319 Mark Lewis – After putting half of their $50M fund to work in regen, what has one of the leading VCs in the world learned?

A check-in interview with Mark Lewis, managing partner at Trailhead Capital, about the inevitability of the "regenerative revolution" and the potential for significant financial and non-financial returns in this space. What does putting almost half of your $50 million VC fund to work in businesses active in the regen space in North America, taught Mark about the space and what has changed since 2021, and what big opportunities haven’t we collectively invested in? What is missing and what is needed? And we discuss why Mark is no longer hunting for unicorns but is still very positive about the potential for financial returns in the regenerative food and agriculture space.

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Chapters

• 53:20 What would you do if you were in charge of a 1B investment portfolio tomorrow morning?
• 58:11 What do you believe is true about regenerative agriculture that others don’t believe to be true? Inspired by John Kempf

Transcript

Speaker 1: 0:19

What does putting almost half of your 50 million VC fund to work in businesses active in the region space in North America teach you about that space? What has changed since 2021, since you started raising? What big opportunities we haven't invested collectively in yet? What is missing and what is needed? And we discuss why. Mark is no longer hunting for unicorns, but still very positive about the potential for financial and non-financial returns in regenerative food and ag space. This is the Investing in Regenerative Agriculture and Food podcast Investing as if the planet mattered, where we talk to the pioneers in the regenerative food and agriculture space to learn more on how to put our money to work to regenerate soil, people, local communities and ecosystems, while making an appropriate and fair return. Why my focus on soil and regeneration? Because so many of the pressing issues we face today have their roots in how we treat our land and our sea, grow our food, what we eat, wear and consume, and it's time that we as investors big and small and consumers, start paying much more attention to the dirt slash soil underneath our feet. To make it easy for fans to support our work, we launched our membership community and so many of you have joined us as a member. Thank you, if our work created value for you and if you have the means and only if you have the means consider joining us. Find out more on gumroadcom slash investing in RegenEgg. That is, gumroadcom slash investing in RegenEgg, or find the link below.

Speaker 1: 2:03

Welcome to another interview Today, a check-in interview with Mark Lewis, the managing partner of Trailhead Capital. Welcome, mark. Thank you, coon, pleasure to be back. We talked last time I checked it in June 2021, which feels like a lifetime ago and only yesterday. So I'm very curious. Obviously, for people that didn't listen to that, I will link it below. But for just to have a short intro and what is Trailhead Capital and just where you stand now, as we're recording this in the middle of 2024. And then we're going to go into all the lessons learned and all of that. But just a short, brief intro for the people that didn't listen to you the previous interviews actually we did quite a few around your team so what is Trailhead Capital and who's Mark Lewis?

Speaker 2: 2:52

Yeah, you bet. So, trailhead, we are a early stage venture capital fund investing exclusively into seed and series A regenerative food and ag technology companies. So we you can think about of us as kind of the overlap between climate tech and ag tech, and our first fund is yeah, we're investing out of is 50 million dollars. We've now made 27 investments. I think when we last spoke we had made three, uh, so I've been making good progress.

Speaker 2: 3:23

On deploying Fund One, I have one exit, a company, vents, sold to Merck, and we yeah, our thesis is that agriculture is uniquely suited to be a climate mitigation, adaptation and resiliency tool for society, and it can simultaneously solve problems around carbon, biodiversity, water, human health and rural livelihoods. So our thesis is that we need to reinvent how we feed, clothe and shelter humanity relatively quickly to avoid the problems associated with those five items. And so we're betting on the innovators and disruptors and entrepreneurs using technology to scale regenerative outcomes on the land, and we think that'll provide nice, robust financial returns for our investors, yeah, and it's fascinating to see three years later, I think.

Speaker 1: 4:28

So we have a lot to unpack in that and we actually are co-investors in a few companies, together with our syndicate. And actually I was personally invested in Fence as well. So I had the same exit as you, which was interesting to go through that process, the same exit as you, which was interesting to go through that process Definitely and to see an exit in this space and maybe not the impact yet we want to see. I think it's being rolled out now, but at least seeing virtual fencing as an interesting sector has helped spur other companies and a lot of innovation.

Speaker 1: 4:58

But, looking back, you raised just shy of 50 million, which in the time was I. I mean you started in a different environment, I think. Raising that you ended, um, how? But the thesis of vc in regeneration I don't think it was even a thesis or even a known thesis back then. Um, how has that changed? Like, let's start with the investor mentality. Now you're starting to to prepare for fund two, as as one does in the space, if you're successful, and, um, how is that different? How is the preparation now different, fund two compared to fund one?

Speaker 2: 5:31

for from the investor side, yeah, so we were uh fortunate to to launch in 2021, which was a very robust venture environment. So we yeah, and then we didn't actually end up finishing the fundraise until 2023. Rockefeller.

Speaker 1: 5:57

Foundation was our final LP that joined and actually joined our LPAC as well. So it took us a couple of years to raise the $50 million. Not deep into space.

Speaker 2: 6:02

Limited Partner Advisory Committee. Couple years to raise 50 million deep into space. Uh, limited partner advisory committee. So they we have six uh of our larger investors that um help represent the interests of the rest of our investors and guide us through, um, yeah, some decisions that we need to make to on behalf of the partnership. So 2024 is definitely a different environment, much harder to raise a first time fund. So we're very grateful to have the track record we do. And but 2024, 2025 vintage venture funds by and large should be quite a bit better than 2021-22 vintage funds because valuations have come down, discipline has returned to term sheets and due diligence.

Speaker 1: 6:54

What do you mean by that? When you say discipline has returned, I mean I have an idea, because we had conversations about this. I was lucky to be helping and one of your investors I think under due diligence and we were talking about discipline in those years prior, let's say before 2022. But when you say discipline and investing, what does that mean?

