YouSaid · the spoken record

Hayden D. Smith

lines on the record: 54
first: 2022-12-06
most recent: 2022-12-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“That I'm the most bullshit on. Maybe fusion is one that's kind of left people in a little bit, but I think a lot of things have actually turned out to be comfortable by human engineering. And I really don't see this being any different. So having that initial strong cohort founding markets, if you will, I think it's really important because that's going to be all those talented people, no other talented people and will pull more people into the ecosystem. And so that makes me very optimistic.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Honestly, I think the biggest Cohort of 1,000 to 2,000 people working on this particular problem. This renewed excitement and kind of inflow of people I actually find really, really exciting. There's been some folks who historically have been highly under-resourced doing a lot of research and work in this ecosystem for the last, in some cases, two decades, but it's been stuck on a bench or been stuck in the field and not really actually productionized and operationalized. And seeing all these really fantastic talented people come from really incredible companies say, hey, I actually want to spend all my time on this particular problem is actually the greatest source of impact that we have. I'm a big advocate of like if you actually just get, in case of climate change, it might make 100 million people rowing in the same direction. But however many people you need to rowing in the same direction, if you just focus on a particular problem, I can't think of very many problems where everyone was aligned and focusing on something for a decade or two decades and the thing wasn't solved, actually. And so that's the thing.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So it depends what we want the outcome to be because it really just spreading your purchase across a bunch of folks in Michigan. Actually, I do that with Patch, where people can build portfolios and kind of not put all their eggs in one basket, if you will. If you're referring to if those other two providers, for example, don't work out or one doesn't work out, the other to pick up the slack, then that might require a little more financial engineering. If you think back to how a lot of utility scale wind and solar got off the ground, this actually typically came in the form of having buyers last resort as well as I think equity positions in the underlying projects themselves. And so I could potentially see a world where infrastructure funds lean in here a little bit more and then start saying, hey, you know, I'll be left to remedy this problem. But if you end up defaulting, I'm going to own 10 or 20% of you either structured equity or SBB type model there. I can see that happening as well because it's precedent for when PVs were far less of a good business model 15 years ago.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you see other financial instruments? Like, I can almost imagine, not an ETF, but more so bundling of technologies. You know, if you were to want to invest in, let's say, direct air capture and there are many companies doing that, do you foresee some sort of instrument that would allow you to, as you're saying, hedge that bet and say, hey, I think this technology is going to work, but I don't know which company is going to succeed within that realm. Do you see products like that also becoming important or necessary?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“In that way. But I think that would actually be really, really compelling because that's something that's prevented a lot of Forbes from actually diving in, where they kind of stuck with the technologies they know and love, if you will, because they don't want to be the ones that go first. And so how do you make going first easier? Because at the end of the day, even with the tools in front of us, we're going to make a lot of great progress, but we can make more progress more quickly if we continue to get more shots on goal. And how do you make it less scary for folks to take a step up to that soccer ball and swing hard and one of those ways to have a slightly softer landing with some sort of insurance product? And that can come in the form of getting paid out either with shrimp cash. So we'll be actually spent on that different form of carbon removal or in an in-the-kind type of payout where you're actually getting carbon credits or tons from a similar shape type of carbon removal developer.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the biggest piece is understanding how to do insurance, actually. That patch will not do, but I think it's really important because that's going to be what actually enables a lot of folks to take on meaningful R&D risk and traverse us curve. It's going to be through some sort of financial engineering and insurance of the underlying project. So you imagine a world where I'm a corporate and I have some sort of net zero commitments. And in 2025, today is 2022 or 2023 and 2025, I'm prepared to make a bet on an upstart or maybe a promising technology folks who just come out of some lab and they're building some sort of pilot facility. How do you build an instrument that enables that buyer to take that risk but not to bear all of the risk on their own? I think there's probably an opportunity for insurance or reinsurance to be had here because X-ray models are actually pretty good at predicting the outcomes of some of these things. And that's certainly not something PATS would do because they kind of be economics and kind of structure the business don't really make sense.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and one facet of a fast growing market or one indicator is that there are just so many problems to be solved. And so it sounds like patch is already focused on solving many of those. But as you're deep within this industry, I'm curious to know if there are other areas in the infrastructure required that you're noticing as opportunities and perhaps things that patch isn't going after. Are there things that you're like, wow, this is really missing and this is an opportunity for other builders to get involved?