Solving Climate Change with 401Ks – E102

Great to chat with Zach Stein, Cofounder of Carbon Collective! Carbon Collective is the first online investment advisor 100% focused on climate change! We discussed the importance of a well-defined customer cohort, how to assess a climate positive company, the intersection of climate and investing and more!

https://carbotnic.com/carboncollective

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James

The unedited podcast transcript is below

James McWalter

Hello today we are speaking with Zach Stein co-founder of carbon collective welcome to podcast, brilliant to start could you tell us a little bit about carbon collective.

Zach Stein

James so glad to be here. Carbon collective is an online investment platform that enables individuals and businesses through their 401Ks to invest in portfolios that are built around solving climate change right now sustainable investing as what wall street sells. It is just a less bad version of the world today. We know what we need to do our greatest issue within sustainability which is solving climate change and we cannot do that with fundamentally scaling sustainable investing but in a way that is aligned with that end goal. So that’s what we do.

James McWalter

And what drove the initial decision to start Carmen collective. Yeah.

Zach Stein

So this is the second company that my cofounder and I have started. We’ve known each other since we were four years old first company was also in sustainability but in a very different space and at 2020 right at the beginning we set out with a whiteboard on saying how could we build better tools. To enable individuals to collectivize their climate actions and just identifying that we as individuals. But so many of us when we face climate change. We just get left hanging at the top of the emotional feedback loop. It was just like fuck like this is terrible. The icebergs are melting the fires are coming. World is still run by fossil fuels and emissions I’ve never been higher I’m one person. What can I do within that so that to us you know seemed like a problem that was looking for better solutions and we ended up interviewing one ah none people in and around our network trying to figure out where their climate actions anxiety took them. But actions it took them to take it where they got blocked and investing was this place again and again that we found they ran into.

James McWalter

That’s such an interesting process and I went through something very similar and I’ve talked to a lot of climate founders on on the podcast who’ve also done similar where you nearly start with a whiteboard and like a print out of the emissions in the economy and then you start trying to draw the lines between these different areas and then also trying to work with you know a certain amount of. Founder fifth and so yeah I guess kind of digging into that process like was this over you know, long weekend or was this kind of just ah, a constant kind of iteration over the series of months

Zach Stein

It was a long process. We formally kicked off on jan one of 2020 and we didn’t know what we were building until June like the beginning of June of none for sure so we started by reading. We probably read like None books in the first quarter. And really just getting deep and then we really kicked off into interview mode and we went through the whole thing of like we started off by building all the like a paper prototype that was like really like beautiful and like trying to illustrate our none idea and the None person we interviewed was like hey there’s this book called the mom test.

James McWalter

Yes, yes, very important book I.

Zach Stein

Have you heard of it. Yes, and so we’re like no we we haven’t done. He’s like you need to read it and so we’ve read it and we’re like oh my God we should have been doing this all along and so we just strapped everything and went right into just mom testing as hard as we could.

James McWalter

Yeah, and and for for the listeners. Um, if you’re looking to build anything that ah has any sort of consumer mass adoption and honestly even from Enterprise as we have the consumerization of Enterprise it becomes ever important if I read that you know it it really really helps you ask better questions. Ah, both of.

Zach Stein

Yeah, yeah.

James McWalter

Potential users. But then also of yourselves in terms of how you try to develop products to solve protect our problems.

Zach Stein

Yeah I think if you’re just at a point whether it’s a new product or a new feature or whatever that is on a product if you’re asking the quiet yourself the question should we build this then Mom testing is as as far as I’ve seen the best way of answering that question without actually building a thing.

James McWalter

I Yeah absolutely and you know I haven’t talked as much about this my own startup but when we were whiteboarding my cofounder and I like going to lots of different options. We were literally just there was a particular cohort of people we wanted to service and we would just ask them questions about the biggest problem they have that no one’s Solving. We just like write those down. And then thematically just the the problem we ended up focusing on came out and I think that just like that’s another way. It’s like I want to solve a problem in a particular cohort of people that have a climate impact or in our case, it was developers of clean energy and so on. But yeah, did they have like. Obviously we need to do all these other things and it’s like well it’s actually blocking it and so then you can kind of start building products around those blockers and those problems.

Zach Stein

Exactly you know for you. It was developers and for us it was individuals who had climbing anxiety So we we each kind of had that focus but then was able to use you know, kind of limit or or you know have our curiosity just take over from there.

James McWalter

And you know people with climate anxiety. That’s also a pretty large demographic group right? A lot of different slices and so as you kind of explored right? exactly. But as you kind of explored that. How do you start? this kind of segment. You know what that early customer cohort you wanted to go after might look like so.

Zach Stein

Fair.

Zach Stein

Yeah, it became clear to us that the hardest people to win over. But also the most important were going to be people who knew a lot and were focusing to some degree on climate change in their lives. They were the most important because. They were often the ones who felt the greatest pain where especially as an individual the level of cognitive dissonance that they they feel for say I work on climate change in my everyday life and then I like I get into that Suv and like drive home that it just it causes pain it causes identity suffering. There and so these type of people are trying to align every part of their personal lives to salt and climate change. So a really good fit there. The reason that they’re the hardest to sell to is that they’ve been burned greenwashing we stepping into the space of sustainable investing. We are stepping into a space that has been.

James McWalter

Right.

Zach Stein

Maybe the most greenwashed of kind of all spaces with it climate and so we fundamentally especially to this group that knows so well and has been exposed to that green washing we are stepping into a place that I like to say we are guilty until proven innocent in coming in for Them. So. Yeah, it’s people who work in the climate Space. So We very much are kind of writing the code tales on the rise of climate tech itself. Also this is obviously like nonprofits and academics as well. But then we also found a pretty strong traction with a group of cohort that we call ecotechies and this is.

Zach Stein

More engineering focused and folks who generally tend to work in tech. It might maybe would want to go work at climate company but like are making 300 k from Facebook or meta or whatever it’s called now drive a tesla ride a mountain bike on the weekend I think we probably all could picture this person. Um, and so them as well.

Zach Stein

Um, and for them they also are going to kind of demand that same level of rigor that this is the type of people who really likes to understand how the world works and once they’re only going to align with something when they can really see that someone has really done the homework in a way that is logical and makes sense to them and and is transparent.

James McWalter

That’s that’s super clear and I think it is ah really essential to get that. Well-defined customer cohort to kind of go after right because you can’t service everybody and so as you kind of zoomed in on that. Um, and one of the nice things about that cohort is I’m already thinking of places where those. Human beings like congregate online like they’re in the forums of places like my climateurney and so on so you know from a distribution and getting in front of people point of view. Um, it’s actually like a pretty nice kind of cohort to kind of go after but you still have to kind of win that trust and you do that through building an Mvp that yeah really starts to solve a problem that. As they see it and so what was that kind of initial Mvp iteration like.

Zach Stein

Yeah, so for us and this came through our mom testing it became really clear that. Yeah, we could not build something and this was also a failure. We interviewed founders who had kind of taken a crap at like a green investment app and stuff like that and a lot of the where we diagnosed. Where they fell short was they did not fully appreciate that the number None reason that people are investing is to meet their financial goals. They’re not investing with to drive impact that is a secondary. Um so primarily and and for so many of us the way that we’ve been taught that is smart to invest. Is what vanguard taught us is to invest passively with as much of the market as you can diversify it as possible with as low fees as possible and so we said okay we can’t break that mold because that would be a double bank shot. We’d have to say you know hey invest in this new way that is different that you are taught and you’ve never heard of us it. It should. This is how we’re going to drive impact that’s going to be too hard so we said all right? Can we build portfolios that kind of meet that none threshold but then secondarily have a very clear theory of change in regards to climate and so that went through a lot of iteration. We had to get registered with the se. And be able to launch as a robo advisor and do that and and then went through like lots of experimentation of how are we actually telling the story of how these portfolios are put together in a way that is concise and makes sense to people and kind of the first test that we had before we raised our pre-seed round. Was would did did it work was our hypothesis correct and how we built these portfolios that individuals would not treat it like climate charity which they often did with other platforms where they’d roll over like or they’d like invest 3 grand or something you know it was like.

Zach Stein

Money that you’re like okay I can lose this It’s not money of saying this is my retirement account and or would they move their full iris over toser roll over at old four None k and what we found luckily our our hypothesis was was correct. That our average account size was like closer to $50000 so people were moving over those larger chunks of money for them. Those full accounts consolidating with us and that kind of gave us the gumption of saying all right we have we’re on something here to go and raise ah a pre preceded in February of 2021.

James McWalter

Yeah, that’s that’s going to be exciting and going from you know ideation right? before covid I guess if it was None all the way through you know within year and a year and a half kind of getting to that level is in a very tough time for for everybody is is actually phenomenal and.

Zach Stein

Thanks Sam.

James McWalter

Going Well going through those steps with the scc and so On. Um I Think that’s also something that people who are coming in to try to ah build something in Climate. There’s often already existing rules of the road to navigate and you know some of them are literally legal like you need to do it Otherwise you literally legally can’t do it. Um, and so I guess how did you find that process. You know it’s something that scares away a lot of you know founders from tackling certain problems because of those kind of regulatory Burdens. And yeah I Guess what was the experience like.

Zach Stein

Yeah I think about this a lot and I imagined you do too that if we as humans had perfect like for knowledge of how hard something was going to be before you did it like we would just do so many fewer things. Yeah.

Zach Stein

Um, so it was a grant to get through that process and rightfully it should I think that this is you know what are the areas in terms of financial regulation that is really important and that you should It should be strict and hard to get through and say yes, the scc. Um, you’ve now passed the requirements that you need to pass in order to legally offer investment advice and manage other people’s money so that certainly was a challenge and also making sure that we found the right people around us to help make sure that the portfolios that we’re building even though they’re. Based on passive investing principles and we had our long back testing kind of showing like hey you could get a similar risk of reward as you would for a generic us-based Index portfolio here getting the right people around to say like yeah like that this this is checking the boxes. This is kind of meeting a fiduciary. Responsibility with this strategy with that That was really important for us to have as well.

James McWalter

And I guess then you know it comes to the the the hard question here. It’s how do we assess a climate positiveive company right? And how do we make sure that we’re balancing portfolios that have that kind of positive climate effect. Guess how do you kind of think through that because even recently there was I know there’s a you know you know Musk Twitter storm about ratings for some of the large oil gas majors getting particular kind of esu ratings that that seemed from the outside to look like overly advantageous to them. So yeah.

James McWalter

How do you think about that and ah, how to measure the actual climate climate impact of these different companies. Please.

Zach Stein

Yeah, so I have a lot of thoughts on this and I’ll try I’ll try to be concise. So this came through our testing as well. We experienced this as individuals but that esg was not actually meeting the the user needs I had that I had as ad as a user of the product. Um, for me, especially wanting impact investing fundamentally what I wanted was two things I wanted a tangible theory of change that I can understand and made sense to me of how my money was going to be driving change in the world. How making this switch from the vanguard index fund to this. Actually going to change anything in the real world and then to an emotional experience of being connected to something higher than myself and I think that for a lot of b to c companies is especially turn the offset space and something like that like that is the Holy Grail that every b to c climate company is going after it’s almost I don’t like to use this word like a religious. Type like of of what religion was you know has historically held of like that connection of I’m a part of something larger than myself I think especially when it comes to climate change that dichotomy of I’m one person who is born into a world run by Fossil Fuels and on a one track to a world of catastrophic warming to the how are we? How am I a part of something bigger that is something that’s really powerful esg as a framework I believe and we argue is in the process of a classic unbundling and so when we look at other products that have. Become kind of the first in their space that were really popular like other users started saying hey I bet we could use it for that. So like we’ve seen the unbundling of of excel. For example, when spreadsheets came about people are like oh this is so great for computation that I can do manually the intended use case. Then other people were like I could store my sales contacts with this not the intended use case you have the unbundling of excel which leads to companies like salesforce so we argue you know there’s the embundling of Craigslist the unbundling of email leading to companies like slack etc. We think that we’re in the middle of the unbundling. Of Esg Where Esg as a framework was created by institutional investors to be used as a tool to build balanced portfolios by institutional investors and they weren’t trying to create impact or drive value what they were trying to do is say huh. There is other factors. That we should be making sure we’re diversified around outside of like credit score and sector and pe ratio. So. It’s literally thinking about it on that level of how are we making sure if there’s you know some piece of environmental legislation hits that we are not facing too much portfolio risk to that.

Zach Stein

The innovation of esg was to quantify all of this for the None time prior to that like that type of rating or that type of system had just been exclusionary filters. So it’s much more basic but you then are these exactly and so.

31:54.38

James McWalter

You like? yeah like get rid of the sin stocks basically Tobacco firearms, etc.

Zach Stein

Then with esg you then have these new users who are like I really want to have value space investing or I really want to have impact investing again. This is a personal theory I think a lot of that especially on the the political left was in response to the election of Donald Trump of there was kind of this looking for ways of say how am I pushing back? How am I that. Kind of doubling down on my sense of identity within that. Which until now we’ve kind of led to this point of the unbundling of esg all right, very long-winded way to talk about How do we build our portfolios as you can guess we don’t use esg esg looks at a company ah at like how it operates at its business. What it doesn’t look at is what does the company make because that is the number None thing that drives its impact. The thing that it makes money from and so we look at the stock market. We kind of bucket companies into 3 categories. The none category are companies whose core business is fundamentally antithetical with solving climate change.

Zach Stein

And these barring some miracle technological breakthrough. This is obviously oil and gas but petrochemical companies dirty utilities airlines right now. Airline manufacturers cement steel. There’s hope for some of these industries but technologically now for a lot of them. They’re still not there. So we divest we do not invest in these companies. We do not believe it makes sense to own Exxon Mobile to vote on them and we can happy to dive into exactly there in a sec so that’s bucket number None and step one that we take we cut those companies out bucket number 2 are companies that are building solutions to climate change. That’s how they make money tesla is a very famous example kind of why we think it’s absurd and this was a lot of the pushback by Elon Muskkin the Twitter storm you talked about so we look at what are the best independent plans to solving climate change those who are in the climate space have probably heard of them groups like project drawdown the international energy agency Rewiring america and we say which publicly traded companies are building those that aren’t generating more revenue from products or services that are dependent upon the fossil fuel industry that kind of fall into that first bucket. So we just use revenue. We don’t use pledges or anything like that. So an example of a company that does not make it into that category in spite of it making a climate solution is general electric. They didn’t make it last year they are the None largest manufacturer of wind turbines in the world but they generate more revenue from their natural gas turbine and jet engine business. Therefore we do not hold them then the none category is everyone else and these are the companies whose core businesses can exist in a decarbonized world in a 0 carbon world. They just aren’t there today and that that means to us as shareholders this is where we should be engaging. And trying to pressure them to get there as quickly as possible. The example I like to use is Coca-cola there’s no reason why coke can’t sell me a beverage using the secret recipe in a zero carbon future. It’s just doing so powered with 100% renewable energy delivered on 100% electrified fleet and they’re protecting instead of abusing their natural resources. That to us is where we should be engaging as shareholders because right now there’s so much in the climate activist space. It’s trying to go to exxonmobil who like has a line out the door of customers waiting to buy its product and say like hey you should become a solar company and they’re like why would we do that.

Zach Stein

Instead we should be going to the line and being like hey there’s a ah better cheaper way to get what you’re going after.

James McWalter

I love I love I love it telling this. So I think I think the um, the pushback on the issue is really wellm made and it’s the nature of large enterprises. It’s the nature of finance generally. You love a number right? because if you have a number you could start doing things you can index against it. You can say is it going up or down and so ishi was like this attempt or is this attempt to kind of orientate the industry around a number. Um and all of the kind of considerations that go into that number were new to a definition. On the basis of a ton of compromise right? because you know an msci or sandp comes up with their esg indices they are doing that with a ton of conversation with the people who are getting hit badly by the esg indices. Um or potentially it could be hit badly and so. There’s just a user level of compromise because even as divestment occurs even after the blackrock letter a few years ago that’s had like this massive effect on on these things in general, you’re not going to see just like the mass divestment across all of these firms. All of a sudden because it would actually have like a you know, very very large effect. In in the stock market in a way that you know most financial professionals are way more conservative than allowing that to happen and so this all makes a kind of ton of sense to me. It was interesting when you mentioned kind of going into the revenue lines of a company like Ge and figuring out the exact yeah revenue line on a you know let’s say a climate positive versus a climate negative. Basis and the kind of things you’re talking about like typically large investment firms will have you know a none analysts like figuring these kind of things out and so how do you? you know I guess how do you kind of scale that research to figure out exactly what’s happening. Um, yeah, are you just kind of living in ten Ks and ten queues or exactly how do you kind of approach. It.

Zach Stein

Yeah, it’s we do only publicly available information. We think that this is again a problem with esg is that it is fundamentally opaque. You’re saying this is ethical. It matches your ethics. Sorry we can’t tell you how we came up with this and we’re not going to be able to show you in the future. What decisions we’re going to make with it. Um, that again, it just it kind of fails. The none test of trust building and it fails what you’re trying to build so for us transparency is absolutely key which means we all use publicly available information. So yes, it is 10 k’s. We look at investor reports and try to dig where we can and there’s companies which you can go on our website and you can look at our full list of all the climate solution companies that we evaluated in 2021 it was 352 companies. We identified as building or potentially building a climate solution. None made it through our filters so you could not only see every single company that made it through but also the ones that didn’t and why they didn’t what they failed of our criteria. We try to make it really really clear and one of the categories is lack sufficient information for it. If we cannot see the exact revenue breakdown between these product lines then we just don’t hold it in there. Um, because it means our clients also could not double check and repeat it for us.

James McWalter

That that’s very interesting. So so we have these kind of None companies just so I have a kind of sense of scale relative to something like the sandpfivehundred would those one hundred and sixty nine from a market cap basis would that be None of the sbfivehundred or like yeah fifteen twenty percent just to kind of get a sense of like how far we have to go to start having companies that have such a clear climate positive. Ah you know impact.

Zach Stein

Yeah let me I actually have members for this if you just give me a sec let me look this up so in the way that we build it about. In terms of the market capitalization. This is not going to be the best way of doing it but about 50% of our climate solutions collection is large gap about 30% is midcap and about 20% of Smallcap. So there are certainly companies in there who are large gap in there. You know Tesla is kind of the going to be the most.

James McWalter

So it’s about 80 so if you think about this and pick 500 is large cap and you have 169 so you know fifty to eighty companies in the sb 500 might fit into that criteria. Okay.

Zach Stein

Aggressive and leading example.

Zach Stein

It’s probably a little bit lower but I would need to go in and kind of look and double check.

James McWalter

Ah, under said. Okay, but I think it’s a good level setting for for me as I kind of think through again the the amount of ramp that’s needed to start pushing all these companies into it right? because even let’s say it is 50 companies that’s 10% of the s and b 500 um there’s a huge amount of.

James McWalter

Gap there that needs to be made up for and to do that and your theory of change is leveraging you know a large movement of capital from the existing place to this new place where it’s focusing on that 10% and kind of expanding those and then also those companies will perform better because of ah you know the ability to kind of. Their valuation is going up and so on and so I guess as you kind of think through like what are like the best levers to to do that. So is it getting yeah hundreds of companies to sign up from a benefits point of view with. Consumers would would you guys or are there other Levers. You’re thinking about.

Zach Stein

Yeah, so when we get to kind of our high level vision. We are trying to build the company at the intersection of climate and investing right now we see it as a fundamentally open category and we think that they’re really people are looking for a place that they can trust and again as we talked about earlier. It’s a really high bar. You have to meet for that and we take on that challenge willingly because we’re so focused it enables us to move really quickly and move into other spaces really quickly so we launched in this in 2021 in September we launched our green four one k program. Which allowed us to come on as investment advisors for mission-driven companies. So like if you guys if and when you guys launch a 401 k if you didn’t work with a carbon collective. You went with like a guide lie and or ah you know, empower or human interest it would force you to invest in Fossil Fuel companies you and all of your members. That is just contrary to your mission that doesn’t make any sense it it. It deflates the value of the perk as a founder of what you’d give to your employees and so we actually found oh. We could actually come on and be the investment advisor where we take on the liability and responsibility away from the record keeper the guideline of building those portfolios. And we can make it a win-win-win for everyone so that is going that that program is going really well and scaling really nicely and kind of from a business standpoint. It’s like what you talked about earlier of you know going to mccj on the slack channel and stuff like that like that’s a collection of people people who come to work at a company like yours or something like that. That’s an. Another self-selecting group of people that we then get to go talk to and hopefully help help them navigate. What is this challenging space and build. Trust.

James McWalter

And we are we are setting up our for one k in the next two weeks so I will I will honestly take you open that I offer because even though a couple of us it is something that I was literally like just looking at guideline it’s None clicks and we be done. Um, and I think that defaults are kind of what you’re battling against right. But I think over time as you actually become the default I think then then you will start to see that kind of real hockey sick kind of growth and at scale.

Zach Stein

I Think so too. Yeah, we definitely should talk. We have a great deal right now with forever savings. So let’s talk a fine about that. Um, yeah I think so this is something That’s really interesting that came out of our mon testing was there was a cohort of people who are just.

James McWalter

Yeah, absolutely.

Zach Stein

Ah, off when we ask these type of questions and you probably see this person. You could think of them too where they would say why should I do anything about climate change when it’s all the corporations in government’s faults I’m one person I was born into this world like get off my back stop guilting me and to some degree that person is totally correct. Like they you are just None person. You are born into this world. But what it misses of saying it’s all just corporations or governments and they should fix it is it fails to ask the question of well what should how do you How do corporations and governments change and what’s on I keep coming back to and it’s something I wrestle a lot with is. Like the status quo only changes and this is like the status quo of guide log be the default option like the status quo only changes when enough individuals or companies. Whatever it is decide to change it like I don’t know of a different theory of change.

Zach Stein

Than that of like how to change the world.

James McWalter

And well so that but then you also have the the combination of ah often technology that makes things a bit more obvious right? and so it kind of goes back to sa of transparency and I think there are so many areas of the economy that has just like relied on the opaque nature of their processes. Because nobody really cared like like a classic kind of non-climate example is the idea of sweatshops and so until mid 90 s there wasn’t really any sort of like general awareness of what is occurring at you know a South East asian sweatshop and then that changed and while that problem is not kind of away. You know it is at least something that consumers started to kind of think through things like ethical fashion and and and these kind of elements and I think that a lot of what happened was it was just actually easier to communicate in the 90 s people all of a sudden could send an email or. Communicate much more rapidly and eventually we had you know ubiquitous video to show conditions and I think what we’re starting to see is as information is more readily available as you know, even small cap companies that wouldn’t typically have a ton of research analysts on it even their data is more easily extractable. You start to have the but benefit of. Places like carbon collective to like make sense of that data expose it and you know drive change that way.

Zach Stein

I think so and I think to kind of use the sweats up shop analogy a little bit further should kind of stand on the shoulders of the work of activists before where you know those activists came in. You know they were to say this is wrong. You know Nike you should change I remember that with you know, there’s. Very focused on Nike at that time and that kind of gave room for a company like everlane to come about and saying there is this this awareness and this push but there’s not necessarily a place to go for it and so I think you know when I look at a company like carbon collective. I see like the group the work of the groups like three fifty dot org and Bill Mckibben and the divestment movement of that being some of the shoulders that we’re standing on of kind of popularizing and educating that we cannot solve climate change without changing how we invest and I think that’s really key.

James McWalter

And I guess you slightly touched upon it. But I’d love to kind of get you know if if you had any kind of numbers around like what the ah roi is right? because if the primary Decision-ma process that you kind of alluded to at the very beginning as you’re kind of thinking through this you know people to trust their fifty K plus. Retirement account in the hands a car collective. They want to see yeah a reasonable return for that in a way that at a minimum I guess tracks with the vanguards of betterments and so on Um, but but you are also from what you said like having to expose. To Larger. Let’s say small cap risk than then maybe more so than a typical kind of Vanguard or betterment. Um, so yeah, so I Guess how do you you know, think about the kind of different ah Roi and the the kind of risk adjusted investment profile of a karma collective account.

Zach Stein

Absolutely we think about it a lot so our core portfolios which is kind of what I described at the beginning with those 3 buckets that divest reinvest and engage the rest. Um, that is the that that’s what makes up our core and that’s where you get a similar level of risk in return when we do our back testing. Can go to our website. You could see our None ar back test. We update it quarterly. We show all kind of like the relevant metrics. We I think we do a pretty good job of explaining what it means to people who don’t know what things like beta or standard deviation are like is higher lower is like higher better or worse like we’d tell you? um.

James McWalter

It Red Red red is bad. Green is good. These kind of things. Yeah.

Zach Stein

Ah, basically um, so we try to make that really transparent we get this question a lot and I think I but take this opportunity to kind of step back and even a little bit larger because you brought it the divestment movement and this kind of goes into the theory of change where I think that that that the divestment movement. Promise land for when you start seeing things to really change is not just when people like you and me are saying I don’t want to be in fossil fuels because it’s wrong but people like you and me are saying I don’t want to be in fossil fuels because it’s wrong and it’s stupid financially and starting to spread those narratives when you. I think are fairly educated educated on economical things. So efficient market hypothesis is you know a theory that stocks are priced based upon publicly available information and there’s a lot of debate upon it in economic circles. But you know you can make the guess that it’s largely true. Maybe outside of some insider trading one people make the argument for efficient market hypothesis and this is often an argument against divestment. They’re just like de efficient market hypothesis. The prices itself. You’re not going to change anything what they don’t take into consideration is that there’s publicly available data is. What are the underlying narratives that we have about certain industries that are just pervasive. There are the undercurrents that you don’t see and there is an underlying narrative and you touched us on this by talking about wall street that fossil fuels are fundamentally a necessary evil in a balanced portfolio that if you want returns. That’s your primary goal. You have to include them. And there was a none narrative that sustainable investing is just for green hippies like me who want to wear our values and are willing to take worse returns for doing that and both of those narratives have proven false. So if you had divested from the sandpfivehundred from one thousand eighty nine to the present you would have made more money. Ah, 0 is born looking forward when we look at should you hold Fossil Fuels like should you be long on fossil fuels or climate solutions just the macroeconomic trends but you know without any legislation at all like 50% of the oil that is used in America is on our roadways. And most of that is in individual cars and trucks like you and I own. We just have a better technology here. It’s like the horse and buggy to a car. It does the same thing as a fossil fuel power car but it does it faster it is safer it is roomier you don’t have to go to a gas station. It costs a none as much to maintain you could drive it for a million miles and in None ars it’ll be cheaper to buy up front like that’s the middle of a technological transformation and that’s a lot of market share for oil. That’s just gonna go away and it’s not.

Zach Stein

There’s not room. There’s not other industries where that’s going to be made up or kind of tapped out in plastic. You know, maybe the growth of airlines and the broader growth of the economy but like maybe blue hydrogen. Maybe if green hydrogen doesn’t get there first. So when we kind of look at the long-term trends of like. Should you be invested sustainably. We try to make it very clear of any time that you deviate from the market you’re gonna have deviating returns in the near term you’re in a half months or you’re higherre gonna have months where you’re lower. That’s the way we you know we let’s not beat around that theres bit and that’s happened with our carbon collective portfolios. When we we are focused on long-term investing on on kind of the decades level approach that to us. It just makes a lot more sense to not hold the industries who are fundamentally being outcompeted and instead hold those that are replacing them well and then just you know hold the rest as well.

James McWalter

Yet’s super interesting and as I looked so you have your index which is on your website and actually a previous guest. The Ceo of beam global is on the index I’m sure he’d be a Duncan Denis um would be delighted. Yeah no I’d absolutely a happy take.

Zach Stein

Um, yeah, make the intro. Let’s get there for 1 k.

James McWalter

Yes, yeah, absolutely. Um, but I think one of the one of the powerful things about it as well. Like if I think about the ah the kind of startup ecosystem and the private company side of things you know we we had this kind of very exciting and I would say a pretty volatile issuance of Sps and so on and I’m sure there’s quite a few specs as like. Quickly glance at the index on there. But what I think is like really powerful about having an index like that and and creating this connection between those companies four one k and the overall kind of long-term market returns that actually also gives very nice comps to. Later stage climate companies and then that I’ll filter down to earlier stage climate companies that there is like a very very clear path and for those who kind of yeah this is before my time but I’ve talked to folks who were involved in the you know the none kind of renewable startup world just over a decade ago. Clean tech 1.0 and they really struggled to get to a clearer exit path whereas this is like you know you’re getting all the way into a 4 1 k like the more eventual boring quote unquote it becomes the more exciting it is for earlier stage investors because it’s like okay that’s that’s true. Scale.

Zach Stein

I Think that’s a really interesting perspective I actually haven’t really considered before yeah in the point that you bring up of what is the difference between Clean Tech 1.0 and you know climate Tech 2.0 of what we’re in now is it’s the end markets. Is that especially in so many of those areas like electric cars or like renewable energy. It’s not based upon altruism of what’s driving the end Market. It’s based upon financials and so all the kind of the whole ecosystem there of like what you’re building. For example. Um, like it just makes a ton of sense like if climate change wasn’t a problem your business would still be a venture business and like that’s that’s a really big difference Mine I don’t know but yours definitely would be.

James McWalter

Bre.

01:14:50.22

James McWalter

No absolutely And and I mean even yours because like we do want clean air right? like so there are also these other externalities that we are trying to reduce. Um hopefully and thankfully and we talked a little bit but before we jump to the call and I believe you have a a newborn and it.

James McWalter

So It’s very difficult to start a company build a company, get it to scale while also you know managing these other yeah, very very important like restrictions on our time and so I guess how you find Found. Kind of balancing those things particularly because you’ve already previously founded a company and I’m sure it was slightly different experience with that first company.

Zach Stein

Yeah, we talked about this a little bit on the beginning of the call at kind of seeing kind of the culture of founders who are like yeah I work seven days a week and like maybe it’s because I’m an introvert at heart or something like that. But I need so much creativity for the work. That I do. It’s like I don’t think you could write poetry 80 hours a week like if you’re kind of in that format. Yeah, exactly like it wouldn’t be very good could just get continually worse unless it’s like you’re like the monkey trying to write Shakespeare so that.

James McWalter

This poetry sweatshop.

Zach Stein

To me. It’s something that’s kind of going as and as a baseline of having really clear rules for myself of when am I unplugging when am I turning it off when am I not checking emails I Very deliberately do not have email alerts on my phone for that reason. So it’s been kind of just a continuation of that of having a newborn his name’s caleb.

James McWalter

It very good. Yeah, it’s good. It’s good that the scottish name right? Yeah, okay.

Zach Stein

Really cute. Thanks um, yeah, biblical. Originally he was one of the the spies sent by moses to go look into the land of Israel and see’m jewish and see come back and say like. You know god said we should go here like should we go here if so how at the other 10 of out of the None spies told like these lies that like it was either like incredibly good like unrealisticically but or unrealistically bad and C Caleb is one of the 2 that told the truth of saying that like. Is is going to be hard, but it’s going to be doable and especially in starting you know, working on a climate tech company and being in this space I think that was part of the reason for naming a child that I think that’s kind of the ethos that so much so many of us have to hold of it’s going to be hard. And it is really hard and it is really scary and we also have to hold that it’s doable and so yeah, my life has become very narrowed since having him in a really nice way in some ways my first priority or my first priority is him frankly, my second priority is carbon collective and my third priority is. Taking care of my wife so she can you know, be there to press feed and do things like that that I can’t do um and everything else is very far beneath that now I haven’t exercised in like twenty days

James McWalter

I and and I think that is yeah as long as people understand the tradeoffs they’re making I think I think it all. It’s all fine and and some people would have their priority stack different depending on on their kind of life situation. Um, it’s funny you you know this idea of like the the poetry search shop. There’s this like old tale of James Joyce the the famous irish author and he’s like supposedly working away in his you know, writer’s room shouting and and you know the person he was with at the time was like downstairs hearing all this and he comes down after like a full day and she’s like oh James like you know. Was today gone and he’s like I wrote None words and she’s like oh my god like that’s that’s really good because she knows how difficult it is for him to kind of produce anything at all and he’s like I don’t know what order to put them in you know and so I think like that like in similar to the metaphor of you know.

James McWalter

Raising a child for a startup founder I think that’s also a bit of a metaphor for trying to figure these things out. Um, but Zack this has been absolutely brilliant before we finish off is there anything I should have asked you about but did not.

Zach Stein

I don’t think so I um, yeah, this has been a lovely chat and you know I think if you are listening to this as a fellow founder in the climate space come check us out for 401 k’s or if you’re an investor in climate you’re None can you have a 4 one k it. Also shouldn’t force you to invest in Fossil Fuels we help you out. We aren you know were work with partners that integrate every payroll provider. We build a series of portfolios offer unlimited education where real people we’re quite helpful frankly and you’re really not going to pay much more than you would otherwise. So tos. It’s a big, no brainer.

James McWalter

I yeah absolutely and I’m not even joking like just because it’s a bug I guess but I’m literally figuring out the 401 k right now and we’ll we’ll well have a chat about this. Thank you Zach.

