E713 | Marta Sjögren, Paebbl on Scaling Carbon-Storing Materials Through Capital and Industrial Alignment

0:00Andreas Munk Holm:Welcome back everyone to the European VC podcast. Today's conversation sits at a rare intersection point between deep climate science and deep capital experience. Marta Sjögren, and I am Danish, so I will definitely mess up the Swedish name here, is the founder and CEO of Pepl, a company turning CO2 into a permanent mineral sink. And before that, she was also a partner at Northzone. This is a conversation about how seeing the system from the investor side reshapes how you fundraise, how you solve problems, and how you build a company when the stakes are planetary and the timelines are long. Carmel, I wanted to bring you in to say just a bit about the table because we're doing this series together to try and put emphasis on the importance of supporting women founders in this space because we are clearly behind all numbers that would be good when it comes to that.

0:46Yes. Hi, Andreas. It's great to be here. So, Carmel, I had the table. We are a community for co-investing in women-led climate ventures. we bring together syndicates, funds, family offices, and CVCs globally to share deal flow. Early stage usually precede to A, where there is at least one female founder holding substantial equity. We qualify that as an equitable state compared to a male counterpart, no more than a 60-40 split between them, because that matters, and doing anything that has a direct and substantial positive climate outcome. So sector agnostic, climate positive. And we're currently building out the Table Foundation that will provide recoverable grants.

1:29You can think of them as a forgivable revenue-based loan to come alongside our community and provide catalytic capital to the underfunded climate innovation while closing the funding gap for women.

1:45This show is not investment advice, and the hosts of this episode may be invested in the funds and companies featured.

1:51Andreas Munk Holm:So Marta, now lights on you. I just said something with a permanent mineral sink. Maybe you can be a bit more concrete and uplift the conversation a little bit to those that actually know tech to talk about what Pebble is. Sure. And I'm going to warn you that there is really no shortage of puns in this space around being concrete, constructive, and a whole bunch of other things. So what does Pebble do? We take captured CO2. We don't do the capturing part ourselves. There's a lot of good companies doing that. We take captured CO2 from flue gas or direct ocean capture, direct air capture, and then we convert it into a stable mineral using other minerals.

2:37Basically, we get the CO2 to react with calcium or magnesium silicate minerals, and then they form new mineral. And therefore, the CO2 is trapped for a very, very, very long time. In fact, it's very difficult to untrap it. And what that's used for is in the built environment to basically replace some cement. So end-to-end, it's a dual benefit. You get rid of the CO2 and you're replacing a highly emitting material in the market today.

3:06Andreas Munk Holm:So, Marta, we've had a couple of episodes with founders building in this space as well. And the continuous question that I always ask is how tied are you to the regulatory environment and the supporting infrastructure that there is to try and help climate positive startups versus being purely commercially a great solution for the market? I think that's an interesting question. We are in a highly regulated market. That's one side of it. So it's not like we can get away from regulatory either inhibitors or enablers in any case, right? The building materials market is highly regulated. You need to be certified.

3:49You need to be under certain standards. There's a lot of regulation there. Does that mean that we are tied to regulatory measures that incentivize folks to buy us from subsidies and those kinds of measures like an intersection of finance and regulatory? No, we are building a company that will be able to be competitive in the market without any subsidies or similar long term. We will be slightly more expensive in the first three years of production than what is out there in the market. However, we envisage that we will be price competitive in the market within the coming five years. So that's kind of from without any regulatory support.

4:34That said, the market around us is also facing quite a bit of regulatory pressure. So that works in our favor. The EU ETS is one good example of this with a carbon tax being charged on emissions and those allowances also being phased out. We are affected by any changes in schedules of that so that the gap between how competitive we are in pricing with or without EU ETS is, of course, there naturally. Knowing what you know from an investor perspective, how does that bring you into packaging your offering and your roadmap in a way that's maybe slightly easier for some of the investors to make the leap forward?

5:20So I think coming with an investor background, it has its benefits for sure, whether it's through understanding what momentum to focus on or what stage of the company or how to package the so-called in-between stages, which are, you know, everyone, every company goes through in-between stages. You don't quite hit your milestones, but you hit a bunch of milestones. So that is certainly helpful. I think the other component is really understanding the mindset of an investor and what do they really care about? What is it that's important to them in a negotiation? And then trying to figure out a win-win.

