#153 Rob Day, Partner and Co-Founder of Spring Lane Capital

Rob Day is the co-founder of Spring Lane Capital where he is also a partner. He has been a sustainable resources private equity investor since 2004, and acts or has served as a Director, Observer, and advisory board member to multiple companies in the energy tech and related sectors. Rob also serves on the Board at the New England Clean Energy Council and the Investment Committee of the Clean Energy Trust. From 2005–2016 he authored the column Cleantech Investing, which appeared on GreentechMedia.com, and co-hosted several conferences with that group on the topic of new investment models for the sustainability sector.

Formerly a consultant with Bain & Company, Rob has worked with companies and evaluated private equity transactions in the energy/utilities, telecom, IT, medical/pharmaceutical, and retail industries. Earlier in his career, Rob was a member of the World Resources Institute’s Sustainable Enterprise Program, where he co-authored the report The Next Bottom Line: Making Sustainable Development Tangible. Rob received his MBA at the Kellogg Graduate School of Management (Northwestern University), and his BA at Swarthmore College. A strong advocate for youth sports, he also serves as the President of the Marblehead Youth Soccer Association.

Take me to the podcast.


This transcript has been lightly edited.

Host Raj Daniels  00:52

Rob, I want to start with a quote of yours that I took from a Forbes article you wrote in November of last year. And it said that for now, investors need to recognize that a price for carbon is already here. It’s just not evenly distributed. Can you expand a little on that quote?

Rob Day  02:03

Sure. Maybe it’s a little bit of background, I originally way, way, way back in the rearview mirror, got an economics degree, and then ended up working as one of my first jobs out of college at an environmental economics think tank. And so it became hammered into me very early on that one of the major tools for addressing climate change is to have there be a policy-driven price on carbon. What I’ve come to realize is that there are now a bunch of different prices on carbon, even if there hasn’t been one overall US National legislative price put on carbon, because there are all sorts of different regional regulatory schemes that involve prices on carbon. Increasingly, what we’re seeing is voluntary adoption of carbon offsets at various prices. The upshot of which is that there are lots of signs in the marketplace of people being willing to pay for carbon at a wide range of prices. So it’s an interesting transition point because you go from wishing there was a price on carbon to wishing it was a much more efficient market for selling carbon offsets or the like.

Host Raj Daniels  03:18

Recently, I heard it said that someone’s speculating that there are going to be the companies, they’re going to be the haves and have-nots of carbon. What are your thoughts on that?

Rob Day  03:27

What do you mean by that the haves and have nots of carbon?

Host Raj Daniels  03:31

The companies that can afford to buy the offsets versus the companies that can’t.

Rob Day  03:36

Interesting? Yeah, there’s probably something to that. I guess what I analogize it to are the early days of corporate direct purchases of renewable energy credits, or RECs. They, in some cases, knew that they needed to make a corporate commitment to purchasing green power, or they saw other reasons why they wanted to purchase green power, and oftentimes tied to, for instance, running data centers. And so they figured out they had to go do these direct purchases of it because the markets just weren’t as efficient as they wanted them to be. I think what that speaks to is the same thing is going to happen with carbon offsets as well, where very large companies that have made big public commitments are probably going to be the early drivers of similar types of purchasing arrangements direct from carbon offset projects or the like. But interestingly, if I’m right about that being the analogy, that led to a much broader adoption, much broader market acceptance, policymaker acceptance of markets for RECs and launched a tremendous growth of the overall renewables industry, by being able to have those early, larger haves in your parlance there that were able to make those purchases that ended up having a pretty strong effect overall, beyond just those few companies.

Host Raj Daniels  04:59

I appreciate you sharing that insight. And we started with teasing with Spring Lane Capital. Can you give the audience an overview of Spring Lane Capital and your role at the organization?

