Raising a first-time venture capital fund to meet the climate investment challenge

Why Phil Dillard and San Francisco-based Thruline Networks are looking for seed VC deals that could have a big impact on global sustainability

Phil Dillard has built on his background in the US Navy, as an engineer, consultant, and start-up entrepreneur to create Thruline Networks. The firm works with mission-driven ventures on innovation, strategy, and solutions in climate tech, deep tech, and space tech.

Now he’s raising a $10mn-plus debut seed fund. He spoke to Shaun Beaney, Editor of Preqin First Close, about his holistic approach to impact, inclusiveness, venture capital, and financial returns.

You describe Thruline Networks as a ‘value-based venture studio’. What do you do?

We're focused on building mission-driven companies that solve climate tech and climate change-related issues by developing circular-economy, regenerative-economy, and waste-to-value-type solutions.

If companies think about stewardship of the environment, and the people and stakeholders they're involved with, they operate in a more stable manner, and they're a little more predictable. They can be more profitable, and they're definitely better for a number of different reasons. There are financial returns. There are impact returns. There's more commitment from employees. There's more commitment from different stakeholders.

So, what's our very particular niche? Early-stage companies that are late-seed through series B, building solutions in these areas. They're looking for financial support, strategic advisory, marketing support, and the three ‘C's’: how to communicate, how to capitalize, and how to commercialize.

Most of the companies we're talking about are limited in their financial resources. And it's especially true for people who come from under-served and under-resourced backgrounds: black and brown founders, women, Native Americans, and some sectors of the military veteran community, for example.

What’s the ‘fourth sector economy’ and why is it important?

There’s this ecosystem that’s grown around us – the OGs who went through cleantech 1.0 and the newer, younger generation who see the climate challenge as not just about energy, and not just about plastics. It's thinking about natural systems and circular systems so 10 billion people can thrive on the planet, and great stewardship and great management of resources. Natural-systems thinking is the next evolution of capitalism or whatever we call our economic system. And we're at the vanguard of it.

There's public sector, there's private sector, there's the non-profit sector. And then there's the ‘fourth sector’ – for-profit companies that have a mission, that move at the pace of start-ups and innovators, and are not encumbered by some of the legacy issues of big corporations.

You’re raising the first Thruline Venture Fund. How much do you aim to attract and who’s backing you?

Well, we're at the early stages of the raise and this is where it’s tricky for first-time, emerging fund managers. My ecosystem partners in the fund have different types of experience, but we've not all built a venture fund together. So, we'll probably start with something around $10mn as a stated value and go up to $25mn in Fund 1. We have really healthy conversations with family offices and with high- and ultra-high-net-worth investors. We're also talking with some partners in larger funds. There are some funds we met during San Francisco’s Climate Week, and we were talking a little bit about how we see the world.

What types of deals will you do and who will you back?

Our sweet spot is late-seed through series B, when the company we’re backing has a team, they have some traction, and they're trying to solve some specific problems. We’re very inclusive. I talk about multi-dimensional diversity. If you look at our team, if you look at our advisors, if you look at the companies that spoke with us at Climate Week, you see all kinds of people there. We want to make sure that we're representative of different types of people, backgrounds, and points of view.

In which technologies and industries?

We’re thinking systematically about an issue. We talk about tires. We talk about food, clothing, and the circular economy. We look at the whole value chain. Same thing for water, same thing for transit. This helps us understand how we can put a solution in place that's going to help the system to get better. And it’ll become a very valuable company. So that's why we're at late-seed through series B.

Are the companies you work with all in the Bay Area or along the West Coast?

We're intentionally not geographically focused. We know that problems need to be solved in the urban coastal areas, in the midwestern urban areas, in the midwestern rural areas, in the south of the US, and internationally. We carve out 10–20% of our attention to address the Global South and emerging markets. We’re trying to understand the global system and how we can scale a solution.

You take a very holistic point of view, and as you say, a ‘systems’ point of view. What’s a good example?

I care about ocean health. I know we need oyster reefs, kelp, and coral to have healthy oceans. So, we're trying to figure out how to monitor what’s going on. We realized we needed a satellite solution. We started talking with people I know in the US Navy about satellites. Before we knew it, we were talking to people who were saying, ‘you know, there's no climate tech without space tech’. Most of the information comes from looking down at the planet and comparing pictures over time and measuring and monitoring, and then being able to respond, whether it’s for wildfire interventions or for regenerative agriculture, or whether it's finding poachers, or people who are illegally logging. So, we're working with a number of companies that are building those solutions. I describe this as solving one problem that draws us into an ecosystem that helps us solve more problems.

Shaun Beaney is the Editor of Preqin First Close, the essential newsletter for the global alternatives market. It’s quick, easy, and free to subscribe here.

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_{The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin and Thruline Networks accept no liability for any decisions taken in relation to the above.}

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