5:57I'm a big believer in, you know, if there's an interest in doing something together, there's always a way, right? And if you speak investor language, so to speak, that's made easier, right? Because then you're there to just ask, hey, what are you here to de-risk? Like what are the top three items that you need in our data room for your own investment thesis to be proven or disproven, whichever way around. And then making sure that the data that we have is in the right shape so that it's easily digestible. In today's world, we are inundated with data, with deals. You know, like I remember I remember being on the other side and within two minutes of looking at a deck or even less than that, I probably within 30 seconds of looking at a deck, I would know if I'm more or less interested.

6:45It is brutal. And now being on the other side and experiencing that now when an investor looks at it for 30 seconds and I track, of course, what they look at. I'm like, what? You haven't even gone through like the whole deck. Like, what is this? So it's easier in one sense, but it's also challenging in that you're trying to put yourself into the mind of that particular investor, trying to understand how educated they are in the space that you're in, and then to build conviction and build trust quite quickly. It's very interesting. I mean, I have a lot of fun. And also, of course, a lot of the, like, I know a lot of the investors.

7:22So they will just sort of say, well, you know what I'm going to ask you? And I'll say, yes, I have, we have the answers. I think one of the fun things that may be worthwhile to this audience to share is that because I know what questions will be asked by a lot of the investors in the first instance, we kind of went ahead and built an FAQ that targets, that gets all of those questions. And then we just say, you know, just dump it into your like whatever AI thing and you can get all of your answers. And then, you know, let's not waste each other's time unless you've gone through the FAQ and gotten your initial answer.

7:53So that's like a tip that I can recommend to others to do. It's very effective. You don't end up being in these like back and forth calls on things that they can just read.

8:03Andreas Munk Holm:Let me ask you just a funny question, because I think it's a very tactical piece of advice. How come you dump the FAQ and tell them to put it in their own instead of giving them a link to ChatGPT and say, this is our FAQ. You can ask anything you want, but this is the link. Use that where you have a bit more of a controlled environment. I'm asking you this because I'm sure that there's a lot of founders that are trying to figure out other smart ways to do this. And I can see both good things about it. I can also see, well, the fact of the matter is that every VC has their own processes. they're not going to do anything that they're not used to doing.

8:39Andreas Munk Holm:They trust their own GPT. They don't trust others, blah, blah, blah. So for that reason, just give them the FAQ and then they'll take it from there. It's actually quite simple. We use DocSend as our data room and I can track who accesses what there. So with a link, like I don't, maybe I haven't figured out how to track ChatGPT links, like to see if they're actually engaged, but I really don't like stale conversations. So we just like we'll switch off access if somebody hasn't accessed the document within a certain amount of time, because I don't want them to be like lurking around our data room and then coming in eventually when we're not on top of the conversation.

9:16So that's the simple reason why. There's probably better ways to do it, I'm sure.

9:19Andreas Munk Holm:Now, let's double click on that because and this is where I think we should focus the conversation because there are a few that have your background. And for that reason, we'll be able to to structure a fundraise process and everything as succinctly as you can. So talk about that, the importance of measuring behavior by investors in the data room. You have your pipeline, right? You have your whatever you're using. We use Atio, for example, right now. It's just like any deal, like you're selling something or like whatever, whatever you're tracking as a pipeline. You need to be very brutally honest on what you have in that pipeline.

9:55If you have your, you know, what sometimes startups do is like, oh, I have this amazing pipeline. It's like billions of dollars in pipeline, but actually qualified, the folks that you're actually having conversations with is like a sliver of that. It's a few percentage points of that. And so when you have that huge pool of investors, and I can tell you what we've talked to and are talking to quite a few investors, you really want to know that you're focusing your time on the right ones. So being able to kind of stalk their behavior in your data room is very important because you will get signals.

10:26You will understand if somebody is engaged in conversation in your process, they will be keeping track of what you're uploading in the data room. They'll be fast to react either directly or indirectly by react. I mean, the moment they get that notification of like Pebble has updated something in their data room, within a few hours or at most within a day, they should have accessed that document. Otherwise, you have a stale conversation. So you can really figure out where you're at in their priorities through this. The other thing you can do is understand who is a bad-behaved investor. This is a particular pet peeve I have, and I'm not going to name any names because I have addressed this directly with those general partners and their LPs, actually.

11:14You do not download a data room and then set a rejection letter or a rejection email like five minutes later. It's just so distasteful that it really annoys me. So you can spot bad behavior as well, and then you can give them a chance to correct that behavior, or you can use that information in other ways.