Rob Day  05:07

Yeah, sure. So I’m one of the co-founding partners of Spring Lane capital. We’re a team that’s been working together for over a decade now, actually, although Spring Lane isn’t that old, we spun out of a previous effort that we were doing to form Spring Lane Capital. At Spring Lane Capital, what we do is provide what we call catalytic project capital. There are so many opportunities out there, where innovations over the past few decades, sub-utility-scale imports innovations, in particular, are addressing some aspect of sustainability, whether that’s energy, food, water, waste transportation, and these can be very attractive growth markets. But a lot of the entrepreneurs and project developers operating in those markets have a hard time getting their first two to three years’ worth of project equity. And that’s our role. So we step in, we partner with somebody who has a compelling solution and compelling project pipeline, and one of those verticals or sub verticals, we stand there not only with their initial two to three years worth of project equity, that they need to be able to roll their systems out into the world, but we also bring expertise to help them and relationships to help them. So being able to introduce them to the right EPCs and engineering firms and the like, so that they can be successful with their first few instances of deployment of projects as well. And when we do our job right, what we’re doing collectively, in partnership with those companies and those teams, is we’re teeing them up for being able to access mainstream infrastructure capital after us. Once those companies get those successful few projects, once it sees some revenues in a proven financial structure, that is exactly the recipe that we and others cut our teeth on in terms of the rooftop solar market, and third-party capital for that. So that’s really what we’re doing is we’re taking that model that we learned there and applying it to the other 99% of the sustainability universe.

Host Raj Daniels  07:06

Can you give a few examples of projects where you’ve invested catalytic project capital?

Rob Day  07:10

Yeah, absolutely. So for instance, we’re partnering with a company called Cambrian Innovation. Cambrian has been around for a few years selling a pretty compelling solution in the distributed wastewater treatment space. If you’re thinking about a food and beverage processing plant, there can be some highly organic waste streams that can create some real challenges for the local sewer treatment authority or disposal for the actual processing plant. So there’s often a compelling need for them to be able to pretreat their waste as it were. One of the things that Cambrian can do is end up fully recycling the water and turn the wastewater into useful water back on site. They’ve been going up there and selling their systems to customers for a number of years. But they had a bunch of potential customers who said, “Look, this is great. We need this kind of solution. But I don’t want to go to my CFO and ask for a few million dollars for a special CapEx purchase of one of these boxes, and then have to go run the system myself out in my backyard, can you please just treat my wastewater for me, and I’m willing to sign a long term service contract,” which is great, it’s a win-win for both the customer and for Cambrian. But somebody still needs to pay for that wastewater treatment project upfront. So we partnered with Cambrian, we’ve enabled them to be able to offer what is a first in the industry, what they call a water-energy purchase agreement because in some configurations, their system can also generate useful green energy on-site. And they’ve been able to start introducing that to the marketplace to seemingly really good adoption. It’s unlocked in an entire new growth vertical for them and offering these services, these turnkey approaches. That’s been pretty exciting to watch.

Host Raj Daniels  09:03

Sounds like an interesting project. And I love the idea of a water-energy purchase agreement. It’s definitely unique.

Rob Day  09:08

Yeah, it’s been great to see, you know how eye-opening, it’s been for a lot of corporate customers, very, very big ones, and the food and beverage processing industry.

Host Raj Daniels  09:17

So in my research for this interview, I came across another phrase you used, global weirding. Can you share with the audience what you mean by this period of global weirding that we’re in?

Rob Day  09:28

Yeah, and I can’t claim credit for that phrase. I forget who came up with it first, but I’ve always enjoyed it, because I think it gets the point across that a lot of the most pressing threats from climate change over the next decade or two is probably not the relatively hard-to-notice-on-a-day-by-day basis rise of ocean levels. But instead what seems pretty clear is that climate change is driving a lot of higher variability in weather systems. And that causes a lot of disruption. There was just a report that came out earlier this week that billions of dollars of damages were added to the cost of one of the major hurricanes last year, because of the exacerbating effects of climate change on that storm. So you get stronger storms. That’s one example of this. We’ve seen around the world more prevalence of droughts, more prevalence of flood conditions, things like that. It just seems like scientists are pointing the fact that that weather patterns are becoming more extreme and stickier in their extremes. And that’s what’s going to have a major impact. Because if you think about it, droughts and such drive major social disruption, that has a lot of knock-on effects on our economy, on our society, on global safety, on just the health and safety of friends and family, near to home.

Host Raj Daniels  10:57

What are your thoughts right now about? Because I can tell you quite often, for example, you and I have this conversation right now, we’re familiar with some of these issues that are going on. But getting outside of our echo chambers outside of our bubble, if you will, how do you convey these messages to people that are essentially outside of our echo chamber?

