83 – Kim Baker – funding equitable, market-driven circular solutions

Interview Transcript

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Catherine Weetman  00:03

Kim, welcome to the Circular Economy Podcast.

Kim Baker  00:06

Hi, thank you. Happy to be here.

Catherine Weetman  00:08

Yeah. Thanks so much for joining us. And could we start by asking you to give us a background to Elemental as a funder, and talk a bit about what sets it apart from other funding organisations?

Kim Baker  00:20

Yes, absolutely. Well, Elemental has been around for over 10 years now. So it was one of the first entities to even think about applying the accelerator model to climate tech and innovation. So it’s just been fascinating to watch its growth over time. elementals, also a nonprofit. So we’re absolutely so much more than just an accelerator or a funding agent. We think about things in a systems approach, we know that all of these operations and all of these issues are so directly linked at their core. And so we strategize about how to sort of uplift all of the sectors, all of these climate related issues together to build a better future that we’re all hoping for. So as it stands today, elemental has about 140 companies and its portfolio, we’ve enjoyed over 20 exits. And we really thrive on spotting that next kind of up and coming entrepreneur that sits across sectors like circular economy, food, agriculture, water, and so so much more.

Catherine Weetman  01:34

That sounds fantastic. I’m almost thinking of breaking off to send my CV in it sounds like a great thing to be involved in, particularly the nonprofit angle of thinking, you know, really sets it apart. So having had a look at the different types of businesses in the elemental portfolio, and as you say, this 140 which include end cycle, and listeners may remember that brilliant story, when I saw spoke to the co founder, Dr. Megan O’Connor back in episode 67. And I noticed one of the recurring themes is connecting those people or organisations who need things with those people or organisations who have what’s needed. So could you give us a couple more examples that kind of helped to shrink our production and consumption footprint by making those connections?

Kim Baker  02:24

Absolutely. Megan’s a fantastic founder. I’m so excited that she spent some time with you previously, I had a listen to the podcast, it was wonderful. It’s always inspiring. Yeah, so So you know, there’s a couple of things that go go into the thought process, our current economy, which we all know is quite linear. That’s what we’re here to talk about, and to create change to help close the loop on that. But in the linear scenario, elemental really understands and builds upon the fact that frontline communities often bear the burden of that linearity, meaning we’ve got landfills and industrial facilities located directly in these communities globally. And so a visual to think about this problem as it relates to our conversation today is one garbage truck of textile is dumped in landfills, and burned every single second of every single day. So think about those people in those communities that happened to be positioned adjacent to wherever that landfill is, think about the air quality, the water quality, etc. So through our work at elemental in our portfolio, there’s a couple of things kind of key issues that we’re looking to solve, absolutely to connect people to things and create jobs and hire within those communities that might be most heavily impacted. And so when I think about the circular economy, it’s not just one or two industries, it’s everything, every single thing on this planet can become circular, or it can become nature based. And so we think about it from a macro point of view, with the concept of platforms at the forefront, platforms that will stand up our manufacturing or industrial processes are buying and selling of tomorrow, platforms for carbon reduction, optimization of all of our stuff, etc. And then from that point on, we see these series of sort of acute viewpoints with very, very specific areas and cycle would be one great example with an alternative to mining or an alternative materials approach. And so then we start to sort of deepen the focus of the lens to think about in each individual sector, what exactly can we implement in terms of technology to help close the loop there. So it’s two things. It’s a platform approach, building the systems and the structure that we need across the board, and then it’s finding those very, very niche sort of direct solutions to help each and every one of the industries that we all live in to become circular?

Catherine Weetman  05:09

Yeah, that’s it just sounds like you, you kind of, really, you really are thinking about the system’s perspective and thinking about what’s going to make the biggest difference not just to the circularity, but to the impact on communities and so on. And, you know, I read a while ago about how most incineration plants are put in areas where, you know, communities are already already deprived. So then, you know, people are purposefully making the decision that it’s better to dump all this air pollution here. And it’s it just seems so unjust. So could you could you give us a few examples of those kinds of platform? Systems that you mentioned?

