Stephan Feilhauer is a Managing Director at Macquarie Capital, the corporate advisory, capital markets and principal investment arm of Macquarie Group. Stephan leads Macquarie Capital’s growth equity investment, or investments on the firm’s own balance sheet, in the Infratech sector. Before Macquarie Capital, Stephan was a VP at Deutsche Bank, a Graduate Researcher at MIT, a Financial Economist at The World Bank, and a Financial Analyst at Goldman Sachs. Stephan holds a Bachelors of Engineering in Business Finance from University College London and the London School of Economics and a Masters in Engineering and Economics from MIT.

In this episode we speak about principle investing and the differences between investing on a firm’s balance sheet compared to other forms of VC funds. We get into investing in infrastructure and energy technology startups, the process, the decision criteria, the investment instruments and much more. Stephan also shares big trends he’s seeing across the infrastructure tech industry, like responsible investing and growth opportunities in emerging markets.



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[00:00:04] ANNOUNCER: Welcome to The Wall Street Lab Podcast, where we interviewed top financial professionals and deconstruct their practices to give you an insider look into the world of finance.

[00:00:23] AVH: Hello and welcome to another episode of The Wall Street Lab Podcast. Today, I speak with Stephan Feilhauer. Stephan is a managing director at Macquarie Capital and responsible for growth equity investments at Macquarie. He does principal investing.

Before Macquarie, he worked at Deutsche Bank in corporate investments as well, and in renewal energies. He has been a graduate researcher at MIT, a financial economist at The World Bank and been with Goldman Sachs. Stephan holds a bachelor’s degree in engineering from the University of London and master in engineering and economics from MIT.

In today’s episode, we speak about principal investing. We go into the difference between principal investing and the C funds. Then we talk about how Stephan sources structures and invest into infrastructure technology deals, what are his decision criteria and how does he do the process from A to Z, including which instruments Macquarie Capital uses to make those investments.

I hope you like this episode. If you do, please leave us a five-star review on Apple Podcast or wherever you get your podcast from.

And now, without further ado, our interview with Stephan Feilhauer.


[00:02:01] AVH: Stephan, hello and welcome to the podcast. How are you?

[00:02:05] SF: I’m well. How are you, Andreas? Thanks for having me.

[00:02:07] AVH: Stephan, tell me who are you and what do you do.

[00:02:12] SF: Hi. My name is Stephan Feilhauer, I’m a managing director in the principal finance part of Macquarie Capital. Macquarie is a publicly listed infrastructure investor founded in 1969. Macquarie employs about 16,000 people globally, and we have about $370 billion of assets under management. Macquarie Capital really comprises of an investment banking arm and a principal investment arm.

On the banking side, we’ve advised on many hundreds of deals worth over $200 billion in 2020 alone. On the principal finance side, we have invested more than $40 billion and closed over thousands deals over the past decade or so.

[00:03:01] AVH: You said you do principal investing. Can you give our listeners a bit of background what is principal investing, and especially, how does it compare to for a example a corporate C fund?

[00:03:16] SF: Yeah, sure, happy to. Like you said, principal investing really just means that we invest our own funds, our own balance sheet. We do not invest third-party moneys like a private equity fund would or like a venture capital fund would. How we differentiate from corporate venture capital funds or from strategic investment funds is that, rather than having a strategic angle to it, so given that Macquarie is a bank in Australia. Rather than focusing on assets that could be accretive to an Australian banking business, we invest with capital appreciation and growth in mind. So really, we’re looking to maximize investment outcomes across the firm, but we don’t really have any strategic arterial motives to what drives our investments.

[00:04:05] AVH: Okay. Then what is your angle? Then what really drives — what makes you invest in a company? What is your focus or your goal?

[00:04:13] SF: The way that we go across the investing universe or the target companies is we really come at it from the perspective of, where is Macquarie good and where do we have a wealth of experience? The way that we like to think about it is almost like, where do we have what we call an unfair advantage, right? Like where do we have a lot of assets in a particular center. Where have we worked with industry experts in the space, and where is — there’s some asymmetry that we see where we feel that we are better positioned than some other investors, and thus have a leg up in investing our own capital.

