Around $800 billion flows through the sustainability sector per year. This seems like a lot, but an estimated $4 trillion is required to meet country wide climate change mitigation goals. Raising capital has always been important, but with a looming climate crisis, Raise Green aims to fill the large cashflow gap. Raise Green is an investing marketplace solution that connects sustainability focused businesses that need funding to individual investors who want to contribute a conscious investment.
Franz Hochstrasser is the CEO and Co-Founder of Raise Green. As a lifelong climate warrior, Franz has a diverse background in climate, community, and entrepreneurship. Franz shares how his time on the White House Council on Environmental Quality led him on the path to founding Raise Green. Raise Green is a fintech corporation focused on sustainability focused start-ups seeking capital and investors who want to financially back the green revolution. Join us to learn about how Raise Green is democratizing access to capital and allowing investors to back sustainability.
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Episode Transcript:
JJ (Host of The Understory Podcast): Hello everybody. Welcome to The Understory Podcast. Understory is a global community of innovators and entrepreneurs who are using technology and innovation to make our world more sustainable. Today, we are excited to have Franz Hochstrasser, who is the CEO and Co-Founder of Raise Green. Franz, welcome to The Understory Podcast!
Franz Hochstrasser (CEO & Co-Founder of Raise Green): Thank you JJ. I’m so excited to be here.
JJ: Tell us about your background. You have a really impressive background which is not typical of an entrepreneur necessarily, but it lends so much to the work that you're doing today.
Franz: First of all, thanks for having us on. My angle to entrepreneurship starts with a position that I took on the Barack Obama campaign for president back in 2008 as a community organizer. This allowed me to work back in Iowa, calling people, engaging with them, hearing their problems, and working to get President Obama elected. After that, I took this journey, which was like being strapped to a rocket, to Washington D.C. where I got to work at the US Department of Agriculture on the Recovery Act, which was the largest investment in U.S. history towards energy efficiency and clean energy at the time. At the White House Council on Environmental Quality, I had helped with the President's climate action plan. In the last couple of years of the Obama administration, I joined the State Department and negotiated the Paris Agreement as part of the climate negotiating team.
As I was coming out of that, I felt that not only was our shared future at stake with the climate crisis, but it was also fairly overwhelming for individuals that that wanted to get involved. You can recycle, you can petition your way out of this by asking Congress, elected officials, or companies to take action, but there wasn't a clear way for those individuals to take immediate action themselves. That was the catalyst for going back to school and starting Raise Green.
JJ: That's excellent. Let's talk a bit more about the company and your vision of that before we dive into the actual platform. What is the vision that you have for Raise Green? What sorts of stakeholders are you bringing together to make it possible?
Franz: We look at two major unmet needs. Specifically, there are about 10,000 cities and towns across the US, and every one of them has at least a handful of buildings that could have clean energy and energy efficiency. If we are going to get to anywhere near meeting the nation's goal of reducing emissions 50-52% by 2030, we're going to need to move to roughly 100% clean energy in the next decade and a half. All those buildings need to be covered with solar panels, and they need to be as energy efficient as possible. We just don't see the level of mobilization and preparedness out there in businesses or communities to execute against this goal. A big part of our vision is to give the tools to those individuals, communities, and companies to make that transition.
The second piece is the 195 million Americans, well over half of the country, that are alarmed or concerned about the climate crisis. They want something meaningful that they can do, and they have anxiety about the problem. They’re being told that they can call their congresspeople and that's not working, so they have an interest as well. A full 99% of millennials care about sustainable investing and want more options, Raise Green is one of those options for them to take action in a meaningful way and have the opportunity to get paid back while they do it.
JJ: Let's talk about that specifically. It's a marketplace for impact investing. Let's break that down a little bit more. Tell us what this marketplace is, and tell us the kinds of projects that you're bringing forward to investors who are able to participate in some of these opportunities that they otherwise wouldn't be able to.