Rob Day  11:16

I have a number of folks, obviously, in my friends and family network, or that we encounter in the course of just being part of the overall broader financial community. And it’s been interesting to watch over the years, the much greater acceptance over time of the fact that climate change is real, that it’s happening, and that it needs to be addressed one way or another. I used to have more robust conversations with relatives who questioned whether climate change was real. And if even if so, if it was manmade, that doesn’t seem to happen as much anymore. I think the messaging has gotten out in that now the question is, what do we do about it? And that’s different for the context. So if you were talking with a member of your family, and they get it and that climate change is real is happening and you know, needs to be addressed, then it’s a question about what do we do about that from a policy standpoint? Or what do I do about that in my day-to-day activity? But we end up having a lot of conversations just by being an institutionally backed fund ourselves. We end up with a number of conversations with very large financial institutions, global financial institutions, where to them, the question is more around, “Okay, this seems to be a megatrend. What should we do about it from an investment standpoint?” What I’ve always found, when you’re talking with folks who are coming at things from that mindset is, it’s just really important to frame things for them in terms of why they should care about the downsides, and why they should care about the upsides. And it’s important to be able to provide both of those downsides and upsides as part of the picture. Because those are both important motivators for different ways that investors approach things. That’s less on my outside of the business world conversation. But you know, in the course of our days here at Spring Land Capital, we end up having a lot of conversations with people where that’s exactly what we’re trying to show. For me, a key piece of philosophy that I’ve had for a long, long time, is that if you want people to do a lot more of something, show them how they can make more money by doing it. And so if we want to see more climate change solutions propagate out there into the world, it’s really good to be able to point out the ones that are profitable, and could use a lot more capital.

Host Raj Daniels  13:31

I like that idea a lot. You’ve been involved in this sector for quite a while now. You mentioned a megatrend earlier. When did you see, feel, or realize that these institutions that you were speaking to became aware that this is actually a megatrend?

Rob Day  13:46

Yeah, it’s interesting. So when we started raising our first fund, it was approximately four years ago now. And we had spun out of a family office. And we were going out there and talking with a lot of these pension fund managers and endowment managers and sovereign wealth funds. And we have this pretty unique investment model that we’re rolling out and at the time, we were in a pretty unique sector of sustainability that was still frankly, largely out of favor. So it was a lot of really interesting conversations with them, where it was the junior person on their investment team who had been seriously asked but asked in an early way, “Hmm, sustainability. Why don’t you go start mapping that out?” And so their first thought was to try to have conversations with interesting investment managers, and we would be part of that, that early conversation for them. Fast forward to by the time we ended up doing the final close on our fund about a year and a half ago. And it was a very different set of conversations, even at those same places in it graduated to more senior members of the investment of their investment team at those institutional investors, and it was much more about, “Okay, we’ve done the mapping exercise. Now we come to realize that this is really important. This going to be a decades-long trend that we need to get out in front of. And now we really need to figure out how we can put some money to work.” That seems to have just even more greatly accelerated over that past year and a half. I mean, I think we all saw just how eager the large investor community has been to put money into sustainability through this back wave that happened at the end of last year at the beginning of this year, as just evidence of my mind as evidence of almost the desperation that a lot of these larger investors are feeling now that they’ve realized that they need to get out in front of this megatrend that their investment committee is, you know, is pressing them to put money into it around this trend. And so they’re eager to put capital now around it. Now it’s more about institutional constraints, rather than whether they bought into the thesis or not,

Host Raj Daniels  16:02

I would agree with that. Now, you were a finance council member for the Clean Energy for Biden, late last year, early this year. An administration can only do so much because of tension and everything else they’re working with. What do you feel like after being on the ground? Or, you know, having your ear to the ground? What do you feel like, from a green-tech, cleantech perspective, should the administration focus on?