[00:04:52] AVH: How would you use this unfair advantage as you see? Can you give us a bit more example on what would be an unfair advantage? Because I mean, you’re investing the bank’s money, so you are basically have [inaudible 00:05:04] that’s based on how good investments are. I think probably from a revenue standpoint, it’s not so much different from a PE fund. From a corporate C fund, they look to probably integrate this at one point into their bank. But really, what gives you an unfair advantage? Can you shed some more light on that?

[00:05:24] SF: One of the things is the networks in the broader infrastructure and energy world that we have. My particular focus on the investing side is what we call infratech, or energy tech or industrial tech. So really looking at how technology drives, operating improvements in these various sectors. So be it energy on the renewable side or mobility, industrial tech. There’s a lot of big scenes that are really being disrupted by tech, and where we thing that our background at the asset base, that the firm owns overall, the relationships that we have through the investment banking practice can be helpful for us to formulate a view. But then also post-investment can be helpful to the portfolio companies of ours to broaden their reach and to deepen the customers that they have.

Just as one example, one of the senior advisors to Macquarie Capital is Michael Huerta, who is the former head of the FAA, which is the regulatory authority of the airline industry. He was a key member for drafting drone legislation. With his help, we really did a deep dive on the entire drone industry. I cannot really count the number of drone companies that I’ve spoken to over the past three or four years. That’s really been helpful in helping us to deliver an investment thesis around how we want to invest in that particular sector, getting access to the most exciting companies in the space, then helping these portfolio companies grow.

[00:06:58] AVH: How do you help the portfolio companies grow? I mean, do you bring the network? Do you try to connect them with some of your existing clients or what value are you trying to deliver to them?

[00:07:11] SF: It’s really all of the above. I think a lot of it is driven by helping them unlock new revenue, helping them sell into new ad markets. For example, we found a couple of companies that for example have been very good at selling into the utility space but they have never had any experience selling into the port sector, where they’ve never had any experience into airports, so they’ve never had any experience selling into some other industrial fields. And through the reach that we have on the investment banking side, the clients that are investment banking colleagues over there, we could put them in touch, we can get them in front of CEOs in that space. We can help them think through how do you market, how do you sell into these markets.

We can obviously then provide them the growth capital to help them expand to new sectors, but also, given that Macquarie is a global firm, like I said we’re Australian listed. The US business is very significant. We’ve got a very big footprint in Asia. We’ve got a big footprint in Europe. We can really help a lot of these companies go global and help them expand into the US or from the US into other parts of the world.

[00:08:17] AVH: What was the primary goal for Macquarie to start investing in those technology companies?

[00:08:25] SF: Macquarie has a really ingrained culture of principal investing. When Macquarie was founded any decades ago. From the very get go, Macquarie used its own balance sheet to invest alongside its clients and alongside its companies in the space that they’ve operated in. So there’s a very deep history from Macquarie of doing this. Specifically, how we got into what we call infrartech, or energy tech or industrial tech was really a couple of years ago with what happened.

Just for your background. I come more from the traditional private equity background and have been working at Macquarie for six years. Originally in a more private equity co-investral. But what ended up happening a couple of years ago was that, we would see a lot of these big trends in technology, and we can cover those. But we would see really interesting growth companies coming with very interesting products, with an opportunity to potentially significantly increase the operating performance of the infrastructure and energy world. We would see these companies, they would be very often relatively small, growing very rapidly, so not really the exact type of large-scale private equity, more in the late-stage venture capital world.

We would see these companies, we would meet with these companies, we would think that there was a lot to be done with these companies. We would get very excited about them, but we would not really have any specific, dedicated investment vehicle or strategy around it to go after them. So it was sometimes a very frustrating experience. What we did in late 2017, early 2018, was that we dedicated a specific investment initiative around late-stage venture capital in what we call infratech.

What we did was to say, “Let’s see if we can find companies in the space that are relevant to Macquarie assets, that are relevant to Macquarie customers, and that are going to be interesting from an investment standpoint.” What we did was we scoured the entire market in the US for tech companies that are adjacent to infrastructure and energy, We came up with about 15,000 companies.” So I said, “Okay. That’s quite a lot.”

