Henrietta Moon, Carbo Culture on Building Multi-Revenue Carbon Removal

0:00Welcome back everyone to the European VZ podcast. Today we are gonna dive into the climate transition and the pressing need to get more women-led founding teams into our world of venture capital. As we all know, in 2024, all female founding teams secured just over 1 % of total climate funding, which of course is far too little. Mixed standard teams have got approximately 7%, which if you do the math really quickly, you can also see is a total waste of money. of talent. So for that reason, we're trying to set a focus here and talk to Carmel, as well as a series of very powerful women in the climate tech space.

0:38Carmel, first introduce yourself to everyone. Hi, it's great to be here. Thank you, Andrea. So I'm Carmel. I had the table. We are a community for co-investing in women-led climate ventures. We invite syndicates, funds, family offices, and CVCs to come and share deals that they are actively investing in. Pre-CTA, where there's at least one female founder holding substantial equity. For us, that means that if there is a male counterpart, there is no more than a 60-40 split between them, doing anything that has a direct and substantial positive climate outcome. So we're sector agnostic climate positive.

1:15And we built this community as a non-commercial community to accelerate collaboration between investors, increase funding for women building in climate. And alongside that, we're building the Table Foundation, which will provide catalytic capital to accelerate the growth of the innovation through recoverable grants that will match the tickets that the investors in the community are doing in the deals shared. Beautiful. Now on to our guest. Today, we're talking to Henrietta Moon, founder and CEO of Carboculture. Carboculture is a carbon removal company using high-temperature biochar to permanently remove carbon from the atmosphere and lug it away for hundreds to thousands of years.

1:52Henrietta brings a rare combination of perspective. She's lived in the valley. She's now building hard climate tech infrastructure in Europe, and she's doing it all while raising a family.

2:05Henrietta, welcome to the podcast. Thank you. Great to be here. So I just made a blunder, I'm sure, of simplifying what you do. Could you just tell everyone what carboculture is all about? Yeah, absolutely. I mean, we build biochar factories that make biochar and also make energy in the form of gas. So a biogenic syngas that can replace natural gas, as well as, of course, the carbon removal, which is accredited at the tail end of activities. I'd say that biochar in general is such a huge climate tool. It's such a powerful way to move carbon from the atmosphere to different places because we tap into this natural carbon cycle where biomass, aka trees and crops, draw down hundreds of billions of tons of carbon dioxide annually.

2:57And of course, respire it back into the atmosphere. So we kind of like hack that carbon cycle, take some of that biomass where nature has done the hard work of atmospheric carbon drawdown. And we take that plant matter, such as sawdust waste or crop waste, and turn it into a kind of charcoal like carbon. So that locks away the carbon in a very, very safe and easy way to understand. So you can weigh it, you can send it to a laboratory. It's this black stuff. And eventually it ends up in open fields so that it's sequestered for a very long time. But we first use it in greenhouses to grow food in the EU.

3:38And so it's this kind of a holistic approach to many different things. And I have to say, just yesterday, it's such a good time to be recording this thing, because just yesterday, the EU announced this incredible landmark deal, which is the first methodologies on carbon removal in the world. And biochar is one of those front runners. So it's such a huge stake in the ground. I can't quite describe it because there's this Brussels effect that when something happens in the EU, why would you set a different standard to that? So the standard is just going to get copied into other jurisdictions. So this means that carbon removal is well underway to regulated markets, which is a huge, huge milestone.

4:22Just for those of us that now we kind of understand the technology and what's the purpose here. Could you describe a bit the business model behind it? Who pays for what? Why is this priced well? So basically, we build, not always own, but we build and operate these factories. They can be owned by partially our clients. Obviously, there's bank lending and project financing and so forth. But we basically build these factories that are next to greenhouses or greenhouse data center clusters, actually, in the Netherlands. And our first one has been already announced that we're in the process of engineering.

