as part of theirs is clean, and it’s really solving to the ESG imperatives? 7:59 Good. And so will you do investments, you know, around the periphery of natural gas as well or is it doesn’t have to be squarely within the so we will have, 8:10 we have two major thesis. One is around the ESG imperatives of the natural gas industry. The second is around the digital transformation of the industry, within our mandates, and within our documents, we can do up to 25% of our investments outside of natural gas, but are somewhat related or related to the utility industry. So we do have some flexibility there. So they’ll be things in water, maybe some things around power to gas, which also dovetails and overlaps with electricity. And we also have the ability to invest internationally. So up to 25% of our fund can be invested internationally, because you’re seeing a lot of European countries are actually taking the lead in hydrogen, which is going to be a critical critical factor for the future of the energy mix here in the United States. 9:00 So I kind of dove in silvan quick on you, but if we get back up, you know, give us sort of, you know, thesis high level thesis energy capital, portfolio, construction, stage, check size, all that. 9:12 So energy capital ventures will be your traditional early stage, venture capital fund, think of us as primarily a series a shop, you know, 5 million up to $5 million checks, trying to lead or leading series A, with reserving for follow ons. Because of the strong LP base we’ve got, which we can dig on that. And our strong strategic advisory board, we have the opportunity, we have the competitive advantage. One of the many competitive advantages we have by working with those two bodies of companies and individuals is that we get unbelievable technical due diligence upfront, right. So we’ll be able to de risk a lot of the science that’s out there by leaning on people like David Carroll GTI Yon friends who’s got 800 technology consultants working for across the globe by going to our LPs, who are five of the more prominent forward thinking publicly traded utility companies in this country and see the technology early. So we could probably come in, in So the plan is to come in at the seed stage, because we’ve already been really deep respect technology. So we have that ability to do that. And then we may inch up a little bit ahead of the A, or after the A, because we’ll have the ability through our partners to write bigger checks through spvs, and things like that, and call invest 10:29 in you will reserve as well for loans. 10:32 So we’re going to reserve there, there we go closer to one to one a little later, probably be a half to one. That’s the way I like the portfolio construction. And then, you know, we’ll see how that works. 10:43 And where are you seeing the most opportunity right now? You mentioned kind of the why now piece, you know, within natural gas, like exploration, development production, its actual maintenance, where are you seeing the most, 10:55 you know, we’re starting with distribution, because that’s our LP base to local distribution companies. However, within that local distribution company on the ESG imperatives, the things we’re seeing around decarbonisation, the things we’re seeing around renewable, natural gas, the things are we’re seeing around hydrogen are super exciting, right? You’re seeing these brilliant technologists that are attacking this space, just with a passion, like we saw early on in FinTech and insurtech. Right, people really felt that the system needed help. And it was all of a sudden, kind of cool and sexy to be in FinTech. Now, it’s cool and sexy to have an impact, right? It’s cool and sexy to do something that’s bigger than just the company, something that’s really going to have that ESG impact. And I think the important thing about natural gas, what people don’t realize is the S side of it is as important as the E side of it. Right? So there’s the environmental impact, which we’re going to solve to but there’s also the side of it right now. And you’ll appreciate this being in Chicago, right? Not every community is built for solar. Not every small family run business, not every diverse community or minority owned business, can afford to electrify. Right. And to retrofit. Right We have a lot of the pundits in our in our industry neck that like to tell about Oh, I just put solar on my fourth house in Manhattan. I’m sure you did. And I’m sure you feel good about that. And you can afford the 20 year payback, that’s on your rooftop solar. But the average American doesn’t have a fourth house in Manhattan, nor can they afford to do best. And that’s why they use natural gas to heat. That’s why we use natural gas to cook. And so it’s really understanding. And that’s why Timothy Simon’s who is the chairman of the African American Chamber of Commerce is on our board of advisors, right? Because he knows how important natural gas is to the energy mix. And how it’s important to having a progressive energy policy for this country. 