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The Only Thing That Matters
Welcome to "The Only Things That Matters", where we deconstruct the path to product-market fit of successful founders and extract the principles and frameworks behind their success so that you can apply them too.
The Only Thing That Matters
Raising $80M to reforest the world with Diego Saez-Gil (Pachama)
Join us as we uncover the multifaceted entrepreneurial journey of Diego Saez-Gil, who navigated the twists and turns of three different startups. From the highs of selling a successful budget accommodations app to the lows of confronting airline restrictions with smart luggage, Diego's story is a testament to resilience and innovation.
In this episode, Diego shares the foundational steps for validating startup ideas across industries, drawing from his rich experience. Discover how principles of customer feedback and doing things that don't scale—lessons from Y Combinator—guided him through ventures in both software and hardware. Learn about the critical phase of achieving product-market fit and the importance of maintaining robust customer support and communication channels to iterate and improve upon products based on user feedback.
Get an inside look at the bold journey of building a hardware company from scratch, navigating manufacturing in Asia, and overcoming the hurdles of crowdfunding campaigns. Diego also illuminates the path to creating a sustainable marketplace ecosystem at Pachama, emphasizing the role of a genuine mission in attracting investors and talent. This episode is packed with valuable insights for aspiring entrepreneurs, highlighting the power of mission-driven companies in making a significant impact on the world.
I would say that, in general, to start something you need a degree of insanity, but to start a hardware company that is going to manufacture in Asia and ship around the world, you need a special degree of insanity. And that degree of insanity allows you to do crazy things such as say all right, let's go to China and let's rent an Airbnb in Shanghai and let's just be there and ask for introductions to people who might know factories, and then let's just go and visit them. And that's what we did.
Ariel Camus:Welcome everyone. This is Ariel Camus, and this is the Only Thing that Matters, where I interview successful founders to deconstruct their path to product market fit and extract the principles and frameworks behind their success. My guest today is Diego Saez-Gil. He is the CEO and founder of Pachama, a leading climate tech company using cutting-edge technologies such as computer vision and satellites to drive funding to effective reforestation and conservation projects that sequester carbon, enhance biodiversity and enrich local communities around the world. Pachama has raised over $80 million in funding and works with customers such as Amazon, airbnb and Netflix, while driving capital to forests in Brazil, mexico, india, the US and beyond. In this episode, diego and I talk about Y Combinator, the importance of choosing your investors, the power of mission-driven companies and the difficulties of building hardware products. I hope you learned as much as I did, and without further ado, Diego Saez-Gil, diego my friend, it's so good to have you here.
Diego Saez-Gil:Thank you so much for making the time my pleasure. Thank you for the invite.
Ariel Camus:Well, we have known each other for a long time. You have been a big part of my story, and every time we spend time together, we spend hours and hours talking about a lot of interesting stuff. I have the feeling that we're not going to have enough time today. I have the feeling we're going to need a second and a third episode, but let's start with this one. I am very excited to explore your journey as an entrepreneur. You have started three companies. You exited the first one. The second one has one of the historical records on Indiegogo that I'm excited to explore as well. That story has a lot of ups and downs as well. Now, with Pachama, you're trying to make the world a better place for our future generations by solving the climate crisis. There's just so much to capture that again, I don't know if we're going to have enough time, but let's start from the beginning. Could you give me a little overview of the three companies that you have started? What were they about and what is Pacham about today?
Diego Saez-Gil:Sure, it's been a journey indeed. The first company was the first mobile-only booking app for budget accommodations app for budget accommodations, specifically hostels, bed and breakfast and any other type of affordable accommodation for students. At the time, I was a young traveler. I had spent two years in Europe doing my master's and I came to the US and I was traveling in hostels. I love traveling and at the time you had these very bad websites where you had to go and find a place to stay and meanwhile the first smartphones had come out and there wasn't any app that you could use to book a place to stay. So we built this app that allowed you to book last minute a place to stay. You could pay through the app and you could connect with other people at the accommodation. It was a time in which Facebook had released the Facebook Connect, so it was a social travel app that resonated a lot with students. A social travel app that resonated a lot with students. We got 200,000 students using the app and connecting it to over 800 accommodations around the world. And it was my first startup. I had no idea what I was doing, but eventually we raised an angel round and eventually we sold the app to a bigger travel agency that was focused on students in the US, that was selling discounted flights to students. So that was the first company.
Diego Saez-Gil:The second one was that after a trip to visit my family in Argentina, the airline lost my suitcase and I became, you know, I came out with this idea of how come we have smart watches, smart thermostats and there isn't a smart suitcase that you can track and know where it's gone? So we built, we designed and created the first smart connected luggage and we launched a crowdfunding campaign that was very successful. And then I moved to China to manufacture the product. We ended up shipping tens of thousands of units of this product to travelers around the world. And eventually that company faced challenges when the airlines decided to ban lithium-ion batteries because some Samsung phones had gotten on fire on airplanes, so we couldn't sell our product anymore. So we had to wind down the company and fortunately we were able to sell the assets because we had filed 12 patents for inventions that we made for the suitcase, and that's how that company chapter ended.
Diego Saez-Gil:And then in those travels around the world, especially in China, and then another trip to the Amazon rainforest I became very worried about climate change and the environment and the state of the planet, and what are we going to leave to future generations? So I started thinking how can I apply everything I learned, building tech startups, to contribute to solving climate change and the destruction of nature, the biodiversity crisis that we're facing? These seem like problems that governments or you know, I don't know nonprofits generally focus on, but I figure startups are a very effective vehicle to bring innovation and to put talent and attract capital to solve problems. So why not use it to solve one of these type of problems?
