Episode 209: Non-Dilutive Funding for Startups with Joel Armin-Hoiland

Today's guest is Joel Armin-Hoiland, Founder and CEO at Climate Finance Solutions.

Climate Finance Solutions, or CFS, as it's also known, is a mission driven consultancy that helps companies and organizations around the world secure non-dilutive funding to develop and scale high impact climate solutions. They also provide technology, business and project development consulting to support their clients in securing funding and scaling their solutions. Their team has secured over $75 million in non-dilutive funding and leveraged over 30 million more in external co-financing, including several million dollars in impact equity investment with an 88% success rate.

Joel also was an early member of the MCJ community, and he's been an active contributor, both in the slack community and also advising and ultimately consulting with several companies in the MCJ Collective portfolio. Non-dilutive financing is different than equity financing, and especially for climate tech companies, it comes up a lot. It can be a viable source of funding, but many founders coming from other types of technology companies that maybe haven't gotten exposed to non dilutive funding before don't know how go to go about obtaining it.

In this episode, we cover the how to think about non-dilutive funding, who it's a fit for, the process to obtain it, and pitfalls to watch out for along the way.

Enjoy the show!

As always, please consider giving us a rating or leaving a review. We heard that helps spread the word about our little show and engages more folks in the climate fight!

Jason: Joel, welcome to the show.

Joel Armin-Hoil...: Thanks so much. It's a pleasure to be here.

Jason: Pleasure to have you and you might remember better than me, but I, I feel like you have been part of the MCJ community since the earliest days when, when and how, and why did you, how'd you find us?

Joel Armin-Hoil...: [laughs] Yeah, I have been involved with MCJ from probably early in 2020. I, I heard about this podcast from a friend. I don't think I was there for the very first episode, but I was there for some of the first ones and, you know, really appreciated the, the guests that you had on.

And I think joined the, the slack community very early on too, and found it was a really valuable resource both personally and, and professionally, and got involved in some of the early community building work and community discussions. And I think it really did a lot to kind of support both my business and my own climate journey too.

Jason: Awesome. Yeah, no, I, I remember that you were popping around there in the early days and now you're like writing community voices pieces for us, and you're working with a bunch of companies in the portfolio and now you're, you're coming on the show. So psyched to have you.

And, and as I mentioned to you before we started recording, non-dilutive financing is a topic that's, I mean, I have no experience with building a digital fitness company, prior, prior to working in climate, but it's clear, especially now that I'm a few years in just how important is for, for many of these companies.

So it's a topic that has been on my mind and I know some about it, but have a lot of questions and it is at the core of what you do, so who better to learn from than you. So thank you for making the time.

Joel Armin-Hoil...: Yeah. I'm looking forward to the discussion.

Jason: Well, to kick things off, tell me about your firm. What is Climate Finance Solutions?

Joel Armin-Hoil...: So we help companies and organizations all over the world secure non-dilutive funding to develop and scale their high impact climate solutions. So we're helping companies navigate the non-dilutive funding landscape and really providing the, the full range of services that are required to access the multimillion dollar funding opportunities that we specialize in, um, at a really high success rate.

Right now, I think probably a pretty large majority of our clients are coming to us looking for, for grant funding. I think probably cause there's so much more becoming available right now. Although we work with, you know, and had success with other types of non-dilutive funding as well.

We are a fully climate focused company and you know, we're trying to create maximum climate impact, for us that means avoiding or moving greenhouse gases, um, by helping direct non-dilutive funding to the most effective solution in technologies.

We also apply an equity and justice lens of the projects that we do. So we actually end up working with a lot of indigenous people and, and underrepresented communities, but in terms of technology, we're pretty sector agnostic.

So we work with everything from buildings and building materials to batteries and, and all kinds of renewables, transportation, CDR, region ag, sustainable development, a lot, a lot more, but there's really wide range of things.

And, and I would say, I think one of the reasons that we can do projects in, in any sector is technical depth of our team. I've been, you know, very intentional about kind of building a team that has those interdisciplinary technical skills, got a couple of PhDs on the team, you know, and then people who have experience, you know, developing, commercializing and deploying climate tech, including myself. So, you know, we've really kind of been where our clients are and can go on that, that journey with them.

And it also allows us to provide other services in the context of non-dilutive funding that are often necessary to secure these big awards. So things like supporting project design, supporting technology, roadmap development, commercialliz- commercialization, plan development.

And then obviously we manage the full process of securing grants and, and non-dilutive funding, uh, and do so pretty successfully. At this point, the team is I think, 14 people, some of whom are contractors and, you know, it's a very experienced fundraising team as well, so I think over our collective careers, we've raised over $500 million fully distributed team as are many companies these days.