12:52 No random thought I heard about a startup that was harnessing natural gas, I think it was maybe out at sea somewhere there was an oil rig and they you know, it created natural gas effluent, right, that was just being released into the air. And so a crypto startup, you know, co located a, basically a server farm, you know, on the side of this oil rig to use natural gas as as the energy source into the mind for for bit or ether or some you know, crypto coin is that something that would be within sort of the aperture for a firm like yours or not, 13:31 it would be so obviously, there’s the advantage, we also have that convergence of FinTech and utility or FinTech energy or tech energy. So we are seeing a lot around blockchain based technologies that solve to the ESG imperatives, the tracking of impurities, and the source. And then also we are seeing similar things about people using renewable natural gas or hydrogen to power, Bitcoin mining rigs, because it’s a whole lot safer. And it’s a whole lot more effective to use these recite renewable energies and these clean energies than to have them suck down a bunch of power off the grid. And as we’ve seen, the grid has its problems, right? The grid operates at like three and four sigma, natural gas was at a six sigma level. And we’re putting more stress on it with electric vehicles and buses and all the new electrification like, the grid can’t handle that. And that’s why you’ve got to find ways to integrate natural gas, renewable natural gas hydrogen, to make sure we’re taking care of people in their and their communities, as well as both the commercial and industrial side of things. 14:34 Good. And for the listeners. Can you clarify what you mean by operating at Six Sigma versus three or four 14:39 yet? You’ll appreciate that back from your from your time, right? Yeah, I mean, Six Sigma, you’re basically at five nines plus close to six nines and you’re almost perfect in your uptime. And in your defect. When you’re at like three or four sigma, you’re probably below 99% and much lower, and you’ve also got intermittency. And you know, what intermittency doesn’t work when you’ve got to heat someone’s home. intermittency doesn’t work in the middle of winter, it doesn’t work for a business that’s got to move, you know, heavy equipment or an industrial park that’s got a power community, right? You can’t afford our hospital, right? You can’t afford to have downtime in your power sources, if you’re operating a hospital. And so at the Six Sigma level, you’ve got the reliability, and you’ve got an error. You got it done and see and an error rate that’s almost infinitesimal, or actually is infantile ism. 15:37 So the the problems are in the industry are pretty well documented. any concerns about the volume and quality of founders technologies, you know, teams that are working to address these issues? 15:49 You know, coming into it, I didn’t know what I was in for. Right? Because, you know, like you do, Nick, like, you’ve done an IoT, like, you’ve seen in the Midwest, like the quality of founder is just exceptional, because people have been at this for a long time, right? They’ve just these founders, they know how to pitch they know how to run companies, they know how to run playbooks, they understand how to build, I was concerned because you know, within the ESG site, it’s still relatively emerging, right. But what I found just completely blew me away, right? Not only that, I see entrepreneurs that had that passion, had that grit and know how to hustle. But they know how to build their businesses. And it’s just Aaron in Chicago, where we’re both headquartered, like the entrepreneurs, we’re seeing coming out of universe Chicago that I’m sure have seen coming out north, Northwestern, that are on these ESG programs. It’s really exciting. And then, of course, we’re seeing a lot of things coming out of Houston, seen a ton of things going to Houston, but we’re seeing great entrepreneurs. And it’s kind of like the early days FinTech, right, when you took like someone that came out of the industry was someone that knew data. Right. Within the ESG side, we’re seeing brilliant scientists that understand decarbonisation, that understand electrolysis, understand hydrogen, teaming up with people that know how to build businesses that are repeat entrepreneurs, people that are from the industry itself that have sold either into the oil and gas industry, or to the ldcs as either a consultant or as an advisor, or maybe they were in the midstream. So the quality entrepreneurs fantastic. And you know, I’m really excited about the future of it as well. 17:27 Is there some co creation going on as well? Will you work with teams that, you know, want to go after a problem in the space but kind of match, you know, the right groups with the right problems? 17:37 Yeah, I think one of the things I learned early on is incubation is key, a lot, want to generate returns as a venture capitalist, to to really solve a problem. And I think one of the secret kind of weapons we’ve got as a fund is because we have this strategic LP base. And because we’re literally cell phone, cell phone, with the CEOs of these companies, and their direct reports, and the staff line p&l owners like you really get to know what’s bothering them, you really get to know what are the holes in the industry and where people aren’t paying attention, right? And so when we’re able to incubate something and put it together, there’s like the, this platform that’s waiting for it, right? And so we get to use that strategic LP base, to kind of create incredible companies, but also as this great virtuous kind of flywheel, right. They send us investment opportunities, because people come to them, and they don’t know quite how to work with the startups due to pilot and they’d like to see some investment entrepreneurs