152 Paul Lightfoot on how carbon negative foods are taking off and why now

Paul Lightfoot is the writer of the Negative Foods newsletter, which covers the foods that have carbon neutral or carbon negative footprints, and the technologies, people and companies that bring negative foods to market, food brands that have carbon negative footprints. Paul is the founder of BrightFarms and an investor in the space. 
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What are negative foods? How do we decrease the carbon net of food to zero? Why is now the critical moment to focus on this? What is the crucial role of startup food companies in the regenerative agriculture transition? Why should companies start carbon labeling?

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Transcript

SPEAKER_00: 0:00

What are negative foods and why is a very successful food and tech entrepreneur wanting to spend the rest of his life working in and investing in this space? And we answer probably the most fundamental question any investor asks about regenerative food and ag. Why now? Welcome to another episode of investors, big and small, and consumers start paying much more attention to the dirt slash soil underneath our feet. In March last year, we launched our membership community to make it easy for fans to support our work. And so many of you have joined as a member. We've launched different types of benefits, exclusive content, Q&A webinars with former guests, Ask Me Anything sessions, plus so much more to come in the future. For more information on the different tiers, benefits and how to become a member, check gumroad.com slash investingbridgeandegg or find the link below. Thank you. Welcome to another interview today with the founder of Bright Farms, but above all, the writer of the newsletter Negative Foods, the newsletter that covers foods that have a carbon neutral or carbon negative footprint, the technologies, the peoples, the companies, and anything around that, the market of food brands that have a carbon negative footprint. And he's also an investor in the space. Welcome, Paul.

SPEAKER_01: 1:41

Thank you. Appreciate it. It's great to be here.

SPEAKER_00: 1:43

So to start with a personal question, I mean, you've been in agriculture, but definitely another, let's say, niche of the agriculture. I can't really call it a niche, but let's say the vertical farm space, Bright Farms, for people that don't know your background. Could you talk a bit about that? And then we're going to unpack how you became so interested and so excited about soil.

SPEAKER_01: 2:01

Yeah, I think I am best known so far for being the founder and the longtime CEO of Bright Farms. It's a company based in the United States, in New York, that sells and produces branded produce, really salads, ready to eat salads, at some of the best retailers in America. So Walmart, Kroger, all hold Del Hayes. And basically our secret sauce is We've got a disruptive supply chain that produces a product that ends up being better for consumers and retailers, and it does it in a more sustainable way. And that combination of better and more sustainable, as you can guess, informs what I want to do for the rest of my life as well. And Bright Farms was a startup, I guess, 11 years ago. I started it from scratch in the same house I'm standing in right now and raised a few hundred million dollars along the way, built a great team, and sold it this past summer to a aligned with our values and treats people well. And so in many ways, as I turn my sights to the things we're going to talk about today, I'm enjoying the satisfaction of knowing that the company I started is likely to have, you know, a multi-generational legacy that outlasts me, which is terrific and fun.

SPEAKER_00: 3:07

When did you get, if you remember a specific point or moment, did you get bitten, let's say, between brackets by the soil bug? Was it already before Bright Farms, in Bright Farms, after, during, like, what were the moments that you started looking, okay, what are these negative foods. It can obviously be salads coming out of things like bright farms, but you take it to a whole new level.

SPEAKER_01: 3:29

Yeah, well, your listeners may think that we set this question up. We didn't. You actually had a role to play in it. So I've got a super good friend, a guy named Chris Zuhlsdorf, who left Wall Street and now advises family offices on allocating portions of their portfolios to regenerative agricultural sort of investment categories, right? And years ago, he told me about your podcast, actually. And I remember just starting to listen to it. And there were concepts that were broadly familiar with me, but it took me way deeper. I started learning about water does not just beget plant life. Sometimes plant life begets water and the nutritional density and different business models. And I think in many ways, I've always been a guy who thought about systems. And when I started listening to your podcast, which I guess it's only five years old, right? So it couldn't have been more than five years ago. It got me thinking more about broader systems. than just the salad supply chain. And eventually, the more I thought about it, the more I decided I wanted to, you know, to make it my life's calling, which I've done.

SPEAKER_00: 4:29

Yeah, definitely didn't expect that answer. But it's always nice to hear when people are actually listening to it because it's very interesting. It's only five years old. I think it was soon, like December 19th, five years ago. So 2016 now, actually. So we entered the sixth year and it's still very odd because we record this now with a piece of relatively fancy software, but it used to be a It's still just a microphone connection and somebody else on the screen. And every now and then, I think one in a hundred, we record in person, but it's still only two people or three. Sometimes we've done four, maybe max, but to imagine that people listen to it and take something out of it and do something else than they were doing before, or it might have influenced them, nudged them a bit or sped up any kind of transition. It's always, it's always very interesting when then many people don't do, obviously they listen to it and which is great, but they don't act. And you took like, what was the first step when you decided, okay, bright farms will go its own path or will go a path without me or with me a lot less involved why did you decide to set up a newsletter like what was that process that learning process which seemed to be very much like this like we're learning in public and it seemed to be like you were doing the same

SPEAKER_01: 5:35

yeah well there's two parallel paths for me one was the very careful and i don't want to use the word exit could sound so final but my transition away from focusing my time on bright farms

SPEAKER_00: 5:45

which is very tricky to do well like that's not an easy yeah and

SPEAKER_01: 5:49

yeah and it's rare to to do what I did, which was I was a founder CEO who approached my board and my investors and said, I'd like to find a new CEO to succeed me. Very rarely is that done. Although I think when it is done, it's done with a much higher rate of success than when boards decide to replace the CEOs.