Diego Saez-Gil:And that was the origin of Pachama. Pachama is a startup with a mission of helping restore nature to solve climate change, and we've been building effectively a technology platform to help connect corporations that want to compensate their carbon footprint with projects around the world that are protecting and restoring forest and sequestering carbon, and we use satellite data and AI to verify and monitor the impact that these projects are having so that the companies and investors can confidently deploy capital into these projects. And we've been going for more than five years, with this company having already a lot of impact, but hopefully it's just the beginning of the journey for us.
Ariel Camus:Wow, there is so much to unpack there.
Ariel Camus:Something that I notice is not a pattern is that the first company was a consumer mobile app.
Ariel Camus:Then you moved on to some kind of like hardware manufacturing or physical product manufacturing type of company, and now you're building a B2B AI power type of product. There's nothing in common between those three types of products, but there seems to be something in common among them in terms of how you came up with the ideas and, at least from what you described, each one of them seem to have come from. Seems to be something in common among them in terms of how you came up with the ideas and, at least from what you described, each one of them seem to have come from something that you have experienced yourself at some point in your life that was frustrating to you, that was difficult to you and was that intentional you were you like looking for like problems to solve, or is it more like the other way around, that when you find a problem that you feel needs to be solved, there is something in you that says, hey, let's go and do something about it?
Diego Saez-Gil:yeah, I think that, um, it was thinking about opportunities and, you know, getting excited about an idea of how could I solve a problem for myself that ideally, other people would have. This was especially the first two companies right. With this company, I was able to dream bigger right and to say what is the problem of humanity, what is the problem of future generations that we can help? Bigger right and to say what is the problem of humanity, what is the problem of future generations that we can help solve? Right. And I had more self-confidence to think bigger right than in the first companies. But, yeah, I think that generally is a good rubric to think of a problem that is unsolved and that, as a result of new technologies, new advancements in certain areas, there is a new way to solve it.
Diego Saez-Gil:Another thing that the three ideas have in common is that they combine different technological advancements. If you think about it. The first one was the rise of mobile and the rise of social and the rise of payments, right In. The second one was a rise of IoT and sensors, and the third one is the rise of AI and satellite data, right. So I'm always looking at what are technologies that are advancing exponentially and that, you know, when you combine two of them, two or three of them, new possibilities emerge. There's a book that I like a lot about this topic, which is, I think it's called when Good Ideas Come From, by Stephen Johnson, and he talks about the adjacent possible, and the adjacent possible is this space of possibility that expands every time that there is a new innovation, and so, yeah, I think that, in short, I always look at problems that I had that I could be passionate about, that could be solved by the new adjacent possible of technologies.
Ariel Camus:So you're basically answering two questions there. One is why me and in all the cases? Because you have experienced a problem, because you're passionate about them, and the other one is why now? What is this new thing that enables us to solve this problem for the first time or in a different way? That makes a lot of sense. And I guess the next question is is there a space for this in the market? Right? These all seem to be problems that are worth solving, but often that is not necessarily enough. The economics have to make sense and the technology has to be mature enough. The consumer has to be mature enough to receive the solution. How did you go on validating each one of these three ideas, and how has your approach at validating ideas evolved from company to company and also from industry to industry? I guess each one of these three companies probably require a very different type of validation. I'm super curious to hear how you did it.
Diego Saez-Gil:Sure of validation. I'm super curious to hear how you did it. Sure, the first one, you know, actually was almost a spin-off of another idea that I was working with a friend in New York before, which was kind of a travel guide for students, and in fact that's probably when we met, because you were working on a similar idea. But we were working on a travel guide for students and in fact that's probably when we met, because you were working on a similar idea, but we were working on a travel guide that was more like a content play, which is super difficult to monetize. But in doing so, we were, you know, talking to young travelers, we were visiting hostels and I think that, like the, the bigger problem emerged. That was, you know, booking a place to stay, and that was a problem that that is more easily monetizable right, because there's a transaction, there's money being exchanged than when you're doing, you know, research or planning for your trip. And but in in those conversations with travelers, we validated there was a need and then what I did was actually to. We actually participated on a startup weekend, which was an event that used to happen around the world, which was a weekend in which you come together with a bunch of aspiring entrepreneurs and you had to build something, starting on Friday and you had to ideally validate and ship by Sunday. And we actually did. We built the first version of this you know hostel booking app and we launched it and we validated and we heard a lot of feedback.
Diego Saez-Gil:Then, to actually launch eProduct to the world, I actually brought the team together. I rented a house in the countryside of Colombia and I moved there with three engineers, one designer and one product person and for one month, we full-time hacked the first version of the app that we wanted to launch to the world. And one month later, we full-time hacked the first version of the app that we wanted to launch to the world and one month later we were submitting to the App Store and that's how we launched the first product and from there we just started iterating by hearing feedback from users. That was the first startup. With the second one, with hardware, it's a lot harder, right, because you you have to build a prototype, you have to build a design for manufacturing. It's so, so hard.
Diego Saez-Gil:But what we did was to prepare for a crowdfunding campaign and the crowdfunding campaign was going to be the you know, the finding moment of whether we do this or not. But even for the crowdfunding campaign, you had to prepare a lot of products to show and materials to display what you are planning to build. So along the way, we actually did do a lot of user research. Some on the team went to airports around the world where we were to talk to travelers. We interviewed people and we bought a bunch of competitor products or legacy suitcases and we studied them. We put them apart and, by the way, it was a super fun part of the process. We spoke before about how fun these zero to one moments are. I find it super, super stimulating to be doing that part.
