Boosting the Energy Transition: VC Trends Shaping the Cleantech Sector

00:00:02: Empowering Tomorrow, the podcast from VERUND X.

00:00:10: I

00:00:10: see Europe booming.

00:00:13: That to move quickly, to take great leaps forward.

00:00:16: There's gonna be mistakes along the way.

00:00:19: You can never stop innovating.

00:00:22: Welcome to Empowering Tomorrow, the podcast from VERBUND X.

00:00:28: Together with top experts.

00:00:29: We explore the future of energy in Europe.

00:00:32: We talk about innovations, technologies, and bold initiatives that are already

00:00:37: shaping a sustainable energy future today.

00:00:41: How can we reach a climate neutral

00:00:42: Europe? How can we close the innovation gap?

00:00:46: These are the questions we'll tackle in this podcast.

00:00:49: My name is Franz Zöchbauer.

00:00:51: I'm the managing director of VERBUND X, the innovation and venture unit of a

00:00:55: VERBUND, Austria's leading energy company.

00:00:59: Let's get started.

00:01:04: Welcome to Empowering Tomorrow, the podcast by VERBUND X. Where we explore the

00:01:08: innovations shaping our energy future.

00:01:13: Today we are joined by a throughly exceptional guest, someone who has helped

00:01:17: shaping the future of clean energy and innovation on both sides of the Atlantic.

00:01:22: Steve Westly,

00:01:25: Steve served as controller and chief financial officer of the state of

00:01:28: California in the team of Arnold Schwarzenegger, was an early investor

00:01:33: in Tesla, and he's the founder and managing partner of the Westly group.

00:01:37: One of the world's leading venture capital firms focused on clean

00:01:40: technology and sustainable energy.

00:01:44: Steve, your record speaks for itself and we are really honored

00:01:47: to have you with us today.

00:01:49: Welcome, Steve.

00:01:50: Thank you.

00:01:51: I'm absolutely delighted to be here.

00:01:52: Steve, we have been in close contact for nearly decade now, and every time

00:01:56: we speak, I am struck by the clarity and precision, how you assess the

00:02:00: future of energy and innovation, and especially by how effectively you

00:02:04: support startups in scaling globally.

00:02:07: So I'm really looking forward to this conversation today.

00:02:10: Likewise, I will look hard to, uh, live up to your expectations.

00:02:14: You've set them afraid.

00:02:15: A, a high bar for me.

00:02:16: I'll do

00:02:16: my best.

00:02:19: You're always great, Steve.

00:02:20: Yeah.

00:02:21: In, in our first season of our podcast we are exploring one of the most important

00:02:24: questions of our time, how we can close the innovation gap, particularly

00:02:28: in Europe and in the energy sector, and starting with the big picture.

00:02:35: The facts are clear.

00:02:36: Um, according to the International Energy Agency, 35% of the emission reductions

00:02:41: we need to reach to net Zero, still rely on technologies that aren't fully

00:02:45: deployed or commercially available.

00:02:47: That means over a third of the solutions simply doesn't exist at scale. Yet,

00:02:54: this is our innovation gap and we fail to close it.

00:02:56: We fail to solve the climate crisis, so we must to close this innovation

00:03:00: gap, and we must do it fast.

00:03:03: Steve, you have an remarkable success.

00:03:05: Turn in early stage ideas into major success stories.

00:03:09: Out of um, 45 startups, you have invested, nine went public and several

00:03:13: reached multi-billion dollar valuations.

00:03:15: That's really impressive.

00:03:18: And to put this in the context of our discussion today, here in Europe, we

00:03:22: are often strong in research, but not as strong when it comes to scaling.

00:03:27: From your perspective, what are the key barriers Europe needs to overcome to close

00:03:32: that innovation gap in the energy sector?

00:03:34: You bet, it's an excellent question.

00:03:37: I'm one of the rare people, you know, maybe your listeners have

00:03:40: met who've grew up in Silicon Valley.

00:03:43: So I've had a front row seat to the greatest explosion of

00:03:47: Innovation, technology, wealth creation, and human history.

00:03:51: And as I look at Europe, I see Europe booming.

00:03:55: It is a completely different continent than it was 20 years ago.