SPEAKER_00: 6:10

It's a whole different podcast.

SPEAKER_01: 6:12

Yeah. Yeah. I started that in the second half of 2018 and I was blessed with really good investors. I found an awesome CEO, a guy named Steve Platt that I'll love for the rest of my life. And so sort of got that train moving down the track and then started thinking about how can I really find out what my mission is and how to follow the path that fulfills my mission, right? And for me, the newsletter is a Trojan horse, right? It's not intended to be any sort of a final thing. It's for me, two things. It's a chance to become more expert in an area that I was expert in an adjacent niche, but not in this particular niche. And nothing makes you learn things better than writing about them, right? Just like teaching will enable you to become better much faster as well. And so I wanted to write so I could become expert on a topic and doing it publicly is a great way to find out when you're making mistakes because people tell you right away. It also was a way for me to have a very public first draft of what's going to become a book. And I'm very much in the process of writing a book on the same topic as the newsletter. And then finally, I guessed, and I guessed correctly, that writing a newsletter would bring to me investment opportunities because I wanted to be an investor in the space first as an individual and as members of as an LP and a couple small funds and an angel group which I've been doing for the last few months but probably a year from now I'm looking to become in a more professional capacity with a more institutional role and I wanted to have just a really strong backlog of opportunities and the newsletter's done all of those things and probably done them bigger and faster than I had hoped which has been awesome super fun

SPEAKER_00: 7:48

and so why a book what is in this day and age Why is the book a step in that process?

SPEAKER_01: 7:53

Yeah, one of my best friends started writing a newsletter at the same time, and he was like, I'm doing it for these reasons. And I said, I'm doing it partly because I want to write a book. And he thought I was nuts, right? Like, you can get everything you need out of a blog. Why would you write a book? I actually, I think he was wrong. His name is Benzie, in case Benzie's listening. I think that writing a book forces a rigor and a depth of analysis and research that still is not found in other places today. Maybe a film would be, but probably not. And, you know, I'm not going to self-publish. I'm going to do it with a publisher and I'm going to do it with an agent. And going through those steps successfully will result in a product that I think has an important thing to say to society, to the capital markets, to governments, to food entrepreneurs, to executives at big food companies. So I think that there's something to be said out there. And I think by saying it in a book, I can say it more effectively than I could say it otherwise.

SPEAKER_00: 8:44

So what is the thesis of this work? I was going to say the thesis of the newsletter, but it sounds like and it feels like it's the thesis of the book. of the book, of the newsletter, of the fund or whatever structure you'll be investing with and in or through next year. What is this thesis of negative foods?

SPEAKER_01: 9:01

Yeah, well, the working title for the book is Eating Our Way Out of the Climate Crisis. And so the thesis is that food is unique. Food is unique in that all of us have to eat constantly, right? Three times a day at least. Food is also unique in that right now it is a terrible source of carbon emissions in society, but Thank you. I believe, to be carbon negative in the future, right? You know, the more food you source that's got negative emissions, the less atmospheric carbon there will be, right? And so that's the thesis, but that's sort of like the underlying thesis, the business part of the thesis, and why I think I've got something to say. I'm not the science guy. I'm not the farm guy. I'm not even the climate guy. I'm the business guy, right? I think that there will be a cheerful tidal wave of startups based on regenerative agricultural supply chains, and these will be food brands that have much better carbon footprints. They'll have better other things as well, like nutritional density. They'll taste better in many cases. They'll have a provenance that's attractive to consumers. But mainly, let's just say that they're better for the climate. And that and several other factors will enable them to capture market share in a way that's going to eat the lunch of big food companies. And that's really the story that I'm interested in. Opportunities for entrepreneurs come about when you see these shifts on macro trends, secular shifts, right? And the last time I saw a shift like this, it was the internet, right? In the late 90s. It's funny, I actually, I have this mug from the internet company I started in 1998. It's a coincidence. I have other mugs as well. I remember starting a company then because it seemed so clear to me that the internet was going to transform every bit of our economy. And I don't just mean the US economy, the global economy. And although the markets got too hot and then too cold, eventually the march toward the internet changing everything never stopped, right? And I think it's that way, not just food, it's that way with climate change and getting to carbon net zero across the entire economy. But food is, you know, between a quarter and a third of our emissions right now. So it's a huge amount of change that's going to happen, let's say, in the next five to 10 years. And when there's change, there's opportunity and excitement. And I don't want to just be there for the ride. I want to be driving for parts of it.

