How to Mitigate 4 Shades of Water Risk Through Impact Investing

Turning the narrative from “Water is Life” to “Water is a Risk” makes its associated challenges more straightforward. This is an opportunity for investment funds to have an impact.

Why and How? Let’s review!

with 🎙️ John Robinson – Partner & Co-Founder at Mazarine Ventures

💧 Mazarine is an impact investor backing young technology companies with innovations that address some aspects of water risk, including quality and quantity.

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What we covered:

🌊 How Quality and Quantity of Water represent increased risks across the industrial and municipal value chains

🧮 How the Environmental, Social, and Governance (ESG) framework is a potent way to rank and evaluate a company’s impact

🤝 How Mazarine Ventures builds upon four lanes: Labs, Fund I, Fund II and Bluehouse

💰 How Funding mechanisms evolve from one Lane to another and why

🌍 How exiting from an investment is not only a financial milestone but also an opportunity to have an impact

🧑‍🤝‍🧑 How there are four types of capital: human, social, intellectual, and financial, and what the most important is in the early stages of a water company

👨‍🚀 How Mazarine Ventures looks for start-up founders that have been to the future and came back

📈 How the real challenge for companies Mazarine backs is not to create a product but to get it to the market

🟢 What an evergreen fund is, how it works and why it was the right fit for Fund I companies

💪 How all parameters play in Mazarine’s decision to invest, but the quality of the founder’s insight trumps it all

🧩 How the chemistry between the impact investor and the early-stage company is key to assembling the puzzle pieces

🌱 How Fund II and Labs were built out of frustration to not fitting promising concepts into Fund I

☑️ How many investors just check the “water box” and move on – and what consequences it has

🚀 Capital-light innovations, IoT, the biggest risks as an early-stage impact investor, passing of the baton as a start-up founder, having a convincing grasp of the customer… and much more!

🔥 … and of course, we concluded with the 𝙧𝙖𝙥𝙞𝙙 𝙛𝙞𝙧𝙚 𝙦𝙪𝙚𝙨𝙩𝙞𝙤𝙣𝙨 🔥 


Resources:

🔗 Have a look at Mazarine Ventures‘ website

🔗 Come say hi to John on Linkedin

(don't) Waste Water Logo

is on Linkedin ➡️


Teaser: Impact Investing to Mitigate the Water Risk


Infographic: Impact Investing to fight the Water Risk

Infographic-John-Robinson-Mazarine-Ventures-Impact-Investment


Full Transcript:

These are computer-generated, so expect some typos 🙂

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22+ hours of tips, technical advice, business hints, entrepreneurial inspiration, and market insights condensed in a MASSIVE 120 PAGES INFOGRAPHIC

20 chapters featuring 21 experts (on top of myself 😅), each one addressing a specific chunk of the water industry cake

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Antoine Walter: Hi, John, welcome back to the show.

John Robinson: It’s great to be back again.

Antoine Walter: That’s an interesting one, because I’m saying back to the show, even though for people listening to that, that’s the first time they hear you, but it’s a retake of a first interview. We cuts last week and we didn’t just throw it off because it wasn’t good.

It was a brilliant view, but it turns out we don’t have it on tape. So that one is the one which we have on tape. And I’m really excited to have that conversation with you because there’s a ton of stuff, which I liked you to address in the way you look at the water sector in the way you look at water itself.

But that starts all with my tradition of the postcard. And you’re sending today your postcard from the UK, right?

John Robinson: Yeah, that’s correct. I’m in London.

Antoine Walter: So I let you decide if you want to send a postcard from Mazarine’s headquarters or from London right now.

John Robinson: The postcards coming from London, where it is 19 degrees and cloudy with a touch of rain. So it’s a, And I think the last time we did this interview, I was in Northern Wisconsin, in the U S from my family’s tree farm. So I’ve gone from deep , in rural America to what is arguably one of the global commercial, cultural, economic hubs of the world.

So, I work the extremes,

Antoine Walter: And I can just imagine where he will be next. So.

John Robinson: Portugal, maybe Portugal, maybe.

Antoine Walter: Actually you’re not coming from the desert. I’ve heard some of your other appearances on other podcasts. So I’m going to link to them in the comments and try not to repeat myself compared to what my colleagues an estimated podcast guests have asked you. Nevertheless, there’s one step in your journey, which is really interesting to me is how you come to building an investment fund.

How do you do that? Is it like black magic? You say, I want to become an investor and money starts to, to flow on you, or how do you do it in concrete steps

John Robinson: The origin I think that every investment group focused on water or any industry for that matter, that’s specialized has their own origin story, their own entry to the business from Mazarine and in particular, our core team of four partners. As a unique set of skills that, that enable us to be in the role we play within water myself and honors house B have spent a lot of our careers bringing technology to market in different ways.

So I ran a consultancy for 10 years, focused on helping water-related technologies get into international markets. So when you’re a consultant, do you touch a lot of technologies? You come across a lot of different sectors and sub-sectors, the whole consultancy was go to market strategy.

So that translates nicely into venture because the companies that we’re investing in their big challenge is not creating a product, but getting to market is really the challenge. So I’m an honors was doing the same thing for most of his career. Pete Nassos our other, our third partner. He spent a lot of his career.

In sales and marketing roles within water and wastewater. So guess what the challenge these young companies have sales marketing go to market is one problem, but then you have to figure out how to sell your offering. So Pete’s really good with that. And then Tammy, our fourth partner, she has a background in private equity and venture capital.

So it turns out these young companies, this is usually the first time they’ve raised money or the first time they’ve had a board or the first time they’ve structured something. And so Tammy’s really good at helping these young companies figure out the financial path forward. And then prior to investment she’s really good at helping us figure out what we should get into and what we should stay out of.