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Of regulatory communities in order to enable that. We'll look software and patch is going to be really good at it. Once that framework is put into place, operationalizing that and scaling that with the kind of both buying and supply side reach that we already have and will continue to grow is where we really view our role coming in. So anyway, where it makes it easier for a buyer to understand what they should be doing, a seller to understand what they should be doing, or making sure a regulator has having their rules abided by or respected is really what we view patches role as. It's really an underlying piping, if you will, of a very fast growing market.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“It's still very, very early days for the broader ecosystem. Like, we're not even spending the right order of magnitude. Actually, we're off by Torres' magnitude on annual CDR spend to actually hit our kind of five to 10 gigaton goal at $100 a ton. So we have a lot, a lot of work ahead of us. So like it does feel like maybe the starting gun has gone off, if you will, but this is a hundred meter race. I don't know if we're even out of the blocks yet. People have been able to sit up straight. So we have a lot of work ahead of us. As far as the role we think pass can play, When you have markets that get really, really big very, very quickly, there's a lot of information complexity and a lot of operational complexity associated with that. And software is okay in managing operational complexity, but really, really good at managing information complexity. And so that's really what we view our role as being, where we are not actually going to be setting up the frameworks or the verification standards. We're going to be leading along the nonprofit, the NGO, and the kind of”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“All of that is to say you're very confident in the patch business model. Let's take a step back and just talk about the industry as a whole. So we are seeing many different entities come into the carbon removal ecosystem. As you said, regulation has played a role here. Public sentiment has played a role here. But really, this is a moment for carbon removal, or at least it feels that way. And this ecosystem is evolving every day. So how do you view Patch's role within that wider ecosystem? And how do you see that also evolving with time?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“The answer actually depends on the type of customer you're referring to because an enterprise, for example, has a little bit more of a rich. And then that'll form what they buy. And so, what we've seen is typically what they can afford per ton is typically on the scale of the average price per ton bottom patch is about $70 today. The terminal price per ton of all the different technologies, that's actually within the range we were talking about already, right? It was at 50 to 200. And maybe it goes up a little bit, maybe it's a little bit lower, but it's kind of in that ballpark. And so what we actually expect and what we've seen is people who have a lower price per ton budget are typically spending on patch. And then as they decarbonize, keeping their total gross budget fixed and ratching up their price per ton budget. So they're actually moving up on what they're prepared to pay per ton as they decarbonize. And when you think about going down the cost curve, that's actually the most beneficial thing a lot of these technologies can do is drive a larger gross amount of spend. A lot of enterprises are actually very priced inelastic where they cannot afford to pay more than”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“There is any risk that if these technologies do go down the cost curve substantially, as we've seen with many technologies, that patch having a business model functioning off of take rate actually loses the revenue growth that you might expect. You know what I mean? You're kind of battling against that cost curve in a way because I assume, and let me know if I'm wrong, the companies that are on the buy side are deciding how much carbon to buy based on, let's just say, their net zero goals. They're not saying we're allocating a million dollars to this. They're saying we need to remove X number of tons from the atmosphere based on the carbon that we're contributing. Is that correct in terms of the way to think about how buyers are determining how much to spend? And then if so, again, returning to this idea of the technologies going down the cost curve, is there a scenario where actually patch loses its revenue growth potential?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's great question. So, you make money in two ways. The first is through take rate, like most marketplaces, right? So it's actually percent of volume to the platform. Something that's a little bit different about patches, we actually only charge take rates to buyers and not to sellers. So that's piece number one. And the second piece is actually we use a platform fee, which looks like more of a subscription model, where you pay a month for your annual fee. And that's going to really depend on what types of features, functionality, API usage you're actually putting through the platform. I don't see the shape of Patch's business model changing materially from those two dimensions. I do see the magnitude of those two numbers changing before enterprise clients. Typically there's pay grade compression and platform fee expansion for smaller companies typically inverse. We don't want to fix costs per year, but you're okay stomaching a higher kick rate. So I expect that kind of to have some variability within those two dimensions. But the overall shape of the business model, I don't expect to change for the foreseeable future.