How do we narrow this down and how do we narrow it down also from a risk return perspective? What we did was we applied three filters in looking at this companies. Number one, we looked at companies where the technology risk has been retired. So we’re not interested in backing some really cool technology coming out of someone’s garage. It really has to be something that is already proven.

Secondly, we were looking for companies that not only have had proof of concepts but that are selling their technologies on a non-pilot basis. Because as you may or may not know, in the infrastructure and in the energy space, there’s a lot of venture capital flowing into companies, and these companies are doing pilots. Very often, pay pilots as well. But it’s very hard for these companies to then actually go through this “valley of death” that is very often is talked about in the venture world, and to really take the technology from an initial proof of concept to a scalable solution. That was the second part.

The third part was to say, “Can we find companies where; number one, the technology risk has been retired; number two, the technology is being sold on a non-pilot basis; then the third piece is selling to blue-chip customers?” So are you selling to customers that look and feel like Macquarie customers on the investment banking side just from the perspective that those are then companies where we can connect them to other clients behind the investment banking side? And they from a stage perspective very much look and feel like the regular Macquarie business improved.

[00:14:32] AVH: Okay. Let’s assume you narrow it down, your list of 15,000 companies to I don’t know how many.

[00:14:42] SF: That’s right. Do you want me to walk you through the process?

[00:14:45] AVH: Exactly. You know what I was getting at.

[00:14:48] SF: Let me describe to you the year and half of the life of Stephan. So basically, what we did was, we looked at these 15,000 companies and we applied those three themes looking at the proveness of the technology, the fact that it was being sold on a non-pilot basis to build your customers and we narrowed that down. By applying these three lenses, essentially, thousand companies popped out at the bottom, and that was our starting point. We did desktop research on a thousand companies. We had 250 plus first meetings with companies. We did detailed, deep dive diligence on more than 60 of them. We put terms in front of 21 of them, and we transacted with 9.

That was the final, to go from 15,000 to 9. This was inside what was called the Macquarie Capital Venture Studio. That was early stage venture studio initiative that we ran a couple of years ago. But I think the big takeaway from that was, that there are a lot of companies that are really fascinating, that touch a lot of the large tech-enabled infrastructure and energy themes. Be it, electric vehicles, be it industrial cyber security, be it in terms of drone inspection platforms, be it the value chain of the renewable’s world. So there are a lot of really, really interesting companies that came up.

Now, our strategy is to really go a little bit later stage, focus on the growth equity part and focus on companies where we as a firm can deploy a minimum of $20 million of an equity check into these late-stage companies as they grow, and as they grow into new markets, as they internationalize and as they become more mature.

[00:16:38] AVH: Could you tell us a bit more about the jump from one stage to the other? So for example, you said, what make you to decide. I think the first step in the screening process, you already told us, right? You check which companies are actually in the space that we’re looking. Then you said you do desktop research, and then only 25% made it to the first interview. What was some of the criteria why did you decide to interview one company but not the other?

[00:17:05] SF: I think a lot of it is really the maturity as the technology and also the quality of their customers. I think if you — there’s a lot of great technologies out there, but at the end of the day, if for whatever reason the big customers are not using them, then it remains an interesting technology in somebody’s garage. Really, the key question is, what are the teams? What are the management teams? What is their ability to scale? What is their ability to sell to large blue-chip customers? And what is their ability to do it quickly and do it in a capital efficient way. Those are the capital efficiency, the caliber of the team, the way to scale their businesses, the way to attract and retain blue-chip customers are really old metrics that we look at when we look at whether or not we would like to invest in a company.

[00:17:56] AVH: I understand from like — how did you get from 60 towards 9? What are some really key areas, or what are you looking for in a team? What would make a team stand out or what would make the customer stand out and how do you combine that with your knowledge about the industry and infrastructure?