SPEAKER_00: 11:43

And I mean, the internet is a very interesting analogy here. And when there's change, timing is absolutely crucial as well like the internet came up and down and of course in the downturn many interesting companies are absolutely behemoths have been created but it's really the timing piece is crucial especially on the investing side as we're talking here so why now what is unique now compared to five or ten years ago where actually many of the research and science was sort of already known of course it has been reinforced over the last years and soil carbon is is much more prominent and kiss the ground it came out and all of that but many of these farmers have been doing these things for sometimes 30, sometimes 40, sometimes millennia, if we look at some indigenous peoples. So why now? What is that macro trend that makes you as excited about this as the internet? You

SPEAKER_01: 12:33

know, one of the giants in internet investing was John Doerr of Kleiner Perkins, right? I don't know if you've read his recent book called Speed and Scale. Not yet. Okay. It lays out a series of goals, essentially, for the world to solve the climate crisis. And I think it's a terrific book. It's not an exciting book to sit down and read every night before bed. But it's a reference guide to have around when you're thinking about, you know, what's happening in the oceans, what's happening here. And he wants us to question the general sense the world has that cleantech 1.0 was a failure, right? That all these investments were made into cleantech 10 or 12 years ago, and it was a disaster when the Great Recession hit. He makes it clear that Kleiner bet a billion dollars and they turned it into$3 billion. And although it seemed bleak along the way in the first several years, they turned out to for the firm and for their investors. And I think that's the case as well.

SPEAKER_00: 13:25

So your point is pick well and stay in for the right, although it's going to be a bumpy one.

SPEAKER_01: 13:30

Well, he actually, you know, I think he said they made four investments in solar panel companies and three of them failed. That's the nature of venture capital. That happened with the Internet as well, right? Pets.com or whatever, you know, he had a bunch of failed companies, but it didn't stop the Internet from becoming what it was inevitably going to become. And I think that's here as well. Anytime there's a lot of volatility and change, change. There's going to be losers. And frankly, you know, I don't care. My first company failed and, you know, I learned a ton from it.

SPEAKER_00: 13:56

Yeah, there will be an enormous amount of investment in underlying infrastructure and things that we now completely take for granted and that can build all the other companies that followed after. Do you see similar things in the region? Is that processing? Is that also consumer awareness that you could call it infrastructure technology? Is that all these things that have to be, quote unquote, rebuilt or built or reinvented or invented at Actually, if you look at machinery for syntropic agroforestry, I mean, that has to be invented. It has never been done, but doesn't mean it cannot be done.

SPEAKER_01: 15:16

Well, but let me give you my second answer to the question, which is that I'm not waiting for silver bullets to appear that don't exist yet, right? There's plenty of lead bullets and I've never been a silver bullet entrepreneur. I'm a guy who gets up early and shoots a lot of lead bullets at my targets and just keep shooting, keep shooting. You know, it is already the case that there are many technologies, many tech and many tools that could dramatically improve the way we're growing food today to dramatically change the climate impact of our food system. Now, that was the case 10 years ago also. So now let's get to the second part of why I think the answer is now. Ten years ago, the awareness among consumers, among the world's biggest companies, among the world's biggest investors wasn't there about the need to change. And it wasn't there about the need to change because the need to change was not as acute as it was then as it is now. Today, you'll be hard-pressed to find anybody who's at all thoughtful who doesn't think that this is a problem that will get solved. Not even that needs to get solved, that will get solved. I wrote a couple weeks ago about how the world's largest investors, the endowments, the sovereign wealth funds, the biggest asset managers, they are uniform in believing that this is both a big problem and a big opportunity, and that it's going to be licked over the next 20 to 30 years and that the transition of the world's economy from where it is to where it's going to be is going to be a chance to lose or win money based on whether you can adapt or not, right? So even if there were no other factors, the fact that all of the investors in the world predict this is going to happen probably means it's going to happen. You know, when the Great Recession happened, the biggest investors in the world all moved into gold. And guess what? Gold rose for years based on that, right? Not on any fundamentals. Like when they all decide to do something together, it tends to happen. They've all decided that this is going to happen. The flip side of this is consumers, right? We've seen in organic that consumers will pay more and demand more organic food. Even though, you know, and this is controversial, I don't think organic has fulfilled its promise in the United States, right? People thought that organic would make them healthier. They thought that organic would be better for the environment in the United States. But very close to 0% of American farmland is organic right now. You know, I think 5% of our food is organic and four-fifths of it is imported, right?

SPEAKER_00: 17:40

Yeah, I think it's around six of it, and I think 1% now of farmland. And there's a very interesting investment opportunity there, obviously, to replace that import. But I think, yeah, organic, it can be done in many different ways, let's say.