Kim Baker  05:54

Yeah, I’d love to in first, just a little snapshot, if you don’t mind, which is I started my career in environmental engineering spent an incredible amount of time in the field. And I would always think about it when I when I got in my car, and I drove home from the refinery, at the end of the day. During the day I was, you know, in complete head to toe PPE, a respirator mask, the whole nine yards. And then I got in my car, and I drove home. And the people that live within a mile, half a mile, a quarter of a mile of the refinery, don’t have PPE, they don’t get in their car and drive home. And so what are we doing, and that was the kind of light bulb moment for me of these systems are broken, we can clean up the mess, but we also need to figure out how not to create the mess in the first place. So to answer your question, a couple of platform related technologies that I’ll share with you today. Two of them are focused specifically in the textile industry. And one is a more broad sort of overreaching across the board approach. So maybe I’ll share that one first. That one is Reath. And they’re a company based in Scotland. And they’re one of our newest investments in this space. Actually, what they’re doing is they’re tagging and tracking circular assets. Just like we have the QR codes on everything we see and do now you pull up the menu these days on a QR code, same idea. They’re building a complete 100% digital platform for our stuff. And so this concept of data and transparency are absolutely critical to enabling us the reuse the resale, the upcycling of goods, it just so happens that they’re working with leading brands across the EU, like Marks and Spencer, who have these lofty, huge sustainability goals, which are amazing. But there’s a gap in the execution of that. And so here comes right into the picture, you need this data, you need this tracking and AI solutions to actually make decisions that matter. So that’s one really fun example that can be applied quite quite broadly across various industries.

Catherine Weetman  08:17

Okay, just just before, I asked you for some, some other examples, because I know, there are more examples sort of on the platform theme. And I’m really keen to explore those. But just coming back to your your background, Kim, so you kind of told us about the and I had a sort of similar similar thing, I suppose when you suddenly realise that you’re kind of part of a big problem. And, you know, for me, it was a tiny little part I was playing in, in helping big companies get slightly more efficient at selling selling stuff we generally didn’t need. And for you, it was about the, you know, the fact that you’ve got the PPE to protect you from all the pollution but the community around around the site hadn’t. But how did you then kind of go from that lightbulb moment to then working at elemental?

Kim Baker  09:10

It’s a fantastic journey, looking back at the time maybe felt a little differently. i Yeah, so I my undergrad degree is in Environmental Engineering. And I worked for a very large environmental consulting agency, sort of at the onset, which was incredible because it gave me such a bird’s eye view of all these various industries and how they operate. I was working at PG knees switch station in San Francisco, we ran a high voltage cable under the ocean along the train the BART corridor to allow San Francisco to receive enough energy. So I was at the forefront of that. I was working on greenhouse gas calculations with Dow Chemical before the reporting system was even stood up. So I really got to see some of These now very common sort of sustainability oriented goals and initiatives really, really early on. What sparked the interest for me, though, was a project in San Francisco working with green businesses, San Francisco has a fantastic Green Business programme where they run around the city and certify young and mature businesses around their internal greening practices. And it was going door to door business to business in the city, working with the people working with the founders of those individual businesses, educating them and then helping them implement the change at the end of the day. So that was the sort of lightbulb that I wanted to do more related to the builders, the people that were building the businesses that create change. That’s what elemental is all about, ultimately, is a we support the founders at the core of everything we do, we want to elevate the founders, because we know they’re the ones that will catalyse the growth, we need to make it to this sort of green future, we all hope for it. So after that, I went back and I got my MBA in sustainable sustainable management. It’s a very entrepreneurial programme, I started a company after that with a couple of co founders in industrial wastewater treatment. Again, thinking about the circularity approach, how do we work on site remove trucking? How do we reuse some of the critical materials that come out of that wastewater, etc. And then I went on to work as a Senior Product Manager. So I’ve worn a lot of hats, which I love to bring to the table when I work with entrepreneurs is they’re trying to reach these critical growth paths for their their company. And then I found Elemental I mean, I sort of just shared it’s really the perfect intersection of the engineering world, the technical world, but also elevating the founders that are really working, you know, day and night to create this change. And so it’s the perfect marriage of of everything, I came to Elemental. As we started thinking about expanding beyond energy. Originally, Elemental accelerator was founded as energy accelerator. And it was to help Hawaii meet its renewable energy goal, as we discussed just a few minutes ago, the organisation at that time, which I wasn’t part of back then, but the organisation of that time realised energy is also water, which is also agriculture, which is also circular economy. So in order to really create this catalytic change that everyone’s hoping for, we needed to think about it sort of across the board, I came to the programme, just around the time that Elemental was starting to think beyond energy and expand the various sector work that we do. So that’s the story. And like I said, I’ve I’ve done a number of different roles, technical business, business development, sales. And so it’s really fun to then bring all those various viewpoints and pieces of information to to the work that we do at Elemental.

