With the increasing severity of the climate problem, thankfully, there are organizations like Cervest that offer their climate intelligence program to empower companies and individuals to analyze their climate risk and make climate-informed decisions. For this reason, Cervest’s Founder and CEO Iggy Bassi joins us today to educate us on why we need to quantify and act on climate risks.
Some of the highlights of this episode include the extremely useful advice that Iggy shares on building a mission-driving business, hiring the right people, finding the right investors, cultivating great relationships with both your staff and investors, and getting through the dark days. He also talks about why you need to marry method with conviction, which he emphasizes a lot, as it has a big role to play for founders when building a company. This is an episode you won’t want to miss.
Maiko Schaffrath 00:02
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You are listening to Impact Hustlers, and I am your host, Maiko Schaffrath. I have made it my mission to inspire the next generation of entrepreneurs to solve some of the world's biggest social and environmental problems. And for this reason, I am speaking to some of the best entrepreneurs out there who are solving problems such as food waste, climate change, poverty, and homelessness. My goal is that Impact Hustlers will inspire you, either by starting an impact business yourself, by joining the team of one, or by taking a small step, whatever that may be, towards being part of the solution to the world's biggest problems.
In today's episode, I speak to Iggy Bassi, founder and CEO of Cervest, a climate intelligence platform helping businesses, governments, and land managers to adapt to extreme climate events. The platform helps customers understand the climate risks that their assets are facing and take action accordingly, and I'm really excited to dive into that topic with Iggy. Thanks very much for joining me.
Iggy Bassi 02:37
Thank you very much, Maiko. Pleasure to be here.
Maiko Schaffrath 02:40
Thanks for your time. So, first question for me is around your personal motivation, personal story. Tell us a bit about your life or career and what led you to actually work on this problem. Oh, absolutely. So, life started in investment banking for me way back in the 90s, actually. I started in Technology M&A, did that for a couple years. Then, I did some strategy consulting.
I actually had the software bug in the late 90s and set up my first software company, which is looking into data matching over complex networks; did that for a couple of years. Then, we had the telecoms crash. I ended up working for my investors. They bought whatever was left of my company, and I ended up running a US software company in Europe, looking at things like automation, business processes, workflow processes.
Then, I went back to Stripe consulting. And then, one day, we had the pleasure of working for a large foundation. We were looking at, how do we create business models for people at the base of the pyramid, something that you know about, and then we developed low-cost business models, which could effectively help people, particularly around the areas of agriculture, sanitation, micro-lending.
And on the back of that, I was really fascinated by this intersection between agriculture, food security, and markets, I decided to commercialize some of that research on behalf of one of my clients and set up my company called GADCO, which is really looking at, can we bring scalable and sustainable agriculture to West Africa? And that was quite a journey, Maiko. It took about six years in total. We raised a fair bit of capital for that business, and that really gave me the genesis of what is now the best, because during that last business, we saw an awful lot of natural events happen, catastrophes happen on the farm.
It also taught me a couple of things. How do you get a better signal, and how do you get an earlier signal so we can use some of that data in a more predictive format to help me plan on the farm better? We lost a fair bit of capex, so it wasn't just a biological harvest that we lost. We also lost capex. So, when I sold that business in 2015, I said, how do we get that early signal? How do I bring together math quotations to help me calculate how do I find out something early? And working in farming also taught me it's not a single risk that matters like flooding or heat; it's a combination of different risks.
So, can we mathematically tie together lots of different hazards in a cohesive mathematical way that would allow someone to say, "This is how you should think about your assets," or, in my case, farming and food processing in a way that allows you to understand some of the risks early, so you can build better. For instance, I would have built a different foundation for my mill had I known some of these events were going to happen, for instance. What we've realized in 2016-2017 through our research is, actually, we can form a very good picture of what is likely to happen across multiple hazards.
And in 2017, 2018, and 2019, we said, well, what does that mean from a business point of view? And how do we enshrine some of that thinking into some of our analytics to basically help other companies think about that? So, my journey here has been long, but there's always been a theme around creating businesses, which had some impact. I was very keen on this cross section of, if you are going to work very hard in businesses, can you also bring about change and change at scale as well? Got it. Yeah, let's dive actually deeper into what you're working on now and what Cervest does, so give us an overview of what Cervest does. You already touched on some of the problem spaces you're working on, but how does it actually work?