that are coming to us because they want to work with our LP base, right. And then the coat and then colon ambassadors like, Wait a second, this is energy capital ventures. And, you know, I’ve got a company that’s doing something in the utility space and power around natural gas, like we should be talking about. And so it’s kind of really exciting to create this virtuous cycle. flywheel that that’s around there. But to your point, yep, co creation is, is in the in the toolkit. One, I 19:01 know you’ve got experience doing that before. You know, you’ve you’ve mentioned this a couple times, but you have five large publicly traded LPs, you know, talk a bit about how you plan to work with these LPs as you make investments and manage the portfolio. You know, specifically, you know, how does that work that interaction? 19:22 So, we took a little bit of a different approach, within our fundraising and within our strategy, right, like, like you mentioned, we went through the strategics into the corporate because we thought we can have the most impact and help them some of the benefit was my partners. I like to say they are your glorious, career long, backslapping investment bankers, right. They’ve been doing but the farm transactions with the CEOs for 3040 years right, my partner, Jeff gangling, Rayo, Connor, but Fatone, so it’s like they have these great relationships. But there’s a lot of other fun. There’s a couple other funds out there that are doing strategic corporate, but it’s very kind of When I’d say pay to play, like, give us this much money and you get this type of interaction, we took a different approach, it’s kind of going back to both you and I come from a corporate background, right, we’re inside there. And I, you know, want to tell people, you know, if you met one CEO, he met one, right, because they’ve all got different cultures that they’re working on it, they’ve all got different board dynamics, they’ve all got nuances to their prioritization. So with each RFPs, we give them a very customized and tailored approach. So I want to talk every two weeks, someone in person meetings, every four weeks, someone like to see a combination of written and in person. And so it’s very tailored, based on the interaction style to what they’re most comfortable with, and what works best for their culture. On the kind of prioritization, like, we literally sit down with them as part of the strategic planning process, and hear about what’s important to them. And so we take those prayers for them. And we also provide them our input, saying, here’s some white space that you might want to be thinking about, or that strategic horizon. And so we kind of balance things from there. And then, you know, we understand what their priorities are near term, mid term and long term. And then we tap into that entrepreneur ecosystem, to find the right partners to help solve to that. And the important thing for entrepreneurs to understand and for you is what soon to be one of our great call investor partners, because I know we’re gonna find something in IoT to work together with some of these utility companies, is that we might not invest in the company, but we’re still gonna make that introduction, right. Because you know, other good reasons why you might not invest, right? Wrong stage, you know, just a little bit off thesis, maybe you’re looking at something else in the area, like, we are still going to make those introductions to our LPs and make sure our LPs are aware of these companies. So I don’t want people to think, Well, you know, I’m not going to talk to energy capital ventures, because, you know, I’m seriousiy, and they only do series A, now if you’re doing something that’s important. And our LPs tell us, it’s one of their priorities, like, we’re gonna make the introduction, we’re gonna get that stuff in front of them, get your stuff in front of them to help out. So to your point, as I Babylon, it’s a customized approach with each of them. But after that customization, we also see the themes that are across all five of them. And we do events, and we do technology showcases around things that are of common importance for all that as well. 22:17 And how did you know this is a tricky one with a lot of corporates, but corporate, you know, partners, and LPs and corporate VCs in general, but how does one avoid, you know, tail wagging the dog, if you’ve got, you know, an agenda, a certain LP has their agenda, you have, you know, a tech investing agenda, most of the time those are going to are going to align, but at times, they may not, you know, how do you make sure that sort of, you know, the, the interests or proclivities of LP don’t get in the way of the collective benefit of of the whole? 22:53 Yeah, you know, I think both of us have seen, you know, corporate venture gone wrong. And we’ve seen what happens both to these large corporations reputation, we’ve seen what it does to the entrepreneurs, we’ve seen what it does to the reputation of corporates within our the venture community as well. And I think what we’ve done is structurally, we’ve made it clear that all investment decisions are made by our team, right? The our LPs do not have any vote or say and into what we invest. And so what we’ve decided to invest in is purely around what we think are the best investments to generate the highest returns with also what can help the most with. So that’s how that’s being handled. And we’re going to know, if something’s not right for one of our LPs, if they want to go down the road of green hydrogen, as opposed to blue hydrogen, which may or may not happen, we’re gonna make sure they see the things that are important to them. That’s not going to stop us from investing in the other, nor is going to stop us from supporting the other. We’re just separating the strategic value, which is all about the insight and the help and the understanding with the financial side of things. 