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Distributions of probability. I think that's when you can get into a situation where people are overcommitting themselves. So I think it's really important to understand that this is chemistry. Chemistry by default falls on a distribution. Even residence time of carbon dioxide in the atmosphere falls on a distribution, right? Where there's some molecules that get emitted into the atmosphere and get taken out immediately by the biosphere. And there are some that linger for 150 years. And really understanding the fact that everything is a distribution, sometimes it's normal, sometimes it's saliable, there's many types of distributions is really important.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. It's absolutely critical. But I think it's also important to understand that we talk about this a lot of the time. When you actually attempt thousands of technologies or solutions, because only hundreds are going to work and tens are going to truly scale. And so there are going to be technologies that don't work. And like really understanding which types of technologies are in de-risk and are contingent versus what types of technologies have matured and have an established operating history is actually really, really important. So that's actually laid out in the platform to help people understand, well, okay, do I want to work with someone that's operated for three decades or do I want to operate with an upstart? Because there's a huge number of upstarts working on some really novel and exciting technology. But as an upstart ourselves, startups are inherently more risky than a company with 30 years of operating history. And so it's really important to understand that nuance. And so I think it's absolutely critical. But I think when you start dealing in absolutes, especially in absolutes when it comes to chemistry and natural systems, which are always operated on”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“And sign off on a series of indemnities, which is basically saying if you break this rule, these are the repercussions associated with breaking that particular rule, which is why people like working with patch, right? Because there are more guardrails in place rather than maybe a traditional broker, which is once the transaction is done, the broker washes their hands clean and the buyer is left responsible for the outcome.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the core element with this is really transparency in the ecosystem and really being very clear about what we do know and what we don't know and what evaluations have been run on the underlying projects and which have not been. And so in the case of durability, that's typically coming from some sort of third party standard or evaluator that's actually evaluating the carbon project. So Patch actually does not do that. So in order to get onboard events of the platform, you have to get evaluated by a third party. And then that data, that's both durability data, but also comes with a bunch of other data related to kind of the real and verifiability of the underlying project gets pulled into patch and standardized. The guarantee if you will actually falls in the standard in that case. But if we are given information that is untrue by the supplier, so the supplier misleads patch or misleads a buyer intentionally, then patch will actually get involved. So in order to actually list on the platform, we have to go through basically an onboarding assessment as well.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“I wanted to ask specifically on durability is there any sort of guarantee or how does Patch position that with the buyers are you telling them okay we are actually guaranteeing that this carbon stays out for one year I know some of the technologies say that they can keep the carbon out of the atmosphere for hundreds if not thousands of years so of course there's no way that you can sell that with a guarantee but I'm curious to know how you're representing that to the customer and how they can have certainty to some degree that what they're buying if they are i assume paying more in some cases for these longer term solutions so how are you positioning that and how are you thinking about that”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So, a really great example of something that's So said plainly, one molecule of carbon dioxide versus one molecule, this other type of greenhouse gas, the carbon dioxide as far as potent from a global heating potential, but there's far more of it getting emitted in the atmosphere. So in that case, that's a form of emission abatement. So you might have an old mine that falls beneath regulations where the EPA says you can only emit a certain amount of methane. It falls beneath that. They're allowed to emit it. And so how do you actually prevent those emissions from getting emitted in the first place? It's by using some sort of climate finance. On the more expensive end of the spectrum, maybe something like direct air capture, which are basically these large fans that suck in ambient air from outside and blow it through some sort of reactant. Typically, it's either some sort of liquid or solid. And CO2 will stay behind in various forms, depending on the type of direct air capture process it is, depending on the type of chemistry that's happening, and pure primarily nitrogen and oxygen and like a little bit of argon will come out.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Now, within that kind of tearing down, I think it's fair to say people are going to want to go for the most cost competitive option, but that won't be the most cost competitive in many cases globally.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“In line, the maturity of the technology, the geography of the technology, the underlying durability, which is how long is that positive environmental effect last for? Depending on your climate strategy and how you're going to tell a narrative on how you're achieving your particular climate strategy, that's going to actually dramatically filter down what you can actually buy. And so if you have a huge narrative around perhaps farmers or agriculture, you might index towards a set of inventory that's agriculture focused on the platform. Or if you're really focused on national excellence, if you will, maybe you want to make sure all the spending happens in your particular country, right? And so depending on that segmentation, there's only going to be a certain amount of inventory available to you, and that's going to have a huge amount of price variability within it. And so it's not going to be just what's the most affordable option to me because that's not going to typically fit within your sustainability strategy.