4:58And essentially, we sell the biochar into substrates, and substrates being the kind of mix of stuff where the tomatoes or the plants grow in the greenhouses, as well as all of our heat and power will be used in the greenhouse data center cluster as well. So we generate heat, electricity, as well as the biochar to be used in those areas. This is one of those technologies that we've all kind of known would come at some point and would be industrialized and used. Where are we on that trajectory? And also how much extra capital needs to be plowed into development before these are industrialized and in the world working?

5:42It's kind of like an age old technology. I mean, 5000 years ago in the Amazon junkies, people were making biochar known as Terra Preta and using it for soil enhancement. So it's kind of like this mixture of ancient knowledge and we're kind of bringing it to a modern day. So humans have been doing this stuff for a long time and traditional pyrolysis is super done and dusted around the world. And mostly today it's a global south play where you have smallholder farmers or other types of setups with excess biomass, turning it into biochar to make some credits and sell those on the voluntary market.

6:17But in that case, you don't really commercialize other outputs. You're probably not using proprietary technology. And it's kind of a side activity of something else. And I think we're taking a completely kind of opposite end approach. Both of these are needed, by the way, so all good. But we are building industrial scales. This is like 15 megawatts of energy is our smallest installment. What we're running in Helsinki today is three megawatts. So to put that in context, it's like a small power plant. And essentially, these installments are meant to be industrially robust and actually start paving the way for this new industry in Europe.

6:55And that's a completely different kind of, you know, beast altogether. I'd say you asked about the business model just now. I'd say that's one of the key differentiators with where we are as well, that we've kind of purposefully chosen to be sort of full stack in that we're a technology developer, as well as our team is actually commercializing the output. So our team is ex-industry from the substrates market. So commercialized billions of euros into this market in previous jobs and so forth. So kind of like taking all of those things together, we are able to then start building a pipeline of these projects, start taking over the market and start plowing the way in that sense.

7:35So there's a lot of different approaches to this, but we're kind of, yeah, chose that way. In this competitive world, when you're thinking of this business model, how are you? And with the geopolitical issues and the fact that it's much harder to talk climate today, how are you thinking of your pricing model and the business model from the perspective of your clients? To these kind of like vibe shocks, I'd call them, because just to make it clear, like the problem has not gone away. Like we're still headed to like over two degree warming, which will be catastrophic for crops, for infrastructure, for life as we know it on the planet.

8:15So basically, like, let's put that in there first. The problem hasn't gone away, but I agree the vibe kind of has shifted as in like the US is closing more climate funds now than it was opening in 2022, which is pretty shocking, right? So definitely there is this kind of a dip in the market. we're quite buffered because we have these other revenue streams like energy is real you still need power you still need heat food is real you can't survive without eating so all of these things are are just so cornerstones of the economy and we have revenue streams which are long-term offtakes de-risks and so forth so that's buffering us quite a lot and now when it comes to carbon removal That's obviously the one kind of revenue stream or the market that has been kind of ebbing and flowing and really dependent on a couple of big buyers.

9:13And that's super risky from anyone's standpoint. But now, again, with this yesterday's announcement from the EU, this has been work of years culminating to this thing. They just announced this voluntary standard on carbon removals, which means that every EU buyer can now look at that standard and make sure that they comply with it and not be afraid of greenwashing, not be afraid of some kind of people coming after them for doing something in climate right. There's been this paralysis of action because of the vibe. And I feel like now the kind of road is open. And if you follow this stuff, you're not going to get in trouble for doing that.

9:56So I think slowly we're unlocking those challenges in the market. And again, the voluntary market today is like a billion. The regulated market just in the EU is around 800 billion. So you can quickly see how these steps are just inching the way to where it's actually going towards. So momentary blip, but trajectory is super clear. Can I ask you, Henrietta, is there a market for your solution completely independent of regulatory requirements? meaning that is this process just from the high quality biochar you get out of it and its qualities for growing food afterwards is that a market in its own or will you always need to have a carbon removal part in the business model as well i'll answer that in three ways so first of all yes the biochar is useful on its own so growing media today is compromised of a bunch of different biomasses like peat or coca choir or wood chips.