Speaker 2: 7:14

so in the in the zero interest rate environment and with the um inflation reduction act, and you know there was just so much stimulus money during COVID yeah, it was, money was just kind of sloshing around in the system and people there were many, many, many unicorns minted, and it turns out like 60% of them were minted by four very large venture and private equity funds, SoftBank Tiger being a couple of them. So there was literally deals being done in a matter of days, term sheets being written in hours, multiple competitive firms trying to get winning the deal, winning the deal. So it was just, you know, and that led to valuations becoming, you know, like multiples on revenue or EBITDA just grew to all time highs. And so sanity has returned to the market. A bunch of the you know kind of quote unquote tourist investors who were, you know, saw the climate or regenerative ag was hot and sexy theme, you know they have sort of retreated and realized maybe they didn't know as much as they thought they did about the sector or the theme.

Speaker 2: 8:36

So all of that, yeah, I think, is actually great for us. We have remained, we are steadfast in our, our focus and our expertise and our, our niche and specialization in the market. So, uh, it's kind of nice to not have quite as much competition in terms of winning the best deals. And yeah, I mean for us, our, our pitch to our investors is if you like this in 2021, you should really like us in 2025, because we're we're on the map now. We have 27 portfolio companies, we're better at sourcing, picking, winning and servicing our companies than ever before, and 2025 is just going to be a better vintage, by and large, than 2021 because of the macroeconomic tailwinds.

Speaker 1: 9:23

I think you have to unpack that one as well. Sorry to do a bit of VC investing one-on-one, but when you say vintage, I think many people not in this space think about wine. When you say better vintage, it's the year where the fund was born right and starts, and you compare that with, like you compare your trailhead fund one with other funds that started in 21,. And you will compare fund two with other funds that started in 21 and you will compare fund two with other funds that start in 25, if I am correct so cambridge associates and pitch book just announced their 2020, so they always report on how all of those vintage year funds are doing compared to their peers.

Speaker 2: 10:00

So it's a metric called tvpi, or total value to paid in capital, and so we just realized yeah, we just discovered that we're top quartile for 2021.

Speaker 2: 10:10

Vintage north american early sector everything across all categories, industries that should help with fundraising. That's right. So that's yeah, we're very, very encouraged by that result. And, yes, the TVPI for 2025 vintage. My guess is that that will be higher than the total TVPI for 2021, you know, just across funds, there's a Stepstone is a group that does a lot of fund to fund investing and they just came out with a piece talking about the power. Law in venture is really largely about vintage and that you you never know what's going to be the best vintage year, but that that really is a large part of what drives investor returns in venture is making sure that you're allocated into rights, rights, right, yep, just getting the market cycle timed correctly.

Speaker 1: 11:09

Which is fascinating, just on timing, just on the year.

Speaker 2: 11:13

For any investment, the most important thing is what's your cost basis?

Speaker 1: 11:17

And you want to start in a low one, or in a low, because evaluations are low. If there's not a lot of competition, you can get into the best deals and for a good price, which is what drives your return as a fund and so if you're in, if you deployed all your capital in 2021-22, your cost basis is unfortunately pretty high in many cases.

Speaker 2: 11:35

So we're top quartile, and the other thing that's really good for us is we still have half of our fund in dry powder, so we've only deployed yeah, I was gonna say like how much have you, how much has been out of the? Door. Let's say and have you invested in in 2021, 22 era, versus 23, 24, 25. Yeah, so we really only made a handful of investments in 21 and 22 and then have made you know more, more of our investments in 23 and 24, and so was.

Speaker 1: 12:02

Was it because of limited dry powder at the time, which was sort of luck? Or was it because of?

Speaker 2: 12:08

discipline. You know, I'll be completely honest with you here, kun, it's a combination. I mean, we were disciplined, we were conservative. We saw that valuations were high and that competition was frothy and we also were still raising our fund and so we weren't sure if we were going to get to our $50 million target. So we made, you know, in some instances a little bit smaller check sizes, which now we have the benefit of being able to deploy more capital into some of those companies, in many cases at the same valuation from several years ago, and they have since made a lot of progress.

Speaker 2: 12:49

You know increased, you know, revenues, customers, market market traction, etc. So that's been, it's, yeah, I would say, combination of skill and luck and just market timing. But, yeah, we were conservative and remain so. I mean, it's still. I don't think we've seen the bottom of the market yet. Valuations are still coming down. And so we're, yeah, we're still deploying in a very. We have a four-year investment period, so the end of the investment period for Fund One is April of 2025. And we will stretch out all the way to the end of that. And then, yeah, the plan is that that would be the first close, for fund two would be around that timing.

Speaker 1: 13:33

And does that mean like your investment period, like do you keep anything for follow on investments, or is that also included in the investment period?

Speaker 2: 13:42

Yeah, we're reserving almost half of the fund for follow-ons. So we've made 27 investments. We'll make three more or three or so additional new investments in fund one and then the remainder of the 50 million will be for double down, triple down, quadruple down on our winners. So we're starting to do that already. We have some companies that we invested in the seed round that are now raising A rounds where we're going to kind of back the truck up, so to speak, because the name of the game in venture is you want to have 5%, 10%, 15% of your fund in your top performing investments so that you have your highest ownership percentage in the companies that have the best outcomes. So that's what we're trying to do.

Speaker 1: 14:33

What will be fundamentally different, if anything, actually in Fund 2? Are you going to do a land fund now or a sea-based? What are your thoughts on Fund 2? Now you have proven a number of things in fund one yeah, it's essentially rinse and repeat strategy.

Speaker 2: 14:50

So we think we've kind of caught lightning in a bottle and found, you know, for companies they call it product market fit, for managers they call it gp thesis fit. We think we've found, found GP thesis fit where we get the right team, the right deal flow, the right advisor network for our thesis and our strategy. So we'll probably try to size up to maybe 75 or 100 million, just so we can write slightly larger checks and increase our ownership percentage. We'll probably do more like 20 to 25 portfolio companies instead of 30. And then we won't. We have not been doing any CPG investing since we made the investment in White Thief. We kind of have decided that that's a different return profile. So we're really focused. I focus, you know, kind of exclusively upstream on farm tech enabled solutions that can scale regenerative practices and outcomes on the land and then pete overly. The other managing partner focuses more, uh, downstream, on supply chain kind of outside the farm gate, supply chain optimization, um, so many kind of software, sas, uh type of investments. So that'll be, that'll be the focus for for fun too. And um, yeah, we're excited to continue our progress and we, yeah, we now have uh many entrepreneurs that are, you know new companies can call and say what's it like working with Trailhead and we think those will be positive references. So, yeah, we think that we're.