00:04:01: We think a lot of the entrepreneurship it has already jumped the ocean and

00:04:06: we see more and more attractive startups in Europe, and we're investing

00:04:11: more in Europe all the time. But,

00:04:15: I think Europe can do more and can move faster.

00:04:18: The two things that are really, uh, on the top of my list, I think as advice

00:04:23: is one, Europe needs more venture capital firms, financial institutions.

00:04:31: You have many, many, many, you know, UBS, credit Suisse, uh,

00:04:37: many large financial institutions.

00:04:40: But many fewer that are prepared to take the risk necessary to incentivize and

00:04:47: support the next generation of leaders.

00:04:51: The other thing we see from European startups is there's

00:04:56: often a great technical founder.

00:04:58: Europe has exceptional universities.

00:05:02: But we believe there is opportunity for your great business schools

00:05:08: to spend more time teaching innovation, encouraging risk capital.

00:05:14: I must pause here and tell you a story.

00:05:17: When I graduated from Stanford's Graduate School of Business, uh, 30

00:05:21: plus years ago, all of the cool kids, the, the smart kids, they want to work

00:05:27: for Goldman Sachs or McKinsey. Today,

00:05:31: it has dramatically changed.

00:05:33: Almost all of the top students wanna form a startup.

00:05:37: The business schools are pushing this, they're promoting it.

00:05:40: It has become part of the culture.

00:05:43: I think Europe needs to go through this same transition where the end

00:05:48: of the day, for your best and bright.

00:05:50: Should not be Goldman Sachs or McKinsey,

00:05:53: as great as those companies are, it should be creating Europe's next

00:05:59: great ecosystem for entrepreneurship.

00:06:03: And I think you've already begun this, the Samwer brothers who I worked with, um.

00:06:07: At, at eBay in the old days because we bought a firm called

00:06:11: Alando that they had started.

00:06:13: You're seeing extraordinary success stories, the same with the founders

00:06:17: of Skype, one company after another, and today our fastest growing

00:06:22: company is ENPAL out of Berlin, Europe's first major green unicorn.

00:06:27: So Europe is on the path forward.

00:06:30: Just needs to move faster, more risk capital and really build up

00:06:35: that entrepreneurial expectation in your best business schools.

00:06:39: Um, thanks for this

00:06:40: first thoughts, um, that's a clear recommendation.

00:06:43: So, uh.

00:06:44: In the direction of a stronger venture mindset, um, if it looks and compare

00:06:51: Europe and, and the Silicon Valley, um, what can we learn from, from, from your

00:06:55: side, but without losing our own strength?

00:06:57: What are your thoughts on that?

00:06:59: You mentioned so that we have great some, um, universities and researchers and, uh,

00:07:03: institutions, but what is really needed to see a tighter integration between venture

00:07:08: capitalists, tech startups, and industry?

00:07:10: So I think it's this mindset that

00:07:14: to do innovation, to do change, potentially radical change,

00:07:19: there has to be a little bit more of a risk mindset and we work with a lot

00:07:24: of corporate strategics in Europe and they, they understand innovation, but

00:07:30: they're not quite understanding or comfortable that there needs to be

00:07:35: a leap that gets taken and that means risk.

00:07:39: And for a lot of the bigger European companies, you know,

00:07:42: taking too much risk is

00:07:45: Uh, it, it runs counter to, to the, the great, uh, cultures

00:07:48: in Switzerland and Germany.

00:07:50: I think in, in, in particular, uh, people need to get comfortable with that risk.

00:07:54: And we're seeing large innovation centers in London,

00:07:58: uh, springing forward in Berlin.

00:08:00: There's a super active, um, uh, entrepreneurial sector and we're

00:08:06: seeing it spring up in Vienna and we're very excited about this, but I think

00:08:11: there needs to be an understanding

00:08:13: from the major financial investors and corporations that to get ahead

00:08:19: to move quickly, it requires a willingness to do things sometimes

00:08:24: a radically different way.

00:08:26: And not every one of those bets is going to succeed.

00:08:30: But if you look at the great entrepreneurs of our time, whether it's

00:08:33: Steve Jobs, Jensen Huang, Elon Musk.