Diego Saez-Gil:And then we launched a crowdfunding campaign and it resonated. But we also learned a lot about what people value more, which oftentimes is unexpected what they value versus what you think they will value. And then with the third company, it was even more difficult in a sense, because here we were trying to serve corporations as customers and as customers, and you know landowners or NGOs and you know project developers in other parts of the world. But again, I did the same, just in this case ask for introductions, jump on calls and talk to people and take notes, but more than anything, deeply listen to what I was hearing their needs and their problems were, and then try to come up with a solution for them.
Ariel Camus:All right, I want to go deeper into all of that, but before that I'll say two things that you and I know that I'm not making up. I'm just, you know, stealing them from Y Combinator that we both have been part of in your case twice, and actually I got into Y Combinator that we both have been part of in your case twice, and actually I got into Y Combinator because of you probably. So, thank you so much, theo. Once again, my pleasure. But the two very well-known principles of YC are talk to your customers and do things that don't scale, and I'm hearing both of those principles applied in each one of the three companies. Right, it's about going to hostels so that you can speak to people and getting the team together in Colombia for a month. Yeah, none of that really scales, but it gives you a lot of opportunities to move really fast, to talk to people, to get information in ways that you want people to do in the future, but it gives you a lot of information, initially With BlueSmart. Right, doing an Indiegogo crowdsourcing campaign is not something that can actually scale and, yes, it takes a lot of time to do it, but it's one of those things that can give you a lot of information at the beginning about whether it makes sense or not to continue.
Ariel Camus:Soudos, for thinking about that one. It makes a lot of sense. Um and and for for pajama. It's also like using your connections, which are, even if powerful, because you have been in the rodeo for a while, uh, they're limited, right. So it's asking for those favors and interests. You can't do that every day, but at the beginning that opens the doors to conversations that will give you a lot of information. It makes total sense. But at which point and I'm going to keep going with this format of comparing the three companies, I don't know. I find it like a very interesting way of comparing, but at which point, in each one of these three companies did you say, what was the moment that you realized OK, it makes sense, let's keep going.
Diego Saez-Gil:What was the KPI or the type of qualitative feedback or conversation that gave you the confidence to say, and in general in entrepreneurship, there has to be a general conviction about the general space, right, you don't know exactly yet at the beginning what are the specific most important problems you need to solve, what are the features that the product or the offering has to have, but there was always a strong conviction that in this space, there are opportunities and I am passionate about them. I am passionate about spending time identifying these opportunities and solving these problems right. So I think that if you don't have that conviction right, you're not going to persist through, you know, the journey of finding what the problems and the solutions are right. So that's why I think that it's important to, yes, be very honest with yourself about validating assumptions and not getting too attached to certain assumptions, but I do think there has to be a general conviction about the space, the problems and the opportunities that potentially exist there, and so that's something that I, in the three cases you know, once I gained that conviction, I started working and I knew that I was going to work on this for a couple of years right Now, in terms of when did I feel ready to launch?
Diego Saez-Gil:Yeah, I don't think that it's necessarily a metric. I think that it's a gradual accumulation of evidence. In my case, I'm more an intuition person, right, than a data person. Of course, I take a lot of data, but it's not that I'm tracking a specific number. It's more like a buildup of intuition to a moment in which it's like I get it, this is it Again. In that book also, steven Johnson talks about these hunches. You have a hunch and then over time you build conviction about that hunch right, and there's a moment in which you feel this is it, uh, like the way that I'm presenting the idea resonates with the audience and and and now it's the moment to to go out more publicly about it what?
Ariel Camus:what was the moment, let's say, with we hostels, that you felt like enough evidence had accumulated that you were like, okay, this is not, this is going to work, but this is actually working, I guess to to give it a name, right, like, what is the moment of, let's say, product market fit, where you feel like the market is kind of taking what desperately what you are, uh, into it? You?
Diego Saez-Gil:know, I think, I think there was a moment we launched the app and you know, another thing that YC has is this chart of like the tech crunch of initiation, because you know, I don't know if people still use tech crunch to launch products but you get the first article about your product launch and you have a lot of downloads or visits to your website, but then that goes down because of course, the novelty passes and those numbers go down. And then there is a thorough of disillusionment where you have small peaks like nothing is really happening.
Ariel Camus:And then there is a moment in which things start to consistently grow because you found I think there was like a valley of sorrow somewhere in the middle where you owned for a long time without seeing any sign of success, and that's the most difficult part, exactly so.
Diego Saez-Gil:I think we definitely saw that with hostels.
Diego Saez-Gil:We launched initial good spike of downloads and usage and then we went down and then, over time, with new feature releases and with improvements on the app and with more articles in the press, we started getting new bumps of growth articles in the press, you know, we started getting kind of like new bumps of growth and then, you know, the SEO on the App Store started improving for us and when you went to the iPhone App Store and you look for hostel and even hotels, our app was first we started hacking, doing all these growth hacks, right, and then we started getting consistent growth and then is when you know, we sold the company frankly, because I was also seeing that competition was going to be really tough with Bookingcom and Airbnb and many other players that were much more funded than us at the time.
Diego Saez-Gil:So we took that moment of traction and growth to find a partnership for the company. But yeah, you know, I don't know to find a partnership for, for, for, for the company. But yeah, you know, I don't know. Well, in the case of blue smart, uh, as soon as we launched a crowdfunding campaign, it was actually almost like an immediate uh, craze, right. Uh, how do?
Ariel Camus:you define some expectations, Like, of course you always set a goal for any crowdfunding campaign and I know you, you know past the, you met the goal really quickly, but did you have like a real goal? That was kind of like, if we get to this point, you know this is amazing, or?