SPEAKER_01: 17:54

Well, and I'm only here to say that what we know from organic for sure is that consumers will pay more for it, right? And I think that the case to be made that regeneratively grown food, in terms of being better for people's So you're really, I mean,

SPEAKER_00: 18:19

the moment is now for different reasons, but mainly the consumer has shown up or is showing up basically ready to demand these things, ready to pick different things in their supermarket aisle or different things online or different of all the different places we can get our food now, which has changed quite a bit. bit as well. So it's now up to the companies to serve that and to source that from farmers that are already in transition or starting to want to, et cetera, et cetera, et cetera, and be that sort of quote unquote middleman or being that glue.

SPEAKER_01: 18:51

Well, and I, one more point I like to make, which is that it's not going to be my job to tell farms how to farm better. I'll never be expert enough to do that. It's my job to create and support and mentor and nurture food brands that need supply chains that have this kind of food, right? And when that demand is there, particularly if we can get higher price points, that demand will drive farmers on their own to find the solutions to get there. And that's really, that's my role in this whole thing.

SPEAKER_00: 19:19

And then, so translate the latent demand that is there among consumers that is partly going for organic, maybe not completely satisfied with it, seeing some of the scandals, reports, et cetera, or maybe not going for that and going for other things too, and then translate that into something that farmers can supply to. Where comes measurement into play? Because that's one of the things that obviously with organic is such an issue. It's a process-based system, not an outcome-based system. And we would love to see outcome in terms of carbon, outcome in terms of water, outcome in terms of biodiversity, et cetera, et cetera. What's the role of a company there? Let's say a hypothetical food company you're investing in or you're helping to set up, et cetera. What's the role for them to translate that into very clear things to a farmer saying, if you supply this, this, and this, and these are the outcomes you get on your land, or how do we make it real instead of just losing it again and say, this is regen, which doesn't mean a lot.

SPEAKER_01: 20:11

So when I wrote a three-part series on carbon labeling last year, and when I began the first one, I hadn't written the third one yet. But in my mind's eye, the third one was going to be the easiest to write. It was, here's the standards we have now. Here's the labels we have now. The first one was about why it failed in the past, why carbon labeling labels succeed in the future, why it was important. The second one was about the early adopters. And the third one was the picks and shovels. And when I got to the third one, I realized it was a mess. Like the standards are a mess right now. There are no definitions right now. This is an area that's still a mess, Kuhn. And I don't, you know, I wish I could tell you I knew the answer. I don't know the answer because I don't think there is one yet. Like, I think I just heard you say, I'd like to be measuring outcomes. And I do think we're about to have a golden age of technology tools that make that possible, right? Like these guys with the satellites that measure methane emissions, right? Like, I think you're going to see more things like that so that you don't have to do what you do now, which is dig holes in the ground and pull out soil samples and mail them to a lab, right? That's not very cost-effective.

SPEAKER_00: 21:16

And burn them there and weigh them. Yeah,

SPEAKER_01: 21:19

it's not very scalable. It can't be done by everybody. Today, we have certain practices-based systems, like the Regenerative Organic Certification, or ROC, label is an excellent one by people who are doing good work and are good people. I hope we see more of that, but I also hope we see more outcomes-based tools of available so that

SPEAKER_00: 21:41

you can have carbon footprints on food, right? already examples that people actually, regular people look in the supermarket, not just geeks like us, to look for these carbon data. What's the current standard there? How do we do that? And how do we make sure it's not something super small somewhere on a corner that nobody actually looks at?

SPEAKER_01: 22:22

It's funny. Every time I see a behavior in myself, I always say to myself, I'm not that unique. There must be a certain percentage of people thinking the same way, right? So peanut butter is a product I buy and I buy some sort of like hippie peanut butter that you have to stir. And I got to say, I have no idea what the emissions footprint is of my peanut butter. However, if I went to my supermarket or if I went to my online retailer and I saw a comparison of the peanut butter I buy, it's Santa Cruz crunchy dark peanut butter. Somebody maybe can tell me what the footprint is. And then I saw next to it on the shelf something with a materially better carbon footprint. I would definitely choose the one with a better carbon footprint. Now, I also would care how it looked, how it tasted, what the nutritional content was, but I think it's probably like you're going to see somewhat of a of an alignment along those lines. And I think that lots of consumers feel that way right now. I also think we're about to enter this age where that's going to happen. Unilever has announced the 75,000 product rollout over the next two to five years of carbon labeling all of their products. And my hope, and I think I'll say this as my prediction as well, is that when consumers see a similar product that has a carbon label on it next to a product that doesn't, they're going to say to themselves, it's likely that the one with the carbon labels has got a better carbon footprint. And the reason it's going to seem likely, it's possibly true, right? If someone's thoughtful enough to measure their footprint, they're almost certainly being thoughtful about reducing their footprint. And then you're going to see a competitive advantage appear for companies like Unilever, and especially for startups that do it from the ground up. And those competitive advantages will gain them that market share, and then all of the other competitors in the space will race to catch up. So I'm hoping it's a virtuous cycle to the top where carbon labeling is based on things that you can measure without too much cost creates a competitive advantage. And then the ones that do it early are lighthouses for the rest of