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“To $200 per ton. So even today, there's a huge amount of variability. But for context, there's even more variability on patch day, where the least expensive thing is around $15 per ton and the most is $1,000. So that's a much wider brand, and everybody sets a titan over time. Now, the other piece is price is the only thing that's important if you code it as a commodity, which we firmly believe that it is not. So if you think about commodities like soybeans, for example, and oxygen is a derivatives based on commodities, but rather the purchasing of the commodity itself, there's not that much variability. Maybe the geography of gross value, maybe the specific genus or species of soybean, but there's actually not that much variance. But if you look at tons of carbon, there's a massive amount of variance that really is what drives the price, whether it's the underlying technology type, the vintage, so that'll be year that the actual credit is delivered, people typically buy both historically sequestered carbon, as well as future commitments to kind of buy their way.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“I actually don't think that's an unreasonable prediction in that folks will navigate towards the least expensive thing they can buy. But I think the thing that's important to qualify that with is, well, what is a thing they can buy? And what I mean by that is there's going to be two competing dynamics. There's going to be availability. So it's actually we're beginning to see this now. There's a huge amount of supply compression. So what was historically the most affordable form of carbon is now beginning to become more expensive. And we're going to have this kind of simultaneous effect of these human engineered solutions as they traverse the cost curve becoming less expensive. And we actually expect them to meet in the middle at some point in like 2030, effectively, where the thing that's the cheapest today won't exist in five or ten years. And the most expensive thing today will be far more competitive. So it's kind of that dynamic of, okay, what is the lowest cost thing and where is it going to end up? There's a huge amount of speculation on where that's going to land. Most numbers are between”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Solutions on the platform that people will naturally migrate to cost. I could be wrong, but within a marketplace, if I use Airbnb as an example, there's many cities that it operates in and there's many like facets to homes that someone might look for. I do wonder whether over time the buyers with carbon removal will naturally gravitate just towards, okay, what is the lowest cost solution on this platform? And let's just go with that. But I'm curious to know what you're seeing there and how you think about keeping the marketplace competitive across many solutions, if that makes sense.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“That's actually a very clear but also interesting way to frame it in that a lot of people view these markets as purely voluntary. And in a way they are, right? If a company is saying we're going to hit net zero, they're not forced to do that. There is maybe some pressure from their customers. But once they say that publicly, I like that you brought up this regulatory aspect of it, where if they're signaling that to their investors, they actually do need some proof. They need analytics. They need to show the data behind what they're saying is net zero at some point. And I know we're in the early stages of that, but I like that you brought that up because it isn't purely voluntary. There are repercussions of some of these statements or actions. I'm curious to know how you see specifically the marketplace approach that Patch has decided to pursue, how you see that evolving. And one lens on that perhaps is cost, because something that I'm curious about is I imagine you mentioned you have maybe 100 or so different.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“That's misleading investors, and that's why the SUC is going to get involved. So it's almost three phases. So, all it's a stakeholder, bring it back. It's who are they stealing the heat from most? Is it customers? Is it capital allocators or is it regulators? And it sometimes is a mix. Sometimes it's one, sometimes it's all three.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, she dollars or solving love fund money that maybe was only going to sustainable businesses. And now, if there's not meat to that strategy, there isn't a materiality to that your strategy that's misleading investors, which is why the SEC is beginning to look at this. It's not because the SEC cares about sustainability particularly, but it's because the CEOs and executive team of these organizations are making a claim to attract retail and to attract institutional capital. And if there's no grounds for that claim,”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“This particular way and hope our companies operationalize this investment thesis, which is operating sustainably because we think in the long run, it'll yield better returns. And then finally, the most lagging indicator of public sentiment is policy, right? And now we're just beginning to see some of that take place with both the SHIPS Act and the IRA. And that right now is actually primarily coming in the form of incentives, primarily tax incentives, right? If you do this sustainable thing, we are going to either give you a tax credit or actually give you money in order to fund that or enable that. we're expecting