Rob Day  16:25

Yeah, it’s interesting. I’ve been part of some of these early conversations with external people trying to get ideas into the hands of the administration. And also lest we forget capitol hill that actually ends up writing the legislation that that ends up being passed. I think a lot of what needs to happen is at least being attempted right now, the first and foremost thing that the administration needed to do and they’ve started to do is get us back into the Paris Agreement, to start making us a serious member of the international community that is going after climate change solutions. So it’s gratifying to see that kind of thing happen. I think a lot of what can be done is done on the agency and executive order level. So it’s very interesting to see what the administration is already starting to make noise about in terms of electric vehicles, in terms of vehicle fleet dynamics altogether. Then you get to what could be put into law. And so that’s where one thing which I would like to highlight, everybody knows about potential tax extensions, infrastructure, spending, etc. One little-noticed thing that I have thought could be really important: there was, I think, $25 billion in the original Biden proposal for the infrastructure bill. The $25 billion would be earmarked for what they called pre-development activities. And the idea there would be to help a lot of project developers get through the development phase costs that they incur when they’re trying to stand up projects, and particularly projects that would be built around resiliency, around sustainability, around being able to provide local green impacts in communities that are subject to disproportionate impacts from climate change and pollution. That kind of support at the pre-development level, I think is super important. The last thing, which I think is potentially bigger than a $25 billion pocket, but therefore, I’m also not sure it will succeed in the legislative effort, but if it did, it would be great, is some kind of cash payout version of tax credits. The tax equity bottleneck in terms of being able to structure and finance projects continues to be there, and while the tax extensions, and then in some cases, creation of new tax credit categories, that’s all well and good, but especially for smaller-scale project developers, it becomes pretty difficult for them to access tax equity. Yet, it also becomes very difficult for them to go ahead and find the financing for their projects without tax equity. So being able to make it more accessible, without having to use tax equity would make a big difference.

Host Raj Daniels  19:21

It really would. Now we’ll switch to the crux of our conversation. You’ve been broadly involved in the cleantech, climate change movement. I think my math is correct for about 16, 17 years. Why did you decide to get involved in it? What drives you? What continues to motivate you?

Rob Day  19:39

So I tell people all the time, I’m an environmental sustainability guy who stumbled into an investment role rather than the other way around. And I am admittedly an outlier here. I’m that former kid who, back in high school, was at my local election precinct stumping for Al Gore because at the time he was the only presidential candidate who was talking about climate change, talking about like, 1988. And so I’ve always had a passion for this. I did think that the direction I was going to go was more policy than finance. And so for me, going into college and getting recognition of the power of economics, not just you know, political science was instructive and led me to want to go work in economics, around specifically environmental economics, but discovered to my chagrin, that I was a highly mediocre economist. And so, you know, while I was able to find a really fun and interesting role within an environmental economics think tank, the World Resources Institute, my job was going out there and working with big companies, helping them figure out how they could make more money and how they could add to their bottom line by viewing the world through an environmental sustainability lens. And it was an early grounding in exactly what I was talking about before in terms of avoiding downsides. And in terms of capturing upsides, importantly, as well. I was at the World Resources Institute surrounded by much smarter economists and lots of really smart data-driven people who are gathering information that confirmed and particularly highlighted that climate change was going to be the fight of a lifetime. And I became convinced from my work with companies that the business world was going to be completely fundamental to any successful effort to address climate change. And that the opportunities were there to be able to do that. But it was tough to be able to drive that kind of change from the standpoint of being at a nonprofit, just sort of waving a stick around, hoping to gently poke the big elephants to slightly change their course of direction. And so I went off to business school to figure out how to become a clean energy entrepreneur came out of business school at a spectacularly bad time to be an entrepreneur of any stripe, so I went into management consulting, and then left to go figure out what clean energy startup I was going to join then. And in the meantime, through some old connections, I took a part-time gig helping what was then a fledgling cleantech and venture capital firm in San Francisco. And eventually, that led to them bringing me on full time and over the course of those 17 years, 17 years later into what, frankly, was kind of an accidental career and investing that now seems to be what I’m going to be doing for a long time to come.

Host Raj Daniels  22:30

Seems like a beautiful scenic route to take. You said earlier, you always had a passion for this, I’m assuming the environment. Where did that passion stem from?