Franz: Before 2016, about 90% of Americans were considered non-accredited investors. This means they make less than $200,000 a year or have less than $1,000,000 in net worth. These investors were prohibited from investing in private companies. They could still invest on the stock market, which are public equities, they could buy bonds, but they couldn't invest in private deals. In 2012, President Obama signed the JOBS Act, which enabled equity crowdfunding to take place. In 2016 that was finalized and made public so that that other 90% of Americans who aren't wealthy actually have the ability to invest in private deals.
Raise Green is an equity crowdfunding platform that enables those investors to find climate solution companies and put their money into them. What that looks like is: go to our marketplace on invest.raisegreen.com and you'll see everything from solar projects on a school to water filtration companies to plastics that reduce emissions in the plastics manufacturing process. There’s also energy efficiency companies that will happily take an investment and use that to retrofit multifamily housing buildings and make them more energy efficient so that the tenants save money. As an investor you can put in as little as $100 into those types of projects. You can also indicate your interest in projects that are considering doing a raise. For free, you can go on and see a number of interesting offerings, and upvote them by committing to invest when they go live.
JJ: One of the things that I noticed is the diversity of investment opportunities that can be explored. Anything from the ability to invest in a certified B-Corp lender, solar projects, or any other type of organization. How does your team find these opportunities? How do you evaluate whether there are worthwhile opportunities to get on Raise Green and be exposed to your investors?
Franz: I love this question because it's so core to our mission which is to democratize access to the capital raising side of what we're doing, as well as to the investors who want to put money into these types of projects and support them. On the capital raising side, underrepresented and historically disadvantaged communities have struggled to get access to capital for as long as capitalist economies have existed. In large part, we exist as an alternative to banks, venture capital or to private equity as a way for anyone to step forward and say, “I'm going to organize my group of supporters to turn them into raving fans and potentially even turn them into customers by turning them into investors first”.
In essence, we allow those businesses and those heroic climate entrepreneurs to step up and raise their hand and say, “I'm going to take the capital formation process on my own shoulders and reach out to my networks and then reach out to the Raise Green Investor network and make my appeal”. In large part, it's their responsibility to tell their story. We help drive as many eyeballs as possible to the marketplace. We are also a FINRA and SEC registered marketplace, so we have to comply with certain diligence and background check rules which we are stringent about. Don't be afraid though, we are happy to give anyone the opportunity to take indications of interest and we will screen those projects for viability. It really is a test to see if they can solicit enough interest from the crowd. Listing an actual project and raising the money requires a little bit more diligence, but we help with those processes as well.
JJ: For the investor audience, what sorts of things have you seen from investors? Whether it's demographic, the amount they're willing to invest or any particular investment? What sort of patterns you have observed if any from your investors?
Franz: We've seen a lot of repeat investors who come back and invest in multiple projects. That's exciting to us because our investor base has grown consistently month to month, about 40%. A lot of that comes because the developers of solar projects or climate tech companies who are raising money bring their own networks into the fold, and those folks then find related companies that also support their investment thesis and then they invest across those.
We also have a lot of accredited investors who use the platform in addition to non-accredited folks. If you are non-accredited, you are limited in the amount that you can put in because the SEC wants to protect against you losing a large amount of money that you can't afford to lose. If you're accredited, you can put in as much money as you want into investments, and we've seen investments everywhere from $100, which has been the minimum, up to $400,000 from a single individual.
JJ: Is the opportunity to invest with Raise Green in the US only?
Franz: Yes, to be an investor you need to be U.S. citizen. There are some countries where you're allowed to invest, but it all depends on the securities laws of that country, so it's simpler if you're U.S. citizen. If you are a US incorporated business, you can also use Raise Green to raise money.
JJ: Got it. Let’s talk about some of the partners that you have worked with and you are working with. You have an advisor from MIT Media Labs and other partners like IBM. Can you talk about the kinds of partners that you are working with and that you want to work with in accelerating the mission and vision you have?