Catherine Weetman  13:08

Yeah, sounds like a really kind of wiggly journey is

Kim Baker  13:13

not a linear journey. It’s not a circular one. Certainly not linear.

Catherine Weetman  13:18

Good stuff. Actually, maybe a circular career kind of sounds a bit limiting, doesn’t it open, even though we think everything circular is brilliant? So just going back to the companies in the portfolio, then could we talk through another couple of examples that are kind of doing that platform role of connecting those who have with those who need?

13:38

I’d love to, I’d love to? Yeah, I’ll give you two more examples, both of which are a little bit more focused in the textile industry. The first company is Trove, Trove is based in the Bay Area in California. And we worked with them starting about three years ago. And we did this just prior to a significant fundraise. So they’ve had great success in the past couple of years. And what trov is doing is allowing big name brands to take control of their resale marketplace. What they’re doing is they’re creating an entire secondary market. And I personally am a huge believer in this. I love when I can go online, with companies like Patagonia, Lululemon, Rei, and find something that has been given a second life essentially. So what Trove is doing on the back end that that you and I as customers maybe don’t see is that they’re a white label technology. They’re providing end to end operations for these big name brands to be able to effectively pull off this resale marketplace it is. It is not an insignificant logistical feat for them to do it and Trove is taking that you know, internalising that at their core Buddy. So, again, they’ve had fantastic growth, they’re working with these huge brands. And something that we really keyed on during our specific project work with Trove, is their ability to hire directly in the communities that might most beam there. What we did with Trove, during their project with elemental, really rings true for a lot of companies related to the circular economy, we focus deeply on the concepts of equity into their company. And what I mean by that is built an entire hiring plan for them to educate upskill hire local talent directly in those communities where those incineration plants might be, like we were just talking about. And so they’ve had a fantastic journey, just related to staffing and growing the company that way.

Catherine Weetman  16:00

Wow, that sounds that sounds really good. And yeah, it’s funny, we, me and my husband, were talking about Patagonia’s WornWear website last night, because of course, I’m always extolling the virtues of it, but he keeps reminding me it’s only in America. And his view is being being the kind of black and white view person that is his view is that that’s just greenwash. You know, the making a big thing of one where, but it’s only for for a certain market. So I guess that’s the challenge, isn’t it? You know, you can’t, if you’re going to walk the talk, you have to make your entire circular economy solution scale out to all your operating countries and so on. So maybe I’ll get around to sending them an email or something, yeah,

16:49

we’ll get them over. I mean, that’s something that we think about deeply at Elemental. And through the work that we do. So we co fund projects, demonstration projects, as we call them, which we did with Trove. And in some circumstances, the goal of those projects are simply to open a new geography. Because we know that it can be very difficult to enter new markets, the regulations are different, the buying habits are different, etc. So sometimes we’ll really support them through that transition from a policy standpoint, from a hiring standpoint, from a, you know, an operational standpoint, really, kind of think about how all of those dots can connect to make it easier to transition the company over there. So someday, it’ll happen. I know that they’ll come over there at some point. But the good news is actually there’s more and more companies that are able to fill this gap. So hopefully, this will become a mainstream solution across the world, there might be four or five various companies that fill each region. But I think it’s a really important note to see just how fast they’ve grown, even if it is here in the US primarily.