SPEAKER_00: 24:12

them. Yeah, and especially if you're not putting it out there, you must have something to hide. That's, of course, not saying that's true, but if Unilever puts it there and Procter& Gamble doesn't, suddenly you think like, why is that not? And it triggers something interesting in our psyche, I think, around what do you have to hide? Even maybe it's much better carbon footprint, much lighter, et cetera, but you don't know unless you put it on there. So it's going to be an interesting, it's going to be very interesting at that scale to see what happens and what drives potentially consumer choices. I mean, we've seen something, I think HowGood has some interesting data of people actually choosing when soil is explained, some complexity around regen, like it actually triggers much stronger consumer demand. I'm for sure butchering the quote or the research, but much stronger consumer demand compared to organic, which is very interesting because people don't really understand what organic means. And soil is very complex, but people grasp it in a different level, which is interesting. I mean, it's what we hope for, but at least they see it in some shops. So you're saying it's not just a negative thing.

SPEAKER_01: 25:12

Well, if you go back to the premise of the question, right, or at least one of the points we made along the way, it's not just that someone who doesn't say what their emissions are is doing something bad or is hiding something. It's that, at least for business people, you know that companies that aren't measuring things aren't really managing them, right? So that's one sense that I have. If you're not talking about your emissions, you're not really measuring emissions. You're not measuring them. You're not managing them. On the other hand, I actually think that transparency is like a fundamental value that most good companies have. So if you are measuring your emissions, and this is one of the most important challenges facing humanity, and you're not releasing them, well, then I am going to judge you for that. And I'm not going to apologize for judging you for that.

SPEAKER_00: 25:55

And so writing this newsletter every week, which I'm always looking forward to basically when it comes in, it's always a treat. Thank you. What has surprised you the most? What has surprised you the most? Let's start with that. Over the last, how long have you been writing it? Because it feels like Much more than a year. I think it's a year and a half or something. Less than a year. Less than a year. Wow. I think

SPEAKER_01: 26:13

it's 40 weekly editions, I think I'm about at.

SPEAKER_00: 26:17

Okay. That's interesting. Yeah, I should have checked that before. Anyway, what has been these 40 plus editions? What has been the biggest surprise?

SPEAKER_01: 26:24

I actually was looking at some notes this morning from early last year, because it's that time of year, right? When you're looking back and thinking a little bit. And I had made a prediction early last year that there would be sort of pure play investment firms in the space at some point in the future. And I think what surprised me the most is that there's now a ton, right? You look at a firm like Trailhead, Mark Lewis, I learned about on your podcast. I'd never heard of them last winter. Now they've raised a fund and they're off to the races and doing some important deals. They may have their first exit soon, right? They're doing a great job. And that list I have now of potential co-investors and potential places to shepherd deals into, it's a huge list, right? And it's not just the pure play startups. It's also, you know, Sequoia and Kleiner have theses with their billion dollar funds in this space, right? So that's the thing that surprised me the most is how fast the capital markets have turned their attention to this opportunity. And it's partly why I'm optimistic, an area of the world that there isn't that much optimism.

SPEAKER_00: 27:26

And I wanted to ask it before, but then we went on to another direction. You were mentioning, like, it seems like the world is turning towards this solution or towards this when you were mentioning the investors, et cetera. Is there a risk there? They are, and they, I'm obviously generalizing, take a shortcut in a sense. I mean, you were mentioning it's definitely possible. I believe that beef could be a carbon positive one. What I do see is with many, and I agree on that. I think we've spent a lot of time on livestock in this podcast, but I also see that many large investors or large players, large institutional players from whatever background started looking at agriculture and food and simply take the shortcut. It should all, let's take the animal out of the equation. It should all be vegan or any of those. It should be this, the silver bullet, the silver bullet, the silver bullet, the silver bullet. And I think we both know that that's a bit naive in the space or maybe short-sighted or too easy to be true. And it turns out to be not true. How do we prevent that, that all this attention that's now coming for climate in general, let's get methane down, let's get carbon down, let's get, oh, soil carbon sounds interesting. Let's pour in a lot of money in that space. How do we, is there a way if they're all for us, maybe there's no role. We just have to weather the storm. But how do we, are you worried that a lot of that money will go for silver bullets that turn out to be not so silver?

SPEAKER_01: 28:44

It's not my job to worry about it. I think it's a good idea for society to worry about it though, right? And I think the two things that we need is in the first place, we need standards and definitions, which are sorely lacking right now. That's a true problem we have out there. And if you made me king, I would decree standards and definitions right away.

SPEAKER_00: 29:01

Okay, let's ask that question. What would you do with a magic wand?