[00:18:16] SF: On the teams, the thing that we always look for is really the depth of the bench. Obviously, the initial, the CEO, CFO, president, the key leaders of the team are obviously very, very important because they set the tone from the top. But one of the key things that we also look at is, what is the overall bench look like, what is the second layer. If you peel back the onion, what is the talent pool behind there. Then the other part is also, how has the company been able to attract and retain talent? Because if you think about the long-term ability for companies to succeed, it is really about attracting the best and the brightest. If you look at some of the big success in tech or in general companies, it’s really been companies that have been able to groom management talent, and to attack some of the smartest people around.

We’re fortunate in the fact that we’ve invested with a lot of people on the earlier stage side, on the later stage side, so we have a lot of relationships in this phase and we can do a lot of channel checks. We can talk to a lot of existing Board members, we can talk to existing employees, we can talk to former employees. So that gives us a relatively rich picture of what the overall culture in the company is and how it is being managed. Then obviously, you need to look at product market fit and we have a very, very deep focus on unit economics. Being infrastructure investors with our DNA, we really want to understand at a very granular level how does the company make money and how does the company grow.

I’m an engineer by training, so I really love nerding out on a lot of the technical points in the infrastructure and energy space. But that is really something that we need to have a very deep conviction that from a unit economic standpoint, the technology is superior to other offerings in the market for us to pocket.

[00:20:11] AVH: And you said you made nine investments, and this is I guess like a couple of years or at least many months back. Are you now on a continuous basis looking to add new investments and doing the same process or are you saying, “Okay, we have done our nine investments, we keep the door shot to new investments and we’re just going to focus them on growing them and exiting them”?

[00:20:34] SF: It’s a little bit of both. Like I said, this was an early stage venture initiative. Now, we’ve really pivoted to growth equity. So we are looking for companies that are slightly later stage. Like I said, we’re looking to deploy a minimum of 20 million of equity in these companies. Across the teams, our average check size is probably something in the 50 to 100 million. Now, with some of these earlier stage growth companies, you may not be able to invest this capital all the way up front, but we would like to find a way to put at least 20 million to work.

You had asked me about how does Macquarie differentiate from some of the other funds, and I think this is where us being balance sheet investors, also makes us slightly different than some of the other folks in the space. Because we are investing off of our own balance sheet, we obviously want to see some turnover in our own balance sheet, but we have the ability to be investors. Either on a very short-term basis, we’ve done a bunch of bridges with other private equity funds, bridges to M&A, bridges to some financing outcomes. It’s totally fine for us to be investing for 30 days. On the other side, it’s also totally fine for us to be invested for 30 years. If we find businesses that are doing well, that are compounding at a very strong basis, we would love to hold them for a very, very long time period.

This is not something that private equity funds or growth equity funds necessarily can do, because they have specific mandates from their LPs, around having fund lifetimes in the 7 to 12-year time period. Wherever there are situations where either the quantum of capital that is required upfront doesn’t stay constant through the investment cycle, you need more, maybe you need a little bit less because you get some money back, early stage. That is something that some investors struggle with. That is something that is totally fine for us. Frankly, those are situations where we tend to compete very well.

[00:22:33] AVH: Whether you go really, really long-term or you just provide bridge capital, but also changes the kind of instrument you use. For example, in one, you might use an equity investment at us, you either use more investment in debt so that I could maybe completely debt financed. How do you decide which company should have which instrument or which say, time horizon for your investment?

[00:23:02] SF: That’s a very good point. Again, we’re completely flexible. So within the principle finance, we cover anything from senior unitranche debt to common equity. So we can really play at the entire capital structure. It really is a discussion with the company, and with the company’s existing investors in terms of what makes the most sense. That can change as well. For example, in our investment in VIA, which is a large tech company in the mobility space, we had invested initially in a convertible piece of debt, which then converted into equity once they did their next equity raise, which was actually done in the middle of COVID.

We’re very flexible when it comes to that. We’re looking to get real conviction around companies and around management teams, and we’ll find the right piece of capital to put into these companies.

[00:23:57] AVH: Can you give some example on what might be reasons why you for example, you go more to rational equity or senior debt, mezzanine capital?