Zach Stein

Okay, like Jabs thanks so much for having me.

Title: Solving Climate Change with 401Ks – E102

Great to chat with Zach Stein, Cofounder of Carbon Collective! Carbon Collective is the first online investment advisor 100% focused on climate change! We discussed the importance of a well-defined customer cohort, how to assess a climate positive company, the intersection of climate and investing and more!

https://carbotnic.com/carboncollective

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we are speaking with Zach Stein co-founder of carbon collective welcome to podcast, brilliant to start could you tells a little bit about carbon collective.

Zach Stein

James so glad to be here. Carbon collective is an online investment platform that enables individuals and businesses through their 401Ks to invest in portfolios that are built around solving climate change right now sustainable investing as what wall street sells. It is just a less bad version of the world today. We know what we need to do our greatest issue within sustainability which is solving climate change and we cannot do that with fundamentally scaling sustainable investing but in a way that is aligned with that end goal. So that’s what we do.

James McWalter

And what drove the initial decision to start Carmen collective. Yeah.

Zach Stein

So this is the second company that my cofounder and I have started. We’ve known each other since we were four years old first company was also in sustainability but in a very different space and at 2020 right at the beginning we set out with a whiteboard on saying how could we build better tools. To enable individuals to collectivize their climate actions and just identifying that we as individuals. But so many of us when we face climate change. We just get left hanging at the top of the emotional feedback loop. It was just like fuck like this is terrible. The icebergs are melting the fires are coming. World is still run by fossil fuels and emissions I’ve never been higher I’m one person. What can I do within that so that to us you know seemed like a problem that was looking for better solutions and we ended up interviewing one ah none people in and around our network trying to figure out where their climate actions anxiety took them. But actions it took them to take it where they got blocked and investing was this place again and again that we found they ran into.

James McWalter

That’s such an interesting process and I went through something very similar and I’ve talked to a lot of climate founders on on the podcast who’ve also done similar where you nearly start with a whiteboard and like a print out of the emissions in the economy and then you start trying to draw the lines between these different areas and then also trying to work with you know a certain amount of. Founder fifth and so yeah I guess kind of digging into that process like was this over you know, long weekend or was this kind of just ah, a constant kind of iteration over the series of months

Zach Stein

It was a long process. We formally kicked off on jan one of 2020 and we didn’t know what we were building until June like the beginning of June of none for sure so we started by reading. We probably read like None books in the first quarter. And really just getting deep and then we really kicked off into interview mode and we went through the whole thing of like we started off by building all the like a paper prototype that was like really like beautiful and like trying to illustrate our none idea and the None person we interviewed was like hey there’s this book called the mom test.

James McWalter

Yes, yes, very important book I.

Zach Stein

Have you heard of it. Yes, and so we’re like no we we haven’t done. He’s like you need to read it and so we’ve read it and we’re like oh my God we should have been doing this all along and so we just strapped everything and went right into just mom testing as hard as we could.

James McWalter

Yeah, and and for for the listeners. Um, if you’re looking to build anything that ah has any sort of consumer mass adoption and honestly even from Enterprise as we have the consumerization of Enterprise it becomes ever important if I read that you know it it really really helps you ask better questions. Ah, both of.

Zach Stein

Yeah, yeah.

James McWalter

Potential users. But then also of yourselves in terms of how you try to develop products to solve protect our problems.

Zach Stein

Yeah I think if you’re just at a point whether it’s a new product or a new feature or whatever that is on a product if you’re asking the quiet yourself the question should we build this then Mom testing is as as far as I’ve seen the best way of answering that question without actually building a thing.

James McWalter

I Yeah absolutely and you know I haven’t talked as much about this my own startup but when we were whiteboarding my cofounder and I like going to lots of different options. We were literally just there was a particular cohort of people we wanted to service and we would just ask them questions about the biggest problem they have that no one’s Solving. We just like write those down. And then thematically just the the problem we ended up focusing on came out and I think that just like that’s another way. It’s like I want to solve a problem in a particular cohort of people that have a climate impact or in our case, it was developers of clean energy and so on. But yeah, did they have like. Obviously we need to do all these other things and it’s like well it’s actually blocking it and so then you can kind of start building products around those blockers and those problems.

Zach Stein

Exactly you know for you. It was developers and for us it was individuals who had climbing anxiety So we we each kind of had that focus but then was able to use you know, kind of limit or or you know have our curiosity just take over from there.

James McWalter

And you know people with climate anxiety. That’s also a pretty large demographic group right? A lot of different slices and so as you kind of explored right? exactly. But as you kind of explored that. How do you start? this kind of segment. You know what that early customer cohort you wanted to go after might look like so.

Zach Stein

Fair.

Zach Stein

Yeah, it became clear to us that the hardest people to win over. But also the most important were going to be people who knew a lot and were focusing to some degree on climate change in their lives. They were the most important because. They were often the ones who felt the greatest pain where especially as an individual the level of cognitive dissonance that they they feel for say I work on climate change in my everyday life and then I like I get into that Suv and like drive home that it just it causes pain it causes identity suffering. There and so these type of people are trying to align every part of their personal lives to salt and climate change. So a really good fit there. The reason that they’re the hardest to sell to is that they’ve been burned greenwashing we stepping into the space of sustainable investing. We are stepping into a space that has been.

James McWalter

Right.

Zach Stein

Maybe the most greenwashed of kind of all spaces with it climate and so we fundamentally especially to this group that knows so well and has been exposed to that green washing we are stepping into a place that I like to say we are guilty until proven innocent in coming in for Them. So. Yeah, it’s people who work in the climate Space. So We very much are kind of writing the code tales on the rise of climate tech itself. Also this is obviously like nonprofits and academics as well. But then we also found a pretty strong traction with a group of cohort that we call ecotechies and this is.

Zach Stein

More engineering focused and folks who generally tend to work in tech. It might maybe would want to go work at climate company but like are making 300 k from Facebook or meta or whatever it’s called now drive a tesla ride a mountain bike on the weekend I think we probably all could picture this person. Um, and so them as well.

Zach Stein

Um, and for them they also are going to kind of demand that same level of rigor that this is the type of people who really likes to understand how the world works and once they’re only going to align with something when they can really see that someone has really done the homework in a way that is logical and makes sense to them and and is transparent.

James McWalter

That’s that’s super clear and I think it is ah really essential to get that. Well-defined customer cohort to kind of go after right because you can’t service everybody and so as you kind of zoomed in on that. Um, and one of the nice things about that cohort is I’m already thinking of places where those. Human beings like congregate online like they’re in the forums of places like my climateurney and so on so you know from a distribution and getting in front of people point of view. Um, it’s actually like a pretty nice kind of cohort to kind of go after but you still have to kind of win that trust and you do that through building an Mvp that yeah really starts to solve a problem that. As they see it and so what was that kind of initial Mvp iteration like.

Zach Stein

Yeah, so for us and this came through our mom testing it became really clear that. Yeah, we could not build something and this was also a failure. We interviewed founders who had kind of taken a crap at like a green investment app and stuff like that and a lot of the where we diagnosed. Where they fell short was they did not fully appreciate that the number None reason that people are investing is to meet their financial goals. They’re not investing with to drive impact that is a secondary. Um so primarily and and for so many of us the way that we’ve been taught that is smart to invest. Is what vanguard taught us is to invest passively with as much of the market as you can diversify it as possible with as low fees as possible and so we said okay we can’t break that mold because that would be a double bank shot. We’d have to say you know hey invest in this new way that is different that you are taught and you’ve never heard of us it. It should. This is how we’re going to drive impact that’s going to be too hard so we said all right? Can we build portfolios that kind of meet that none threshold but then secondarily have a very clear theory of change in regards to climate and so that went through a lot of iteration. We had to get registered with the se. And be able to launch as a robo advisor and do that and and then went through like lots of experimentation of how are we actually telling the story of how these portfolios are put together in a way that is concise and makes sense to people and kind of the first test that we had before we raised our pre-seed round. Was would did did it work was our hypothesis correct and how we built these portfolios that individuals would not treat it like climate charity which they often did with other platforms where they’d roll over like or they’d like invest 3 grand or something you know it was like.

Zach Stein

Money that you’re like okay I can lose this It’s not money of saying this is my retirement account and or would they move their full iris over toser roll over at old four None k and what we found luckily our our hypothesis was was correct. That our average account size was like closer to $50000 so people were moving over those larger chunks of money for them. Those full accounts consolidating with us and that kind of gave us the gumption of saying all right we have we’re on something here to go and raise ah a pre preceded in February of 2021.

James McWalter

Yeah, that’s that’s going to be exciting and going from you know ideation right? before covid I guess if it was None all the way through you know within year and a year and a half kind of getting to that level is in a very tough time for for everybody is is actually phenomenal and.

Zach Stein

Thanks Sam.

James McWalter

Going Well going through those steps with the scc and so On. Um I Think that’s also something that people who are coming in to try to ah build something in Climate. There’s often already existing rules of the road to navigate and you know some of them are literally legal like you need to do it Otherwise you literally legally can’t do it. Um, and so I guess how did you find that process. You know it’s something that scares away a lot of you know founders from tackling certain problems because of those kind of regulatory Burdens. And yeah I Guess what was the experience like.

Zach Stein

Yeah I think about this a lot and I imagined you do too that if we as humans had perfect like for knowledge of how hard something was going to be before you did it like we would just do so many fewer things. Yeah.

Zach Stein

Um, so it was a grant to get through that process and rightfully it should I think that this is you know what are the areas in terms of financial regulation that is really important and that you should It should be strict and hard to get through and say yes, the scc. Um, you’ve now passed the requirements that you need to pass in order to legally offer investment advice and manage other people’s money so that certainly was a challenge and also making sure that we found the right people around us to help make sure that the portfolios that we’re building even though they’re. Based on passive investing principles and we had our long back testing kind of showing like hey you could get a similar risk of reward as you would for a generic us-based Index portfolio here getting the right people around to say like yeah like that this this is checking the boxes. This is kind of meeting a fiduciary. Responsibility with this strategy with that That was really important for us to have as well.

James McWalter

And I guess then you know it comes to the the the hard question here. It’s how do we assess a climate positiveive company right? And how do we make sure that we’re balancing portfolios that have that kind of positive climate effect. Guess how do you kind of think through that because even recently there was I know there’s a you know you know Musk Twitter storm about ratings for some of the large oil gas majors getting particular kind of esu ratings that that seemed from the outside to look like overly advantageous to them. So yeah.

James McWalter

How do you think about that and ah, how to measure the actual climate climate impact of these different companies. Please.

Zach Stein

Yeah, so I have a lot of thoughts on this and I’ll try I’ll try to be concise. So this came through our testing as well. We experienced this as individuals but that esg was not actually meeting the the user needs I had that I had as ad as a user of the product. Um, for me, especially wanting impact investing fundamentally what I wanted was two things I wanted a tangible theory of change that I can understand and made sense to me of how my money was going to be driving change in the world. How making this switch from the vanguard index fund to this. Actually going to change anything in the real world and then to an emotional experience of being connected to something higher than myself and I think that for a lot of b to c companies is especially turn the offset space and something like that like that is the Holy Grail that every b to c climate company is going after it’s almost I don’t like to use this word like a religious. Type like of of what religion was you know has historically held of like that connection of I’m a part of something larger than myself I think especially when it comes to climate change that dichotomy of I’m one person who is born into a world run by Fossil Fuels and on a one track to a world of catastrophic warming to the how are we? How am I a part of something bigger that is something that’s really powerful esg as a framework I believe and we argue is in the process of a classic unbundling and so when we look at other products that have. Become kind of the first in their space that were really popular like other users started saying hey I bet we could use it for that. So like we’ve seen the unbundling of of excel. For example, when spreadsheets came about people are like oh this is so great for computation that I can do manually the intended use case. Then other people were like I could store my sales contacts with this not the intended use case you have the unbundling of excel which leads to companies like salesforce so we argue you know there’s the embundling of Craigslist the unbundling of email leading to companies like slack etc. We think that we’re in the middle of the unbundling. Of Esg Where Esg as a framework was created by institutional investors to be used as a tool to build balanced portfolios by institutional investors and they weren’t trying to create impact or drive value what they were trying to do is say huh. There is other factors. That we should be making sure we’re diversified around outside of like credit score and sector and pe ratio. So. It’s literally thinking about it on that level of how are we making sure if there’s you know some piece of environmental legislation hits that we are not facing too much portfolio risk to that.

Zach Stein

The innovation of esg was to quantify all of this for the None time prior to that like that type of rating or that type of system had just been exclusionary filters. So it’s much more basic but you then are these exactly and so.

31:54.38

James McWalter

You like? yeah like get rid of the sin stocks basically Tobacco firearms, etc.

Zach Stein

Then with esg you then have these new users who are like I really want to have value space investing or I really want to have impact investing again. This is a personal theory I think a lot of that especially on the the political left was in response to the election of Donald Trump of there was kind of this looking for ways of say how am I pushing back? How am I that. Kind of doubling down on my sense of identity within that. Which until now we’ve kind of led to this point of the unbundling of esg all right, very long-winded way to talk about How do we build our portfolios as you can guess we don’t use esg esg looks at a company ah at like how it operates at its business. What it doesn’t look at is what does the company make because that is the number None thing that drives its impact. The thing that it makes money from and so we look at the stock market. We kind of bucket companies into 3 categories. The none category are companies whose core business is fundamentally antithetical with solving climate change.

Zach Stein

And these barring some miracle technological breakthrough. This is obviously oil and gas but petrochemical companies dirty utilities airlines right now. Airline manufacturers cement steel. There’s hope for some of these industries but technologically now for a lot of them. They’re still not there. So we divest we do not invest in these companies. We do not believe it makes sense to own Exxon Mobile to vote on them and we can happy to dive into exactly there in a sec so that’s bucket number None and step one that we take we cut those companies out bucket number 2 are companies that are building solutions to climate change. That’s how they make money tesla is a very famous example kind of why we think it’s absurd and this was a lot of the pushback by Elon Muskkin the Twitter storm you talked about so we look at what are the best independent plans to solving climate change those who are in the climate space have probably heard of them groups like project drawdown the international energy agency Rewiring america and we say which publicly traded companies are building those that aren’t generating more revenue from products or services that are dependent upon the fossil fuel industry that kind of fall into that first bucket. So we just use revenue. We don’t use pledges or anything like that. So an example of a company that does not make it into that category in spite of it making a climate solution is general electric. They didn’t make it last year they are the None largest manufacturer of wind turbines in the world but they generate more revenue from their natural gas turbine and jet engine business. Therefore we do not hold them then the none category is everyone else and these are the companies whose core businesses can exist in a decarbonized world in a 0 carbon world. They just aren’t there today and that that means to us as shareholders this is where we should be engaging. And trying to pressure them to get there as quickly as possible. The example I like to use is Coca-cola there’s no reason why coke can’t sell me a beverage using the secret recipe in a zero carbon future. It’s just doing so powered with 100% renewable energy delivered on 100% electrified fleet and they’re protecting instead of abusing their natural resources. That to us is where we should be engaging as shareholders because right now there’s so much in the climate activist space. It’s trying to go to exxonmobil who like has a line out the door of customers waiting to buy its product and say like hey you should become a solar company and they’re like why would we do that.

Zach Stein

Instead we should be going to the line and being like hey there’s a ah better cheaper way to get what you’re going after.

James McWalter

I love I love I love it telling this. So I think I think the um, the pushback on the issue is really wellm made and it’s the nature of large enterprises. It’s the nature of finance generally. You love a number right? because if you have a number you could start doing things you can index against it. You can say is it going up or down and so ishi was like this attempt or is this attempt to kind of orientate the industry around a number. Um and all of the kind of considerations that go into that number were new to a definition. On the basis of a ton of compromise right? because you know an msci or sandp comes up with their esg indices they are doing that with a ton of conversation with the people who are getting hit badly by the esg indices. Um or potentially it could be hit badly and so. There’s just a user level of compromise because even as divestment occurs even after the blackrock letter a few years ago that’s had like this massive effect on on these things in general, you’re not going to see just like the mass divestment across all of these firms. All of a sudden because it would actually have like a you know, very very large effect. In in the stock market in a way that you know most financial professionals are way more conservative than allowing that to happen and so this all makes a kind of ton of sense to me. It was interesting when you mentioned kind of going into the revenue lines of a company like Ge and figuring out the exact yeah revenue line on a you know let’s say a climate positive versus a climate negative. Basis and the kind of things you’re talking about like typically large investment firms will have you know a none analysts like figuring these kind of things out and so how do you? you know I guess how do you kind of scale that research to figure out exactly what’s happening. Um, yeah, are you just kind of living in ten Ks and ten queues or exactly how do you kind of approach. It.

Zach Stein

Yeah, it’s we do only publicly available information. We think that this is again a problem with esg is that it is fundamentally opaque. You’re saying this is ethical. It matches your ethics. Sorry we can’t tell you how we came up with this and we’re not going to be able to show you in the future. What decisions we’re going to make with it. Um, that again, it just it kind of fails. The none test of trust building and it fails what you’re trying to build so for us transparency is absolutely key which means we all use publicly available information. So yes, it is 10 k’s. We look at investor reports and try to dig where we can and there’s companies which you can go on our website and you can look at our full list of all the climate solution companies that we evaluated in 2021 it was 352 companies. We identified as building or potentially building a climate solution. None made it through our filters so you could not only see every single company that made it through but also the ones that didn’t and why they didn’t what they failed of our criteria. We try to make it really really clear and one of the categories is lack sufficient information for it. If we cannot see the exact revenue breakdown between these product lines then we just don’t hold it in there. Um, because it means our clients also could not double check and repeat it for us.

James McWalter

That that’s very interesting. So so we have these kind of None companies just so I have a kind of sense of scale relative to something like the sandpfivehundred would those one hundred and sixty nine from a market cap basis would that be None of the sbfivehundred or like yeah fifteen twenty percent just to kind of get a sense of like how far we have to go to start having companies that have such a clear climate positive. Ah you know impact.

Zach Stein

Yeah let me I actually have members for this if you just give me a sec let me look this up so in the way that we build it about. In terms of the market capitalization. This is not going to be the best way of doing it but about 50% of our climate solutions collection is large gap about 30% is midcap and about 20% of Smallcap. So there are certainly companies in there who are large gap in there. You know Tesla is kind of the going to be the most.

James McWalter

So it’s about 80 so if you think about this and pick 500 is large cap and you have 169 so you know fifty to eighty companies in the sb 500 might fit into that criteria. Okay.

Zach Stein

Aggressive and leading example.

Zach Stein

It’s probably a little bit lower but I would need to go in and kind of look and double check.

James McWalter

Ah, under said. Okay, but I think it’s a good level setting for for me as I kind of think through again the the amount of ramp that’s needed to start pushing all these companies into it right? because even let’s say it is 50 companies that’s 10% of the s and b 500 um there’s a huge amount of.

James McWalter

Gap there that needs to be made up for and to do that and your theory of change is leveraging you know a large movement of capital from the existing place to this new place where it’s focusing on that 10% and kind of expanding those and then also those companies will perform better because of ah you know the ability to kind of. Their valuation is going up and so on and so I guess as you kind of think through like what are like the best levers to to do that. So is it getting yeah hundreds of companies to sign up from a benefits point of view with. Consumers would would you guys or are there other Levers. You’re thinking about.

Zach Stein

Yeah, so when we get to kind of our high level vision. We are trying to build the company at the intersection of climate and investing right now we see it as a fundamentally open category and we think that they’re really people are looking for a place that they can trust and again as we talked about earlier. It’s a really high bar. You have to meet for that and we take on that challenge willingly because we’re so focused it enables us to move really quickly and move into other spaces really quickly so we launched in this in 2021 in September we launched our green four one k program. Which allowed us to come on as investment advisors for mission-driven companies. So like if you guys if and when you guys launch a 401 k if you didn’t work with a carbon collective. You went with like a guide lie and or ah you know, empower or human interest it would force you to invest in Fossil Fuel companies you and all of your members. That is just contrary to your mission that doesn’t make any sense it it. It deflates the value of the perk as a founder of what you’d give to your employees and so we actually found oh. We could actually come on and be the investment advisor where we take on the liability and responsibility away from the record keeper the guideline of building those portfolios. And we can make it a win-win-win for everyone so that is going that that program is going really well and scaling really nicely and kind of from a business standpoint. It’s like what you talked about earlier of you know going to mccj on the slack channel and stuff like that like that’s a collection of people people who come to work at a company like yours or something like that. That’s an. Another self-selecting group of people that we then get to go talk to and hopefully help help them navigate. What is this challenging space and build. Trust.

James McWalter

And we are we are setting up our for one k in the next two weeks so I will I will honestly take you open that I offer because even though a couple of us it is something that I was literally like just looking at guideline it’s None clicks and we be done. Um, and I think that defaults are kind of what you’re battling against right. But I think over time as you actually become the default I think then then you will start to see that kind of real hockey sick kind of growth and at scale.

Zach Stein

I Think so too. Yeah, we definitely should talk. We have a great deal right now with forever savings. So let’s talk a fine about that. Um, yeah I think so this is something That’s really interesting that came out of our mon testing was there was a cohort of people who are just.

James McWalter

Yeah, absolutely.

Zach Stein

Ah, off when we ask these type of questions and you probably see this person. You could think of them too where they would say why should I do anything about climate change when it’s all the corporations in government’s faults I’m one person I was born into this world like get off my back stop guilting me and to some degree that person is totally correct. Like they you are just None person. You are born into this world. But what it misses of saying it’s all just corporations or governments and they should fix it is it fails to ask the question of well what should how do you How do corporations and governments change and what’s on I keep coming back to and it’s something I wrestle a lot with is. Like the status quo only changes and this is like the status quo of guide log be the default option like the status quo only changes when enough individuals or companies. Whatever it is decide to change it like I don’t know of a different theory of change.

Zach Stein

Than that of like how to change the world.

James McWalter

And well so that but then you also have the the combination of ah often technology that makes things a bit more obvious right? and so it kind of goes back to sa of transparency and I think there are so many areas of the economy that has just like relied on the opaque nature of their processes. Because nobody really cared like like a classic kind of non-climate example is the idea of sweatshops and so until mid 90 s there wasn’t really any sort of like general awareness of what is occurring at you know a South East asian sweatshop and then that changed and while that problem is not kind of away. You know it is at least something that consumers started to kind of think through things like ethical fashion and and and these kind of elements and I think that a lot of what happened was it was just actually easier to communicate in the 90 s people all of a sudden could send an email or. Communicate much more rapidly and eventually we had you know ubiquitous video to show conditions and I think what we’re starting to see is as information is more readily available as you know, even small cap companies that wouldn’t typically have a ton of research analysts on it even their data is more easily extractable. You start to have the but benefit of. Places like carbon collective to like make sense of that data expose it and you know drive change that way.

Zach Stein

I think so and I think to kind of use the sweats up shop analogy a little bit further should kind of stand on the shoulders of the work of activists before where you know those activists came in. You know they were to say this is wrong. You know Nike you should change I remember that with you know, there’s. Very focused on Nike at that time and that kind of gave room for a company like everlane to come about and saying there is this this awareness and this push but there’s not necessarily a place to go for it and so I think you know when I look at a company like carbon collective. I see like the group the work of the groups like three fifty dot org and Bill Mckibben and the divestment movement of that being some of the shoulders that we’re standing on of kind of popularizing and educating that we cannot solve climate change without changing how we invest and I think that’s really key.

James McWalter

And I guess you slightly touched upon it. But I’d love to kind of get you know if if you had any kind of numbers around like what the ah roi is right? because if the primary Decision-ma process that you kind of alluded to at the very beginning as you’re kind of thinking through this you know people to trust their fifty K plus. Retirement account in the hands a car collective. They want to see yeah a reasonable return for that in a way that at a minimum I guess tracks with the vanguards of betterments and so on Um, but but you are also from what you said like having to expose. To Larger. Let’s say small cap risk than then maybe more so than a typical kind of Vanguard or betterment. Um, so yeah, so I Guess how do you you know, think about the kind of different ah Roi and the the kind of risk adjusted investment profile of a karma collective account.

Zach Stein

Absolutely we think about it a lot so our core portfolios which is kind of what I described at the beginning with those 3 buckets that divest reinvest and engage the rest. Um, that is the that that’s what makes up our core and that’s where you get a similar level of risk in return when we do our back testing. Can go to our website. You could see our None ar back test. We update it quarterly. We show all kind of like the relevant metrics. We I think we do a pretty good job of explaining what it means to people who don’t know what things like beta or standard deviation are like is higher lower is like higher better or worse like we’d tell you? um.

James McWalter

It Red Red red is bad. Green is good. These kind of things. Yeah.

Zach Stein

Ah, basically um, so we try to make that really transparent we get this question a lot and I think I but take this opportunity to kind of step back and even a little bit larger because you brought it the divestment movement and this kind of goes into the theory of change where I think that that that the divestment movement. Promise land for when you start seeing things to really change is not just when people like you and me are saying I don’t want to be in fossil fuels because it’s wrong but people like you and me are saying I don’t want to be in fossil fuels because it’s wrong and it’s stupid financially and starting to spread those narratives when you. I think are fairly educated educated on economical things. So efficient market hypothesis is you know a theory that stocks are priced based upon publicly available information and there’s a lot of debate upon it in economic circles. But you know you can make the guess that it’s largely true. Maybe outside of some insider trading one people make the argument for efficient market hypothesis and this is often an argument against divestment. They’re just like de efficient market hypothesis. The prices itself. You’re not going to change anything what they don’t take into consideration is that there’s publicly available data is. What are the underlying narratives that we have about certain industries that are just pervasive. There are the undercurrents that you don’t see and there is an underlying narrative and you touched us on this by talking about wall street that fossil fuels are fundamentally a necessary evil in a balanced portfolio that if you want returns. That’s your primary goal. You have to include them. And there was a none narrative that sustainable investing is just for green hippies like me who want to wear our values and are willing to take worse returns for doing that and both of those narratives have proven false. So if you had divested from the sandpfivehundred from one thousand eighty nine to the present you would have made more money. Ah, 0 is born looking forward when we look at should you hold Fossil Fuels like should you be long on fossil fuels or climate solutions just the macroeconomic trends but you know without any legislation at all like 50% of the oil that is used in America is on our roadways. And most of that is in individual cars and trucks like you and I own. We just have a better technology here. It’s like the horse and buggy to a car. It does the same thing as a fossil fuel power car but it does it faster it is safer it is roomier you don’t have to go to a gas station. It costs a none as much to maintain you could drive it for a million miles and in None ars it’ll be cheaper to buy up front like that’s the middle of a technological transformation and that’s a lot of market share for oil. That’s just gonna go away and it’s not.

Zach Stein

There’s not room. There’s not other industries where that’s going to be made up or kind of tapped out in plastic. You know, maybe the growth of airlines and the broader growth of the economy but like maybe blue hydrogen. Maybe if green hydrogen doesn’t get there first. So when we kind of look at the long-term trends of like. Should you be invested sustainably. We try to make it very clear of any time that you deviate from the market you’re gonna have deviating returns in the near term you’re in a half months or you’re higherre gonna have months where you’re lower. That’s the way we you know we let’s not beat around that theres bit and that’s happened with our carbon collective portfolios. When we we are focused on long-term investing on on kind of the decades level approach that to us. It just makes a lot more sense to not hold the industries who are fundamentally being outcompeted and instead hold those that are replacing them well and then just you know hold the rest as well.

James McWalter

Yet’s super interesting and as I looked so you have your index which is on your website and actually a previous guest. The Ceo of beam global is on the index I’m sure he’d be a Duncan Denis um would be delighted. Yeah no I’d absolutely a happy take.

Zach Stein

Um, yeah, make the intro. Let’s get there for 1 k.

James McWalter

Yes, yeah, absolutely. Um, but I think one of the one of the powerful things about it as well. Like if I think about the ah the kind of startup ecosystem and the private company side of things you know we we had this kind of very exciting and I would say a pretty volatile issuance of Sps and so on and I’m sure there’s quite a few specs as like. Quickly glance at the index on there. But what I think is like really powerful about having an index like that and and creating this connection between those companies four one k and the overall kind of long-term market returns that actually also gives very nice comps to. Later stage climate companies and then that I’ll filter down to earlier stage climate companies that there is like a very very clear path and for those who kind of yeah this is before my time but I’ve talked to folks who were involved in the you know the none kind of renewable startup world just over a decade ago. Clean tech 1.0 and they really struggled to get to a clearer exit path whereas this is like you know you’re getting all the way into a 4 1 k like the more eventual boring quote unquote it becomes the more exciting it is for earlier stage investors because it’s like okay that’s that’s true. Scale.

Zach Stein

I Think that’s a really interesting perspective I actually haven’t really considered before yeah in the point that you bring up of what is the difference between Clean Tech 1.0 and you know climate Tech 2.0 of what we’re in now is it’s the end markets. Is that especially in so many of those areas like electric cars or like renewable energy. It’s not based upon altruism of what’s driving the end Market. It’s based upon financials and so all the kind of the whole ecosystem there of like what you’re building. For example. Um, like it just makes a ton of sense like if climate change wasn’t a problem your business would still be a venture business and like that’s that’s a really big difference Mine I don’t know but yours definitely would be.

James McWalter

Bre.

01:14:50.22

James McWalter

No absolutely And and I mean even yours because like we do want clean air right? like so there are also these other externalities that we are trying to reduce. Um hopefully and thankfully and we talked a little bit but before we jump to the call and I believe you have a a newborn and it.

James McWalter

So It’s very difficult to start a company build a company, get it to scale while also you know managing these other yeah, very very important like restrictions on our time and so I guess how you find Found. Kind of balancing those things particularly because you’ve already previously founded a company and I’m sure it was slightly different experience with that first company.

Zach Stein

Yeah, we talked about this a little bit on the beginning of the call at kind of seeing kind of the culture of founders who are like yeah I work seven days a week and like maybe it’s because I’m an introvert at heart or something like that. But I need so much creativity for the work. That I do. It’s like I don’t think you could write poetry 80 hours a week like if you’re kind of in that format. Yeah, exactly like it wouldn’t be very good could just get continually worse unless it’s like you’re like the monkey trying to write Shakespeare so that.

James McWalter

This poetry sweatshop.

Zach Stein

To me. It’s something that’s kind of going as and as a baseline of having really clear rules for myself of when am I unplugging when am I turning it off when am I not checking emails I Very deliberately do not have email alerts on my phone for that reason. So it’s been kind of just a continuation of that of having a newborn his name’s caleb.

James McWalter

It very good. Yeah, it’s good. It’s good that the scottish name right? Yeah, okay.

Zach Stein

Really cute. Thanks um, yeah, biblical. Originally he was one of the the spies sent by moses to go look into the land of Israel and see’m jewish and see come back and say like. You know god said we should go here like should we go here if so how at the other 10 of out of the None spies told like these lies that like it was either like incredibly good like unrealisticically but or unrealistically bad and C Caleb is one of the 2 that told the truth of saying that like. Is is going to be hard, but it’s going to be doable and especially in starting you know, working on a climate tech company and being in this space I think that was part of the reason for naming a child that I think that’s kind of the ethos that so much so many of us have to hold of it’s going to be hard. And it is really hard and it is really scary and we also have to hold that it’s doable and so yeah, my life has become very narrowed since having him in a really nice way in some ways my first priority or my first priority is him frankly, my second priority is carbon collective and my third priority is. Taking care of my wife so she can you know, be there to press feed and do things like that that I can’t do um and everything else is very far beneath that now I haven’t exercised in like twenty days

James McWalter

I and and I think that is yeah as long as people understand the tradeoffs they’re making I think I think it all. It’s all fine and and some people would have their priority stack different depending on on their kind of life situation. Um, it’s funny you you know this idea of like the the poetry search shop. There’s this like old tale of James Joyce the the famous irish author and he’s like supposedly working away in his you know, writer’s room shouting and and you know the person he was with at the time was like downstairs hearing all this and he comes down after like a full day and she’s like oh James like you know. Was today gone and he’s like I wrote None words and she’s like oh my god like that’s that’s really good because she knows how difficult it is for him to kind of produce anything at all and he’s like I don’t know what order to put them in you know and so I think like that like in similar to the metaphor of you know.

James McWalter

Raising a child for a startup founder I think that’s also a bit of a metaphor for trying to figure these things out. Um, but Zack this has been absolutely brilliant before we finish off is there anything I should have asked you about but did not.

Zach Stein

I don’t think so I um, yeah, this has been a lovely chat and you know I think if you are listening to this as a fellow founder in the climate space come check us out for 401 k’s or if you’re an investor in climate you’re None can you have a 4 one k it. Also shouldn’t force you to invest in Fossil Fuels we help you out. We aren you know were work with partners that integrate every payroll provider. We build a series of portfolios offer unlimited education where real people we’re quite helpful frankly and you’re really not going to pay much more than you would otherwise. So tos. It’s a big, no brainer.

James McWalter

I yeah absolutely and I’m not even joking like just because it’s a bug I guess but I’m literally figuring out the 401 k right now and we’ll we’ll well have a chat about this. Thank you Zach.