to see more and more we have a few carrots today we're expecting to see a couple more sticks come out as well and we're going to begin to see that in the sec playing with the idea of evaluating climate disclosures right where you have these investors with the sustainable thesis saying we think sustainable companies are going to perform better and then corporates make net zero claims right and say hey we're going to physically be our sustainability strategy and we want to attract all the”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“The night scene of group of people that typically moves are investors. So investors, if you're investing on a 5, 10, 15 year time horizon, they see, oh, well, these are how individuals are changing their behavior. That's what would affect how businesses perform. So now we actually have to change our investment strategy, right? Are we going to prioritize companies that operate more sustainably? Because we think they'll actually yield better returns in the next five, 10, 15 years. So then the investors capitulate. And then that'll actually look like some organizations coming to us because maybe they got bought by a private equity firm and it's been mandated. We actually work with quite a few private equity firms, three of the largest in the world. Or in some cases, it's actually the private equity firm driving or the investor driving the commitment because they made a commitment to their LPs. So another patch customer, EQT, they have a net zero commitment by 2025. And they've made a commitment to their broader LP base, which are institutional, sovereign wealth funds, et cetera, saying, hey, we're going to actually invest.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I know. So your question, it really actually goes back to his broader secular trend we're seeing, where in the last, call it decade, we've now entered the period where the first two generations who are going to be materially affected by climate change are entering their prime spending years, their prime earning years, as well as beginning to vote. And those are millennials and Gen Z. And when you have that, when you have kind of the masses beginning to care about the problem that two to three decades ago was a kind of a niche problem, and now it's becoming a mainstream problem that changes a lot of different things. So typically the things that are most reactive, organizations that are most reactive, are actually businesses, right? They see their sales drop, they see competitors winning business over them. They look into why that is. And we're realizing that sustainability and offering sustainability is one of those key elements.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“That's very cool. I'm curious to know on the buy side if you've heard from customers why they're pursuing this. Is it just someone within the company has determined this is important? Is it some sort of corporate action and some sort of legislation that they need to meet? How are these companies making the decision to decide, okay, I'm actually going to integrate into these carbon removal solutions?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So, on the buy side, we have a little bit over 150 customers now, ranging from small startups. Most of these listeners probably haven't heard of, or maybe we'll hear of eventually, to large corporates and so very large banks in Canada and North America. So here's a amount of variability there in terms of size and scope. And then on the supply side, we have around, I believe, 50 suppliers on the platform representing over 100 climate action projects, spanning 15 different project types.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“It's really up to the integrator. So, in the case of Bay specifically, they actually broadcast the fact that we're using Patch, viewing it as a little bit more of like an Intel inside, if you will, where they're alluding the fact that this experience is powered by someone else, kind of like Wealthfront does with PLAD or even like if you check out with Stripes, sometimes it says powered by stripe in the corner after Play is something very similar. And most people actually do something like that with Patch. There are a few select instances, though, where people completely white label Patch's tech and there's no mention of the patch branding or infrastructure underneath the hood.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“I really like the analogy of Lego bricks because it does allow these companies to just integrate it into their platforms or their companies or their processes. And for the end user, they don't necessarily know that this company like AfterPay is using Patch, right? It's kind of opaque in this case to the end user in terms of what that company is utilizing. Is that right?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“And whenever that's turned on as carbon neutral, that calculation is that on their side, and then the compensation happens on patch. But the end user of that experience is also someone writing code. And so again, it really depends on the kind of end customer and what your end trying to do because there's a huge amount of variability. That's kind of the power of APIs. You have these Lego bricks and you can build really whatever you want, whether it's another business application, consumer one, or even if you're just automating the back office of your own company.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“There's a huge amount of variability. And so in the case of after pay, that's a B to B to C application, right? Where we're selling act for pay, which is a business and then they're selling to end consumers. For them, it actually looks like a location within the FA app, where they're actually tracking the associated negative environmental externalities associated with your shopping that took place on after pay or if you want any sort of after pay pay pay pay pay pay pay pay pay pay payment experience across the web and then they give you the ability to select from this case six projects that after pay has curated that they feel matches their sustainability strategy. And then they expose that by API and then the end user can actually decide which of the six do I want to select. But you then have organizations like EasyPost, for example, which is actually a B2B to be sales motion, where they've actually exposed in their API the ability to launch corporate neutral shipping, but they themselves are an API. And so they've actually added a flag within their API per shipping label.