Rob Day  22:40

Well, growing up, my father worked on the Senate Environment and Public Works Committee as a staffer, helped write key pieces of legislation, worked at EPA. And so it was always steeped in me to care about environmental things. And then as you get older, and start paying attention, I think I saw recently, there was some seminal work that was done back in the early 70s, that people were already publishing about the likelihood of pretty strong damages from climate change. So it was always something that I identified as something that I cared about, even if a lot of other people just in day-to-day, just thought about the environment as only being a pollution issue. But climate change has always seemed like it’s something we need to try to address.

Host Raj Daniels  23:36

So on your scenic route 17, 18 years, what’s the most valuable lesson that you would say you’ve learned about yourself on your journey?

Rob Day  23:44

Hmm, that’s a great question. Well, one of the things that I’ve learned is that everybody’s got strengths and gaps. And it’s really important to find a team that you work well with, and partners outside of your team that can help facilitate filling in those gaps. And also that can leverage your strengths. For instance, at Spring Land Capital, the three co-founding partners, as myself with more of a background, frankly, in growth equity than project finance. And yet, because of the stage we’re stepping in, we’re identifying and working with growth-stage companies and developers for the most part. Then there’s my colleague, Christian, who’s got a background––he’s got a nice fun journey of his own. But one of the key points along the way for that journey is he became quite an expert in management, team evaluation, and coaching management teams to high execution. And this is a very obviously execution-driven model. Then my third partner Nikhil. Again, he’s had a lot of different hats over the years, but for the past decade and a half, he’s been very focused on project finance and structured finance. And being able to take those skill sets together is what allows us to approach this type of opportunity that we approach and just take that one step backward and look at it. What we’re doing is trying to team up with teams who themselves recognize, okay, we need to go in the direction of utilizing project capital for the deployment of the projects that we’re developing, whether they think of themselves as an entrepreneur who’s selling blank as a service, or whether they think of themselves as a project developer who’s building projects, that all look sort of like Build Own Operate to us. But in most cases, they’re standing in to be able to do this for the first time, at least in their configuration with those types of projects. And so recognition on their part, that, okay, we’re going to need not only capital but if possible, to be able to tap into the expertise, how to work with EPCs, how to use the right project management tools, how to think about procurement strategically, you know, that’s the kind of stuff that then the right financial partner for them should also be able to bring to the table because everybody should have a shared goal of making those projects successful. So that more directly answers your question. It’s really about recognizing and just being sober about recognizing your strengths and your gaps, whether that’s as an individual investor, or whether that’s as an organization, and purposely seeking to leverage one while filling in the other.

Host Raj Daniels  26:16

Well, we’ve looked backward at lessons learned. Let’s walk into the future. Two-part question. It’s 2030. If Forbes or Business Week would write a headline, about Spring Lane Capital, one, what would it read? And two, regarding the climate movement, what would you like to see in the future?

Rob Day  26:32

Interesting. Yeah. So by 2030, I don’t think anybody’s going to be writing headlines about Spring Lane, one. You know, these are 10-year fund lives, and also, less technically speaking, one of the great advantages of being able to invest into decentralized infrastructure like we are, is that while these can be long-lived assets still, and we’re investing in sometimes projects that have 2030 year contracts associated with them, the actual construction phase is much smaller than you get it utility-scale or like airport scale construction. And so for us, what that means is we’re able to identify partners, like I said, we give them their first two to three years’ worth of project equity. We hopefully send them on their way. So while, I don’t think there’ll be too many headlines about our fund, but I hope those headlines would be about the companies that we partnered with. A headline story about what a fast growth we’re seeing, among the wastewater treatment industry of this, this WEPA phenomenon, for instance, the Water Energy Purchase Agreement phenomenon, you know, and we’ve faded into the background because our role has been largely complete at that point as financial partners and as catalysts. But still, if we’ve done our job, right, we’ve helped get these companies on a really strong growth path. What was the second part of the question?

Host Raj Daniels  27:57

Regarding climate change. The climate change movement.