24:03 Yeah, a challenge I had back in the day at Danaher, you know, working in m&a is that you know, the standard BCG matrix where you got your cash cows, you know, in the upper right corner, right, many of the different tech innovations we would look at were, you know, presented margin erosion, right for those incremental upside, lots of upside, but a lot of margin erosion, right, that was a challenge. When I worked on the product side, the challenge there is that they always wanted higher top line and higher margin, which was tricky, like how do you find a good product sweet spot that, you know, has has just a higher price point overall and better margin profile? You know, it’s it’s tricky with corporate so I’m just curious if there’s any concern that some of these disruptive technologies could, you know, be a threat to some of the cash cows 25:00 I think and I know from talking through our LPs and talking, it’s not just our LP base, obviously, you know, it’s like to get the five core, we have to talk to 200 of them, right. And we still have the active conversations going with most of the industry as well, to be part of a second close, and maybe even a third close. But you know what most all of them have realized, and especially the more forward thinking ones and they’ve been explicit about it is they know over the horizon, their core products are going to have to change, right, there is going to be hydrogen that gets introduced through those pipes at some level, which is going to change the nature of what they’re selling, right carbon capture that is not harmsen cost effective today will be more cost effective over the horizon. But it’s important to them to hit their net zero carbon goals. And so they’re going to make those investments now. So I think what’s really exciting about this space and working with these ldcs and local distribution companies is that they’re self aware enough. And they put the processes in place to understand that things have to change, and they’re going to change. And they have to do it with partnerships. And then also to make sure like you said, you don’t have that tail wagging the dog, we’re making sure when we bring companies in, that they’ve got enough of a product plan that the technology is ready, that it’s commercially viable, that has been proven, so that there’s not going to be this, you know, kind of change to the company that is just going to be pushed upon them by a strategic corporate, the corporate to understand where their industry is going to understand the necessary need for innovation. Some of them have it clearly in their goals to innovate every day, right? Take spire for example, right? Like number three in their strategic priorities. So they appreciate that. And so that’s why it’s really exciting. I’m like, really, really honored and excited to work with these folks. 26:51 You know, Vic, you, you’ve worked with and invested in a number of unicorns. It was kind of a mouthful at the top of the interview here, which is, you know, many investors hope to get one in their prior and you’ve had a number um, you know, what, what common threads? Can you tease out from the the winning companies you’ve worked with, that you’re gonna apply as part of your investment thesis at energy capital? 27:16 Yeah, what am I do at mg capital ventures, similar to what I’ve done throughout my career in investing is like, it goes back to just the basic stuff neck. I mean, it’s all about teams. Right? We’re here at the series A, we’re early stage, what if I’ve learned nothing throughout all the unicorns throughout all those guys? Like, would it extend Blake and Id me, right, Kyle and Claire cover, I mean, Fred, at Coinbase, like, it was the team, it was the leadership and it was the team and who they were at that time that made you 100% believe that no matter what the market through Adam, these people were going to get through it, no matter what happened in their business, somebody was going to want to work with them. Right. So they had that ability to inspire people to leave their jobs and take the risks and do this like, and I knew that like when I gave like college, first $5 million, like, the business is gonna change, and it did change. But you know, what he was the type of leader that somebody was going to come in after me and put money into this business, right? He can inspire someone to invest, he can inspire somebody to come in his team, and inspire customers to actually write him a check, and trust them with it. And so the same thing we’re doing here. And I think that’s one of the benefits we have as a fund is that having invested in so many successful having been fortunate enough to invest in so many successful businesses, I will take those lessons learned to ESG and to the natural gas industry, which is still relatively nascent. In its entrepreneurial journey. And so, you know, we will focus on Team above all others. And then we’ll realize how can we leverage an industry to prop up those teams? 