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. So there's what we call future parity between the dashboard products that patch below. So those are the user interfaces. That's the web application and the API. So anything you can do in the dashboard, you can do in the API and vice versa. The reason that's so powerful is because in a lot of cases, people want to own their end user experience. So whether you're an e-commerce company, enabling organizations to take climate action or a carbon accounting platform, those software, those B2B software platforms we were talking about earlier that do the reporting, reduction and removal where patch powers, the removal element, this Lego brick of interacting with carbon markets is actually really valuable for a lot of experiences for folks who actually want to control that end user journey. And so a really concrete example is an organization like AfterPay where they've made the claim that having some sort of integrated climate action within their product or service will help them drive loyalty, acquire.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'd actually argue that it's actually the collection of functionality that makes it really valuable, right? Because it's almost like a form of verticalized SAS, where it's software built for their particular workflows that have the context of their domain built into it. So there are definitely other payment providers. There's also other localization providers. There's other ways to manage inventory, but there's nothing that really sings or plays in harmony together like Patch does for different forms of carbon removal developers. So it's really kind of, there's actually not one killer feature, if you will. It's actually them all coming together that creates this ecosystem that makes it a lot easier to run a scalar business. If you just have one or two, it tends to feel incomplete.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Are you seeing a particular facet of that be especially valuable to the suppliers? Is there an area where they're like, wow, we really can't find this elsewhere? I mean, if I think about payments as just an example, feels like there are other payment solutions out there. So is there, again, a facet of the supplier solutions that you're providing that you're like, wow, our suppliers are really in need of this?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, absolutely. So huge focus for patch is really making incredibly easy for suppliers to scale their business commercially. And so when you think about all the things any company needs to do that's not related to the core service they're offering, in this case, it's putting carbon underneath the ground or avoiding emissions in a particular chemical pathway.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Because we read these, I write to them to buy more. And so, again, having that separation of concerns is really, really important. Where we do actually play a lot is a lot more on the supply side. So we really do these kind of suppliers, the carbon care developers as our core customer, Apache, where we build and invest a huge amount of our R&D dollars on building software and systems to help their business become more transparent and more scalable.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So that's really where patch starts is that kind of compensation piece, that last step. The one kind of exception is actually with the reporting element. So we're now just beginning to see organizations like the SEC who want climate disclosures starting to have requirements on, well, you also have to disclose what type of renewable energy credits or carbon credits you're purchasing as well. And so PAS will be playing a role there because if the transacting takes place in our platform, we'll be responsible for some level of reporting. And the reason Rupturing said actually goes back to that incentive point we were talking about earlier, which is a different type of incentive problem at scale, where you wouldn't want your doctor getting commission on medicine that prescribing you, right? And so because we again monetize on volume to push through the platform, we have a take rate, it would be highly unethical for us to tell people how much to buy.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you're right that each company, especially smaller and medium-sized businesses, they're not going to have an expert to be able to understand these markets to the degree that they might want to. And so yes, having specific carbon experts, we're actually doing an episode, which maybe this will be applicable to, of thinking about the jobs of the future. And you can imagine a carbon buyer or a carbon strategist or something like that for these companies might be something that emerges more, or maybe, yes, it'll be absorbed by the big four. Speaking to that, I've heard you talk about kind of four steps. There's calculations, so calculation of the offsets that accompany is producing, reporting, then some sort of reduction or decarbonization, and then finally offsets, which we've been talking about. But can you speak to maybe across that full trajectory, are there other areas other than being the marketplace at the end that patches involved?”