Zach Stein

Okay, like Jabs thanks so much for having me.

Decarbonizing the Middle Market – E101

Great to chat with Gabriel Phillips, CEO at Catalyst Power, Catalyst Power is an integrated provider of commercial energy, connected microgrid solutions, and Community Solar! We discussed decarbonizing the commercial and industrial middle markets, what makes a good acquisition, the connected micro-grid, incentivizing energy customers and more!

https://carbotnic.com/catalyst

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

I’ll tell you’re speaking with Gabriel Phillips Ceo at Catalyst Power Holdings, welcome to podcast Gabriel, great to start with. Could you tell us a little bit about catalyst.

Gabriel Phillips

Thanks for having me James. Absolutely ah catalyst power exists to decarbonize the middle market commercial and industrial end user. We focus in the northeast. We are a retail energy supplier that brings to bear. Other decarbonizing energy supply options for our customers in a combined offering that’s novel and we use the retail energy supply as our entry point into understanding the customer’s needs better than other standalone distributed generation developers or. Efficiency. Ah, ah players for instance because we have better insight and better access to customer data. We could be more effective in offering decarbonizing solutions for the customer. So yeah, um.

James McWalter

And when you say Middle Market What what does that that exactly mean I guess so.

Gabriel Phillips

I think the easiest way to describe the middle market customer is sort of what what they are not. You know they are not residential mass market or consumer. They are not hyper sophisticated you know energy buying end users that have a. Procurement team and you know have implemented their own nonsite measures and so forth. They’re sort of everybody in between typically a privately held. Ah you know corporate entity. We frequently find ourselves pitching multi-generational families multi-generational companies excuse me and. You know and other entrepreneur owned companies and so yeah, it’s everybody that’s in between the 2 bookends you know the 2 bookends are really well covered right? residential and small commercial both energy supply and renewable options are a particularly crowded space. There’s lots and lots of opportunity.

Gabriel Phillips

Um, on the more sophisticated side the Microsofts the home depots the walmarts have every option from every developer under the sun on ways to decarbonize themselves in a cost-effective fashion. It’s the folks in between that get left out because they’re hard to get to more difficult to educate. Their decision set is more. You know it’s more diverse. They’ve got a lot more on their plate typically smaller teams and you know keep getting and keeping their attention for reasons other than price is a tough one and so I’ve found that a lot of these privately held businesses that we address. The owners have more options for renewable energy supply at home than they do at their business. So we we viewed that as perverse I wanted to shoot that gap.

James McWalter

Yeah,, it’s so interesting within the kind of energy Space. We’re seeing more and more of a you know, slicing up of specific offerings to specific use cases whereas before you had a you know pretty broad broch of residential or mega and starting to see this kind of. You know offerings that are very very tiered to or to a specific group I think are going to become more and more common and more and more powerful I guess was ketlows power always focused on that market or has there been kind of an evolution in its History. So.

Gabriel Phillips

Well since the history isn’t all that long. It has always been focused on this particular customer segment and but that really you know comes from my my background and my my experience in my previous company and and prior to that. So I saw this gap before and I and I. Set out to to try to fill it. You know for the last several years before I Even form Cattle’s power.

James McWalter

And so you saw that gap and I guess what were those kind of steps to start to? yeah start catalyst and then also kind of what were the kind of early ideas for different types of product and we’re doing kind of pivots along the way. So.

Gabriel Phillips

Um, the goal has always been to. You know, find a way to finance onsite distributed generation and decarbonizing measures for this this particular customer segment. Um, and I figure the way to do that would be starting with the customer relationship. So. Um, acquire retail energy providers. You know that are already in that position of ah you know being the trusted energy supplier and advisor to the end-user. Um, even though you know the commercial sector is you know heavily energy advisor focused or or brokered the supplier does have that hook directly into the customer and that. Access to data that even the brokers don’t have just by virtue of being a licensed retail supplier you have access to utility data from a customer gives you permission and that just immediately gives you so much power. Um, you know to be able to show them the value of different distributed measures very quickly so that was my first step I you know found a couple of Target. Acquisitions and figured I had to raise some money to do that and and you know took the show on the road and it was very fortunate preco to ah to meet bp energy partners out of Dallas that bp stands for Boone Pickens not burns petroleum helpfully quadify for everybody.

James McWalter

Sure.

Gabriel Phillips

They’re a private equity fund focused on you know on energy. However, they really had a focus of late on the energy transition. So it was a really natural fit. Um, you know in the midst of our negotiations and getting into exclusivity on funding covid did happen and so our closing dragged on. Beyond the timeframe that any of us wanted because the world was quite uncertain but we ultimately closed in the summer of 2020 so hats off to the team over there for seeing through you know through covid to what things might be like somewhere on the other side and then it was worth pursuing this business opportunity which involved us. Ultimately going on site to customers to build things. It wasn’t you know, purely ah a hands-off you know type of ah a customer proposition. So I think the beginning of covid that that took a lot of guts to to support that. Um, sorry.

James McWalter

Yeah, no absolutely and you know I guess the you know so many companies have their kind of founding stories in the you know the months right before during or as we’re kind of coming out of the pandemic and it really kind of. Drills in certain kind of principles within the kind of company culture and and the kind of overall approach um have you found that for CAtalyst Power. So.

Gabriel Phillips

Well I do like to tell people that our plan was to be fully remote before covid now is just less weird so that didn’t change too much about how we were working with 1 another and where we are like it did for many others like that was a big pivot point from many other entrepreneurs or. Even you know, existing businesses you know throughout covid and because of covid that that wasn’t our story and the reason that we wanted to do that was you know in my previous business which was a startup I hired a a lot of twenty two year olds out of college you know taught them how to get up in the morning go to work till it was dark out and then go home and I knew like.

Gabriel Phillips

Couldn’t do that again because my picture of entrepreneurship did not involve my being chained to a desk or an office I was very fortunate growing up. My father was an entrepreneur is an entrepreneur and worked out of our house and I wanted to have a catch at two Pm He could put it down and come outside and then get back to work and.

Gabriel Phillips

Was wanted to have that for my own life in my family and I didn’t in my last business that I started because I hired a lot of people who required and you know and rightly so they they needed the coaching you know from an experience Management Team. So The physical proximity was really key this time around I decided I’m going to hire adults folks with deep experience and. Distributed Generation Wholesale Energy Market and Retail Energy Market Industry. You know corners of the industry and as I was executing on that covid it happened and all of a sudden you know, even my geographies opened up a little bit and everyone’s comfort with being fully remote nowhere near where the you know the home team is or whoever the. Is in charges you know started to feel reasonable. Um, yeah.

James McWalter

Yeah, it’s it’s ah so interesting. Kind of the reaction to you know, previous work. So for myself I’ve actually been remote for about 6 years on on the lead up to covid and then now I’m like with my own startup Likere. We’re having an office. It’s like been a very long time you know, kind of yeah out of ah you know back back room. Of an apartment. Um, and.

Gabriel Phillips

I think it would have been the the feeling of isolation would have been very moderated had we been able to have our plan to team offsites more frequently. But every time we planned one like a new variant kicked up and then we couldn’t have hits so we’re finally having our first next month but on ah.

James McWalter

Absolutely.

James McWalter

Ah, that’s exciting. Where are you going.

Gabriel Phillips

You said you’re from upstate New York going to Buffalo. Yeah.

James McWalter

Are you going to buffalo. Okay, very good. Ah yeah I will like I lived very barely upstate but people properly upstate. Don’t say Pokesie and what waingers are not really upstate, but for a lot. Absolutely.

Gabriel Phillips

Yeah, that that still counts as downstate New York and in our in our book. Yeah, so you know I so I hooked up with bp in the summer of twenty. We had an acquisition target that didn’t pan out and then the first one did close in February of 21 and that company was out of Buffalo. So we’ve got some key teammates up there. You’ve grown the team in the area. A little bit. It’s a funny corridor of the of the energy industry in that area of New York it was you know early days of deregulation. Yeah, um, you know, kind of that that area had a lot of telecom and a lot of sales focused businesses and so it it it got. Became a bit of a hotbed for retail and then also demand response and a few other niche corners of the energy industry and so you know the fact that we acquired a company there and I’m now found additional talent in the area wasn’t too shocking. Um, but you know that that’s why we’re going to Buffalo for our first team offsite. Yeah.

James McWalter

Ah, absolutely and this model of kind of starting with acquisitions I think is somewhat unique in terms of the different entrepreneurs and people from different startups that we’ve spoken to on the podcast. What makes a good acquisition.

Gabriel Phillips

Um, my answer to the you know to that question. Well that for me, it was you know that the the business was focused on our customer segment. Um, you know that was that was the my first criteria the second was. Um, you know that the price was right honestly because these are typically what I’ve been executing on are smaller acquisitions so you know a little bit off the radar. Um the bid ask spread you know between seller and buyer is pretty wide. Typically there’s no real good benchmark to point to you know for where valuation ought to be.

James McWalter

Right.

Gabriel Phillips

And frankly, the the plan postclos and any of the acquisitions that we’ve made has been to alter the way that the business operates so significantly that its historical history. You know historical performance wasn’t a great metric for valuation. You know so we needed to make sure that there was an entity with either a culture or at least a blank slate. We could affect our changes seamlessly so those were my criteria for our acquisition targets at least initially in the retail world and and you know we were thankful to find you know sellers that that you know were happy to transact with us that got us our first beach ed for the business in New York so first was the company in Buffalo us energy partners. Second was the downstate New York operating entity of a company out of Texas called Apg and E New York that got us our operational footprint in downstate New York and customers there and then we expanded organically into New England and now also into the pgm the mid-atlantic footprint. We didn’t find any acquisition targets that made sense for us there. We did acquire a broker entity in Upstate New York more recently that was back in this past February and really like you know the way I’ve viewed. Um you know how we continue to be acquisitive is that anything that we find that’s you know going to get us closer to these customers to help to decarbonize them. Is a good candidate for us to consider as an acquisition. No then they.

James McWalter

That’s so interesting and and I guess how do you think about? let’s say you know you you touched on kind of geography and then you also touched on um, function or business model. You know you have micro-grids and community solar boat mentioned on on your website. Mentioned these different to kind of geographic areas and kind of getting coverage and so you know I’d imagine the first couple are just like you basically just kind of complete the you know blue ocean to to kind of select from. But then as you add more. It’s like okay is this ah additive to what we’re doing versus something that is actually like duplicating our you know work that we’ve done elsewhere. And so as you kind of move along does it become more difficult does every kind of marginal acquisition um have a you know need more due diligence.

Gabriel Phillips

Um, well on the geography concept First and foremost you know because we deal in retail and we deal in renewables and combined them. We are subject to the regulatory whims on both a local state iso and federal level. So for us geographic diversification is a very important risk management tool for the business. You know, ah renewable incentives open in 1 state while they close in another right? That’s a sort of cascading effect that you know that takes place over time and this is sort of whack-a-mole right? on you know where you want to point your efforts. And the same thing is true in the in the retail market. You know whether you can deliver value to a customer relative to their alternatives that also shifts and changes with time markets mature at different times. The rules for operation change and so forth. So the the geographic expansion either via acquisition to you know do that with with speed or organically.

Gabriel Phillips

Um, is key for the businesses risk management for all all facets now in terms of like the additional effort of integrating new acquisitions. Um, you know depends on if the acquisition is like more like a tuck in you know, ah existing geography. The same building System. You know any other sort of ah overlap or similarities also depends on whether or not there’s a significant amount of people coming along with it in in our last instance we acquired assets. Um, you know, not people we expect that you know to happen sort of on and off in the in the coming year as well in our new acquisition Targets. You know the. The acquisition of a team definitely requires a lot more care time and effort you know than integrating you know, just a platform of customers and some other technology you know so it’s it’s not ah, not an easy answer on whether future acquisitions take more or less effort or more or require more or less scrutiny.

James McWalter

And when you say you required assets are those like literal distributed engine resources like solar Farms Community solar that kind of thing.

Gabriel Phillips

Um, it really depends on each instance.

Gabriel Phillips

In that particular instance it was customer contract assets and hedges along along with them. Not the physical power generation assets so on the cross so you know our focus of you know, crosssowing these decarbonizing solutions to the customers where you know we were stepping through sort of our our planned path right? and the first was. Get into retail use that as our springboard next was start to crossell something to the customer the first and easiest thing and most successful thing at this moment that we’ve been able to cross-ell to our customers have been community solar subscriptions that’s sales cycle is relatively short.

Gabriel Phillips

So guaranteed to be an asset for the customer in the long term like there’s no risk of a fixed price ppa being out of the money or something like that. There’s no physical infrastructure or change happening at their premises. So it’s the lowest touch decarbonizing solution that we can offer to a customer and so that’s been our you know our first cross sellll next. Is what we only recently really kicked up marketing on is our what we’re calling our connected micro-grid which is essentially just our distributed generation solutions at the moment that is standalone solar which we own and operate and then offer to a customer under a power purchase agreement a ppa the other flavor of that.

Gabriel Phillips

Same thing with you know, with still cni solar is renting or leasing our customers’ roof to develop either small community solar projects in areas where we have other customers who want them or depending on the state selling the output of the asset to the utility or some other regulatory-d drivenve revenue model. And then lastly we are offering a a gas firered backup generation service even though our goal is to decarbonize customers. You have to do that safely and continue to provide you know, direct resiliency to the grid and gasfire generation is the at the moment the most efficient way for me to see anybody doing that. And so we’re only offering that as a backup solution not as continuous duty I don’t want to put more gas onto the onto the stack but those are the the ways in which we’re we’re offering connected micro-grid solutions to customers Today. We do plan to incorporate batteries. Just. Working on understanding the economics and how we you know maintain warranty compliance while dispatching them and stuff like that. So you know, please stay tuned that would be coming but we call that a connected micro-grid rather than what I think a lot of people view the classical definition of a micro-grid as something that’s islanding the customer. We maintain their connection to the utility system to the broader grid for a bunch of reasons you know our plan is to try to build something that’s undersized for their needs. You know so that the customer has the option of implementing some other distributed generation solution in the future that none of us have dreamt up yet. That’s. Cheaper to implement and more decarbonizing if possible so you’ll keep that option open but also so that the customer doesn’t feel as if they’re putting all their supply eggs in one basket. You know if you build a piece of equipment on site and it’s going to produce all of your needs or maybe even more you’re subject to the sellback price. There’s risk involved with that.

Gabriel Phillips

And then if you made a bad decision on you know on the contracting because things got cheaper in the future. You kind of you’re wedded to it. You don’t have any any way of continuing to diversify your exposure.

James McWalter

That’s that’s fascinating I Guess to dive a little bit deeper into I Guess the sales motion and you know these kind of Middle Market customers I’ve spent over a Decade. You know so selling different things to to enterprises who is like the typical you know person of final decision. Is it. C-suite. Is there a director of facilities and energy that you’re tackling who already you know, presumably one of the acquisitions has that direct relationship and then as you said you’re doing some crossselling or upselling of these other solutions or there might be a better solution wood in your portfolio that is already kind of relevant for that given customer. And yeah, what is the kind of sales motion of of those kind of conversations I, so I’m fascinated by the kind of sales motion of different types of segments within market and so I spent.

Gabriel Phillips

Ah, yes to all I think is the easiest answer I mean yeah, again because the customer segment that we address has such a wide berth of look and feel and sophistication at times we’re dealing with the director of facilities at times we’re dealing with a sustainability manager more often than not. We’re dealing with. 1 of the owners perhaps their family their Cfo which may also speak family. You know there’s just a lot of in these independently held businesses that are you know the owners got their finger in every you know in every decision that’s made and so we you know we we do find ourselves pitching and then closing you know.

Gabriel Phillips

Up and down the spectrum of the corporate ladder. Um, yeah, but we are digital first. Um, and and I think that’s key because the retail industry you know is really still somewhere. You know a couple decades ago in terms of marketing and sales and so I think is the distributed generation world. At least you know when addressing you know this particular customer segment. Um, you know we have taken the tack that you know the the decision makers you know would prefer to educate themselves so we put as much information as we can on our website we’re trying to make. Process for our customers to engage with us as seamless and easy as possible and something that ah that is as much self-serve as possible. So right now like for instance on our website a customer could go on there and get a custom price for retail electricity in the markets that we serve. That’s you know any term from you know 3 to 36 irty six months no other retail energy supplier focused on commercial customers has done that to date. You’ve also given our customer the ability to step through a diligence process I’m a solar project entirely online. No one else has done that in my view for the customer either. They have applications and platforms that are focused on you know, selling agents or channel partners which we also have to address.

Gabriel Phillips

Clearly too because they’re a very important part of our sales channels. But um, you know trying to empower the customer in any way that we can using technology is is key for our long-term plans short-term Um, you know we find ourselves either via the acquisition relationships with our customers. Or our channel partners or our internal direct and you know old fashioned and digital sales channels that we are talking to everybody up and down the corporate chain when making the decision.

James McWalter

I’d also love to kind of hear your thoughts on what is driving the decision-making of the middle market to decarbonize their energy. So the kind of typical kind of residential customer like that’s very much a kind of of values and emotional decisions like you know I’m concerned about climate and my tripin’s future. All those kind of things. So I want solar panelund my roof and then on the kind of mega enterprise fortune 500 you know they have seen what the blackrock investment letter from a few years ago around coal has done and that’s you know the recent kind of changes for esg rules from thecc and it’s like okay we we actually have to do this from? Ah, you know the Cfo now cares about this kind of thing. Um, at those kind of large kind of corporation level and the middle market I guess what is kind of driving the you know the ah the kind of need to decarbonize energy. You know through those organizations please.

Gabriel Phillips

So I have some strong feelings about this. Unfortunately you know the the middle market commercial you know customers still very much coin operated. It’s got to have. Easy to understand direct and nearly riskless economic value to them to make a decision to host an asset on site or to adopt some sort of decarbonizing measure. Even if they’re not the 1 putting up any sort of capital expenditure. Um, you know there are non-monetary benefits to going solar whichever. Or you know becoming decarbonized right? We you you and I in the industry. We all take that for granted and obviously so do much larger corporates that are public and getting pressure from either their investment. You know their investors or the public markets or the scc like you suggested but these privately held corporate entities. They could put a sustainability page on their website. But. Don’t necessarily have to act on it and in order to act on it. They have to have a direct line of sight to that action and economic value. So community solar is like the easiest one because that provides them with a bill credit. That’s always going to be a guaranteed benefit the commitment typically is relatively short or if it is long term. It’s. Ah, commitment long term to something that provides them a discount There’s no risk of it being a premium to what they’re they were already going to be spending at the time onsite solar you know has flavors like that. But it’s clearly like much more of a commitment to them in their eyes. Both you know, physically at their premises and you know, maybe it. Hinders their ability to sell their company or to sell their building or creates an additional hurdle for that flexibility that entrepreneurs and independent business owners. Highly value I’ve been an entrepreneur for 12 years I’ve never signed an office lease for longer than 2 years I understand why a 20 year power purchase agreement is a difficult decision for a business owner to consider committing to.

Gabriel Phillips

Even though the discounts that we show are positive. You know there’s there’s there’s economic benefit. They need to figure out how to have direct line of sight to the ah to valuing the non-monetary aspects nondirect monetary aspects of going going Greener. So if there was more data on you know. Customers are willing to pay a premium for a product if there’s a solar adoption happening at the premises or they would would be able to garner a better valuation on a sale or get more interest from investors like in in their industry and their tier of that industry then it’d be easier for them to say yes and so right now the customer that says yes to.

Gabriel Phillips

Posting those things either has to have ah you know a very clear expectation of the economic value to them So the discount to their current rates has to be very steep. You know some? It’s a no-brainer or they’ve got to be pushed from some external source into you know.

Gabriel Phillips

Into decarbonization and and those are not a high proportion of the middle Market commercial and industrial customer right now.

James McWalter

Yeah I think there’s this kind of interesting ah parallel track that’s happening with ah carbon accounting or sustainability measurement software. So you have percephony and ah watershed and a couple of these kind of companies some of which we’ve had on the podcast in the past. And they’re definitely focused on those very large megacorporations who have that particular set of you know, external factors for why they want to kind of measure their carbon and then you know set a 20 year Target or 15 year target to decarbonize as those opportunities for those kind of software companies fill up right? Like as. You know you have some winners in that space you in inevitably have other folks try to move down market and try to start measuring things and if you know if it’s a 50 to $100 a month subscription for a middle market company. That’s probably not that expensive to try to start getting a grasp on their kind of carbon impact and really you start. Do you actually have to have the measurement for the metrics to that and kind of lead from that that would say okay, not only is this our kind of the level of our depluting elements of our business but to your point how does that actually connect to will we create more sales with that data right? if we are at level. You know 10 for you know, carbon emissions if we get to level 7 will that produce a 1% 10% 8% increase in sales increase in some other kind of dollars and sense element and honestly and until I think we have like just better. You know transparency around that and I think that is the responsibility of software companies to kind of come in and and find that opportunity as long as the price isn’t too high but then also having to connect that to the actual sales of that organization. Otherwise you’re not going to get too far.

Gabriel Phillips

You know I think the most mature data set around that is in the real estate sector I’ve seen a lot you know a lot of reporting around that um you know, but for every other industry. It’s It’s a big black hole of information right Now. So and I don’t think that’s going to get filled in for a very long time.. It’s just. Too disparate right? There’s too many different industries that we’re talking about you know, like’ you know I’ve been talking to you know folks about marketing and sales on our end or and you know investment team and stuff like that and you know we talk about you know, attending industry conferences. But what industry conference should I go to our customers in every industry.

arbtonic_admin

Right? Sure Love live out of a suitcase. Yeah.

Gabriel Phillips

Can’t pick one so like but but you know right? It’s like you know just I’m not like in the manufacturing industry. So I just go to manufacturing conferences right? I’m not in yeah I’m in the energy business but I can address every kind of customer under the sun that exists in the in the territories that we care about so that.

James McWalter

Sure.

Gabriel Phillips

Each one is going to have to have a bespoke understanding of whether or not there’s a benefit for them. That’s non-monetary that translates into some economic benefit and I don’t know I’m not going to bet on that that information gap being filled anytime soon because we don’t have that kind of luxury right now you know I don’t think we have that luxury for the world I don’t mean us as a company I mean the world doesn’t have that luxury.

James McWalter

So right.

Gabriel Phillips

So like I’m just in a rush and so I think that I need to find ways to incent the customer that speaks directly to them in only the way that they care about which is dollars and cents and to get them to make 20 year commitments what I have found is that they just need the economic benefit today to be a screaming absolute no-brainer. So guarantee. It never causes them any issue with the funnggibility of their business down the road or their flexibility or the discount today is so screaming huge thirty forty percent relative to their current cost that it makes them. Ah, ah you know a real impact on their bottom line today and something that happens frequently that I’ve written a little bit about you know in a couple of bylines is that. Um, you know folks in the renewables world like to trumpet that renewables are at parody with other types of Fossil Fuel generation and I and I think I see a smile on your face because you must know that that’s just highly inaccurate. But um, you know it just drives me bananas because what will regulators think.

Gabriel Phillips

When they hear that message Besides oh great, it’s time to sunset some incentives that is the opposite of what’s needed in order to address this particular customer segment who’s got such a difficult time valuing the non-monetary thing So The cheaper the incentive the the more lucrative the incentive for the solar developer. Means that we’ll be able to penetrate this customer segment more you know there’s lots of like special dispensation in the incentive structures for like the residential customer class. Um, but nothing in this sort of this this no man’s land of customers and and I think that the the middle Market Commercial End User. Needs a special incentive class from each state that cares about adopting solar because they are being overlooked right? They don’t have the the sophistication to make the investment themselves or the Bandwidth typically so they needed to be easier for them to say Yes, the way that we’ve made it so easy for residential solar to say yes. And there’s endemic. There’s going to be endemic challenges that you cannot ignore with the privately held company like credit analysis right? that we have to do that is so much simpler with residential customers and with public companies. So If you’re going to have a harder nut to crack. And it’s a necessary set of rooftops that we got to cover with solar in order to meet our goals for decarbonization like in the world we got to make it easier for them to say yes and that means more incentives not less so stop telling the world that where I could parody guys renewables are not and they need more incentives not less.

James McWalter

Absolutely there’s a couple kind of threads I want to pull on there. So one is I think it’s often like oh like you know, solar. It’s kind of old school all this kind of thing. It’s like guys. It’s 4% of the energy mixing. It’s right. It is a tiny tiny tiny proportion of what’s happening now. It’s you know. With solar and wind. It’s close to 100 % of all new build. But in terms of what is actually in the energy mixing United States right now. Um, solar is below 5 % today and so starting to remove um incentives and other ways of speeding up the transition when you’re at 4% just obviously doesn’t on it. The face of it doesn’t make a ton of sense. We’re already seeing that right? So what’s happened in California over the last six months where you know Pg and e and some of the other utilities try to remove some of the incentives for rooftop solar being like oh we have so much roofop solar installers like it must be a healthy industry and it is a somewhat healthy industry. Although the margins are not great and I’ve talked to some of those folks who. Do rooftop solar installation in California but basically California has proven a model for the rest of the country to follow and it’s not like California is done with rooftop solar again. They’re probably still only ten percent of the penetration needed for that state to hit their kind of own clean energy goals. Um, and so it is this kind of fascinating thing. It’s like okay we get to parody and it’s like oh should we just slow everything now. It’s like no, it’s like not only do we have to like blow past that when as we electrify pretty much every part of society. We actually need 3 times larger energy produce on the grid anyways and so it’s like parody is like okay well we actually need to get 1% of the cost of. What parody is today.

Gabriel Phillips

Um, yeah, and I and I um, yeah, sorry, it’s ah it’s a frustration for me because I just in reading industry you know publications that is just a constant theme. That’s that’s trumpeted and it’s just it’s it’s giving the wrong message to the regulator and to the the public who might vote for a particular. You know, elected official who might push a policy in one direction or the other like if they want their kids to have a nice place to play one day and you know, clean water to drink and clean air breathe then we certainly cannot take our proverbial foot off the renewable gas here and that was a lot of mixed metaphor but we need to we need to continue to move that ball forward with. More velocity not less and it’s a huge frustration that you know I think a lot of developers are gravitating towards you know larger projects that are utility scale in nature versus distributed you know because a lot of the same effort goes into a large project that goes into a small project. There’s a lot of efforts that are duplicated. There’s a lot of costs that are you know that are static and most people have the mantra that you know, ah ah one hundred Megawatt solar project is the same amount of work as a ten megawatt solar project which is the same amount of work as a one but we we got to find ways to make these smaller projects easier and more lucrative to build. Because we don’t want to take up some of our green space with more solar I don’t think I mean if we don’t have to there’s already so many commercial and industrial rooftops that are providing 0 value to the world. Besides you know, collecting heat for their buildings. We we should leverage that every you know commercial industrial rooftop should be. Plastered with solar and then we’ll have to use that much less of our open land to accomplish the same goal.

James McWalter

Yeah, and we we haven’t talked about this offline but ah audience probably are familiar that my own kind of startup is around finding the best places for climate positive projects right? So should it be solar should be wind. Should it be left as agricultural land should it be dense, commercial and residential and. A lot of it. Ah, right now we’re going to. We have a lot of land in a lot of places to build these kind of things but that’s not always going to be the case you know for any sort of kind of societal level Decarbonization. You’re going to start to have real fights between should this be a biomass Drivenn Fuel should this be food should this be solar. And you can’t triple use the land right? and in the next five to 10 years. Those arguments have going to become ever louder and anything that’s already built on right? like can you put panels on yeah on buildings as you mentioned, um, can you. You know Cover Roads. You know there’s all these different elements where it’s like okay where can we get double and triple use of the land to be a generating asset or some other kind of climate positive asset.

Gabriel Phillips

Anywhere that cars go can be covered with a you know a canopy right? But you know there’s ah, there’s a lot of other economic considerations as to why? that’s difficult at the moment you know steel Prices are pretty nuts and that makes things challenging but you know.

James McWalter

Get some shade.

Gabriel Phillips

Ah, stronger incentive that was unique to a solar canopy. For instance, if we you know could get that granular from a regulatory standpoint then we would be able to see more of that. Um, you know, Ah, ah, an issue I have frequent frequent regulatory you know issues are. The lack of granularity you know or specificity that Regulators bring to the discussion. You know there there is a way to incentivize the right behavior that that we all care about you Just got to get into the weeds and too frequently. A broad brush is used to paint you know either an incentive or. Particular Market design that I deal with like on the wholesale or the retail level and more granularity and specificities always needed and that that typically comes from not bringing in like enough stakeholders and enough you know industry participants to get that feedback and and and Regulators don’t always have a luxury of time to do that. You know they get political pressure to make them. You know to do something and. Or you know literal Laws. You know require of them to go and move forward with you know, putting together some regulatory Framework. They don’t have the time or the resources necessary to get it as granular as it could be and that’s unfortunate. Um, you know for my person.

James McWalter

Yeah, so I was actually talking to somebody who represents an industry group for different utilities and they are trying to work with those utilities to get some better data around the the interconnection queue right? So we’re generating capacity should be produced and suppose the the utilities we’re complaining to this. Intermediary who I was talking to about it’s like these developers are just trying to build everywhere and as I was saying the intermediary is like tell us where to build like you know if you want us to build and by us I mean people building generating assets in particular places you know where exactly your transmission capacity is, but. For varying reasons some of which are are valid around data security and and infrastructure security and some are less valid. It’s like you could just tell us where those things to build and we wouldn’t have like this kind of a massive issue with you know the opaqueness of these processes to your point and so I guess then like you know because you you mentioned having this kind of Geographic. You know this. Diversity across your assets from a kind of risk management point of view from the regulatory point of view I mean would you want to see a you know more positive for distributed energy resources kind of regime. That’s a bit more even or is it actually still valuable to have experimentation across different Geographic entities. Um. You know where some areas can move faster in some areas. It might be moving slower but you actually do see it some experimentation at the regulatory level that might be interesting for a company like yours.

Gabriel Phillips

I Like um, um, ah, um, all fornov innovation whether it’s on you know Incentives or um, you know the regulatory regulatory framework within which we operate but Simpler is better for the development world and a consistent regime across the entire country would be the Holy Grail for us all. If There was a federal incentive that you know made up the entire gap that solar or solar plus batteries or other distributed measures needed then you know we’d be able to operate in 50 states instead of just a handful and that that would be really valuable for the decarbonization goals of our country. And our country’s a pretty big energy consumer so it would probably make a pretty nice dent in the world’s issues that we have right now as well and I know that you know the current administration would like very much to prioritize it and is challenged in doing that right now in a lot of ways. So The public has to voice their opinion and I.

Gabriel Phillips

Seen some of that you know seen some letters to you know to congress and I’ve seen some letters to the Biden administration coming from various trade groups. Both you know, renewables and non but we need more of that trumpet from the hilltops that. Um yeah, we are in need of making this easier for us to build solar. We are in need of our. You know, prospective customers also understanding the value to them that goes beyond just the dollars and cents today. So. There’s an educational gap. There’s a ah incentive gap. Um, you know and then also just we need you know much more patient capital to come into this space. You know, thankfully there’s a lot of capital moving into the space but patience is key there because the sales cycle and education gap. You know, filling process are long and this is not a short-term story. Unfortunately I wish it would it was it was easy to say you know they’re gonna flip a switch in all fifty states arerenna go sole or just watch but that’s not the key. It’s Goingnna be a grind and. You know we hope to make it easier. We’re we’re trying to you know cut that sales cycle by putting it all online by digitizing it by delivering clear and easy messages for our customer base to understand and by finding them online where they’re doing their research. You know that’s again, weird pivots that others aren’t making.

James McWalter

Sure.

Gabriel Phillips

Um, that we hope to lean into and see success and have seen some and we’ll continue to see success from. But I think you know if there was a way to see more support for that then I think everybody needs to raise their hand and say yeah we want this.

James McWalter

And on the financing side especially as we’re moving into a world of increasing interest rates and and that’s just a world that yeah I’m a yeah young lad in his ah late 30 s but I haven’t seen any world of of kind of very high interest rates I think there’s actually a huge opportunity to come up with new financing models. We we often have this kind of people working on these kind of resources caught between 2 stools right? So you have like project financing um that has a certain type of structure and then you have venture capital and the amount of companies I’ve seen who are using you know equity venture capital self financing to fund projects that clearly should be debt because these are going to be physical assets in a ground. Have a twenty third year lifespan and have some sort of you know, rate of return over that time period is kind of remarkable and it was just the nature of so much cheap money around that that was even allowable. But that’s just not going to be possible anymore like valuations are going to tighten up. Ah debt is going to change and and the kind of what debt you can get is going to change. And so one of the things that when I talk to people on the financing side mostly in in venture but sometimes in private equity as well. It’s like what are some new financing models that could be come up with that are still great for the investor but also have a little bit more reflection of the types of assets that these are that they will be around for multi-decades. Um, but they do need some sort of technological element or some sort of clever way of capturing a lot of customers that might make more sense from a kind of a venture perspective and how do we combine those 2 elements right.