Speaker 2: 16:29

I mean to answer your other question. What else has changed is a lot of ag tech generalists have become more and more climate and region focused, has been our observation. So several funds that are on fund two, three, four, you know that kind of started out as just kind of generalist ag tech folks are now more focused on Regan and climate, which is terrific. So we think that's. Yeah, we were very delighted to be on the early side of that trend and, yeah, very glad there are more, more entrepreneurs and more funds and more dollars flowing to to those solutions and and on the entrepreneur side of things, how has that shifted?

Speaker 1: 17:15

how, how many more options do you have to choose from, or not? Maybe has the the space, has more talent coming to the space, like what's your, your observation from, let's say, the deployment side of things. But where, where do you put the money to to work? What do you tell your investors? Compared to what you said maybe in in 21, 20, etc. When you were fundraising for the first time and it was it feels like a very different space in terms of region.

Speaker 2: 18:09

Yeah, I would say in general, there are fewer deals happening now than in 2021, 22. But we still I mean plus or minus we invest in less than 1% of the deals that we see. So we've seen several thousand opportunities, uh opportunities, and we've made 27 investments. So, um, yeah, we and we've we've just gotten better and better over time at thesis or strategy, um and but, yeah, that said, I mean we still have a very robust pipeline. Uh, we have multiple deals right in recognition and you know more quickly dismissing uh opportunities that that are not a fit for our, our, our right now, um heading potentially towards investment committee.

Speaker 1: 19:05

So, um, yeah, are you saying it's become less? Or, like you said, you know there are less investments in general because of the general atmosphere, but in terms of companies that are raising or companies that want to raise in the region space, I would imagine there would be more, simply because the wave of region is growing. But have you seen that as well?

Speaker 2: 19:34

I saw recently some stats about, like early stage venture across the board is down like 50 to 60% in terms of number of deals done and I think in in you know kind of our space, it's more like 12 to 50, down like 12 to 15%. So climate and um you know kind of where we play is has been more resilient than the, the writ large um. So, yeah, we still have very healthy, robust deal flow and, yeah, it's super exciting the number of brilliant entrepreneurs that are that have decided to to dedicate their careers to to this space. So we're yeah, we're not, we're not, we're not twiddling our thumbs waiting around for opportunities to review. There's plenty of activity for us to consider.

Speaker 1: 20:20

I remember your thesis in the earlier interview we did was I think I titled it Hunting for Unicorns in a Region, space, ever, region, agriculture and food, and you made a very I pushed back on what VC returns are possible in regeneration. Is that not inherently not possible because of, I think the growth of an old grown forest is, I don't think, three to 6% or something like that. And you made a good case for, yeah, but we're in such a degraded state we're definitely not an old grown forest, and so for a limited time who knows how long that window is we can have very interesting regeneration and, if you do it well, very interesting returns. What do you think of that thesis? I mean, you're obviously raising another VC fund, so you're still into that thesis, but how do you look back at that? And now, with 27 deals under your belt and many, many no's, what do you think about that?

Speaker 2: 21:19

It's funny, I'm actually looking at a drawing here on the table from my daughter of a unicorn. So there's lots of unicorns at our house. You know, I honestly would probably back off of that a little bit. You know, just if you look at the data, there are not a lot of ag tech unicorns and there might not be, and that might be OK, and so we're.

Speaker 2: 21:41

We're really underwriting now more for like two, three, four or five hundred million dollar exits, which for us you know we underwrite to a 10x return minimum is what we want to build a believable case for. So that's why we need to be so disciplined on our valuation as we enter the deal. So we need to enter deals at $10, $20, $30 million post-money valuations so that we can have the potential for a 10X at a $200, $300, $400 million exit. So yeah, I'm definitely not ruling it out. There will be additional ag tech unicorns and we will have a terrific outcome for our investors and our fund if we can find several exits in the several hundred million dollar range. But I do stand by the fact that if, in fact, we need to reinvent how we feed, clothe and shelter humanity in a relatively quick timeframe to solve problems around carbon, biodiversity, water, human health, rural livelihood those are huge environmental and social problems that are going to require massively scaled uh companies and solutions and that should lead to to large, large exits.

Speaker 1: 23:06

So if it's a billion dollar or more is then sort of not irrelevant but large enough. I think unicorn is always this, this mythical term. Right of evaluation about a billion dollar or more is then sort of not irrelevant but large enough. I think unicorn is always this mythical term of evaluation above a billion, but maybe not so relevant in this case.

Speaker 2: 23:19

Exactly, and I think there are 1,400 privately held unicorns and many people estimate that the vast majority of those will never have unicorn status again. Never have unicorn status, you know, again like that. Those are there. I've heard the term Zerpicorn, which is, you know, in the zero interest rate environment. You know people, everyone thought that they had that their company was worth a billion dollars and because they were raising in that frothy environment, raising hundreds of millions of dollars at billion dollar valuations but their revenues might never catch up to that valuation. So, yeah, I'm less focused on unicorns, necessarily, and more focused on if we can build several hundred million dollar outcomes, and more than likely. I'd be delighted if there was an ipo in our portfolio, but more than likely. These are these are companies being acquired by the ag and food majors, um, that are trying to become more regenerative through acquiring our portfolio companies. That'd be a great outcome for our investors and for the food supply chain.

Speaker 1: 24:31

More broadly, yeah, and there is some tension there which I feel. I mean full disclosure. I'm a small investor in the fund as well. Do you feel the tension there? I think definitely. The interest, let's say, from the food and ag majors in region has exploded in the last few years. I haven't seen a lot of acquisitions yet and we also know a lot of acquisitions, let's say, don't come to full fruition in terms of impact. What is your feeling there? Because some of the companies you are working with will head in that direction over the next years. How do you guard not guard? How do you try your best, of course, within your influence, that the impact will materialize at the large scale, which is what we need and how we started this interview.