Diego Saez-Gil:Yeah, the stated target was $50,000. Our internal target was $500,000, right, 10x the stated target, and we ended up raising $3.5 million, right. So you, you know it was wild. So I think sometimes we would dare to dream well, what if we make a couple of million dollars? That would be amazing, and that happened. So in that case it was like an immediate traction. But then there was this valley of suffering when we had to then go to China and manufacture a product, all while we kept taking orders. And then, once we were shipping the product, with hardware, you have that moment of product market fit People want what you're building. But then you have a second moment of truth of product market fit, which is you ship the product and then there is, you know, the true either you fulfill the expectations they had or not. And we're seeing, actually this week, you know, many hardware products being crashed by reviewers and I feel it for them. It's so hard and I feel it for them it's so hard. But you know, with hardware there are more than one product market fit moment.
Ariel Camus:I would say how did you manage to create some kind of communication channel with these customers once they received their product, to know how satisfied they were?
Diego Saez-Gil:Yeah, I mean we had to build a customer support team. We built it down in Argentina and you know we had, you know, several channels. You know you could chat with us on the website, you could call us. There was a phone number and, yeah, I mean we tried to respond to all the comments. I think you know there were like we had tens of thousands of orders. I don't remember exactly the number of the first year, but tens of thousands. So tens of thousands of people that received the product and of course, the first version, to be honest, was baggy. You know there were many bags on the product and people, you know, are loud when there is a bag on a product. So yeah, I mean I guess it was just being very, very available and us as founders also being very available. We were doing customer support.
Ariel Camus:Makes sense, and I think that's another pattern of a lot of successful founders, especially in the early days. Everyone does customer support because it's another way of talking to your customers, right? So it makes a lot of sense, although I wonder when it's customer support because it's another way of talking to your customers, right? So it makes a lot of sense, although I wonder. When it's customer support, you tend to get a very biased perception of what your customers are experiencing because you only get to hear the troubles they have. What did you do to also get to see whether people like the people who were not having problems how happy, how excited was the product you know as like amazing to them, it was like a like step function compared to like a normal piece of suitcase.
Diego Saez-Gil:Yeah, I mean totally. You first focus on people with problems, right. But every so often you know you need to have, you know for your own sanity, the testimonial of someone who's happy, and we did get many of those. And in social media there were people posting. You know about their awesome experience and you know photos. That was the nice part is when we saw people posting on social media and then we got some amazing surprises, like one day Usain Bolt, the Olympic champion, posted a photo in an airport with a suitcase.
Ariel Camus:And that was not something you planned.
Diego Saez-Gil:No he bought it and then he posted it, and then he went to the Olympic Games in Rio with our suitcase, and then one went to the Olympic Games in Rio with our suitcase, and then one day Sean Penn landed in JFK and was taking a photo by paparazzis with our suitcase, and so all these things were very rewarding. And then I remember, actually, the first time that I was at an airport and I see a random guy with a suitcase, and of course I approached this person. I was like, hey, that's a cool suitcase, do you like it? And then the person yeah, I like it a lot. And then, you know, I pretended that I wasn't the founder until at some point I told him but yeah, that's, the nice thing about a hardware product is that you get to see it out in the world.
Ariel Camus:That's a feeling that with software, it's much difficult to get for sure. I would love to go a little bit deeper into the process of building the first version of the suitcase. Like you had to go to China. Like that on its own seems to be such a massive probably massive barrier for a lot of people to even want to try this. I think maybe we can throw some light and I know it's been a few years already, but maybe we can throw some light of what does the process look like and how is your experience with this journey of all the way from designing the product to, you know, manufacturing it? I'm sure it goes through like a prototyping stage and then you have like a qa stage and like how does it look like? I'm an ignorant on that topic, so I'm super curious to learn all this.
Diego Saez-Gil:You know, I would say that in general, to start something you need a degree of insanity. But to start the hardware company that is going to manufacture in Asia and ship around the world, you need a special degree of insanity. And that degree of insanity allows you to do crazy things such as say all right, let's go to China and let's rent an Airbnb in Shanghai and let's just be there and just ask for introductions to people who might know factories and then let's just go and visit them. And that's what we did. You know, we rented an Airbnb in Shanghai, we went with a team of four or five people and then we would fly between Shanghai and Shenzhen and Beijing and Hanzhou and you know wherever. We would find some connections to factories that could manufacture the two parts of what we were building, because we were building a suitcase and we were building an electronic that needed to go inside of the suitcase. So it was two types of factories that we needed.
Ariel Camus:Did you have anyone with experience, having done this before, or any advisor that was telling you hey, you do x, y and z?
Diego Saez-Gil:not really. I mean, we were asking for connections and learning along the way, uh, but a high degree of ignorance and sometimes ignorance is bliss, because if we knew how hard it was, we probably wouldn't have started right. So later on we did hire you know, we hired someone in Hong Kong who was an expert on, you know, supply chains and an expert on manufacturing, like we. Later on, as we raised capital, we managed to hire, you know, locals that could help us. But at the beginning it was just us, a bunch of Argentinians who had never been to China, doing whatever we could. So in parallel, part of the team was visiting factories, learning from these conversations with the factories.
Diego Saez-Gil:Part of the team was designing the industrial design by putting competitor products apart, learning what was possible. What could we innovate? Because we also took the opportunity to say let's innovate everything of a suitcase, let's start from scratch. How is going to be the suitcase of the 21st century? Right, and in fact we came up with some very crazy ideas that you know we never, you know incorporated into the final product. But that was also fun, you know, to really think, you know, outside of the box, what a suitcase could be in the future.