Gabriel Phillips

Um, I mean I think you you know, pointed out that you know there are 2 sort of tranches of financing that enter the space. There’s project finance and there’s corporate finance right? and I think that the private equity and venture funds that have moved into the corporate side of it. Um, are now the the lines between them are being blurred even in my case, you know Bp Energy Partners is a private equity fund but when we closed it was just me and a small team. We didn’t have any operating company yet being that they’re private equity and wired to you know to buy operating companies. We went. You know to acquire the cash flow as we needed to build out the company around it. You know at scale. Um, but that was still a venture type of play. Um, and I think that you know venture funds are also now looking at more mature businesses and seeing the lines blurred between you know themselves and private equity in ah in a new way. But I don’t think that at least I’m seeing any real shift in the the flavors of project finance availability. You know the and you know it sounded like you got a crystal ball when you said the availability of yeah debt I community. Um, but but.

James McWalter

Oh I’m hope I’m it’s more hope than of all I would say.

Gabriel Phillips

Like yeah, my view is less is less certain than that I do think that. Um we’re actually kind of in an unfortunate position for project finance and renewables because of the Itc. Not as a direct pay incentive. It’s just this sort of cottage industry has developed around you know tax equity that. Adds cost and complexity to being able to finance renewables that I wish wasn’t there. Um, and if that were to change then I do think you’d see a lot of financial innovation. There has been some innovation to get me wrong like I’m aware of a you know a couple one is solar reit for instance that. You know, has you know levers a reach structure to buy down you know land leases for solar and there’s other innovation I’ve seen like that out there that I find you know great and and that does drive down the cost of capital to a certain extent but the biggest hurdle is the you know the ability to to use the investment tax credit for a renewable developer. And so I think until that big shift occurs you’re going to see pretty much a lot of the same instruments available for project finance. Um now whether companies are using their corporate equity that they’ve raised for project equity. You know and blurring those lines I feel like those lines have always been blurred. Um i.

James McWalter

Sure. Okay.

Gabriel Phillips

And I think that ultimately once a project is contracted and its reliance on merchant revenue typically is low then the ability to back lever is what most you know investors have you know, have that’s the path most investors in project finance and renewables have taken I’ve done that you know my my past I’ve helped others do that at my last company and. You know help get the revenue contracts in place so that they have financialanable revenue streams and can backlaver something that they built or developed on balance sheet and I don’t I don’t think that that blurring of you know the use case of that capital is all that novel of a thing. Um, but I I really think that in order to see a big shift there we have to have a big shift in the incentive structure. The Itc has to become a direct pay mechanism. Otherwise we’re going to sort of be stuck in this world. Um, you know where the fairly fairly limited menu of financing choices are available.

James McWalter

I call congress that is the main way we we’re going to get that Itc changed um Gabriel Phillips this has been absolutely fantastic I really enjoyed the conversation. Um, before we finish off is there anything I should have asked you about but did not.

Gabriel Phillips

Um, well, um, you know if you would ask I guess a little bit about our process for qualification customer you know and and and who’s eligible I think would be would be of interest. Um you know and for us.

James McWalter

Please please.

Gabriel Phillips

Honestly. Ineligible customer is anybody who is responsible for their power bill and has control of their own building either a very long-term lease or they own and occupy the building and they pay their own power Bill. That’s a candidate even if their credit. Um, you know is difficult to underwrite. We have a process that’s seamless for us to do that. Even if their building is complex in its operations and they don’t want us to alter the way they you know they they experience their day-to-day. Our approach involves no effort from them aside from providing us with the information that we need. It’s seamless to the customer and that’s on purpose. We do not want our customers to feel as if it was a high-touch solution. And so I think eligibility like if somebody is thinking to themselves in listening to this and oh I’m not eligible for whatever reason, try me like give us a call There’s a way for us to decarbonize you whether it’s ah even if you don’t own your building and you have a short-term lease. Maybe your landlord wants to discuss this with us and there’s value for them in the equation as well. We are bringing the solutions that typically get structured and are bespoke for the very large sophisticated customer in the c and I world down market to those who have not had those accessible to them before and now that those those various flavors are available to them I think we have to.

Gabriel Phillips

Just get through this brief educational process where they realize that they are eligible for some decarbonizing solution whereas previously. They thought that they weren’t They don’t live in a no man’s land. They just have to call Catalyst power.

James McWalter

So absolutely and we’ll include all those contact details in the show notes. Thank you Gabriel Phillips! thank.

Gabriel Phillips

Ask Me Anything – E100

Great to be interviewed by Bridget Hickey, Director of Marketing of Cloud to Street ! We discussed why I started the carbotnic podcast, my background, inspirations,the challenges and experience of entering the climate startup world and more! 

https://carbotnic.com/100

Download Podcast Here: https://plinkhq.com/i/1518148418

Please also find some great climate focused resources for roles below:

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello everyone welcome to this 100th episode of the Carbotic podcast and I’m joined by a wonderful special guest Bridget Hickey. 

Bridget Hickey

Hello. So excited.

James McWalter

Brilliant, um, and so today we’re going to do a little bit something a little bit different. We’re gonna actually turn around the mic and Bridget Hickey Hickeyis actually going to interview me and so Bridget Hickey, love to have you introduce yourself and get into it.

Bridget Hickey

Hi I’m Bridget Hickey HickeyI lead marketing at cloud street we do ah flood mapping with satellite imagery and a lot of interesting machine learning I I’m very excited to be here and chat with James.

James McWalter

Great. Um, yeah, we so we we we actually met at a ah climate meet up from my climate journey back probably about six seven months ago and we we hit it off and was like oh you know it’s ah it’s fun talking climate and it’s fun making friends at climate events.

Bridget Hickey

It’s very fun, very excited to be here. Very excited to learn about your journey through all this. Um, so I guess my None question for you is how did this podcast come about how did you start this? Why did you feel like you wanted to get into this.

James McWalter

Yeah, no, absolutely so I’ve always been like like podcast-obsesed you know like the friends family. My and my wife which just like ah he’s just like always listening the podcast three x speed minimum. You know. So for those who are listening 3 x speed I’m sure I talk quite fast. And so like I was always like into podcasts and like I learned so much from podcasts and so a couple years ago it was kind of early days of covid I was like all right I want to be involved in climate change from a startup point of view probably start something myself and I was like ah there’s probably a couple different ways I could do that right? So I could like. But sorry my background was nothing to do with climate change. It’s like where do you even start? you know, um and things are a little bit different now. There’s a lot more opportunities for moving across industries into climate. But at the time there wasn’t that much so I was like I kind of had. Ah yeah took a pen and paper out and I was like what are my options to move into yeah becoming. Somewhat knowledgeable some part of the climate change problem and and start a companying the space and so I was like okay I could go back to school I could do a masters I could get a job at a climate company but it might be more junior than what I’d been doing previously or I could start a podcast where I like just talk to lots and lots of people and find out what they’re working on and. I actually kind of weighing up like the different elements podcasts. Well, it’s not easy by any means it’s just definitely easier and faster and the learning cycle is way faster compared to those other options. So I was like oh let’s let’s try it out a couple of episodes see if I enjoy it and then kind of go from there.

Bridget Hickey

Great And how did you sort of slept the guess what kind of people were you interested in getting to know on the podcast.

James McWalter

Yeah, so you know the none couple of guests were very generous with their time like you know this is all just cold messages out from me to a few different folks working um at you know, climate companies of various types and so the the none 2 said yes. At the time it was I think monthly I was aiming for and then as those went well I moved it to every two weeks and then eventually I moved it to weekly and so really and then and then I took on Gabby who became my producer and she does most of the kind of you know, guest booking and so on. But really, what we’re looking for are people involved in solving problems through the medium startups. So are they on the startup founder or kind of leadership team side of things or are they more on the ah investment side and so we’ve interviewed a few folks on that side as well. And so yeah, pretty much any. Sort of founder who’s working on climate change and solving things in interesting way I’m interested in talking to we we have refused some guests over the over the last couple of years um yeah mainly because I I don’t think that their their approach is actually going to be effective for climate um hydrogen personal cars like. That that is one area that I’ve had a few people recently be like oh there’s going to be hydrogen fuel cell cars everywhere I’m like now evs of one. It’s just it’s just a waste of time for heavy duty vehicles. Maybe but um, but not so much for personal and passenger cars. So yeah, those people will will say no to. But in general we’re pretty open to talking to people working on lots of different. Parts of the climate problem.

10:56.20

Bridget Hickey

I Mean climate Tech is so big. Do you like how did you sort of build your own company. How did you decide where your interest lied within the very very wide and widening space of climate tech.

James McWalter

Whiteboarding lots lots ah lots of whiteboarding. Um, yeah like I think I think the that path is pretty similar to like a lot of folks who are coming from a more generic tech background into the space where they you know. They’ll get some sort of printout or pie chart of like the emissions in the economy and it’s like oh there’s transport and there’s residential and there’s whatever and then we’ll be like okay you know could I tackle that piece could I tackle this piece. That’s basically what I did um I actually did with a couple different folks like I was. You know, doing some pretty lengthy cofounder dating with with a few different people over the course of yeah, a year and went through that process multiple cycles of that process and some and some ideas we would reject based on like they just don’t tackle enough emissions or I would reject reject on that basis and some would be ah. Like it’s a really cool problem. It’s a really cool set of solutions. You could build but just it’s on a good founder fit right? Like if it doesn’t have a software component I’m just like less of a good fit because that’s my background like you know you could bring in a cofounder at school with hardware or something. But in general I was like looking for things that had a software potential solution. So. That was that was it I guess like I know Bridget you were also looking at different climate startups to to join you know because you also kind of come from a more generalist kind of tech background I guess how did you? you know sigh for yourself.

Bridget Hickey

I find I found the ones that were most interesting were the ones where there was I mean I’m I’m on marketing Side. So I liked the ones with like a real ah a bigger story. Obviously the entire climate story is pretty big but um, you know we do flooding right Now. It’s very relevant. There’s a lot of.. It’s affecting a lot of people in real time and there’s not a lot of people tackling it I think anytime a founder has like a pretty strong point of view on where they think the world should go and a specific sort of especially with climate I have identified a gap in which nobody’s really addressing the problem. That’s always. Sort of a fun thing from the marketing side.

James McWalter

Yeah, it’s on on that kind of strong view. But I mean I guess so the view that kind of eventually came to my cofounder Charles is that we’re going to like replace the entire built environment in the next thirty years like that’s a yeah there you go? um.

Bridget Hickey

Um, that’s a good line but.

James McWalter

And and outside of money I say outside of monuments like you know outside of statue of liberty. Everything else is going to be replaced the next thirty years to be like at an worse climate neutral but ideally climate positive in some way so it’s producing clean energy or it’s sequestering carbon in some way. Um, and that’s even like. Literally the residential building will be living and you know individuals are living in because we’re you know, starting to produce things like concrete that absorbs c o two out of the atmosphere and strengthens the actual concrete over time. Lots of like super cool things and some of those solutions might not work. But I think that you know that’s that’s the best where I’m like all right we’re we’re going to be changing everything. What are the kind of barriers to that mass change right? You know rep’re placing the and built environment that we we did it in Europe after world war None in like you know 8 to 10 years um where it’s going to take us longer because we don’t have something as acute. Obviously as a world war but that is the level of change that is.

Bridget Hickey

Um, yeah.

James McWalter

Required over the next twenty years and so there’s a lot of opportunities for kind of making that more efficient and uneffective.

Bridget Hickey

Cool all right? So I have a list of of a bunch of questions that your listeners have given so we might jump around a bench. We just get into it all right? Well None off, you are irish which I don’t know if anyone knows you don’t have this longest accent anymore. But you are we now living in New York doing a tech startup.

18:18.94

James McWalter

Ah, yeah, you go for? yeah, go None No.

Bridget Hickey

Like how did this happen. What was the sort of more generalist tech background you had Do you think that that being Irish has changed your approach to how you’re approaching this I’d love to know about how you got here.

James McWalter

Yeah, so yeah, so I’ve definitely mentioned the farm on the podcast in the past. Um, so yeah, so I was born in Ireland in the kind of mid 80 s ah we had a little farm but we immediately basically not immediately. But when I was 4 years old we moved to New York we lived in the Bronx for a year from age 4 to 5 and then we moved upstate New York to a place called wappinger falls which is like near pokeepsie it’s kind of halfway between New York city and Albany so not that far upstate. And yeah, I’ve lived a kind of classic american suburban life like what later I would like watch on Tv where you know you’re. Playing baseball games and teball and going to boy scouts and getting up to all sorts of you know mischief running and around so we did that um and for various kind of family reasons. My parents decided to move back to Ireland um, in 9095 and so we move back and onto a little rural farm. You know, fifty acre sheep farm on the west coast of Ireland and I sounded pretty american you know a yank as they’d call you back back home and I’m not going to say that it was easy I would ah you know, basically you know. My I guess childhood into my teens was pretty tough in a lot of ways mainly because you’re completely an outsider like when you when you sound that different in such a rural area. Um, and rural west of Ireland accents are incredibly strong, incredibly distinctive. So you know there was there was a kind of a lot to handle a lot to manage with that. Um, you also have this all other kind of culture element that um you know was I guess kind of awkward so in american schools and in american culture in general like success is generally a positive thing right? It’s like you know if you said how how’d you doing your tests. It’s like oh I thought it did pretty well right.

Bridget Hickey

Nice.

James McWalter

Um, that’d be like a reasonable answer to to give whereas in Ireland even if you know you ace the test. It is culturally unacceptable to say that you have to be like I probably failed it and so I did not get the memo as you know an none year old coming back to Ireland and so people will ask me this question and and I’d be like oh you know I feel like I did pretty well. And they’re like oh you’re so arrogant and so ah, it was literally so this was kind of literally the vibe and so I guess it took a kind of while to absorb and understand and kind of bring the you know those None different cultures together in my own head in a way that was satisfactory. And that didn’t really happen until I got to kind of university and you know started to find a bit of a tribe that that worked I worked kind of better with you know I started getting into philosophy and theater and like all these kind of the other artsy things that I ended up. Yeah, not not working in full time. but um but yeah, so yeah that was that was the kind of the message None thing I will say though that did definitely affect. Elements of kind of my focus on climate now is that we convert it to organic farming in 1997 and 98 and yeah and my mom who who Bridget Hickey Hickeyis a big fan of um, yeah, um, by Bob my mom who’s who’s you know.

Bridget Hickey

Pull up. Um, your mom.

James McWalter

Kind of launched a business in her in her early sixty s and and the british has been very impressed kind of looking at it from afar. But um, she was head of the Irish Organic Farmers Association um at the same time as my father was implementing you know, organic farming on our local farm and so you had this scenario where mam was basically like.

Bridget Hickey

People.

James McWalter

Setting up the criteria for the country um whereas his dad was doing it. You know locally and like those things are obviously in clashing right? because what you’re trying to do locally um has all these kind of local considerations that you can’t really take into account when you’re doing like a policy for an entire country. So yeah, so there was a lot of that that kind of stuff.

Bridget Hickey

Your mom continues to get cooler every time I hear more? Um, so you sort of had a winding path into this. But obviously there’s a lot of people who are trying to get into climate tech. We meet them all the time in our various communities in New York um what is what kind of.

James McWalter

Growing up. Yeah, yeah.

Bridget Hickey

Advice would you give to somebody who’s working in tech not working tech but really wants to get involved with the work that the climate tech crew is doing. How would you think that people can go about getting involved.

James McWalter

Yeah I mean I think with any we’re trying to move into any new space right? It can seem very ah restrictive. It can seem like there are various ways people speak or there are various kind of the rules of the of the road for any sort of group that you’re the outsider of and so the biggest thing is. Got to get into that group in some way as quickly as possible to realize that they’re all just normal people doing normal things and what does that mean it means just talking to to lots of people. Um I think it is difficult to break into any new Industry. You know for the true introverts out there but it has gotten easier because there’s a lot more. Slack communities and things that are more virtual that I think are are generally easier for for people who have that more of that approach. But yeah I would say like there is nothing better than hearing for somebody like a genuine interest in working on something that that you care about um I’ll semiregularly at least couple times a month get inbound from different. People who are like you know, looking for mentorship in some way and if I have the time to you know to be full on accessible I’ll I’ll give it if not I’ll point always point people in in the directions of people who might be more suitable to them and one of the great things about the climate space in general is like people are just like super welcoming like you know we’re all. Kind of joined in this incredibly large project and problem that um you know that it’s just it’s so mad. Madly big like how do you even kind of begin to cut a tackle it and so there’s never a sense of like oh we’ve got too many people working on climate like no, but the more the merrier you know.

Bridget Hickey

It’s also weirdly optimistic I Think despite the very big and large challenges people are very kind to friendly. Um.

James McWalter

I really love. Yeah I think that it’s great that you said optimistic None of the things that I think people get wrong and like in a particular way is that the people who are most negative on major problems are the people who work on it the least right? if you go online. It’s like oh you know. Climate change is terrible and like nothing’s gonna be solved and we’re all be living underwater and all this kind of thing none of the people who write that are working on climate change either in a startup or policy or like they’re assigned it like are activists. They’re literally just people complaining and that’s fine like it is a big thing and and you know and people have jobs to do and so on I’m not saying that everybody absolutely should be. Dropping everything to work on climate but I will say that if you do work on climate whether it’s startup or policy or activism. Whatever it may be you do start to feel more optimistic. You do feel more empowered like I think just from a pure mental health point of view like if you’re really worried about climate and it actually stresses you out. Start working on climate and it actually weirdly make you less stressed.

Bridget Hickey

I Totally agree I can’t believe how much I have calmed down about it because I’m I’m just surrounded by really smart people all the time who are so knowledgeable about the problem and it just makes me feel better that they are all working on it. Um.

Bridget Hickey

Okay, so you mentioned a bunch of different online group I Know you’ve personally mentioned my climate journey I think you did on deck as well. Can you talk a little bit about some groups that are available how you’ve how you’ve approached virtual versus real world communities and what you could get out of them if you’re looking to get involved.

James McWalter

Yeah, and we’ll include some of these links in the show notes. But ah, there’s pretty decent communities with pretty large amounts of activity for quite a few different segments of climate. So one is air miners. So my climate journey. It’s probably the most generalist it does have a I think it’s $10 a month fee which is a little. You know it definitely kind of blocks maybe like students and so on to kind of get involved in it but but it’s probably the the oldest and most kind of generalist. Um, so that’s well worth checking out and and paying the $10 for a month or 2 just to kind of get ah get a sense of it. And then Jason Jacobs’s podcast. My climate journey you know is obviously somewhat of an inspiration for this podcast is ah quite an even overlap of guests. So um, definitely checking him out in general. Um, the other piece is air miners so air miners is a great community for anyone trying to do carbon sequestration. So whether that’s through soil or direct air capture machines or something else. Um, there’s a lot of really smart people there. It’s actually probably the best place I’ve found for like genuine research scientists interacting with people trying to build companies and I’ve met some great people from there in person as well who who are kind of working on really cool tech. Um, and then moving things from the lab into. You know, commercialized use cases that have a climate effect and then the other one I would mention ah off the hand is the task force so they’re very focused on distributed energy resources and energy. Um, the 3 people who founded that they’re all based in Brooklyn I meet up with them pretty regularly now. Great great group. I’m really focused on you know, getting clean energy deployed at scale there few others work on climate I think climate base one is there any um missing british.

Bridget Hickey

I like work on climate they have they have interesting little like subgroups where you can do like learning hoops I’m learning about Kelp farming through them. They’re very cool cook consider a past hi.

James McWalter

Everyone goes through their Kelp phase with climate. It’s like ah it’s not even joking. It’s like I was like K solve it all and then it’s like oh it’s pretty tough. Yeah.

Bridget Hickey

It’s very very complicated but it’s still we should all eat more elp. Um, okay next question. Ah, what is the largest climate problem that you don’t think anyone is tackling.

James McWalter

And.

James McWalter

Yeah I mean I think that there I think basically the less sexy. The thing that the less likely to are smart people tackling it. Um I think that’s just like a general rule right? So I guess one experience I had ah on on the other side of this is. When covid started everybody started a Zoom or slack competitor right? So I was in on deck at the time you’re just talking to lots of founders and like honestly fifty sixty percent of people were working on Zoom are are slack competitors. And that’s fine. You know like there’s obviously a clear need for for those things now. Um I don’t think any of those companies really have have like done anything because Zoom and slack did a pretty good job for what they’re doing and like what else kind of you add from there and so those were cases where there’s this like kind of very obvious set of problems. But maybe it’s reasonably well served. And it kind of it was kind of sexy at the time it’s like everyone’s on Zoom quote unquote and so let’s try to solve that. But if I think about like just the economy in general There are so many opaque kind of hard to identify parts of the economy that I personally just don’t know that much about and a lot of them have to do with materials various types. So it’s like if you just look at any object around your home right now. It’s like you know, ah like I’m just looking at my desk some of dog food because the dog sleeps next to me and I have my laptop There are probably easily hundreds of materials going into each of these. Um they have all their own different supply chains and every single one of those supply chains have to be decarbonized. And new materials found either because we have an existing material that could be repurposed that has a more climate friendly like approach or it’s something that we have to completely invent from you know, whole cloth and like completely you know disrupt and like an existing material with something new and so to me like I would nearly. Start just looking at all of the different materials and these materials by the way like you think about cardboard you think about concrete like these are none or at least hundreds of none but none of dollar industries pretty low margin but like just absolutely massive and they do need to be decarbonized and while there are definitely some companies working on some of these things were like way way way. And like I would love to see just lots and lots of you know so smart business people talking to smart material science people and coming up with like new startups.

Bridget Hickey

Yeah, there is so much option there um more specifically on Decarbonization. What do you see? Obviously there’s been a ton of attention paid there recently it sort of seems to be the next big thing with the frontier money going into it. What. What do you see as the biggest barrier to decarbonization I Know you’re pretty involved with air miners. What do you sort of see as like what doesn’t exist yet what will make that scale and.

James McWalter

Yeah, so I guess like so it’s thecarization of existing industries and then just like taking carbon out of the air or getting the carbon removed from the economy in some way So I’ll kind of tackle the second one because I think you kind of touch on the None one already. So I would say that direct our capture. Is like a really really really exciting concept and there’s a reason why a lot of smart people are working on it and a lot of money is being put on it. Um, it’s probably pretty far away from scaling and so to me a lot of the focus on decarbonization right Now. Should be about all of the fastest low-hanging fruit things we can do to buy time for those more technologically advanced things that we’re going to need to finish out the Picture. So What I going to mean by that. So one is just pure clean energy right? Like we just have to decarbonize the grid like just has to happen as quickly as Possible. We literally don’t need to invent anything new for it like it’s purely a scale thing. It’s not even a financing issue from a scale point of View. It’s a lot of other issues that I’ve talked about before when I talk about Mo startup around permitting and interconnection and these kind of things so we also have like transport. That’s another massive segment like we basically have now invented the evs that are necessary. The biggest subject like a barrier to Eb adoption now is more supply chain driven than technology right? like we just need to get more the T Ion batteries built and into these cars. Um like so in general things are happening. It’s just the scale of new supply chains and kind of removing certain barriers around. Things like permitting and so on those are kind of necessary things but all those things need to be ah, sped up as quickly as possible to buy time for things that I think will still be necessary which are things like direct air capture of carbon and you know. Kelp or algae and other methods of like sequestering carbon soil carbon sequestration these kind of things which are somewhat unproven at scale but like we need all of those hits a goal and some of them might work but like most of them are not going to work this side of 2030 like they may be working in the mid 2030 s And by that time though we should have like everything else as optimized as possible up to that point. But yeah I Guess what are your thoughts on that.

Bridget Hickey

And I mean I’m kind of interested in. So Obviously these are big long-term bets and you’re a founder who’s going out and you know raising money in the markets which are obviously all over the place right Now. How do you recommend? A founder is going out with these big huge ideas that just take a lot of time. How should they be. Position that that to investors. How do you think Investors are sort of adapting to the climate Tech market.

James McWalter

So yeah I would say they’ve been adapting really really well until like two weeks ago so so we’re we’re talking and a may here of 2022? Um, so I talked to a lot of ah climate investors before I so even was. Really actually the early days of the podcast really just to kind of get a sense of like where like what is vc aable right? like you know Vc has a very specific type of time horizon they have a very specific type of investment and return investment. They’re looking for and with that. Not everything is. Going to make sense for a Vc right? So a chain of hairdressers is not going to make sense for a Vc but a software app like you know a calendar might because it it scales and has certain kind of elements of scale and and network effects. So when you kind of think about like all the different elements of climate like what’s. Kind of vc backable and what’s not I would say in general vcs ah are driven by the same sort of elite recent elite focus on climate change that a lot of people listening to these podcasts are so climate change is not a populist ah problem to tackle. Vast majority of people working on climate tend to be from higherd socioeconomic groups tend to be well-ed educatated so generally some form of a word elite and vcs are about as elite as you can imagine and so they’re basically going to dinners and cocktail parties and all the usual things. Ah you know, pre and post covid. Um, that necessitate like an interest in these things and so what we’ve seen over the last couple of years is just like a lot of vcs rudy folksing climate and it nearly became a joke you know bridge and I we we also kind of co-host this in-person meetup now in New York for climate folk and whenever there be like a Vc folks showing up. there’ always be like a Vc coming from an existing fund that was non-climate focused and now they’re kind of working to raise their own fund that’s climate focused and it just became me like kind of a semi- joke in my own head. It’s like oh another another Vc doing a climate fund which is great like I ah like we need more like evermore. Um, but it is the kind of world where um. That money is I don’t know if a lot of the money and that a lot of those funds are actually going to make a return for their investments because a lot of the investments going into climate tech startups are not probably Vc backable. They actually should be something more like project financing or some other type of of financing now again I’m not complaining because right now all the money should be diverted as much as possible. But I think we what we are going to see is a bit more streamlining over the next few years as some of the returns from some of those companies that were never really good for Vc in the none place. Don’t you know? don’t don’t don’t come to fruition.

Bridget Hickey

Yeah, he sense? Um, so you were a startup talk a little bit more about your startup. So your startup’s focused on the built environment I’d love to hear about sort of why you focus there here sort of the 1 line pitch and just sort of how you see that evolving and.

James McWalter

Yeah, so we’re um, basically so at the moment green infrastructure projects like solar wind hydrogen have just a really low success rate. So only 1 in 5 of projects that are being attempted actually get built and the reasons that are not get built are issues around. Zoning permitting interconnection and so on and so we’re basically trying to identify all the issues that might prevent a project from being built in a specific place right? because None of the interesting things about once anything is being built in the real-world. The physical world. Ah it has to be built somewhere right? and so the unit of measurement is the land itself and so what can you build there. A is it good for the climate b and can I make money c and so we’re trying to figure that out for every personalcel end ideally right now. New York safe but eventually the world. Um and say okay, yeah, this is a great place to build solar but it’s even better place to build solar for storage or it’s actually an even better place to build a dense residential like tower because that is. You’re downtown Manhattan and that actually makes more sense from a climate point of view because density actually helps climate at the margin. So you know that’s kind of what what we’re or we’re up to I mean so lot of data collection. A lot of figuring out data from lots of different sources making sense of it appending it down to the parsel level and then we’re mostly focused on solar developers. And some hydrogen folks to get up and running because those are the people who seem to have the most acute need. But eventually we do want to be that data source for pretty much any amount of building happening in the built environment.

Bridget Hickey

Me say how’s going. Yeah.

James McWalter

How’s it going? Um, you know it’s sort of world right? So like we we raised we raised money which was ended up being like really easy and now it’s very hard for everybody to raise money. So we’re happy that we got that in done before in time. Um. My cofounder is just incredible. So he built an amazing Mvp and and in pretty fast timeframe. We’ve hired some like interns to help with some data collection and the big thing right now is it’s all it’s all it’s all about getting that none page user so we have some trials outstanding. Um. We’re meeting those folks every week every couple of days in some cases and just converting them into paid customers and so right now everything is about. Can you get that first paid customer because if you don’t have a paid customer. It’s a of business I know historically in the last two years startups have just been able to raise money just on ideas time after time after time. But I think with the the recent kind of valuation downturn.

James McWalter

Well, the economy in general but in sort of some particular like you have to build a business and so yeah, one of the great things that are that that I’ve always been kind of aligned with with my cofounder is like look we have to build something that has real revenue because real revenue means we’re actually helping real buildings in the climate getting built and like it has all those kind of positive. Ah you know? Ah. Kind of additionalities as well.

Bridget Hickey

Yeah, all right somebody wanted to know what upcoming or current technology. Do you think will be a disruptive force in the future.

James McWalter

Yeah, um, coming ah the the so I think that touched a little bit about director capture. But I probably want to kind of paint how I think like director capture is going to actually happen. So director capture. It’s it’s a basically it’s a large series of fans think of it as a little factory but what it’s doing is actually it’s sucking atmosphere in it’s taking that atmosphere. It’s removing the C O two and then it’s storing it in some way either. It’s pumping it underground or combining it with some other material to be stored. We’re going to need like None of these right? like just like a lot. Um, if it’s going to have an impact but what’s interesting about that is they need they could be actually built anywhere because they’re just taking c o two out of the atmosphere and the C O T Two in the atmosphere is completely diluted right? So it’s the same you know x percent in. Your backyard as it is like in the himalayas like it’s it’s the same so you could build these anywhere and so I think one of the like fascinating pieces of like how that that gets deployed is going to be where they get deployed who gets disrupted like if you’re building None factories around the world. Like is there a world where certain countries are say we’ll build them all in our country because they can build anywhere and but the world has to pay us some sort of import export tax because we’re decarbonizing right? So could you have a country like Ireland or a country like Uganda. Yeah, I’m just making random countries who say look you know, put none of. Of dac factories here like we’ll take care of it but we need to be appropriately kind of compensated. So I think once you have something that like has that level of solving the problem if it can’t get cheap enough of course and there’s a lot of technological issues around it I think it starts to throw up some interesting and weird things around trade because one of the things where the. I guess the related aspects we’re going to see is that um I don’t know have you ever read ministry of the future. The the Kim Sandley Robinson book super super powerful book but None of the kind of concepts in it that ah they they kind of get into is when a particular country has this incredibly bad. Um, heat wave.

Bridget Hickey

I Literally just bought it I have not read it yet.

James McWalter

The country starts doing ah geoengineering so you start releasing suphates into the atmosphere and but they’re doing it over their own land and so what can other countries do to combat that I mean there’s not much you can do. But if you do a lot of geo-engineering at scale you start to affect every obviously every other country in the world right? because it’s. Geo. It’s the whole geography. Yeah, it’s the whole planet and so things like dac if they can get to scale I see as like a main way to help prevent some of the you know geoengineering of countries going their own way. Because it’s just incredibly like it’s just going to be outside of war. It’s gonna be incredibly difficult to prevent countries from actually doing geo-engineering because it’s actually pretty cheap to do like putting sulfates up in the atmosphere is not an expensive thing to do relative to other costs. So I don’t know so to me like. Dac if it actually happens is like probably the most most disruptive thing I can think of.

01:05:57.88

Bridget Hickey

Yeah, that are there companies that you think are sort of most likely to do it who are you watching and are really plus why.

James McWalter

I mean climbmeworks has the most money behind them so they’ve built their factor rate in Iceland to take advantage of some geothermal cheap energy. You also they’re their swiss company I believe there’s a few others I mean like there’s a lot of activity on air miners. Ah.

Bridget Hickey

Yep.

James McWalter

None interesting thing about the dak community is that they’re like it similar to like the fusion community I guess like they’re all just kind of like bullying up on each other being like oh that’s a stupid way of doing it. Um, you know it’s it’s the closer. You are to a particular frontier technology the more I guess arguments there are about which direction will work out. Um. Like the None guy recently and and he’s planning on something where they have the capability of stacking the carbon in like basically shipping containers and you can just like stack that I mean these are all super cool things but none of it’s been done at scale outside maybe climb works so climbwork has done it at some level scale. But it’s $600 a ton of carbon which just ah. But context like a carbon in a tree is like $12 a ton. So like we have a long way to come down from a price point of view.

Bridget Hickey

Yeah, um, speaking of sort of the geopolitical side of this. How do you feel about the Biden administration and how they are tackling climate.