So our origin story is a little bit different than other people, but it’s a combination of four individuals. Experience and expertise has enabled us to start Mazarine and one final thing. The four of us. Have a very high degree of intentionality around impact, social and environmental impact.

We wake up in the morning as investors and as business people about, I think we go to bed at night, genuinely concerned with the water risks that the world faces industry and society. So our mandate is impact and that’s core to everything we do.

Antoine Walter: I’d go a bit deeper into that topic of how you look at water and how you. You place it on the map and what’s your, somehow your investment thesis, but you define yourself as an impact investor. And according to GSI numbers, which I consulted before, having the discussion with you, there’s roughly 15% of the market, which is ESG investments.

So that’s $35 trillion roughly speaking. And then there’s one percent of those 35 trillions, which is impact investing. So you are a niche in the minority. You see that something which you wake up with and which you carry with you the full day. And you go to bed with that aim of being an impact investor.

Nevertheless, if you want to make money, that’s maybe not first track to follow. So if I’m being a bit of a contrarian here, why did you decide for that path of being an impact investor?

John Robinson: I think Mazarine in a unique position to be able to help humanity. It sounds like a very grandiose claim, but by identifying early stage technology companies that can genuinely help their customers with their E or S or G goals. So our utilization of ESG as a framework is pretty straightforward.

We look at, you know, 300-400 deals a year, just like any other VC would, but when you find a company, we have to score them for their potential to help their customer realize their E or S or G goal. So for water, the temptation is to say that it’s all E and clearly E is a big part of water, environmental protection, making sure that the environment.

That we live in animals, live in plants, live in, is protected. And so water and environment, obviously very connected. So pollution is a big part of investing in technologies that mitigate pollution to the environment. So we like technology companies that are able to generate a high degree of E for their customer, whether it’s a public sector or private sector customer on the S side. I mean, I don’t know how you can talk about water without talking about social. The most disadvantaged communities in the world are oftentimes the ones that have the most compromised water or are more prone to flooding. Wealthier neighborhoods are generally higher up in low income neighborhoods are definitely lower within the topography of a city or a region because they flooded more and wealthier people don’t want to live in flood zones and lower income people end up there.

Unfortunately. So water, whether it’s. Biological determination or heavy metals contamination or flooding. So quality or quantity is a huge S so any technology that’s able to generate S value. So social impact score is very high on our scale, and that will motivate our checkbook to invest in that company.

And then I see G the way we see G is around transparency and democratization of water. So it just doesn’t sit right with us. That communities don’t have visibility into their water risks, whether it’s quality, risks, like contaminated water, or quantity, risks, like flooding or drought or availability. So if a company isn’t able to democratize that data and democratize tools to understand that data and create transparency and enable the community to have a voice.

Most importantly, low-income communities to have a voice. That’s a huge G. And so we like companies that have been able to do that. And if anybody in your audience is interested I’m more than happy to go through our fund one portfolio of 13 companies. And talk about specifically how each of those companies generates either E or S or G, or oftentimes it’s a combination between the three.

Antoine Walter: Well, actually, let’s do that now. Let’s go through you, your portfolio because actually. What’s interesting in your take that’s full, what a story is, that’s, you’re an impact investor that you define it. You’re an ESG investor. You define that as well. You invest in water. That’s also one of the elements, but you don’t invest in the water industry per se.

You invest in the consequences of water you invest in, in the externalities, in what water can cause what water can be as a risk. all the shades of water, which are not core to the water industry. So first, why so, and second, can you give us like concrete examples of how that translates into your portfolio?

John Robinson: Sure. So we are in the water industry and the water industry is generally defined as municipal and industrial water, distribution and treatment. That’s a traditional definition of the water industry. But there’s so many applications outside of the water industry where there’s risk. So I’ll just quickly do a quick tour for your audience.

Just a sentence or two on each of our fund one portfolio companies and the impact they generate. So starting alphabetically without Aqua membranes, essentially Aqua membranes is generated a a 3d printed spacer technology, which is utilized within the membrane element. In order to protect the membrane from fouling and scaling sock, remembrance is a performance improvement technology for RO membranes that enables significantly less energy use.

Within the ROL processes, your audience might know reverse osmosis demands, a tremendous amount of energy to create the osmotic pressure, to realize the potential of RO and energy means carbon. I would park them in climate tech as much as they are in Watertown. The ability for membranes to to improve the performance of RO Membranes means more water availability for communities in need.

So I would consider that a public health and safety innovation, because it’s enabling communities to have water where it previously wouldn’t have it

Antoine Walter: if it try to understand the nitty-gritty details, that means you have an E impact and an S impact E because you helping with the water and S because you’re making more water available and at less energy.

John Robinson: correct? Correct. So that would be an E and an S Aqua Osso?. Aqua Osso is straight up a FinTech company. The customers of Aqua Osso are banks and increasingly insurance companies, and there’s some corporate sort of starting to get interested in it, but Aqua Osso is essentially doing one thing. It’s enabling stakeholders lenders, mostly the ability to understand the water security risk or the climate risk of their customer.

So you want to borrow money from a bank. The bank , has to understand what your ability is to repay that loan. But if you don’t have a water available, you have too much water. That’s even a flood zone. That’s a risk that previously was not quantified. So Aqua Osso’s is essentially a decision support tool for banks to understand the Landee’s water security risks.

They don’t operate in the water sector. They operate in FinTech, but the whole problem, no risk that the banks are looking to manage is water. So it is water, but it’s not the water industry I would consider that a very high G score because it’s creating transparency around water security risk of in the marketplace.

And I would say it’s a high degree of E because it’s enabling more efficient distribution of capital , to lendees that are able to be better stewards of whatever water is available.