Speaker 2: 25:13

Yeah, yeah, I think it's inevitable. I mean I just I don't. I don't hear any acquisition by the majors. I just I don't hear any big food or agriculture company publicly stating that we're going to continue business as usual. I mean they're actually like in the oil and gas industry that's now coming back. I mean Shell is now saying actually, yeah, we're an oil and gas company and that's how we make money and we're good at it and we're going to continue to do this. I mean I don't hear Mars or Pepsi or JBS or any. You know Danone, general Mills, you know ABM Cargill, like these groups are not. I don't hear any of them saying business as usual is working great.

Speaker 1: 26:02

Why? Why is that and why have we seen that in the renew or in the, let's say, the energy space? Yes, maybe it's the same way if everybody excited and then reality hits in and starts dialing down the commitments and stuff. Or do you think something else is at play? Why would we take this more serious than we took the bp saying beyond petroleum at some point as well?

Speaker 2: 26:21

well, I mean, a huge part of it is human health. I mean, climate is obviously a big focus water, biodiversity but a huge, huge piece of this is human health, and I mean, look at all the the lawsuits that are that are piling up for Bayer, related to Roundup. It's just I think these companies are realizing, like, if you can attribute, you know, diet related illnesses to their products, that's problematic for their business model. Is that more than three years ago.

Speaker 1: 26:57

That notion I mean in our bubble, definitely, but like? Is that more a thing, the health part compared to 2021?

Speaker 2: 27:05

I think so. I mean obesity and diabetes and a bunch of these diet related illnesses are continuing to get worse. Ozempic is an interesting development, but, like I mean, look at, andreessen Horowitz just led an investment of $53 million into functional health. Mark Hyman, yeah, mark Hyman. So like there's, I think more and more people are starting to realize Maybe we should start a health company next to this podcast?

Speaker 1: 27:27

That would be interesting.

Speaker 1: 27:29

Now for people as a background sorry that Mark Hyman has a very successful podcast and also a successful company and just raised from one of the best known if not the best known, probably not, but anyway in the uh, in the select group of uh very well-known tech vcs investing in a functional health company, which by all means is already interesting. I'll put, I'll put some links in the in the show notes. Just just read it and see how suddenly people in silicon valley start caring about health in a different way, let's say, than they did until now with superfoods and Soylent and things like that.

Speaker 2: 28:01

Yeah, and his whole thesis is that food is medicine and that you can. I mean, there's a healthcare crisis in the United States and we have got to figure out how to do preventative healthcare and help keep people from developing these diseases that are diet related. And so, yeah, that's one of the things I think is different between the oil majors and the food majors is that there's an additional consideration for I mean, it's kind of like the tobacco companies, Like they said they didn't know, they said it was fine. It turns out it wasn't fine. It's the same thing. If your whole business model is predicated on selling high fructose corn syrup to children, it's causing childhood obesity and diabetes.

Speaker 1: 28:56

Sooner or later that game is up, I hope. But then you could argue is that the same in, and I think, the energy transition? Very few will be able to adapt. I mean they might try by buying companies, which is good for for the investors, um, but that's such, it's such an intricate. Part of selling ultra processed food is, I think, in some companies 80 to 90 percent of what they sell. So so that transition, that's going to be rough.

Speaker 2: 29:19

Let's say yeah, I think it's going to be rough and I think they're going to have to adapt and evolve and acquiring some of our startups and a bunch of the other brilliant, innovative.

Speaker 1: 29:33

So are you back, focusing at CPGs or what are you?

Speaker 2: 30:09

No, I mean that could be Cargill, that could be Louis Dreyfus, that could be Cargill, that could be Louis-Dreyfus, that could be the grain majors, that could be. Yeah, it could also be the food companies, the ingredient suppliers, I mean up and down the entire food supply chain, I think will be affected by that trend will be affected by that trend and in your current portfolio, because we only discussed three last time, because there were only three, now there are 27,.

Speaker 1: 30:38

what are some of the surprises? Let's say I can say highlights, but for sure you mentioned them everywhere. But some of the surprises, things you really, three years, didn't even consider on your radar as a thing, let alone a company, let alone an investment, consider on your radar as a thing, let alone a company, let alone an investment.

Speaker 2: 30:56

Well, I just skimmed through our last interview this morning in preparation for this, and you and I it was funny I talked about the right this fear a few times and how we might learn more about that.

Speaker 2: 31:07

So we invested shortly thereafter in a company called funga that's doing just that. I mean inoculating tree saplings with mycorrhizae to help optimize the nutrient flow between plant roots and the soil microbiome, and so that happened way, way more quickly than I thought it would. Another conversation you and I had was how great it would be if nutrient density were measurable and monetizable, and we mentioned Dan Kittredge in Bionutrient Association. Maybe that's fund two, five years away before there's an investable opportunity there. We just invested in Audacious.

Speaker 2: 31:45

Shout out to Audacious One of your podcasts, yeah, yeah, so he's building that solution now, which is super exciting, and so that's happening more quickly than you and I thought it might three years ago. Ai is coming for food and agriculture. We just invested in a company called Avalo that's using large language models to do computational breeding for genetic trait selection in seeds, and so they are doing things, for example, like trying to figure out which genes could lead to more drought-resistant cotton. So a lot of the cotton that's planted in West Texas, for instance, is never harvested because it doesn't get enough water. So you could really optimize that whole system if you could figure out how to make cotton more drought resistant.

Speaker 2: 32:40

If you've heard David Friedberg talk about Ohalo, his new project from the All In podcast this is the same guy from Climate Corp Corp. Um, we, yeah, he's. He's figured out how to grow way bigger potatoes, uh, with the same or fewer resources. So those are yeah, those are the types of innovations that uh, I think are happening even more quickly than I anticipated, and uh can help help us feed more people. Help us feed more people good, nutritious uh diets, uh, in a in a time, yeah, hopefully in a in a less resource intensive, uh, and better human health outcomes uh. Sooner would. So I'm yeah, I'm generally feeling like the technology and the disruption, disruption in this space is happening even more quickly, generally, than I anticipated.

Speaker 1: 33:37

And what have you changed your mind about?