Ariel Camus:By the way, as a travel nerd, could you share? Do you remember a couple of those that you haven't seen yet?
Diego Saez-Gil:Well, I mean, we thought of things such as a self-driving suitcase that would follow you, or you know, we thought of a suitcase attached to a drone that would fly like crazy ideas, right, that didn't make sense, but it was fun to entertain, right? Sounds fun. That didn't make sense, but it was fun to entertain, right, sounds fun. And but you know so, someone was designing, others were talking to manufacturers, others were prototyping, others were like a part of the team was prototyping the electronics, right, and the first product of the electronic was a Tupperware with some electronics inside that we would just send around the world to see if we could track that object. Right, with the technology we came up with, which is GPS plus 3G and Bluetooth. But, to be honest, there wasn't a process. It was like a crazy series of activities done by people and just coordinated by constant communication between team members.
Ariel Camus:Communication across very different time zones by the way, right yes. Was that a challenge on its own, or how did you overcome that?
Diego Saez-Gil:For sure. I mean, it was a challenge, but everybody was working 12 hours a day. Right, it was, everybody was working 12 hours a day, right, us also, you know we were all young single no, we're actually not single, all of us but our relationship suffered, for sure, but, but, but people were working, you know, across time zones to be able to communicate between China, argentina, the US, and so it was a super intense time, not really a process. There was one on the team that was like we had a wall with a giant gun chart of things that needed to happen before and after for the final milestone of shipping the first batch of products. Right, but you know it was a very messy process, with an attitude of let's do whatever it takes to move as fast as we can on the critical things that need to happen.
Ariel Camus:If you were to start a new hardware company. Let's say you want to make it happen. Now there are new regulations, whatever, like what will you do differently this time to build that type of product?
Diego Saez-Gil:I will answer what the founder of Nvidia answered the other day, which is I wouldn't. I wouldn't start a new hardware company Now, to be honest, unless you know it can solve a critical problem of humanity such as climate change. I do think we need new hardware companies on the energy, transportation and you know so many industries as we decarbonize and move away from fossil fuels and build a more sustainable future. But so what would I do different if I had to start a new hardware company? First and foremost, I wouldn't do a crowdfunding campaign because, even though that was a very good way to validate the idea and, to you know, gather feedback and so forth, it creates, you know, an expectation and a deadline that you don't know you can deliver.
Diego Saez-Gil:That pressure of shipping something fast is actually not good for hardware Hardware. You need time, to you know, build, iterate, prepare the manufacturing, fix issues. So I would try to raise a lot of money up front, which, again, at the time, we probably couldn't have done right, because we didn't have the track record. But you know, ideally, you know you raise a lot of money and you have time. You know a couple of years to figure out a first product, but that's something that not everybody can and not everybody can, or you know. Frankly, you shipped a first generation, but with very clear expectations about the fact that it's just a prototype. The first generation is always a prototype.
Ariel Camus:Makes sense, makes total sense, and I can see why it's such a difficult uh thing to do. And if you, if you couldn't do the, the crowdfunding campaign, what will you do to validate that there is this, you know, very strong product market, that the market really wants, uh, the product? Even if you can raise the money right, like raising a lot of money and spending a year, two years, three years working on hardware, even if the conviction is there, even if you have done the let's say you have answered the questions of why now? Why me? Is there anything that you would have done if not crowdfunding to validate the market interest?
Diego Saez-Gil:Yeah, I mean, I think that you can. There are other ways you can do it. You can run focus groups. You can, you know, just uh, build a beta testing group that you give prototypes and maybe you pay them to use it and give you feedback uh, but without putting out there in the public. By the way, another thing that I would do on hardware is not have that many features. That's a problem that we had, and so many other hardware products have try to promise too many features in the first version. Each feature is a new opportunity for bugs and problems. So just have one feature that is useful, that brings new value to the customer. That's enough, right, and don't try to do too much on the first version.
Ariel Camus:That seems very applicable to any type of startup, not just hardware startups. I can see why for hardware, it's probably super important because of the high cost of introducing bugs and defects. But even for software startups, I think it's a very common mistake, especially first-time entrepreneurs, to try to compete by having a lot of more things. Then you really cannot spend as much time doing one thing incredibly well, much better than anyone else. You don't really know what is the one thing that is actually making a difference. There's always someone else with more money that can move faster by hiring more engineers to build futures faster. So it's a slippery slope and I think it's a good piece of advice for everyone. And yeah, you started talking about the connection between this experience in China, pollution and then Pachama, your current company, and I would love to now talk about Pachama, the big dream, the big push to make the planet a better place. How did you go on validating this idea? How did you get started? How was it different to the other two companies?
Diego Saez-Gil:Yes, I mean, in this case we had two customers, if you want. In one hand was companies that had an environmental commitment to compensate their carbon footprint and on the other side, projects that were doing reforestation or conservation and seeking to certify or having certified already carbon credits and looking to sell those carbon credits to these companies. Right, already carbon credits. And looking to sell those carbon credits to these companies, right. So again, it was about just going and having conversations with those stakeholders and after a period of just validation and going and asking hey, if we were to build something like this, would you find value? Actually, no, the first question was what are your problems, what are your top problems? And then, once we had heard what were their top problems, we would say if we were to build something like this, would you find value? Do you think that this is something that would solve your problem? Would you give it a try? And after hearing positive answers to that, then we went and built a first version of that and we came back to all these people saying look, here's the first version. Will you take a look and will you entertain using it? And then we started seeing first usage.