Franz: We are a Techstars portfolio company, so we've worked with them and ABN Amro through the future of finance accelerator program. They've been very helpful. The MIT Media Lab City Science group are close thought partners of ours, and we've gone through several accelerators. We're currently headquartered at Greentown Labs in Somerville, Massachusetts which is the largest cleantech incubator in North America. We're proud of that partnership and they've been very helpful as well. Our best and most critical partners that we're looking for are those looking to raise capital, particularly those that are developing or implementing clean energy or climate solution projects like solar on a school, and using Raise Green to finance those projects on a recurring basis. Those that want to raise up to $5 million per year to bankroll their projects and their development efforts. Those are the optimal partners for us because once we build a relationship, it lowers the amount of time that we have to spend doing diligence on a new deal. They are a known entity and once you go through the process of writing your paperwork once, it's fairly simple to reuse it. We also have templates for those that are going through it for the first time that we provide to make it very simple for people to raise capital on our marketplace.
JJ: Let's shift gears and talk a bit more about impact investing, the projects and the transparency trends given your expert background in the field, and as someone who has worked in sustainability and climate related initiatives for a very long time.
How have you seen impact investing or ESG investing changing in the recent years? What are some of the exciting trends that you’re seeing in the space?
Franz: Great question! You have me smiling because it has changed so immensely just in the last five years. When we started Raise Green in 2018, there was about $300-400 billion a year flowing into climate finance globally. At the time the estimate was that we needed a trillion dollars per year if we were going to hit these climate targets and avoid the worst impacts of climate change. Now, it has basically doubled. We’ve seen about 800 billion a year flowing in, but the need has also doubled. We are now looking at anywhere from $2-4 trillion per year that’s needed to tackle these challenges.
People have definitely stepped up, institutional investors, as well as venture capital have really dived into the space headfirst with more and more climate tech funds emerging everyday, which is excellent, but the exciting part to me is the talent that has flown in into the space as well. Many people have shifted career trajectories to focus on the climate challenge and this idea of stakeholder capitalism as opposed to simply shareholder capital. We are really excited about the shift toward more ESG investing and a shift away from greenwashed investing. The SEC has a rule which is currently under a comment period, which would crack down on greenwashing and require standards around climate risk disclosure, as well as other social and governance issues. This is really encouraging because it keeps everyone honest, particularly the big finance shops that have tended to relabel existing funds as ESG, which doesn't actually do a ton to help.
Watching that shift has been really exciting, participating in and catalyzing that shift in a sense of rhetorically goading some of those bigger players into making the shift toward more impactful investments has been crucial. Seeing philanthropies also step up and decide that it's not enough to just give grants to nonprofits anymore. Program related investment and blended capital involving philanthropy, concession capital, and profit driven investment are all required. All those things add up. It's exciting, it's also not happening fast enough, it needs to be done quicker. Buddha says that people's biggest mistake is thinking that you have time. I think as an entrepreneur and as a lifelong dedicated climate warrior thinking we have time would be our biggest mistake.
JJ: I love the various dynamics that you highlighted. A lot of these issues are now coming to the foreground. We like the fact that you as a climate warrior who understands how the policy works as well as how the industry works, Raise Green is a great example of that.
Last question Franz. How do people learn more about your company? Whether it's companies that are looking to use your platform to gain access to capital or investors who are looking at these opportunities some more.
Franz: Thanks again JJ. For the question, raisegreen.com is our website. We are also on most of the social channels, LinkedIn, Twitter, Instagram and Facebook, so follow us on there, check it out. We are always standing by, excited to work with prospective customers. We call them originators, people who want to raise capital on our marketplace, and we have the most competitive rates in the industry, I think. We are so excited to share that opportunity with those raising money.
As an investor, how you spend your dollars and how you invest them is entirely up to you. We really feel that voting with your dollar on what you believe you want to see in the world by way of companies emerging is a really powerful way to take action. Don't just sit on the sidelines, join the ranks of the heroic entrepreneurs and innovators that are powering this transition from dirty to clean energy. Raise Green is here to help you do that.
JJ: Excellent! With that, thank you so much for joining The Understory Podcast. We look forward to having you here again to talk about the progress you have made. Thanks again for all the things you and your team have been doing, Franz.
Franz: My pleasure JJ. Onwards and upwards. Thank you.
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