11:35Andreas Munk Holm:Yeah, that's obviously a very big breach of trust. Hold on, not just trust. It's a big breach of the NDA that they also, we all sign NDAs and then we're very specific, like, you know, everyone has in their NDAs that they will destroy the files. If they're no longer in our conversation, they will destroy that access to that information. I'm very deliberate about following up on that. I can tell you that folks don't do it increasingly. Okay. And this is, I think, very, very bad behavior that I think founders should be aware of. And it's fine. You know, part of our job is to educate the market, but then do tell me if you're looking to just be educated in the market and, you know, don't waste time off founders if that's all you're doing in your face.

12:18Like I, at the same time, I have had some really good discussions with investors that I have, they don't have a thesis in the space yet. And then there's, they say, you know, I don't, I don't yet have a thesis in this space, but I'd love to learn what you guys are building. I'm going to build my thesis over the coming X amount of time, six months, a year, and then let's talk deal, maybe that. And I'm like, you know what, that's fine. Very, very happy to do that. But the in-between, the non-communication is very frustrating. And I wish more founders came out and spoke about this as well.

12:52Andreas Munk Holm:It's a classic that founders are like, on the one hand, you have VCs saying, dude, show me everything. because it's like the only way I can diligence this and I am seeing thousands of deals. Why would I care about your thing? Like, I'm not about that. And then they say founder reputation is everything. I would never violate your trust. All these things, those are the VC talking points. But then in the deep tech space, especially, of course, you have a lot of founders that are not comfortable and are requiring, and are trying to stage gate access and all of these things. How do you navigate that?

13:31Andreas Munk Holm:Because you know the investor mindset 100%. So where have you come down on that, knowing that you have a lot of sensitive material that you don't want to be sharing everywhere? But at the same time, you also know that there are some rules in the VC game that I have to adhere to. Yeah, so we share our like intro deck without NDA and we even share like a teaser to the FAQ without the NDA. That's called gate zero, basically. Once we have come far enough in the discussion so the investors, OK, interesting, I would like to dig deeper. Then we have them sign an NDA and then we let them into gate or zone one in the data room.

14:10This is where you have everything, all of your commercial, basic team, like you don't have the very sensitive stuff, but you can do all of your commercial diligence. You can do some of your technical diligence, can do some of your, what is it like, you know, compliance, regulatory, all of that stuff, diligence. And then it's only when you're at term sheet stage that we go into gate two, basically. And gate two of the data room, it contains very sensitive materials like the results of technical diligence, results of IP or legal diligence, all of the stuff that basically you're paying some kind of a third party to do external diligence on you.

14:48That's post-turnsheet for obvious reasons also because then you're kind of in deal mode.

14:53Andreas Munk Holm:There is a usual VC saying, which is data rooms are where deals go to die. But obviously, you don't think that's true. It also, of course, there's a lot of connected here to the complexity of what you're building and how far you are and the stage, the size that you're raising. Can you talk a bit about that? Just because it's it's there's a lot of unnuanced advice going around. And this is a sentence everyone will remember. So true, false. When is it true? When is it not? And maybe also how does it shift from your earlier days to where you are now? Because you're in a different position at this point than when you just started and when you're doing your free seed seed, even the A round probably.

15:39happening? Yes. So I think the sentence data rooms is where deals go to die. I think in the very early stages makes a lot of sense because you don't have anything in the data room. It's sort of like when you're like, I don't know, in high school or university and you have a LinkedIn profile and you're just trying to desperately put something onto that LinkedIn profile. So you appear somewhat employable. That's kind of how I think about data rooms at pre-seed, seed stage. But then, you know, the further you go, the more data you obviously have. And so then there is also the bar for what kind of diligence investors do just increases with every single round.

16:27The more money you raise, the more years of data you have, the more you will need to show that data and have that be scrutinized. So I would say that in your pre-seed-seed phase, yes, the data room part is a bit of a joke, just like modeling in your pre-seed-seed phase is a bit of a joke. At series A, there is certain quote-unquote metrics, if you will, that in some ways make sense for software companies, right? The revenue targets, the whatever. For deep tech companies, they're kind of not really in sync with how deep tech companies are built, that's when, again, understanding of what really matters as momentum at what phase and how to show that momentum through your data room starts becoming important.

17:14So yeah, I'm a bit split on that because I would want to do diligence. I was typically a series A investor. I would want to do some diligence, but the other side of it is that it is relationship based. It is about trusting the team. And one way to show that that team is investable is to see their track record of delivering against plan. So one of the things that I would typically do, and I still love doing it is, and this is what we have in our decks is, you know, typically you will want to see what was the previous deck, like the previous rounds deck, what did they say they would do and what have they done?