The next one just moving forward is box of rains. A box of rain is essentially an emergency water solution. So a lot of utilities and the disaster events, the most immediate need for the community is safe. Drinking water, Suboxone rains, innovated a suite of products that enable the disaster relief, emergency relief organization to be able to get safe drinking water or containers to distribute safe, drinking water into the hands of communities at a very cost efficient and environmentally sound way.

So the incumbent solution is just plastic water bottle. I mean, it’s a disaster. So people don’t really have too much time to think about environmental issues, but it creates a sort of the disaster after disaster where there’s mountains of plastic, water bottles, and a disaster scene box of rain is targeting those kinds of situations to deliver water with less plastic in a more cost-effective way.

So it’s very much an S. And then I would say it also scores high on E and a touch of G because it’s enabling a disadvantaged communities to have access to resources that, previously were not offered to them, but it’s mostly an S next one, conservation labs. That’s the basic labs lives in PropTech.

Their technology lives within buildings, period and building owners and operators have problems with plumbing and appliances within water related plumbing, appliances, and property conservation labs is leveraging audio sensors, sensor technology. To listen to the flow of water through pipes or through appliances to understand normal abnormal behavior of that, plumbing or appliance.

And then leveraging AI, you can start to categorize or predict likelihood of problems within the plumbing of the appliance. So their customers are building owners or operators or occupants that has face water risk within property. So they’re just as much in smart home smart building PropTech as they are and walk water problem is water, but the customers are building owners or operators.

Same thing with clear. Another one of our portfolio companies in pool tech, you have just S Jen Jensen, the CEO of Claire. He will tell you right away, they’re in pool tech, which is a subsegment of smart home. It’s enabling owners and operators, a pool, whether it’s a private pool or a university swimming pool, or a public pool, the ability to get more visibility and control over the pool risk.

So this is very much an S that’s creating transparency and enabling everybody to understand what the status is of the asset. Anytime you’re creating democratization of data, transparency is a very high G in our mind. So clear intentionality is to democratize tools that enable healthier pool management

Antoine Walter: think that, that gives us an understanding of how you approach all of them

John Robinson: if any of your audience wants to go through these one by one with us to understand the calculus behind our investments in these. Schedule a separate call with your audience, but you get the flavor of how we approach things.

Antoine Walter: Absolutely. So all of this 13 companies, they live into one fund. So it’s fund one from, Mazarine ventures and. I’m wondering that fund is a bit special if I’m right really for the muggles it’s an evergreen fund. So that means that all those companies would understand how you look at them and what they do and how they solve for some E some S some G some G topics, but what isn’t an evergreen fund.

And when does it change for that?

John Robinson: Yeah. An evergreen fund is a fund that doesn’t have a finite timeline. And it enables us to continue investing in companies over the years as they grow. So many of these companies are fund one, we’ve cut multiple checks to a couple of them only one check that?

was required. But I think that was only.

Company, we’ve only What two companies are 13. We’ve only got one check two, but most of them, we continue to invest over the beers as they require for their financial capital. We have the ability to do it. So Mazarine is on track to cutting five or six checks a year. And we have the ability to keep doing that.

I guess in perpetuity. So we don’t have a very clear or very finite timeline, like most funds do on a five-year investment timeline and then five years of harvesting exits we’ll continue investing in perpetuity out of fund one.

Antoine Walter: What is the typical shape of one of these companies when it enters the funds. And when do you think they are mature enough? So that’s, you probably are not the one anymore that can help them to grow to the next stage?

John Robinson: The criteria for a fund one check is companies that are in market nearing a million dollar us dollars in sales. So they already have some customers. And we think that this year or in the coming year, they will be at a million dollars in top line sales and they can’t be grants that can’t be non-dilutive money from the government.

That means customers paying them near a million dollars. That’s the key requirement of financially for the company to be qualified for a fund one investment. Also at this stage, these are seed stage companies that are in market. At this point. The vision of the founder is crucial. And because we’re impact investors in the intentionality around the founders is crucial as well, but we need the founder of the company to be alert, articulate a future that is compelling to us.

So the product itself of course, has to work and we have to understand the engineering principles behind it or the market competitiveness of the product. But it’s the quality of the founders insight alone that sometimes generates enough interest for us to invest. So we put a very high emphasis on the founder’s vision or co-founders vision and their ability to articulate a future that maybe we can’t see, or the market can’t see yet, but they have some sort of asymmetric advantage in the market because they see what other people don’t see and their product that data embedded has enabled them to capture market, share that incumbents or others are not able to capture.

So that’s a very important part of our criteria. Financially nearing a million dollars in top line, secondly, a founder that can articulate a vision. And lastly, because it’s so early stage and we’re on the phone with these companies pretty regularly, it has to be a high degree of chemistry between Mazarine and the management team and the founder where there’s a mutual respect and a trust between us that we have some puzzle pieces.

They have some puzzle pieces. Let’s make sure that we respect each other’s opinions and strategies, and let’s get to the next milestone. Together. So the next step milestone is why we launched Fund Two.

So Fund Two, which we haven’t kind of checked out of yet is focused on growth stage companies. So companies that are nearing $10 million us dollars in sales, those companies need a very different type of support than the fund one companies, because they’re more mature in the market and they’re already sort of starting to pop up on the radar of corporates.

So our fund two is focused on growth stage companies that at this point, the founder’s vision is less important than the board composition and the sub market that they’re operating in their competitive advantage. And that sort of our criteria for fund two.

Antoine Walter: Fun too, as is currently rolling out. So you have these 13 companies within fund one and fund two is seeking its targets. Will it be the 13, which will flow into fund two. Or do you also look for other prospects?

John Robinson: Other prospects as well. Some of the fund one companies will receive a fun to check and then fun too. We’ll also include some companies that were not in fund one for whatever reason, but are nearing 10 million in sales and fund two has an appetite to invest in that. You know, another thing I should share with your audience is that of our fund one 45% of the company is pretty 5% of the.

