Branding Climatetech
with MJ Alvarez from WNT Ventures
As part of this exercise, we have had the privilege of talking with a wide variety of different folks across the climatetech space. One of those people was the amazing MJ Alvarez from WNT Ventures. WNT is a deeptech-focused firm with a few familiar names in its portfolio such as Mint, Insite AI, and EatKinda. We were really happy to be able to talk to her, because WNT is a venture firm that has been around in New Zealand for nearly a decade, and has seen a lot of the growth that has happened in the NZ startup space first-hand.
Our conversation with her was wide-ranging, and covered areas including institutional investment, supply chain challenges, diversity in climatetech, ESG reporting, and what distinguishes the NZ market globally. A lot of these topics will (hopefully) make their way into other posts. But, we are focusing here on a couple of key topics that have been areas of interest for us—governance and branding—and we wanted to share a bit of our conversation as part of this series (all quotes by MJ Alvarez).
Governance: A Critical Early Component
We’ve talked a lot about governance primarily from the perspective of ESG reporting, but MJ considers the wider question of how a board can best support a climatetech—or other deeptech—startup.
Good governance starts at the earliest stage, and it’s something you need to have in mind when you are starting a company.
The board (or, in the case of pre-funding companies, the founding team’s advisors) can play a critical role in the formative stages of a company, and if that role doesn’t initially include ESG or other impact reporting, it can be hard to add it in later. This can be especially true in a market like New Zealand, where many boards are composed of an “old guard” that, by instinct, focus primarily on financial returns. In MJ’s view, if you don’t have a large and diverse governance community, you are in danger of maintaining an insular viewpoint.
It’s really difficult to undo the work that you’ve done from an early stage—to fix it later on. So once you have a board established, it’s hard to break that pattern, even if you’re an incoming board member.
Good impact governance is more than just ESG reporting. MJ stressed that boards should think beyond their own products to the second-order impacts of their company on the world. Questions around sourcing, hiring, and distribution, for example, can have a huge impact on a given vertical.
As a collective, people have gone to the ‘E’ and stayed on the ‘E’ of the ESG. [But,] the intersections of ESG are all equally important because they’re intertwined, and you can only be as good as the next responsibility that you have.
As an example, MJ discussed how a company operating in a country with poor or limited governance may endanger the efficacy of the product. Boards must ask themselves if the product even has a viable market in these scenarios.
For WNT, they are working on adopting the ESG_VC standard so as to not duplicate efforts. MJ mentioned that they’ve had two people understanding ESG reporting now and in the short term they see an extension of it by having each new portfolio company needing to report.
But, again, good reporting is not, on its own, good governance. And good governance is intersectional.
The companies that we’re creating do not serve just one side of the world… they serve the entire population. When you start considering that from a climate point, you realise that the way the climate impacts someone from a massive hedge fund is different to the way that it’s going to impact someone from a rural community. It is quite different.
So when you are thinking about your deeptech climate company, you should ask: what is the impact that this company is going to have? Can we have a board that’s representative of that?
Not many (and certainly not enough) boards are having these discussions now, and anecdotally it could be that people are afraid to admit that they don’t know or don’t understand. In MJ’s view, this highlights the importance of education of the latest science and the latest trends, especially in established industries.
These established industries may paradoxically be the hardest to change for this reason. We discussed the obvious example in New Zealand: agriculture.
If you look at anything related to agriculture here; it’s unlikely that a lot of the policies are going to change. So you basically have to convince people that what they’re doing should be slightly less bad, rather than fully better. ESG [reporting] and environmental impact in particular feels like it’s very black and white, and that puts on a lot of pressure. So, I like creating a path of incremental changes and I quite like setting up goals.
More vested interests and more established processes that need to be changed mean that the inertia is much higher. Incremental changes, in this context, means saying “by 2025, here are two very achievable, measurable things we’re going to do” rather than jumping straight to “we’re going to be net zero.”
However, the counterpoint is: as climatetech-driven solutions become more prevalent globally and start to succeed and deliver outsize returns, NZ’s industry will see its global position slipping and will be forced to change. And inertia works the other way too… once it starts changing it will be impossible to stop.
Branding: The Key to Unlocking Growth?
We’ve previously identified that the public relations battle may in fact be one of the biggest hurdles out there to effective climate action. If we want the industry to scale, then we need to shift the Overton window of consumer behaviour, and that is a marketing problem more than it is an engineering problem.
MJ agrees, but she also sees a PR problem that sits a lot closer to home: selling investors on the vertical as a whole. We’ve heard that investors need more certainty, and that they need to see big wins in the vertical for them to jump in. But MJ argues: the wins are already there.
I’ve seen how the perspective and the narratives around [climatetech] evolve. When I got to New Zealand, no one was talking about “deeptech” yet. But it’s not new. We’ve had science and engineering and breakthrough innovations as long as PhDs have existed! You weren’t a deeptech company, you were just a company. But now we’re labeling it in a different way to sound more appealing and make it a catchy trend.
The problem is that because the term “climatetech” (and, to a lesser extent, “deeptech”) is new, investors—and the wider public—don’t associate other, similar success stories with this vertical.
These are not problems we didn’t have before, they’re just in our face now.
As examples, both Abacus Bio and Aroa Biosurgery are NZ success stories, and their formula for success exactly matches the climatetech formula.
WNT itself is an example of what she means here as well! They turn 10 years old next year, and are on their fourth funding round, and the model is showing no signs of slowing down.
Deeptech has longer terms and longer timelines. However, it’s just good business!
We have previously observed that there aren’t any big climatetech companies, only startups, which is why we are focusing on the funding landscape in the first place. The common view at the moment is that a career in climatetech is by extension a career in entrepreneurship.
There is certainly a benefit to taking advantage of the added momentum and excitement around the “trend” of climatetech. After all, we certainly are.
But to MJ’s point, there ARE massive companies that have been around for decades and have mastered the process of commercialising innovation that climatetech requires. Think GE, Sony, Apple, or Boeing. How is climatetech any different?
The label of “climatetech” can be a deterrent. We need to normalise climatetech a little bit to get to more LPs. We want to get to a world where it’s not a label; it just is. How do you remove the tag?
The challenge falls to investors to find a pathway to de-risk their investments. By compartmentalising companies into “climatetech”, they are leaving opportunity on the table. Instead, MJ argues, they should look to similar companies outside of the vertical for their exit strategies.
Science is not a “black box.”
Investors can and should have the skillsets to run due diligence on the deeptech process and build confidence in their investments. Climatetech and other deeptech industries should not be as “scary” as they seem.
Perhaps we as an entrepreneurship community have gotten too used to the SaaS way of doing things (a model which has only been around since the early 2000s at best), and have forgotten what it means to build a company that simply makes a thing well.
Our Thoughts
Hearing MJ’s perspective was really refreshing for us. One of the highlights was her comments on diversity… if we expect our ideas to have an impact, we must incorporate the input of those impacted!
But a big takeaway for us is her perspective on climatetech branding. This is really exciting because it means that barriers that are part of our initial hypothesis are perhaps not barriers at all, but simply misunderstandings of what business we’re really in. It promises a world where every company is a climatetech company, in the sense that every company has a responsibility to make an impact, and there is no need to have a dedicated “climate” vertical.
The challenge, then, becomes funding impact. And that can happen institutionally, commercially, or through the startup world. So, what are the most effective ways for us to do that?
Big thanks to MJ Alvarez from WNT Ventures for the great conversation.