So we're spread across North America, Africa, and Europe. And we also do quite a bit of work internationally. Uh, we have clients on five continents, but we probably do 70 to 75% of our work in the US. You know, and I think both abroad and in the US, there's just been so much more non-dilutive funding and grant funding for climate and which is great, but we really want that to go to, to the highest impact companies.

But we found that the teams have the highest impact solutions or the highest impact technologies are not always the best at securing non-dilutive funding. So there are various barriers to that that we can get into, but you know, really, it's just, it's a different skillset than developing technology.

So, you know, fortunately we do have that skillset. And so, you know, if we're able to add that capacity to companies, it really allows founders and teams to focus on their core business activities and, you know, taking a step back, if you think about that, that distribution of labor, where everyone is really focusing on their core competencies, I think that's the best thing for climate.

You know, I believe, you know, as the climate ecosystem grows, I think it's also gonna be really important to build this ecosystem of climate service providers like us, and really just kind of lower the activation energy for these solutions and technologies to be developed and, and deployed. And, you know, that's ultimately why we're doing what we're doing.

Jason: How did you get into this work, what's your journey look like?

Joel Armin-Hoil...: Yeah, I guess I would classify myself as coming from the Environmentalist School of Climate. It's actually very exciting that there are, you know, other people coming from such a wide range of places, you know, but I'm kind of from the true believer school, I guess that, that goes back to, to my childhood.

You know, as we were talking about before I, I grew up on in Humboldt County on California's North Coast, it's a very kind of rural area, backpacking and, and kayaking and running cross country in the Redwood Forest.

And at the time this is in the, you know, late eighties and nineties, the timber wars were happening where we were trying to preserve the last of the old growth Redwoods. And my family was a big part of the activism and, and that had a big impact on me. My dad was also a biologist.

So, you know, I was aware of climate change from a, from a pretty young age. And, you know, I knew that I wanted to, to work on environmental issues. So I ended up going to UC Santa Barbara to get a, a BS in environmental studies. And once I got there, I quickly figured out that climate was a thing that I really wanted and, and needed to, to focus on.

And that was both through the schoolwork that I was doing, but also the, the paid academic research that I was doing. So, you know, I was doing, you know, field work and writing papers on the effects of sea level rise and studying the phenology and life cycles of plants and how that was changing with climate change. I also served on the board of directors of the coastal fund, uh, for five years. And in that position, I was responsible for making funding decisions for grants preserving the coastline.

And so that was really my first in depth exposure to, to the granting process. I did a, a few other environmental jobs, including working as an analyst for the coastal commission, but, you know, I wanted to focus on climate a lot more directly. So I went to work at all power labs, a, a bio energy startup in Berkeley.

And over my six years there, I got exposure to, to a lot of different things that, that really informed my work now. So, you know, starting on the kind of engineering in, in R$D side, after a couple years, I was running their, their manufacturing team and then was, uh, moved over to running project development, which was both in the US and, and also globally. And I also stood up at grants department and ended up winning several million dollars in grants. So at the time the APL technology and business were definitely much too high risk for investment.

And so we were able to get grants to, you know, fund the R&D for the court technology and then fund the demonstration and deployments in California and all over the world. And so that was really my introduction to the, the transformational power of grants for, for climate startups.

While I was working at APL, I also got my masters of environmental law and policy from, from Vermont Law School with a dual concentration in, in climate change and energy. And, you know, that really complimented my, the work I was doing, the technical work, cause it helped me, you know, understand how all the different parts of the climate system fit together and what the different policy levels were.

So after I finished my masters, I was hired by engineering, which is a clean cooking company in Rwanda to help them raise non-dilutive funds. So moved abroad with my wife and spent about two years completely immersed in the international non-dilutive funding space, working with international philanthropies and development aid organizations and multi laterals like the World Bank and, and Green Climate Fund, and we nearly raised over $20 million in grants, concession loans and carbon financing.

And again, I was really able to see the power of non-dilutive funding, you know, in [inaudible 00:13:48] at the time was generating revenue, but was definitely not profitable. And the non-dilutive funding enabled us to prove out a really innovative business model in a very difficult environment.

And after working with [inaudible 00:14:04], we came back to the US at the very end of 2019, took a little bit of a break and was trying to figure out, okay, well what can I do that will, that will have the, the greatest climate impact?

And I was seeing all these new climate startups that, you know, folks I, I knew are working in and I was talking to them and seeing the difficulty of, of many of those founders in accessing this big new wave of non-dilutive funding that was coming out, if they were even pursuing it at all.

Cause it was pretty daunting, and became obvious that there was a big gap in the services to kind of support these founders in, in accessing non-dilutive funding. And I realized that, you know, this was where I could really play a role in helping companies secure this, this catalytic funding, doing that with a lot of different companies at once I could have a much bigger impact than just doing it for one at a time.

So that was really the impetus to, to found CFS. And, you know, as, as you mentioned, MCJ was very valuable connecting me with founders and some of my earliest employees were hired from the slack, you know, that was the beginning of 2020. And then think probably late 2020, early 2021.