James McWalter

So they started really good and then they’ve got progressively worse and worse. So um, so going into the none kind of 6 months of Biden administration obviously coming out of a pretty anti you know climate change solution administration in in the Trump administration it was yeah it was. It was a breath of fresh air. There were certain rules that were immediately brought in that were positive the bipartisan infrastructure bill while there was a lot of money in that for roads there was actually quite a bit of money for things like transmission for the grid that’s helpful for renewables. There was stuff for evs. It could have been more but you know it was all pretty powerful thing. Then there’s 2 elements that have shown the by administrations I guess you know have have been just not successful on climate. So one is build back better which is like a large bill that we proposed last year is a bit of a grab bag bill but there was a very very large climate component and basically build by pay editor was not passed. And I was pretty bullish on Bill Black ridter all the way through until eventually mansion said no and basically when you have a um, ah senate where you have you know a pretty conservative none vote in Joe Manschin you kind of just basically have to let him write the bill and. I think that exactly how it kind of panned out. There was an attempt to bring in other aspects into what in many ways is a climate bill which made no bill at all pass. So that was somewhat disappointing but you know I can kind of understand the elements of and the dynamics that kind of produced that. But at this point I’d be like whatever bill I mentioned be willing to write. That has at least some positive climate effect. Let’s just do it because like we’re running out of time for a you know we’re all likelihood going into republican senate in the next you know None to None to twelve months and in that model like nothing’s going to get passed in pro climate way the other piece which I think is absolutely more egregious and. Ah, yeah, and and pretty kind of infuriating is the solar tariffs. So the Trump administration had tariffs on solar panels produced in China the Biden administration last January extended those tariffs which are bad enough. But. All the tariffs are all these panels coming in to build solar pounds today are coming from southeast asian countries that are not China so Thailand vietnam etc those countries are now under a um department of commerce investigation because a domestic solar panel manufacturer called axion solar. Um. Basically said that those countries are secretly putting in chinese panels rather than producing them themselves and so that they should also be under tariffs I was at a conference for solar and storage developers in New York last week and they were just telling me person after person that nothing is being built right now.

James McWalter

We have stopped building story solar in the United States at scale. Um, basically this is the first year in 25 years that solar costs have gone up for and only in the United States nowhere other country in the world because these tariffs and the fear around these tariffs because one of the the aspects of the of the. Department of commerce’s investigation is that if they find some issues with you know these panels in in these thai countries. They’re going to backfill tariffs on existing solar panels that have already been installed and so this is freezing the entire industry so I talked to people at some of the largest renewable energy developers in the country people are literally. Directly building the things that are decarbonizing energy and they have stopped building like literally in the last three weeks they’ve stopped building because of issues around these tariffs. So I’ve been involved in some you know political wranglings in a small way on this? Yeah, but yeah, engaging your local senator all this kind of thing. But. Yeah, if anybody hears this please please please get involved in kind of getting these tariffs issue kind of resolved because ah, right now. Yeah I think the client like there was more solar being built in the last year of the Trump presidency than this year of the Biden predeency and there’s way more money to be spent. On it. We just can’t literally build it. So yeah.

Bridget Hickey

Well okay, great. Let’s really agree I find find all like like you know you hear these awful like climate news and there’s there’s just nothing people to do and it’s just so deeply frustrating like you know like college senators sort of where we get to. But.

James McWalter

No.

Bridget Hickey

Very frustrating. Um, despite that frustration despite everything going on where do you stand On. You know we touched a little bit about staying optimistic and working in climate Attack. Where do you stay on sort of how optimistic you are that we will stay below ° of warming and that we will be able to sort of collectively. Turn things around in the limited time that we have.

James McWalter

I think we’re going to do it like and again we’re just the pure like optimist. But I I think that there are now enough smart people who care about this I think that number is going up every day I think the resources are pointing in the right direction I think basically I think there are a lot of different levers. That we need to use to solve climate and so you know policy government activism like corporates like larges scale corporates Smalls Scale corporates like startups research science like all these things are different levers to accelerate. Ah, you know the solutions set that we can use and flighted climate. All of these are basically in motion ah to varying degrees of success as we said government as I just said government is is probably moving the slowest but that’s always the case but across the board like these things are generally pointing the right direction and that was not true. Three years ago it was not true. Definitely not true. Five years ago and so I don’t see any sort of large-s scale ah countervailing pressure to prevent that outside of like just like a series of large wars which knock on wood you know is not going to happen. Um, and so if we can you know keep a reasonable amount of geopolitical stability. When all these levers are now kind of pointing in the right direction or we got you know a few decades at least of some somewhat ge havepolitical stability and I know sometimes it can feel like things are very unstable obviously with the horrific things happening in Ukraine and so on but just like on a world historical level like things are still reasonably stable. You know compared to other periods in history. I think that we are in pretty okay shape to hit ° now one more ° is still terrible like don’t you know it still means that you have just terrible things happening to a large large parts of the world but it isn’t disaster and so ah so I’m I’m pretty optimistic. We’ll hit that and I think if things like.

Bridget Hickey

Yes.

James McWalter

Director capture dac that we talked about earlier that got to scale ahead of schedule then we have a chance of even beating that. But that’s more of a I think that’s completely depend on technology being better than what we what we plan for.

Bridget Hickey

It’s more optimistic view than I often hear it’s exciting to hear from you up. Um all right. We have a few more personal questions that we’ve gotten in for you. So None up, what is something that you have been wrong about.

James McWalter

Yeah, yeah.

James McWalter

Ah, self-driving cars incredibly wrong I I’ve like read this article by I called Kevin Drum about five years ago and he basically fully convinced me by this year Twenty Twenty two pretty much every car would be. Decently self-driving and it would just be a regulatory policy thing that was slowing it down but like the technology would be there and that is obviously not true at all. so um I yeah so I was I was very bullish about things moving very very quickly in self-driving cars but was could be wrong out.

Bridget Hickey

Who do you think’s gonna win it who do you think will do it.

James McWalter

Um I I actually do think that it’s the companies that have the most access to data because in the end self-driving cars is like a machine learning data play and so there’s a couple of companies that spun out of Google Google itself has some efforts. So I would say companies that have spun out of or have access to like None of the big tech companies data mapping data in particular like they have the highest odds so all things being equal like I don’t think Google itself because Google itself is just not very good at building hardware. But I think people coming out of like Google kind of you know. Frameworks there’s a few companies who who have that kind of profile. It’s probably most likely I think the least likely are like uber and lyft I think they’re really good at certain type of logistics and I don’t think they’re good at this type of thing.

Bridget Hickey

Yeah, um, what is the biggest challenge you faced over the world.

James McWalter

Yeah I mean probably probably all to do with like immigration of various types and so I probably briefly mentioned in the past. But ah, you know I spent the last few years and in Mexico um hiing on my green card to come through. Um it was. Like I guess like if we’d gotten into it. My wife and I knowing that it would take 4 years it would’ve been fine but like you think it’s a year and it’s another a year that’s another year under a year and so I would say that kind of trying to manage yourself to that when you’re yeah, you’re trying to move forward on certain parts of your life personal life business life work life. Yeah know family friends. All those kind of things.

Bridget Hickey

Well.

James McWalter

But like you just don’t have full freedom I mean that’s obviously something that a lot of people experience. Maybe the majority people experience in the world. But you know someone who is westerned you know english speaker fella who can usually move through spaces in a particularly easy way like everybody kind of brought home like how. But restrictions really can be on you on on your decision making and so on. So finally finally getting through that like it was a year pretty much a year ago this weekend that I did my immigration interview in Juarez Mexico um involved getting completely naked and explaining tattoos that I have and making sure they’re not gang tattoos um during my medical it. It involves even other things that were you know and I will say like everybody involved like I work like like the doctor and everybody I was involved in. Just incredibly like kindhearted generous generous people. It was just the system itself was just pretty. You know, um, like dehumanizing and again and I was by no mirror the nowhere near the like the worst affected person like yeah, you’re doing your interview by all these little windows. And like as you’re talking to the person doing your final interview like um, you’re just hearing people crying like around you because they’re getting denied. Um, and so yeah.

Bridget Hickey

Oh no, um on the immigration note I mean with the world of remote work and obviously there’s booming startup ecosystems in Europe. Do you think you need to be in the us for for building a startup or for building a climate startup.

James McWalter

I I don’t think you do I think that? um, what I guess what does like a place give you so so I personally have worked remote for nearly six years and and now I’m yeah I have an office with my cofounder because I like I like being in a space. Um, after so long kind of remote. So so ah, you know I’d done a few years previous to covid and I would say that covid was incredibly powerful for me in a positive way. Obviously it was horrific for most things but from a kind of leveling of the ground. So everyone all of a sudden was on the Zoom call. So you could get access to investors and and people for this podcast and so on in a way that was just way more difficult to precod like you had to like fly into San Francisco and do the tour and meet all the vcs in person. All that kind of thing with covid and the kind of adoption of so much remote work that made things a lot easier. Having said all that though. I think it is very very difficult to build a company when you’re not surrounded by other people who are building things I think that building something out of nothing is just so so difficult that even if you’re around people who love you and people who you know appreciate what you’re doing all those kind of things. Um, unless they’re. Like builders kind of are people building things and not just in startups. But in general people who are building something new like they tend to like push each other in various ways that are kind of subtle and I think that my time down in and puto verto I had amazing friends and some of people were definitely you know building different things and and so on but the general atmosphere of this place was like. Pretty laid back. Pretty chill. Lovely place to spend some time but not some place to kind of build something and so I don’t think you have to be in the Us to build things. But I do think that San Francisco and New York Boston and a few other places are like known as startup hubs for a reason because there’s just a lot of people building and I think you do have network effects around that and so if you are in a country other country. Like where in your country are other builders building like I would gravitate to that in general is.

Bridget Hickey

All right last question what sort of predictions. Do you have for a climate tech space. What are you excited about what kind of advice would you give someone like what do you think is sort of the next thing that we’re going to be seeing a lot of.

James McWalter

So I think there there’s going to be more fractionalization of ah the climate space right? So you know my climate journey iron miners like these are are yeah these are somewhat aggregated ways of like approaching climate. But. Because of climate is the entire economy. You’ll eventually have trade publications and all these different kind of segments that will be very specific to something and so whereas before you might have to go to yeah my climate journey to talk about you know, electric vehicles. There are if not now there will soon be just like. Online and offline communities entirely devoted to not just electric vehicles but you know electric vehicles that are replacing ah Ford trucks right? that are replacing that like the pickup truck segment of the market and so I think like 1 of the things that will happen is again much more specialization much more focus on those things. Um, it will mean that. Will be a period where it will be kind of hard to find these things and generalists will maybe start to struggle to get the the clear kind of you know, like know exactly where people are kind of congregating online or offline. Um, and so I think that’s None kind of opportunity for people in climate tech we’re thinking about building some sort of collaboration software platform and so on is like continuing to make it easy to direct people into the right directions and so you already mentioned. Ah you know work on climate. That’s a great you know. Product for that like terra terra do is is another like there’s a few of these that that do a good job with that. So I think ah more specialization and then also hopefully in in tandem people who are helping other people navigate that specialization. But how about you.

Bridget Hickey

My connections. Ah I’m actually quite and I mean I work in a B Two B company but I’m I’m really interested in sort of the consumer marketing angle of things I mean I Even just like I feel like a lot of things are starting to get marketed with a bit of like.

James McWalter

Yeah, yeah.

Bridget Hickey

Environmental Guilt. Um, and I don’t think that’s terribly effective and I think that more and more we will just see really solid environmental options that are just marketed as like the best option on the market I think I’m kind of excited for that to get away from all of the The. The shame and the doom and gloom and the guilt and just start ah marketing solutions just because they’re the best cheapest most convenient option on the market.

James McWalter

I Love that and yeah, we actually had somebody talking about solar punk on the podcast a few months ago you and I and and other people at in-person and meetups have talk about this complete like I guess failure on the kind of climate tech community to do a better job of describing this like super exciting future like not just.

Bridget Hickey

Um, one yeah I think there is a lot of gloom and doom and it ah you know it definitely gets clickbait and um, you know people will will read it but I just don’t think that’s.

James McWalter

Mitigating these things but like it’s actually better.

Bridget Hickey

Future I think like everything that I’m seeing that you know a lot of the D to C startups that are popping up are just like really brilliant options but they you know they don’t have like the blue and Green Earth Water Montage There will say just like really great ah branding and marketing. So I mean I look at everything from the marketing and but I’m very excited for that.

James McWalter

Love that? Um, well Bridget. Thank you like? ah you’ve you’ve asked some great questions like it’s it was great.

Bridget Hickey

Have on ah episodes I’m thrilled for you I’m very excited to listen to a None more fight.

James McWalter

Thank you so much. Cheers Bridget.

Predicting Energy Markets – E99

Great to chat with Lauren Kuntz, CEO and Co-Founder at Gaiascope, Gaiascope is dedicated to maintaining planetary balance and combating climate change! We discussed forecasts on the electric grid, energy trading market, how energy efficiency is correlated with lower carbon, ways energy usage is shifting and more! 

https://carbotnic.com/gaiascope

Download Podcast Here: https://plinkhq.com/i/1518148418

Contact Gaiascope: https://gaia-scope.com/contact

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Lauren Kuntz Ceo and co-founder at Gaiascope welcome to podcast Lauren Kuntz brilliant to start. Could you tell us a little bit about Gaiascope.

Lauren Kuntz

Thanks so much for having me.

Lauren Kuntz

Yeah, So we’re really focused on trying to help the assets that we need for a carbon free grid so things like storage renewables demand response maximize their returns so that those projects that are more. Financeable in the future moving forward and we can help accelerate our transition to a carbon free grid.

James McWalter

And what drove and what drove that initial decision to start Gaiascope. Yeah.

Lauren Kuntz

Um, yeah, So my cofounder and I came from totally different backgrounds. But I think had really seen similar Trends Happening. So I.

And very much an academic by nature and training I did my undergrad and physics mechanical engineering my ph d in climate science and had the wonderful opportunity during my education to both take a class around decarbonization and teach classes around decarbonization. And I think in that process I learned a ton about how important the grid was and how we actually had no idea how to operate a grid without Dispatchable Fossil Fuel plants on it and that we like need to fundamentally answer that question so I was. Leaving grad school with this in mind of like this is a question I really want to work on and engage with and I met up with my co-founder Jess Stiles who is a rockstar badass in energy finance and she had been basically 10 years in energy finance everything from hedge fund to. Development deals and I’d realized that like we’re seeing this interest and shift towards renewables and decarbonized assets but nobody understood the economics of them so we kind of just really synced together on those 2 learnings and we’re like hey the way that we can help figure out how to make this grid operate is to make the economics. More transparent across different timescales. So we really focused on short term to begin with.

James McWalter

And so what does that look like in terms of like a product and I guess what the you know the early product look like and where do any pivots along the way I.

Lauren Kuntz

Yeah, so the early product we were just like hey we’re going to be a saas company and we’re going to sell price forecasts on the electric grid. The idea being if you know what price expectations are you immediately know how to make decisions right? like that’s the clearest signal you kind of can have when you’re thinking about revenue and returns. Um, really early on. We learned we had to pivot away from that because almost everybody we spoke to was like if you’re amazing at forecasting prices. Why don’t you go trade and there was a huge skepticism so we’re like okay I mean we’re like great idea. We’re gonna go trade and we’re gonna prove this works and we’re gonna like understand your pain deeply. So we pivoted kind of within that first three months of formation just from trying to be a software platform to actually running a very small trading platform. Um so we spent about two and a half years then trading ourselves building up our models having an amazing feedback loop between. Is the model working and seeing that in returns and now are really launching a product that’s focused on giving bid decisions and optimization optimization around dispatch to decarbonize assets on the grid. Um, so kind of taking that price forecasting a step further for them as well and being like look this is how you should trade. This is how you should dispatch your asset to maximize your returns.

James McWalter

And could you speak a little bit then to exactly how it works today in terms of energy trading and you know I guess where there are ah you know you you mentioned the kind of the old world of like the peaker plant-driven model and this new world. We’re kind of going in through. And how I guess the kind of current trading regime or the current trading model that most organizations who are trading. Um what they’re missing big big topic.

Lauren Kuntz

Yeah, so I mean to date a lot of them. Yeah, not a small question but we’ll start with just renewables I think to date so many renewables have been under ppas for so long that they haven’t had to worry about trading in Wholesale markets. Right? They’ve basically had 0 exposure to this and so they haven’t had to build build out trading teams in house like they’re just like we just need to make sure we produce as amazing Megawatts as Possible. We don’t care about the price because we already have somebody that guaranteed a price for us. Um, and now you’re seeing the ppa value start to Fall. Um, so it’s not quite as valuable to do as it was before you’re starting to see assets that were on ppas now that contract has ended and they’re now exposed to this wholesale market risk and they’re like we don’t know necessarily How do we manage that risk we don’t know how to trade in the day ahead versus. Real time. How much our volumes that we should be sort of Guaranteeing. We’re going to deliver versus leaving open to whatever real time prices are so we really are trying to come in and help with that specific problem.

James McWalter

And it’s so interesting. You also mentioned this kind of ah you know, starting with a saas product and then the the kind of idea of building your own kind of prop trading desk about a year ago to put my kind of cards on the table I actually had a friend of mine who was a machine learning engineer and he had a very similar idea to to. Gaiascope was like okay, let’s take some you know day ahead predictions use some weather data use some fancy different kind of models specifically targeting battery storage and then use the ash somehow to kind of decarbonize the grid and when we were like chatting about it was like okay well. We could probably make a ton of money on this right? We could just trade it like if if our model you know if his predictions are better and than the average predictions that are out there and you have enough capital to deploy. You actually make serious but amount kind of money but I think the thing that we were a little bit struggling at and we we kind of immediately moved away from that and I ended up kind of going in different direction as a he. Um, with a different company but the bit we were always kind of struggling with was the kind of connection to directly nudging the industry into kind of more clean directions and so it sounds like you went through you know way more successful and like more thoughtful kind of way of kind of thinking through those problems. But yeah I guess how did that kind of process go for you.

Lauren Kuntz

Yeah I mean I think I entered with a similar mindset of probably coming from academia was like how does trading help anything like you’re just sort of scraping money away from other people and the more that I’ve been involved in it the more that I see it actually is it is value. Add to the grid. Um, and it is helping decarbonize the grid in the short term long term we need physical assets on the grid that are decarbonized right? like that’s going to be the limiting factor more than whatever you can do with just purely financial trades but part of the reason that even financial traders. Like the work we’ve been doing is allowed in these markets is because we’re basically taking on risks that other people won’t take on and are helping the market in advance get a better understanding of what will happen tomorrow in reality. So if you have no idea what tomorrow is going to look like. You have to make decisions around what plants are going to be turning on at what time. Um and will I have enough generation from those plants and there’s some plants that have a very long time. It takes some to spin up and be ready to produce power and you probably if you have no idea what’s going to happen are just going to be like hey guys. Be ready all the time to produce power be running and then if it gets really windy all of a sudden you’re just like sorry wind we have to curtail you because we can’t ramp that coal plant down. But the more insight you have in advance through the day ahead market through the type of trading that we do the more understanding you can have of like hey there’s actually really a high chance. There’s going to be a lot of wind so we should 3 hours in advance turn that coal plan off so that we don’t have to curtail the wind we can take advantage of all of this really cheap power. Um, and. Because we have different return expectations than say the wind farm or the coal plant were able to bid more aggressively and get the market to look more accurate than they otherwise would they probably are going to be more conservative and they’re like well we don’t want to take on the chance. It’s not windy. Um, so we’re able to really help the market operate more efficiently through our trading and efficiency also is really strongly correlated with lower carbon.

James McWalter

Yeah I definitely take both those points I think the peaker plant point is one that I think is not really noticed in the way that it should be right? And so for the audience you have these typically coal-fired or very dirty sources of energy they tried to to get fired up on a pretty quick basis to kind of fill. Ah, peak issues within in the grid itself so that nobody loses energy and it’s just like an incredibly dirty way of doing those things and so if you can avoid it as as Lauren Kuntz was saying um, you can have this kind of huge benefit and then we’re also moving to this world where we’re starting to have thepach dispatchable, clean energy like things from so storage and batteries. And so how are you thinking about how I guess you know how different models can work across different types of energy sources and how you kind of you know judge that or are your kind of model takes in lots of less inputs and then it’s like we will predict the good price and that price is consistently beating the market itself.

Lauren Kuntz

Yeah, so we really focus on having good inputs that help us get a really good understanding of not just like what is a point price forecast but like what’s the confidence in that which is the other really big piece of what we do that I think is different from how other people look at these markets. But transmitting that into decisions for assets is actually very asset specific because for something like a peaker plant. They can kind of respond to prices as they wish unlike. Storage which can only respond to a price signal if it has power stored up already right? So There’s this time component in storage that makes forecasting there even more important and makes how you utilize those forecasts as well. Even more important because it’s like if you have a $9000 price by coming.

James McWalter

Right.

Lauren Kuntz

And you have an awareness of this even if prices right now were two hundred or three hundred dollars it’s worth it for you to charge so that you can discharge in that even higher price time. Um, and that’s a consideration. You don’t necessarily see in fossil type dispatchable plants. Um I think demand response similarly has that sort of time varying tradeoffs that you have to realize and it just makes everything we do about the christ forecasting and translating it into decisions even more impactful.

James McWalter

And I guess who are today are your customers and what is a process if I was let’s say one of those customer profiles of signing me up as a customer. Okay.

Lauren Kuntz

Yeah, so we are really focusing on storage assets and renewable assets that have basis risks that they would like help managing that’s kind of our initial use cases right now and specifically within the Texas market that’s kind of the grid that we’ve really focused on to date. And the way that we tend to interact with potential clients is we start with just a free trial process. So we engage with you. We kind of show you hey this is a simple strategy that is just for purist illustrative purposes, no bells and whistles on it. You can get an understanding in a back test of how it would have performed um and every day then for the next month we’re going to send you how that strategy would recommend trading so you can kind of see this is exactly the information I’m getting if you’re already trading yourself. You can see how is it different and we do kind of a weekly retro of like. How would our simple strategy have done really get you familiar with kind of how it’s working why it’s working the way it is assuming the trial is of interest and both parties want to keep moving forward. We then move into a pilot phase where we do kind of a 2 to four week period of. Really customizing the strategy to that client specific needs. So everybody has a different risk reward profile. Everybody has different concerns that they’re worried about so we want to actually spend the time upfront really making sure that we’re building the strategy. That’s right for them around our price forecasts. Um, doing a lot of back testing so we establish baselines how much better. Do we think it’s going to do than what they’re currently doing and from there we move into kind of phase two a pilot which is just incubation so similar to the trial. We’re sending them the trades every day the strategy would recommend. We’re not live trading them It’s just kind of but make sure all the processes are working get everybody comfortable and then final phase of the pilot would be an actual deployment so you would be trading around the recommendations of our software.

James McWalter

And what is a kind of typical you know, um excess return um standard that and and Ram charge is a very large range but you know what would you say a good pilot would look like if you know would you make a customer very happy using your your product.

Lauren Kuntz

Yeah,, That’s a great question I mean I think it’s very much asset dependent and it also really depends on kind of what their baseline is like I think there’s some players where they have no idea how to manage basis risk and anything that is helping that is a win in their book. Um, and then you have other players where they already have a decently sophisticated strategy and they want to see like hey it’s only worth it if you’re making 20% plus more I think some back testing that we’ve played with have shown like the capability of five X Ah Roi on some assets. Um, but again it really depends like what are they currently doing how comfortable are they with trading everybody kind of has a different set point.

James McWalter

Um, if I x sounds good though. Um I’m sure I’m sure people are happy when they see those kind of numbers. Um, and 1 thing that again the can canadian might not kind of be familiar with is trading in the wholesale energy markets. Is a has pretty large barriers to entry so my understanding to trade in Texas which is one of the kind of you know the energy regions where this kind of trading takes place is at maybe it’s about but 7 figures about $1000000 to kind of get up and running and similar for other regions and so. As we’ve seen different kind of policy changes happen to allow more distributed energy resources allow a lot fewer or a lot more you know organizations. Yeah, even going down at community solar and like kind of approaching things like mom and-pop dispatchable energy this kind of thing. Um, one of the big barriers to entry is still the access to those wholesside markets. How how do you think about that barrier to entry. Obviously you’re filling out like some of that gap as well. But um, is it where it should be like is does it protects people from like maybe you know the the right and toot and claw nature of markets that are that are like the energy markets or. Should it be what opened up some more. So.

Lauren Kuntz

Yeah that’s a really good question I mean I think we definitely struggled with this super early on as a company and even 3 years into it still can where we ended up in Texas made the strategic choice to start there largely because the. Credit requirement that you have to post is substantially lower in the Texas market than elsewhere so was one where it’s like as a family and friends round and ycy funded company like we had enough barely enough collateral that we could start doing what we’re doing um and as we’re growing. We’re starting to reach those thresholds but even now it’s still hard to kind of show that you have the required collateral to trade. Um I definitely have an understanding as to why you don’t want to just sort of have a free for all be like yeah as long as you have $10 come under these markets like at the end of the day. This isn’t just like stock market where oh it’s going up and down. It’s like if you really mess up electricity markets like you could cause blackouts like there’s severe consequences that can happen and that’s not just like an uncomfortable thing but it’s like. Losing power to hospitals like these can be really extreme consequences if the grid goes down so I understand the need to keep it somewhat protected and somewhat a barrier because you don’t just want anybody playing but at the same time you’re completely right? that these limits are somewhat arbitrary. They’re also somewhat set kind of like there’s the ability of the markets to be like well you’re a small player that we don’t like so we’ll just set a higher credit limit for you in a bigger hurdle that you have to jump over it than somebody else and to really let all of these distributed resources take advantage and give the benefit to the grid that they can provide. I do think we have to be a lot more thoughtful about how do they engage? How do we engage them safely. How do we engage them without really risking the stability of the system I think it’s a question that Ferc is constantly struggling with to be honest.

James McWalter

Yeah, absolutely so for 22 22 which was this new rule that passed a couple of years ago that kind of allows just more types of energy to be allowed onto the grid and in various ways and and I actually spoke to one of the people who wrote the the ra law one of the lawyers at Ferc. About this and I was like hey it is just like a cold message I was like I’m curious of fork 22 22 um, what’s and it was like my my email was like what are the entrepreneurial opportunities caused by Fork twenty two 22 and I a great chat to him and he was like very blut. He was like. Not for like 3 years it was like it’s going to take years just for people to really understand because again he’s like we we’ll write these rules to be more permissive of different behavior but you know as as you’re saying like you’re having all these other layers right? and all these other areas of kind of risk version because it is dealing with something that’s so fundamental like you know. The backbone of our entire civilization is electricity. Basically so um, you know for yourself and I coming from like the startup world. We’re like let’s move faster. Let’s let’s open it up. Um, but I also could understand the yeah the need to move slower in certain areas.

Lauren Kuntz

Yeah, for sure I Guess the one area though that still really frustrates me and like if I could wave a magic wand and get furk to change is around demand response I feel like the way right now Demand response markets are set up. Is you get rewarded for peak Shaving. So. Times when there is a lot of load on the grid if you are able to reduce your load. You can get paid for this but you can’t get paid for filling Troughs. So if you have too much renewable generation and prices are Negative. Most demand rockets are set up where you can’t take advantage of that. And so like you’re really limiting how that resource can interact and what benefit they can provide from the grid because you haven’t incentivized them properly and it’s stuff like that where like every time I see it I’m like oh come on move faster be a little more like a startup don’t be like an old school energy system. But. We’ll get there and just never I think as fast as entrepreneurs like us want.

James McWalter

Exactly but 1 of more gray hairs. But we’ll we’ll get there in the end and I guess you you could have mentioned risk a couple times and especially because you are kind of focused on Texas we you know had this kind of very famous event last year pretty much just over a year ago where and a lot of people outside of Texas heard about this as well. Where. Because of extreme weather. You had very large shutdowns in the grid. You also related to that had these incredible spikes in price which from a kind of pure economic point of view is basically what you want to see right? You want to see these large spikes in price to adjust behavior. But in the same way that everybody somewhat misunderstands surge pricing on ubers and lyfts when there was a disaster and are like oh my god this is like terrible. It’s like well you get any drivers out unless you actually pay them. You know a higher rate. Um, you know there is the I guess the economic reasoning for why an event happens. And then how you know we kind of socialize that and also how we kind of socialize the risk of associated events. How do you think about those elements because you could build a barbell strategy where it’s like we’re going to make it lose money every day until there’s a disaster and we’ll make a ton of money. But you know you you’ll be yeah, like in trouble with the public. We’ll say that.

Lauren Kuntz

Yeah I mean you’ll be in trouble with trouble with the public I think you’ll also struggle to find any investors that are like truly truly okay with you losing money for 10 years straight until there’s like a 1 in 10 year winter storm event that happens. Um I think most investors aren’t okay with that ah level of risk reward. Um I think it’s it’s a challenging question because especially in Texas where you don’t have capacity markets. You don’t have kind of baseline payments that you’re making to generators that are just sitting idle most of the year but are like what’s keeping the lights on on that hottest day. Really operating. Um you end up in Texas with like needing those price spikes to incentivize enough capacity to exist there for like the biggest days that you need it and like the winterstorm is one of those right? where it’s like seeing high prices helps incentivize more people to come build. Um, but at the same time you don’t want to pass that on to consumers right? like you were hearing about some consumers getting $20000 bills where it’s like to an extent like electricity but in basic need like electricity and heat like you need it. We can’t really survive without it.

James McWalter

So bit botch right.

Lauren Kuntz

Um, so we do have various protections in place for most of the country like most people do not sign utility agreements where they’re playing the wholesale price for their electricity like you normally have a fixed rate. Maybe it varies a little bit over the day but it’s kind of a locked in you’re set up in this Contract. So I think it’s partly. Kind of making sure the right people bear the risk and being very cognizant of sort of Okay, if you are going to benefit from the risk. How are you then paying the system back at other times. How are we making sure that like the reward you’re reaping is truly in line with the benefit that you did provide.

James McWalter

That that makes absolute ton of sense and I guess it kind of brings to mind again. How the energy usage itself is shifting right? and so you obviously have this kind of massive increase in the variability of the supply right? as we’ve talked about with you know, renewables and not being the step batchable. But. Now starting to see battery storage which is somewhat but still needs. Yeah to be charged at certain points then on the demand side. You’re also having a huge amount of variability as we start to go from. You know one percent evs and so certain markets to 5 10 15 twenty thirty percent and so on and that is I think in general people are not. Outside of people directly working on this like not really prepared for how wild the change is going to be to the grid and how we kind of cope with that. How are you thinking about that in terms of like you know the opportunities or challenges for gyoscope.

Lauren Kuntz

Yeah I mean I tend to view it all as an opportunity right? I think as an entrepreneur change in any form is generally an opportunity. Um, so for me I look at that I’m like this is huge potential. Um. Part of it does depend on like how do does ferk decide that these types of new loads and new assets that can be dispatchable on the load side. How are they allowed to partake in the markets. Um, but at the end of the day I’m like well that’s hundreds of thousands of batteries. On the grid that all could benefit from price forecasting and understanding their optimization around charging and discharging potentially so I view that as like a massive potential stream of clients for us the timing of it again depends on the markets and what’s set up there but it’s. It’s going to get there eventually because it has to for the grid to work for the grid to be balanced. We have to start treating these loads as dispatchable like they are um I also just in general for the grid view it as a win like storage standalone is incredibly expensive to build still. We’re starting to build more of it and that is fantastic. That is wonderful. We need it but the amount that we need right now is not going to get there so I’m like hey look people are naturally buying evs like I just purchased a Prius prime. That’s a plugin and has a battery like. Why are we not letting these partake in the market they already could help stabilize our grid they could provide more benefit to it. This is a wonderful potentially lower cost way to get a lot more storage faster to the grid.

James McWalter

And by definition are already just going dramatically affected on the demand Side. It’s just reverse reverse the flow right? like um and and the tech is all there to certain extent. You have companies like stem and so on who allow you know what they call Ev Degrade just from a pure like technical ability. Um, but it’s funny I like when I was again kind of investigating a Geiscope esque approach I was like talking to people who are doing Um, yeah software to kind of control battery when it should operate in different markets and so those services market and so on and like ah talk to multiple folks who were just like using a timer like they weren’t even like trying to predict anything they’re like. Oh you know, usually like load is like this in the day. Yeah know at the end of the day versus that. Um and I was like oh well, why? why? Why don’t you try to like actually optimize it like ass a lot that’s a lot that’s complicated. Um, and so but but like all I guess all the but buildinging blocks for this, you know, very streamlined. You know, ebbing of flowing of supply and Demand. Like are all technically in place. But as you said you know the opportunity for entrepreneurs is to actually piece them together into something that actually you know is a new stable hole.

Lauren Kuntz

Yeah, exactly and I think I think they’re right and I understand why they’re like this is a lot like having now spent 3 years building up our models of this system I’m like yeah, it’s hard like why I get why using just kind of a timer is a lot simpler of a first step but I do think we’re gonna see be it one company that kind of. Pulls all the pieces together are many that ultimately come together with all the pieces into a giant collaborative effort I think I think we’re going to get there I think I’m just always questioning when is the timing of it is it the next five years is the next ten is the the next twenty.

James McWalter

You absolutely and then thinking about the timing. So what’s next for geoscope over. Let’s say the next kind of 12 to 18 months. What are some milestones you’re hoping to hit.

Lauren Kuntz

Yeah, so we’re really excited to be onboarding our first pilots fully so that’s kind of going to be the really big focus of this next couple months is success with pilots in Texas’ ‘ market and then from air. They’re really looking to do a series a raise. So we’ve done a seed and seed prime round to date and are really excited that a series a is going to open up us for us the ability to really expand beyond Texas I think that’s kind of the big one that we’re really excited about is like there’s a lot of players beyond that one small market that we could reach so. Unlocking those other markets I think also expanding beyond kind of just sort of the storage basis risk focus that we have right now for storage and renewables. Um and starting to think more broadly about how can we help other players in this space.