SPEAKER_01: 29:04

Well, and you may know, I just wrote my magic wand wishes for 2022 Yeah, I agree with you. short, right? So my magic wands are all about the government, and they're magic because I don't think they're going to happen. But the first, it would be put a price on pollution, and in this case, put a price on carbon. So I would want a carbon tax imposed so that it would be more palatable to both parties. I would say make it revenue neutral. Whatever is collected by the government gets distributed back to consumers somehow or to members of society. And if you did that, right, if you had the price of the emissions of industrial beef and the price of beef for consumers, you amount of beef consumed and the associated emissions would plummet and the beef that's a good actor would rise very quickly. So that would be the first one. The second is I would end the current subsidies in the United States for both beef and dairy, which create artificially low prices, which is basically an incentive for emissions. And then I would end the ethanol requirements for gasoline in the US. About 10% of our gasoline is ethanol, which is really synthetic fertilizer made from natural gas used to grow corn, then processed to convert into a gasoline replacement It's a waste of resources for everyone. And it's a giveaway to the corn farm and the ethanol industries. I would end that right away. And then the fourth magic one, you didn't tell me I had four, but I took four, would be to establish standards and definitions. I would probably make them outcome-based. I would make them very scientific and I'd make them as simple as possible.

SPEAKER_00: 30:57

And let's say they are obviously, not obviously not happening, but any of those is a long and very, very difficult process. Already taking away the subsidies, I think in general, it keeps coming back as such an important one, but let's assume that they stay in place. Let's assume nothing on the government side of things, both in Europe, in the US, in Australia, in the large agriculture place in Brazil. Let's not forget another country with a very interesting government. It's going to stay the same. Maybe that's even our best case in some countries. So what do you see that this role that all of these startups even that have to fight, have to set up processing, like it's very difficult to become a large enough food company. I mean, you know that to actually have a dent, like it doesn't matter if you sell a few hundred even a few hundred thousand drinks somewhere. Like it needs to be millions and millions and it needs, it becomes almost industrial. Like, is it fast enough? Is it going to be like the next five to 10 years, which turns, sounds everywhere to be crucial and crucial and crucial. Exponential is great, but does it fit in food companies? What makes you excited about this, the potential here, or is it going to be too little too late?

SPEAKER_01: 32:01

Well, yeah, the way you asked the question for me, it doesn't seem theoretical. That's the reality we have. I have very little confidence the federal government is going to do much good in the near term. But I have a lot of confidence that the markets are going to change quickly, right? And, you know, I can tell the story a little bit from my experience. When I started raising capital for Bright Farms in 2011, it started with venture capital, right? And it was hard. You know, I was telling a story of a branded food company with a sustainable supply chain. And that was sort of right after the Cleantech 101 bust had happened, right? So it was a hard time to raise that sort of capital in a capital-intensive business. We were putting a lot of money into the ground in high-tech buildings, right? Today, it's way easier, Kuhn. And I'm not here to say that building startups is easy because it's always very difficult. But the macro factors surrounding companies that do this right now, startups, is way easier than it was for me then, way easier than it's been most of the time historically. The investors want it. The big food companies want it, right? They've all announced their massive regenerative strategies. They're not going to get there on their own. They're going to lay out these strategies and they're going to fail to innovate. They're going to fail to cannibalize their own portfolios But they're still going to get there somehow or another. And they're going to do it by acquiring the companies that I'm investing in, which is fine, right? Like that'll create the cycle that keeps the capital markets lubricated and going. So I actually think it's a great time for starting companies like this, like an unimaginably better time than I would have guessed several years ago because of the interest from investors, because of the interest from the acquirers, because of the interest from retailers, but mainly because of the interest for consumers, which I feel like is really high right now. So I'm bullish on this opportunity.

SPEAKER_00: 33:37

Which is actually a title of, I think, one of the first newsletters you wrote, which I've shared with quite a few people. A case for being bullish. I will link it below as well. And so what seems to be missing there, or at least you didn't touch upon it, is the companies, the startups. So what has been your journey there? Have you seen a lot of them, exciting ones? Has it been surprising, disappointing over the last 40 plus episodes of this year, basically, or last year? Have you seen enough of that deal flow that gets you up in the morning?

SPEAKER_01: 34:06

When I was coming out of graduate school a long time ago the smartest and the best people coming out of the best business schools were going to McKinsey or Goldman Sachs right I see so many of those people today moving into this space and I'm totally energized by it right one of the sub motivations I have for what I'm doing now is I get to hang out with young young smart people all the time people who are younger and smarter than me and it's energizing and fun right so that's part of why I'm pretty optimistic now to directly answer your question I started keeping a list of potential investors for an opportunity. Part of why I write the newsletter is to build a backlog, a pipeline. And it's extraordinarily deep, like way bigger than I expected and filled with better and smarter people than I would have expected as well. Can I give you some examples? Absolutely.

SPEAKER_00: 34:52

Please make it concrete.

