“People want to invest in companies that can improve the world.” - Andrew Haughian is Pangaea Ventures’ bellringer
We chatted with Haughian, the firm’s general partner, about impact investing, his personal ups and downs and recent wins.
South Manhattan’s paramount intersection, the corner of Broad Street and Wall Street, has a distinct soundtrack in the form of the New York Stock Exchange (NYSE) bell. In the 1870s, the NYSE decided to institute an audible alert to signify the opening and closing of trading. A Chinese gong was originally the tone of choice. When the NYSE moved to its current location in 1903, the gong was replaced by a bell.
For Andrew Haughian, general partner of Vancouver-based Pangaea Ventures, the tones that emanated from the bell represented both personal and professional victories. A 15 year veteran in the venture capital space, he was in New York this fall to ring the bell alongside one of Pangaea’s portfolio companies, ESS, Inc. The Portland-based cleantech company, which crafts low-cost, long-duration batteries, was going public on the NYSE.
Back in Vancouver, Haughian told me over Zoom, that this experience was “probably the highlight of my career in venture capital.”
To be in town for the Monday morning open, Haughian and the ESS team arrived in New York the weekend prior. There was an air of cautious optimism amongst the group as they strolled past the NYSE Sunday evening. Entrepreneurs often have to be concerned with what could go wrong not what could go right, after all. 12 hours ahead of their cue to ring the bell, they saw the famous landmark adorned in ESS branding. It was a perfect remedy for any Sunday Scaries. The group snapped a photo and allowed it all to sink in.
“Then the next morning you’re right in the middle of the action. You go up and ring the bell, and you watch the stock open. It typically happens a little bit after that 9:30 bell. Things started to go up slowly. Then in the afternoon, a big story came out about the company and the stock price really started to go up. The next day the stock price had more than quadrupled from where it was on Monday,” he expanded.
Haughian also recounted to me what made ESS stand out, not only on the NYSE but for Pangaea.
“They're really solving the problem around grid-scale energy storage to increase the amount of solar and wind that can be used. It’s safer than lithium-ion batteries and really scalable. We first invested in that company back in 2015. There were lots of ups and downs along the way. We were the only major investor for about three years. So, I've worked really closely with the entrepreneurs to get them to the point when others are willing to make that leap. To see that company go public, be really well received in the public markets was pretty rewarding,” he shared.
“I think it's because we're seeing this overwhelming demand from investors for these sort of truly transformational impact companies, impact people. People want to invest in companies that can improve the world. There aren’t many companies that are in the space that ESS is,” he continued.
For Haughian, there was a period in his life where he had to miss out on these rewarding, in-person experiences. Though he studied engineering at the University of Toronto, Haughian’s larger passion was athletics, running for the Varsity Blues track team.
“Running was a huge part of my life. When I was in university, it was more important than engineering, it was more important than going out drinking with my buddies. About two years after I graduated, I started to have all these injuries. I just suddenly couldn't run anymore. I started cycling and then eventually I couldn't even do that. I remember there was a board meeting for a company called CarbonCure that was in Montreal. I couldn't even get on a plane. I ended up doing the board meeting on my couch. This is even before Zoom, right?” he shared.
“Pushing through those ups and downs, I had to go through different sorts of treatments, but I didn't give up. I don't actually know what the problem was, but eventually, it started to fix itself. Now I do competitive road cycling. So, to go from being competitive to not being able to do anything, then to be competitive again, it speaks to the ups and downs we all face. It definitely allows you to be empathetic to entrepreneurs. They’re experiencing those ups and downs not just over a multi-year period, but every day, right?” he explained.
This vantage point is fitting. Haughian told me he always wanted to be involved in a startup-like environment. It just took him a few industries and some time to get there.