Speaker 2: 33:42

That's a good question.

Speaker 1: 33:44

Something that you thought was going to be real big, or I don't know, or something the other way, or something you thought would never invest in x and you ended up, or I don't know yeah, um, let's see, I mean we invested in a company uh called progenco.

Speaker 2: 34:05

That is, um doing some very uh innovative and interesting things in uh combining the beef and dairy supply chains. So they take embryos from Angus beef and they implant them into dairy cows, and so a dairy cow gives birth to a beef calf, and so a dairy cow gives birth to a beef calf. And our thesis is that this can have major drive, major efficiencies in both the dairy and beef supply chains, because you can replace a certain number of cow-calf operations by using the dairy cow instead of the beef cow. And then in dairy, many of the calves are males and they don't need most of the males. So it's a sad outcome for a lot of those male dairy calves and they live short and brutal lives. So if you can replace that with a very high value male or female Angus beef calf, we think that's a huge win. So we think there's a way to basically replace a certain number of beef and dairy cows without sacrificing any volume of milk or beef. So that, yeah, it's a bit more you didn't think you would be looking at that.

Speaker 2: 35:36

It's a bit more in the playing God category than I thought I would get comfortable with, but it's. I mean IVF, humans are doing it. I think it's a technology that is here to stay and it has massive potential. Animal welfare, I mean. Think about the amount of water you can save by not having to have that additional feed. Think about the methane. I mean the methane emissions savings could be enormous from this type of solution. So yeah, that's one I I didn't necessarily see coming and let's then play god on the other side a bit of.

Speaker 1: 36:17

Uh, apparently we're really good at predicting things, or at least you. You share what you're interested in, and then you happen to make investments. What are you interested in? You haven't invested yet. That might happen through this fund or or through others, or things that you would love to see more of. Like, like, I would love to see companies operating in X, y, z. If it's an investment for you or not, that's a side note. But just like, what are you missing in this space? What would you like to for more talent? I get a lot of people that reach out like what should I do in this space? We have a great video course that can help you figure out a path in that. But at the end end, like, what are neglected spaces that you would love to see more entrepreneurs, um, globally, uh, biting their teeth in. I don't know if that's a sentence, but you know you. You know what I mean yes, uh, more.

Speaker 2: 37:00

more food is medicine. Uh, generally, just uh. And then I'm still really bullish on carbon markets and I'm I feel like I'm one of the few. But I continue to be convinced that all these big publicly traded companies that made net zero pledges, the Securities and Exchange Commission in the United States is going to hold them accountable to that, because people bought and sold their stock based on that information. So Microsoft has the most aggressive net zero by 2030. That's five and a half years away, and Microsoft's carbon footprint is growing substantially Because of AI, because of generative AI. I mean they're building their own electricity generating capacity just to drive their data centers for generative AI. So, yeah, I think they're going to be buying a lot more carbon removal credits, cdr and a lot of that.

Speaker 2: 38:07

My preference would be that it be nature-based, over direct air capture or these other kind of geoengineered solutions. I think there are great ways. Funga is a great example. Ion with enhanced rock weathering is a phenomenal way to sequester gigatons of carbon in a more permanent fashion, while providing agronomic benefit to the land and the land steward and not requiring a major practice change. You can swap in this olivine rock dust for ag lime or limestone for ph balancing benefit, use the same equipment and then also benefit from, uh, you know, major like gigaton carbon removal potential. So I uh, yeah, there's, it's, it's.

Speaker 2: 38:58

I actually I went on linkedin and went on a little bit of a rant saying I think you know, the only people that can kill the voluntary carbon market right now is not, you know, republicans in congress, it's not the bad oil and gas companies or food companies, it's actually like the climate tech community who seems to have lost faith in the voluntary carbon market. And yeah, I'm trying to be counter cyclical and sort of contrarian, I guess, in that view, because I believe that it has to happen from a global, you know, livable planet standpoint, but also just more practically, these companies and yeah, there's Frontier Climate, which is a big consortium of the tech majors is still very active. There's a new group called Symbiosis that was just announced. So I think there's, I'm bullish on carbon and that's not necessarily where the majority of climate tech investors are at the moment.

Speaker 1: 40:04

And what is missing to deliver those billions of those gigatons? What do you see that was missing in the market to to really, to really deliver that?

Speaker 2: 40:17

scalable supply chains. So ion is working on how do we source enough rock, mill it, you know, spread it on farms? Uh, for funga, you know we just announced a big partnership with a big, you know, ifco, prt, that we're going to be inoculating their, their seedlings, in their nurseries. So it's just a matter of, yeah, getting the, getting the, those seedlings onto timber and forestry land with these real estate investment trusts or private landowners, timber and forestry land with these real estate investment trusts or private landowners, and then getting the measurement, reporting and verification protocols in place. So it's just yeah, it's building out these, these new complicated supply chains that don't exist yet.

Speaker 1: 41:04

Yeah, so really about collecting, like finding the spaces, collecting this case, the Mick, grinding it, getting it into it's a lot of implementation and rolling it out at scale season after season. But we've done that before in many other things like the oil and gas industry and other industries. Renewable energies are really good at running large-scale projects, so that doesn't seem like an impossible task, at least.

Speaker 2: 41:29

Absolutely not. I mean, yeah, and that's what's so exciting, is that I think this space is where renewable energy was 10, 15, 20 years ago? Or it's where oil and gas industry was in 1858, when they drilled the first, you know, when they found oil? Inr, in my view, and if you're a wildcatter in this space now, that's where I think the billion-dollar outcomes can come from.

Speaker 1: 42:04

And do you see any risk of the Microsofts and others peddling back on their commitments, because there's no way they're going to get their net zero without these. But, as we've also seen with oil majors, they also are quite flexible in adjusting their commitments. Let's say, what do you think the risk is there, especially with some political outcomes or potential political or these political turmoil we've seen in Europe and, of course, this year in the US? How do you think major companies will react to that? Or will they just keep going in the background regardless of what's happening in Washington or in Brussels or Delhi?