[00:24:09] SF: It really depends on what the use of funds is, right? Let’s say for example, you’ve got a company and they’re doing something in the energy efficiency space. That space tends to be around the capital intensive, but you are really investing on the back of long-term contracts, that really have characteristics where it could be debt financed or it could be project financed. At that point, you can look at doing mezzanine debt, or convertible debt or some form of debt characteristics. Whereas, if you’re a company that’s growing very rapidly but it’s really being done on the back of the growth of the overall business and going into other markets and going into other regions, that is really something that where equity tends to be the more appropriate instrument.

[00:24:52] AVH: You mentioned your difference between other VC funds, private equity funds. Is it for example that you sometimes cooperate on deals or do you often do the deals more alone?

[00:25:08] SF: Corporation is really the name of the game in the investing world. I mentioned some of the corporations that we do inside of Macquarie with the different parts of the house. But obviously, externally, we corporate a lot as well. A lot of the growth rounds are being raised, have many, many investors that come on. But I think we pride ourselves in some of the relationships and co-investment relationships that we’ve garnered over the years, so that we are investing alongside what we would like to think are some of the best and brightest in some of the particular subsectors.

For example, if you look at the infrastructure and the energy tech space, there’s really been quite an interesting evolution in the types of investors that have invested in this. Historically, there’s been venture capital and growth equity funds that have been invested in the space, and that continues to be the space. We’ve partnered with a lot of these. But you’ve asked me upfront as well about the corporate venture capital world. I would tend to call them sort of non-traditional investors and those are all investors that are continuing to play an incredibly large role. I mean, there have been a couple of high-profile cases, Breakthrough Energy is raised to fund which is backed by Bill Gates and a bunch of other energy-minded billionaires. Amazon has just released $2 billion climate-pledge fund.

If you look at just the role of non-traditional investors, they’ve invested in about $100 billion of venture capital deals over the past three years. Each up from maybe $50 billion only a couple of years ago. There is a massive inflow of non-traditional investors. Other investors that have tended to be fund level investors, so I’m thinking more of the sovereign wealth funds in Asia, the sovereign wealth funds in the Middle East, the Canadian pension funds. Those have all been investors that historically have invested through funds. These players are now starting to invest directly as well. They’re creating cross-over teams between growth equity and between private equity, between the infrastructure world.

Those are teams that we co-invest alongside a lot as well. The last investor category is really on the family office side. Again, family offices have tended to invest passively, but so many families have accumulated so much wealth that have hired independent and direct investment teams. That is another category of investor that we tend to co-invest a lot, and a that we have in our network to work together with.

[00:27:35] AVH: With all this influx of new investors with every more capital in the space, this is a pretty obvious thing that we had on a podcast over and over again. That VC valuations are rising to an ever-high level, right? Do you see this is still substantial or did it get harder to find good value deals?

[00:28:00] SF: Absolutely. It is getting harder. I think because we are balance sheet investors, we do not have raised a fund. There is no expectation of our shareholders that we deploy a certain amount of capital and a certain amount of time. We do struggle from a value perspective. You mentioned that, right? Like if you look at the US median late stage VC pre-money valuation at the beginning of this year, I think was more than 100 million. The average deal valuation was quite significantly above that. The median step up from a prior round to the current round was about 1.6 times. We’re at historical highs on a lot of these valuation metrics.

It is becoming harder and harder to find good value. But I do think, we also need to step back a little bit and look at what we’re trying to do in the infrastructure tech and the energy tech world. Let’s take the US infrastructure for example. I mean, the industry is in need of a dire upgrade. There is about a $2 trillion funding gap by 2020 that is required according to industry experts. If these upgrades aren’t being done, the results of the real economy are somewhere in the order of $4 trillion. I think it was McKenzie who estimated that there’s $150 billion that’s required every single year through to 2030 just to keep up with the US infrastructure needs. There is a massive, massive need for investment in the space, and technology has an incredible opportunity to really improve the quality of the assets and to improve the durability of this and to make sure that we can avoid situations where, for example, traffic congestion I think is causing the economy $120 billion per year of loss productivity, right? There’s a lot of opportunity to really drive operating efficiency with the help of technology.