17:48So in our deck, we have a page literally saying, this is what we said we would do, and this is what we've done with the Series A money. And that builds trust then. And they can go in and say, okay, yes, I can find all of these documents that say that, yep, we have done it. So you're very, very deliberate in your approach. And so in building a very complex solution, so we have chemistry, and we have manufacturing, and we have a financial vehicle that we haven't talked about yet with the carbon markets. But within all of this, there's also a very mixed capital stack that needs to come and support, and also a wide array of types of investors that you want to reach out to and give access here.

18:34So when you were building up from your, let's say, seed stage to your A, and then after that, How are you thinking of your mixed capital stack beyond VC, but also within VC and the different type of VCs? So we were very deliberate. We are very deliberate with how we build our cap table. And also the capital stack, the diversified pool of finance instruments to finance different parts of this equation in the right ways, right? So our seed round, we were very adamant that we wanted to have some of the best focused climate tech investors in the world. We wanted to have a regional one here from the Nordics.

19:18I'm based in Sweden. So there we partnered with Pale Blue Dot. Hi, Hampus. We love you guys. So that was one of the seed investors. Then we had another European long term. This was important to us also, a climate tech investor. We picked a 2050 from Paris. Marie Eclon. Hello. which is an evergreen fund. Again, not pressured to sell super fast. And then we also wanted to have somebody from the US and one of the best names in the business at pre-seed, seed phase is Grantham Foundation. So we have the Grantham Foundation, Highmark from Kites, that also backed us. And then it was a bunch of sort of our network friends from the entrepreneurial angel space that came in.

20:03So that was important to us. Then at series A, frankly, we got so many no's in our series A that we were like, what is going on? Like, you know, why are we getting all these no's? And we started listening very intently to a lot of the no's. And they really were made up of two categories. And they were usually both categories, actually. So they said, oh, so you want to move from batch to continuous under a high pressure process and replicate the chemistry. We're like, that sounds difficult. We don't think you can do it in the time that you say you can do it. Or we don't think you can do it full stop.

20:41That was the other side of it, which is kind of depressing. And then the other side was like, even if you could do it, who's going to buy this stuff? It's very regulated, very price sensitive, blah, blah, blah. So we thought, well, one side of that risk equation, we just got to do it, right? We have to build the tech. We can't not build the tech. And on the other side, we thought, can we create a financing run in which we cater to some of those risks that some of the investors see on the commercial front and show that there is interest in this solution? So we, together with our seed stage investors, in particular 2050, we designed something called the aligned value chain.

21:22And the aligned value chain is basically there to represent the demand side de-risking of this technology. So we mapped out our value chain. We said, OK, who would be selling to directly? That would be cement world. The cement world would sell into cement and concrete world would sell into general contractors and general contractors would sell into real estate developers and eventually asset owners. So then we said, okay, who are the most ambitious in each of those categories that we can access that also we can have very close collaboration with in each of the de-risking steps. So we were very fortunate that Amazon Climate Pledge Fund at the very end there at the asset owner, asset manager front came in and said, we as building a lot of data centers, fulfillment centers, whatever, and have very high sustainability targets.

22:17We like the sound of this. We'd like to be a catalytic here. And then we thought, OK, who basically what type of buyer or general contractors built for the likes of Amazon? And we didn't at the time know, by the way, that they were directly working together because nobody was, nobody knew this of us. But Family Goldback from Germany that is behind the huge construction empire, primarily in precast, also wanted to come in. So that was that was also amazing. And then we have Holcim, one of the cement majors that has the highest number of CCUS projects. So they've decided between CCS and CCUS to go into CCUS.

22:57So that was the aligned value chain that we built. And then we thought also, okay, do we take another climate tech investor on the financial side, so not the strategic side? And we thought, no, actually, it seems like the world is changing. Let's put it this way. And we need to be held accountable on pure financial metrics. So we decided to bring in a pure play VC. We chose Capnamic from Germany, Hi Christian and Christian. And we've partnered with them to have a very strong basis on the price competitiveness market side of things. So we have a very good balance between climate tech investors, finance, sort of regular finance, VCs and strategics.

23:43So extremely deliberate. That's one side. But Carmel, you didn't answer your other question, which I'll be fast. There is a very important capital stack design part of this equation. And this is true for most deep tech companies that are building something in the physical world. So there's really three main components to the finance mix. One is, of course, equity. But equity doesn't like to finance, for example, CapEx or very long-term R &D. So you've got to figure out some kind of debt product, not venture debt, by that I mean project finance product that works for your type of a solution, and then complement that with like whatever grants, subsidies, tax credits and whatnot.