13.

Their IP is essentially rooted in data science, something in the data, science toolbox enables them to generate value. I know that people call it digital or something, but essentially it’s leveraging IOT to ingest data in a new way. And then applying. Tools within the AI toolbox to generate new insights and predictive analytics around the product.

So that fund one is heavily into data science and fund two. We’ll continue on that trajectory. We have a very big focus on capital light innovations which kind of steers us clear of equipment and and capital-intensive

Antoine Walter: No hardware basically.

John Robinson: a couple of our companies. So it was real techs. So world techs and Electromed both touch more capital intensive than the other companies, but the founder’s vision for both of those companies and their competitive advantage was compelling enough for us to participate in those capital intensive businesses

Antoine Walter: We have the this clear framework, if I tried to recap it and to make like, like the portrait of a typical company, which interests from one that has 1 million of sales impact entrepreneurs, and as symmetric advantage on the market. And and it has a good affinity with Mazarine because you will be working quite closely with them.

And then there’s a special hint, which you say 45% of them are into data science and are rather capital light. So that gives us the typical portrait. And you also explain how they jump to fund two when they reach their, that mark of the 10 million of seeds. How long between those two milestones, what’s your vision?

John Robinson: We expect to exit our investments in these companies between three to five years from first investment and by exit, I mean, a later stage investor or a corporate comes in and Texas out of the cap table. So that would be an exit. So we would invest money.

And within three to five years, somebody would come and take us out of the business, which is, I think our role has been accomplished. So that’s the same for fund one or fund two. And so for fund two that investment would often take out our fund one investment. So our fund one would get, would see its ROI.

From a fund two investment. So our target is three to five years, but the world is not always on such an accelerated timeline. Sometimes it could take five to seven years, but our target is by five years, we will exit all of our fund, one companies from the date of first check of those of each company, the clock starts ticking and then fund two of the same thing three to five years we expect to be in and out of those companies and enabling later stage investors to add their value.

Success for us is exiting to a corporate that has a global network that can enable this small company to reach more customers globally and therefore generate even more impact. So exiting for us is not just a financial event. It’s enabling this company that we were backing early on to finally be able to reach customers in regions around the world that as a small company was not able to do.

So the exit for us is a big part of our vision on the impact.

Antoine Walter: It’s interesting. You mentioned how you look at a symmetric advantage from the companies you’re backing, but it sounds to me like yourself as investment fund, you also have an assymetric view at the market because if I recall what Paul O’Callaghan was sharing on that microphone some months ago, it was looking at the dynamics of water innovations are really the core of the water industry.

And they are, the timelines would be between the first pilot and the moment you’re in the middle of the market, it would be 12 to 16 years. And you are able to see accelerated timelines of three to five years. You said, if it’s slow, it’s seven years, but seven years, arguably is still very fast. If you compare to the core of that.

So that means that you found that edge or that asymmetric part, or that differentiated approach to the market, which means that you’re evolving in niches or in the periphery of that core, what industry which allows you to go significantly faster.

John Robinson: Yeah, I think that when you approach technology investing like we do there is a different time. I mean, if you just look through our fund one companies there. So three to five-year time horizon is from when we invest to exit. So the clock starts taking on an investment and w and we’ll exit within three to five years.

Now, the company might’ve been operating for two or three years before we cut them a check. So something like conservation labs, I think we got in 2019 2019 for the first time. And then we cut another check in 2020 if my memory serves me correctly. But mark Kojak the founder of conservation labs. He’d been working on this for at least two years before we showed up.

So the company’s been around for, let’s say six or seven years now, but as early stage investors, we have a different time horizon, but I think It’s the framing of the water industry that is by definition, more conservative and slower. And a lot of those technologies are treatment technologies. Or, and if they’re sensing and monitoring for diagnostic tools and they’re focusing on municipalities, of course, it’s going to be slower. And so if you look at a lot of our portfolio companies, they’re not necessarily in municipalities.

In fact, we only have one of 13 that is pure play utilities and that’s water click. And the reason water click is interesting. And the reason we decided to go into municipalities and the water industry is because it’s an enabling technology to enable other software sensor companies to reach utilities.

So it’s a platform. To accelerate digitization. It’s not a new software or sensor in its own, right? So Mazarine decided if a couple of years ago, the only way we would get into , municipal heavy stuff is if we could build or invest in a company that could accelerate digitization of small, medium size utilities and that company water click has a much faster growth trajectory because it’s not selling a sensor, it’s not selling the software and it’s not selling a pump or a valve or some membrane technology or primary secondary treatment technology.

It’s a platform that’s accelerating digital tools to get the customers technology. So it’s a totally different animal than the ones that traditionally have popped up in BlueTech’s market analysis of time to exit. We’re cutting the market differently and seeing the market differently.

And other investors have their own thesis and their own framework, which is exciting to see the different people are tackling the market differently.

Antoine Walter: Is it a real way to cut the market and look at it differently? Or is it a marketing angle? I’m trying to be a contrarian here.

John Robinson: Not a marketing data. It’s a real way to cut the market. I’ll give you an example. Everyone likes examples. Our portfolio companies, simple lab based in California, simple lab is in the environmental testing labs business. If you asked the CEO of simple lab, you would say, they’re not in the water industry.

They own the business of environmental testing labs. So I don’t know how many are in other countries, but I know in the United States, there’s several hundred government certified environmental testing labs and just use, imagine a lab. They have a lot of expensive equipment that can generate tests and results to understand what’s in your sample.

So guess which industry needs to do a lot of tests, the water industry, but does that mean that simple labs in the water industry? No. Nope. They are water quality testing is a risk for owners and operators of water assets and labs traditionally have been somewhat analog and slow, and the reports are sometimes hard to read.