James McWalter

That that makes that makes sense and you know very kind of exciting next next next year two and yeah I’d imagine you’re taking lots of data and I’m sure you don’t have to tell me the data are taken in I’m sure most ah that it’s very proprietary but are data sets that you wish were available but you’re just struggling to find. Um, yeah, this is some of the world that. But I live in my own startup. But I also like talk to tons of folks who are trying to think of new ideas and such like an opportunity with collecting data in new ways. But yeah, is it anything that comes to mind or you’re like I wish somebody would actually start collecting some of that data.

Lauren Kuntz

So There’s a good amount of data on the grid collected that we have access to as a market participant which has been phenomenal I Think honestly, my biggest pain is less like oh I wish I had this data. It’s. Generally been around like oh my God I Wish this data was cleaner and less of a pain to work with like name matching between data sets is just so Hard. There’s no consistency. It’ll even sporadically change over time and you’re like why? Why do you do this to me. Um.

James McWalter

Wreck.

Lauren Kuntz

The other thing that would help I understand why they don’t do it but would make our lives a lot easier is we get information on kind of like what generators were producing and various people’s bid information but it’s all delayed by two months so having a closer to real time understanding for some of those numbers would be really beneficial. Um, it obviously is collected. It’s delayed because you don’t want any sort of unfair competitive advantage that you can take from that and like if you are the only natural gas. Or there’s 2 natural gas plants. Let’s say in Houston and one of them is down for maintenance and you’re the other one and you know this you can suddenly ramp up the price that you’re bidding into the market and like really screw everybody over like that’s the reason that you don’t allow this data to be published as soon as it’s available. But it’s also one where it’s like it would just make it so much easier to model like we would do such a better job forecasting if we had this sooner.

James McWalter

Yeah, it’s it’s so interesting. You know, ah Isis sell datasets to quantitative hedge funds in New York and some of them were high-f frequencyquency folks and like the timing was like all all important for certain types of data. It’s like Ken you know and and those these tales at the time of like people just like building things physically closer to. Parts of Chicago where data will be announced and because you’re working with like the speed of light basically to get the data from but you know from 1 place to another and like if you can yeah you can trade a lot in the time it takes for light to move from Chicago to New York supposedly and so yeah, that it’s obviously a more extreme version. But um, once you get kind of getting into a thing that touches a market. You know. Frequency timing. Um like depth cleanliness of data like all those things are interesting and yeah I would love so I would also love somebody to build a pipe of all the different location marginal prices for the country into like a nice downloadable format or you know etl would be amazing.

Lauren Kuntz

Yeah, yeah I mean there’s some players out there that are trying to do that and bless their souls. Um, it is a hard job because everybody uses a slightly different format and especially with the Grid. So many of these data sources are coming from like software that was built in the eighty s. And the 90 s and has like weird conventions to how you can name things so you just see kind of like residualness in it. But yeah I mean I think easier ability to play with data is going to be a massive game changer when it comes to innovation in this space.

James McWalter

Yeah, and I guess connected. You know your background like has a kind of very strong kind of scientific basis. Um, you know you have a ph d you know you’re interested in in kind of climate one of the things that I’ve noticed as I sort of can investigate like ideas would it anything that touches a grid is that we just have not a lot of you know, traditional. Software and tech folk from yeah, the the coasts in that space and you still see a ton of you know, not even Microsoft 95 things being like shared around. Ah you know, not just the utilities but even often private companies as well. What are things that could be you know done to kind of attract more of a you know. Diversity of background and experience into people who are kind of working on the problems that affect the grid and and energy more generally, right.

Lauren Kuntz

I mean I think we are starting to see that to be honest, like I think with all the startups and interest in climate tech There’s so many young people young people in tech who don’t just want to be software programmers but want to be software programmers and something that they really feel like matters in the world and I do think. Grid and energy is a deeply interesting one and especially with all the startups that are popping up I do think there is a bigger and growing diversity of the just talent pool that’s getting drawn here. Um I do think the other one that was representation matters like. Almost all the conversations that I have are with people that don’t look like me in this space right? So decision makers in the space. Do not look like like I look um and I think that can be something that’s hard for a young person just entering this space but I do think over time that’s going to change. Um I think. Seen it start to change even in the three years that I’ve been doing this with geyascope and I’m hopeful that it’s going to continue to just progress in that direction. Um, the one last thing that I’d kind of add though is like this framing really helped me understand. Why so much of energy in the grid specifically is rooted in this like old tech mindset and utilities tend to think like hey I want to buy something and then I own it right? like I pay you to build a solar project and now it’s my project and they tend to think about software the same way they’re like build me software. Now I own it and they don’t understand like software gets updated like there’s license fees for software. So I think a little bit of just like is that mentality of how you engage and think about your expenses as a company can be very different in energy than it is in other aspects of.

James McWalter

Yeah, for those ah you know software folk who are interested in working the space but never took an accounting course like just learn Capex Op X and why utilities love Capex they as as you’re saying hate off X and software is always op X It’s just like you know and we’re just all coming you know and who.

Lauren Kuntz

Business.

James McWalter

Build software from an opx world and it’s just like no yeah, just build it and we literally have $20000000000 for capex and we have 0 like ah $12000000 for op x for the next ten years it’s it’s crazy like the disconnect. Yeah.

Lauren Kuntz

Yeah, yeah forger.

James McWalter

Um, and also you mentioned earlier that um you were yc company number years ago. Actually my governor and I were far our own startup. We were actually just accepted into y see early entry for for the summer batch. Um, it will be thank thank you very much. It will be public information by the time this podcast comes out. Um how how did you find that? um.

Lauren Kuntz

Congratulations. Um.

James McWalter

You know the experience and I guess like any any tips for those who are kind of going through not just YC but you know incubators and accelerators in general.

Lauren Kuntz

Yeah I think we were really blown away by how much value we got out of y c um I think a huge part of it honestly was like that was the first time my co-founder and I and our first employee were all in person working 100 % of our time on this startup. Um. Jess and I we founded the company when we were living on opposite coasts. So I was in Seattle she was in New York and like we met each other like 3 times in person and then why see happen and we’re like we’re moving in together into this house in a place that neither of us live and like all we’re gonna do is like code and make this work and. Having that time together was just so important like we learned so much about each other learned so much about building a company made so much progress on the product and really got pushed by the mentors at yc to like strive for more than we thought was even like possible within a summer so I think that was like very wonderful in that regard the advice that I would give is reach out to all of the partners there and have office hours and take the initiative to get the help I think these programs have started to like really grow in size where. Scheduled touch points of a meeting every two weeks with a group. Super awesome. Super helpful. But you can get so much more if you’re just willing to kind of take that first step and be like hey I really want to talk with you. Let me book some time in your office hours and like just share with you what I’m struggling with get tons of different. Former founders views on what you should do like that’s incredibly powerful and helpful.

James McWalter

That yeah, that’s that’s very helpful. Yeah know I think I think taking that initiative in general whether you’re a part of those programs or not like I always say to people like you know if you’re interested in moving into a new industry just like cold message like 50 people like that’s that’s how I met everybody. That’s I meet everybody at the podcast. You know it’s just. Put yourself out there like I don’t want to trivialize it when you’re new to it it. It? Yeah, there is it like an emotional weight to like putting yourself out there I’ like that. But yeah, you eventually get very use of rejection and I think that’s that’s very helpful than a lot of different initiatives. Ah Forfins Shav was actually looking at your background and I notice ah something called Green Vision. Um. That you’ve you know, kind of working on and and this very kind of cool website um could tell us a little bit about Green vision.

Lauren Kuntz

Yeah, so green vision was like some of the very first modeling I did around the electric grid before gyoscope happened. Um I mentioned earlier on in the podcast but I spent time in grad school helping teach a class. For undergrads that was really focused on what does it take to get to a carbon-free energy system for the us so they had to think about like what do you do in transportation. What do you do in industry and how do your households use like like energy and what I kind of noticed when I was teaching this is all my students would make the choice of electrify as much as you can. And then power that electricity with a carbon-free grid and they came and would start asking me questions of like well how many solar panels do I have to build for that. How many wind farms like what does this actually take so I just started doing for fun during my ph d some really simple and modeling trying to look at like what are the levers that matter. So not looking at the economics of it but really saying if you wanted 100 % solar in the us what would it take like how much do you have to build and just started to kind of do various benchmarking around that and I kind of realized hey I built this really interesting model. My students love playing with it. Let’s try to put it out there for the rest of the world to play with as well because I think a lot of people have these issues and questions and want to know like what does the future energy system look like so the idea was to create something that’s really purely for educational purposes but just a tool that you can go play around with and fiddle with and ask okay. I think that wind and solar are the only technologies we can use and you can look at what this looks like and be like wow that’s going to be really expensive. Maybe I should include some nuclear and like start to kind of just figure out. How do you balance all of those different needs and components of our future grid. Um and kind of. Decide for yourself like what is that right? mix? How do we actually get there.

James McWalter

I yeah I love it I’ve played around a fair amount with this and I also end up put a lot of nuclear I will say it’s like like like twenty fifty numbers I was like it’s like 80% nuclear um which which I say no problem was but it might be a difficult thing to take thing to achieve um Lauren Kuntz has been great. Ah, really enjoyed it is there anything I should have asked you but.

Lauren Kuntz

Um, so we are actively looking for clients and people that are excited about being one of the first pilots with our software in Texas so anybody that is excited about that opportunity wants to learn more should absolutely reach out to us.

James McWalter

Did not.

Lauren Kuntz

at founders at http://geyoscope.com

James McWalter

So brilliant. Well and we’ll include that email in the show notes. Actually I have a couple of people in mind in arcot for you. So I’ll make those interests as well. Thank you Lauren Kuntz.

Lauren Kuntz

Yeah, thank you so much.

Offsetting with Better Design – E98

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James

The unedited podcast transcript is below

James McWalter

Hello today we’re string good Andreas Homer cofounder and CEO at Aerial welcome to podcast Andreas. Great to start. Could you tell us a little bit about Aerial.

Andreas Homer

Thank you so much for having me.

Andreas Homer

Yeah, absolutely so we founded Aerial based on the concept around quantifying carbon emissions across different sources and making it really easy for people to see those numbers and take action on them. So my team my founding team we have. Background building products at companies like Instagram Microsoft Casper um and many others and we decided that we could probably have a unique take on the way we build a brand in a product in this space. And build something that feels familiar lovable relatable and like a lot of your favorite products and so we saw that the space was really lacking that. Um and so we first built an ios app that quantifies your entire carbon footprint for the last. 3 years based on a travel rideshare train confirmations. So you sign up with like your Google or your Microsoft account and we show you usually within 30 seconds depending on how many confirmations you have what your carbon footprint looks like across those different categories. Um. And we’ve since launched on Android and we also built a whole suite of tools for web 3 so um, a lot of creators wanted to learn more about their energy consumption on Ethereum and we built a couple prototypes and ended up launching them with. First with Calviniris for one of his big projects that he was working on and then since then we’ve further developed the tools and methodologies and um, worked with a lot of different brands like Pepsi and Levi and budvisor to other celebrities like Shakira and then other web 3 collections like some that you might have heard of like moonbird and deadfeass etc. So yeah, we’ve really started out with the idea that you know how can we take the skills that we had at these other you know companies that we help build and build those delightful experiences in the climate space for people and brands and really everybody to use.

James McWalter

Yeah, so I actually downloaded the app. Um before the call and had had it. You know, go through my emails and yeah, so I’m in the 23% worst emissions anyone on on the platform which for somebody working on climate is obviously not not ideal. Um. And it’s very slick. It is absolutely as you mentioned it’s it’s a very you know, kind of delightful experience. But I’m sure it wasn’t like that like out the gate. So you know how any kind of difficulties as you’re kind of building out your Mvp or you know what were the kind of interim steps to get it to something as smooth as this.

Andreas Homer

Yeah, well I think one of the first things that we started to think about was how could we wow people when they signed up for the product. So we’d seen like a lot of different. Ah. Websites and tools that had existed where you would answer a series of questions or check some boxes and then just get information that was more or less like a one-time. Screenshot. So our first thought was what are some of the signals that we can use to make that. Ah, much more rich experience that shows you much more. You know customized information based on your own behavior and um, really make it something that you can live with so you know every time you get an uber receipt or a ride chair or a trainer seat. You get? ah. Notification and a new activity in the product that shows you the distance the kilograms or pounds of co 2 depending on your setting and then an overall view like a pie chart. So initially you know looking at different signals like there are a lot that exists there. There are motion. Signals there are signals from your inbox or signals from your your credit cards and we ended up settling on email because it gives you so much information and around your carbon footprint. So your uber receipts your lyft receipts your train your any flight right? Delta united etc. Um will show up. So um, that was initially probably the biggest challenge was building that out just because there is a lot of complexity around parsing that information. So. Um, yeah I’d say I’d say initially it was a big, pretty big hurdle to get over. Um, but once we started you know, onboarding early users. They had this sort of aha moment where you know this pile of what would normally just be useless information turned into. Ah, new rich data set that that not just gave them that view into the past but also that view going forward with those new activities. So I’d say that was probably initially the first big challengers like what signals exist that. Can give you real insight here and created engaging experience that not only gives you that 1 time snapshot into the past but also an accurate view going forward.

James McWalter

Yeah, that that that makes a ton of sense I Guess you know as you’ were of trying to think through whether credit cards or email know receipts and like the different kind of sources of information. Um, how did that I guess kind of translate into what the total total typical potential users emissions look like. So again for me who does not own a car and does way more flying than they should ideally like it’s probably a pretty accurate total because basically everything outside of that I’m just cycling So it’s like it’s It’s pretty low, but um I guess for people like like my exact profile. Um you know Suburban heights would. But a car. It might not show up in the same way and so how do you think about? you know, balancing different type of users to get like a accurate representation of their emissions and.

Andreas Homer

Yeah, we’ve we’ve looked at other sources like for example, credit card charges and the problem is is. It’s not a great signal for emissions because you actually don’t know. What dollar amount correlates to an emisssion type or a distance for example, so if you book a last minute flight from Los Angeles to San Francisco that’s a pretty short flight but it could cost $400 so booking a flight to europe sometimes you know you can get. To London from San Francisco for for just about that much one way. Um, so how do you differentiate between those 2 those 2 charges same goes for grocery shopping like you have no insight into what’s being purchased so we’ve thought that it was kind of a weak signal and you are asking. Yeah, of course asking you’re asking someone to sign up with their Google or Microsoft account that does have friction but so does ah credit card. But at least we’re giving people like accurate information. Um, so I think that was the tradeoff there was like you know by going that route. You couldn’t possibly capture more activities if you’re using like 1 credit card for example, but how accurate is that information. Um, so I think I think that’s one big thought there that we had um and neither one is perfect of course. But when it comes to other activities. I’d say the biggest the biggest 3 categories for an individual are travel transportation and home energy. Especially since we’re all doing a lot more working from home these days. So in addition to that there are things like diet that account for. Ah, you know a percentage of your overall footprint. But if you’re driving you’re flying and you’re you know, working from home doing all one 2 or 3 of those things chances are that that’ll consist of the vast majority of your bureau footprint. Um, so yeah, we’ve been looking at other sources we have ah a prototype for home energy that we’ve been playing with which is pretty interesting, especially as I said people are working from home more permanently now. It’s not just a pandemicic phenomenon and then things around motion as well. So capturing. You’re driving capturing ah positive activities that you do like biking you mentioned or taking an electric scooter or any form of transportation that’s cleaner than the alternative which is you know, maybe a suv for example, so we’re constantly looking at these different sources of emissions.

Andreas Homer

But at the core we’ve wanted to create the most seamless experience for the most people and not require like manual tracking of information or you know giving false positives which is a common theme around motion Sentencing. So. Yeah, it’s a tough problem. But I think you know if you can cover travel transportation and home energy. That’s like the vast majority of the footprint.

James McWalter

And yeah, it’s it’s so interesting. You know I’m again, maybe in some areas are typical reason typical I’m talking about myself just because ah you know you’re getting user test out of this as well. I guess um, but I’m very much a quantified self kind of person and even for me who tries to track an incredible amount of things. Those elements that use things like Gps to identify where I’ve been and the time I spend in certain places and you know you like my office is is connected and it automatically tells me how much time I’m spending at a work site versus an nonwork site those always get are just. Have way longer history and more effective history than the ones where I have to actually imagine it open up a spreadsheet once a month and like try to remember what I did so absolutely think starting from the lowest friction data collection point and then that’s your wedge like makes absolutely a ton of sense. Another thing I know slow in the app was this? Ah. Community has saved 22000 trees and so kind of trying to connect the um, the spent emissions with something that is you know mitigating can you speak to that process in in more detail.

Andreas Homer

Yeah, absolutely so when it comes to the community aspect I think it’s really important to obviously you know have mechanisms within the product that make people feel like they’re part of something bigger. And that’s one of the goals with you know that community feature is just to show people that there is a broader you know broader community there’s broader action that’s happening outside of just yourself. Um, so yeah, that’s ah, that’s the idea there. Um. When it comes to those types of statistics. What we’ve been trying to do is make the the numbers as relatable as possible to people. So for example, not a lot of people know what a carbon credit is or how much carbon it equates to but 1 carbon credit is equivalent to one metric ton of c o two and so you can you can make estimates on for example, like tons of co 2 equivalents to number of trees or cars taken off the road or you know there are some statistics that can be used in order to show why these numbers are relevant and what they mean because I’m sure you’ve noticed like at that main screen view of your footprint. Knowing what a ton of co 2 is is pretty difficult so trying to build that relationship between the the individual and tons of cotwo is really the goal there um build that that intuition and awareness. Um, because if I ask you. How many kilograms of flight from San Francisco to New York emitted it might be a tough question answer you might know I don’t know but ah well yeah, yeah, so it’s it’s one of those things where if you can relate those.

James McWalter

Sure I wouldn’t and again I live in this world and I actually do not.

Andreas Homer

Numbers to other statistics that make sense to people I think it becomes a lot easier to communicate and that’s one of the challenges in this space is you know the activity tracking space had this problem ten twelve years ago where products like Fitbit and Strava would show you. Calories burn for activities. But for the longest time like the average person just didn’t understand like what that metric meant because we had been used to like pedometers and numbers of steps and over time like there. There is sort of this connection that you build with the metric. So. You know now I know if I do a three mile run I’ll Burn Eight hundred calories depending on the pace of works. But you know you have you build that relationship with the metrics and I so I think a similar thing is needs to happen on on the sustainability side where people actually start to understand what what these libers. Actually mean and what they equate to.

James McWalter

I absolutely agree. Um I actually did some whiteboarding a year or two ago with a couple folks who are trying to come up with a better than a ton ah concept and then you know things like trees are like probably the most sensible one and the way you’ve done it um in terms of the offsets themselves though. You know it says in your website you know verified environmental projects you what would it like a typical ah you know carbon ah offset from a specific or a typical type of project look like.

Andreas Homer

Yeah, so there are quite a few different partners that we work with. We have a few listed on our website which are ah forestry projects as well as advanced carbon removal through a partner called charm industrial. Um, so for the most part you know every project type has pros and cons. So generally we like to do a blend of different projects. So um, you know forestry like ah land-based projects as well as blue carbon projects and advanced carbon removal. Projects. Um, so we’ve been doing a lot more blue carbon which we’re going to be communicating more on our website. We’ve done some we did a cool partnership with an entity called sea trees based in Southern California they have some really cool ocean-based projects and.

Andreas Homer

Plant mangrove trees and restore kelp forests. So we did a partnership with an nf platform called bitsky over Earthweek and we also did one with maker place. Another Nft platform that included some of these blue carbon projects so more to more to come there on our website. To update that. But um, yeah, generally speaking the land-based projects anything that we work with it has to be verified by by one or more third parties so the most popular ones are ah american carbon registry climate action reserve and. Vera. Um, so yeah, and in short any practice that we work with have to be verified. Um, and in addition to that we’re doing a lot more with blue carbon projects as well as our existing work with advanced carbon removal.

James McWalter

I Yeah I’m I’m very familiar with charm I know some of the folks over there pretty well very cool company doing some really cool. Ah you know offsetting and it’s It’s great to hear that we’re starting to see more blue carbon offsets I Know a lot of people go through the you know Kelp and mangrove obsession when they start for sort of reading about offsets. But. Scalability elements become an issue and you saw you know running tides and few other kind of companies who are early to it and you know it’s great to see that sea trees um are starting to kind of get offsets on the market as well because it’s It’s very cool. The the kind of power of your blue carbon relative to the landbased stuff.

Andreas Homer

Exactly? Yeah, Oh no I was going to say um, it’s It’s also it’s interesting because you know every project type like I was saying has pros and cons and so um, you know there are issues around scalability for like the direct air capture. Technologies There are issues around additionality with a lot of land-based projects and um, you know I think questions around like erosion arise when you discuss like mangroves and ocean-based Projects. So I think Overall it’s just best to have a more. Um. Balance approach when you’re looking at credits because none of them are perfect. But I think when combined they can be be pretty strong. Um, yeah, so that’s just ah, a.

James McWalter

Yeah’s portfoli. Especially if you’re starting to have a lot on the demand Side. You have the ah ability to kind of create a portfolio of credits who you know have various kind of flavors. You know some more permanence but maybe more expensive some that are hitting specific ah kind conservation elements like. Mangroves and so on um and you can start to build something that you know I think yeah, any the consumers using your product will actually find compelling at least someone across all those different options like some people get very excited by dac and some people are like you know, show me some trees. Um I Also noticed I Guess the kind of final section of of of the app. Um, and I like that various. Um these kind 3 steps. It’s like what what are your activity Your overall um overview The last one is discover and seems to have you know some specific kind of action items that. Yeah I Presume is kind of custom to the individual. Um that they can take to have a more kind of sustainable kind of Lifestyle. Can you speak to that process. So.

Andreas Homer

Yeah, so we actually almost all of those content pieces are are written all and were written by our science writer and ah there are a few that we’ve reposted under the the rules. That apply for example from Mit and a few others. But for the most part they’re written and curated by our science Writer. Um, and the the process there is just to keep them as short and concise as possible and make them. Ah as as. Um, friendly and not intimidating as possible because obviously I think what we’ve seen a lot of is sort of like guilt or shame-based tactics to get people to reduce their consumption of like you know. Troum based goods or fast fashion but the reality is is like people are still going to travel. They’re still going to drive. They’re still going to buy things online. So Why not show them maybe better ways to do those things without telling them that they shouldn’t do them or making them feel. Bad about doing them. So if you notice like the themes in most of those pieces of content are mostly like how to do things more efficiently as opposed to you know don’t fly or um, don’t use energy at home during these hours like we’re not. Know That’s not realistic for a lot of people. So yeah, just generally we try to be informative give people information that they can act on and as best as possible, not alienate people because I think it can be a bit intimidating if you. So reading content about these topics and feel like you’re helpless or feel bad about yourself. So It’s a goal there.

James McWalter

Yeah, that that that makes sense and yeah I think there’s always like a balanceunce between the carrot and the stick as well with with these different things like if you’ve too much stick people have that sense of learned helplessness or you know give up like why bother. It’s too big. A problem. Um. Termly if it’s like oh it’s so easy like that don’t have to do anything at all like that’s not that not true at all and so I think as you said it’s it’s kind of trying to strike that balance the other piece that that you mentioned at the beginning was around this idea of offsetting you know and Nftts from various kind of creators and anything to do with Blockchain has ah. Like definitely had a lot had a lot of articles written about the you know the relative dirtiness from a energy point of view an energy consumption point of view of things that have are kind of based in the blockchain and so I guess we’re the genesis of kind of focusing on. Nfts and crypto come from and what’s the kind of overall approach there in terms of you know what? Aerial ‘s trying to achieve.

Andreas Homer

Yeah, so early on a couple years about two and a half years ago we we’d been playing with and nftts and me and my cofounders had you know, been aware of a lot of the projects in the ecosystem just because. Do follow a lot of you know, different areas of the the software the technology industry. So my cofounders had minted a few as creators like photography and design and nfts and we we realized that there there was. Lot of potential there. Um, and it wasn’t until really the beginning of 2021 the end of Twenty Twenty that mainstream artists started to take on and nfd projects. Um, and so around that same time. This discussion around the environmental impact of of crypto and nfts started to come to the fore forefront. Um, and so and happening was this immense popularity of Nfts rapidly increased like public awareness you know around. What the ethereum network was and also you know in in conjunction with just more volume in trading and mining increased the consumption across the network. So that’s when we started to see that people were you know looking into the energy consumption. Ah, ethereum and Nfts and by chance we had actually been prototyping adding your crypto wallet emissions to our app believe or not so we had been looking at ways to show you your your wallet alongside your your flying your train travel your rideshare. But we tabled it because we thought it maybe didn’t really make sense for that audience but we had a really unique opportunity come along someone that we were close to knew that we we had worked on that wallet analysis and said hey we’re working on some. Really interesting nfd projects. Um, you know, maybe we can help you know help people understand their the footprint of their Nfts and so we built a pretty rudimentary first prototype and then did a couple. Big partnerships out of the gate with like Calvin Harris and Mr Brainwash and some other really really well-known creators and then from there. We just had a lot of inbound interests and started I started reachant to a lot of my.

Andreas Homer

Like my contacts as well who were working on projects and um, you know the idea really was like how can we try to move the space forward and provide like a temporary rage for people who are maybe a little bit more reluctant to enter the space. So from the first day that we started to work on this stuff like we’ve always known that technology would solve these problems with Blockchain Blockchain energy consumption. But we thought you know how can we help your exact app. Give people some numbers and the same in the same spirit as what we do in our app right? where we show you the numbers around your travel and transportation. Can we put an estimate on these nft emissions and your ethereum transactions and so what’s happened you know what’s interesting is I don’t know if you follow. This world at all, but the merge to testnet was successful for ethereum to move over to a proof of stake network and so what was once just a talk of you know, talk of the town around um the sustainability of ethereum. Has actually now moved materially in the right direction and so still unsure when it’ll move from testing that to production. But um, you know it’s a pretty dramatic shift from the power hungry proof of work mechanism that currently power. Powers Ethereum um, and I think a lot of that is due to obviously efficiency issues across like number of transactions per second but also just like the immense demand for a more sustainable ethereum immense demand from artists from creators from. Platforms. Um, and really anyone with a voice in this space because if you’re a minor you’re not going to care one way or another um you know about making noise about this because it’s not in your interest. But if you’re ah a well-known creator who has a platform. Like a famous artist or a brand. Um, it’s in your best interest to talk about it and um, do something in the short term but also like discuss how this can be solved from a technological standpoint. Um.

James McWalter

So it idea then you know let’s say I’m yeah famous djfamous musician I’ve minted you know a thousand nfts of a certain type and that’s produced a certain amount of carbon just because of the energy. Mix used in the production. So some of it was green but let’s say a lot of it was from traditional dirtier sources and would I then offtset the thousand or would anyone a purchasing have the option to offset like how does that kind of dynamic work I guess where it’s responsibility for. You know, greening the Nft lie.

Andreas Homer

Yeah, exactly yeah so it really depends on who the creators but it’s generally whoever is minting and selling the nfts that will take that action and part of it is because they’ll have the most visibility into. Overall number of transactions and really the responsibility for that and they’ll also be able to talk about it and you know at their launch at their Twitter spaces or their discord. It can be a ah talking point that that that they discuss um. So I think you know obviously you don’t get that if you’re an individual buyer and you’re just offsetting your crypto wallet. For example, your ethereum wallet. Um, so yeah I think it gives um you know the creator the opportunity to take that action to talk about it with their fans. Um. And hopefully like I said before keep pushing the space in the right direction which I really I’m very bullish on space from a sustainability standpoint I mean there are several blockchains that are alternatives to ethereum that exist that are very energy efficient like salana. Flow tesos polygon and you can min nfts on those blockchains and it’s ah very very low energy consumption like even to the smaller energy consumption on some of these watchins than doing a Google search. Um.

James McWalter

Emailing a Jpeg which is not too disabler.

Andreas Homer

And yeah, yeah, so these these these alternatives exist and once ethereum you know moves over to the consensus layer. It used to be called ethereum two point zero. But now it’s called the consensus layer I think you know it’ll it’ll Mark a pretty big shift in. Um, the way the network works and the way that all networks going forward ah will work. So I mean if you’re building anything now in blockchain sustainability and energy efficiency is a core pillar and that wasn’t necessarily true. A couple years so things are moving in the right direction.

James McWalter

How do you think about that from I guess a business point of view at Aerial  because I guess the cleaner the blockchain gets the the less of your opportunity I mean obviously better for the planet which is in the end. What we all want but ah yeah I guess you know you’re building for that use case and that use case is getting. Yeah, dramatically cleaner. There might just be less to be offseted in that space.

Andreas Homer

Yeah, so it’s interesting since we we did our first release which was the beginning of last year um we explicitly mentioned ethereum 2.0 and our position has always been that. What we’ve built is a temporary bridge for people who are probably a little skeptical or less likely to want to build particularly on ethereum but that as I said before this problem will be solved by technology. It’s not going to be solved by. Carbon offsets or carbon removal like it has to come from the top down. So I think we’ve been like pretty clear about that. Um, and for us like we’re actually really excited for ethereum to become a a proof of stake network because it. Opens up the door for us to do a lot more on chain which we we plan to do so we actually think like it opens up the door for us to do a lot more in the space and so we’re we’re actually pretty excited about it. Um, and we never viewed it as ah, you know, maybe the longest term part of our business. Um, and we we want. We want it to move in a cleaner direction. It’s better for us. Actually.

James McWalter

That’s that’s that’s great to hear and so then kind of thinking ahead. You know what are those kind of next 12 to 18 month goals for Aerial .

Andreas Homer

Yeah, we have we have a couple big bets that we’re making right now. Um across on the mobile side and on the the web 3 side as well. Um, and I’ll have you know, hopefully more to share there soon. Um, but yeah, we’ve we’ve definitely been pretty good about seeing where people are using our products where there’s traction. Why people like the brand why they feel compelled to share it or talk about it and so we’ve been looking at a lot of those signals across our products. And thinking big like how can we you know have the most impact. How can we scale? Um, and so yeah, we’ve we’ve got a couple things we’re cooking up that um, can’t talk about Jesse yet. But I think will be. Pretty exciting.

James McWalter

Yeah, excellent, no, but I’m sure I’m looking forward to kind of keeping an eye out for that I guess thinking about you know how the company has evolved over the last couple of years I believe you know you raised some capital last year. Um, you know and and and kind of building that team from those that that core. Early group any kind of I guess surprises along the way things that know I believe is the first company you’ve been Ceo of ah you know even mistakes that you were like oh that that was not what I expected as I kind of try to build the company.

Andreas Homer

Yeah, so it’s actually this goes back to Microsoft so I actually I helped build a couple different software startups 1 was a private social network called path that was founded by an early Facebook or. And the cofounder of Napster. Um, the company did all right? You know, ended up selling it to cacao talk which is like a korean equivalent of Whatsapp and I did another company that was a mobile email calendar startup a really small team. We ended up selling the company to Microsoft so I was. Ah, director at Microsoft for four and a half years and I left near the end of 2019 and I raised this little small tiny round to just get things going with with my co-founder and lo and behold dun and. The pandemic hits just a few months later um in March of 2020. So yeah I think when I look at you know challenges along the way. Definitely leaving one of the most stable companies in the world to build something new. Um, you know, particularly in ah, an a nascent space um presented present a lot of challenges. Um. You know, obviously like we were all working together in our office in San Francisco and then overnight our office just closed down and we had to work you know from our apartments and so so yeah I I think you know for from our standpoint like. You know and my cofounder was at Instagram before and um, you know having that sense of stability and then you know leaving and starting something new and pushing through to get a product out. But yeah I’d say you know it’s not a. A direct answer to your question around. You know some of the things that we could have done differently but I it just goes to I guess the point I’m making is like it’s good to learn from your past mistakes and.

James McWalter

So sure.

Andreas Homer

Also at the same time realize that there’s no perfect timing to do anything like starting a company. Yeah, um so I think like you know going back to your question like Hidesight’s 2020 but it’s like oh would I have chosen how to start a company.

James McWalter

Right? Always start.

Andreas Homer

In the worst pandemic in 100 years probably not right? so.

James McWalter

Yeah I mean it’s it so interesting to say that. So I think a lot of it is kind of kind of where you’re situated so as you mentioned you know you’re in the Bay Area you know you’re working at Microsoft and so on and so interpersonal. All physical connections were obviously so important. That time I was actually living in Mexico waiting on my green card and I just had so little access to a certain type of yeah investor and and people who wanted to work on things and then everybody was on a Zoom screen and so nobody cared that I was in Mexico or wherever you were as long as you could you know make a meeting a specific time. Um, you had that access and so. I think depends on the kind of company and the access. So for me, it’s like it probably made it more difficult in the traditional areas where startups flourish but it definitely leveled the playing field for a lot more areas the world as long as they’re they’re willing to kind of work with a time zone difference on ah on a Zoom call.