00:08:37: They're all risk takers, and Europe in general needs to get its arms around

00:08:44: this notion that to move quickly, to take great leaps forward, there's

00:08:48: gonna be mistakes along the way and you can't fire those people or let

00:08:52: this be a career ending situation.

00:08:54: You need to support your entrepreneurs, even those that have the occasional miss.

00:08:59: Okay, what does it mean

00:09:01: for established companies like established energy companies like

00:09:04: VERBUND? Um, we're also in the field of, um, doing corporate venture capital

00:09:08: and pushing innovation forward.

00:09:11: But what we do you expect from, uh, established companies and you have, um,

00:09:15: 33 of the world's largest corporations and innovation leaders in your fund.

00:09:20: Do you have some best practice examples, uh, at the corporate level as well?

00:09:24: Yeah, I mean, let me give you an example

00:09:27: with the German auto industry.

00:09:29: We work with Audi and Volkswagen.

00:09:31: These are great companies, but I think they had done so well for so

00:09:38: long it was hard to break out and

00:09:41: realize that the future might be going in different directions.

00:09:44: I think Europeans and especially the German auto industry, was a

00:09:47: bit late to electric vehicles.

00:09:49: They, they didn't see that Tesla thing coming.

00:09:52: They weren't looking over the horizon and understanding that just because

00:09:58: German vehicles, even Americans would admit we're probably the

00:10:01: best for the last half century.

00:10:04: Uh, but that is no promise

00:10:06: you're gonna be

00:10:08: the best for the next century, and I think we call this in America, I

00:10:15: call it the, the paradox of being number one, if you're the best auto

00:10:19: company, like say Volkswagen, or if you're American, it's easy to say

00:10:24: we're the best, or maybe Harvard or Stanford as a university or Cambridge.

00:10:29: That doesn't mean you can stop innovating.

00:10:33: You can never stop innovating and if you become too comfortable.

00:10:37: With your dominant position, others will pass you by.

00:10:42: One of my favorite quotes is from Steve Jobs who said, if you are

00:10:47: not busy, obsoleting your current company and business model,

00:10:54: someone else will be.

00:10:56: And I think to bring this back to Verbund, we view Verbund as

00:11:00: one of the most progressive

00:11:02: and profitable utilities in all of Europe.

00:11:05: And one of the things I like about Verbund is you are not standing on your principles.

00:11:10: You are continuing to invest in innovation.

00:11:13: Whenever I talk to Franz, you or the Verbund team.

00:11:16: They're always saying, what's new?

00:11:18: What should we be trying next?

00:11:19: Where's the future going?

00:11:21: These are the precise three questions to ask.

00:11:24: I think VERBUND is doing the right things.

00:11:26: Let's see if we can, uh, help get you there faster.

00:11:29: Steve, um, you've been also one of the first investors in Tesla.

00:11:33: Um, and, um, if you look to the future and shift to the investors lens,

00:11:37: and if you were to place a big bet on, um, a European energy startup

00:11:41: today, what would you look for?

00:11:43: Uh, what makes a clean tech founder idea stands out to you?

00:11:47: Well, what we did at Tesla is exactly what you should be doing

00:11:53: today.

00:11:54: So at Tesla we were looking at global themes.

00:11:58: Obviously there's a global move to decarbonize, but we were also watching

00:12:03: carefully at the the precipitous, the rapid downward cost curve of batteries.

00:12:11: Because simply put, 30 years ago, when General Motors came out with

00:12:16: the EV one, the power density and batteries was so poor and weak.

00:12:22: Uh, you just laughed at these vehicles.

00:12:25: They took, uh, 11 seconds to get to a hundred kilometers an hour.

00:12:30: They had a short range.

00:12:31: They were a joke, but we knew because of the revolution and handheld

00:12:36: devices and iPhones and laptops, batteries were becoming more efficient

00:12:41: quickly, and we also saw the future.

00:12:45: Perhaps a little before others that as battery prices came down, electric

00:12:51: vehicles would not only become possible, they would become better.