Catherine Weetman  17:58

Yeah. And I do think that, you know, I noticed there’s quite a trend now in particularly with the high end brands of having a resale option on their own site. And I think knowing the provenance of the of the goods, and kind of knowing that you’ve still got the, the quality and the customer service, and so on, have that brand sitting behind it, I think that that is much more reassuring for people who want to try having more pre use stuff, it feels much better than you know, as, as I have to do, if I want any pre use Patagonia stuff, I have to just put a search on eBay and wait till the right thing comes up. And then you know, hope opening bid in time.

Kim Baker  18:41

Well, it’s so true. And it demonstrates commercial pole. And that’s one of the the leading indicators, we think I think of a success factor of a company, if you’re seeing that commercial pull from those big name brands, even if they’re doing it in their own way. It’s showing that there’s a need out there in the world. And that’s really important. That’s something we look for as we’re doing diligence on on various companies to fund and it’s also something we track over time through what we call commercial inflection points. And at a certain point, we hope that the companies will become market leaders in that they are the leader, they are the ones pushing those big brands to do that. But until that point, those big brands making a move of any kind is very important.

Catherine Weetman  19:29

Yeah, absolutely. We just We just need, we’ve really got to change mindsets away from new being the only thing you know, or pre used being substandard. Somehow that seems to be the biggest biggest shift that we can we can make which which seems to be to be starting to happen. So are there any other examples that you that you’d like to share in terms of those platforms?

Kim Baker  19:55

I’d love to it’s another textile related company, and it’s called Thrilling. It’s a company based again here in the US. We worked with them about two years ago from the onset, we’re just wrapping a project with them now. So we did a demonstration project with them as well. And a little fun fact before I share a little bit more about Thrilling is, there’s more secondhand stores across the United States than Starbucks, and McDonald’s combined. That’s over 40,000 secondhand storefronts in the US alone. And most of them are owned by women and people of colour. As it turns out, Shilla is the founder of Thrilling and she’s an incredible force. She’s got a big vision. She’s a really humble leader. But she’s got an incredible sharpness about her about number one, how to engage her team. But number two, how to elevate those 40,000 secondhand stores that are primarily owned by women and people of colour across the country. So what she’s done over the past couple of years, is created an online marketplace for secondhand vintage stores. She’s covering now, I think, close to 1000 stores in 200 US cities, and what she’s built essentially as a network store to store so that now she’s got a one to many model, where they can understand what everybody else’s inventory looks like they can buy and sell across the platform to each other. As well as an online platform to sell to a consumer again, like you or me, you can go online have a one stop shop platform, online, that then opens the doors to those various shops across 200 cities in the United States. What was incredible is we saw this business just take off during the pandemic, if you can imagine many stores were forced to close their doors. And all of a sudden Shilla and a team at thrilling became the like livelihood for all of these small business owners across the US because it became one way that they could still receive income to their communities. So she’s she’s enabling small businesses at the very core of what they’re doing. And what’s really fun is she’s partnering with market influencers like Beyonce Stylist, and we’ve seen her in various blogs. And I think Vogue recently as it relates to fashion. So it’s the concept again, that we you just talked about it. It’s cool. It’s not, it’s not sort of like second fiddle to, you know what shiny object you may buy off the rack, it’s cool to buy something that’s vintage, it’s really exciting to support a small business owner. And there’s celebrities now that are on board that are doing it that are building this trend. And so through this one to many model, she’s just really provided opportunity for the entire vintage resale market to grow.

Catherine Weetman  23:13

Yeah, I think I just find it fascinating. The whole thing about fashion, where people kind of, yes, you need to sort of look like you’re part of your social tribe or whatever. But people are trying to be different by buying new stuff. But that new stuff is available to a whole load of people. Whereas if you’re buying vintage and kind of you know, creating your own your own look from other things, that’s much more likely to make you stand out or somebody creative and individual and different. And yet, you know, most people just seem to follow, follow whatever the celebrities have, have, you know, a showcasing from some big brand, and then wear it once or twice, and then that’s the end of it. So I’m really hoping that, you know, this, this new trend, and particularly the influencers kind of get on board and show people the power of, you know, creating their own individual look from, you know, whatever, vintage whether it’s whether it’s, well everything comes back, doesn’t it I noticed platform boots were were in photo shoot and I was had my head in my hands. So great. Okay, so one thing we haven’t talked about is how Elemental finds and selects the complete companies it invests in?