Andreas Homer

Of course, yeah, no I completely agree. It was just it’s you know you get used to just you know being elbow to elbow early on and just turning to each other and discussing ideas and you kind of lose that you know with not being near each other. Um, so It’s a pretty big challenge and I do agree the the fundraising like you could take 20 meetings in two days if you wanted to all over Zoom which wasn’t a case in the past where you had to do a lot of things in person and meet people for coffee or for lunch or whatnot. So. I do think the velocity of meeting people for fundraising also wasn’t necessarily a bad thing. You could do a lot more in a shorter period of time. There are some good things that came out of it but definitely difficult to adjust to particularly you know. So early on in the company building process to have to just you know disband from our office and our routine and you know have to go on Google meets and hope for the best.

James McWalter

Right? that those super early days. There’s they’re so fragile as well. Right? like you’re trying to summon something out of nothing. Um, and so yeah, not like that that level of disruption. Ah you know is is is absolutely super high. Um. Andreas This is this’s been great for really enjoyed the conversation before we finish up is there anything I should have asked you about but did not.

Andreas Homer

Um, I think we covered a ah lot of cool topics I I guess 1 thing that we didn’t talk about which I um, you know wouldn’t mind touching on is pertains. Ah, you know the idea of individual responsibility with. Regard to climate change and it’s a question that I get asked a lot and you know by friends and like people in the space like you know why should an individual care when the biggest polluters in the world are. You know oil and gas companies and big corporations and I think what’s interesting there is especially in light of you know the last couple years which has shown that. Big companies and governments alone can’t solve our most pressstling problems. So right? Like if you look at the last couple years like keeping distance from people and getting revaccinated and you know, avoiding crowded places. Um, those are like the only ways to actually. You know temper the aggressive spread of a really big global problem. So you know we as individuals had to decide collectively that that was something we were going to do to limit the severity of this problem and so I think that climate is actually. Quite similar because you have this problem that affects everybody regardless of where you are in the world in different ways of course. But um, you know it’s pretty convenient to just point to governments and big companies as the culprits and the enemies here which I’m not arguing with right. Oil and gas is by far the biggest fluter on the planet. But at the same time. Why do these oil and gas companies keep drilling and keep producing fossil fuels because there’s the demand for it. There is a man for it across. Ah. Lot of different sectors transportation is 1 whether it’s flying or the cars that we decide to buy. Ah if you look at fast fashion right? like that’s ah, a lot of those materials that are used in fast fashion or petroleum-based materials. There’s a lot of plastic nylons polyesters right. Are derived from fossil fuels. So I think and our ah you know societal obsession with plastic in general. Um, but yeah, if you look at just across the the spectrum of consumption. You know we are driving.

Andreas Homer

Demand for Fossil Fuels for for petroleum-based products and so at what point do we yes hold corporations responsible. But also you know, read the room and realize that we’re contributing to a lot of this demand. Um. And I think Consumers Underestimate sometimes like how powerful we can be um because you know sometimes I think it’s easy to think that you know obviously ah you know your your your voices and counter action actions don’t Count. Um, but. Thinking change pretty quickly and I think you know there is a lot of greenwashing going on. But I think a lot of companies are realizing that consumers are caring more about sustainability and reducing reliance on on Fossil Fuels and um. Dirty Materials petroleum based materials and so hopefully you know Collectively we can ah apply more pressure on that on that system and reduce some demand for for for Fossil Fuels. So anyway, that’s just a.

James McWalter

Yeah, yeah, I’ve ah but yeah, have a couple couple thoughts on that. Um, and generally I actually do agree with you I mean the way I think about how how do you kind of enact dramatic climate you know change mitigation so we have these large levers and so government is a lever. Um.

Andreas Homer

High level.

James McWalter

You know, corporate action is a lever you know activism is a lever and I would say those are the 3 big levers today with consumer behavior this like distant for it and 1 of the I guess the dirty truths of environmentalism today is that climate change mitigation is very much an elite driven like phenomenon right now like it is. Generally in the and the fine elites. Yeah, however, want to wish but educational profile economic profile those kind of things. The people who are working most actively and making the most kind of active change to climate are generally people who fall into that kind of elite level booke. Um, on the other hand. 1 of the things I think from a yeah, just a human psychology point of view if you take ownership and action. You will feel better about the problem and that is just regardless of nearly any kind of phenomenon out there right? Um, you know there’s a but pothole on your on your local road right? um. You know you can take ownership fill the pothole and then you can take action. You know bug your local like counselor or whoever the government official response for that until like they commit to never doing that again or making sure that those proper upkeep and that’s a lotsh more powerful than kind of just like complaining to your you know spouse or friend. Oh they never fill up the potholes right. And so and even if it’s unaffective and effective. It’s like oh I keep complaining about this pottle not being filled and nobody’s filling it at least if you’re complaining and and doing activism and and working on the actual right levers you are actually making some progress you are probably starting to connect with people who have common you know, common cause on those cotopics and so I think. But on the individual level even if it doesn’t necessarily have a massive effect and even if it is true that the largest polluters you know one person’s change is not going to necessarily affect the largest. Yeah relative to the larger producers changing it still gives you ownership in a way that like. Not just the despairing are on climate right? like the only people I who are like incredibly hopeful of climate are the people who are actively working on climate like mitigation right? All those people are like super optimistic even when they’re pessimistic, they’re like for. We’re going to figure something out you know and that’s mainly because they take an ownership and action and even if it’s in some areas like a kind of. Yeah, maybe borderline and pointless endeavor. There’s still such kind of psychological power in taking those steps yourself.

Andreas Homer

Yeah, definitely yeah and it’s it’s also interesting to see like you’re right regarding the that sort of top 1 you know to 2% who globally right? who or who who care about these topics. Um, those people also omit more exponentially more emissions per year than someone who sorry, there’s a fighter jet flying right over my house right now. Ah yeah, is it.

Andreas Homer

Very loud. Um, but yeah, wealthier people in developed countries tend to emit exponentially more than people in in developing countries. So it’s it’s ah it’s shitty because a lot of. Developing countries will be hit a lot harder than developed countries. Um, and even though they’re not emitting as much carbon per per individual typically um, but but yeah, it’s it’s I have to look up the the statistics again, but there are some some. Pretty good studies on emissions per capita of you know, wealthier societies and wealthier upper tranches of countries and it’s not great. Um, so yeah I guess it’s good that those individuals you know. Care a lot because they are emitting a lot more per capita. Um, but yeah I do agree. It’s also tough because 1 of the symbols of economic development is the ability to harness energy like if you can that’s. But it’s led to so much of our progress and development is our ability to harness energy and you know if you look at a lot of developing parts of the world. Not all but some of them are just trying to harness energy. They’re trying to progress they’re trying to. You know, catch up. Um, and you know they might not have the cleanest sources of energy to to use. Um, so that that’s another you know topic it makes it tricky. Because obviously the hierarchy of needs in some of those places is very very different than ours right.

James McWalter

I no absolutely um and this it was was good chatting. Um, best liquid Aerial  and thanks for your time.

Andreas Homer

Yeah, thank you so much. And yeah, let me know if you ever get out to the Bay area yet. Okay, thanks.

James McWalter

Absolutely um I’ll be there next month

EV Charging Infrastructure for Fleets – E97

Great to chat with Jules Brenner, Founder of Zeus Power, Zeus Power is changing the way facilities add EV charging! We discussed optimizing building installations for EV fleets, the sales cycle in the public sector compared to the private, retrofits, EV infrastructure development policy and more!

https://carbotnic.com/zeuspower

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Jules Brenner co-founder at Zeus Power Welcome with podcast, great to start. Could you tell us a little bit about a Zeus Power?

Jules Brenner

Ah, show you how many James. Yeah, absolutely so Zeus Power creates energy solutions for the modern industrial real estate facility. We focus on first creating electric vehicle charging products for the trucks and the fleets that house. Their vehicles in those facilities and really focusing on that next wave of energy where the predominant load of the building is the electric vehicle charging systems.

James McWalter

And so you’re saying those kind of industrial type type buildings. Are we talking about? you know like an Amazon warehouse. Are we talking about? you know a supermarket that might have trucks kind of going in the back something else.

Jules Brenner

Yeah, yeah, it’s definitely more of the Amazon warehouse think ah, it could be a private fleet. It could be a government fleet where they house like city vehicles street sweepers and different vehicles and spec lighting poles all the way to a you know. Ah, kind of a smaller enterprise fleet that has Chevy bolts for their employees. Um, anywhere where you’d have like a fleet and lots of older vehicles as well.

James McWalter

So that makes sense and what drove the initial decision to start Zeus.

Jules Brenner

Yeah, um, it was kind of interesting I was in the industry I was working at a company called exos trucks that was working on the the sales side and we looked a lot at you know installations and deployments of multiple chargers and trucks. And I started just looking at how complex it was to spec out charging systems for a lot of the buildings. You not only had to find excess power in 1 of the buildings but you also had to then go and make sure that the you know the building is really speced and ready for. Lots of chargers at scale and started to think that you know not only are most buildings going to tap out maybe at 5 chargers maximum. But the way that and a lot of the trucking industry procures vehicles is very exponential versus say in like the public charging space. Um, they typically will sit on the sidelines with any new technology whether it’s hydrogen and biofuels et cetera for maybe an extended period of time and then once they like something they tend to ramp pretty quickly with some pretty big orders so really wanted to be able to think about when some of that stuff happens for the. What currently is nascent electric truck industry. How are we going to be able to keep up and you know from there we started doing more research looking into charging systems and came up with the idea of produce.

James McWalter

And you said we there? Um I believe you have a cofounder and would love to hear you know the kind of how you 2 met.

Jules Brenner

Yeah, yeah, absolutely yeah, my co-founder Austin Hunt we actually grew up like 10 minutes down the road from each other in Brooklyn New York we went to high school together went to college together in college we created a school’s first baha racing team basically building. A team to put together a du buggy for school competition from scratch raise money from the school and built the team over course about six months of a team still has stood stay but Austin and I really like working with each other and after you know college we. Separated for a bit. He stayed in the northeast you worked at a few different companies some startups all the way from doing kind of powerpoint product to commercialization. You worked at some aerospace companies and had internships at Spacex and a variety of other. Prominent aerospace firms and um, you know he kind of is the more technical side of everything even though we both have mechanical engineering degrees and his focus is very much on electro mechanical solutions.

James McWalter

And and so you know you had obviously this amazing kind of basis of a long-term relationship with each other but you know we we all have people we grew up with but we don’t always necessarily want to start companies with them in my own case I Even at one point started a company. My brother I wouldn’t say that was the the most successful thing but you know definitely the person I know best in the world and so these things have you know pros and cons how how were you kind of communicating with each other to say Okay, actually we want to start something together.

Jules Brenner

Yeah, it was interesting. Um I think Austin was um, getting to a point of his life where he wanted to get in really early into something he was working at a company that was more like series b stage but he was there through some of the early fundraising rounds and. Think we just kept in touch and when I started to you know census kind of desires to to branch out almost on his own I was kind of thinking about you know, a lot of the growth in the electric truck industry and was managed to to kind of convince him over a course of a few months to come join on. So. I think it worked that well he certainly has a lot of skills that are complementary to mine and I think we create a a very moral round the team.

James McWalter

And absolutely I I think like the you know the the founder fish for this space is like super strong which you two as as a founding team and I guess then so you know you had this idea coming out of your experience at exos trucks. You know you have cofounder with ah. Technical abilities that you have this kind of long-term relationship building things together. Um, and so I know you’re kind of currently working on. You know, designing and and kind of going through some iteration on the Mvp could you speak to what that process is like today.

Jules Brenner

Yeah, absolutely so you know we really wanted to focus first and foremost on a strong kind of customer fit before even getting too far along with the Mvp you know this is probably the fourth or fifth hardware startup that I’ve personally.

Jules Brenner

Either either joined early or in this case co-founded and we’ve seen this mistake over and over again. Austin certainly seen it in his engineering experience. So when we started doing that we first figured out like who could be our initial first customers and started taking a very. Kind of collaborative team approach with them like we have some government fleet managers that will very likely be that first early deployments and we try to speak to them every you know for few weeks as we do this and literally show them everything we have and get inputs as we go through and think of it as we’re custom making them a solution. And setting Kpis for it as we go as well. So that’s been really important and helpful in our in our general goal and you know putting together the Mvp. We really wanted to focus on what’s the you know literally the minimal viable product for um. You know this? So we we focused on a more toned down version of the commercialized solution in terms of both cost and functionality with the thought that the key features that kind of alleviate the largest pain points would be focused on first. And um, you know Austin’s built a team on his side of various professionals in the charging sector power electronics, mechanical design etc. Um to make sure that this is a robust product that is really geared towards the um commercial mission critical flut applications.

James McWalter

And so those design partners that sounds like are kind of running or have ownership of governmental fleets. How did you find those and and get them to agree to chash. You know every few weeks.

Jules Brenner

Yeah, yes, so those? um, those government ah customers like um was actually fairly easy. We really didn’t spend too much time frankly, most of the relationships that I had from my time in industry were with private f athletes and we called the ones on you pretty early on and you know learned a lot. But. Government fleets have been very progressive with um electrification and just clean energy on their yards. Um, you know we pretty much went found a ah list on some of the local agencies of the fleet managers reached out and and started conversations. A lot of the government mandates are really really soon versus private fleets and they’re ordering like you know we were literally ons site with ah a government fleet yesterday and you know it’s pretty bad I mean they were telling us how there is ah 1 of their fleet yards is actually housed in an old. It was a horse barn and the it’s It’s so old that you can see two truth marks on some of the walls from the old horses. But the infrastructure is very weak and I think that’s why they’re most receptive to this kind of stuff.

James McWalter

Yeah, and whenever I kind of talk to people who are starting founding startups and they’re like oh you know I really struggle to find people to help you know, give feedback on the product and it’s like if you can’t find design partners to even talk to you now like you might not be painful enough a problem and so I think it’s like so. You know it’s it’s great to hear that how easy it is because if you find people who are just like loving jumping on a phone call with you to talk about the scale of the problem then there’s definitely something to be solved here. There’s definitely you know a potential solution that you know that smart startup folks can kind of work on and so okay, so the. You have these you know design partners you’re talking to on a regular basis. Amazing. You’re getting you know, physically on site seeing seeing horse barns and and other kind of issues. Um I guess from here like what’s the kind of next mostones in terms of getting you know some sort of Mvp to service those type of customers right.

Jules Brenner

Yeah, absolutely so we are currently in the pretty much supply chain kind of ordering phase of our Mvp. So. It’s designed. We’re focused on ordering parts as the parts come in. We’ll begin to assemble. And then you know at that point start to firm up the exact details of where we want this thing to go first and you know and this kind of stuff should happen pretty quickly next maybe 3 to six months or so and you know to whatever extent possible. We’re also focused on. Really, you know we refining in a lot of the um you know products core like software features so we have ah a sauce kind of very basic software layer that we initially and have for the fleets and dialing that in and then you know we take the data from that pilot or the course of. Subsequent 3 to the six months and feed that back so that we can have a better pilot number 2 as more of a kind of focus on the key features that we need to succeed and then over time as we build the. And these case studies if you will. We can then start to take it to larger and larger customers even like the landlords of some of the private fleets themselves that have you know been more proactive and want to install chargers maybe earlier when the vehicles are on site.

James McWalter

And just so I can fully understand like the use case. Let’s say I’m like 1 of your target customers and everything goes well the the kind of current direction. You know as you’re kind of going through these pilots and the development of the technology all goes well for me, let’s say I want to be onboarded as your customer you know in 6 to 18 months. Um, what would that experience be like and both through the onboarding and then once everything is set up like how would I guess my life change and for the positive.

Jules Brenner

Yeah, absolutely yeah, so you know a few things so I’ll maybe talk to you about the experience. We heard about yesterday with ah that government fleet manager now. Um you know this gentleman he is very you know aware of some of the challenges of just. You know, installing more than even 1 charger in his facility. That’s pretty much where he taps out and you know for their experience if you know they didn’t use ah a Zeus unit. They would literally have to redo their whole electrical room as he was telling us yesterday and and modernize everything and then also pretty much tear up a bunch of concrete on their yard to to get. You know some solutions in that you know they might not eventually scale. You know they’ll install 5 chargers. But then once the the building taps out and they need more later down the line they have to redo it so it’s kind of a messy experience but you know with Zeus it’s very much like just the typical installation of a charger. You know we help you with like. Permitting process to you know start the the application you know once all of it’s approved. You know we’re working through the surveying where this thing is going to sit how it’s function once the unit arrives the site. It’s installed by certified electrician and then after that we help tune in the. Le management software to the vehicles that you have which is just a simple onboarding process and I would definitely say that you know it’s a um, it’s it’s a much kind of cleaner installation because you’re going to save on and only the cost. But most importantly, the time and headache.

Jules Brenner

Of all the other electrical system upgrades which tend to take the whole charging installation process from being maybe six months to you know a year plus

James McWalter

And that that makes sense and the and I guess why? Why do these things take so long. Um, you know is it you mentioned permitting is that like a large component that’s kind of outside the control of both your customers and yourselves is it. Getting the components is it something else like what? what are the reasons for why this is such a kind of long process relative to you know? um, like ah for example, if if you wanted to ah like yeah build ah build a you know an outbuilding as part of an industrial park. You know you could probably do that in a few months right relative to this which which takes ah quite a.

Jules Brenner

Yeah, so so there’s a few things to consider so you know the first thing is that the amount of power that chargers in general are pulling is multiples more than what a building is rated for you know one statistic I can give you about 50

James McWalter

But longer.

Jules Brenner

Tesla supercharr type stations that would basically be for kind of semi truck level draw as much power as a whole empire state building peak load and it’s it’s quite a bit of ask for a yeah old 1920 s you know horse barw.

James McWalter

Right.

Jules Brenner

Right? So You know if you think about kind of what you need to do just from the electrical equipment perspective. That’s not only a big kind of logistical mess. But it’s also a huge capital capital planning allocation that a utility needs to take on plus. Actually all you know applying and installing all the different components transformer substation upgrades et Cetera Um, those things really add a lot of time permitting isn’t too bad I mean it depends on the State. Some are more backloggged than others but it’s kind of you know everyone really has to go through it. It just doesn’t. Um, I just get elongated.. It’s pretty substantially once other equipment gets in often. The thing that happens is that you you tend to really run into what we used to see at Exos which is that you would go down the kind of sales chain. You would get a happy fleet. Everyone would. You know, be working towards the goal of an installation of a certain amount of units and then you know once they start talking with their landlords about you know whether or not who pays for what that turns into like a whole lengthy negotiation and further ads time. So It’s It’s a really big hassle versus if you just install the unit that had. What you need built into it and that thing was as movable as a charger unit will get and just needed to do permanent. Not everything else.

James McWalter

And that definitely makes sense and so I guess then you know know this is obviously very kind of early days but 1 of the kind of challenges that some hardware startups have is you know is this something that I’m selling the hardware and you know it’s not offgraded very often. And I just have a single point of sale with a customer versus things where you have hardware kind of connected to other solutions services software and so on or there something more like a kind of long-term relationship with the customer. It is a long-term revenue stream. How are you thinking in these early days about kind of. The potential monetization of zoos.

Jules Brenner

Yeah, good question I think that’s ah in general, it’s a tough issue for a lot of hardware companies hardware tends to be a much lower margin you know sale and then adding that into you needing a lot of sales time to get it done a more highly technical sale and usually rank day sale. Doesn’t tend to a very cash flow and positive business and you know we’ve thought about that a lot we really didn’t want to end up in this situation where it was tough to scale and then also we didn’t like what we saw in the industry about having this kind of you versus mean type attitude towards a customer. You know we’ve talked to. Ah, variety of different fleets and in general just like talked huge hotel chains that have installed will take thousands of charge points and they would kind of complain that you know the more units that they put out the higher their saas fees grow but the you know their value isn’t increasing anyway, it’s just similar kind of cost tacking on and on for. Essentially charger and energy dashboards. So you know, kind of thinking about that. We really wanted to be able to create a set of products and kind of revenue streams that better align interests. So we have you know our typical revenue from the oem charger sale. So the margins on there are pretty in line. What what? a typical oe yeah would sell their unit for that 40 to 50% gross and then from there you know once we are installed in the building we use this kind of hardware aspect as essentially a moat right? to not have our software. Um, you know, switched out like what might end up happening to some of the other charter oems and you know we encourage the stickiness that the customer there and then we work on the 2 software layers so we have a kind of software layer that’s focused directly on our customer which is in most cases, the Landlord. Sometimes the fleets on their building so they are technically the servers that customer as well. But essentially that software package just focuses on using the batteries that are in the Zeus unit as a literally an energy storage unit for the time that the vehicles are not charging. If you think about a lot of fleets vehicles are actually not using them throughout the day that often is much more so that the battery is sitting around and you can use it all the different benefits that already exist in energy storage today including peak shaving to help you save on utility bills um resiliency to give you. Ah, peace of mind knowing that there is power on sight at all times in some bit capacity especially when you go all electric and then also create random streams to things like wholesal where how sound markets where you’re essentially by low sell high with some of the energy and you know we create our kind of higher.

Jules Brenner

Grow A margin revenue stream from that package. Um and really just try to focus on being more of like a partner with our landlord where we yes we charge for that software. But we also make sure that that creates value to them so that it isn’t just the of and our money. Kind sort Sas fees are growing and I don’t know what extra I’m getting every time it happens kind of thing and then towards the fleets themselves. It’s just the standard fleet management software so they have all your data and you know again know the software side. It’s typically higher gross margins as well.

James McWalter

Yeah, on the kind of bouncing the pricing incentive piece I think is really key. Um, you know you generated their bulk discounts for a reason right? at the enterprise level unless you’re getting some big value ads right? And so. Maybe there’s elements of compliance. Maybe you know there are these other kind of buckets that people can add to an enterprise plan but you definitely if you’re just kind of linearly going up in cost. You’re eventually going to have pushback from enterprises where it’s like why am I getting charged you know per unit. You know 10000? Yeah and I’m buying 10000 units and a smaller company is basically getting a better deal for because they have fewer units and and but our period of price is the same. So I think definitely kind of taking into that concern into account um is is going to be quite powerful as you were kind of looking to kind of differentiate down the road the other piece as you’re took on chatting there. So. Think I’ve mentioned the podcast before that one of the ideas that I explored in the past for startup for myself was some sort of pure software solution that enabled yeah the better. Um, kind of monetization of distributed energy assets specifically batteries but others as well. You know how could you kind of aggregate batteries. That are already connected to grid and somehow in a way that kind of plays with wholesale energy markets and I was talking to a few folks about this at the time the thing we kept coming back to was how how can we make sure that we continue to have access to those physical assets because what would stop you know the owners and. Of the batteries themselves are not the owners of batteries. But the manufacturers of the batteries themselves from having their own software layer sitting on top of those and because they own the physical asset in the value chain. They seem to have yeah the ability to block out other software that’s trying to reach down into the physical asset and so I guess. You have a kind of similar kind of thought process around why the but owning the physical asset and the development of physical asset is so important.

Jules Brenner

Yeah,, that’s that’s ah, that’s a very good point. Yeah I think owning the um you know, physical asset allows you to be better protected. Um you know or or other from the from the oems lens like from Missou lens allows you to be better protected. In a world where there are just a lot of different software platforms that help manage charging systems. Potentially even battery systems. There’s a variety of laws coming out with compliance at Ocp for charging Systems. So I Really see that if you are just a pure like software play In. Kind of control Hardware. You might have a really tough time growing. Um I’ve been in that space before and I’ve just seen it. It’s ah it’s a pretty like tough equation sometimes to manage in terms of customer acquisition cost versus you know what people are willing to pay and to that point earlier about like the the both pricing on Enterprise. The funny thing is the way that the incentives are aligned in the industry right now like we had so many customers that are really just telling us I wish I was paying 0 and you know they honestly mean it like they are to a point where they are just about to ask the charger oems to just shut off their software. Let them use it as what they call a dumb charger.

Jules Brenner

Um, so if something doesn’t change there I mean I don’t know that they’ll get around it but they are certainly feeling like they’re being forced. So um, you know, thinking about like you know how do we ourselves like you know, bring in a battery on site that is you know essentially. Ah, smaller version of what you might get like from an energy storage application and something that we purchase direct so we have full control over how that is used but we are you know, not being very like closed off about this kind of like very Aes or instead trying to be open with the customer and saying. You know now that you have this asset on site. Let’s work together to get the maximum monetization the ah roi on it and roi is a big word. It can mean just the insurance resiliency which doesn’t have an immediate cash number but you know helps out if there is a problem.

James McWalter

Yeah, so.

Jules Brenner

Um, but I think that’s really important you have to look at this industry much more through the lens of property technology than you do automotive technology if you’re going to stand out in you know 2022 and frankly, be profitable.

James McWalter

Um, and you mentioned the the kind of customer segments at the beginning that you’re mostly targeted on is more of the public sector and they seem to be the those who are you know have the greatest need are moving the fastest and I guess like my intuition would be that That’s generally. Not really the Case. So If you’re trying to sell to public entities. The sales cycles can be quite long often. It could be hard to get to the right decision maker and so on whereas you know more typical corporate clients tend to move faster. But obviously if they’re very big corporates. Those can also move quite slowly. Um. I Guess how how are you thinking about that kind of sales cycle aspect and why is this industry or this particular segment so different compared to the typical you know public sector moves very slowly model.

Jules Brenner

Yeah, yeah, good good questions. So you know a few things you know when we think about like who is the ideal customer that buys today I mean the ideal customer is going to be someone that is either the landlord or the feet of an industrial facility that is older and has less capacity. Right? And that could you know that could vary the older the building the more likely they are going to tap out. Maybe even at that first charter and if that’s the case as soon as they go to do some sort of utility study could even be with ah another charger company. They’re going to find out pretty quickly that. Need to do something and when they start pricing out what it costs to do you know all the station upgrades and the building upgrades then they get turned off to the idea sometimes so those those um parties tend to move a bit faster in general but when it comes to government agencies. It’s actually interesting because with. Fleets. They’re not that hard to find um you know they’re mostly the the information’s online and very minimal effort. Um I used to sell to private fleets and I’ll just tell you it’s frankly, been harder um with private fleets than with ah government fleets. Um, government fleets. Also they look at it a lot more through an esg lens than a like fleet manager at a private fleet. Usually the board of a company of a private fleet maybe has some esu mandates. But by the time it hits the fleet managers deaths. They really don’t care that much. So. Um, that’s a big part of it government agencies also usually find themselves with a lot more cash towards this stuff. So while maybe the sales cycles can be slower. They actually have more spending power and they actually have to spend it so you know there’s always some politician that comes out with some new. Idea for how they can clean up the roads and usually gets implemented. You know in fairly short order. Um, but sometimes you’re right, you know it can take a little bit of time the approach that we have always recommended to people is to say you know think about your yard. Not in the lens of you electrified 3 out of 50 vehicles think about it in more the lens of what would happen if you electrified whatever your goal is let’s say 30 out of 50 and maybe the other ones are bioiesel or hydrogen or something or cng. Um, what would the. You know, equipment needed look like what would the cost of your utility bill. Be call your utility try to figure it out and look at it from that lens and then ask them the other important question which is what’s the timing on all this and we would talk to a lot of utilities and you know they would tell us this kind of jokingly where fleets would call them and say I need.

Jules Brenner

All the existing power in this location and I need it in a few months and a lot of them would you know they just kind of say no we get give a few years so when you know some of that stuff you tend to move much faster and and I do think that a lot of the government agencies are a bit closer to their utilities and. Thereby it moves a little more smoothly but um, a lot of them do have you know lots of vehicles on order I mean we were with one yesterday and you know they have like I think they said 15 ford e lightnings and you know so street sweepers and all sorts of stuff coming in at the end of this year going into the end of next year we slow that down a little bit in terms of supply chain. But those vehicles are coming and with the permitting process and even you start to think all that through you’re about right there in terms of when you want to start procuring these things.

James McWalter

Mostly we’ve been kind of talking about retrofits you know the the horse barns of the world and and that kind of thing. Um, but how do you think about like new builds you know would real estate developers generally be. You know, potentially interesting segment to focus on in the future as they’re thinking about New New Bill commercial and industrial um to make sure that they have the right charging infrastructure from the beginning. Um, and before thinking about where you know the heavy automotive industry is going.

Jules Brenner

Yeah, yeah, absolutely yeah, the um, you know we definitely recommend with early builds that you you know you plan twice and you try to also you know, future proof to whatever extent possible. Um I can’t tell you how many different companies I used to talk to that would basically take advantage of every single rebate and grant at a point in time, especially those like really big franchise hotel chains and find themselves in the situation where they. You know install chargers of different brands some that are wi-fi connected. Some are not and then at some point they start to realize we should probably start to really standardize the asset and figure out 1 central place to track them and find themselves then in a position where. You know it gets kind of messy. So I think it’s really important to think about a standardized process for your facilities somewhat early I understand that most will probably not go to 1 technology in total. But definitely you know, keep the batch to a very small limited amount. And you know to whatever extent, you do have the ability to install early from fresh concrete. Um, you’re going to keep your total cost down. Um, but more importantly, you’ll be able to plan for things like footprint right? You don’t want to stick chargers in the front of parking spots and have vehicles have to park. You know three feet from the curb. You also want to be thinking about to whatever step possible how you can use the um, the battery systems to better. You know manage the building. It’s it’s kind of interesting like if you think about the way a lot of like the let’s say office park charges are installed. They’ll be closer to the building and they’ll also be thinner profile chargers just because closer the building means less electrical cost thinner profile because you don’t want to cover up the whole building to a point where you can’t see chargers if you start thinking about like batteries as part of that. Um, you know if you don’t plan electrical lines early. You don’t want to find yourself in a position where batteries start to take up a big part of your front facade as well too. So early planning is really really important and it’s also cheaper.

James McWalter

And then you know thinking kind of on about broader spectrum. The changes at the policy level and so we had the federal infrastructure bill that passed last year. There were multiple billions of dollars set aside for ev infrastructure development. Um, it’s still I guess a little bit unclear to me about the exact kind of deployment structure of that money. But how do you think about either the existing incentives like what was passed last year or things that could potentially kind of emerge in the future and about how that affects how you’re approaching. You know the deployment of your early product.

Jules Brenner

Yeah, yeah, good question I think the um you know it’s It’s very exciting to see that amount of dollars flow in from the federal level I think you know most even you know. Cities now are are adopting their own programs and spending their own money but the federal level should create a lot of opportunities for us to you know, not only find just on government website opportunities for bid. But most importantly, I think what it’s doing is it’s bringing into the light um a lot of grid issues. This kind of chooses electrical infrastructure. Um, and as you start to think more about that you start to really start to weigh whether you want equipment upgrades that maybe give you more capacity but still force the utility to work hard to produce lotss of energy or whether you want the um you know battery systems. Part of the equation that should make it easier for the utilities to generate energy and store them in the batteries prior to use. But I do think that the you know Overall the federal will has been a um, a strong sign for acceleration in the industry and it’s certainly kind of woken up a lot of the fleets to. Um, the opportunity of taking advantage of incentives now a lot of them. You know they maybe were thinking of going electric but they were going to stall closer until the um you know date mandates and now with the money coming out over a limited time here. They.

Jules Brenner

Um, accelerated a lot of their plans.

James McWalter

And then thinking about the team and and kind of as you were kind of building out the team and the company culture over the next few years you know one of the things I found in myself is every kind of new venture thing you know company that I start. The culture is often a either. Ah, reflection in some way of kind of my my past experiences at other organizations or other companies that I’ve involved in so either I’m embracing certain aspects of those other companies and trying to you know, incorporate those in what I’m working on now or I’m kind of reacting against them and saying okay you know that that company was great, but. Had this particular part of their culture or part of what it was to work there that I just absolutely do not want to have at my new company. Um, you know for yourself having you know, worked at a few companies worked at companies that have you know also been part of the kind of ev and electrification space. What are the kind of elements that you’re like okay. These are the things that I really want to bring in and and then still is the culture of ah you know of Zeus versus other areas where it’s like I absolutely do not want to bring those into this new company.

Jules Brenner

So yeah, that’s um, good. Good question. Well I think ah you know a few things some of my past roles and companies I think we’ve worked on some you know products that were kind of similar like some proptex some electroomechanical hardware and I think with those you typically. You know you’ll need your engineering team of course. Um, but most importantly, a lot of those companies they had strong like mission driven values and I think you know with trucking it’s a um, you know in general fleets and all that they they are a small portion of a total transportation. Pi but they are disproportionate part of the actual emissions side. So I think having a culture of people focused on you know, alignment on decarbonization is something that’s important to us. Um, but also a culture focused on strong engineering and. You know, active conversations with customers early is is key as well too. Um I’ve been in companies where you know we’ve cut corners and early stage engineer and design and I think that has certainly come to haunt us later and I think when you’re making a you know a missioncritical product. Like a charging system or energy system for a charge for a vehicle application. You want to do it right? You don’t want a call from a fleet you know someday telling you that they can’t um, operate that day because the chargers are out or something like that which is unfortunately becoming an all too common issue. And the um public charging sector these days. So I think you know those are really important I think really also focusing on you know, a very kind of systematic approach to the growth is is vital to we don’t want to make a product just for. Sake of it so we’ve really focused on identifying customers of pain points today instead of just adding out and looking at the broader market of who will certainly feel this pain in a year or 2 and we want to make sure you know that also really ends up being a kind of. Ah, right? recipe of culture and Zeus.