11:02Some of these have long supply chains. Some of them have supply chain shocks. So actually bringing in a material that's made in the EU, that's safe for food production. And so our biochar is the only one so far that has qualified for, you know, there's probably a thousand different metrics that have to go right. But basically by qualifying this material there, we're actually helping to bring new materials into this huge growth market. High-tech agri in itself, so greenhouse growing, is growing at a pace of 6 % to 8 % annually everywhere because everybody's urbanizing. You need more food as the population is growing.

11:44Climate shocks mean that you have to grow it under controlled environments, and you just get more yield per square meter in these greenhouses. So that's why the Dutch greenhouse business is like dominating in growth right now. So definitely, yes. Then to your question of, can we exist in a non-regulated or in the absence of any regulation? In theory, but I think it's a theoretical question because there is no country on the planet that doesn't have regulatory environments, right? Whether it's Canada, whether it's the US or whether it's Europe, there's always gonna be some regulation that you have to go by.

12:21And especially energy and food being such close topics to heart in kind of like national interest and food safety and all kinds of stuff like those are going to be regulated environments wherever we go. And we just have to play with what's around and what's regulated. But yeah, definitely. I mean, they are giving us tailwinds because everybody wants to get rid of natural gas, especially the imported stuff. and so forth. I'm hearing that there's a lot of local resilience play in the conversation now, both from the soil enhancer perspective as well as the energy perspective. Is that a new perspective that you've kind of seen that it works in the existing narrative?

13:11Or I'm just curious if it was something that drove you from the beginning. In the beginning, I have to say, I don't know if we know anything today, but we knew nothing when we started. And definitely the very, very, very basic concept of like, our soils are impoverished, we need to put more carbon there, we have too much carbon in the atmosphere, it should go in the soil. Great, makes sense, right? Now, how you make that into a business model, it's a lot more complicated. And we're humbled to be starting to work with the high-tech agriculture space because it is so precise. It's so exact. They know exactly what they're doing.

13:53And in the end of it, I mean, biochar is a valuable material in that, you know, in the mix of many other materials. And then at the end of its life, it can go to open field agriculture to enrich the soil there. Like the best thing that you can do is to use the material for something useful and then park it somewhere where it's going to be sequestered for a long time instead of some other type of play where you just kind of put barchar in a cave or something to just lock it away but why wouldn't you first use it as a valuable material so this cascading use is kind of like I think the principle that we're driving I am learning every day but luckily my team is a lot smarter than me we have one of our scientists on board has worked in this industry for over 30 years, understands kind of everything down to the root hairs and what they need of these plants and so forth.

14:48So food and soil is like a different galaxy. When you start diving in, you see how little you actually know. Clearly, you have a mixed capital stack. You've raised$27 million today, mix of venture capital and public funding and grants. I'd love to ask you a bit about that mix, kind of how you balanced the need for both both grants and of course also the non-public funding, VC and also that. When we started out, it was kind of like there was a lot of thinking that, oh, we'll just build all of this fast on equity and so forth. I think that kind of bullishness has gone. And I think there's a broad acknowledgement that kind of like we're building real world infrastructure.

15:34You just have costs. You can't do it without the proper engineering for piping, for safety, for this and that, right? But that's the beauty of it as well, that it is infrastructure then. It's so real. The revenues are real. But in any case, the approach is very different to a normal VC case or anything like that. So right around the first factories at scale or at commercial scale, you have to start heavily blending in different forms of financing because you just have a different return profile for the assets. And so eventually you get to project financing, like how hospitals, bridges, everything are built today from wind farms and so forth.

16:17That's great. But in between, there's this de-risking period where you have to start bringing in government grants, anything that you can bring in sort of debt from government-backed sources and so forth. And in Europe, it is really strong. I mean, if you look at a lot of the European funds, they are largely backed by the EIF and so forth. So Europe has a very, very strong role in the kind of funding scheme here. Yeah. And I think the Americans also see that as a super, super strong point for infrastructure making. It's a whole other skill set to think of how you're going to finance the building that you're, the company that you're building, than thinking of how to do the innovation, build it, implement it, and do the practicalities of it.