Speaker 2: 42:47

I think they have to. I don't think the Securities and Exchange Commission cares if Donald Trump wins the election this year. I think they care about protecting widows and orphans who bought and sold stock based on public statements that these companies made. And so I believe Google just announced that they're no longer claiming to be net zero because their generative AI footprint is expanding claiming to be net zero because their generative AI footprint is expanding and they also said we're not going to do offsets anymore, we're going to try to decarbonize our supply chain and we're going to buy CDR, I mean carbon removal. That has really clear. You know it's taking carbon out of the office Clear dismal.

Speaker 2: 43:31

Yes, so yeah, I mean they might have, and that's why Frontier and Symbiosis, that's why they have pooled money to create those groups. It's a demand pull mechanism to market. To say, ion Funga, all these CDR companies show us how you can build these supply chains and what the price would be for us to buy millions and millions of tons of CDR from you, and I think they're motivated to do it. I mean, it's also a matter of attracting and retaining the best talent. I mean the kids coming out of college, the software engineers, the people that are going to work at Microsoft, meta, alphabet, salesforce. I mean they care about climate and they want to know that the company they're going to work for is part of the solution and not part of the problem. So it's not just shareholders, it's all of the stakeholders that these companies have to be accountable to. And I just think there's yeah, there's no point at B. I mean we don't have the option of continuing on the trajectory we're on.

Speaker 1: 45:01

So, yeah, I think it's, it's, it's gotta happen and if you wouldn't be running a vc fund or, let's say, a group that's gonna have different funds, what would be the most impactful thing? You would do, like what would in a parallel universe? Uh, let's say, chairo, just going, you're, you're not part of that, um, what would be something? Would you focus on a land fund, maybe in the investment space, or not on a lobby? Like what? How would you spend your time if trailhead wasn't an option?

Speaker 2: 45:31

yeah, I, I mean, I really can't imagine doing anything else. I absolutely love what I get to do. I feel super, super fortunate to have the opportunity and my skills and network and subject matter expertise are uniquely suited particularly for this exact job, so I love it. Worthwhile spending some time uh fighting the farm bill or lobbying hard for better policy around uh food and agriculture in the united states. It's just, it is a mess and we are systematically creating uh health problems for our population. We're systematically poisoning the pollinators. We're creating biodiversity collapse. Our policy is systematically drying up our aquifers.

Speaker 1: 46:35

I would probably spend some time trying to lobby or influence policy more to lobby or influence policy more and in, let's say, the capital approach or the investment approach, are you still, apart from the fact that you really like, let's say, the VC game or the VC work, do you see a role or what other ways of putting money to work do you think are going to be very impactful over the next, let's say, five to 10 years, which is sort of seems to be the window we have? What other ways of putting money to work would you explore if you wouldn't be running the VC side, nor the activist side.

Speaker 2: 47:14

I think there's a potentially really interesting private equity roll-up strategy that somebody could do. So yeah to your billion-dollar question. I think, yeah, I think if someone had, if I had, a billion dollars, I think there's a really interesting opportunity coming maybe not today, but soon, even just within our portfolio, to say we will buy these three or four companies and combine them into one larger company that can begin to go head to head with some of the oligopoly of existing food and ag industry. So I think that's.

Speaker 1: 48:00

Do you see that happening? Do you see people starting to? I mean not the happening happening yet, but see people that are even posing that as a potential.

Speaker 2: 48:09

I mean we are and yeah, I mean I just I think it's like some of these renewable energy companies decided like we're going to just try to go head to head with with the fossil fuel industry and some of them were acquired and some of them remain independent and some of them went public or some of them, you know, got private equity money or got, you know, acquisition or roll up and they scaled and I think for sure that is a very viable path for food and ag in regenerative supply chain development.

Speaker 1: 48:49

And do you see because having that idea is not enough do you see the potential LPs or investors in those kind of strategies starting to warm up to, to considering larger tickets or these kind of approaches in the region space? Because until now I don't think they have or they have not even looked at. I mean, agtech is one thing, a lot of people burned um regeneration I'm not saying the hype is over, but definitely some of the tourists, as you said, left um. But in the, in the larger tickets, the pe funds, the infrastructure people, the large, large, large institutional players like, are they starting to be interested at least in, in, let's say, region food and egg?

Speaker 2: 49:32

yeah, for sure. I mean there are, yeah, uh, a number of folks that are already, you know, paying and um, I mean S2G, lucas Walton in Chicago, I mean they're now moving later stage, um, looking to write larger checks. Um, so, yeah, I think that there are definitely larger buckets of of capital that are, like, you know, all right trailhead. You, you go do one and two million dollar investments at a time and when something grows big enough for us to put 30 or 50 or 100 million dollars to work, you know, give us a call.

Speaker 1: 50:10

So we're, we're getting closer to that day, for sure, fascinating and and what has gone slower than you expected compared to three years ago. We talked about a number of surprises and things that seem to have moved, and what what hasn't moved as much as you thought or wished for uh, soil carbon and all total farm ghg monitoring.

Speaker 2: 50:35

Um, I was, you know, we've looked at all of the companies that are that are playing in that space and, yeah, none of them have progressed as quickly or proficiently as I would have hoped or would have thought sample to really understand and have very high accuracy and credibility in terms of measuring soil, organic matter, soil biology, soil chemistry, soil texture, which is why I continue to be excited about our investment in trace genomics, which does just that.

Speaker 2: 51:13

But, yeah, the spectroscopy, the remote sensing, the satellites, the models have not advanced this as quickly or as far as I thought they would. That said, we are looking at two companies right now that I'm very excited about. One that's a laser that actually was developed on the Mars rover with a bunch of funding from NASA NASA that could be a very interesting addition to farm implements to get real-time, accurate soil data. And then we're looking at another company that's been around for a while that's recently made some breakthroughs, that kind of on the total farm GHG reporting front. So I'm not giving up on that and continue. I think that's a critical piece of the puzzle, but that has happened more slowly than I would have thought and anything else.

Speaker 1: 52:09

Let's say you've looked back at the last three years that really stood out of. I'm not saying moments that a bubble grew, but definitely, let's say, the region space has expanded a lot. Any stories from that or any moments I mean maybe when the Rockefellers came on board, or something that you really look back at as an interesting moment in time in the fund one, of course, but also the general journey.