00:12:57: And so instead of trying to understand the future by looking in the rear

00:13:02: view mirror, we were looking at where things were going, and that's why

00:13:08: we made what at the time was considered to be a a radical, risky bet in

00:13:13: batteries and electric vehicles, but we knew because of the cost down

00:13:17: curve, it was not a radical bet at all.

00:13:20: It was just a matter of time.

00:13:22: And as people have seen, the world is now

00:13:26: rapidly moving towards electric vehicles.

00:13:30: One fifth of all cars sold on the planet last year

00:13:33: were electric.

00:13:35: This year will be one fourth, next year one third, and the cost continue to

00:13:40: go down as the Chinese auto company.

00:13:44: BYD goes global.

00:13:46: So the same thing I think is true for Verbund. You need to look at

00:13:52: the trends that are coming, and I'll tell you the largest trend.

00:13:56: Is this explosion of artificial intelligence is creating the largest

00:14:06: build out of data centers in history.

00:14:09: And when you combine that with the electrification of global

00:14:14: transportation modes, we are about to live through the largest

00:14:21: growth in energy demand and build out of energy supply in human history.

00:14:27: And that means all of us all over the planet need to get smarter

00:14:32: about new ways to produce energy.

00:14:37: That are greener than the ones we've had in the past, like coal to A, keep up with

00:14:42: the demand, and B, reduce global warming.

00:14:46: It is not so easy to do all these things together, but there are a lot of

00:14:49: technologies we're excited about from geothermal to virtual power plants, which are

00:14:56: probably at the top of our list for deployment.

00:15:00: Um, um, Steve, your, your message, it's not so easy.

00:15:04: It brings me to a quote of Arnold Schwarzenegger.

00:15:06: You can have results or excuses.

00:15:10: Yeah.

00:15:11: So it's, it's, it's, I think that's right.

00:15:13: Yeah.

00:15:14: Um, As you work together, so, um, with Arnold during your time

00:15:18: in, um, in the government, in, in California, and I think, so you're

00:15:21: still a close friend of Arnold.

00:15:23: Um.

00:15:25: What's your perspectives on how you're shaping together on the future of energy,

00:15:28: uh, on a, on a personal coalition

00:15:30: You both?

00:15:33: You know, it's interesting you mentioned Arnold Schwarzenegger because

00:15:37: I've worked with him extensively, both inside government and, um, in the gym.

00:15:43: I've worked out with him, uh, and even recently in Vienna.

00:15:48: To me, he is one of the most inspiring people

00:15:54: I've ever met or witnessed. He's the only person I know who's become a world

00:16:02: champion athlete as a bodybuilder and comes to America and says, I want to

00:16:08: come to America to become an actor.

00:16:10: No a star.

00:16:13: And he becomes the top box office grossing star in the world for

00:16:17: close to a decade, and then says he wishes to go into politics.

00:16:21: No one thinks this is possible, and within a short time, he's

00:16:26: become governor of California, the world's fifth largest economy.

00:16:30: For one person to do this in one life is extraordinary, and I've thought

00:16:37: a lot about why did he do this?

00:16:40: How? And I believe the answer is, he is the single most positive

00:16:48: person I have ever met in my entire life.

00:16:51: Once he has a vision on what he must do, he is absolutely unstoppable.

00:16:58: And I think there's a message there for VERBUND and the global energy

00:17:06: industry, there's a challenge before us, we have to build more power,

00:17:12: faster than ever before, and increasingly without traditional carbon based

00:17:18: fuels like coal and even natural gas. I am utterly convinced we can do it.

00:17:25: We have a clear vision at the Westley Group for how to do it.

00:17:28: Now it's a matter of executing.

00:17:31: Without any excuses.

00:17:34: And one of the things you learn if you spend time with uh,

00:17:38: Governor Schwarzenegger, is he doesn't want to hear excuses.

00:17:42: He just wants to hear the positive vision and how we execute.

00:17:47: By the way, I think Mario Draghi has identified a similar vision

00:17:52: for how to fix the European economy, how to restore faster growth, how to

00:17:56: bring more innovation to the continent.

00:17:59: And I will tell you from a Silicon Valley standpoint, everything

00:18:03: Draghi is calling for is exactly what Europe should be doing.

00:18:07: And I think frankly, VERBUND is already doing it.