That's when things really started to take off, was getting a little better known in the ecosystem and putting a really good team together over 2021. And things have, have really just accelerated from there and, and have been, been continuing

Jason: From a distance there's, there's almost the perception that, that non-dilutive funding is free money, where with equity, you have to sell a percentage of the company, uh, you know, with, with, with debt there's these onerous covenants and they can come after you.

And it's, there's some big risks that maybe not everybody understands when they get involved with that. But, but with non, you know, with grants, it's free money. Like, why wouldn't you take it? But I mean, I'm, I've been around enough to understand that everything has trade offs.

What are the trade offs with non-dilutive financing? Who is it a fit for? Who isn't it a fit for and how should one think about whether it might be a fit for them when they're assessing their capital stack?

Joel Armin-Hoil...: It's definitely not free money and there's a time and place, uh, at which to, to take it. I think pursuing non-dilutive funding can be in specifically grant funding. It can be very, very complex. It can be very time consuming. It can be difficult for people to even just navigate the ecosystem, to understand what's out there and identify opportunities and assess them.

There are really not that many good resources, we're helping people do that. And there's not really that many consultants either, the application processes are not standardized. They can be very long and complicated. It's easy to get disqualified and it takes some experience to really understand exactly what the funders are looking for, because everything they're looking for is not always kind of in the solicitation or, or RFP.

And there's really quite a big, a big learning curve to applying for these things. And then, because these opportunities, especially public funding, especially multimillion dollar public funding opportunities are, it can be very time consuming.

And so companies are maybe pulling resources off other things. So maybe some of their like high level engineering people need to be put on it or their, or their leadership team, for smaller companies, it can be all hands on deck.

Like let's, let's get this thing in. Um, so, you know, a lot of people are just completely kind of turned off by that. And I think another thing that folks, uh, are worried about is the post award management. So all of the different reporting and accounting things that people need to do.

And that, that definitely is something that folks need to consider. I think something that people might not be aware of, but is definitely still a barrier is there's quite a bit of a lag time before receiving the funding. So if you're, you're applying for, for a grant, it can be six to 10 months before you, before you receive public funding.

I, I do think that there are ways to kind of overcome these, these barriers. I mean, for post award management, you can, you know, make that easier by really being careful about how you design this scope of work and the budget, and obviously selecting grants that are well aligned with, with your roadmap and then getting outside expertise to help with these things is, is always helpful.

I, I do, if someone is, is in a relatively mature business, I would say, you know, it is reasonable to kind of try to build that internal competence, although it may take some time, you know, but for startups building that internal team that's dedicated this work is, is definitely not, not easy. And, you know, I think the most important thing, what I tell people is identifying and assessing opportunities is really the most important part of the entire process.

Because if you're not pursuing the right opportunity, you're really just, it's a waste of time. So it's really important to kind of be doing, you know, a comprehensive search of the ecosystem, make sure you're down selecting opportunities in accordance with priorities and making sure that things are, are aligned through roadmap.

In terms of who, who is eligible for it. I mean, there's different types of funding that are available at, at different stages, uh, of a company. And I think it's really important to have an, an integrated fundraising strategy.

So, you know, basically integrating non-dilutive funding with dilutive funding with equity investment, because I think best chance of scaling the enterprise and climate impacts certain as quickly as possible, is really taking advantage of the full capital stack, right? So using investment funding can help provide runway to get through the lag times of non-dilutive funding.

And it can also kind of help provide co-financing, but to really kind of have that integrated view, you need to tailor the approach to the, the unique needs, uh, of each company. So there's gonna be different types of funding, whether that's public funding or, or philanthropic funding or debt available at, at different stages and appropriate at different stages.

So what you need to really do is look at your technology, look at your kind of commercialization roadmap and pathway to scale, and then use the available non-dilutive funding that you've identified through an identification process and match that up to the relevant points in, in your roadmaps.

And then you can identify, you know, where you can use equity investment to fill the gaps in non-dilutive funding, or the other way around. If you kind of know when your equity rounds are gonna be, you can identify, you know, how you're gonna use non-dilutive funding to kind of backfill, you know, to get over, over a value of death or, or support a certain, you know R&D pathway.

And, you know, that's a process that we do with pretty much all of our clients. So in terms of who is eligible, I would say, you know, most, most climate startups are eligible for non non-dilutive funding, but it's really a matter of being really intentional about when and where you take it and kind of having that integrated fundraising strategy.

Jason: Joel, can you talk a bit of about the eligibility requirements and also it is your recommendation that everyone who's eligible pursue it?

Joel Armin-Hoil...: Different types of opportunities have different eligibility requirements. So oftentimes, you know, philanthropic sources of capital, they do provide funding to private sector companies, but it can be a lot more difficult to funding for private sector companies.