Speaker 2: 52:39

Yeah, good question. Yeah, I meanfeller, um, investing in our fund was a was a huge, huge deal for us, uh, and for the movement. I mean, yeah, they've been very active and continue to be um with, uh, you know the periodic table of food, I think they call it and um, yeah, so they've been putting, you know, big dollars to to work here, not just you're one of the first I think um they did uh, yeah, we were, we were toward the beginning, I think, um, and so, yeah, let's see there are.

Speaker 2: 53:18

Um, you know, my feeling is that, like, more and more climate tech generalists are starting to think long and hard about food and ag and nature-based carbon removal, which requires land management and agriculture, agriculture, um, I think you know there's. Uh, yeah, I'm encouraged by kind of that, that trend, um, and then, like I said before, I'm really encouraged that there are more kind of ag tech generalist investors that seem to be having more language, uh, on their websites and in their materials and in podcasts about regenerative and climate and carbon and biological inputs. And, yeah, thinking about, yeah, I mean Andreessen Horowitz investing in Mark Hyman.

Speaker 1: 54:16

We'll look back at that, I think, as a moment. What do you think?

Speaker 2: 54:20

Yeah, I hope so.

Speaker 1: 54:21

I mean, I think it's incredibly encouraging.

Speaker 2: 54:21

What do you, what do you think? Does that? Yeah, I hope so. I mean, I think it's incredibly encouraging. Did you look at it as well? Uh, yeah, I mean he we did not.

Speaker 1: 54:29

It's a little bit late later.

Speaker 2: 54:32

It's too too big of a round for us. So you know he raised 53 million um, so our check size would be too. We wouldn't be able to get the ownership stake that we we would want um for that. But yeah, that ownership stake that we would want for that. But yeah, that's one that we would have loved to have invested in the seed round prior to Andreessen Horowitz getting involved. So we're searching for that next one general generalist vcs from sandhill road on down uh coming into food as medicine you know is is a.

Speaker 1: 55:09

I'm super delighted to see that. Yeah, he's a big part of uh, of common ground actually as well. You might recognize him from that and, of course, podcast and and very present in that space and you've been very focused, obviously because you need to focus, geography-wise, on North America, any things you've seen outside of that geography that really excites you, interests you, even though you don't have a mandate maybe to go there.

Speaker 2: 55:33

But in terms of development, if you've followed anything outside of the North America, let's say bubble, yeah, I was on a call with a really sophisticated, very well-educated family office in Hong Kong last night. There's some very interesting activity happening in Asia. A co-investor with us in one of our deals just is I don't think it's been announced yet, but it's closing a very, very large land purchase in Australia to implement regenerative grazing and take advantage of the more advanced carbon market that they have in Australia. We continue to look at deals and see interesting opportunities in Israel. Know, devastating what's happened in that country with the war, but, um, you know incredibly resilient.

Speaker 1: 56:26

Have you invested at all outside? I mean in terms of the first fund, the first 27, um outside of uh of North America?

Speaker 2: 56:36

we have two Canadian companies, 25 us-based companies. We've looked at a bunch of other geographies but yeah, we're in the US for tax purposes and regulatory and legal purposes. It just makes the most sense for us to be focused here and it's just where so much of the innovation is happening. So we keep an eye on the Brazilian market. We we keep an eye on the Brazilian market. We're keeping an eye on the Indian market. Those are two huge agriculture opportunities and so we're. Yeah, that may be a geographic expansion for fund two or possibly fund three, for fund two or possibly fund three, but yeah, for the time being, lots and lots to do here in the US and our neighbors to the north up in Canada.

Speaker 1: 57:29

And I don't know if that has changed over the last three years. But as a final question, the one that John Kempf likes to ask, and we adjusted slightly what do you believe to be true about regenerative agriculture that others don't? Let's say you go to Arvidsai or to one of the where the bubble meets or where the movement meets. Let's say, where are you? I mean last time very clearly the unicorn let's say the exit, the potential of this movement, and there are interesting investment opportunities, also purely from a financial point of view. And what investment opportunities, also purely from a financial point of view. And what would you say now?

Speaker 2: 58:06

maybe it's the same, maybe it's similar but what do you believe to be true about region ag that others don't? Definitely inspired by john kemp. Yeah, john's a great, great, great guy. Um, I will say that I think it's. It's.

Speaker 2: 58:14

The regenerative revolution is inevitable. I think it's. It's going to happen. It's a matter of time, um, but of time. But we cannot continue on our current course. Agriculture contributes 20 to 25% of all global greenhouse gas emissions and, uniquely, it can go from source to sink. So that has to happen and that's through regenerative practices.

Speaker 2: 58:43

The leading cause of biodiversity collapse is agriculture and land use, so you cannot stem that tide without changing how we grow food. Water 70 to 75% of all fresh water on the planet goes to agriculture. So low flow toilets and shower heads do not move the needle. If you're concerned about water, you have to fix how we grow food. Human health we've already touched on. And then rural livelihoods. I mean, there are something like a billion people that are malnourished on this planet, that live on, I think, less than 1,000 or 1,200 calories per day, but we grow enough for 3,500 calories of food per person. So we've got to figure out how to improve those supply chains. Reduce waste, grow food in areas that are currently not viable. Grow food in areas that are currently not viable. Um, so that's, yeah, these are just like. These are human rights issues. These are this is just improving the plight of of humanity and, uh, in nature, and it's I don't know. I just feel like we've reached peak insanity in terms of how bad our food is today, and it's the other reason.

Speaker 2: 1:00:08

I think it's inevitable is because it's delicious. It's once you've had really good food from really good soil, you don't really want to go back and we just need to get that opportunity to more people more quickly.

Speaker 1: 1:00:25

And I knew last questions always lead to more last questions. So here we go. What do you say? Because I think, fascinatingly, your, your fund, one also sort of um, coincides with the rise of um, the focus, the attention. I haven't seen a lot of results yet, but on really technology, um solution to all of these issues, just mentioned people saying let's just get on with with um precision fermentation and other and cellular ag etc. And and then we rewild the rest and we'll free up so much land we'll, we'll fix the water, biodiversity and and climate side of things.