17:07Founders building in climate, building in real world solutions, where would you recommend, and you're heading into your next race as well, and going into industrialization and commercialization, which is a whole other scale and size of fundraise. What are you learning now and you learned before that other founders should kind of keep in mind when they're thinking of structuring their seed rounds, A rounds and going forward from there? For our line of business, especially working super closely with what your clients want. I mean, there's an age old wisdom, but those revenue streams and proving that somebody actually wants what you you're making is so critical especially when you're trying to front load the financing of infrastructure so showing that there's a buyer for the next 10 years for the stuff that we're going to start making is critical and imperative in this in this line of business I'd say that that's number one and I'd say that you brought up something really interesting which is like how to transition a company from this early stage to this like growth stage and that is so key in your team and the mentality and so forth because early stage startups are like the technical r &d figure it out optimize it change parts always making it better and making it work and scaling it and so forth but at some point you have to be like great now we're going to start replicating the same thing that we've been doing and making it really boring.

18:40No more changes all the time. No more new stuff. And that's like a totally different mindset where you have to then kind of get the team to go to like, hey, now we're going to start scaling this thing. It has to be super boring. And those are like different forces sort of pulling it, let's say. I think you make a really great point here because one thing is the communication to your team and getting your team to transition there. There's also the fact that you go from when you raise equity, you're talking pie in the sky talk and you're saying, we can 100x this. It's going to be a massive opportunity.

19:16There's also a very big... Yeah, infra doesn't want to hear that. They're like, no, no, one exit, one exit. Exactly. Can you talk a bit about that mindset shift and also the fact that oftentimes you are running an equity round at the same time as you're also talking to the infra guys and you need to run two completely different narratives and how do you split that? In a new market, yeah. Can you talk about how you navigate that? Because that's what I am seeing when I meet a lot of hard tech founders. They're struggling a bit with distinguishing between those two stories. When they talk to VCs, it's one language.

19:50When they talk to the people that are meant to basically fund their CAPEX, that's a completely different story. And maybe I'll just add on top of that, the question of off-takes, that we really want to treat them as actual revenue, but most investors don't yet. And so how do you add that into these narratives? To take maybe the second question first, so how we mature projects is like super classical infrastructure style. So basically you mature all the contract suite at the same time because you don't want to have like a site without the offtakes or offtakes without the permits or you don't want to be liable for stuff before you can actually produce it, etc.

20:37So it just has to kind of mature at the same time. And then one day you kind of sign everything figuratively, so to say, so that it's like kind of buttoned up at the same time. And that's project development. So you're always looking at multiple different buckets. But as a startup, at some point, you probably have to lock in like one choice. And there, actually, the revenues are super key because to fund the thing that you're going to build, I mean, funding the construction and the kind of like deployment time is the riskiest period. And most likely you're going to need venture funding for your first couple of facilities for those.

21:12And so there it's really imperative to show that, hey, the revenues are coming from the sturdy offtaker who has a lot of bandwidth to take these, whatever we're producing in. They're not going to back out at the first sight of trouble. They're going to be there. They're financially sturdy. Like all that stuff has to be there because we've seen in climate tech where offtakers start being flaky, that just chips away at the confidence at the top co and the mother co and the projects. So yeah, revenues really, really key and work with those clients. Make sure that they're on board as well. They're almost like partnering with you in the beginning.

21:55And then the kind of equity story and the CapEx, it's how you have to start thinking about your business, which is like, what's going to be the role of your business? Are you going to be like super duper heavy, like own and operate everything? Maybe if you have some kind of like super CapEx light thing, maybe that's possible, like a battery play or something like that. Maybe you can kind of roll them out and have some kind of a service fee and own them all or whatever. And then you have like different kinds of infrastructure like us, which is like, you know, not as expensive as a wind park, but not as cheap as a couple of mil batteries somewhere.