28:53 Does it sting just a bit that you know, future startups and FinTech or insure tech that reach out to Vic and say, Hey, I’m doing a seed round, you’re, you’re gonna be a pass on those. You know, it 29:05 kind of I, you know, I cannot lie to you. Like, when I pick up strictly VC and like, you see one of your friends getting funded, you’re like, oh, but the reality is, I’m still staying active with my relationship with IRA capital. I’m still really, still very close. I’m a strategic advisor at i o capital. So on the insurtech side, I’m still working with them at the early stage. So any learner Matt Prohm, and Rick and the team, they’re still working on them. And then on the FinTech side, if it doesn’t fit, we still have great relationships with the friends at cross link. That’s going early at the seed in a in a great point ventures too. So it kind of it It does. It does make me wince every now and then and in some of my colleagues and our colleagues will gently read me going, huh, guess what’s going on? But that’s okay. I’m really excited about what I’m doing. And I’m really excited about the impact of having an industry. Well, don’t 29:58 don’t forget about your friends at nice Stacie You can add it all feels this way to Absolutely. Absolutely. The bar is high at hoosac. So we, you know, we got a new firm a new fund and team here, Vic, you know, how do you set the right cultural process and sort of people foundation for long term healthy bridges? 30:22 Yeah, I mean, I think what I’ve learned over the years is that the true success of a firm and firms that persist after decades and decades, it’s about the health of that partnership. And it’s about the healthier the partnership, the better decisions you make, right? Because you can’t make every investment. And we all can’t know everything. And so being really upfront with the partnership about what you’re good at what you’re not good at, so that everyone’s comfortable enough to have a real robust discussion about whether to invest or not invest in something that’s professional, something that’s articulate something that’s fact based, so everybody can lay their cards on the table, so that you can make an informed decision, validate amongst yourselves solidify on it, and then move on, right. And it’s those healthy partnerships and healthy relationships that lead to healthy decisions. Because, you know, deals will get away from you. There’ll be investments that you don’t make, and I’m okay with that, provided the decision we went through as a team was the right process, right? You got healthy relationships with your partners, you respect each other, you laugh with each other, you know, what each others are good at, you can joke about what everyone’s preferences are pushing node going into the meeting, but you’re still going to have a healthy discussion, because at the end of the day, like, you know, we’re all cutting that same GP commit check. Right? And so, we want to make sure you got a good, a good partnership dynamic, when you’re making those decisions. 31:46 about some thoughts, you know, something I’ve been thinking a lot about lately is elpac construction and advisory back instruction, you know, that there’s, I feel like even with startups, right, there’s a fine line between sort of well constructed boards that can really amplify efforts and, and, you know, bloated, or, or poor functioning boards that can build momentum and progress. Right. Right. How have you thought about sort of advisory board construction and, and making sure you’re set up there for success? 32:15 So I think, you know, both of us have been part of really high functioning boards, and then low functioning boards, right? And, you know, I think when it comes to constructing them, this is this this advisory board and then the elpac. You know, when it comes to the elpac, you really have to, you know, it’s one of those, it’s kind of like, it’s like everything else, right? It’s a balance, you have some people that want to be on the elpac, just because it’s a level of status symbol, and everyone says you should be on the elpac, where the reality is, it’s work, right? You’ve got to make some judgment calls, you got to make some governance calls. And it has to be the members have to be willing to do that. And excited to do that, as well as the, I guess, the pomp and circumstance that comes with the outback. So I think it’s constructing people on the elpac that have diverse backgrounds, some as investors, some as operators, some that had been another alpex before, and some are strategic allocators, and some are traditional allocators. I like to bring that kind of mix around. And when it comes, so separating that from the strategic advisory board, you know, one of the things that I learned early on, like, I couldn’t know everything, and I could know more people than I knew things. And if I was nice to people and good to people, they would share with me what they knew. And they’d support me with their knowledge. And so when it came to putting our strategic advisory board together, I started thinking about with my partner sitting with Jeff and Rick and Ray, who, what’s the right makeup of advisors that we should bring together to help our portfolio and help our LPs. And so we did this great diverse cross section of operators. So if people like Bill Rogers mahvash, Charles D. Margaret McLean, who’ve been operators in large utility companies in large power based