Kim Baker  24:36

Yes. So let me provide a high level overview of the application process, what due diligence looks like for us internally, and then how we go through this selection process. We run on a cohort based model. And what that means is we’ll do a call for applications one time per year, and we’ll fund up to 20 companies at the same time. So not only are we looking for portfolio fit thesis fit across the work that we’re doing, but we’re also looking through our selection process when we get down to those sort of top 20, that peer to peer learning models. So one example is, a company might have a really strong operations plan, another company might have a really clear understanding of how to engage with a community partner, and another company might have 100 customers already, what we want to build is a collaborative environment across companies that are non competitive with each other, so that they can learn from each other. So we’re looking for that variety of strengths, so that they can come together and say, like, Hey, this is what’s keeping me up at night, this is the really hard thing that I can’t figure out how to go for you guys. And ideally, the answer is always within that room. So a little bit about the process itself. We do this call once a year for applications and we see well over 500 applications typically. So it is a competitive process, we’ll narrow it down, as we learn a little bit about the company, understand if there’s a fit or not, we’ll invite a sub selection of those companies to move on to kind of another round of diligence, which is another round of us asking them various questions, etc. If we still are excited, we’re still feeling like it’s a good path forward. And there’s sort of mutual benefit to the add, we’ll invite them to what we call an interview stage, which is probably, you know, it’s very common at this point. And so we’ll talk to the team will talk to the founder, we we want to understand their big vision, and the inflection points that they’re hoping to achieve through the work with Elemental, and then we’ll talk to customers and investor references. At that point, we will move forward and fund up to 20 companies per year. And this year, we’re going through the process right now. So it’s a really busy but super exciting time of year where we’re learning about everything that’s out there in the world, and will fund this year, either $300,000 or $600,000. And that depends on which track of the programme that company is eligible for and selected for the $300,000 is a nine month coaching based engagement. And typically, it’s companies that are looking to solve for things like market intelligence, sales and operations, growth plan, fundraising plan. On the flip side, this $600,000 is for companies that tend to be a little bit later stage. And they want to achieve a commercial demonstration project. So Trove and Thrilling, are examples of project based companies that we are doing a project with or that we did pass tents, we just finished them. And Reath is in what we call the strategy track, which is that nine month coaching based work for companies that are are looking to kind of build out what that growth plan and trajectory will look like.

Catherine Weetman  28:17

Hmm, yeah, that’s fascinating. Thanks for, for talking that through. was just really interesting to get that kind of outside of you in. So Kim, in the process of of all the time that you’ve worked at Elemental, what kind of things have you struggled with, or what surprised you the most?

Kim Baker  28:38

If this part of it, it’s what we just talked about is that as we get towards the end, we see so many fantastic entrepreneurs and really big incredible ideas. It gets personal, we build personal relationships with the founders, regardless of if they’re in our portfolio or not. The world is quite small, actually, and that we see them at various events, etc. And we absolutely want to support in every way possible. But sometimes the right fit is not actually through our funding. And so that discussion, and those decisions get really, really hard. And what we have to come back to time and time again, is alignment, alignment based on our values, and alignment based on where we know we can catalyse growth to reach those commercial inflection points that are so so important along these founders tracks.

Catherine Weetman  29:34

Yeah, I can imagine that gets really difficult because you must get close to people as you’re discovering more about what they’re doing. And then you know, because in in the end it is a competition. Even some of the ones that you love might just not come quite as far up the up the scale of of, of the criteria and thinking about you know, if you were sitting next to a business that wanted to start going so killer or an existing business that wants to be more circular? What would be your number one tip that you’d share with them?