With public funding opportunities, there are oftentimes, you know, a range of actors or entities that are eligible for that type of funding, but you may have a much better chance at it with a certain type of entity.

And so you can kind of mitigate some of those drawbacks by, by developing partnerships. So we work with a lot of private sector companies, probably 95% of the folks that we work with are actually private sector companies or climate startups.

But a lot of times we will identify, you know, an academic partner, for example, a big NSF research grant. Sometimes an academic partner needs to be the lead, or it really kind of should be the lead. Like that's what they're looking for. And so you can use partners and identify other partners that can be a lead applicant to really get around some of those eligibility requirements.

Jason: And should everybody who is eligible seek it?

Joel Armin-Hoil...: You need to develop that integrated fundraising strategy and that roadmap to figure out when it makes sense. So I would say for a lot of certainly climate hardware startups, it's most likely going to make sense to take non-dilutive funding at some point in the development cycle.

I think for other companies, maybe software companies, it may be a bit easier to, you know, the venture funding space is kind of optimized for software. And so it can be easier to, to do it without non-dilutive funding.

But, you know, I've seen a lot of software companies really be catalyzed, especially kind of in the early days, by even a smaller infusion of, of non-dilutive funding. So I think the main thing that you need to do is really take a comprehensive look at what is out there and match it up to kind of what your technology roadmap is and what your commercialization plan is, and then make a decision based on your availability, the availability of funding, and then what your roadmap is.

Jason: Does it work similar to, I, I'm just thinking philanthropic giving say at the university level where sometimes funds are earmarked, where the university can use it for anything they want. And other times it's strictly for athletics or strictly for theater or things like that with equity financing generally.

I mean, it's a, it's at the company level and, and the company can choose to use the proceeds, how, how they think it will be most impactful. Are there any restrictions that come along with a grant funding or certain types of grant funding?

Joel Armin-Hoil...: Yeah, I would say the majority of grant funding is going to be for specific activities or a specific program, for private sector companies. I think there are very few grants, whether they're philanthropic or public funding that are gonna be unrestricted operating funds.

That's really more of a model of, of grants for nonprofits. And we do work with nonprofits. We do work with some foundations. We're not only working with private sector companies, but I think for a climate startup, you're most likely going to have to be looking at what's the technology roadmap that you have and matching up the specific funding opportunities, some of the activities that are on your roadmap.

Jason: Uh-huh [affirmative]. And you mentioned before that, that sometimes there are cases where, what they put in the, I don't know the word, a brief, or, you know, in the, in the description of, of the grant that they're looking for things that aren't in there. Can you give some examples of what types of things they might be looking for that they wouldn't include in that description?

Joel Armin-Hoil...: Yeah, I think it, it is more a matter of potentially a matter of emphasis, right? Because oftentimes, uh, they will put, they will say, okay, we have this long list of funding focus areas of things that we like to fund, whether that's, that can be philanthropies where they have different funding focus areas, or that could be a specific RFP or solicitation for, for public funding.

Sometimes in a specific fiscal year, they might have a specific priority that is not necessarily mentioned in the RFP, or for the philanthropy if you're trying to identify what, who's a good fit, you need to not only look at the funding focus areas, but you need to go to their past grantees because they may have three funding focus areas, but they may provide 90% of their funding to one of those three funding focus areas.

And so you really need to do more background research on the funder and the agency more than just reading specific solicitation or RFP.

Jason: I know if you take the, the equity landscape, for example, there's different types of capital, there's generalist technology capital, there's climate specific capital, there's catalytic capital, there's double bottom line capital there, I mean, there's all sorts of kind of twists. What does that landscape look like on the non-dilutive side?

Joel Armin-Hoil...: Yeah. So I think in general, for climate startups, non-dilutive funding is typically gonna take the form of, you know, there's grants, right? So that, that public, public funding and, and philanthropic funding, there's debt, and there's various kinds of debt, there's kind of concessional debt, there's loans, there's loan guarantees.

They are blended financing instruments. And so that's where you really use different classes of capital like public or philanthropic funds to catalyze private investment. And I think even government incentives or individual contributions would even kind of count there.

Jason: And so you mentioned that hardware startups, for example, will likely be a good fit for grant financing at some point in their journeys, whereas software it's, it's more of a toss up. What does that eligibility criteria look like and what is it about hardware as an example that makes it a more obvious fit?

Joel Armin-Hoil...: Yeah, I mean, I would say that hardware has larger capital costs. They have longer development cycles. And I think this is something that, you know, a lot of people are aware of. I don't know if this is a, a criticism of, of venture capital, but it's just, there is somewhat of a mismatch oftentimes between the cycles of, of hardware funding, which may be a 15 years to exit versus the five year BC fund model.