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“The patch team typically gets to the point where they know enough to be dangerous, if you will. The other model we've actually seen happen more and more, which is actually what I expect to happen in the majority of cases. The actual organizations working with consulting firms. So I actually believe that the big four, if you will, we're going to be doing the carbon accounting for a lot of these firms, the EYs, the KPFGs, the Deloitte of the world, these are organizations that are actually going to clean up big time when it comes to doing the carbon accounting for the Fortune 500 organization. And they're actually using Patch and curating on top of Patch. So they use all the Lego bricks that we give to create a particular bespoke solution for their client. And I actually expect that to happen much more often. So the Fortune 500 might be paying, but it's actually the Deloitte to the PWCs that are going to be doing the curating using the tools we're building.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“And so, what we're seeing is there's always going to be some level of education coming into the platform because of essentially that gap between where most people are. Because this is still a niche problem. Like climate change is obviously a huge problem. Interact with carbon markets. It's still kind of a niche behavior. So it's a huge problem of education that actually happens within the platform. And at the end of the day, a lot of these attributes, most people can actually understand if it's presented in the right way. It's actually more BUX problem. If you actually explain the concepts in very plain English and the strengths and weaknesses of going with one solution versus another. And what you have things actually compared to one another, you can understand, oh, if I could pay $100 for a ton and get more durability versus paying $10 a ton for less durability. And now I can understand what I'm paying for. So I can make a trade-off one way or another. That's why transparency is so critical. And so what we're seeing is although a lot of people are coming to paddocks with a very limited understanding, the actual education takes place in the platform and by interacting.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“Really, there's just a huge amount of variance in understanding from buyers today, where there are a lot of people coming to patch thinking every time is the same, not even understanding that the idea of commissions avoidance is different than emissions removal. So like very fundamental concepts. And then you have some that are incredibly sophisticated that kind of dive into all the project documentation presented, patched all the metadata, and actually really like something that patches that enables their power user type behavior.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“This positive environmental effect has taken place here not resulted in the same emissions or even more emissions somewhere else outside of your boundary condition. So those sabotary attributes are all the same regardless of standard today. So the standards are actually dynamic and evolving for what they're attempting to do is actually quite similar. So that's where a platform like PASH is actually incredibly valuable because you can present those four, five, six, seven data points in a standardized way, but we can react to the highly dynamic market because there are new standards cropping up all the time. Yeah. And that's what's actually really interesting why a marketplace like patch is actually so important is because the underlying ecosystem is so turbulent. And so if you go with one partner, that will not change and will react on their behalf. It gives you as a sustainability leader who's trying to leverage.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So, there are many carbon credit standards that are emerging right now, both in the kind of historical carbon credit market. So organizations like Vinera or Gold Standard, but as well as new age organizations that kind of act like credit rating agencies like Solvera D0. And we actually represent both of these data sets together. That being said, the outputs of these organizations are actually all fairly similar. So although the standards and the methane in order to get to a particular output are different, the actual end result is the same. So typically when you think about carbon, people are typically caring about what's the underlying chemical pathway, what's the geography, the price, the associated vintage. So vintage is the year that impact takes place. Is it a future vintage? The durability or permanence, how long is that positive environmental benefit last? The idea of additionality. Does that incremental dollar spend result in new climate impact that otherwise would not have happened? And finally, leakage, which is done.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“So that as we scale up market, we can scale at a healthy and ethical way. So to give you an idea of why does a past go on the ground, the kind of key element there is really making sure that at scale, patch are being said of I used to say everything is good because we make money off the throughput. So structurally, we will never do that. We have to make sure that kind of light in the sand is very clear and never crossed.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source
“We basically give a series of data and reporting requirements to our supply partners, and they have to actually input into a platform and maintain over time. And the reason it set up like that really comes back to incentives. So it's really critical to think about incentives at scale. Historically, voluntary car markets are incredibly small. They're on a scale of two, three billion dollars a year. But their poised to grow to the mid-level tens of billions of dollars by 2030 and then the hundreds of billions of dollars by 2050. And so what you have that much throughput, you have to make sure the incentives are well balanced. And so if you think about patch as an exchange, we can kind of make the relationship to financial markets. It wouldn't really make sense for us to be a credit rating agency or the auditors, right? So if you had Nasdaq also be the Deloitte and the booties, that's a bit of a conflict of interest. And so it's really important to us to have very clear boundaries today on who's responsible for what.”
2022-12-06 · a16z Podcast · Building a Marketplace for Carbon · IDENTIFIED FROM THE TRANSCRIPT · source