Nov 11, 2021 · 51m · catalyst
Can 'deeptech' venture capital solve climate change?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this inaugural episode of Catalyst, host Shayle Khan and investor Ramez Naam analyze whether deep tech climate venture capital can deliver venture-scale returns by debunking the lessons of Cleantech 1.0 and addressing core challenges around capital intensity, green premiums, development timelines, and exit pathways.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Shayle holds 56.2% of the talking time here. How this is scored →
Shayle as informed peer 6.9 Guest teaching 2.6 Guest disagreement 1.1 Shayle pushing back 1.8
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 48:55 Naam warns of an inevitable future bust
Naam rejects unbridled optimism by bluntly predicting that cleantech venture capital will inevitably experience another market bust despite current momentum.
Hardest push from Shayle ▶ 21:46 Kann challenges policy assumptions on direct air captureKann directly challenges whether investors backing direct air capture and carbon removal are deluding themselves by relying purely on anticipated policy mandates.
Biggest teaching moment ▶ 13:41 Naam dismantles the capital intensity mythNaam reframes the conventional capital intensity critique by illustrating that mainstream venture darlings like Uber and WeWork burned vastly more capital than cleantech startups.
Shayle holds their own ▶ 38:27 Kann presents proprietary EIP Climate Index returnsKann demonstrates definitive industry expertise by sharing data from EIP's Climate Tech Index, revealing a 97% gain that substantially outperformed NASDAQ's 62% over the same timeframe.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| Framing the Climate Tech Debate and Cleantech 1.0 Legacy | 0 | 0 | 0 | 0 | Solo host introductory monologue setting up the premise of the episode and framing historical Cleantech 1.0 data. Host-side scores are zeroed per monologue instructions. | |
| Debunking the Cleantech 1.0 Boom and Bust Lessons | 8 | 3 | 1 | 2 | Kann breaks down Cleantech 1.0 losses by specific subsectors (thin film solar, biofuels, and Better Place), demonstrating strong historical command. Naam agrees and enriches the historical narrative around venture retrenchment. | |
| Evaluating the Capital Intensity Challenge in Deep Tech | 8 | 3 | 1 | 2 | Kann methodically introduces the four core arguments against hard tech investing and cites PitchBook mega-round funding statistics. Naam counters the capital intensity fear by contrasting it with massive software burn rates like Uber and WeWork. | |
| Mid-Roll Sponsor Message: Bloom Energy Clean Power | 8 | 4 | 2 | 3 | Kann cites Rebecca Dell to explain how embodied carbon premiums in steel and cement dilute at the consumer product level. Naam explains learning curves and cautions against certain policy-dependent bets like direct air capture. | |
| Accelerating Development Timelines and Building Defensible Moats | 8 | 3 | 1 | 2 | Kann outlines three structural shifts accelerating hard tech iteration (firm airline LOIs, ML/synthetic biology R&D tools, and defensible moats). Naam validates that traditional SaaS moats have proven unexpectedly fragile. | |
| Analyzing the Expanding Exit Landscape for Climate Tech | 9 | 3 | 1 | 3 | Kann shares proprietary data from the EIP Climate Tech Index outperforming the NASDAQ (97% vs 62%) while pushing Naam on the absence of mega M&A deals in climate compared to enterprise software. | |
| Key Catalysts Powering the Climate Tech Renaissance | 8 | 2 | 1 | 1 | Kann introduces his wave-building versus wave-riding framework for supply chain startups and highlights the institutional maturity of ARPA-E and Activate. Naam contributes observations on talent migration into climate VC. | |
| Final Verdict on Deep Tech Climate Venture Capital | 6 | 3 | 2 | 1 | Naam delivers a nuanced final verdict, predicting another inevitable investment bust within the broader hundred-trillion-dollar energy transition. Kann concurs on the macro direction. |
Statements from this episode (15)
Kann: Cleantech 1.0 deep tech Series A returned $153M on $1.4B
“In that first wave of clean tech venture capital investment a decade ago, early stage series A investors plowed ultimately around 1.4 billion dollars Into startups that were in the categories of material or chemical or process innovation and hardware integrati…”
Kann: Cleantech 1.0 software investments returned over 3x on $157M
“Meanwhile, the hundred fifty seven million that during that same period Went into software deals in clean tech had already returned more than three X.”
Naam: Cleantech VC funding dropped 4x to 5x between 2008 and 2015
“We saw this retrenchment of venture capital, and maybe it peaked around 2008, something like that, and by 2015, the dollars flowing per year had dropped by a factor of four or five, and especially for the earliest stage deals.”
Kann: Cleantech 1.0 losses were concentrated in thin film, biofuels, and Better Place
“So the big categories of where the money pits in cleantech one.o were thin film solar. Like you said, alternatives to silicon for PV, biofuels, and then one big money pit, which was, you said battery swapping, it was Better Place... If you subtract those three…”
Naam: Uber, Lyft, and WeWork burned more capital than cleantech
“If you look at, you know, some real darlings of The tech VC world, companies like Uber, or Lyft, or WeWork, you see companies that have burned through an enormous amount of capital, far more than most cleantech companies ever have or ever will.”
Kann: Manufacturers can absorb high green premiums for carbon-intensive components
“Oftentimes, if you pay a premium for the most carbon intensive parts of the thing that you are making, you can pay a fairly hefty premium for those things, but the cost of the end product isn't affected nearly as much because the cost of those things aren't th…”
Naam: Steel accounts for 8% of global carbon emissions, tripling aviation
“Steel is like eight percent of global carbon emissions. It's three times aviation.”
Ramez Naam: Portfolio company ESS went public before achieving commercial scale
“ESS, you know, my portfolio just went public two weeks ago now when we're recording this, and they've got a commercial product, but they haven't certainly hit commercial scale at this point.”
Naam: Deep tech startups no longer need commercial scale to exit
“It's no longer the case that we have to wait all the way until we have a product commercially on sale or at scale for this to produce an exit.”
Kann: Electric plane startups slated for 2026 already have airline orders
“We have orders for electric planes from, you know, electric aviation companies that are going to come to market in 20, 26 at the earliest, but they have orders from big airlines today.”
Naam: App-based software businesses have weaker moats than hard tech
“We used to believe that, or companies like, again, I'll say Uber or WeWork, we thought, oh, they have natural network effects, they're gonna have a gigantic moat but it turns out switching costs for consumers are actually pretty low, and maybe lower, And some …”
Naam: SPACs generated more upside for deep tech than other investments
“I think it's a fair case to be made that SPACs have generated more upside for deep tech in climate tech and in other sectors than they have for any other Type of investment”
Kann: EIP Climate Tech Index surged 97% since 2020 vs NASDAQ's 62%
“So, as of now, since the beginning of twenty-twenty, NASDAQ is up 62% as of this recording, and our Climate Tech Index is up 97%.”
Naam: Global cleantech spend grew from $50B in 2004 to over $500B
“If you go back, 2004, the world was spending maybe fifty billion on cleantech, very broadly defined. Now we're spending well north of five hundred billion.”
Naam: Addressing climate change requires $100 trillion in infrastructure turnover
“Or the early stages, honestly, of a hundred trillion dollar clean energy revolution, essentially. We're going to turn over, that sounds like it's just a made-up number, but when you actually look at the infrastructure turnover we need to address climate change…”