BIV Welcomes Third Partner - Steve Kloos
In 2015, we still used those table speakers for conference calls (remember that?!), and having just started at Imagine H2O, the first call I had on my first day was with someone who was very highly regarded by my colleague Ivy Nguyen (now a BIV IC member). That someone was Steve Kloos, Partner at True North Venture Partners, previously of GE Water and Osmonics, and Ivy was right. Over the following 8 years, Steve became a friend, mentor, colleague, and through an annual seminar for IH2O companies that he ran, probably the single biggest influence on how I and the team thought about the science of early stage company creation and entrepreneurship. I was grateful for his support through the formation of BIV Fund I, and it was a wonderful moment when we saw the possibility of working together. Along with Christine joining, BIV has now entered a new phase, and one that sets us up excellently for the long term. We have a three person partnership of complementary skills and backgrounds, and it’s tremendously exciting to have Steve join us. He’s an exceptionally smart, kind person, with a hell of a resume, and is one of the highest integrity individuals I have had the pleasure of working with. Steve - welcome to the Burnt Island.
Steve, you’re back in start-up land - this time in a fund. How does it feel?
Water is my first love and where I spent my first 17 years. Over the past dozen years, I’ve drilled deep into climate innovation, including energy, hydrogen, clean chemicals & fuels, waste, and a bit into food & ag, and loved that too. I’m thrilled to be back in an active investing role again in water and as part of an outstanding team.
Walk us through your background in water.
I was the first PhD hired by Osmonics, and worked in R&D developing and commercializing membranes, ultimately leading that team, and we really grew the capabilities and technology set. I learned a ton at Osmonics, working with so many fantastic people who now have prominent roles in the water sector. We were bought by GE in 2003, and I had an incredible experience in GE Water, first leading membrane technology, then moving to Shanghai for 3.5 years to build & start-up the GE Water R&D labs and to lead the In China for China program, and later to build the GE Water R&D Centre on the campus of the National University of Singapore. I returned to the US in 2009 to lead Advanced Technologies, and was also part of GE’s venture capital team. In this role, I really started to engage globally with start-ups, accelerators and incubators and of course, ImagineH2O. In 2011, I was recruited to join True North Venture Partners, a significant multi-family sustainability investment platform, and jumped in, leading new investment sourcing, serving on boards and even stepping in to lead a couple companies. In 2015, the City of Chicago asked me to be the founding board chair of Current, a water nonprofit, and I’ve really enjoyed that start-up experience and the awesome team and board. I am so pleased with what it has become and the impact Current is making. And am immensely thankful to have friends and connections in water around the world.
What’s different this time?
The clear link between water and climate - not just that water will need to adapt to a new reality with more droughts, floods, heat extremes, and ocean acidification, but also that water solutions are deeply connected to Net Zero solutions. The lines between water and climate are really blurry now. And that there’s a broader consensus that we need to both achieve Net Zero and also adapt to climate change. We’re starting to see the development of strong policies, commitments, and most importantly grassroots action.
The macroeconomics of water are more compelling. Water is now over $1 trillion in global spend and the World Wildlife Fund recently stated that the total economic value of water is $58 trillion annually, or about 60% of global GDP. Water is getting either more scarce or more in excess, and sometimes both in the same region. Population is rising as is per capita GDP. Higher interest rates means throwing legacy capex-heavy solutions at a problem is less attractive, creating a nudge to try innovative solutions. The money is there, so are the problems, and good things are happening.
The quality of founders and companies are consistently better now than even 5 years ago. Nonprofits like ImagineH2O, Current, Elemental Excelerator, Wetsus, and others around the world have really helped start-ups, as have boot camp programs like I-Corps. There’s just more resources and more help now. It takes a village, and the village is there. And, because the needs and opportunities in water are greater now, more high-quality entrepreneurs are jumping in.
What excites you the most about the BIV opportunity, and what makes you most nervous?
Most Excited - BIV has built a fantastic platform and brand and I’m thrilled to be a part of it, active in the space again, supporting the best companies, providing great returns for our LPs, and making meaningful impacts. I’m driven to be part of the best, and that’s why I reached out to Tom, and lucky for me this is working out.
Most Nervous - It’s super easy to be optimistic and have the feeling of sure success at the start of a new venture, a new fund, or a new investment - until reality kicks in. I want to make sure that I keep a sound, sober, eyes wide open perspective, being aware of risks as well as opportunities, to anticipate issues by spotting early indicators with potential solutions in mind. The Fund I companies are on a great footing, but the world is a complicated place. It will take all of our great internal and extended team to make all of the companies we back as resilient as possible.
You have built research labs for GE, you’ve invested for 12 years with True North Venture Partners, run a green hydrogen company through a Series B raise - what is the most important insight you have learned on your own about company building?
I think the most important indicator of success is around the people in the company. The most successful types have high IQ & EQ, humility, a desire and ability to learn, and a work ethic. If a CEO and team have those, it’s more likely that they’ll be able to figure things out and create value while minimizing mistakes.
What is the most important insight that someone gave you?
Integrity is what’s most important. Without integrity, there is nothing. I learned that from my parents.
What do you hope to bring to the Burnt Island Ventures Team?
I totally believe in teamwork. I want to fill a place and work collaboratively with the other BIVers, founders and their teams, other co-investors, board members, in achieving our purpose and mission.
How do you think about the downstream opportunity in water, beyond the Seed stage?
BIV has done a great job filling the need for a top-tier seed stage VC in water and there is always PE money and exit opportunities for larger companies with attractive businesses. But there is a funding gap for Series A and B stage companies, especially by a sophisticated water specialist VC firm. That’s a space that we will be looking closely at, to extend BIV’s range from seed to cultivating attractive companies into profitable growth engines.
What advice do you have for any investors out there curious about the water space?
Water is a great place to lose money, especially by optimistic but naive investors who are quite confident but also just don’t understand the space and its challenges. But, for those with the background, skills, platform, and playbook, the time has never been better to be an early-stage investor in water. So, my advice is to learn, stay in your zone of competence, and co-invest with experienced and aligned firms.