[00:29:57] AVH: I think it makes sense. If you look — I mean, you yourself live in New York, and if you probably check the traffic in New York, there is a lot to be done. In Asia, there’s still a huge gap in infrastructure, right? There’s still some much potential for infrastructure space. Do you see this in your investments? Are you more US-focused or do you more, and more look outside the US to get startups from there to back?

[00:30:29] SF: I cover the US markets. I look after a couple of our investments in Europe as well, but I tent to be focused mostly on the US. A lot of the companies that we are backing are truly global in their outlook. For example, our investment in VIA. VIA is deployed in over 100 cities in over 20 countries all around the world, emerging markets and developed markets. That’s the beauty of tech, I think, is that you can scale and you can deploy in many different ways.

Maybe just as a bit of a detour from my personal journey to where I am today. As you can probably tell from my weird name and accent, I’m German originally. I grew up in Berlin, had the great fortune of living in the US as a small child. Went to an international school, then did my undergrad in mechanical engineering and finance in the UK. Then actually came to the US for grad school, thinking that I would save one or two years maybe. That was many, many years ago.

But one of the really seminal points or experiences in my life was really when I did my internship between my two years of graduate school. This was 2008, 2009. We were going through the great financial crisis. I actually worked for The World Bank in Indonesia, and this was really the first time in my life that I had lived for a longer period of time in a developing country or in a rapidly emerging market. I really saw the dynamism that is there in these countries. The sheer potential, but then also some of these very, very basic needs that are holding back massive economies. This was really a wake-up call for me to learn more about the space, and that was also one of the experiences that then led me to spend two years in Singapore when I was there just to be closer to the vast variety of markets that you have in Southeast Asia, in Singapore, which is obviously a highly developed city state. But sits across from some very poor but rapidly emerging economies in Southeast Asia. Really, it was a fascinating experience for me. Really energized me when I came back to the US to look for companies that have a global reach and that have global potential with their technologies.

[00:33:01] AVH: I’m a huge fan of Singapore and of Asia in general. I think those countries have so much potential. Before we jump into career advice, I would like to know what is the recurrent themes or what are the emerging topics that you see more and more nowadays. We touched on Asia, you said, I think ESG and like sustainable investment, always a topic that comes at point. What else is out there?

[00:33:28] SF: The way that we look at this is we really look at the convergence of the energy and the transport industries, which has very profound impact, I think over the coming decades. So you’re moving from fossil power generation to favoring renewable generation. You’re moving from internal combustion technologies on the mobility side to electric technologies. You are moving from a centralizes infrastructure model to a highly distributed infrastructure model.

If you take these mega themes, there are lots to unpack in every single piece of this. But the changes that will ripple through the entire value chain, from source to switch will have a really significant opportunity for sustainable and responsible technologies at every single step. You mentioned ESG. The way that we look at responsible technology and sustainability are clearly guiding principles to how we evaluate investment opportunities. Macquarie was one of the founding members of the Global Council for Adaptation, which is a council that’s shared by Bill Gates and former secretary general, Ban Ki-Moon, then our CEO is a founding member of that.

Rather than looking at narrow definitions in subsectors of climbed or clean tech. I think we’re really guided more broadly, be it by the 17 UN Sustainable Development Goals, ESG integration as being defined by the principle for responsible investing. To us, investing in technology and investing in responsible technology is really looking at sustainability from the broadest sense, driving societal benefits beyond the individual stakeholders. I think that’s really the mindset that we like to take, and that’s really the starting point before we start diving into specific things.

But obviously, there are some really fascinating things going on once you peel back the onion, right? I mean, if you just look at the number of robots is going to increase tenfold. It took five years for the first million electric vehicles to be sold and only six months for the next million to be sold. Depopulation globally is moving into cities. The renewable energy share is going from I think 9% globally to more than 25. So there are these massive, massive trends happening, so we’re looking for technology enabled place to truly look at this.

I think the interesting thing to me is always, if you just look into your driveway and you look at a car, right? A car from 1960 hasn’t really changed very much, right? It’s the same motor, you drive it the same way, refuel it at the same gas station with a gasoline that may come from the same oil field and we use the same roads. But really, we’re at this incredible tipping point today, right? If you use an electric car, it has a new motor, you can drive it on autopilot and work or take calls at the same time. You can charge it at home from power that we’ve actually generated on solar cells on our roof. In the future, more than 90% of the hours of the day where we’re not driving it, we could actually have somebody else use that car.