Iggy Bassi 06:32
Sure. So, the early years were very much focused on looking at research. Is there enough of what we call signal in the data in these various physics models? Can we apply machine learning in ways that could really tell me what's going to happen at an asset level, rather than a general view of climate? I want to take it down, so Maiko can understand what's going to happen to his asset. Now, that asset could be a factory, it could be a real estate, it could be a collection of real estate assets, it could be forestry over time.
So, in many ways, different assets just mean different things to different folks. But by taking it down to asset level, we're seeing actually, can we personalize climate risks, so Maiko knows exactly what to do when to do it? And also, he has better predictive capabilities to know the timing, magnitude, the location of certain risks, where his assets may be or where he may have a dependency on other assets. For instance, it may not just be ownership. It may be dependence on some very critical components from different parts of the world. Being able to understand physical climate risks there as well should help you in your planning in your business as well.
So, in 2018-2019, we started building the platform out having done some of that initial research. I mean, we still continue to do research. We think it's fairly fundamental to how we think about multivariate risk. And then, we started building a digital platform where we collected many, many millions of assets, and we could apply that mathematical formula to look at single hazard risk and multivariate hazard risk in a mathematically coherent way.
We've been working, I guess, for the last year or so on onboarding the initial wave of customers. They can come on, they can build our portfolio of what's happening to their assets, and they can find out, both the past present and future state in terms of climate risk across a number of hazards like flooding, forest fire, wind, excessive heats, cold snaps in ways that they haven't been able to look at before and in areas and geographies that they haven't been able to look at before as well.
This also coincides with the emergence of disclosure laws. As you know, disclosure's becoming a key part of how markets want you to quantify this climate risk as well. We've had a wave of TCFD, we've had the European Standards, we now have the SEC Standard, which is good since it may become a law soon. All of a sudden, large enterprises have been really tasked with this new muscle that they've never had before, because they've never really understood climate, they don't really have climate departments, they don't have climate MBAs, they don't really have climate scientists.
They have been tasked with understanding this problem of climate in a way that would allow others to understand, well, how much risk am I carrying in that security? How much risk does Company X carry versus Company B, for instance? So, that becomes something that the market's really looking for. How do we quantify at scale, but how do we do it persistently, so that we can really incorporate the latest climate science as and when it comes out across multiple hazards and multiple geographies? So, people can make better decisions.
They could ask questions like, which of my assets are likely to be flooded? What can I do early to those assets? Which of my suppliers are most critical from excessive Heat? We've just had a couple of clients, for instance, in Europe, one in particular in Germany, they calculated that the average number of heat days is likely to change, so they've already made preemptive investments in their HVAC systems, for instance.
We've had other clients in the States who are looking at this from a locational planning point of view; where do I roll up my capex? Where do I put my critical factories? So, by understanding not just asset level risk, but also locational risk, they can make more informed decisions, because the banks and insurance companies and the regulators and the city planners all need to get a little bit smarter on, where do we put assets, why do we put them there, what's the probability of something happening to those assets, which could be detrimental.
Maiko Schaffrath 10:33
Give us more of an understanding. From what I hear, it seems like you're covering quite a few customer segments of use cases and types of assets, etc. You're covering quite a broad spectrum, but [are] there any use cases and customers that tend to be prominent at the moment, like the most common types of use cases where they tap into Cervest to inform the decision-making?
Iggy Bassi 10:58
Yeah, I would say most of the customers today are coming on, because they want to understand these emerging disclosure laws, both on disclosure, but also they want to understand their supply chain risk. Those are the two areas where we're seeing most of the interest, disclosure because the new mandatory pressure or emerging voluntary standards in some countries, so they need to understand, what does that mean for me, for my assets? How do I quantify that? How do I report that on a regular basis? How do I even understand this?
In many ways, a lot of them who are coming on, they're taking what we say their climate journey for the very first time, so there's a lot of hand-holding. It's not a product that you can just plug and play easily, because it needs interpretation. Luckily for us, we've had a couple of iterations of products since the early customers have come on. That's allowed us to automate more and more. But also, it's the way people interpret climate data, and climate scores, and climate ratings, and quantitative maths. So, we've had to simplify that Maiko.
