She Made an Early Bet on Tesla. Here’s What Nancy Pfund Sees Now

(Bloomberg Markets) -- Nancy Pfund has been turning ideas into businesses for most of her life. Soldering wires with her inventor father instilled an affinity for entrepreneurs that drew her to venture capital. Pfund made early investments in companies such as Elon Musk’s Tesla Inc. and in 2008 spun off a “double-bottom-line” fund—focusing on both profits and social impact—from JPMorgan Chase & Co. San Francisco-based DBL Partners, where Pfund is co-founder and managing partner, has raised a total of $750 million across four investment pools. Here, Pfund, 63, describes what she’s learned and where she’s investing now.

Brian Eckhouse: How did you find your way to venture capital?

Nancy Pfund: I didn’t know what venture capital was when I was in college. I was very interested in innovation and policy and tech. I worked at Intel for a few years after business school and then moved to San Francisco. There weren’t any tech companies there back then, which is hard to believe, but there were a few VCs and investment banks that were funding tech companies. I joined Hambrecht & Quist in 1984 as a securities analyst. But I switched a few years later to venture capital after realizing that I was much more interested in private companies than public stocks.

BE: What drew you to cleantech and policy?

NP: Well, my father was a patent attorney and an inventor. My mother was very involved in campaigns and policy. While in college at Stanford, I was part of a student group to identify whether gas prices were transparent. My first job out of college was with the Sierra Club, and I worked with Stanford Medical School on biotech policy. So it’s always been in my DNA, kind of that intersection of where technology, innovation, and the environment meet policy.

BE: What did your father invent?

NP: He invented things that our family needed. Our car got stolen when I was in third grade. And so, long before antitheft devices were anywhere near cars, he invented something called a Stop Thief, which had three buttons that you wired to the steering wheel. If you didn’t have the right combination of those buttons, the horn would go off. I have four sisters, and we handled marketing and manufacturing. We were soldering wires together in the basement for this product.

BE: How did you get your start in venture capital at H&Q? [H&Q was acquired by Chase Manhattan Corp. in 1999. Chase became JPMorgan Chase in early 2001.]

NP: Long before we went public and long before we were acquired, H&Q had a very small fund that looked at environmental issues at our founder Bill Hambrecht’s behest. We were the first investor in Odwalla [the juice company] when sustainability wasn’t in anyone’s vocabulary. It wasn’t just an investment success. It created jobs. It made an environmental improvement.

BE: How did the idea of a double-bottom-line impact fund come about?

NP: The tech and dot-com booms created a lot of prosperity but didn’t help the poor neighborhoods of the Bay Area. Community groups went to a business association called the Bay Area Council and said, “Look, all this wealth is not helping our neighborhood. Do something about it.” The Bay Area Council started a venture capital fund to invest in interesting young companies—but one that paid attention to place.

The council came to me and to my boss [the late Dan Case] and asked if we’d be interested in raising and managing the fund. It ended up morphing many times during fundraising because we wanted the small companies to drive top-tier returns.

One of the first things we did as an early investor in Tesla in 2006 was to aid its search for a plant to eventually house the Model S sedan. We showed Tesla that there were ways to stay in the Bay Area that helped level the playing field against cheap labor in other parts of the world—using economic development programs that were already in place, like job-training programs or certain rent-abatement strategies, because we were going to create jobs. There’s a whole toolkit that people use.

Now it’s kind of famous because of companies like Amazon, but back then the only companies that knew about this were big companies that had the staff to do this. Tesla eventually found the factory in Fremont, Calif.

BE: How did you first get to know Tesla?

NP: Through a contact at Stanford, Jane Woodward, who runs Mineral Acquisition Partners. She was very interested in electric cars. She had us over to learn more—and that’s when we met J.B. Straubel [Tesla’s chief technical officer at the time]. That was our first encounter. And we were very excited about it.

Our mission drove us to invest at a time when it was very risky. It’s well-chronicled that the 2007-2008 period was brutal for Tesla and [solar panel company] SolarCity. It was very difficult to find people who would invest, and the businesses were capital-intensive. There were some pretty scary moments. I don’t think we knew how much of a phenomenon Tesla would become.

BE: You stayed in cleantech when many investors—you’ve described them previously as “drive-bys”—left. Why?

NP: We’ve fared extremely well. Tesla and SolarCity were big wins in part because we were in early, so our cost basis was extremely low.

After the dot-com crash, people had an allergic reaction to the internet. That led to some heated rounds in cleantech. But many people didn’t understand cleantech, including the policy and regulatory sides, and it was being politicized at the time. Some investments started going awry, and broader tech got healthy again. That was sort of the tourist phase of cleantech; it didn’t work well. But fast-forward to today, there are family offices and corporates doing cleantech. It’s a much healthier ecosystem.

BE: What technologies interest you today?

NP: Among other things, energy storage to reshape the grid and inverter technologies that can help drive down the cost of solar power. Like what Zola Electric is doing in Nigeria. When you have a weak grid, people use diesel generators to fill in gaps. With better smart batteries and inverters, you can allow your solar and your battery to seamlessly take over for the grid and vice versa without blowing up your devices. There are at least 100 million diesel generators in Africa alone. We’re also looking at conservation; one company that we’re invested in, Better Place Forests, allows people to use protected trees in forests instead of tombstones in cemeteries to commemorate the dead.

BE: You’ve invested in cleantech. Do you use cleantech products at home?

NP: I have solar panels, two Teslas, and home-charging. I don’t have batteries yet—I got solar before batteries were available—but eventually I will.

Eckhouse covers energy at Bloomberg News in New York.

To contact the editor responsible for this story: Christine Harper at charper@bloomberg.net

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