Diego Saez-Gil:We got into Y Combinator and we got these three months to try to get as much traction and in the form of transactions right.
Diego Saez-Gil:We wanted companies purchasing carbon credits from these projects through our platform and we managed to do it and by the end of YC we had like a nice curve of growth that allows us to then raise a first round of funding and then from then on, I hired our first commercial person, a sales guy, to go and help me At the beginning.
Diego Saez-Gil:Of course, as a founder, you have to do sales right and then at some point you can hire someone to fully dedicate to the sales. And you continue doing it while you do product and fundraising and you know all the things that you need to do to start a company right, every area, all the things that you need to do to start a company right every area. But yeah, it was a sales-driven, it is still a sales-driven motion, a business development-driven motion, in which you want to be in front of the right decision maker at these organizations. You want to develop a relationship and generally it's a long sales cycle. You want to develop a relationship and generally it's a long sell cycle. It's a long cycle of building trust and adapting your offering to the needs of your customers.
Ariel Camus:What is the average transaction size for Pachama?
Diego Saez-Gil:Right now I would say it's a couple of hundred thousand dollars, but we have transactions that are in the millions of dollars, and so it varies Was that the size also at the very beginning. No, at the beginning was on the thousands of dollars or ten thousands of dollars, and then it started growing. We started realizing that we could go up into the enterprise chain, so to say.
Diego Saez-Gil:we actually started selling to yc companies, by the way we went to you know, to to other yc companies, to probably the more successful or well-funded yc companies. But then we started going up the chain all the way to the largest corporations in the world and along the way we were improving our offering. Improving the way to the largest corporations in the world and along the way we were improving our offering, improving the way that we showed up, improving our communication and our data and our offering in short.
Ariel Camus:At the beginning, you had to build the technology for the marketplace, the ai technology for the verification of the, the carbon you know footprint uh was being offset by the deforest. You had to build the sales process with the companies uh wanting to buy the carbon um credits. And you also had to build the relationships with the, let's say, land owners. Yes, yes, Was there like in this marketplace, like having to build, you know, two products and also relationships with the two sides at the same time? Was there anything, any kind of like hack there on? Hey, can we just do half of that at the beginning, somehow?
Diego Saez-Gil:Or did you do all of them, minimum viable versions of everything all around and then hiring people and giving them a single mission right? There was one person in the team whose job was to go and talk to as many project developers in Latin America as we could. There was another person whose job was to go and talk to as many corporations, or get us in the calls with, as many corporations buying carbon credits in the world. There was one person who was focused on building a first version of an algorithm to measure and monitor carbon on satellite data. There was one person focused on analyzing projects using that data analyzing projects using that data. There was one person focused on the website for facilitating the transactions creating your account and purchasing and tracking a project. So a small team, but each one with a particular mission related to building the pieces that are needed for that first minimum viable ecosystem of transactions to happen.
Ariel Camus:But even in the very early moments you had to build all the pieces. There was no piece that you could get away, for example, by selling the carbon credits or getting a promise of a future transaction so that you could get the letter of intent without having the project yet yeah, for sure.
Diego Saez-Gil:I think the first transactions were lois, were letters of intents, that then we say, okay, yeah, sign this paper, and then let us go run and get you, you know uh, the credits, uh, from the projects, right, so there was definitely that. You know, time arbitration, right, being always transparent, right, because you don't want to lose trust, you don't want to lie, for sure. But you can say, look, you know, I'm still securing the deal with the supply side, but sign this letter of intent so actually I can go and make it happen. You know, confidently, right, there were, there were definitely, uh, and until today, frankly, you know, getting a supply and a demand to meet at the right time with the right conditions takes a lot of back and forth with the two sides was there any part of your vision for Pachama and your vision for how to solve the problem that you had to like temporarily give up and say we will do this, but we'll do it later?
Diego Saez-Gil:All the time, all the time, especially, for example, with AI. You know being being so exciting, having so many possibilities. There's so many things that I envision that could be done, that we could do, but that, unfortunately, you know, for focus, I have to say no to right. This is a market, a world with so much need for innovation across every front that I have to constantly restrain myself of not telling the team hey, let's do this. I'm coming out with ideas all the time, right, but I had to restrain myself like, okay, I'm not going to tell anybody this idea because I don't want anybody to get distracted. We already have so many things on the table anybody to get distracted.
Ariel Camus:We already have so many things on the table. How did you discover what were the, let's say, minimum? Yeah, the minimum viable product, the minimum number of features that you actually needed um to build so that you could actually focus on the right things?
Diego Saez-Gil:again talking to customers. Talking to customers, asking them what are their problems. I like to ask you, know what are your top three problems, do you?
Ariel Camus:ask like top three problems in general, or are you kind of say within the boundaries of, I don't know, your carbon footprint?
Diego Saez-Gil:Yeah, I mean generally. We are talking to the person in charge of. You know carbon. You know carbon sequestration or carbon.
Ariel Camus:You know decarbonization at companies is that normally a person that is only dedicated to that in these large organizations, or do they normally have some other role and that's part of their scope?
Diego Saez-Gil:yeah, there is everything. In large organizations there is very specialized people on their teams sourcing, you know carbon projects, others, you have sustainability professionals. That's everything right. But, yeah, asking what are their top problems, trying to understand more, why are these problems problems and how are they solving them? Today? And we're constantly, I frankly think that product market fit is not a one moment in time. You have to constantly think that product market fit is not a one moment in time. You have to constantly refresh your product market fit. Needs change, technologies change, industries change and I think that you have to be constantly re-challenging your own assumptions and what you're building, whether what you're building is the right thing.
