How to unlock the value of your business in the “circular economy”

Michael Smith, General Partner of Regeneration.VC, sat down with Jessica Abo to talk about his business and the steps you can take to create value where you work, especially if you’re looking to be part of the economy circular.

Jessica Abo: Michael, nice to be with you. Can you start by telling us what the circular economy is and why is it important?

Black-smith:

The circular economy is really a response to the linear economy we live in today, where we take things from the earth, turn them into products, consume them, and then throw them away. 91% of all materials end up in a landfill, ocean or natural system. Thus, in a circular economy, from the moment we manufacture new products, we think about reusable materials. We think about how we use them and try to keep things broad beyond one-time use or limited use. Nearly two-thirds of global emissions are linked to the things we consume every day, the food we eat and the clothes we wear. So if we can make things better and keep them circulating longer, we can dramatically reduce emissions and improve life on our planet.

I love your origin story. Can you share what you were doing before starting Regeneration and what made you want to start this venture capital fund?

Black-smith:

I had toured the world as a DJ in my early 20s and 30s and saw the world changing around me, the environment, and I really wanted to do something. And I had also been an entrepreneur and started a music business for restaurants, hotels and retail stores. And after selling this business, I really wanted to marry my two interests in the environment with an investment in a for-profit business. And so regeneration is the marriage of those two things. We invest in start-up companies working around circular economy opportunities.

And what is your overall fund strategy, and how do you use capital to drive positive environmental outcomes?

Black-smith:

We invest in three different areas. The first we call design. These are the materials that go into the products we consume, the fibers in clothing, packaging, and food and beverage inputs for consumer brands. We buy formulations for beauty products. The second is usage. These are the brands and services that use these products. Think of companies like Patagonia and Alternative Meats and things like that. And finally it’s reuse. So if we don’t send something to a landfill and put it back into the supply chain, what do we do with it? How do you recycle what would otherwise be a waste stream into a valuable material?

We invested in a company called CleanO2 that does all three of these things. First, they have equipment that captures HVAC emissions from air conditioners and heaters, and traps a material called potash. And this potash is then used to make a new material, a cleaning product, which is sold as a brand, a consumer soap. It is the complete chain of circularity. We are becoming active with our portfolio companies. We have made eight investments so far. And we’re working to accelerate them and get them to market faster so they can be actively competitive and really grow.

Can you tell us about your most recent investment and why you are so excited about it?

Black-smith:

The most recent investment we made in a company called TULU. If you live in an apartment building, you’ve probably thought you could share certain things with the residents, like vacuum cleaners or maybe consumer products, video game systems. And they have units in your lobby that allow that. They allow you to unlock additional conveniences and opportunities from your experience of living in shared environments, whether it’s a scooter you could pack with a much nicer helmet than what you’d find on the street. Printing services so you don’t have to have your own printer and paper. We’re very excited about what this means for the way manufacturers, like Bosch, who are an investor and a partner to them, are using this information to make products that can last longer, that can be used more. Where you can only use a vacuum once a week, in this model that same vacuum is used multiple times, and it moves each vacuum, over 50, from its inception in the first place. So we’re very excited about unlocking the sharing economy in living environments.

Are large companies engaging in circularity and leveraging these learnings?

Black-smith:

Industry leaders like Apple are salvaging their phones and making new ones, paying more to salvage those old phones, and opening up repair opportunities for the first time in over a decade. You have companies like Amazon working on their packaging and committing to different circular outcomes. You have Nike offering open source strategies on how you can make your business more circular, especially in the apparel world. Unilever, Procter & Gamble and so many others are committed to it, as well as cities and governments. So there is a huge movement around circularity and we are delighted to be part of it.

For people who want to unlock circular opportunities within their business, what steps do you recommend?

Black-smith:

There are so many ways to apply it, but the easiest is to browse your business now and think about the places you’ve lost. Think about when you can increase efficiency and improve overall performance. Rank them according to how much they are going to cost you, how much they can earn you, and how profitable they can become for you. And then do your best to understand what the environmental implications may be and where the new regulations are going. There’s so much to do here, and it’s a really fun way to think about how you can improve the planet and make some money.

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