I think we made some assumptions in the early days that people should be able to interpret this data. But actually, if you think about a large enterprise, all the different areas of often modern enterprises need to use climate intelligence in different parts of the enterprise. You have to create a common denominator which can travel across multiple departments, and there's a common understanding of, what does this risk mean for different departments? So, that's been a challenge, but it's a challenge that we work with closely with our customers.
They ended up co-designing some of the front end in terms of, what should it look like? What should it say? And what shouldn't it say? Like if you want deeper quantification, then we can give you that separately, because I've seen people do freeze up when they see statistical tables and formulas and whatnot. We avoid that at all costs, basically.
Maiko Schaffrath 12:51
I'm wondering, who are you actually talking to in these companies? Is it very different from company to company? I assume there's not a Chief Climate Risk Officer, so is it the CFO? Is it, I don't know, procurement or like real estate departments? Who are the people that are actually most commonly concerned with this problem?
Iggy Bassi 13:15
I would say there [are] a couple of clusters emerging. There's the CFO, the CRO, so the Chief Risk Officer, CFO, I think a lot of the Sustainability and the ESG teams have been tasked with understanding, how do we look at the risk? How do we think about this? How do we quantify it? How do we think about new reporting standards? Those are the two areas, but if I look at all the clients we have, some of them come from very different types of departments, so someone who manages facilities all the way through to different chief levels, so different C titles.
It varies across the firm, because climate has come from top-down usually, like the CEO, the Board say, "We must have a look at that." It percolates down. For people who manage operational assets like operations managers, they're also looking at it, because they've seen the disruption. In Germany, for instance, that initial demand curve came from people who had their facilities flooded last year in Germany. People who have experienced something in different departments are the ones who are normally on the ground operating those assets. They're asking those questions.
We're also seeing strategy departments who say, "We're thinking about this M&A. We're thinking about location planning. How should we think about from the lens of climate risk?" Because the banks, insurance companies, the planners, the boards, the shareholders are all asking about, "Am I climate-aligning my future investment growth in ways that I can now do that I couldn't do before?," for instance, because everything that's been built has been built in the absence of climate intelligence. But now, we can be a lot smarter.
We can be a lot more intentional about, where do we put factories? How do we build them? How do we think about different locations? And how do we optimize our different supply chains? As well as helping the assets that they have built to become a lot more adaptive, a lot more resilient to some of the physical realities that they will face.
Maiko Schaffrath 15:10
Got it. I'd love to cover a bit more on the actual data that goes into assessing the climate risks. You're talking about using mathematical models and science-based predictions, etc. What I'm wondering as well is, do you find there [are] already really good standards to follow or that make, for example, the estimations I'm getting through Cervest comparable with others? Or is there a need as well to standardize climate risk assessment more across different solutions and approaches? How are you thinking about that and what standards do you use with Cervest?
Iggy Bassi 15:55
I would break that down to say if you're measuring carbon, so if you think about the long tail of climate intelligence, there's four main components for us. One is just carbon management; how do I measure carbon? There are some great protocols that are already well established; there's the GHG Protocol.
There is a strong methodology for understanding and tracking and following that, and that has some implications for pricing and how do we price carbon etc. Then, there's a whole cluster on physical risks, and it's a lot more variable, Maiko, so there [are] no real technical standards, no certification body for that.
This is why you have to do lots of testing and back testing and benchmarking to say, am I within the realms of possibility? Because you have to give plausible scenarios, so people can make low-regret decisions. Then, there's a whole new area of natural capital quantification. And again, that is quite complicated, but there are some emerging standards around natural capital accounting. And then, what else do we have?
Then, we have the transition risk which is, to be honest, there aren't any standards, because a lot of that is scenario planning. What's our view on forward carbon price? What's our view on the energy mix? Whatever you want an energy regulation, for instance? What's our view on new technology? That's a lot more scenario-based. You have to come up with plausible scenarios, so your clients can understand. So, many ways. It's a sector that will probably create more standards going forward, but I wouldn't say there's unified standard across the board yet. I think that's what the markets will be asking for next.
Maiko Schaffrath 17:30
Absolutely, okay. What I'm wondering is, what are you usually replacing? Are people coming up with manual ways of trying to get as close to as possible to the solution you're offering them or are they not using anything, they just feel the regulatory pressure to start doing something?