And there are more BCEs that are kind of changing their, their fund horizons and, and models now, which is really great to see, but there are, you know, so there are issues with kind of securing other types of funding in terms of, of development cycles. And then, uh, oftentimes there are capital requirements that are not always easy to fund, especially in the beginning. When, you know, there's kind of more risk.

Jason: You talked before about how these are different muscles, uh, raising equity versus raising non-dilutive funding. Is it an exception when a company ends up raising venture capital, let's say and grants, or, or do most people that raise grants also raise money from venture capitalists on the equity side as well? How much overlap is there?

Joel Armin-Hoil...: Yeah, I mean, there's quite a bit of overlap and I think an increasing amount. So a majority of our clients who we win, you know, a lot of, a lot of grant funding for, are venture funded. There are quite a few advantages I think to having venture funding or having equity investment when you're pursuing non-dilutive funding.

I mean, you're able to kind of have, uh, enough venture funding to provide runway, to get through the lag times between applying for non-dilutive funding and actually securing that funding. Um, and you're able to kind of do more work on the front end to give yourself, you know, a track record, prove out your technology, maybe prove out the, the technical feasibility of that technology that makes you eligible for maybe a later stage technology demonstration and, and deployment grant, or even gets you to being able to, to, to raise debt funding.

Jason: And what are some common misconceptions that people have coming in that are poking on whether this might be a fit that are eyeopening once the potential client or client becomes informed?

Joel Armin-Hoil...: Yeah. I mean, I think one of the most common misconceptions that was something that, that you already raised, which is the fact that it's free money. I think some people kind of enter into the space and we found that a lo- you know, a lot of companies are doing it opportunistically.

So they may hear about an opportunity. Someone might tell them about, about something, or maybe they do kind of a cursory look around, you know, a ground stock gov, and then they do an assessment, but they're not really, they don't really know, you know, how to really match up the funding opportunity to their roadmap.

And it's not really the most kind of strategic or, or efficient way of, of going about it. And, and so, you know, a lot of people end up taking time to apply for opportunities that really aren't a good, aren't a good fit, fit for them.

And then, you know, folks get confused about, you know, I've applied for three opportunities. Why am I not pursuing it? And then we're able to kind of come in and, and, and help them understand how they can better identify opportunities, how they can better assess opportunities and how they can start working on funding that is maybe more appropriate for their model.

Jason: And you mentioned that for hardware company, for example, because they're capital intensive and the cycles aren't necessarily aligned to the typical venture capital cycles, let's use a different example where venture capital is abundant for a particular company or category.

Does that make grant funding more relevant, less relevant, or is that a non-factor for, for them like, should, if equity is there, should companies just stick to equity or would you recommend that even if equity is more abundant than they would ever need that this still could make sense to pursue?

Joel Armin-Hoil...: I think that it, the availability of equity is doesn't necessarily preclude pursuing non-dilutive funding. I think that there is, you're raising different rounds of equity. There are different terms that you can get if you have non-dilutive funding.

Oftentimes we've seen venture funded firms want to secure non-dilutive funding because they have a funding round coming up. It might be easier to, you know, secure more advantageous terms or they just, you know, need to, to raise less funding.

There are also kind of different, uh, tracks in folks development cycles. So, you know, there may be technology in your technology roadmap. You may have a product where you can take this to market. This is what you have gotten your, your investment for. Um, and you know, you can be successful at that, but there may be kind of a potential breakthrough technology that you could also, uh, that's not on your development path, your current development pathway, but, and you may not be, you know, able to use some of the investment dollars for that, because it's kind of, it's high, it's high risk. That would be a good fit for non-dilutive funding, even if someone kind of has that, that venture capital.

Jason: And when it comes to the types of non-dilutive financing, I, I mean, it's a, I don't know why I'm thinking of this analogy, but if you look at a wealth manager, for example, a financial advisor, there might be a generalist who's like your primary point of contact, but they can't be an expert on everything because the bond landscape is different than the public equities landscape, which is different than the alternative assets landscape, which is different than commodities or whatever.

And, uh, so they have specialists that they work with for each. On the non-dilutive side, is it pretty straightforward where you can have a firm like yours that, that can help across everything? Or does there need to be further specialization or, or other opportunities for further specialization within the non-dilutive landscape?

Joel Armin-Hoil...: Yes. I mean, there's certainly specialization within the non-dilutive funding landscape. I mean, I think most of the folks that are coming to us are looking for grants and we really specialize in multimillion dollar grants, whether that's public funding or philanthropic funding.

Uh, and we really work mostly with, with private sector companies. Although we also work with other, you know, nonprofits and, and foundations and tribal organizations. And we also have experience with securing concessional debt and, and carbon secured financing.

But if that really is the primary need, then we will potentially work. We'll bring in an outside consultant that really kind of has that specialized expertise that someone needs, because we wanna make sure that we're gonna be as successful as possible at raising those funds.

