Looking back and what’s next

Last week, I finished answering all 30 Evergrow questions. It took me 8 weeks to finish all 30 questions, which works out to around 4 questions per week. Looking back at my original post, I’m surprised at how much of it I still believe. But I’ve changed my thinking on a few points:

  • I think I was wrong to imply that it’s “bad” whenever trees are harvested before they reach their peak growth rate. I now believe that this depends on how we use the trees, not whether or not we cut them down in the first place. According to this study from the US Forest Service, the half-life of the carbon in the wood in US housing is 80-100 years, compared to 1 year for paper. If we use trees in long-term applications like housing, then continuously harvesting and replanting a given forest as frequently as possible should sequester more carbon over time than if we just planted once and never harvested.
  • I was wrong to suggest that we can get most or all of the CCOs up front, and use that to generate positive cash flow within a short period of time. Instead, it seems that our trees will generate a steady stream of CCOs over time. I still think it’s possible to structure the company in a way where investors get liquidity when they need it, but we’ll be more reliant on debt financing to grow than I had originally hoped.
  • I was originally more worried about finding good, cheap land. Now I am more worried about selecting the right trees and geographies to develop. Our financial model is so sensitive to rate of CCO generation per ha, that we’d be willing to pay a premium for land on which we could plant a lot of trees that sequester a lot of carbon.
  • On the Berkshire analogy: I still think that owning the land and trees “forever” in a permanent capital vehicle is the right way to do this. However, one defining feature of Berkshire is that Warren Buffett invests the company’s surplus cash instead of returning it to shareholders via a dividend. I think that it makes more sense for Evergrow to pay a dividend. The goal with Evergrow is to prove that you can use carbon offsets to fund for-profit reforestation at scale and make it an acceptable investment for institutional capital. I think it’ll be hard enough to do this without also having to convince investors that I can reinvest their money more effectively than they can.

So what’s next? Well, as of May 15, I’ll be leaving TriNet and working on Evergrow full time. This marks the end of a 10-year chapter in my life, going back to when I left my job as a corporate lawyer to get into tech and started a company that eventually became Teleborder, which we eventually sold to TriNet in 2016. I feel happy with how things ended, and am excited to start a new chapter. I’ll continue to invest out of Garuda, and hope that I get the opportunity to invest in more climate-focused companies as a result of my work on Evergrow. In some ways, working on Evergrow has brought me back to my time as a corporate lawyer on Wall Street. I still get really excited about thinking through financings and corporate structures, and it’s been fun to imagine how Evergrow might help create a new asset class.

My near-term focus is now on de-risking a few items and raising initial financing for Evergrow. I’ve found that writing publicly about what I’m working on forces me to make progress, so to continue that, I’ve made my Trello board for Evergrow public – here is a link.