00:18:11: I just want to make sure we can help, uh, VERBUND do it faster

00:18:15: for Austria and Europe, the

00:18:16: continent as a whole.

00:18:18: Um, thanks Steve, uh, for this perspective.

00:18:23: So in, um, to summarize, maybe this this conclusion from the

00:18:27: political side, uh, do you think that, um, we have the best, um,

00:18:32: regulatory framework already, already in place in the US and in Europe?

00:18:36: So to

00:18:37: Driving investment in the US and Europe so in for clean energy.

00:18:41: You have in the US the Inflation Reduction Act.

00:18:43: In Europe we have Green Deal, Fit for 55.

00:18:47: Uh, do you think we need more regulations on to support, um, renewable energy or do

00:18:53: you think it's just a matter of execution?

00:18:55: Uh, we have the framework now, just let's do it.

00:18:57: So I think the private sector knows exactly what to do, our utility

00:19:03: CEOs are amongst the most forward-looking in the world.

00:19:08: Uh, the challenge for the US as you know, from reading the papers is we've had

00:19:13: a change in, uh, political leadership.

00:19:17: I, I think the Biden administration understood very clearly

00:19:21: Uh, this is a case where I'm not afraid to admit as an American. But China

00:19:26: really had the correct game plan.

00:19:29: They wanted to become a leader in solar and wind,

00:19:32: Uh, batteries and electric vehicles.

00:19:36: The government heavily subsidized those industries, and we in America

00:19:43: sometimes complain about that.

00:19:44: But I agree with Governor Schwarzenegger, you can't live in a world of excuses.

00:19:49: And by the way, we subsidize some of our own industries as well.

00:19:54: The Biden administration, I believe correctly said, Hey

00:19:58: to keep up in this energy world with Chinese, and in fact to lead,

00:20:03: we need a massive stimulus program.

00:20:05: The Biden administration got that passed with bipartisan support

00:20:09: and I believe set the country on the best path that has been in.

00:20:14: Unfortunately, the Trump administration has decided to go a different direction.

00:20:18: I believe it's gonna slow America down and

00:20:23: I think that is a regret.

00:20:25: Now, it does create the opportunity for Europe to pick up the slack

00:20:30: for Europe, lead in solar,

00:20:34: battery production,

00:20:36: EVs.

00:20:36: It may require some government support, it may require some stimulus, but this

00:20:41: is the future, and I think Europe has a rich opportunity and VERBUND at the front

00:20:48: of this movement as the most profitable

00:20:52: utility in Europe to really emerge as an innovation leader, and I will tell

00:20:58: you exactly where things are going, but it is wise to look at what ENPAL

00:21:05: has done to become the solar installer leader in Germany, then the battery

00:21:14: Powerwall leader in central Europe

00:21:18: and didn't stop there, then became the leader in installing heat pumps,

00:21:23: but is always looking forward.

00:21:24: It's now becoming the leader in installing smart meters and now

00:21:29: virtual power plant opportunities.

00:21:32: And so they have quietly aggregated in enormous amount of energy capacity that

00:21:38: they can help provide to Europe's largest utilities when you have times of maximum

00:21:46: demand as Europe has just seen over the last 30 days with your massive heat waves.

00:21:51: So I am very optimistic about Europe.

00:21:56: I think you have the right policies.

00:21:59: I think you have the right

00:22:00: companies like VERBUND leading and now you have more and more models

00:22:05: Uh, we call them green unicorns, like Enpal.

00:22:09: So I am optimistic about the future and that's why at the Westley

00:22:13: Group we're planning to open our next office somewhere in Europe.

00:22:18: We want to be where the action is.

00:22:20: That, that are great news, uh, Steve, that you, um, that your

00:22:23: appetite for investing, in European startups is increasing.

00:22:26: Uh, and you're also planning on coming, uh, to Europe, um, with an own office.

00:22:30: Um, what excites you most right now about the potential for innovation Europe?

00:22:34: Do you have some one or two thoughts on what's the most exciting

00:22:38: things are going on in Europe?

00:22:39: So,

00:22:40: well, yeah.