You know, and if someone is, you know, looking for, some people do come to us looking for both non-dilutive funding and investment, we will provide a referral for the equity, equity investment portion of it. And I think most firms that are working with non-diluted funding kind of have an area of, of specialty.

Jason: For these grants, there are grants that are, so I'm saying this as a statement, but I'm asking as a question, that are based on projects that can have an impact and a cause that the grantee cares about. And so my question were one, like, is that right?

Um, and then two, how important is viability? And I bring that up because I remember when I had a fusion guest on the show, they were talking about the fusion landscape and there were certain approaches that are higher risk and lower probability to work. But if they work, they'll be much less expensive, for example.

And then others that have a higher probability of working, but it'll be more incremental improvements relative to existing options if they work. And so how much does v- like, and if you look at equity, certainly they're not just looking at what will have an impact.

If it works, they're looking at like what teams are uniquely equipped to take a real shot of like, who are, what horse are they gonna bet on to actually do it? Right? Like, like viability matters. So does viability matter when assessing who gets grants?

Joel Armin-Hoil...: Yeah. I mean, viability absolutely matters. I think every single non-diluted funder wants to get a win, even if that's a public funding agency who is providing high risk capital, uh, who providing high risk grant funds, those funding managers and program managers are motivated to have successful projects within their portfolios.

Jason: Do they have performance data that they track. And if so, what do they care about? Like with a venture investor, for example, they look at like, you know, multiples of capital and timeframes and, and they have these like fancy acronyms and terms. Uh, what does that look like in the non-dilutive world?

Joel Armin-Hoil...: They certainly have metrics for success. And I think it varies between different organizations. I think for, for philanthropic organizations, they have their theory of change and their, their impact. And I think if their impact metrics are satisfied, whether that is co-benefits or livelihoods or, uh, or gender, or, you know, also obviously climate impact, they're, they're happy with that.

Oftentimes depending on the program, public funding we'll, we'll say, okay, well, we got X number of companies through commercialization, or we get X number of technologies through to TRL5, if it's kind of an earlier stage. So they definitely all kind of have those, those impact metrics.

Going back to your, to the other question about appropriateness of, of different, different opportunities. You know, it's really about, there are different types of opportunities and different types of funding that are designed for different things. So there are certain public funding opportunities that are really designed for extremely high risk work.

And so some of those are kind of, SBARs where you're really in the point of where you're proving technical feasibility. There are other opportunities that are a bit later oftentimes RPE is really looking at kind of technology to market, and they have programs like scale up where they're taking technology that's already basically been funded and proved out, proved out as technical feasibility and funding is pathway to scale.

So it really depends on the program. I think that's one of the reasons that it's so important to really do a good job of identifying the different opportunities in the ecosystem and kind of mapping out the funding ecosystem to identify the opportunities that are really aligned with your technology and, and your commercialization plan and how you're gonna reach that goal.

Jason: And they say, at least on the venture side, that the sorts of introduction really matters if it's like kind of an unknown service provider accountant or something versus portfolio CEO that they've backed three times who returned the fund on the last two companies that, that he or she built, then maybe they'll take that introduction more seriously, especially if it's in a, in a category that they understand really well for, for example, my question is, so there's these applications, but what about the people side?

Like does the source of introduction matter how important are relationships and in some ways, are you like a, I mean, lobbyist is the wrong word, but it's like, uh, you know, if you get walked in by Joel, it means something different than if you just fill out the application like everybody else does. Does that matter when it comes to grants?

Joel Armin-Hoil...: Yeah, it definitely matters. And I think it matters to certain degrees depending on the funding type. I would say the philanthropic landscape is very similar to the investment landscape and maybe even, maybe even more so, depending on, on relationships. You'll see on the majority of philanthropies websites, it will say no unsolicited, unsolicited proposals, or proposals by invitation only.

Which basically means they're going out and finding companies or finding grantees, or more likely, they're basically asking people in their networks and other philanthropies, "Hey, who is someone that would be high impact that we could fund that would fit our funding focus areas."

Jason: Does that create an equity issue?

Joel Armin-Hoil...: Abs- yes, [laughs] absolutely. It creates an equity issue. And I think that's one of the biggest issues in the philanthropic world is that what are, what are the odds that the highest impact solution is gonna be two degrees of separation from someone, uh, program manager, manager at a philanthropy. It's, it's pretty unlikely.

So there's definitely an equity issue there, but I do know that a lot of philanthropies are changing some of the ways that they, that they do things and even changing the structures of some of their programs to really kind of support more equity.

You know, there's, there's a, a philanthropy that is actually starting to fund more in the developing world, fund, uh, more private sector companies, because they realized that most NGOs were by, founded by foreigners because they could make, not make a profit.

And so in order to fund local funder, founders, they needed to, to fund private sector companies. And so there's folks that are definitely working on that and changing the structure. Um, but that is definitely one of the, the biggest issues I think, in, in the ecosystem.