So a simple lab has brought the labs forward and made the labs more relevant to anybody who has to test their water quality, whether it’s a utility or a factory or a conservation group, or me and my home, it’s bringing efficiencies to the environmental testing labs services business than it is the water industry.

So that’s a different way of cutting water. in that respect it’s sort of bringing efficiencies to owners and operators of water assets. Then selling them a new valve or a pump or a DAF solution or some sort of software to manage their X, Y or Z asset. So different way of looking at opportunities.

Antoine Walter: I was trying to push a bit yet. I have to be sometimes a bit of a contrarian. I’m wondering what’s the level of risk you’re taking with those companies so far. I guess you have a 100% survival rate, but on the long run, that might not be the case?

John Robinson: First and foremost, our biggest risk is that we get something wrong. Then we invest in a company that somehow we had some blind spots or we didn’t understand that what the market potential was or the impact potential. And we just get it wrong. Just like anybody else or any other group, you’re not going to get it right.

A hundred percent of the time. So our biggest risk is that we get one of these wrong. We totally misread the opportunity. The second risk is something happens to the founder. For whatever reason, they’re not able to run the company anymore. And that’s the second biggest risk is that we lose the key person. And that’s kind of scary because, you know, we could probably find a replacement for the person, but oftentimes the early stage investors the biggest concern is that the founder is either unable to operate the company or it gets to a point where they need to step aside. And they’re not willing to step aside to allow somebody else to come in and take the range.

So sometimes you get founders who were extremely technical and they’re doing their best on the business side of things, but you get to a point where the company is nearing five, 10 million in sales, maybe it’s time for the founder to step aside and be the.

CTO and enable somebody else to come in and be the CEO.

That’s a risk. So it’s sort of founder risk beyond those two risks. The macro economic environment is not something we can, we think about too much because all of these companies they’re in businesses. There’s likely to be steady demand for every one of these offerings. Whether it’s a bear market or a bull market globally.

So it’s found a risk and then our, of our own calculus risk,

Antoine Walter: we’ve explored so far fund one. And one, which is your first your first body and fund two, which is continuation of fund one and more. Two more siblings in the family. You have your Mazarine labs and you have blue house. So those are the two ends of the story. So what are the labs and what is blue house?

John Robinson: we created labs because Mazarine was coming across very early stage innovations. Founders are postdocs. University graduates are PhDs that had an idea or some entrepreneur that was pre-everything no website, not even a name. Or inventions from other industries where we saw applications, water-related applications, but this technology was invented for doing something else, but we wanted to bring it across the fence to address water risks.

And so we found ourselves passing on a lot of these early stage things because they didn’t meet the criteria fund one. They were not nearing a million dollars in sales and the founder hadn’t quite articulated a vision that was compelling yet, But, we had a vision for this invention, or we had some, our own vision for something.

So we created labs in order for us to participate in opportunities that at the very earliest stages, and it leverages our Mazarine teams, entrepreneurial interests and our capabilities to be able to help get an idea from pre-seed to seed. And then once it’s in the seed stage and in market, well, then it can receive a check from fund one.

So we kind of created labs out of necessity and we organized labs around nine work benches, every work bench and labs is has its own dedicated focus. It’s all a virtual labs. We don’t physically have a lab somewhere, but each workbench has pilot high with good ideas, bad ideas, crazy ideas. So skunkworks, it’s a, it’s an incubator where we can take some risks and we can be a bit Maverick in our approach to things.

And we can hypothesize around, you know, it’d be nice if somebody did this or what would be compelling is if someone did that. So we kind of formulate these hypotheses and then we try to find the people place or thing out there in the market , to bolt onto that vision. And so one company that recently graduated from our labs and received the check from fund one is water clinic.

So we had this vision about a year and a half ago around small utility. And we looked around the market and are under deal flow for companies that had tools to help small utilities around the world. And we just couldn’t find what we were looking for in our deal flow or in the marketplace. So we had this vision of creating this cloud platform that enabled digital tools, software, and sensors, to be able to more effectively reach small utilities.

And we bumped into this founder named Chris, says Nowicki, who was running a company called Waterloo. And she had a shared worldview. He said, totally, we’ve got to accelerate digitization to smaller guys, smaller utilities. They don’t even know what AI is. They can’t afford expensive integrations.

And so we had a good chemistry. And so he came to our labs work bench meetings, and we work bench this idea for six months, and then we finally figured out what to do. And we launched water click last October, and now water clicks in market. So that’s a sort of a success case out of our labs. We have a couple of other ones that have come out of our labs, but we also have a list of failures of stuff that is still in labs.

And we haven’t figured out what to do with it yet or stuff that we’ve totally shelved and we’ve killed because we just can’t figure out what the path forward. So labs is a safe place for us to be right on things and wrong on things. So we have the luxury of having our own incubator as investors

Antoine Walter: Is it the same skill set and the same job for Mazarine and to be like an incubator, but also a friends and family and and a pre-seed round than it is to grow a company from one to 10, like you do in, in fund one or from 10 to 100, which you do in fund two, it sounds like, like different words.

John Robinson: labs, a zero to one, and I would say fun. One is one to five, and I would say fun too is five to 10. So it’s nearing 10 defunct. Two of the criteria is the company is nearing 10 million in sales and we’ll probably do 10 million and next year. So the one that did the zero to 10 scale is actually pretty helpful, but that zero to one financial capital is not really the most important thing in labs.

It’s the intellectual capital, the human capital. And most importantly, the social capital, the endorsement. So part of our lab’s contributions is bringing in our network of friends who are experienced veterans in industry and bringing them into the conversations and bringing them into under the board or into the management team in some way to help that company go from zero to one.