00:22:42: I mean, at first, at the top Level,

00:22:45: when I used to come to Europe in the old days, people would talk about

00:22:48: the great history and tradition and the great companies, you know,

00:22:51: Mercedes and Deutsche Bank and so on.

00:22:54: Uh, now everybody's talking about innovation.

00:22:57: They're talking about Mario Draghi.

00:22:59: They're talking about, you know, universities.

00:23:01: I know St. Gallen is really, uh, trying to become a leader in innovation,

00:23:06: and I know universities all over Europe and Vienna are offering innovation

00:23:11: programs at the business school.

00:23:13: I think there's been a, a traumatic, a noticeable uptick in the

00:23:19: interest in becoming an entrepreneur.

00:23:21: You just didn't hear that in Europe as often.

00:23:25: Uh, 20 years ago, people wanted to go work at investment banks in

00:23:28: London or car companies in Germany.

00:23:30: That's changing now.

00:23:31: I think everybody wants to be, uh, maybe not Elon Musk, but perhaps Jensen

00:23:37: Huang or Mark Zuckerberg or Steve Jobs.

00:23:40: But, uh, we think it's become part of the culture in Japan.

00:23:44: Uh, sorry, in Europe.

00:23:45: It's not just looking at

00:23:47: Europe's extraordinary, uh, history.

00:23:51: It's looking with equal excitement at Europe's future, and I think

00:23:55: it's a very exciting future.

00:23:58: Um, thanks Steve.

00:23:59: Um, finally a question on, on working together.

00:24:01: Uh, it's great that we have, um, this conversation today at the Podcast

00:24:05: Empowering tomorrow from VERBUND X, but how we could foster more climate tech

00:24:09: innovation investment across the Atlantic?

00:24:12: And what would be your single most important advice to Europe, uh,

00:24:16: for closing the innovation gap?

00:24:17: Well,

00:24:17: again,

00:24:17: I think it's

00:24:19: providing

00:24:20: investments, uh, to bring more funds there.

00:24:23: I think Europe is so large, you need to have a vibrant venture ecosystem

00:24:28: in each of your major cities.

00:24:30: You know, Berlin, London, uh, it's already starting, but I think the next

00:24:36: big areas to move are likely to be, uh, Vienna, maybe Zurich, possibly Barcelona.

00:24:42: Um, we're looking at all of these areas.

00:24:45: Copenhagen's also booming.

00:24:47: That's why we plan to come to Europe and we think the EU is extraordinary.

00:24:53: Um.

00:24:55: Because of the EU presence, the ease of use, uh, to travel around one country

00:25:00: to another without, uh, passports.

00:25:03: Uh, there are many things we find attractive to Europe.

00:25:06: Now, the one thing I think Europe does need to be

00:25:10: careful about is, uh, Europe has very, uh, friendly employee laws and, and there's

00:25:17: talk of 35 hour work weeks and so on.

00:25:20: Not all of that is, uh, a, a good fit for entrepreneurship and, and

00:25:25: people who have companies that must need to, you know, work longer weeks.

00:25:31: But we think that's, those things are fixable.

00:25:34: But I think if Europe can continue on with its commitment to innovation.

00:25:40: And, um, make the investing climate attractive to firms like ours.

00:25:48: Europe is going to bloom for a hundred years.

00:25:52: Steve, thank you so much for your time, your insights, and your vision.

00:25:57: It's been an absolute pleasure to have you with us.

00:26:01: Your deep understanding of the energy transition from policy to startup

00:26:04: execution from Silicon Valley to Europe is both inspiring and incredible valuable.

00:26:10: Thank you for being with us today, and thank you for your work you

00:26:13: continue to do to move the world towards a more sustainable future.

00:26:19: And to our listeners, thank you for joining us on Empowering Tomorrow.

00:26:23: Stay tuned for more conversations with the voices shaping the future of energy.

00:26:27: If you have enjoyed this episode, don't forget to subscribe to Empowering

00:26:32: Tomorrow and leave us a review.

00:26:34: Your support helps us to bring more fascinating guests like Steve and

00:26:38: keep the conversation going around

00:26:39: Innovation, Climate tech and venture capital.

00:26:42: And remember, the future of energy depends on the things we do today.

00:26:46: Let's empower tomorrow together.