Jason: Yeah. I mean, it, it's disheartening to hear that, for example, the equity philanthropy world might have an equity problem, right? And it's like, if, it's a psychology world has a mental health crisis or something, right. [laughs].

Joel Armin-Hoil...: [laughs].

Jason: Uh, then it's like, what does that say for the rest of us kind of thing?

Joel Armin-Hoil...: And I think that everyone, like everyone has good intentions here, right? It, it's not, it's not by any means something that they're trying to exclude people. It's just kind of the way business is done and the way business has been done. I do think that's changing.

I mean, we're seeing a lot more kind of newer, more, you know, really climate focused philanthropies out there oftentimes backed by high net worth individuals. And a lot of the kind of incumbent traditional institutional philanthropies are changing some of their policies, are, are starting to have programs that are, you know, more climate focused or, or starting new climate programs, even though, uh, a lot of, a lot of them have, have been doing great climate work for a long time.

And I did wanna just mention, go back to the funder engagement question just because it's, you know, it's important, certainly not just for philanthropies, although I think that's probably, it's probably the most important for philanthropies, but it's also very important for, for public funders as well.

Most public funding, uh, in terms of grants are done with a competitive RFP or a competitive solicitation process. So you don't actually ever have to reach out to someone. And I think a lot of people do just apply for lots of grants without ever reaching out to the program managers.

And that is something that we always do. We always try to make contact with the program manager and not just when there's a specific opportunity out, but when we're working with a client over a long period of time, say a hydrogen company, we're making sure that we're talking to people in the advanced manufacturing office and in the hydrogen fuel cell office at, at DOE because just having those introductions is really important.

It doesn't mean they're gonna put their thumb on the scale. It just means that they're going to know more about the technology and they're gonna have a good impression of those folks and the company can share important information, you know, with those program managers and they're, you know, really usually, usually open to that. And so I think funder engagement on the front end is, is really important, not only with philanthropies, but also with public funders.

Jason: Maybe it'd be helpful just from an illustration standpoint to run through a quick case study or two. And don't, don't mention any names, uh, if you prefer not to, or, or aren't allowed to, or something, but if you can, just run through like, you know, a client that was this type, you know, at this stage had these needs. And when we engaged here were their goals and here's what we did, and here's the results they had, some, something like that just to kind of bring to life the work that you do at CFS.

Joel Armin-Hoil...: So I think that there are a lot of clients that come to us with hard tech that are in the R$D cycle and are not able to get, uh, equity investment yet at that point, because the risk is just too high. And so what we're looking at is, you know, what we start with is what we call, uh, mapping the funding ecosystem, which is basically our, our way of identifying and assessing opportunities.

So we understand what the company does. We sit down with them and we say, okay, "What are your funding priorities? What are the activities that you're looking to fund? What fund, funding amounts do you need? What geography are you, are you looking in?"

And then we take a step back and we say, okay, knowing what we know about the, the funding ecosystem, what are the different funding buckets that they could get funding in? So we're trying to enlarge the universe of funding as widely as possible.

So let's say it's a buyer energy company. We're not just looking for that specific type of bioenergy. We're looking for rural economic development in all of, in, you know, maybe, uh, waste to energy and all of the kind of upstream and downstream issues. So we can enlarge that universe of funding. And then we do a really comprehensive search of that ecosystem.

And we're looking at thousands of opportunities, oftentimes and hundreds of funders. And we're able to build the funding pipeline where you down select and prioritize all of the different opportunities. And that really allows you to identify the opportunities in the ecosystem that have the highest probability of success and are the most well aligned with what the company wants to do.

And that I think is one of the, you know, that's always the first step that we take with people. And that really is one of the keys to having that really high success rate, because it means we're working with pursuing the right opportunities that have the, the highest chance of success.

And it, there's also patterns that kind of pop out of that. Oh, there's a lot more funding coming from these areas. This is where we can do the most effective fund, funder engagement.

Jason: So it's a typical goal when an engagement kicks off from a client like a dollar amount of non-dilutive financing, I aspire to raise 5 million in non-dilutive financing. Are there other criteria that they tend to have beyond that? Or is it as simple as just a dollar amount in grants.

Joel Armin-Hoil...: There are specific requirements for each opportunity. So it's gonna depend on the geography that they're in, the type of work that they're doing. And even within the category of work, the specific activities that they're looking to fund, because not every opportunity is gonna fund every, every specific activity.

And so you really have to drill down and do a pretty detailed assessment as to how good of a fit is the opportunity for, for the specific client. But usually you take, you can take a look at the technology roadmap and say, okay, they need X number of dollars to get from where they are to where they need to be, because they're in one of the valleys of death, equity investment is not available or it's not appropriate, or it's gonna be hard to get on, on good terms, how much money do they need to, need to get where they wanna go?