And once the company gets to one, they figured out what the market is and they’re in market and they can sell at that point, financial capital starts to become more important. You need fuel in the machine. So as investors in the earliest stages, we recognize that there’s four types of capital. Intellectual capital human capital, social capital, financial capital, and all of them are the most important thing in different situations. But at the earliest stages, the least important is financial capital.

Our fourth and final sibling in the Mazarine family is blue house.

The blue house investments is what we call an international impact fund. It’s a small fund. And it’s a pilot fund really for us, we’re just trying it out. But the whole focus of blue house is on diagnostic tools. So by diagnostics, I mean, testing technologies and monitoring technologies around water and wastewater.

So the premise for this fund is that many communities in the global south the base of the pyramid countries like Cambodia or Guatemala, Burkina Faso, just to name a few. Yes. They have water problems. Yes. They have some sort of water crisis. to use sort of general terms. But our insight is that they have diagnostic tools, problems, the tools that those communities are using to understand their water problems are analog.

They’re from the sixties and seventies and eighties, they’re using dated tools to understand flooding of the river or what type of contaminants are in their drinking water or well health or any other water related risks that, that community faces. We can generate significant amount of environmental and social impact by getting more modern diagnostic tools in the hands of that community.

Now, where are those tools? Most of those two tools are in the global north. And so blue house’s mission is to invest in companies in the global. And then the founder of that company needs to have a high degree of intentionality and the ability to fly to Guatemala or Cambodia, or became Faso and figure out how to get there.

Genius invention around testing and monitoring in the hands of base of the pyramid communities. So the mission here is to accelerate the flow of technology from global north to global south. And the mission is also to help those communities get out ahead of their water risks by getting more sophisticated diagnostic tools in their hands that already exist in the global order.

So what’s that one quote about the future’s already here. It’s just not equally distributed. Blue house is distributing the future. It’s making sure that the same diagnostic tools that we can use in London are now available in Burkina Faso. That is a grand vision. I realize it’s potentially a little bit I’m oversimplifying the complexity of doing that.

But the vision is to make sure that diagnostic tools are available for anybody who wants to understand their water risk. So in some sense, it is democratization of technology and it’s making sure that every human being in the planet has the opportunity to understand their water risk. And then once you can, what is the quote?

If you can’t measure it, you can’t improve it. So, so that’s our impact goal for blue house. And we haven’t cut any check out of that yet, but a couple of the companies we’re looking at for blue house are in fund one. And it’s, and so, so the catch or the angle of blue houses at some founders might not want to jump in an airplane and fly to Cambodia, their existing cap table on their board and their owners might decide, you know, we just need to focus on Europe or let’s focus on north America.

Let’s first get to a point where we can get the company in a more stable and established position before we start to go to Cambodia and Guatemala, but other founders. recognize that in these communities, around the world, it’s an urgent problem. And the sooner they can get their technology in the hands of that community in Guatemala, the better.

So it really comes down to the founder’s intentionality around allocating time and energy and resources to flying to the base of the pyramid of countries. So those are our four siblings labs fund one fund two, and blue house. And each one has its own mission, but they all share a similar backend infrastructure, which is Mazarine.

Antoine Walter: I think from the way you present them in the way you’re engaged in the mission of each of these companies. We feel how, you get involved yourself into your portfolio. Companies is it’s the same for the four of you inside Mazarine when you’re all like part of the team of those 13 companies, or do you also sit back and say, Hey, we’ve got to check.

You have your targets. Let’s make sure you meet them.

John Robinson: In labs we all participate to different degrees, but just like anything, it depends on the project. It depends on the work bench, but we all participate in different ways. There’s some that I’m deeper into and there’s some that underages deeper into and Pete and Tammy.

So we kind of share the load and labs a fun one, same thing. There’s some companies that I’m closer to her on the board of, and some companies that Tammy P and honors are closer to. So we kind of share the load on things about whatever feels comfortable. I have a better chemistry with this founder and understand a better chemistry with that founder, for whatever reason, and for fun too, in blue house, the responsibilities will be shared, but time management becomes a big challenge for us.

We’ve got a lot of moving parts here. And so we, we need to make sure that we have our priorities and our schedules cleared for prioritization of what’s the most important thing today.

Antoine Walter: You mentioned the human capital, which is somehow what we are discussing here with the relationship we, you have with with those companies. Obviously the 13 you’re in are the ones where you clicked and you had a good bond. But I guess there must be much more that you’ve met, which somehow were ticking the other criteria, but not that one of the affinity to Mazarine, but generally speaking, what is the number one mistake you keep seeing in that human capital or the way entrepreneurs or impact entrepreneurs look at the market?

What is that single thing which annoys you and you would like to share to everyone, stop that and you’ll be so much more successful?

John Robinson: Yeah, I would say the number one thing is that the founder of the company we’re looking at, they don’t have a convincing grasp of the customer. They’re very product centric because they’ve worked so hard on their baby and they’ve developed a product that works. 99 out of a hundred times, the product usually works as advertised, but they have a loose understanding of the customer’s problem and need, and that the motivations and the buying behavior of the customer is still elusive to them.

And that’s the biggest mistake they make. And so if a company really doesn’t have that, it’s not the end of the world, but we will steer them to labs. And we will say, Hey let’s go into labs and let’s work on the customer discovery and let’s really understand the customer, but some founders they say no, I don’t need to go back to school.

I just need money. It’s like, well, to go after what customer and they articulate some version of the customer that they know, but if we don’t sense that the founder has command of the customer, we’re not going to invest number one. So, so if we have an hour to spend time with. We want to talk about the customer and the market landscape and competing offerings for 45 minutes.