Iggy Bassi 17:54
Again, I would say it's very variable. I think there has been a cottage industry around climate or climate resilience planning, environmental modeling for years and years and years, but it's a long tail of thousands of fragmented players. I think the market has fundamentally shifted in the last five to six years, Maiko.
I think we're seeing a lot more structure, and that's coming, because the volatility has fundamentally changed. New technology has allowed us to do more with the data that we do have, for instance, so we can look at more assets, more geographies, and more frequently at a lower cost. That's also changed the equation of how we think about modeling risk, for instance.
Also, computing cost has come down massively. Algorithmic design has fundamentally changed as well. All that is fed into a new emerging market structure that's allowed people to measure carbon, measure physical risks, think about transition risks, think about even natural capital inclusion. I would say all that is relatively new. But again, I think there's no real market texture that's really developed at the moment, and I think that's still in flux.
Maiko Schaffrath 19:04
Got it. And then, give us an idea of the datasets you're actually using. What's the type of data that goes into Cervest to assess these multivariate risks?
Iggy Bassi 19:17
First of all, we only use peer-reviewed science, first and foremost. Peer reviewed-science and their underlying data sets are fairly important to us, because we don't want to replace things like fantastic modeling platforms like the MIPCC, for instance. We want to be able to use established credible science. We want to be able to take it down to the asset level across multiple different hazards, so everything from atmospheric models to fire models to flooding models. We look at the underlying physics.
We need to be able to understand the dynamics, because through our modeling frameworks, we want to represent as much of the physical world in our modeling framework as possible, so that when we give you those predictions, when we look at your assets, we are reflecting as much of the physical world as possible, as opposed to what have been great individual models like flooding models or fire models, for instance, but they don't tell the whole story. You may miss some of the signals. I mean, there's obviously very famous cases like Fukushima, for instance, or the heat wave last year in the States.
Looking at individual models and not combining the different branches of physics together doesn't allow you to have as much predictive power as you need, because climate is also getting played out in very niche ways, novel ways. In many ways, you need to understand the interactions between the variables, not just the variables by themselves, and that just requires a different branch of, if you like, maths, machine learning, and physics to come together in new and novel ways. Now, luckily, we have the tools, we have the algorithms to do that, and we have the datasets for the first time to do that.
Maiko Schaffrath 20:54
Hi, it's Maiko here. I want to interrupt this episode briefly to make you aware of two exciting things that are going on here at Impact Hustlers. First of all, if you are a founder solving social and environmental problems, and you're looking to connect to like-minded founders like yourself, you're looking to learn from some of the most experienced entrepreneurs, experts, and investors in the world, and you want some support and actually fundraising for your startup, we've built the Impact Hustlers Community.
We are now about 100 entrepreneurs and founders, and we're growing every month, with more founders from all over the world joining us, and we're really here to support each other. Our goal is to build the most supportive ecosystem for impact-driven founders. So, if you're a founder, head to impacthustlers.com/community to learn more.
And if you're not a founder, but you want to work for impact-driven companies, we have also recently launched something really exciting for you, and that is the Impact Hustlers Talent Collective. This is a group of some of the most ambitious and talented individuals in the world that want to use their talent to make a difference in the world and work for some of the most innovative impact-driven companies. If you're keen to join the Talent Collective, this is all free of charge, obviously. You can submit your application to the Talent Collective on impacthustlers.com/jobs, and what will happen as a result is that companies will start approaching you through our Talent Collective and share job opportunities with you.
We'll also share our Weekly Jobs Update with you where you see relevant jobs in the field of impact, including from all the previous podcast guests, so you will actually see opportunities from companies that have been covered here on the show and also companies that are members of our Impact Hustlers Community. So, go to impacthustlers.com/jobs If you're looking for a job, or if you're a founder and need some support, go to impacthustlers.com/community. Okay, let's get back to the episode now.
It seems like we're still some steps away from companies adopting climate risk assessment at scale, especially maybe those outside of, I'm sure certain asset and investors, etc. are thinking about this more than certain other companies, but what do you think are the biggest hurdles for a lot of companies in the economy actually adapting this? What are the biggest struggles? Are there regulatory challenges? Is it just basically organizational challenges within those companies? Is it a challenge of priority? What are the hurdles for us to overcome before we get to a scalable way of doing this?