Kim Baker  30:08

Great question. Can I get two tips? Can I have two tips? All right, yeah, two. The first is, I would say time is key, especially when you’re a startup, when you’re really pinching pennies and sort of watching when the door is going to close. Time is key, find the partners that are ready to make a move with you that are ready to join on in some capacity and agreed to do some action with your company, not just talk about it, do something about it. So that that is number one, I see a lot of talking, I want to see more action on the partnering side. And then the second one actually goes back to what I was talking about in the beginning of kind of how we see the sector and the work that we do. I would encourage companies specifically when they’re fundraising, to broaden the lens, they’re not just a carbon company, they’re not just a water company, they’re not just a circular company, you do not have a good company, because it is a circular solution, you have a good company, because this is the business model of the future. This is the only way to have a sustainable business in the future. So I often tell people lead with the business case, lead with why this makes sense for investors, communities and corporations. It’s incredible that it’s a circular related solution, or an upcycling solution, but lead with the business case, because that’s what creates the stickiness between the investors, the customers and the community that shows that future path is even possible.

Catherine Weetman  31:48

Yeah, that’s that’s just a brilliant tip. And I think so often you see companies talking about what they offer or what they do, but not the why not why why should you do it this way? Why should you choose? pre pre used instead of brand new, there’s there’s nothing to kind of help people understand the bigger picture, really, in terms of the business case? Yeah. So fantastic. Thank you, Kim. And who would you recommend as a future guests for the programme?

Kim Baker  32:18

Well, we talked about Thrilling so I’ll start there. Shilla’s founder story is just incredible. It’s just incredible. I won’t spoil it. So I will absolutely connect you to her and let her share with you. And I’ll also suggest a company that we work with that’s based in Africa. It’s called WEEE Centre. Bonnie is the founder. And his founding story ties back to laptops in schools for Kenya. So that was top of mind, because I know you just spoke with previous guests on computers. And they are creating a similar type of platform, actually, for people’s old electronics that have been discarded throughout the country of Africa. And he’s working with various large corporations across the EU and even further abroad. So lots of good stuff to learn from Bonnie there.

Catherine Weetman  33:08

Yeah, great. And my partner at Rethink, Peter Desmond, he’s the co founder of the African Circular Economy Network. So he’s always happy to get more circular economy examples from Africa as well. So that’s

Kim Baker  33:22

incredible. Well, Bonnie just set up a circular Innovation Centre in Kenya. I don’t know when or how I don’t think he sleeps much. But I’m sure that’s of interest as well.

Catherine Weetman  33:31

Yeah, sounds like it. So great. I’ll I’ll ask you for those links afterwards. And, Kim, if you could wave a magic wand and change one thing, sort of overnight to create a better world? What would that be?

Kim Baker  33:46

Such a good question. I would love a magic wand to help everybody internalise. Everybody else has lived experience. This is something we think about a lot in terms of the founders. Have you walked a day in their shoes, like that concept of it right? Do you know how hard it is for them to do X, Y and Z or to raise money or to get a meeting with a large partner, perhaps if they’re hoping to have an action from instead of sort of just supporting from an arm’s reach? You know, we really want to understand these things that may so often be after thoughts for for everybody else, because no one’s experience is the same. So I really think that shared experience would be the magic wand.

Catherine Weetman  34:33

I love that. Thank you. And lastly, how can people find out more and get in touch with you and Elemental?

Kim Baker  34:41

We’re always excited to connect with the outside world, whether it’s through career pathways. Our companies are always hiring. We’re always hiring. You can learn more about our five year strategy and our impact through reports that are located. All of this is on our website at Elemental with an E, elemental Excelerator.com. We have various blog posts that myself and other team members put out into the world. Some of them are specifically about the work that we do or about what we’re looking for in our next investment cycle. And some of them are some of the blog posts are about the companies themselves. There’s a great one that came out of a few months ago about end cycle, you could check that out. So that’s also on our website. You can find me personally on LinkedIn, Kim Baker on LinkedIn, I’ll share the link with you. You can you can add it to the notes there.

Catherine Weetman  35:37

Thank you. That’s that sounds excellent. So Kim, that was a fascinating insight into Elemental and a few of the many businesses in your portfolio. So thanks very much for sharing that with us.

Kim Baker  35:48

Oh, it was great chatting with you. Thank you so much for having me.