Rob Day  27:59

Yeah. I mean, it’s hard as somebody who has been doing this for a few decades now, to feel too much optimism ever, but at the same time, I’ve just never seen so much seriousness of action. There’s still more talk than action. But still, there’s a great deal of seriousness of action as well now. And the headlines that I would hope we would be writing in 2030, would be around how much progress we’ve been able to make towards these net-zero goals that are now being announced. As with everything, in almost every context, people are setting goals that then the goals will slip or the goals will be met in ways that weren’t really the intention. But at the same time, it all is progress towards a common goal. And if you had asked me a few years back, whether we would be seeing a way of very large companies and countries and regions declaring that they were going to go carbon neutral, by a date that would be within my lifetime, I would be surprised to hear that. And so the fact that people are setting these goals, and they do seem to be serious about tackling it, I hope a lot of what’s going to be written about is about the progress made. Now, I don’t want to sound too pollyannish about it, because that’ll be progress made in terms of what you would call current emissions. We’ll still have now stockpiled way too much carbon dioxide and other greenhouse gases into the atmosphere, the climate, unfortunately, is still going to be getting worse at that time. And so the headlines are also going to be probably dominated by even more extreme weather events and the like. So it will be interesting to see that interplay. But I do feel like this decade is going to be a decade of action, not only because it has to be but because we’re starting to see real signs of it. And that at least is the encouraging side.

Host Raj Daniels  29:46

You know, again, it could be that echo chamber, but I feel the same way. I feel like this decade is going to be a pivotal decade. And I feel like the conversations are louder and to your point. It’ll be interesting to see how much or how much action follows the conversation.

Rob Day  29:59

Yeah. And what form that action takes. That’s the key, too. We continue to have, in my opinion, a dumb debate about whether we need to be pushing for new innovations or whether we need to be pushing for greater scaling up of the current solutions. And the obvious answer is both. It’s sort of a false debate that goes on. What I think we should not just expect, but demand to see over this decade is that the current solutions that are on offer, get a lot of support, because, for one thing, they increasingly are very attractive financially. There should be a lot of capital and a lot of policy support and the like that that goes into promoting the scaling up of existing solutions and energy efficiency and renewables in other aspects across the energy, food, water, waste transportation landscape. And we should be seeing a lot more R&D into the new innovations that we’re also going to. So I think, if we don’t meet that litmus test in this decade, you’re exactly right. It will be a pivotal decade, but not in the way that we want.

Host Raj Daniels  31:06

I think we should take a page out of the improv playbook. And just Yes, and.

Rob Day  31:10


Host Raj Daniels  31:11

So last question. And this could be professional or personal. If you could share some advice or words of wisdom with the audience, what would it be?

Rob Day  31:19

Hmm. So when I talk, I do have a lot of conversations with people who are starting out in their career, they’re thinking about transitioning their career, and they want to be able to get into sustainability. They want to get into potential sustainability-oriented investing, or as an entrepreneur. They always ask for advice on, what’s their next step? What should they do next to be able to do that? And as you can tell, from my own career story arc, I’m a firm believer that you set your goals in two-year increments early on in your career, and you go ahead and take opportunities where you’re going to learn a lot. I think that a lot of folks don’t realize where they are destined to end up. And that is totally okay. I thought I was going to be a clean energy entrepreneur. And instead, I ended up being an investor. I get to work with a lot of cool clean energy entrepreneurs. That’s the kind of thing that’s going to happen to a lot of people in their careers. So my one piece of advice is, don’t agonize over whether the choice you have today, in terms of the next step in your career, is the perfect one for you. Pick one that you are going to be excited to tackle every day for the next two years. And then at the end of those two years, reassess and look at your choices at that point. I once worked with somebody very smart, who was pretty insistent upon that two-years-at-a-time timeframe. And that doesn’t mean you switch jobs every two years, he had been doing the same job for a decade. But it does mean you put your head down, you do what you’re doing for two years, you get the absolute most you can out of it. And then you take that step back and figure out whether it’s time to tack and head in a slightly different direction to get towards the ultimate goal you’re working towards, or whether it’s full steam ahead if I can completely mix my nautical metaphor.

Host Raj Daniels  33:12

Rob, I love the idea of picking one that you’re excited to tackle, put your head down, and follow for two years. I think that’s a great place to end off. I really appreciate your time today. And I look forward to catching up with you again soon.

Rob Day  33:23

Likewise, thanks for having me.

Host Raj Daniels  33:25

Thank you.

Before we go, I’m excited to share that we’ve launched the Bigger Than Us comic strip, The Adventures of Mira and Nexi.

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Raj Daniels

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