businesses at the highest levels, right, you’ve got one perspective, obviously, regulatory compliance is so important to what we do within utility space, and relationships with the state regulators and federal regulators are really important. So we’ve got guys like Mike Kip, and who was a regulator himself for the state of Wisconsin and worked at Nehru at the national level, and then Timothy assignments as well as part of his relationships at the American gas Association. And then you got to bring in the technical folks as well. Right, we talked a little bit earlier about David Carroll, a GTI. He’s got 20 acres of lab space and hundreds of scientists working for him to really validate and backup the science background that a lot of us don’t have. Similar with john brennan, who’s been one of the leading energy consultants in the world, around utility space, it’s got 800 consultants working for them, I mean, super deep, technical bench strength that’s there and then even having other investors that are out there. Right, Brad Goldstein, he was the chairman of his firm for decades, right of decades and decades and decades. And, and Rod did amazing work. And so it’s also nice to have someone out there who’s on the board that can, you know, you know, a little bit, you know, check me on things, right. So I mean, you ran a firm like front neck for decades, you learned a thing or two about private equity, and some things that I don’t know about venture investing. So it’s, it’s bringing together that cross section, because those are people that can help us as a firm, and most importantly, can help our portfolio companies and maybe even more important there folks that can sit down with their LPs and provide additional guidance. And and it’s up to them. 35:44 Vic, this question is called three data points, I’m going to give you a hypothetical situation with a startup, you can ask three questions for three specific data points. So let’s say you’re approached to invest in a series A enterprise SAS startup, the company is based in Houston, the sector is natural gas, they currently have 2 million of arr. And they’re growing 30% month over month. The catch is you can only ask three questions for three data points. And then you got to make a decision. What three questions yes. 36:15 I want to see ACV. trend? I want to see. I want to see net dollar retention. And then I want to see product plan and iteration for like two years. 36:37 Got it? And then what sort of levels around ACV? And are you looking for 100 plus 10%? What about ACB? What’s a healthy sort of, you know, annual contract value? 36:56 Yeah, I want a for me, it’s more of a trend. Like I want to see that trend that’s going from 15 to 25 to 50. That’s there. So I’m more concerned on the trend than I am for the actual dollars. Because to me that’s really showing beyond product market fit that showing something that there’s an ongoing need, and people are attributing more value to what they’re doing? not less. 37:20 Is it more important to you that there’s customer expansion opportunity? Or that they’re picking off bigger customers over time? 37:29 Ideally, both but for me, I’d rather see more customers over time. Got it, right, I see more customers, 37:34 more large customers over time, 37:37 larger cost. Yeah. And just because like, you know, I don’t you never want to and it’s happened to me, it’s happened to a lot of us, like where you get that customer concentration issue. So I just want to see kind of that full, full bench. 37:53 Vic, if we could interview anyone here on the program? Who do you think we should feature? And what topic would you like to hear about? 37:59 So I actually, I hate to break the rules on you. But I actually have two folks, I think are two different groups I’d like to see for different reasons. Okay. So I like the early stage folks similar to yourself that have a little bit different thesis on things. So my friends, Kelly, Purdue, and Craig Cummings, from moonshots capital, just like you, they started with a syndicate and then went out and raised a fund after prune Southern syndicate, however, their unique angle is they back veteran entrepreneurs. Both of them are Westland grads, both of them served in the military, and they do seed stage investments. But there’s got to be some military or veteran in that management team. And that’s what they do. And so I really like that. And they’ve had some great success in that model. So I like that. And then I think that’s kind of the emerging manager side, I think at the other end, like there’s a firm out there that don’t think gets enough credit for how they help out emerging managers, least how they helped me as an emerging manager, both tips on how to run the fund, LP introductions, and kind of some were super helpful networking was David Silverman and Eric genic at crosslink. Capital, were super helpful to me, and, and they don’t get enough credit for what they do. Now. Granted, they’re on like fun, I think 12 now, but like they took over, basically a legacy around fun nine and 10 when the legacy wasn’t performing. And so they still came in as newer managers. And when they’re a part of the fund, they had a bunch of partner turnover. And like, they turn the fund around, they’ve got things like chime databricks now like a bunch of unicorns, but at that time when they took it over, that was not the case. And so they got the fund done, and then they keep increasing font size, and they’re producing more and more unicorns, but the reason why I like them I think they should be on the show, is because they help folks like us. 39:56 You know, just quick question on the overall market. You know, do you think things are good Super overheated right now. I mean, we see everything’s getting really competitive valuations spiral in that we’ve got late stage intense competition with Tiger coming in quick and fast and big valuations, you know, give it you’ve been at this a long time. Give me your sense for what what’s happening? 