Ariel Camus:Yeah, it's like the horizon For every step you take it moves one step away from you, at least, I guess. To keep going with the analogy, you can see that it gets brighter, but it keeps moving as you make progress.
Diego Saez-Gil:So yeah, that makes sense these times where technology is advancing so fast, like you know. I think change is accelerating on the technology world, right. So I think that no one can feel too comfortable with you know. Suppose product market fit, not even Google or Microsoft or Amazon right Like biggest companies, or Apple right Amazon right Like biggest companies around. Apple right, biggest companies in the world have to be, you know, and they are, you know, constantly challenging their own assumptions.
Ariel Camus:To start Pachama you had to put together a small but mighty team of very specialized people and roles that takes time to find the people and skill, but also takes money. How did you approach the capital side of things? With Pachama, you have raised more than $80 million. That's a lot of money. I'm curious about the early days. How did you think about capital here and how did that compare to the other two companies?
Diego Saez-Gil:Yes, fundraising. So with Pachama I was fortunate to already have a lot of connections, right To know a lot of investors here in Silicon Valley and around the world, and I also did Y Combinator for the second time, and Y Combinator is, you know, an expansion of your network. Right, you have Demo Day, where you're pitching to hundreds of investors. Right, you have.
Ariel Camus:Demo Day, where you're pitching to hundreds of investors. And why did you do YC twice? Was it just because of Demo Day, or what was it about it?
Diego Saez-Gil:I'm a huge fan of YC and I'm public about it. I think that, first and foremost, it's a wonderful community of positive, well-meaning people that I got so much value from just being part of the community that first and foremost, I wanted this new company to be part of the community. I wanted to give back to the community by being again with my own company. But I also wanted the advice of the partners and in fact I got game wanted the advice of the partners and in fact I I got game changing advice during the the yc uh process with pajama uh could you share?
Ariel Camus:do you remember one piece of advice that was, uh, that unexpectedly valuable?
Diego Saez-Gil:for sure I, too, I can say I had office hours with Paul Graham, who's the legend, and he told us guys, you're thinking too small. You guys can be bigger than Airbnb or Google, because you're going to be channeling all the money in the world that wants to go to solve climate change. If you can build the best platform to drive that money to solutions, you may as well just think bigger and pitch bigger to investors. Right and I think that's one of the superpowers of PGE is that he takes your idea and expands it to its biggest possible form. And then the other side, I had Michael Seibel saying like we had office hours with him and he was like okay, what do you do this week? And we were like oh, we're coding this feature.
Diego Saez-Gil:He's like why are you not selling? Why are you not talking to customers? You know, why are you not like can you not sell? We're like no, because we don't have yet you know this ready. He was like can you just go and get an loi like what we were talking before? He pushes. Even though this is my third startup, I still needed that reminder and that push. This week you should be selling. You should be talking to customers, right?
Ariel Camus:I find this sorry, the, the, the group, um partners, you know, and the, the weekly meetings you have with your group and the partners assigned to your group. I found them to be some of the most valuable hours of my life as an entrepreneur. Like and it's exactly what you said Like it's not that you don't know those things, it's that it's so easy to miss the forest for the trees right. Like you are in the day-to-day, you know, in the trenches getting things done, and then you often forget that there is a bigger picture that you might be missing. And just having someone holding you accountable to do the things that you know you should be doing, you just like forget because you get lost into the details of the day-to-day.
Ariel Camus:To me, that type of accountability and it is annoying, like every week is like hey, what are you trying to accomplish? This week? I'm going to try to get 10 customers, and it doesn't matter if you say 10 or whatever number, they will just multiply that by 10 or by two. They'll say why not 100? Come on, you know, even 10 is hard. Why is it hard? And why, and why? And at the end of that hour, you, you do, they push you always to go a little bit further, and I find that super powerful.
Diego Saez-Gil:Yeah, totally so. It was an amazing experience. And then, yes, demo Day is also, of course, super valuable right To have all investors in one room, you know, listening to your pitch and then wanting to come and talk to you. That's, you know, a game changer for fundraising. But with Pachama I was. So we managed to get a lot of interest in our first round of funding like huge interest, and I took that to pick amazing investors.
Diego Saez-Gil:And like, the first investor that we closed with was Chris Saka, who was pivoting to climate investing and he was creating this new fund called Lower Carbon. And then Chris Saka introduced me to Ryan Graves, who was the co-founder of Uber, who, you know, had, just, you know, exited Uber and was looking to give back to the planet. And then that was a snowball of introductions to incredible people that led us to have an amazing group of investors. And what I learned from my previous company is that it's all about who you raise money from. It's not about the valuation, it's not about the fancy brand of the VC. It's about the people that you are going to be interacting with, that are going to join your board or that, even if they don't join your board, are the main point of contact that are going to help you through the ups and downs. Yeah, fundraising is just, uh, like they say that, celebrating fundraising is like a chef celebrating going to the supermarket and buying the ingredients right it's nothing to be celebrated, it's just okay.
Diego Saez-Gil:You got some input that you needed to go and build and in fact it increases the pressure because like, oh, now you need to give back this money. Multiply many times, right, so it adds new pressure. In fact, I have huge admiration I know you too for bootstrapping entrepreneurs who don't raise money and manage to build companies. I never did that myself, so I have enormous respect and admiration for for the ones who do. Enormous respect and admiration for the ones who do. But for certain things you do need capital, but you have to take it with a level of responsibility and respect that it entails and then use the money very thoughtfully to hire great people and build products for your customers.