Iggy Bassi 23:48
I think that some of the biggest challenges are- it's like a multivariable. There are challenges of just technical skill, being able to understand climate models across multiple hazards. You would only do that if you're really looking at hazard-specific assets, if you're going to build a bridge or a wind factory, for instance. You would then definitely do some specialist modeling.
But in terms of mainstreaming climate, for all of your corporate decisions for, how do we plan M&A growth? How do we climate-align? How do we decarbonize? A lot of that narrative has really come about in the last five or six years. That's been driven by market trends, and one of the big market trends is just disclosure. There's been a greater recognition that, particularly capital markets, that there is risk. There is inherent risk, and that risk now needs to be measured, modeled, amplified, and made public.
Actually, many of these disclosure laws are actually architected by central banks and not governments, because they have a better and deeper understanding of risk and what are the implications for securities for pensions for savings over time. I think structurally, enterprises are beginning to understand there is both a regulatory push, but there's also a push to build a different type of enterprise, which is more aligned to the economic climate. So, how do I climate-align my growth, my assets, my future M&As? Because my employees, my customers, my stakeholders, they all want me to operate differently as an enterprise, so how do I how do I start incorporating climate intelligence into all of my decisions?
Because not only is that a radical transparency push, there's also push from customers and stakeholders. There [are] multiple pressure points, but they're all forming together to say, "I can't operate the way that I've operated in the last 30-40 years. Nature's changed. Climate's fighting back. Disclosure's changed, and my customers are asking for something else." All those combined create some very powerful change mechanisms for companies to start incorporating climate assessments.
Maiko Schaffrath 26:00
Got it. Let's move a bit to your entrepreneurial journey. We covered it very, very briefly in the beginning. You've founded multiple companies. You have quite a bit of experience. With any entrepreneur I talk to, I'm always keen to understand some of the war stories and hardest lessons learned and the difficult bits in your journey, especially to help early stage founders listening to this learn from your mistakes that you may have made in the past and lessons learned. What do you say over the years, running Cervest, but even before that has been the hardest lesson that you had to learn as a founder? Is there anything that jumps out for you?
Iggy Bassi 26:47
I think that company building is always hard. I think you have to truly believe what it is you're doing. If you're building mission-driven businesses, where you're using business as an instrument to solve a problem, that's really where I focus. You have to fundamentally believe in what it is you're trying to solve. You can't just wake up one day and say, "Well, I've decided to go solve the healthcare problem." You fundamentally have to believe it. You have to have a lot of conviction. I would say that that conviction needs to be high on mission, but also needs to marry with method as well, because your impact, the real impact you're looking to make has to be scalable. You need method, you need skills, you need talent.
And fundamentally, another big lesson for me is really align your capital early, because it's always going to be a long journey. It's a very unpredictable journey. You don't know what's around the corner, so you need capital partners who are going to travel with you. It's not just your C suite and your senior people. You have to think about your capital partners. Are they aligned to the mission that I'm also aligned with as well? Because there'll always be dark days. [There'll] always, always, always be dark days. So, the question is, who do you want around your board when times get dark, and do they believe in the same thing that you believe?
But at the end of the day, if you're going to choose a path of making your mission through business, there [are] also business realities. You have to build revenues. You have to manage your costs. You have to raise capital. You have to go and sell a strong value proposition to your customers. So, it's no different to normal business. You may be solving a big problem, but you still need basic business principles. This is why mission and method have to come together in equal measure over time. There [are] lots of war stories, Maiko.
I mean, trying to build a farming business in West Africa is not for kids. It's hard work; a totally different part of the world. It's always people. I always say in every single business, it's always going to be people. How do you manage people? How do you work in cultures that you haven't worked with before? That was a big challenge going to West Africa. And how would you work with the stakeholders there? How do you understand their values, their principles? How do they want to work with somebody from London, for instance? That's always going to be quite challenging, but you can codify lots of your mission.
We have gone for a B Corp status. We do institute policies in the firm around equality as much as we can. I'm also quite a flat organization person. I'm not a big hierarchical person. I want the best talent in the best swim lanes doing the best work that they possibly can. Part of marrying mission and method is also reducing the risks. The way you do that is you don't look at yesterday's corporate structures, because that's not going to solve for what it is you're trying to build. I'm quite comfortable with 25-year-olds working on big strategic problems for me as long as I have someone who's 30, 40, 50 years old, for instance.
