Christian Hernandez, co-founder of venture capital firm 2150, discusses his journey into the climate space and their mission of revolutionizing cities' design and construction. They explore the importance of decarbonizing the built environment and their investment approach. The podcast also touches on topics such as reserves allocation, investment decisions, risk balancing, development of an investment thesis, measuring impact, and the search for 'giga-chorns'.
2150 focuses on investing in scalable solutions for the built environment, targeting gigacorns that can benefit billions of people and lower emissions.
Christian Hernandez's journey from technology operator to climate-focused VC and the need to decarbonize quickly in the built environment.
2150 employs a comprehensive impact measurement approach, tracking metrics beyond CO2 emissions and using a carbon accounting company to assist portfolio companies in reporting their impact.
Deep dives
2150's Focus on the Built Environment and Climate Solutions
2150, a venture capital firm co-founded by Christian Hernandez, is dedicated to addressing the climate crisis through investments in the built environment. With a focus on scalable solutions, the firm aims to make cities and their infrastructure more efficient, resilient, and sustainable. They believe in targeting gigacorns, the technology champions of the future that can benefit billions of people and lead to significant commercial value while reducing emissions. By identifying and supporting companies in the built environment space, such as Carbon Cure, Blue Frontier, and Luxwall, 2150 aims to drive positive change and have a tangible impact on urban environments.
Christian Hernandez's Journey and Awakening to Climate Crisis
Christian Hernandez, partner and co-founder at 2150, shares his personal journey from being a technology operator to becoming a generalist technology venture capitalist. However, his perspective shifted when he realized the magnitude of the climate crisis. This realization led him to focus on investing in climate solutions in the built environment. He discusses the process of starting 2150 with his partners and emphasizes the need to decarbonize quickly and find solutions that can be implemented at scale. By combining their expertise with industry partners and conducting thorough research, they aim to identify and support companies that address pressing climate challenges, such as cooling, steel production, and more.
2150's Approach to Impact and Portfolio Construction
2150 adopts a comprehensive approach to impact measurement, taking into account multiple factors beyond just CO2 emissions. They track metrics related to human health, air pollution, and biodiversity, among others. The firm has established an impact framework and employs a carbon accounting company, Normative, to assist portfolio companies in tracking and reporting their impact. The metrics and reporting vary across companies based on their specific goals and solutions. The firm strives to invest in a diverse portfolio of companies, balancing hardware and software solutions, as well as considering capex requirements. The focus is on investing in companies with tangible potential for impact and generating returns for LPs while contributing to a more sustainable and resilient built environment.
Focusing on Value Add in Investments
When choosing companies to invest in, the speaker emphasizes the importance of providing value add. They believe that being chosen as the investor of choice is not just about having cash, but also about offering assistance in facilitating market entry or helping convince other investors to come on board. The speaker shares specific examples where they co-led investments, issued term sheets to founders, and syndicated with other investors to make the right bets for long-term success. The ability to maximize ownership in the initial round and allocate reserves to promising companies is also highlighted.
Decision-making in Extension Rounds
The discussion touches on the challenges faced in extension rounds, down rounds, and pay-to-play scenarios. The speaker emphasizes the need to evaluate each case individually, considering the risk profile, the company's metrics and potential, and the interests of LPs, co-investors, and previous investors. They recognize the importance of not diluting founders excessively and maintaining their focus and motivation. Effective communication and alignment with syndication partners and other board members is crucial. The speaker also notes the importance of good governance through board seats and the need for productive and streamlined board meetings.
This episode is part of our new Capital Series hosted by Jason Jacobs. This series explores a diverse range of capital sources and the individuals who drive them. From family offices and institutional LPs to private equity, government funding, and more, we take a deep dive into the world of capital and its critical role in driving innovation and progress.
Christian Hernandez is a partner and Co-founder at 2150. 2150 is a venture capital firm focused on the built environment. They're building businesses that are changing how our cities are designed, constructed and powered for good. They hunt for “gigacorns,” which they define as the technology champions of the coming decades with the potential to benefit billions of people, create billions in commercial value, and lower gigatons of emissions.
Jason and Christian have a great discussion in this episode about Christian's journey from being a technology operator to a generalist technology VC, and then his awakening about the magnitude of the climate crisis and his path to building 2150, from meeting his co-founders to the initial thesis to their approach to the different twists and turns on the way to getting that first fund raised, and of course where they're heading in the future. Enjoy the show!
In this episode, we cover:
[2:16] An overview of 2150 and Christian's background
[8:51] Early days of starting the firm and its focus on the built environment
[16:22] Christian's views on structure, stage, et.c plus how they evolved at final close
[20:34] His thoughts on portfolio construction generally
[23:39] 2150's reserves and follow on
[26:57] Christian's thoughts on extensions, down rounds, and pay to play
[30:22] How he measures impact and the balance between hardware and software
[33:49] Advantages of being Article 9 Fund
[35:08] Christian's early LP targets and how they played out
[37:47] Risks and what 2150 is comfortable with
[42:22] The firm's impact framework
[44:31] The role of brand building and how Christian thinks about deal flow
*You can also reach us via email at info@mcjcollective.com, where we encourage you to share your feedback on episodes and suggestions for future topics or guests.
Episode recorded on Sept 26, 2023 (aired on Oct 4, 2023)
Enjoyed this episode? Please leave us a review! Share feedback or suggest future topics and guests at info@mcj.vc.
