Michael Smith, General Partner at Regeneration.VC, sat down with Jessica Abo to talk about his company and the steps you can take to add value where you work, especially as you become part of the circular economy want.
Jessica Abu: Michael, nice to be with you. First, can you tell us what the circular economy is and why it matters?
The circular economy is really an answer to the linear economy we live in today, where we take things off the earth, make them into products, consume them and then throw them away. 91% of all materials end up in a landfill, in the ocean or in a natural system. So in a circular economy, from the moment we make new products, we think of materials that can be reused. We think about how we use them and try to extend things beyond a one-time or limited use. Almost two-thirds of global emissions are tied to the things we consume every day, the food we eat and the clothes we wear. So if we can make things better and keep them around longer, we can drastically reduce emissions and improve life on our planet.
I love your origin story. Can you share what you did before you started regeneration and what made you start this venture capital fund?
I was touring the world as a DJ in my early 20’s and 30’s and I saw the world changing around me, the environment and I really wanted to do something. I was also an entrepreneur and started a business making music for restaurants, hotels and retail stores. And after I sold that company, I was keen to combine my two interests in the environment with investing in a for-profit company. So regeneration is the combination of these two things. We invest in young companies that are working on circular economy opportunities.
And what is your overall fund strategy and how do you allocate capital to achieve positive environmental outcomes?
We invest in three different areas. The first we call design. These are the materials that go into the products we consume, the fibers in clothing, the packaging, and the food and beverage add-ons for consumer brands. We buy formulations for beauty products. The second is usage. These are the brands and services that use these products. Think companies like Patagonia and Alternative Meats and things like that. And finally, reuse. So if we don’t send something to a landfill and feed it back through the supply chain, what do we do with it? How do we recycle what would otherwise be a waste stream into a valuable material?
We invested in a company called CleanO2 that does all three things. First, they have devices that capture HVAC emissions from air conditioners and heaters, capturing a material called potash. And that potash is then used to make a new material, a cleaning product that’s sold as a brand, a consumer soap. This is the complete chain of circularity. We become active with our portfolio companies. We have made eight investments so far. And we’re working to accelerate them and get them to market faster so they can actively compete and truly scale.
Can you tell us about your latest investment and why you are so excited about it?
Our most recent investment was in a company called TULU. If you live in an apartment building, you probably feel that you could share certain things with the occupants, like vacuum cleaners or maybe consumer goods, video game systems. And they have units in their lobby that make that possible. They allow you to unlock additional amenities and possibilities from your shared living experience, be it a scooter that you can take out with a helmet much nicer than what you would find on the street. Printing services so you don’t have to own your own printer and paper. We’re very excited to see what it means for manufacturers like Bosch, who is their investor and partner, to use this information to make products that last longer and are better used. Where you might only use a vacuum cleaner once a week, with this model the same vacuum cleaner gets used many times and displaces any vacuum cleaner, over 50, from creation. We’re just really excited about the concept of unleashing the sharing economy in living environments.
Are large companies committed to circularity and using these insights?
You’ve got industry leaders like Apple taking their phones back and making new phones out of them, paying more to get those old phones back, and opening up repair options for the first time in over a decade. You have companies like Amazon working on their packaging and committing to various circular outcomes. You have Nike, these are open source strategies on how to make your business more circular, especially in the apparel world. Unilever, Procter & Gamble and so many are committed to it, as are cities and governments. So there is a big movement around circularity and we are happy to be a small part of it.
What steps do you recommend for people who want to unlock circular opportunities in their organization?
There are so many ways you can apply it, but the most basic is to go through your business now and think about places you’ve wasted. Think about times when you can increase efficiency and improve overall performance. Order these according to how much they will cost you, how much they can bring you and how profitable they can become for you. And then do your best to find out what impact that might have on the environment and where new regulations are headed. There is so much to do here and it’s fun to think about ways to improve the planet and make money.