Bringing the right talent for the right problem is also you have that flexibility to do that when you're building businesses. I think I should have done that a bit earlier, in the previous business. You have to break down some of the hierarchy, but I think there's no set formula. I can't say these are the five principles you should definitely follow if you want to scale a mission-driven business, because there are idiosyncrasies to every business, every challenge, every set of people you hire. Investors change their minds. Investors may wake up one day and say, "You know what? We want you to do this."
And then, people's own life journeys change. You can hire some fantastic executives, but their journeys change and their life circumstances change. So, there's always the constancy of change that you have to deal with whilst you're trying to build something big. It's never easy.
Maiko Schaffrath 30:44
No, definitely not. And I liked your point earlier on aligning what you actually deeply care about, but then also your skill set, and you have to bring all these different things together, getting the right investors to invest in it. I've definitely made that painful experience myself when founding my first company a few years ago, which was a recruitment platform for social impact jobs.
I was very passionate about the vision, but I wasn't that passionate about recruitment, which isn't a great thing to do when you're a recruiter. I mean, with you, I think just talking to you, I just feel like there is this passion for the overall problem you're solving, but it's also really the passion for the nitty gritty of what it actually means of making that happen. I think it's super important to bring both elements if you want to succeed.
Iggy Bassi 31:42
Yeah, one thing I would say, Maiko, though, you may be very strong on vision, but you've got to surround yourself with the right talent, and you have to build the right culture, because I always say for every power you have, you have a corresponding weakness as well.
The right people for the right swim lanes matter. And when you start building businesses, you should own up to the fact that you're not good at everything, and you'll never be good at everything. The question is, how quickly can you fill those gaps and recognize your own weaknesses as well? I think as you grow older, you become a little less arrogant about what it is you can do and what you can't do, so believe in the team, but build the right culture where people can thrive as well.
Maiko Schaffrath 32:26
How do you combine that element of delegation, empowering people, hiring people that are better than you at things that they do, but also maintaining flat hierarchies? I assume flat hierarchies also means that everybody can access you as easy as possible, but I think you have a team of 100+ people now, so how do you reconcile that empowering them to be independent and not need you, but then also be like, "Okay, you can talk to me"? How does it work?
Iggy Bassi 32:58
I mean, I always keep open hours where anyone in the firm can access me. I mean, I have an AMA channel on Slack, so I get all sorts of bizarre questions, which is fine. I actually welcome all range of questions. We have anonymous sliders, so when I do talk to the firm as a whole, anyone can ask any question. People can upvote it.
But as you scale, you also need to bring in some of the right structure. We've moved to a matrix organization, which has really helped. I want market-facing people involved with some of the product decisions, for instance. I want some of the product decision people involved with how some of the science should showcase some of their scientific findings.
It's definitely an extra headache, because you have to have so many more meetings with so many more different voices, but the end product is just so much better. It's worth creating that organizational muscle, where you can bring those different skills together, because I think at the end of the day, for the problem you're solving, the more interdisciplinary skills you can pull together, the greater the chances you can actually deliver a great product, a great experience and make the change that you're looking to make. That's key.
Maiko Schaffrath 34:08
And you mentioned the point of investors, aligning your investors. You have some pretty known brand name investors on board with you such as Lower Carbon Capital. I know the guys at Future Positive Capital as well, very mission-aligned investors. How did you go about that process, especially, let's say if you try to package some advice for early stage founders?
Obviously, you were in a position that you're a successful entrepreneur. I'm sure it's not easy for you but still, maybe a little bit different than for a first-time founder going out. How do you get the capital you need but also make sure you're getting the right capital, the right investors, and the right ones to support your vision and not distract you into a different direction?
Iggy Bassi 34:55
Yeah, so I think when you're starting out early, taking little capital, try and get it from family and friends who believe in you. Because right now, they can't see the product, they can't see the service, they can't see the end state. So, if you've got the right level of passion, you will find the right investors early stage, and there's a thriving early stage ecosystem, whether you're in Europe, you're in UK, you're in California.
In this day and age, if you're pretty passionate about a problem, you can find the right investors if you look hard enough. So, sell them the vision, because at the end of the day, when you're starting a mission-driven business, you're going to be pretty high on mission and vision. What is that? How can I carry that forward?