22:36So there you're probably going to start working on some kind of a mixed version of how you're going to fund these in the future so that your top co, which is where you're gathering the equity to, doesn't have to take on that heavy load. And you don't have to think of fundraising billions into the top co, which is difficult. And so I think there's two different flavors. But again, as founders, like, I'd say spending too much time with infrastructure financiers when you haven't gotten a couple of commercial plans up and running is maybe good for education, but not good for a lot of other things.

23:15Because there's like super deep diligence and all that kind of stuff. And you really don't want to waste time on that prematurely because they're just going to want to see dearest technology. Minimum TRL level is eight. You can check the NASA technology readiness level, kind of like real world stuff, operating, making revenues. That's what they want to see. Then you can go and talk to all the banks in the world and start kind of like competitive bidding on who's going to give you the best offer for a loan and so forth. But like bird by bird, you have to kind of like acknowledge where you are as well in which stage.

23:48I'd love to ask you for equity from both the US and from the Asian world, Singapore. And then you also have from Europe. I'd love to ask you a bit about navigating as a founder, raising globally. Why did you do that? What are maybe the pros and cons? Do you see differences in what's valued slash the narratives that need to be applied, that type of thing? I think every fundraise, every founder, every board is very different. So, you know, like I have to also give credit to our Nordic family offices and to Lifeline Ventures who backed us in our very early days before we had any like there was no regulated market.

24:30There was no carbon removals like it was really, really, really early. So those are the kind of like family offices and stuff like that. you know they can make those bets so they are really important for you and a good lifeline sometimes when you need them then true ventures incredibly instrumental and especially you know strong VC with conviction they don't need to follow others they can make decisions on their own and so forth so sturdy amazing investors top tier like 100 top tier and then Gen Zero who came from Singapore is a later stage investor. So they're very different flavor again. So we had like the Nordic early stage family offices and very small, a small VC in the scope of things, then the kind of like top tier VC name from Silicon Valley.

25:23And then you bring in the kind of heavy duty fund, which is a 4 billion decarb fund. All of those have a very different role, and they can help you in very different ways. So I'd say that that's one thing to consider. And then the other thing is just the people. Like at the end of the day, you build a business, you build it with people. Are those people there because they believe in the mission? They can see the future. They're going to help you pave the way, form that new market, close those deals, understand the value and so forth. Or, you know, how are they going to be allies on that journey?

25:59Was there a strategy behind picking from three continents, so to say, versus take the money where it is from good people? I think it's more the latter. We actually got introduced to both of the later stage investors through other investors. And after some digging in, they were just like recommended by other founders and so forth. I mean, that's something that I would always do, check with other founders if funds are great to work with. And so I think once all those things are ticks in the box, there's no reason to kind of limit yourself. And of course, you know, Southeast Asia is super interesting for the future for us as well.

26:40If you're ready, I would love to go to public funding and ask a question there, because obviously every company has the same issues around having most in the carbon space or in the climate space or also raising significant public funding. However, timelines can be a bit difficult to navigate, can also be quite difficult to even figure out where you're really eligible and where you're not. Can you talk a bit about navigating that morass? The EU has obviously great funding instruments, as well as there being local kind of government level instruments for companies. And I think it's super important to understand those from an early day.

27:18of course your customers are the number one thing that you need to crack and kind of like make sure that you're making value with whatever your core proposition is but then start working with the agencies as well like how how are we gonna scale this what are the steps what are like benchmark companies that have gotten funding are there other founders that are a bit further along that you could ask how they did you know xyz funding with the public space and so forth and so on and of Of course, there's like grant writers and so forth around. You can spend a lot of time and money on those as well.

27:54It's not a one size fits all. I think for infra, like getting a government backed loan or something like that is just so important because you don't have to raise it as equity. It's like kind of soft lending in some forms. Super, super, super important. And those are really the things that are needed to scale up new industries. We had like one person on our team in the early days who was just tirelessly pushing at these things and got quite good at it in the sense of like understanding what is eligible, what can we go for, what are benchmarks, how can we pave the way for ourselves. And then couple that with the equity story, because often they need to go hand in hand, as in like this lending won't be unlocked until your next equity comes in or whatever is the setup.