And then they spent 15 minutes talking about the product. Typically founders want to talk about the product for 45 minutes and then the customer for the last 15 minutes. So that’s the number one reason. The number two reason is valuation that oftentimes these young companies they’ve done a preliminary round or something, or a friends and family round, or they were on stage at some accelerator and they fancy their valuation to be 15, 20, 30 million on just a million or less than sales does the product work.

Sure, of course it works. Is the founder smart, capable probably, but the valuation is the second reason why we pass because we don’t feel the valuation reflects where they are in their journey. And so we, we have to pass on those ones where we feel like the valuation is a bit inflated. Those are the two main reasons why we pass.

Antoine Walter: I have a curve ball for you in that field, actually, because. Right now in the markets, if you look at the water sector, so now a bit more inside the water industry than your portfolio companies. There are, and I’m not going to give names, but they are companies with the same level of sales than the one you would have in fund one.

So between one and five millions and valuations, which go through the roof, like almost unicorns, if not actually unicorns, do you have a rational for that? I mean, your investor you put valuation as one of the two main mistakes that entrepreneurs might be doing. So I guess investors must all have that common sense of not trying to inflate for the sake of inflating.

So how do you explain the current level of valuations we see, which are often attributed to the ESG wave? So it’s somehow related to to, to that topic.

John Robinson: You know, there’s some funds out there that are, I know this sounds contrarian and maybe a little bit cynical, but they’re just checking the box for water. So they’ve done their their investment in gender or race poverty or some other clean energy. And then, oh, we have to do a water one. So they’d look at the 15 or 20 deals they see in water and they find one that.

looks pretty good and they invest , I mean, I hate to question their due diligence capabilities, but there’s some of the companies, or some of these outside investors, they’re just checking the box and water and then they move on. I know that sounds cynical and they would probably disagree with me, but there’s just a lot of money out there. That’s just looking to do water. And they get into companies without really an understanding of the market that the founders are going after. So later stage money later stage investors, it’s less important later stage investors and later stage companies, they just need money period, but you go down to the forest floor where we are the companies need some guidance and some mentorship on market strategy and sales and marketing.

And so we found a lot of these non-water centric investors have inflated valuations, unfortunately. And that’s made it hard for investors like us to participate because as I mentioned a few minutes ago, the second reason why we pass in companies is inflated valuations. So, so that’s unfortunate.

So there is some frothy bubble happening a little bit in water. But you know, over time bubbles don’t always last and there’s sort of a day of reckoning. But, you know, we have our labs. And so if a company doesn’t make it, they can come back to us and maybe we can reboot them or we can rebuild the company with a better vision.

Once they sort of run out of money and they collapse, but we’ve seen a lot of companies throw in the towel and just close or sell for pennies on the dollar. And one, of the values of our incubator is that, Hey, before you sell the company for pennies on the dollar, why don’t you re incubate it, let’s go back to school and let’s reboot this company with a better strategy.

And so we’ve approached some companies on that, but oftentimes the founders and the investors are just interested in selling and getting out instead of rebooting, because rebooting requires another three or four years of work. And they prefer just to exit the business for a loss and move on to the next thing of one realm in particular, where there’s been a lot of struggles and membranes.

There’s been a lot of companies struggle in the membrane space and sell eventually for pennies on the dollar. And that’s been a vertical where we’ve really avoided the membrane space, a couple of our portfolio companies, apple membrane, and short techs. They’re in the membrane realm, but not the membrane itself, swirled Texas in the pre-treatment for us membranes.

And Aqua memories is the spacer that improves the performance of membranes, but not membranes themselves. So happy to elaborate that further with your audience in a sense.

Antoine Walter: I would have , one last question for you for this. I mean, you’re clever. I, on the, on, on that topic it’s a riddle I’ve had on that microphone several times, because I’ve seen the two various shades of it. What would you expect to be the best profile to become a water entrepreneur?

Is it someone coming from the industry, which might know the ins and outs of the customer pain and the technologies or someone from outside the industry, which might have a totally fresh, eye.

John Robinson: What do you mean by the industry? How do you define the water industry? So it gets back to our,

Antoine Walter: guess that’s a tricky question.

John Robinson: I mean, in order to sell to property owners, you have to understand the motivations and the risks of property owners, fire suppression system, point of views, point of entry, leak detection, pool irrigation.

Water appliances. If you’re an owner of a property, globally, water is a big headache for you, but they’re not in the water business. They’re in the business of running a property, but water is just a big headache for them. and if you’re a manufacturer of pulp and paper or your manufacturer of apparel and textiles, guess what the biggest headache is for water for pumping paper and textiles water, but they’re not in the water industry.

They’re textiles guys and pulp and paper guys. So an entrepreneur that comes from Portland paper or comes from textiles, we’ll have a much better grasp of the customer pain than somebody who’s just a product person. And they can usually go on find the tech, the engineering and technology capabilities to there’s no shortage of innovation out there around software and hardware.

But the missing piece is usually the command of customer, which I mentioned a few minutes ago, which is our primary. Interest is the founder’s vision of how the customers will be buying over the next few years, the vision for the future. In a sentence, we’re in the business of water as a risk, that’s a new framing. No. Does it take us into utilities? Of course, utilities, face risks and their source water, distribution of water and the compliance. Does it take us into industrial water and wastewater? Of course, all kinds of water related risks, but that also takes us to new numbers, like power generation, thermal electric, power, businesses, water. Is that the one It’s the power generation business, where water is a problem. So that’s a different framing than what a. Investors maybe offer

Antoine Walter: It’s a fascinating framing. I mean, you just created the WaaR. Everybody is boasting about the WaaS. So what is a service and you have what is a risk? So it’s a very interesting one. I think it gives a clear lens towards what you’re doing with Mazarine, which makes me for a smooth transition to my really last question, that deep dive.

What’s your definition of success for Mazarine?