But also, you need a plan. You need a capital plan, like okay, where do I want to be in one year's time, two years' time, three years’ time? How much capital do I really need? And also, if you're building new categories, it's even harder, because you don't know what that category actually looks like. You're hoping your vision is going to look like that category, but you don't know. When you're building things in climate, for instance, or brand new branches of science, where you don't have 50,000-60,000 reference points that you can look at to say, "Well, I'm going to be slightly better than this company," it's even harder, Maiko.
And then, you're trying to carry investors into something that they can't reference. This is why you always know whether those early stage investors, do they believe in your conviction and your vision? Because they sure as hell don't know what the market looks like yet, because the market could be five, six years out. As in our case, we've been at this now for six years, and we've raised a fair bit of capital, but always from investors who truly believe in the vision that we put forward. Even years ago, even the early vision that we put to the investors, because we've had a couple of pivots, we've made some changes. We haven't really lost that overall vision. What is it that we want to do one day?
I would say also, one of the things that I think a lot of entrepreneurs when they find investors, don't chase the highest valuation always. I would trade off aligned investors with the highest valuation term sheets, because that's a rookie mistake that a lot of first-time entrepreneurs make. Ask yourself, "How will this person behave? Do they believe in me enough, so when days get really dark, they're going to stand next to me?," as opposed to, "I've got the best term sheet in the market." At the end of the day, that may or may not matter. You don't know yet, but you know the days will get dark, as we're seeing now. The markets are turning. What does that mean? What does it mean for investors? Because the investor sentiments always change as well.
Find thematic funds, if it's a scene that has a pretty strong following, and there [are] lots of investors in that space. Thematic funds are already married to the problem, because they've raised capital for that problem. In the case of climate or health tech, for instance, there are enough investors with thematic understanding. The question is, do they align to what it is you want to build next? Always manage investor expectations. Be close to your investors. Share some of the concerns you have. Share some of the market concerns you have.
You want them as conversation partners, as opposed to an adversarial relationship, because I think some entrepreneurs that I meet is like us and them with investors. That's not going to bode well long term, because you're going to have to work with investors for many years, for many financing rounds. You're going to need them when you have to negotiate some complex clauses, or when you have to diminish some of their rights to bring in new investors. So, having that strong relationship is fairly key.
Maiko Schaffrath 38:34
Yeah. Yeah. Really, really good advice there. I think it's been such a range of good advice as well across the episodes we've recorded before. We've had a founder on here who's actually called off a funding round, because he realized he got the wrong investors, at least canceled pretty much late stage, and he doesn't regret it. He lost a bunch of money, and it was last minute.
But yeah, these are people that you will have to deal with for 10 years or so, who knows how long, and yeah, you need that support system. What else are you looking for from investors? I mean, there [are] different philosophies of value add investors. Are you really looking for that? Or are you saying, "Okay, I just need somebody that just makes space for me to do my thing and give me the money," and that's it?
Iggy Bassi 39:32
I think with any partnership, you need to give and take. First of all, some of my US investors I got, because I wanted a US footprint. I wanted a US network, so some of their networks have now opened up fantastically. Also, as someone who's done this a couple of times before, I have a better pattern recognition of understanding how I want to work with those investors.
What advice do I want? What advice do I think I don't really need, and what information do I and what sort of exchange do I have with them? What's the frequency that I have with them, for instance? Different investors have different strengths and weaknesses, so I'm able to discern that. I have one investor who's very experienced. I turn to him fairly often to say, "I'm thinking about this. What do you think before I formalize it at the board?," so having some of the soft conversations are more important than the board conversations sometimes.
Most board meetings are pretty done before you get to the board meeting, but again, you have to have that relationship. Build a social capital early with those investors, and that includes the early investors as well, because early investors, there's a tendency for some entrepreneurs to say, "Well, they only wrote me a small check." Well, they were there from the very beginning, so make sure that you don't diminish the frequency of comms. I mean, we reach out to all of our investors all the time with the same information.
Obviously, the board members have a different set of information, but you need to manage them. You need to manage them, and you need to communicate with them, because again, they're mission-driven investors. They've been with you from the start, because they care about what it is you're doing as well, not just because you can get a 5x on their money. It has to be more than that. Again, it depends what type of entrepreneur, and I'm talking here specifically about mission-driven as opposed to, "I'm just an entrepreneur. I just want the best price capital from the best investors. That's it."