SPEAKER_01: 34:54

Yeah. So one example is my friend, Tom McDougall, who runs 4P Foods. It's a food distributor basically in Virginia, but it's narrowly focused on farms that grow food regeneratively, right? His customers are like, do University and other universities and school systems and thoughtful corporate cafeterias that all want to shift their supply chains toward food like this. And the big broad line distributors like U.S. Foods aren't able to move fast enough, right? So Tom is capturing that market share. In the long run, you know, he'll probably have a chance to sell himself to those big distributors, which is fine, right? That's going to be how they get into the space. Another one is Hickory Nutcap in Asheville, North Carolina. I'm not an investor in this company, but I'm interested in it. They're out raising money right now. But they Basically, they are a branded meat company that sources from 90 farms. They're a savory hub down in North Carolina that goes out and measures the soil and verifies the practices of these 90 farms to show that it's regenerative. Their sales are skyrocketing and I think will continue to skyrocket. I think in the meat space, there could be several billion-dollar brands based on regenerative supply chains. There's another guy that I met randomly a few weeks ago who's taking dairy cow waste, converting it in a controlled environment into a plant and then converting that plant into cow feed that is both cheaper for the dairy farmers and reduces the methane of the cows, right? That's a sort of example that I think is awesome. And I have dozens of entrepreneurs bringing businesses like this to market. So it's way more than I thought and way more exciting than I thought.

SPEAKER_00: 36:58

And these type of businesses, I mean, they are not the typical VC type of business in terms of it's mostly code. It's a few guys, unfortunately, mostly guys, somewhere with pizzas and a garage, et cetera. This is stuff. You have to build stuff. stuff, processing, slaughtering, sending things. This is a lot of money, as you said, in the ground. Do they lend themselves well for the current money that's looking to get into the space? The VC money that needs the X returns in X years, like the liquidity and the speed we hear often in the podcast can be, or is in many cases is an issue.

SPEAKER_01: 37:30

Yeah. Well, I'll again, speak from experience, right? Bright Farms probably had it worse than almost all of these companies today in terms of how capital intensive it was, how long our product paid off and how bad the markets were for those sorts of deals back then. And it still worked. Our early investors got returns. Everybody was happy. I think that when anybody starts a startup and raises capital, and people forget this sometimes, almost all investors won't be a good match, right? That's just always the case. Investors have very narrow theses, right? And so you can't say to yourself, ah, nine out of 10 of my targets don't want to do my deal. There's something wrong with them or something wrong with me. No, it's just the same reason that every person you meet won't be a good match to be your spouse, right? It's very, very specific what the matches are. There are plenty of investors today who want to put tons of money into the ground, who say to themselves that they can wait eight years instead of four years. There's plenty of capital available for that. So no, I don't think that's going to hold us back at all. If I heard that as an excuse, I would reject it.

SPEAKER_00: 38:31

And so what do you feel or what would you say to other investors? Obviously, this is not investment advice, but what should smart investors, let's say we're in a this discussion, hopefully in person. And somebody asked us in the audience, yes, I'm super excited. I've seen the documentaries. I visited some farms. I want to get into this space, but I don't really know where to start. I'm reading the newsletter. What would you tell them where to start or where to start digging maybe a bit deeper or where to focus to get that? Because that first deal is, I see it as an impact investing all the time. You might want to almost, some people want to have that first perfect deal. They never find it and never get going. And so what would you tell them to an audience full of investors? Like, okay, how do you get going in this space?

SPEAKER_01: 39:11

Well, some things are the same, right? Like you have to have a great management team. You have to have a great market opportunity. It's very helpful to have incumbents who won't be able to cannibalize their legacy businesses and who are vulnerable. And you need some sort of an edge, whether it's IP or a blue ocean business model. So those things are the same no matter what. But in this case, maybe what's different is you have to look around the corner to how the world's going to change, right? Like we know that our power grids will become electrified in renewable ways, right? We know that the world will get to carbon net zero by 2050 and halfway there by 2030, let's say. We know there's a certain series of changes. We can't predict the timelines necessarily or exactly how it's going to happen, but we know the world is going to get there, right? So I would recommend investors find the deltas between the worst products that are the incumbents out there and the startups in terms of carbon footprint. When you find those massive deltas, and you often find other deltas Like beef, yeah. where you can make costs lower by being carbon negative would be a good idea. And also which products with incumbents will be the most vulnerable to climate change, right? So if I'm growing salads in California where water is no longer available, right, because it's surface water that's rationed and I'm not going to be able to get water in the future, there's a vulnerability to the incumbents there, right? And if I can instead grow products in the same areas, let's say, that don't require water like that or that can store water because they've got root systems that have more carbon in the soil and can store carbon. Well, that's another way I would think about finding opportunities.

SPEAKER_00: 41:16

And so, I mean, we might have this discussion in a year and it might be actually true, but what would you do if you were in charge of a billion dollar investment fund? Like overnight, we took the magic wand, obviously we're on stage. Now we can actually discuss this on stage. What would you, I'm not interested in the exact dollar amounts, but I'm interested, what would you prioritize? Would you use that same framework you just mentioned? Like what are the biggest deltas and what are the biggest opportunities in terms of pollution, where the biggest gap basically is in terms of current food system and how we know things can be done, or would you even take some other leaps into things that we think we might be able to do, but we haven't really done yet at any scale?