There are some really profound changes that are happening now. Those will not happen overnight, but we’re really starting to see some of these really fundamental changes to how the built environment around us works. There are fantastic opportunities from an investment perspective to back interesting tech infrastructure and energy companies around.

[00:37:21] AVH: What would you say is the hottest upcoming technology that you see that is deployed? So we’ve fast spoken about infrastructure tech, right? But even tech has like a myriad of things that could be there. Is it AI? It is big data? Is it blockchain? Or fill in the blank, right? What is the technology that you mostly invest on that you see really be used at the moment?

[00:37:48] SF: We like to take longer term views rather than chasing the hottest tech trend that’s currently available. I’ll leave that to people that are far smarter than I am. But I think if we look at how the overall energy landscape is changing, and especially we’re looking at energy storage, there are some really, really fascinating changes there. We’re an early investor in a company called Forum Energy. We are looking to really provide seasonal battery storage. So rather than having a battery that you could use for a couple of minutes or a couple of hours, you can charge and discharge them over several weeks and months. That has profound impacts to how much renewable power you can use, and how the grid overall can be better leveraged.

That’s portfolio company of mine that I’m very excited about, but there’s many, many others as well. But really, we are looking for these tech trends that really have the ability to change an industry for decades to come, as oppose to having a disruptive change just over one or two days.

[00:38:54] AVH: How did you end up where you are now? So you’ve done some infrastructure, you’ve done venture capital in Asia, you’ve done some private equity before. Now you’re doing principal investing, right? Why did you choose this way or how did you arrive where you are and what other ways might be there for interested young professionals and students to get into principle investing?

[00:39:18] SF: Let me preface this by saying that I’ve been incredibly fortunate and incredibly lucky. I think the reason why I’m in my seat today is that, I’ve had some mentors along the way that believed in me, and that have been supporting my career path, but then I’ve also just been lucky to be at the right place in the right time. I sort of think back to the times when I was a first-year undergrad student, and I was looking for a summer internship and I was really interested in China. I literally just cold called every German company whose phone number I could find online that had an office in Shanghai. For some reason, I had the good fortune that the secretary of Deutsche Bank business in Shanghai was stupid enough to put me through. I pitched myself for a summer internship back then, and thankfully, the person on the other end of the phone agreed to it and said that he really like that scruffy attitude. That was actually how he had got his first internship as well.

Now, we’re talking about a pandemic and we’re in the middle of COVID right now. The reason why my CV did not begin with Deutsche Bank in Shanghai was that, another epidemic called SARS actually broke out. I was not able to actually go to China and do this internship back in the day. And found my way doing another internship as an undergrad, working at Goldman in London and really understanding what it means. I started as an equity analyst. So really, started to learn about corporate finance, how companies are valued, speaking to investors, speaking to companies and really getting a relatively base education in how finance works.

That was really something that then led my interest in going back to graduate school. I have done some work on carbon emissions trading. I was then again very fortunate to be accepted into a spotted graduate school, where I had the chance to work with some of the key architects of carbon emissions trading. That then led me to a job in the principal investing world, originally at Deutsche Bank but then later at Macquarie.

That was the long, and circuitous and somewhat random path that life has. I’m extremely grateful for where it has brought me to. You asked about career advice that I have for other people. What I tend to tell people that are asking me for advice is, is really to — it really doesn’t matter what field you’re in, but to really look at trying to understand how is technology changing your field, because technology really has the ability to change every single industry. But also more importantly, to find or to look for new trends that haven’t really been covered, and really get involved, really learn about and really become an expert

For example, when I started my career, carbon emissions trading was a completely new thing. As a research analyst, it’s important that you have a point of view and that you can communicate to investors. And in all the existing fields, you had folks that have been covering an industry for 20, 30 years. So if you are the 21-year-old analyst, what value add point can you bring against somebody who has decades of experience in a space. It’s going to be very hard to compete. I really focus on finding this new theme, this new industry. Started going to conferences, starting calling the companies in the space and really becoming smart, and really becoming an expert, and really helping my team understand what it means and try to come up with a view around how that be a theme.