John Robinson: our definition of success is that all of our portfolio companies are able to exit to larger corporates with global networks that are able to realize the full global potential of that technology. That’s our goal. If a big corporate is able to help this company from Calgary or from Berkeley, California, or Lexington, Kentucky, wherever they are reach a community in Indonesia or in India or in Mongolia. That’s something that small company is not able to do. And only through a large corporate and multinational with global network is able to realize the vision that’s our vision. And if it happens to be a financial event where we exited it again, that’s great too. But the most, the key drivers generating maximum amount of impact, which means a company’s got to be on board with a larger distribution network, which is usually a corporate

Antoine Walter: I think that makes. The conclusion for the deep dive. Actually, if you give, you gave several times that hints, that if people want to go deeper with you, you’re open to, to, to that. So of course put your contact lens in, in the episode notes. So if you want to go deeper into all of that with John and oh, you have one of these companies and you’d recognize yourself in one of this portray of the typical company he would invest in.

So I guess you’d be happy if they reach out. I propose you to switch to the rapid for our questions,

just to round it

John Robinson: do lightning round rapid-fire.

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Rapid fire questions:

Antoine Walter: So, I try to keep the questions short and you have to keep the answers short that’s our common pledge. My first question is what is the most exciting project you’ve been working on and why??

John Robinson: Water click because it’s , democratizing digital water tools to enable the smallest communities in the world to be able to benefit from breakthroughs in sensing and software and decision support that will privilege the not there

Antoine Walter: Can you name one thing that you’ve learned the hard way?

John Robinson: Saying no to investment opportunities. Has some times created a negative energy between us and the company we’ve passed on. And we obviously don’t want to create any negative energy with any founders, but we’ve learned the hard way that when you say no to a founder and entrepreneur, you’ve got to do it in a way that. Create stress between us and them. So going forward, we need to be a lot better at figuring out the appropriate way to pass on deals without coming across as being uninformed and arrogant. So we need to be better at that. We’ve learned?

the hard way of it.

Antoine Walter: Is there something you’re doing today in your job that you will not be doing in ten years?.

John Robinson: I think our focus on treatment will be eclipsed. We have a couple of investments that we’re doing in treatment and purification. I think in 10 years, we will only be focused on diagnostics tools and within diagnostics, probably mostly on AI as a tool to mitigate water and wastewater risk. As investors where risk is our core investment thesis.

It’s only natural that we wake up every day and think about AI because the whole promise of AI is to de-risk things.

Antoine Walter: What is the trend to watch out for in the water sector?

John Robinson: The trend to watch out for in the water?

sector is opportunities outside of what is traditionally defined as the water sector. So, So I’ll give two examples very briefly. Since it’s lightning round, snowpack forecasting, a lot of communities on the road world rely on snowpack mountain spring for their irrigation or for their power generation.

Water is a source of feedstock for hydroelectric power. That’s a realm where there’s a lot of money going to go into understanding and monitoring. Snowpack forecasting. Another area that we think is really interesting is. Drip irrigation and sort of, irrigation efficiency technologies. That’s traditionally outside of the water industry, but the growth of irrigation technologies is going to grow a lot in the next decade.

And then the third final one is indoor agriculture. Once you’re in, once you’re growing crops, whether it’s a plant or a fish indoors, the whole business becomes water. The outcome come as protein or grain or a plant. But if you’re growing things in Northern of a hundred percent control of the water distribution to the plant or the crop, which is really exciting play in the next decade.

So all of those are outside of municipalities and industrial water waste water.

Antoine Walter: So somehow the trend to watch out for is think outside of the box. So I guess it’s a very powerful advice. If you were a word political leader, what would be your first action to influence the fate of the world’s water challenges?

John Robinson: We need more entrepreneur, entrepreneurship and entrepreneurial activity within water, which means government leaders or corporate leaders ideally need to place more emphasis on cultivating an entrepreneurial community that is recognized as playing an important role in in, in addressing global challenges.

Policy of course matters, large engineering projects of course matter. But unfortunately the entrepreneurial corner of water is getting more attention, but it still is not where it needs to be. And so if I could have a message as global leaders, I would say, support entrepreneurship within water with whatever resources you have available.

Antoine Walter: I’m going to recommend me that I should definitely invite on that microphone as soon as possible.

John Robinson: Chris has now ski from water click. He has the best grasp of small medium-size water, wastewater utilities than anybody else I’ve ever met. And he has a very high intentionality around helping those little guys get out ahead of their operational risks that they face every day in their community. So he is at the intersection of water utilities and public health and safety in a way that I haven’t met anybody else globally.

So I think it would be a fascinating interview for him to unpack his vision and his work and democratization of digital.

Antoine Walter: Well, thanks for the advice. Thanks for all the wisdom you’ve shared over the past hour. Thanks a lot for having made that second pass on that full series of topics. I feel like you’ve opened many doors, which I would like to explore further. So that might be the first episodes, but I could see a sequel where hopefully you’re again at a different place.

You, you were saying maybe Portugal next time.

John Robinson: One final comment before we sign off, I think it’s each investor within water broadly defined water has their own thesis and in their mind, their thesis is right and accurate. Just like any investment group, whether you’re investing in publicly traded stocks or you’re investing in any other industry, it’s all about the thesis.

And I highly respect every investor’s thesis because they see some things in the market that maybe we don’t see. And so I think our thesis around water as a risk

is just one of many VCs out there. And I would encourage you to interview other investors and ask them about their thesis and enable your audience to understand how these different investors, frame opportunities relating to water.

And I think that’s encouraged that you over the course of the next year to try to interview all of the different investors out there.

Antoine Walter: Yeah, let’s let’s make that the first one of a series and I have other investors on the microphone to explore all of that.

John Robinson: Wonderful. Yeah. Thanks for the opportunity. And always happy to share our worldview with a motivated audience.

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