40:18 Yeah. So I think a couple things I I don’t my take and I, I could be wrong I have a different maybe impressionists, I don’t think you really find out how if you’re any good in this until you’re like 10 to 15 years old, right? Because it’s over that time spirit, like stuff that you thought was going to work out may or may not. And then how deliberate lay didn’t work out based on original thesis. And that takes some time. And that dovetails into I think what’s happening the market is, there’s a lot of newer managers that haven’t been doing it for a while that raise a fund. And then they’ve got some markups, but not real returns. So they got markups. So they went back to their LPs to raise bigger funds. And then because of specs and because of what’s going on environment like and because these later stage funds that never were in venture like tire are coming in throwing these huge valuations. Everyone showing these huge markups in our portfolio, and they’re able to raise it now a couple things that makes it one direct thing, it makes it harder for first time funds to raise because all the LPS are flat out of cash because the re ups. So they’re like, well, I can’t invest in a new managers, because all my existing managers are coming back. So I think that creates it. And then so you’ve got people flush on cash, willing to bid up deals in order to get them. And so I think it’s overall, it’s a good thing for all of us for there to be sufficient capital in the system to fund innovation that makes a difference. So I’m all for that. I think where it gets to a point where valuations are not sustainable, or not sustainable, the capital they raise at the value, the capital I get at the valuation they raise, it’s still not viable, that they’re going to have any metrics to double that valuation that we just got for large companies, right. And so we’re seeing a little bit of that, but I think it’s gotten super competitive. But I think what makes it better for guys like you and us, firms like yours, and mine, to have a specialization, I think separates you. Right? If you have a defined thesis, if you have a specialization, there’s certain entrepreneurs that are come to you before anybody else, right. So that’s why I think the specialists will survive as opposed to like, Oh, I know everything. I know everyone about everything. And I can invest, consumer and SaaS and energy and you know, FinTech and everything else, like you got to pick, right, because you got to be able to differentiate yourself, we differentiate yourself with the ESG imperatives and the digital transformation, we amplify that competitive advantage with our strategic LP base, and our advisors. And it all kind of runs medflight will like some of you, you’ve got your own thesis, run the Midwest, around IoT around seed around this podcast that differentiates you. And so I think when you have generalists with huge amounts of money, they’re investing things they don’t quite fully have their head around, it makes it it could be, could be a recipe for some brain damage down the line. 43:20 Certainly, in the increasingly increasingly competitive space want to ask to carve out you know, their real estate, their area of expertise. Vic, what do you know, you need to get better at 43:32 I need to get better at balance. I’ve never been good balance. I think my biggest winning balance is I take everything too extreme. So it’s such polar opposites. It has to balance out so what I tell everybody that like don’t look at me when it comes to work life balance. So look, give me when it comes to any other types of balance because I over index on just about everything. 43:59 Finally, what’s the best way for listeners to connect with you in the follow along with energy capital ventures? 44:06 easiest way is always on a warm intro. But, you know, if you’re emailing financial capital ventures, one of the warm intros one of the greatest ways to get a hold of me is thanks to some of the talent I poached from you. I put the approach I take but for the I was fortunate enough for the listeners as a gift. I was fortunate enough to hire one of the graduating analysts from the news tech ventures, Stephen, Stephen Oh, golly, also. So Nick introduced us and Stefano is a senior associate now at our fund, and Stefan was a great way to get a hold of me if you know Stephen as well. 44:43 Super guy, super talented, brilliant guy. Amazing working with them while we did and, you know, it’s uh, you got a good one in him. So that’s a wrap. You know, Vic Pascucci Best of luck with the energy capital ventures, huge first close, great partners. Really excited to see what you’re going to do. Hear I’ve known you a long time. You’ve always been sort of cutting edge on things and who would have thought natural gas but much opportunity. So I’m excited. I thank you very much, my friends. Great being here. Transcribed by https://otter.ai