Pachamama Ventures’ Karen Sheffield On The Journey From Operator to VC Investor
I had the pleasure of interviewing Karen Sheffield, the Founder & Managing Partner of Pachamama Ventures, a venture capital firm investing in US early-stage climate tech companies. She is also a Finance Director at Visa and has previously worked for PepsiCo and American Airlines. A self-described operator turned investor, Karen began angel investing 3 years ago and, ever since then, has dedicated much of her time to uncovering opportunities in unlikely places. Karen holds a double degree in Finance and Economics from Texas Christian University (TCU) and an MBA from The University of Texas at Austin.
How did you break into tech investing?
During the pandemic, I was getting restless about what my next professional chapter would look like. I was already investing in public stocks, bonds, and preparing to make my 1st home purchase. Then, I stumbled upon PE/VC after chatting with a good college buddy of mine. Shortly after, I started making small angel investments — that was 3 years ago. Since then, I joined Vitalize Angels as a founding member, which allowed me to get a full view of the deal sourcing, due diligence, and portfolio support process. My investments were sector agnostic at first, but now, I solely focus on climate tech as I see the urgent need for accelerating specific solutions to arguably the world’s biggest challenge today.
What is your advice for someone trying to break into tech investing?
I would break it down into 3 steps. Number one: make connections in the space with other investors you admire and take furious notes from their experience. They say that a smart person learns from their mistakes, but a wise one learns from others’ — absolutely true! Number two: develop an investment thesis of your own that is best suited to your skills, experience, and/or network. Start making investments to prove out and execute the chosen thesis — so you can build a track record and, ideally, point to markups & successes early on. Number three: keep a long-term view on all the relationships you build. VC is a patient capital asset class — you won’t know how good of an investor you are until several years down the road. Capital is not the only way you can add value to a portfolio company. Leverage your expertise as a mentor or advisor and build a solid reputation with founders. Remember: people always remember how you treat them.
What has been your biggest challenge when it comes to finding the “right deals”?
Climate tech is very hot right now, which makes the space a bit crowded. Differentiation or identifying your “unfair” advantage as an investor becomes paramount in accessing high-quality deal flow. They say that you know you’ve made it when the deals start coming to you, but I think in the world of climate tech, which includes deep tech/hardware investing for me, investors have to put in the effort of connecting with those super technical founders. Most of these founders are spin outs from universities or government research labs. I do not shy away from approaching these institutions. The worst thing I can do is sit and wait for the deals to come to me or rely on pitch competitions to find them — I think it’s too late by then.
As the Founder & Managing Partner at Pachamama Ventures, a climate tech VC firm, what major trends do you expect to see in Climate Tech innovation over the next 5 years that excites you?
There is a lot happening right now in the carbon capture and carbon removal space. When I started sourcing deals in climate tech, I thought I’d find the energy and AgTech deals by the dozen, but it’s actually the carbon capture, utilization, and storage (CCUS) space that is beaming with exciting innovation — everything from nature tech to measuring biodiversity to sinking algae into the ocean floor or making fungi super strong using AI and machine learning. Watch this space! I also like watching other trends that I do not particularly invest in yet, but I think would have an amazing potential over the next decade such as materials innovation (in fashion, for example) and industry decarbonization (building materials, for example).
If you had to share, “words of wisdom,” with a Founder who’s about to start their own startup, what would they be?
I would tell them to really consider current & specific region market needs/demand before they set out to build. Especially, in climate tech, the solutions needed will be very capital-intensive and will, generally, have a longer tail before reaching commercialization. Make sure your startup is solving a real pain point and that this solution is an improvement to business-as-usual (BAU) of, at least, an order of magnitude. Remember that VC investors are looking for a strong founder/market fit — you have to be the right person developing the best solution at this moment in time (who/what/when). Ultimately, we are looking for founders who are building companies that, we believe, can grow 100x or more.
How can our readers follow you on social media?
They can follow me on Linkedin at https://www.linkedin.com/in/karen-sheffield and/or on Twitter at https://www.twitter.com/kar_n_twitts.
This was very insightful. Thank you so much for joining us!
