Seth Bannon on Biden Administration & Climate Tech Startups

The outcome of the U.S. election remains uncertain as voters head to the polls tomorrow. It may take some time after tomorrow to determine a winner. However, it is always relevant to discuss with investors their perspectives on the future, and many are considering the potential consequences should Joe Biden win the presidential race.

Specifically, venture capitalists concentrating on climate change are enthusiastic about the possibility of a president who views climate change as a critical, existential issue. This is particularly true considering the previous administration’s actions, which included the official reversal, rollback, or revocation of 70 environmental rules and regulations over the past four years.

Seth Bannon, a partner at the seed-stage venture firm Fifty Years, which focuses on impact investing, is among those contemplating a Biden presidency and how his administration could best promote climate technology while simultaneously addressing the COVID-19 pandemic and economic concerns. We recently had a conversation with him on this topic.

TC: What are your thoughts on Joe Biden’s comprehensive climate plan?

SB: The Biden campaign’s proposed approach to climate change is exceptionally promising. It envisions substantial investment in research and development to foster innovative climate solutions, and then leveraging the government’s resources to deploy these technologies widely. The plan includes a $400 billion investment in advanced, more affordable batteries for electrification and $300 billion for cleaner power generation – a truly exciting strategy. It represents a modern economic plan for job creation, and from the perspective of someone building businesses in Silicon Valley, it’s precisely the kind of initiative we would hope to see. The focus is not simply on implementing further regulations or restrictions, but primarily on developing solutions to overcome the current challenges.

TC: If you had the opportunity to advise his team directly, what recommendations would you offer, based on the plan and your observations in your daily work?

SB: The plan includes the establishment of an ARPA-C, a new federal agency dedicated to low-carbon energy technologies, modeled after existing agencies like DARPA, the Defense Advanced Research Projects Agency, and ARPA-E, the Advanced Research Projects Agency-Energy.

I would suggest allocating a budget to ARPA-C that is ten times that of DARPA, given that the magnitude of this threat is ten times greater than any posed by a foreign adversary.

Furthermore, I would recommend structuring its interactions with startups similarly to the National Science Foundation and the National Institutes of Health, where companies can apply for initial grants – perhaps ranging from $125,000 to $250,000 – and, upon achieving specific milestones and providing data to the government, potentially receive an additional $1.5 million. This would significantly accelerate progress in the field and unlock substantial funding for companies dedicated to fundamental research and development, focusing on areas like carbon capture, utilizing biology to decarbonize industries, and shifting away from animal agriculture – all currently unresolved technological challenges. Government funding could be instrumental in bringing these solutions to fruition.

An even more effective approach would be for the government to offer a startup, for example, $250,000 with the potential for $3 million upon meeting milestones, and ultimately committing to purchase the technology if further milestones are achieved. While technical risk is a factor, market risk also exists. A government commitment to be a first customer could greatly encourage greater private sector involvement.

TC: Assuming Biden were to be elected, he would undoubtedly need to prioritize controlling the pandemic and restoring employment. Realistically, what would be left to address, and in what order?

SB: A comprehensive, all-of-the-above strategy is essential. The positive aspect of climate tech is the diverse range of approaches available for decarbonizing numerous industries and removing existing pollutants from the environment. We have companies in our portfolio working on decarbonizing food production, the fashion industry, data storage, transportation, chemicals, and mining. Each sector of the global economy contributes only 5% to 10% at most to greenhouse gas emissions, so a broad focus on decarbonizing many industries is necessary. If I were to prioritize a few areas, I would focus on food, transportation, and energy.

TC: What would be the implications if Trump were to be reelected?

SB: A second term for President Trump would likely result in no progress on climate tech, which would be a setback. Even conservative elements in European countries are recognizing that investing in climate tech enhances competitiveness. Regardless of one’s beliefs, many sustainability-focused companies are developing superior products at lower costs. However, this administration does not share that perspective, and a reelection would likely lead to the continued dismantling of existing regulations.

TC: You have experience in politics, having served as an operations director for Connecticut Governor Ned Lamont and as an organizer for the Obama presidential campaign. What are your feelings as we approach tomorrow?

SB: I feel optimistic as we move forward. While the election outcome is not yet determined, I am hopeful about the current situation. I believe the country is ready for a period of healing.