Maiko Schaffrath 41:25
Yeah, got it. Yeah, I think that's okay. In fact, most guests are very mission-driven looking for mission-aligned people and are missionaries in what they do, and definitely got that sense from you today. I've got one more question before we wrap up, and that's about 10 years from now. Cervest has been running for seven years or so? Is that right? Six years. So, if you imagine 10 years from now, how does the world look like if Cervest succeeds or keeps succeeding, I'd like to say?
Iggy Bassi 42:02
Our vision is to try and make every decision climate-aligned, so every financing decision, every enterprise decision, every government or local government policy decision needs to incorporate climate intelligence. What we mean by that, is this decision going to make the climate positive or negative, and is that shared with multiple parties? Because we focus heavily on open intelligence, which means I can see my close assets. I can see his risk. I know what his risk is. He can see mine as well.
The power of open intelligence will also change some of the behaviors. If you know other people can look at your risk and your profile, how does that make you behave over time? Because we always say that we want to take some of the game theory out of privileged information by making this information available to everybody, so that when people are making bad decisions or decisions that are not climate-aligned, everyone should know about those.
The market should be able to see and know that over time as well. I think that's important if you think about what the world needs to do in the next 12-15 years, if we want to stay with the Paris-aligned paradigm, we have to think about mass decision-making, which means you need to incorporate decision-making into every automated decision, whether you're pricing, whether you're ordering something, whether you're about to make an acquisition.
Every aspect of the climate needs to be encoded in your decision architecture. That will take some time. This is why this is not an overnight journey. Progressively now, since I started this journey, we've seen thousands and thousands and thousands of companies become subject to disclosure laws that weren't when we started the journey, but we bet early on that one day, all these companies are going to have to quantify and disclose to capital markets what their exposure and what the impact of that climate risk is on them.
So, 10 years out, I want to be able to see as many decisions as possible climate-aligned on an automated basis work and shared openly, so when you do make critical decisions, everybody knows what that is, and everybody understands the climate consequences of that. But also, how do we make new decisions or new assets, new growth decisions, new cities, new buildings in a way that is climate-aligned from day one? How do architects use climate intelligence? How do planners use it? How do funders use it to say, "I can only finance this if it matches these criteria"?
Because we can't just carry on blindly building, Maiko. We are building up a stock of very low-resilience physical assets, which are not going to withstand some of the realities that these assets are likely to see. So, rather than asking the lowest cost asset, we should be asking the most resilient assets over time, "How do we change that?," and this is a systems change that we're looking at as well, but it all starts with the individual decisions.
Maiko Schaffrath 45:01
Thank you so much for sharing your journey and sharing what you're doing with Cervest to be part of the solution. I really appreciate your time and hopefully catch up with you soon. Thank you. I really hope you enjoyed today's episode and learned some valuable lessons from today's guest. I want to share two things with you. First of all, if you're a founder and you're solving a social or an environmental problem with your company, there is something that we've launched recently to support founders like you and to introduce you to more founders that are like-minded and that are solving very difficult problems in the world, and that is the Impact Hustlers Community.
It is a community of over 100 founders that solve problems like climate change, education, the crisis in health care, and really pushing the boundaries on what's possible. And what we do as a community, we connect to each other, we run mastermind groups where you can connect to other entrepreneurs and founders. We bring experienced investors, entrepreneurs, and experts in to run workshops and ask-me-anything sessions, and you can also connect to others in our online community. And we have something for those of you that are actually fundraising. We have an investor matching tool where you get introduced to relevant investors based on the startup that you're building.
But, it may be the case that you're not a founder, and you just want to be part of the change, and you want to join some of these companies that you've learned about here at the Impact Hustlers podcast, and we've got something for you as well. We've recently launched the Impact Hustlers Talent Collective.
This is a group of some of the most ambitious individuals in the world that want to make a change and an impact with their careers, and you can join the Talent Collective, obviously completely free of charge. You can apply to it, and we will introduce you on a regular basis to companies recruiting people like yourself. You'll get access to exclusive job opportunities from companies that have been on the podcast but also beyond that.
So, make sure that you go to impacthustlers.com/jobs if you're looking for jobs in the social impact space. Even if you're not actively looking right now, you should still sign up and be part of our Talent Collective. And if you're a founder, don't forget, go to impacthustlers.com/community. Okay, thanks very much for listening and bye. See you at the next episode.