SPEAKER_01: 41:53

Yeah. Well, as I said earlier, I don't need silver bullets right now. There's plenty of lead bullet opportunities, right? So my short answer is if I had a billion dollars to invest, and hopefully a year from now, you can hold my feet to the fire because I'll be doing it. The first thing I would do would be laying out a plan to turn it into three billion dollars for my limited partners, essentially, right? Over the course of five, six or seven or eight years. And I would do that. The longer answer is I'd invested in startups that are launching food brands that have regenerative agricultural supply chains. And I would be basing those investments on this thesis that consumer demand will continue to rise big time for foods with carbon negative or neutral footprints. And knowing that this is gonna be one of the greatest money-making opportunities in history, knowing that some of the best entrepreneurs are drawn to this opportunity, right? I can have premium prices. I can have demand that unstrips capacity. I can attract employees with a strong social mission. And the big food companies are going to get leapfrogged by my startups, which is going to create great exit opportunities. That's exactly what I will do and what I intend to do.

SPEAKER_00: 42:56

And do you see any risk there? I mean, of course, many risks, but any risk of the consumer demand to, I wouldn't say shift, but to maybe phase away if we go into like the next eight to 10 years, we could go through, I don't know how many massive crises. I don't think we've seen, a huge drop like in organic actually in years of crisis. So there might be some precedent there. But do you see a risk there unless we get to maybe really measuring nutrient density, et cetera, that the carbon part maybe become less important or less important for a group big enough to actually hurt these startups? At the moment, they're really starting to take off.

SPEAKER_01: 43:30

I hope that we can do great measurements of the nutrient density, by the way. And hearing Dan Kittredge on this podcast has been inspirational to me.

SPEAKER_00: 43:37

Did you see the latest things coming out on their their end of year roundup is very interesting in terms of variations, et cetera. I'll link it below.

SPEAKER_01: 43:46

Yeah, I'll check it out. So if in fact the need to solve the climate crisis became less urgent over the next few years, perhaps that would happen. And I'd be happy to have that problem for my portfolio of investments. I don't think that's going to happen, right? So absolutely not. I don't think that's going to be a problem. I think that consumer demand is going to continue to rise for this as consumers become increasingly aware of their role in the climate crisis, right? You know, eating industrial beef, it turns out, is ruining the world, right? And the sooner people understand that, the better.

SPEAKER_00: 44:18

And your health, probably.

SPEAKER_01: 44:20

And your health as well, right? Which, you know, the greatest source of death in the United States is chronic disease related to diets, yeah. I mean, I did study what happened to organic food during the Great Recession, and demand did not go down, right? It remained strong throughout. I began Bright Farms at the tail end of the Great Recession, right? So, you know, my most directly informed answer to your question is maybe there will be a downturn and who cares? Downturns are a great time to start companies and people are still going to buy food. Food is the one category where people aren't going to stop consuming when they've run out of money. They will buy food before they buy shoes.

SPEAKER_00: 44:55

And that's very good. We're actually going to have an interview soon on a regenerative leather shoe coming out. So we're going to venture into some other sectors potentially. Let's see how you all listening today actually enjoy things beyond food. But I was thinking, I I know you went to the Oakland conference and as this is the final question, I want to be conscious of your time as well. When walking around there at the regenerative food investment summit, our food system investment summit, where were you seeing, because I think John Kemp was there as well. We borrowed this question from him. Where were you contrarian? Where do you think actually different than let's say your peers in the region, ag and food space?

SPEAKER_01: 45:32

Yeah, I'm spending less time thinking about the government's role in this than most people. I think, you know, I spent some time working with the federal government of the last several years in a couple of different roles. And I think that they're well-meaning people for the most part who will do the right thing. But by the time they're able to do it, most of the good will already have been done because the private markets and consumers will change more quickly. And that's just the way it is, at least in the United States. So that's one thing that's different for me is that I'm not looking to be saved by the government. Maybe another one is that I don't think big food is necessarily going to be the enemy. Now, I think their products in many cases are bad. and cause the climate crisis. But I think they will be part of the solution when they acquire startups and when they get smart enough to change quickly enough to not get leapfrogged by startups. So I don't think big food is the enemy that we need to obliterate either. And I'm probably a bigger believer than a lot of people there, even though it was a finance conference, that the capital markets are probably, you know, in modern society, one of the greatest levers to make good change happen. I think it's actually been that way for a long time in the world. And if we're going to make the world better when it comes to climate, there's no other way to do it fast enough than by leveraging capital and private businesses.

SPEAKER_00: 46:48

I think it's a good way to end this conversation. I want to thank you so much for your time. And we might be checking in in a year from now when you have a significant amount under your belt or in a different role, or I mean, the book will be out by then and who knows what the regenerative journey will take us in 2022. So thank you so much for writing your newsletter and for getting on here and to share your thesis work and what keeps you up during the day, not necessarily

SPEAKER_01: 47:11

at night. Thanks for having me, Koen. This was terrific fun. Thank you.

SPEAKER_00: 47:15

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