Ariel Camus:You've said something that it's I was going to say, counterintuitive, but it's just like maybe an unpopular opinion, and it is that choosing the right investors at the beginning matters. And I say this because very often you hear you know, the idea of smart money is a lie. There's no smart money, there's just money and kind of annoying money, like people who are not good investors. I will, like you know, drive you crazy, but you have a different opinion that these early people who join your mission can actually be very influential. In my experience, by the way, I've had cases like that. They were the exception. I've had cases in later stages, like, for example, in my case.
Ariel Camus:I decided that I didn't want to start a board of directors in the seed stage. I started in our Series A and the investor that joined the board in the Series A has been so incredibly helpful and added a lot of value. So that was definitely smart money, smart capital. But it also came with a large ticket size, a big chunk of ownership of the company. So the incentives were there. But for an angel investor that is not putting a lot of money, that's not necessarily the case, because they make a lot of investments. How did you think about this?
Diego Saez-Gil:So here's an insight from Pachama Every single person that comes around a company brings with them their principles, their connections, their energy. If we want to get hippie woo-woo right, their vibes and you know, you have to curate that Because, at the end of the day, a company is just that is, a group of people's. You know ideas and connections and and tasks and execution that create something. And I'm talking not only about, like generally you think of that and you think of the employees of the company, but it's actually every person who who will come and contribute to a startup, from your lawyers who will incorporate the company. You know the PR firm that you might hire to launch. You know the company. You know whatever external you know agency you use for anything in the company.
Diego Saez-Gil:And then, of course, the employees, the investors, like every person who comes to the company, and then, of course, the employees, the investors, like every person who comes to the company, are co-creating the company. And therefore, if you have a really high bar and you only bring excellent people, people with excellent values, with excellent experience, with excellent networks, that makes an excellent company. It's kind of obvious, right, but? But sometimes I made a mistake in the past of saying like oh you know, I just need to get this done right doesn't matter that much, you know, because it's just like a transactional thing. But but no, like every person that touches the company matters a ton, and I think there is, you know, when you, when you're starting a company like Pachama to me was like a very special thing, you know, I felt like a huge level of responsibility creating this company for this very important mission.
Ariel Camus:So I took very seriously that curation of the people who were going to, you know, help the company get started and, and as a result of that, you know, things went um, you could see the results and I think there is, like with everything in life, there are vicious circles and and virtuous circles, right, and when you work on something you're super passionate about, but also you work on something that is super important to the world and you dream big and you start choosing the right investors, it all contributes to create this energy that, in the opposite side, can be destructive energy, right, if you don't have strong product market fit, however you want to define that. So you struggle to raise capital but you still push through, but you don't get as many options to choose your investors. And then you get people who are like kind of like lukewarm, kind of like about your company and investment, like it all kind of cascades into like this, like decadence. That never feels right and it's a lot of wasted time and energy. But when it clicks right or when one thing becomes a spark for this to become a virtual circle, it's very magic and I give a lot of credit to YC for that. And I think what they've managed to do with Demo Day, it's something amazing Having part of Demo Day, equivalent events in other accelerators and and it's not the same thing and it's again, it's because they have created a virtual circle around, what the type of people they bring, the type of people they accept and how they coach the people.
Ariel Camus:But somehow you get to the end of demo day and, like I remember having like eight, nine, ten investors around me pushing me to take their money, to say like, yes, okay, I'll take 50K from you. I think I still have unread emails from investors that email me offering money, saying I don't even need a meeting with you, like that was like Disneyland for entrepreneurs and and what it gives you, this boost of confidence that then allows you to then say I'm going to pick my investors and and then that becomes the virtual circle, that that you are describing, which is super inspiring. But I think the essence of that, at the end of the day, it's also your conviction and nothing beats, I think, a big mission. Uh, my company, micro, is your company, but chama, we have these like mission-driven companies that are super powerful just because they're so mission-driven.
Ariel Camus:Like was that? Or how did that help you, especially in the early days? Kind of like, you know, not just attract investors but also talent. That initial team how was the process of curating that team and using your mission as a weapon?
Diego Saez-Gil:yeah, I. That is the ultimate insight, which is that having a genuine, because it has to be genuine you cannot fake this. You shouldn't fake this. If you have a genuine mission, that you are going after, a mission that will make the world a better place, that will make humanity better off or the planet better off, and you're truly driven by that, people can read it, can see it and you're building a company that is truly directly contributing to that.
Diego Saez-Gil:Because sometimes there are so many situations where there's a mission statement and then the business model has nothing to do with the mission statement. But if there is that alignment between mission and what you're doing, that will be a superpower that will attract the best investors, investors who already made their money and therefore they're successful and smart, and now they're focused on impact. They're focusing on what planet are they going to leave for their children? And, same with talent, you are able to attract people who have already made a successful career in tech or in, you know, other companies and now, having fulfilled all their basic maslow pyramid needs, are, you know, looking for self-realization and contribution and impact, and these are the best people, right? So I think that truly, uh, being a, a mission-driven company that has an important mission and that you're truly going after. That is a superpower.
Ariel Camus:It is a superpower indeed, and I'm super bullish about that mission that you are working so hard for. So thank you so much for sharing everything you have to share with us. I look forward to continuing the conversation another time, but I hope that no, I don't hope. I know you will be inspiring a lot of future generations of entrepreneurs with your story, so thank you again.
Diego Saez-Gil:Thank you, Ariel, for the invite.
Ariel Camus:Thank you so much for tuning in. Your support means the world to me. If you enjoyed today's episode, please consider subscribing and leaving a review. It's one of the best ways you can help this podcast get off the ground and help more entrepreneurs like you. Thank you and until the next episode.