“I'm an engineer by education. I focused on energy, thermodynamics, those kinds of things. I actually did work in oil and gas for a couple of years before I moved to Vancouver. Then, I continued being in big, heavy industry. I really understand industries like mining, pulp and paper—resource industries. Those will continue to be really critical. But, we also need to think about how we modernize those industries and others as well. So, I wanted to get into cleantech. I ended up doing my MBA, then it was 15 years ago that I joined Pangaea. I was thinking about doing something entrepreneurial, but at the time, Pangaea was entrepreneurial. It was just three of us for a number of years,” he said.
15 years is a considerable amount of time. In 2006, “iPod” was still in our lexicon—and pockets. So, I was curious what Haughian had seen over that time.
“One of the things that we learned—maybe the hard way—the first few years I was involved, was investing in companies that are really deep science companies when they're still early stage. It's really, really difficult. It's almost like going to the casino, really. No matter how much due diligence you do, how much you know, how many experts you hire, we found that it didn't necessarily pay off. It was really, I'd say, about 10 years ago that we realized in our space, you need to invest in companies that have got a current commercial product,” he reflected.
“That matches up quite closely with traditional venture capital in software companies. As VCs, we're looking for things to happen fast, find product-market fit and get traction. We've seen entrepreneurs figure that out, as well. They're learning how to do more faster, better, with less money to get to that phase. And then the key is finding the ones that really can shift gears at the right time and scale,” Haughian continued.
Another throughline in Pangaea’s history is impact investing. Despite it being in Pangaea’s DNA since the firm’s inception, impact investing has looked a little different of late.
“We've always been investing in sustainability, cleantech, healthtech, which fit under that category of impact. Impact investing wasn't necessarily a term that was used in venture capital until maybe three or four years ago. When you thought of impact investing, you thought of maybe providing microfinance to [nations] or funding schools. That was the traditional idea of impact investing. And now what we're seeing is that filtering into for-profit companies, technology companies that are using their product and technology to really make meaningful changes,” Haughian pointed out.
“Hardtech” is something Pangaea also touts. I asked Haughian to walk me through it.
“When we say hardtech, our definition is chemistry, materials, biochemistry...anything you can kind of touch and feel. Those technologies typically have really strong intellectual property to give those companies a leg up compared to other people trying to address the same things,” he explained.
One such company is Redlen. The company was founded in 1999 in the Vancouver Island community of Saanichton and develops tech for CT scans. In September, it was announced that Redlen would be acquired by Japanese juggernaut Canon for its Canon Medical division. It was a banner deal for both company and investment firm, representing a 20x increase in enterprise value for the latter.
“This is a company that we've actually known about for most of the history of Pangaea. What they're doing with their core semiconductor technology is really, really hard. It took a long time for them to perfect that. We didn't end up investing in them until 2014. We saw the glimmer of hope that this long r&d cycle was kind of mostly behind them and their customers were starting to recognize it, too. We led that investment round in the company in 2014 at a time when it was hard for them to raise money,” Haughian said of the deal.
“In venture capital, it's really important to zig when others are zagging, to have a contrarian view. We did that and the company over the next few years was able to add to their customer base, start to scale revenue and scale production. That eventually led to a relationship with Canon. Canon was an investor in the company, so I got to know them. We're really excited about what Redlen could do to their medical imaging business. I think this will be transformational to healthcare. This technology will really allow doctors to achieve much better images of diseases in their patients. This technology will become the gold standard in medical imaging over the next decade,” he expanded.
“I've been lucky enough to work in venture capital now for 15 years,” Haughian once again reflected. “It's been quite a long time. There are not that many people who get to do that journey. I'm also really lucky to work at a venture capital firm that I think is addressing big, important problems in the world—making people's lives and making the planet better. We’re an impact venture capital fund. We believe that the big problems in the world don't get solved by software alone. It's really going to require hard science, hard technology to fix those issues. Moderna did it with the vaccine. We see companies like Tesla doing that,” he pointed out.
Pangaea and Haughian are keen to invest in the next Tesla or the next Moderna, they too potentially dreaming of a certain sound emanating from brass on a South Manhattan morning.
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