That was really something that helped me as a first-year analyst on Wall Street. It then led me to do a graduate degree on that space and really helped me launch my career thereafter. Again, looking at the infrastructure and energy tech space, it’s a little bit of a similar story. This is a nascent and emerging space, and it does provide me the opportunity to only with — with a handful of years of experience, to be what other people would call “seasoned investor” in the space. That really is the opportunity if you’re starting out. Look for what’s new, look for what’s emerging, immerse yourself in it, become the expert, ask a lot of questions and see how you can help your existing teams.

[00:44:02] AVH: I love to start. Now, after doing so many interviews, I see some recurring stories. Funny enough, my first internship out of retail banking at Deutsche Bank was because I must have message from the internal group directory 50 to 100 managing directors just asking if I can do an internship with them. One of them got back to me and interviewed me, and that was like my start out of the retail banking. That’s how I got interested in like cattle markets and all those things. It’s funny how this works.

Another guest on the podcast, Clare Flynn Levy, she told us pretty much the same thing about how she ended up being a fund manager quite early, because she just happened to stumble on that one particular piece of technology. Then she was like the youngest in the team. She looked at it and then she became the expert in it, right? They gave her one more responsibility because she was the only one understanding how this field works. I think that’s some very great advice and I would definitely encourage everybody to really look where are their interest and then where can they be the first one to do something. Or maybe not the first one, but don’t be number 22 at age 22, when like people of 20 years’ experience in the field and you try to make it there, right?

[00:45:25] SF: Yeah. Absolutely. Look, I think one of the up things is just, keep an open mind. The world around us is changing so quickly. I think some of the most exciting technological developments I’m really seeing through some of the summer interns. Like we had a summer intern this summer that was working in my team, who made me aware of a company because one of her friends was interning there. He was completely in self-mode under the radar. I would have never even heard about. I would have never found out about it.

Really reach out to networks beyond people that you would normally talk to. Find people that are outside of the age bracket that you happen to be in. Talk to people that are outside of the industry sector that you’re currently in. Talk to people that are in other countries than where you’re currently in. There is so much to be learned and so many fascinating things out there. It would be a shame to limit yourself early on in life.

[00:46:24] AVH: Absolutely, could not agree more. If anybody would look at my CV, they would be like, “Were you drunk when you decided what to do next?” It’s really good because in the end, this kind of network of connections will help you. Now, Stephan, do you have any last words, any wise words that you want to leave our audience with?

[00:46:47] SF: Just stay hungry and to stay curious. I think that curiosity is one of the key drivers of new insights and new outcomes. So read a lot. Talk to lots of different people. Especially now that we’re in a pandemic, a lot of people are spending time locked up. Reach out to other people, reach out to friends that you haven’t spoken to in a while. Reach out to companies that you have not gotten around to talking to. I think you’ll be surprised at how open people are now, given that we are in a pandemic and there is a lockdown. It’s harder to see people in person for obvious reason. I’m always surprised how easy it is to get people on the phone now that there is nobody traveling. Really, as challenging as this environment is, make the most of it and let’s come out of this together stronger.

[00:47:38] AVH: Close Netflix and open MIT course on LinkedIn and try to jump onto a video call with some people you always want to reach. And maybe to add because you probably wouldn’t say it. Be humble, because I think Macquarie has a lot of not-so intelligent managing directors. You would definitely be at your place where you are by not being intelligent. So I think — I wouldn’t quite trust it but I love to see that you’ve been humble about all the accomplishments. Anyway, thank you so much for coming on the show. It has been great fun.

[00:48:16] SF: Thank you so much, Andreas for having me.


[00:48:21] ANNOUNCER: Thank you for listening to The Wall Street Lab Podcast. For the show notes and much more, visit us at to see what we’re up to before anyone else. Subscribe to our newsletter on our website and follow us on Facebook and Twitter.


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Published On: December 10th, 2020 /