Speaker 1: 1:01:01

Um, it seems like it lost steam a bit. That narrative which a lot of people invested a lot land will fix the water, biodiversity and climate side of things. It seems like it lost steam a bit, that narrative which a lot of people invested a lot of money in, and very loudly as well. What do you see there, both from the investor perspective because for sure people you're talking to for the new fund have been exposed to that or have been exposed to the narrative, maybe invested in it as well but also the entrepreneur side. How do you respond to that? Or have been exposed to the narrative, maybe invested in it as well, but also the entrepreneur side. How do you respond to that? Um, I'm not saying techno optimist, but the food grown in in factories and labs, to to then rewild and fix it, um, fix the issues you just mentioned. Agriculture and food has that nobody denies. I think, or I hope, in another, through another route yeah, I think the pronouncements.

Speaker 1: 1:01:43

Took us one hour, and now we go down a deep rabbit hole. There we go.

Speaker 2: 1:01:48

I think the pronouncements of the death of precision fermentation or cellular agriculture are premature. I don't think that has hit the end of the road. I think there's still really interesting technology and innovation to be done there. You know we invested in Omeat, that you know they've had troubles, along with the rest of the industry. There's a huge regulatory uncertainty, but these things take time and, yeah, I still am a believer that there are solutions there.

Speaker 2: 1:02:20

Where you can and again, I mean our investment in Omeat is that all of the ingredients come from cows on pasture. This is a way to amplify the amount of meat coming off of each animal. Therefore methane savings, therefore food and feed and water savings, animal welfare benefits. This could be slaughterless ground beef. So I still am bullish on that space in certain instances. But I also think, yeah, that there's room. We still are not interested in controlled environment agriculture, for instance. I mean our controlled environment agriculture, for instance. I mean our.

Speaker 2: 1:03:01

There is life on this planet is because of a couple inches of topsoil and sun and water, and that's really where life comes from.

Speaker 2: 1:03:14

And we can try.

Speaker 2: 1:03:15

Yeah, I don't know, it'll be interesting to see what audacious results show, but my guess is that there's a lot more nutrient density and positive human health benefits from food grown in soil versus hydroponic or aeroponic or under artificial led lights or things like that.

Speaker 2: 1:03:37

I think you just I come back to following the wisdom of nature and bias is still the reason while also using human ingenuity to potentially try to improve upon it. But ideally strike that right balance and not trying to trick or fool or, you know, outsmart natural processes, cause I think that uh has a long history of having unintended consequences that don't work out well in the longterm. So we're yeah, I mean it's, uh, I have some dissonance about it. I think we live in dissonant times and uh, I think it's, it's part of the challenge and the the intrigue of our work is to figure out. You know, I don't think we're going back to horse drawn plows, but I also am not convinced that we're going to be manufacturing food pellets out of thin air in there. So some, something in between and lots and lots of of positive progress to make from from our existing system to to something that's that's more regenerative and healing for ecosystems and and people.

Speaker 1: 1:04:53

And have you changed personal question your your own diet or your own eating over the last years, or has that changed with with the deep dives you've been on, obviously through all these companies? Has has that change shifted in your family at all or or actually not at all?

Speaker 2: 1:05:10

yeah, I mean, I've always, uh, tried to eat as well as as I can. Um, I mean my. The mission I'm on now is with my kids. I mean it. You have to be very disciplined to prevent your children from eating processed food and candy and high fructose corn syrup. I mean it's at every birthday party, it's at school, it's. I mean, yeah, it's ubiquitous. So that's, that's the, the.

Speaker 2: 1:05:41

The big struggle with our house or the, the thing I'm trying to convey to our kids is, uh, yeah, that actually that doesn't make you feel great and, uh, you know, and it's, yeah, ultimately not good for your, your brain development and your, your growth and your livelihood.

Speaker 2: 1:05:58

So we're, uh, you know, white leaf provisions, pouches, uh are, are helping and uh, yeah, we try to, we try to source as locally and organic and regenerative as we can.

Speaker 2: 1:06:14

I mean, we live in Denver, so we're in the city, so we're not exactly immediately surrounded by farmland, so we have to, you know, be uh more methodical about it. But, yeah, and then there are, you know, anytime we go out to eat, we're very much choosing the the few restaurants here in town that are that are sourcing from farms that we, we know of and and love. So, yeah, it's uh. I mean I do not have the perfect diet, that's for sure, and I'm I'm conscious of it every time I eat something that I shouldn't or don't particularly want to, but that's, it's a constant, daily, multiple times a day reminder of, you know, room for improvement for myself and for all of us, for myself and for all of us, and I do. I mean, it's just measurable how much better I feel and sleep and operate when I'm eating really good food, and so that's, I'm fully convinced that food can be medicine and it can be healing and be delicious and build community, and that's why it's such a fun space to work in.

Speaker 1: 1:07:25

I think it's a perfect way of wrapping up this conversation. I want to thank you so much for coming on here and share the journey over the last years and, of course, the journey ahead, but also what you've learned, what you've seen, what you would love to see more of, and all of the above and all of it in between. So thank you so much for coming on here and share in a very busy time and, of course, thank you for the work you do cool, you the man.

Speaker 2: 1:07:51

I really appreciate it. Thanks for having me and yeah, quick plug, if you want to come. Uh, join trailhead in our our network. We're going to be in new york during Week, the week of September 23rd, so we're holding our annual general meeting on the 24th at Stone Barns and then some other events in the city surrounding Climate Week, so come find us there.

Speaker 1: 1:08:14

We'd love to meet up and they can ping you if they want to know more. I'm guessing, please, that'd be great.

Speaker 2: 1:08:25

Thank you so much, mark. Thank you be well.

Speaker 1: 1:08:32

Thank you so much for listening all the way to the end. For the show notes and links we discussed in this episode, check out our website investing ininregenerativeagriculturecom. Forward slash posts. If you liked this episode, why not share it with a friend or give us a rating on Apple Podcasts? That really helps. Thanks again and see you next time.