Usually, because, you know, we're specializing in large opportunities, we're looking at pretty ambitious projects that are gonna be multimillion dollar projects.

Jason: Given the time lag in between. Do the clients tend to be hair on fire when they call you, like, is it a fire drill? Like, "We're running outta cash and we're, you know, we're not having luck on the equity side. And so we're switching gears or we're gonna focus on grants," or is that testing a fit like once you're in that mode, is it too late?

Joel Armin-Hoil...: Well, you have to have enough runway to get you through the lag time. Even though we have a very high success rate, any individual opportunity is sub 100% chance of success. If there's gonna be a nine month lag time and you have nine months of, of runway, this should not be applying for a grant, should not be your only way that you're trying to, that you're trying to raise funding.

Jason: It's kind of parallel processing. And so sometimes they're out ahead of the game and they're just exploring because it seems like it could potentially be viable. So we're gonna explore in parallel as we do a number of other fronts. And then other times it, it's like, well, we kind of got our teeth kicked in on the equity side, but we still have a year of cash. And so let's see what we can do.

Joel Armin-Hoil...: Yeah, absolutely. And I think one of the things that we do with all of the clients is develop an integrated fundraising strategy. And not only with our clients, like I work with a variety of accelerators, like breakthrough energy fellows and third derivative and, and tech stars.

And I also work with a variety of, of VCs to just help people understand how important it is to put together an integrated fundraising strategy where you're sitting down and you're, you're understanding, you know, what your pathway to commercialization and scale is, what your technology roadmap is, doing a really strategic identification and assessment process of a non-dilutive funding ecosystem, and then matching those things up.

So you're not coming in with your, your hair on fire. You're able to really strategically go after all the elements of the capital stack, whether that's equity investment or, or non dilutive funding.

Jason: It reminds me a bit, I mean, we haven't talked about business model yet, but I used to, before I was an entrepreneur, I, I spent a little bit of time a couple years as a head hunter. And I was doing, you know, CEO and executive searches on a retained basis for while high growth technology firms.

And in that business, you get retained and there's kind of installments. Um, but it's, it's success based. You, I mean, you get paid either way for the engagement, but you keep driving until there's success. What does a model look like in your world?

Joel Armin-Hoil...: Yeah. So there are a lot of folks that, that do what we do potentially even the majority that work on a success fee or an award fee basis. And I started out doing that, but I had a couple of experiences that really made me move away from that.

So there were a couple of times where I was working on majority success fee basis with a client and for reasons completely unrelated to what, to what we were doing, they decided about 90% of the way through a, we're not gonna apply for this.

And so basically we had done a lot of work and we had almost no way of, of getting paid. And after having that experience a couple of times, it, it just seemed like it was a better model to just kind of work on a straight hourly rate. Funding ecosystem mapping that we do for identification and assessment, that we do on a flat rate basis, just because it's a very standardized process, a very streamlined process.

And so that's just a flat rate, but all of the other work we do is on an hourly basis, both because I kind of have those experiences with success fees, but also because, you know, we're not just providing those services that are, we're writing a grant for you, and that's it.

Oftentimes we're providing those other services, like helping design projects, helping engage with the funder, helping develop and cultivate partnerships, helping design, integrated fundraising strategies and commercialization plans. And so, you know, all of that takes very pretty wide, widely varying amounts of time. And so kind of the hourly basis just makes the most sense.

Jason: And I, I know from, you know, hearing about your process and stuff that there's these layers of work and each one builds upon the other, but ultimately, if I'm a client, it seems like the thing I would wanna know if I were evaluating, working with you is what's your batting average?

The, the people, the clients you take on, what percentage of them are able to raise the capital that they aspire to successfully? Is, is that how you think about it? Is that how your clients think about it? And to the extent you're comfortable sharing, we'd love to hear what your batting average is.

Joel Armin-Hoil...: It means one of the things that I think we try really hard to keep that batting average up just because that's how we best serve our clients. And that's how, you know, it's one of our big selling points. So we have an 88% success rate in terms of dollars awarded versus dollars pursued.

So we calculate that basically, how much funding did we apply for and how much funding did we win? That's a pretty, pretty high number. And I think there are a few reasons for that. I think number one, we do a very strategic identification and assessment process. So we're really going after the highest probability opportunities.

B, we're working with really the highest impact companies that, that we can find, which always kind of have the best chance of securing funding. We have a really deep technical team. And so we're able to like really take on highly complex projects and do a really gut, good job kind of explaining and, and presenting them.

And then we do very, uh, sustained funder engagement. So, as I mentioned, we were talking to program managers, talking to other people who are helping our clients fill out RFIs or requests for information, having them attend workshops. And all of that re- that funder engagement is really important.

Like funders do really recognize those things. And I think all of those things that we do, and in addition to obviously just being really good at, at this process and putting extremely good packages together has all contributes to that.

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