James McWalter

I yeah I love that um and I think it’s great that you’re already kind of being so kind of thoughtful about those elements as you kind of build out the company. Um Jules Brenner  I’ve really enjoyed the conversation. Um, before we finish off is there anything I should have asked you about but did not.

Jules Brenner

First yeah I think um, you know 1 question that we get a lot is you know, kind of why or maybe 2 questions. Why are we not using kind of those like public charging systems at truck yards and fleet yards and we get this a lot and I think.

Jules Brenner

Few things, the fleet trucking industry is probably about Five To Ten Years delayed behind public charging. Um, you know if you just look at a lot of the even most progressive fleets out there I mean you know like the government agencies they got about you know until the maybe end of this year or so until they start seeing. First batch of vehicles and um and that’s the most progressive on private fleets or some or maybe have you know, been testing a few and this is you know fleets that own hundreds and thousands so you know we’re still early days but it accelerates quickly just based on those purchasing habits I mentioned earlier. Um, but the other thing that we get asked a lot is like you know once the industry catches up. Why are people not just going to use you know a typical non-battery powered public charging station in your application and you know we always encourage people to think about that a the amount of power draw from. A power draww need from a truck or a piece of any heavy machinery is often much larger than what a public charger is typically built for but the just the software and the form factor are very different right? 1 ne’s going permissional critical application. 1 ne’s going to a. You know, kind of more discretionary retail type play and then really important to you also make sure you know you’re kind of thinking about how the landlords of these facilities are going to care about this because that’s a very different um relationship. Typically you’re going to put the charger in and the fleet side. Um, when time of use is low to not existent and you want to make sure that the direct customer the landlord is happy. So I think a lot of you know, just understanding a bit more. The market landscape is is really important to understanding us from a timing perspective. Um, but then to the second and final point we get asked a lot like you know. What is exactly your kind of differentiation. We try to segment ourselves and you know there’s charging. We think of it as like permanent charging and a non-permanent charging non permanent being those chargers built for like construction sites. Um, and then we’re in the permanent charging side and then when you segment.

Jules Brenner

You know who does industrial focus charging units. There are not that many players out there. But when you start digging in further as to who actually puts batteries in a lot of the ones who use batteries they’re just sticking in in a big iso container. Which is not a form factor that a lot of fleets have told us they like it usually takes a whole parking spot and does not look like a charger so you know we are the only industrial focused battery supported charging system out there that we’ve seen that actually looks like a charger and comes with all the typical software tools that you’d expect. The fleets and the landlords and I think it’s a um, it’s really important that we you know consider that in the lens of the industry because things like batteries will likely be mandated at some point if not highly encouraged by Utilities. So We definitely you know want to help. Continue to help find customers that you know like this stuff and if anyone is you know curious to talk to us further about it. We are always happy to chat.

James McWalter

So brilliant and we’ll include those contact details in the show notes. Thank you Jules Brenner  has great.

Jules Brenner

Yeah, absolutely appreciate you having me James take care now.

Title: EV Charging Infrastructure for Fleets – E97

Great to chat with Jules Brenner, Founder of Zeus Power, Zeus Power is changing the way facilities add EV charging! We discussed optimizing building installations for EV fleets, the sales cycle in the public sector compared to the private, retrofits, EV infrastructure development policy and more!

https://carbotnic.com/zeuspower

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Jules Brenner co-founder at Zeus Power Welcome with podcast, great to start. Could you tell us a little bit about a Zeus Power?

Jules Brenner

Ah, show you how many James. Yeah, absolutely so Zeus Power creates energy solutions for the modern industrial real estate facility. We focus on first creating electric vehicle charging products for the trucks and the fleets that house. Their vehicles in those facilities and really focusing on that next wave of energy where the predominant load of the building is the electric vehicle charging systems.

James McWalter

And so you’re saying those kind of industrial type type buildings. Are we talking about? you know like an Amazon warehouse. Are we talking about? you know a supermarket that might have trucks kind of going in the back something else.

Jules Brenner

Yeah, yeah, it’s definitely more of the Amazon warehouse think ah, it could be a private fleet. It could be a government fleet where they house like city vehicles street sweepers and different vehicles and spec lighting poles all the way to a you know. Ah, kind of a smaller enterprise fleet that has Chevy bolts for their employees. Um, anywhere where you’d have like a fleet and lots of older vehicles as well.

James McWalter

So that makes sense and what drove the initial decision to start Zeus.

Jules Brenner

Yeah, um, it was kind of interesting I was in the industry I was working at a company called exos trucks that was working on the the sales side and we looked a lot at you know installations and deployments of multiple chargers and trucks. And I started just looking at how complex it was to spec out charging systems for a lot of the buildings. You not only had to find excess power in 1 of the buildings but you also had to then go and make sure that the you know the building is really speced and ready for. Lots of chargers at scale and started to think that you know not only are most buildings going to tap out maybe at 5 chargers maximum. But the way that and a lot of the trucking industry procures vehicles is very exponential versus say in like the public charging space. Um, they typically will sit on the sidelines with any new technology whether it’s hydrogen and biofuels et cetera for maybe an extended period of time and then once they like something they tend to ramp pretty quickly with some pretty big orders so really wanted to be able to think about when some of that stuff happens for the. What currently is nascent electric truck industry. How are we going to be able to keep up and you know from there we started doing more research looking into charging systems and came up with the idea of produce.

James McWalter

And you said we there? Um I believe you have a cofounder and would love to hear you know the kind of how you 2 met.

Jules Brenner

Yeah, yeah, absolutely yeah, my co-founder Austin Hunt we actually grew up like 10 minutes down the road from each other in Brooklyn New York we went to high school together went to college together in college we created a school’s first baha racing team basically building. A team to put together a du buggy for school competition from scratch raise money from the school and built the team over course about six months of a team still has stood stay but Austin and I really like working with each other and after you know college we. Separated for a bit. He stayed in the northeast you worked at a few different companies some startups all the way from doing kind of powerpoint product to commercialization. You worked at some aerospace companies and had internships at Spacex and a variety of other. Prominent aerospace firms and um, you know he kind of is the more technical side of everything even though we both have mechanical engineering degrees and his focus is very much on electro mechanical solutions.

James McWalter

And and so you know you had obviously this amazing kind of basis of a long-term relationship with each other but you know we we all have people we grew up with but we don’t always necessarily want to start companies with them in my own case I Even at one point started a company. My brother I wouldn’t say that was the the most successful thing but you know definitely the person I know best in the world and so these things have you know pros and cons how how were you kind of communicating with each other to say Okay, actually we want to start something together.

Jules Brenner

Yeah, it was interesting. Um I think Austin was um, getting to a point of his life where he wanted to get in really early into something he was working at a company that was more like series b stage but he was there through some of the early fundraising rounds and. Think we just kept in touch and when I started to you know census kind of desires to to branch out almost on his own I was kind of thinking about you know, a lot of the growth in the electric truck industry and was managed to to kind of convince him over a course of a few months to come join on. So. I think it worked that well he certainly has a lot of skills that are complementary to mine and I think we create a a very moral round the team.

James McWalter

And absolutely I I think like the you know the the founder fish for this space is like super strong which you two as as a founding team and I guess then so you know you had this idea coming out of your experience at exos trucks. You know you have cofounder with ah. Technical abilities that you have this kind of long-term relationship building things together. Um, and so I know you’re kind of currently working on. You know, designing and and kind of going through some iteration on the Mvp could you speak to what that process is like today.

Jules Brenner

Yeah, absolutely so you know we really wanted to focus first and foremost on a strong kind of customer fit before even getting too far along with the Mvp you know this is probably the fourth or fifth hardware startup that I’ve personally.

Jules Brenner

Either either joined early or in this case co-founded and we’ve seen this mistake over and over again. Austin certainly seen it in his engineering experience. So when we started doing that we first figured out like who could be our initial first customers and started taking a very. Kind of collaborative team approach with them like we have some government fleet managers that will very likely be that first early deployments and we try to speak to them every you know for few weeks as we do this and literally show them everything we have and get inputs as we go through and think of it as we’re custom making them a solution. And setting Kpis for it as we go as well. So that’s been really important and helpful in our in our general goal and you know putting together the Mvp. We really wanted to focus on what’s the you know literally the minimal viable product for um. You know this? So we we focused on a more toned down version of the commercialized solution in terms of both cost and functionality with the thought that the key features that kind of alleviate the largest pain points would be focused on first. And um, you know Austin’s built a team on his side of various professionals in the charging sector power electronics, mechanical design etc. Um to make sure that this is a robust product that is really geared towards the um commercial mission critical flut applications.

James McWalter

And so those design partners that sounds like are kind of running or have ownership of governmental fleets. How did you find those and and get them to agree to chash. You know every few weeks.

Jules Brenner

Yeah, yes, so those? um, those government ah customers like um was actually fairly easy. We really didn’t spend too much time frankly, most of the relationships that I had from my time in industry were with private f athletes and we called the ones on you pretty early on and you know learned a lot. But. Government fleets have been very progressive with um electrification and just clean energy on their yards. Um, you know we pretty much went found a ah list on some of the local agencies of the fleet managers reached out and and started conversations. A lot of the government mandates are really really soon versus private fleets and they’re ordering like you know we were literally ons site with ah a government fleet yesterday and you know it’s pretty bad I mean they were telling us how there is ah 1 of their fleet yards is actually housed in an old. It was a horse barn and the it’s It’s so old that you can see two truth marks on some of the walls from the old horses. But the infrastructure is very weak and I think that’s why they’re most receptive to this kind of stuff.

James McWalter

Yeah, and whenever I kind of talk to people who are starting founding startups and they’re like oh you know I really struggle to find people to help you know, give feedback on the product and it’s like if you can’t find design partners to even talk to you now like you might not be painful enough a problem and so I think it’s like so. You know it’s it’s great to hear that how easy it is because if you find people who are just like loving jumping on a phone call with you to talk about the scale of the problem then there’s definitely something to be solved here. There’s definitely you know a potential solution that you know that smart startup folks can kind of work on and so okay, so the. You have these you know design partners you’re talking to on a regular basis. Amazing. You’re getting you know, physically on site seeing seeing horse barns and and other kind of issues. Um I guess from here like what’s the kind of next mostones in terms of getting you know some sort of Mvp to service those type of customers right.

Jules Brenner

Yeah, absolutely so we are currently in the pretty much supply chain kind of ordering phase of our Mvp. So. It’s designed. We’re focused on ordering parts as the parts come in. We’ll begin to assemble. And then you know at that point start to firm up the exact details of where we want this thing to go first and you know and this kind of stuff should happen pretty quickly next maybe 3 to six months or so and you know to whatever extent possible. We’re also focused on. Really, you know we refining in a lot of the um you know products core like software features so we have ah a sauce kind of very basic software layer that we initially and have for the fleets and dialing that in and then you know we take the data from that pilot or the course of. Subsequent 3 to the six months and feed that back so that we can have a better pilot number 2 as more of a kind of focus on the key features that we need to succeed and then over time as we build the. And these case studies if you will. We can then start to take it to larger and larger customers even like the landlords of some of the private fleets themselves that have you know been more proactive and want to install chargers maybe earlier when the vehicles are on site.

James McWalter

And just so I can fully understand like the use case. Let’s say I’m like 1 of your target customers and everything goes well the the kind of current direction. You know as you’re kind of going through these pilots and the development of the technology all goes well for me, let’s say I want to be onboarded as your customer you know in 6 to 18 months. Um, what would that experience be like and both through the onboarding and then once everything is set up like how would I guess my life change and for the positive.

Jules Brenner

Yeah, absolutely yeah, so you know a few things so I’ll maybe talk to you about the experience. We heard about yesterday with ah that government fleet manager now. Um you know this gentleman he is very you know aware of some of the challenges of just. You know, installing more than even 1 charger in his facility. That’s pretty much where he taps out and you know for their experience if you know they didn’t use ah a Zeus unit. They would literally have to redo their whole electrical room as he was telling us yesterday and and modernize everything and then also pretty much tear up a bunch of concrete on their yard to to get. You know some solutions in that you know they might not eventually scale. You know they’ll install 5 chargers. But then once the the building taps out and they need more later down the line they have to redo it so it’s kind of a messy experience but you know with Zeus it’s very much like just the typical installation of a charger. You know we help you with like. Permitting process to you know start the the application you know once all of it’s approved. You know we’re working through the surveying where this thing is going to sit how it’s function once the unit arrives the site. It’s installed by certified electrician and then after that we help tune in the. Le management software to the vehicles that you have which is just a simple onboarding process and I would definitely say that you know it’s a um, it’s it’s a much kind of cleaner installation because you’re going to save on and only the cost. But most importantly, the time and headache.

Jules Brenner

Of all the other electrical system upgrades which tend to take the whole charging installation process from being maybe six months to you know a year plus

James McWalter

And that that makes sense and the and I guess why? Why do these things take so long. Um, you know is it you mentioned permitting is that like a large component that’s kind of outside the control of both your customers and yourselves is it. Getting the components is it something else like what? what are the reasons for why this is such a kind of long process relative to you know? um, like ah for example, if if you wanted to ah like yeah build ah build a you know an outbuilding as part of an industrial park. You know you could probably do that in a few months right relative to this which which takes ah quite a.

Jules Brenner

Yeah, so so there’s a few things to consider so you know the first thing is that the amount of power that chargers in general are pulling is multiples more than what a building is rated for you know one statistic I can give you about 50

James McWalter

But longer.

Jules Brenner

Tesla supercharr type stations that would basically be for kind of semi truck level draw as much power as a whole empire state building peak load and it’s it’s quite a bit of ask for a yeah old 1920 s you know horse barw.

James McWalter

Right.

Jules Brenner

Right? So You know if you think about kind of what you need to do just from the electrical equipment perspective. That’s not only a big kind of logistical mess. But it’s also a huge capital capital planning allocation that a utility needs to take on plus. Actually all you know applying and installing all the different components transformer substation upgrades et Cetera Um, those things really add a lot of time permitting isn’t too bad I mean it depends on the State. Some are more backloggged than others but it’s kind of you know everyone really has to go through it. It just doesn’t. Um, I just get elongated.. It’s pretty substantially once other equipment gets in often. The thing that happens is that you you tend to really run into what we used to see at Exos which is that you would go down the kind of sales chain. You would get a happy fleet. Everyone would. You know, be working towards the goal of an installation of a certain amount of units and then you know once they start talking with their landlords about you know whether or not who pays for what that turns into like a whole lengthy negotiation and further ads time. So It’s It’s a really big hassle versus if you just install the unit that had. What you need built into it and that thing was as movable as a charger unit will get and just needed to do permanent. Not everything else.

James McWalter

And that definitely makes sense and so I guess then you know know this is obviously very kind of early days but 1 of the kind of challenges that some hardware startups have is you know is this something that I’m selling the hardware and you know it’s not offgraded very often. And I just have a single point of sale with a customer versus things where you have hardware kind of connected to other solutions services software and so on or there something more like a kind of long-term relationship with the customer. It is a long-term revenue stream. How are you thinking in these early days about kind of. The potential monetization of zoos.

Jules Brenner

Yeah, good question I think that’s ah in general, it’s a tough issue for a lot of hardware companies hardware tends to be a much lower margin you know sale and then adding that into you needing a lot of sales time to get it done a more highly technical sale and usually rank day sale. Doesn’t tend to a very cash flow and positive business and you know we’ve thought about that a lot we really didn’t want to end up in this situation where it was tough to scale and then also we didn’t like what we saw in the industry about having this kind of you versus mean type attitude towards a customer. You know we’ve talked to. Ah, variety of different fleets and in general just like talked huge hotel chains that have installed will take thousands of charge points and they would kind of complain that you know the more units that they put out the higher their saas fees grow but the you know their value isn’t increasing anyway, it’s just similar kind of cost tacking on and on for. Essentially charger and energy dashboards. So you know, kind of thinking about that. We really wanted to be able to create a set of products and kind of revenue streams that better align interests. So we have you know our typical revenue from the oem charger sale. So the margins on there are pretty in line. What what? a typical oe yeah would sell their unit for that 40 to 50% gross and then from there you know once we are installed in the building we use this kind of hardware aspect as essentially a moat right? to not have our software. Um, you know, switched out like what might end up happening to some of the other charter oems and you know we encourage the stickiness that the customer there and then we work on the 2 software layers so we have a kind of software layer that’s focused directly on our customer which is in most cases, the Landlord. Sometimes the fleets on their building so they are technically the servers that customer as well. But essentially that software package just focuses on using the batteries that are in the Zeus unit as a literally an energy storage unit for the time that the vehicles are not charging. If you think about a lot of fleets vehicles are actually not using them throughout the day that often is much more so that the battery is sitting around and you can use it all the different benefits that already exist in energy storage today including peak shaving to help you save on utility bills um resiliency to give you. Ah, peace of mind knowing that there is power on sight at all times in some bit capacity especially when you go all electric and then also create random streams to things like wholesal where how sound markets where you’re essentially by low sell high with some of the energy and you know we create our kind of higher.

Jules Brenner

Grow A margin revenue stream from that package. Um and really just try to focus on being more of like a partner with our landlord where we yes we charge for that software. But we also make sure that that creates value to them so that it isn’t just the of and our money. Kind sort Sas fees are growing and I don’t know what extra I’m getting every time it happens kind of thing and then towards the fleets themselves. It’s just the standard fleet management software so they have all your data and you know again know the software side. It’s typically higher gross margins as well.

James McWalter

Yeah, on the kind of bouncing the pricing incentive piece I think is really key. Um, you know you generated their bulk discounts for a reason right? at the enterprise level unless you’re getting some big value ads right? And so. Maybe there’s elements of compliance. Maybe you know there are these other kind of buckets that people can add to an enterprise plan but you definitely if you’re just kind of linearly going up in cost. You’re eventually going to have pushback from enterprises where it’s like why am I getting charged you know per unit. You know 10000? Yeah and I’m buying 10000 units and a smaller company is basically getting a better deal for because they have fewer units and and but our period of price is the same. So I think definitely kind of taking into that concern into account um is is going to be quite powerful as you were kind of looking to kind of differentiate down the road the other piece as you’re took on chatting there. So. Think I’ve mentioned the podcast before that one of the ideas that I explored in the past for startup for myself was some sort of pure software solution that enabled yeah the better. Um, kind of monetization of distributed energy assets specifically batteries but others as well. You know how could you kind of aggregate batteries. That are already connected to grid and somehow in a way that kind of plays with wholesale energy markets and I was talking to a few folks about this at the time the thing we kept coming back to was how how can we make sure that we continue to have access to those physical assets because what would stop you know the owners and. Of the batteries themselves are not the owners of batteries. But the manufacturers of the batteries themselves from having their own software layer sitting on top of those and because they own the physical asset in the value chain. They seem to have yeah the ability to block out other software that’s trying to reach down into the physical asset and so I guess. You have a kind of similar kind of thought process around why the but owning the physical asset and the development of physical asset is so important.

Jules Brenner

Yeah,, that’s that’s ah, that’s a very good point. Yeah I think owning the um you know, physical asset allows you to be better protected. Um you know or or other from the from the oems lens like from Missou lens allows you to be better protected. In a world where there are just a lot of different software platforms that help manage charging systems. Potentially even battery systems. There’s a variety of laws coming out with compliance at Ocp for charging Systems. So I Really see that if you are just a pure like software play In. Kind of control Hardware. You might have a really tough time growing. Um I’ve been in that space before and I’ve just seen it. It’s ah it’s a pretty like tough equation sometimes to manage in terms of customer acquisition cost versus you know what people are willing to pay and to that point earlier about like the the both pricing on Enterprise. The funny thing is the way that the incentives are aligned in the industry right now like we had so many customers that are really just telling us I wish I was paying 0 and you know they honestly mean it like they are to a point where they are just about to ask the charger oems to just shut off their software. Let them use it as what they call a dumb charger.

Jules Brenner

Um, so if something doesn’t change there I mean I don’t know that they’ll get around it but they are certainly feeling like they’re being forced. So um, you know, thinking about like you know how do we ourselves like you know, bring in a battery on site that is you know essentially. Ah, smaller version of what you might get like from an energy storage application and something that we purchase direct so we have full control over how that is used but we are you know, not being very like closed off about this kind of like very Aes or instead trying to be open with the customer and saying. You know now that you have this asset on site. Let’s work together to get the maximum monetization the ah roi on it and roi is a big word. It can mean just the insurance resiliency which doesn’t have an immediate cash number but you know helps out if there is a problem.

James McWalter

Yeah, so.

Jules Brenner

Um, but I think that’s really important you have to look at this industry much more through the lens of property technology than you do automotive technology if you’re going to stand out in you know 2022 and frankly, be profitable.

James McWalter

Um, and you mentioned the the kind of customer segments at the beginning that you’re mostly targeted on is more of the public sector and they seem to be the those who are you know have the greatest need are moving the fastest and I guess like my intuition would be that That’s generally. Not really the Case. So If you’re trying to sell to public entities. The sales cycles can be quite long often. It could be hard to get to the right decision maker and so on whereas you know more typical corporate clients tend to move faster. But obviously if they’re very big corporates. Those can also move quite slowly. Um. I Guess how how are you thinking about that kind of sales cycle aspect and why is this industry or this particular segment so different compared to the typical you know public sector moves very slowly model.

Jules Brenner

Yeah, yeah, good good questions. So you know a few things you know when we think about like who is the ideal customer that buys today I mean the ideal customer is going to be someone that is either the landlord or the feet of an industrial facility that is older and has less capacity. Right? And that could you know that could vary the older the building the more likely they are going to tap out. Maybe even at that first charter and if that’s the case as soon as they go to do some sort of utility study could even be with ah another charger company. They’re going to find out pretty quickly that. Need to do something and when they start pricing out what it costs to do you know all the station upgrades and the building upgrades then they get turned off to the idea sometimes so those those um parties tend to move a bit faster in general but when it comes to government agencies. It’s actually interesting because with. Fleets. They’re not that hard to find um you know they’re mostly the the information’s online and very minimal effort. Um I used to sell to private fleets and I’ll just tell you it’s frankly, been harder um with private fleets than with ah government fleets. Um, government fleets. Also they look at it a lot more through an esg lens than a like fleet manager at a private fleet. Usually the board of a company of a private fleet maybe has some esu mandates. But by the time it hits the fleet managers deaths. They really don’t care that much. So. Um, that’s a big part of it government agencies also usually find themselves with a lot more cash towards this stuff. So while maybe the sales cycles can be slower. They actually have more spending power and they actually have to spend it so you know there’s always some politician that comes out with some new. Idea for how they can clean up the roads and usually gets implemented. You know in fairly short order. Um, but sometimes you’re right, you know it can take a little bit of time the approach that we have always recommended to people is to say you know think about your yard. Not in the lens of you electrified 3 out of 50 vehicles think about it in more the lens of what would happen if you electrified whatever your goal is let’s say 30 out of 50 and maybe the other ones are bioiesel or hydrogen or something or cng. Um, what would the. You know, equipment needed look like what would the cost of your utility bill. Be call your utility try to figure it out and look at it from that lens and then ask them the other important question which is what’s the timing on all this and we would talk to a lot of utilities and you know they would tell us this kind of jokingly where fleets would call them and say I need.

Jules Brenner

All the existing power in this location and I need it in a few months and a lot of them would you know they just kind of say no we get give a few years so when you know some of that stuff you tend to move much faster and and I do think that a lot of the government agencies are a bit closer to their utilities and. Thereby it moves a little more smoothly but um, a lot of them do have you know lots of vehicles on order I mean we were with one yesterday and you know they have like I think they said 15 ford e lightnings and you know so street sweepers and all sorts of stuff coming in at the end of this year going into the end of next year we slow that down a little bit in terms of supply chain. But those vehicles are coming and with the permitting process and even you start to think all that through you’re about right there in terms of when you want to start procuring these things.

James McWalter

Mostly we’ve been kind of talking about retrofits you know the the horse barns of the world and and that kind of thing. Um, but how do you think about like new builds you know would real estate developers generally be. You know, potentially interesting segment to focus on in the future as they’re thinking about New New Bill commercial and industrial um to make sure that they have the right charging infrastructure from the beginning. Um, and before thinking about where you know the heavy automotive industry is going.

Jules Brenner

Yeah, yeah, absolutely yeah, the um, you know we definitely recommend with early builds that you you know you plan twice and you try to also you know, future proof to whatever extent possible. Um I can’t tell you how many different companies I used to talk to that would basically take advantage of every single rebate and grant at a point in time, especially those like really big franchise hotel chains and find themselves in the situation where they. You know install chargers of different brands some that are wi-fi connected. Some are not and then at some point they start to realize we should probably start to really standardize the asset and figure out 1 central place to track them and find themselves then in a position where. You know it gets kind of messy. So I think it’s really important to think about a standardized process for your facilities somewhat early I understand that most will probably not go to 1 technology in total. But definitely you know, keep the batch to a very small limited amount. And you know to whatever extent, you do have the ability to install early from fresh concrete. Um, you’re going to keep your total cost down. Um, but more importantly, you’ll be able to plan for things like footprint right? You don’t want to stick chargers in the front of parking spots and have vehicles have to park. You know three feet from the curb. You also want to be thinking about to whatever step possible how you can use the um, the battery systems to better. You know manage the building. It’s it’s kind of interesting like if you think about the way a lot of like the let’s say office park charges are installed. They’ll be closer to the building and they’ll also be thinner profile chargers just because closer the building means less electrical cost thinner profile because you don’t want to cover up the whole building to a point where you can’t see chargers if you start thinking about like batteries as part of that. Um, you know if you don’t plan electrical lines early. You don’t want to find yourself in a position where batteries start to take up a big part of your front facade as well too. So early planning is really really important and it’s also cheaper.

James McWalter

And then you know thinking kind of on about broader spectrum. The changes at the policy level and so we had the federal infrastructure bill that passed last year. There were multiple billions of dollars set aside for ev infrastructure development. Um, it’s still I guess a little bit unclear to me about the exact kind of deployment structure of that money. But how do you think about either the existing incentives like what was passed last year or things that could potentially kind of emerge in the future and about how that affects how you’re approaching. You know the deployment of your early product.

Jules Brenner

Yeah, yeah, good question I think the um you know it’s It’s very exciting to see that amount of dollars flow in from the federal level I think you know most even you know. Cities now are are adopting their own programs and spending their own money but the federal level should create a lot of opportunities for us to you know, not only find just on government website opportunities for bid. But most importantly, I think what it’s doing is it’s bringing into the light um a lot of grid issues. This kind of chooses electrical infrastructure. Um, and as you start to think more about that you start to really start to weigh whether you want equipment upgrades that maybe give you more capacity but still force the utility to work hard to produce lotss of energy or whether you want the um you know battery systems. Part of the equation that should make it easier for the utilities to generate energy and store them in the batteries prior to use. But I do think that the you know Overall the federal will has been a um, a strong sign for acceleration in the industry and it’s certainly kind of woken up a lot of the fleets to. Um, the opportunity of taking advantage of incentives now a lot of them. You know they maybe were thinking of going electric but they were going to stall closer until the um you know date mandates and now with the money coming out over a limited time here. They.

Jules Brenner

Um, accelerated a lot of their plans.

James McWalter

And then thinking about the team and and kind of as you were kind of building out the team and the company culture over the next few years you know one of the things I found in myself is every kind of new venture thing you know company that I start. The culture is often a either. Ah, reflection in some way of kind of my my past experiences at other organizations or other companies that I’ve involved in so either I’m embracing certain aspects of those other companies and trying to you know, incorporate those in what I’m working on now or I’m kind of reacting against them and saying okay you know that that company was great, but. Had this particular part of their culture or part of what it was to work there that I just absolutely do not want to have at my new company. Um, you know for yourself having you know, worked at a few companies worked at companies that have you know also been part of the kind of ev and electrification space. What are the kind of elements that you’re like okay. These are the things that I really want to bring in and and then still is the culture of ah you know of Zeus versus other areas where it’s like I absolutely do not want to bring those into this new company.

Jules Brenner

So yeah, that’s um, good. Good question. Well I think ah you know a few things some of my past roles and companies I think we’ve worked on some you know products that were kind of similar like some proptex some electroomechanical hardware and I think with those you typically. You know you’ll need your engineering team of course. Um, but most importantly, a lot of those companies they had strong like mission driven values and I think you know with trucking it’s a um, you know in general fleets and all that they they are a small portion of a total transportation. Pi but they are disproportionate part of the actual emissions side. So I think having a culture of people focused on you know, alignment on decarbonization is something that’s important to us. Um, but also a culture focused on strong engineering and. You know, active conversations with customers early is is key as well too. Um I’ve been in companies where you know we’ve cut corners and early stage engineer and design and I think that has certainly come to haunt us later and I think when you’re making a you know a missioncritical product. Like a charging system or energy system for a charge for a vehicle application. You want to do it right? You don’t want a call from a fleet you know someday telling you that they can’t um, operate that day because the chargers are out or something like that which is unfortunately becoming an all too common issue. And the um public charging sector these days. So I think you know those are really important I think really also focusing on you know, a very kind of systematic approach to the growth is is vital to we don’t want to make a product just for. Sake of it so we’ve really focused on identifying customers of pain points today instead of just adding out and looking at the broader market of who will certainly feel this pain in a year or 2 and we want to make sure you know that also really ends up being a kind of. Ah, right? recipe of culture and Zeus.

James McWalter

I yeah I love that um and I think it’s great that you’re already kind of being so kind of thoughtful about those elements as you kind of build out the company. Um Jules Brenner  I’ve really enjoyed the conversation.

Thank you Jules Brenner  has great.

Jules Brenner

Yeah, absolutely appreciate you having me James take care now.

Hydrogen Mass Transit – E96

Great to chat with Rainer Küngas, CTO at Stargate Hydrogen. Stargate Hydrogen delivers turn-key solutions for electrolysis plants and hydrogen trains! We discussed retrofitting freight locomotives, zero-emission hydrogen, hydrogen production by electrolysis, Estonia as the European Silicon Valley and more!

https://carbotnic.com/stargatehydrogen

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Rainer Küngas CTO at Stargate Hydrogen Welcome to podcast Rainer. Great to start. Could you tell us a little bit about stargate hydrogen.

Rainer Küngas

Thank you so much for having me.

Rainer Küngas

Yes, we’re a company about 1 year old and we are focusing on 2 main aspects of hydrogen technology on 1 hand we are developing 0 emission hydrogen-based locomotives. Um, and at the same time we’re also developing and and establishing hydrogen production systems based on electrolysis. So how to make green hydrogen with the help of electricity and and water.

James McWalter

And what drove the initial decision. You know a year. Maybe a little bit further ah long ago to start Stargate.

Rainer Küngas

Um, yeah, so I um, kind of have been working in the hydrogen space for about half my life. So what’s that 1520 years and and you can really see that there is momentum in this field at the moment. There’s a lot of you know things happening the countries are coming up with their plans for how to get to net zero how to establish more and more electrical electrolysis capacity and so on so it was really this momentum that. That drove us to establish stargate hydrogen and um particularly we we saw these 2 areas where there was where where we so where we saw that we have something unique to offer so in the case of locomotives. Ah, we could see that this that this market of of you know, true zero emission locomotives was about to pick up and and there was a clear demand from the from the market side. Or more solutions like that and and on the electrolysis part we were. We had this idea to develop a new class of electroizers. Um, which is where we what we’re now doing and. And getting closer to commercialization.

James McWalter

That’s super interesting. It’s just on that first use case so locomotives what is the kind of current status quo of locomotives trains in terms of the type of energy use and I guess water are the kind of advantages of Hydrogen versus the status quo.

Rainer Küngas

Yes, so the um, the majority of of locomotives today run on diesel essentially you have 2 technologies competing at the moment. It’s either. You know, um, electric locomotive is powered by catonary lines. So the overhead lines. Or you have diesel locomotives and in the us it’s actually almost exclusively diesel locomotives. There’s almost no electrified rail in in the us at all. Um, and it’s ah it’s a it’s a. Huge market in the in the us alone. There are 25000 class one locomotives operating and most of them are quite old. The average age is about 30 years in Europe it’s actually forty years that the average age of a locomotive is so you can imagine how much they emit not just co 2 But also you know, partic emissions Nos and so on um, and and and. To to kind of but in the future you know, like ah as countries have this target to go towards net zero then all areas of the economy need to decarbonize including the really hard to decarbonize sectors like like rail transport or heavy heavy transport. In general. So um, and and rail is you know the typical lifetime of a locomotive is perhaps you know if average age is 3040 years then it’s maybe 50 years so um so it’s if we want to get to net zero byte. Ah, twenty fifty then we need to do something without locomotives already today. Um.

James McWalter

Yeah, that’s that’s that’s interesting. So I guess and to take those kind of 2 competing ah kind of technologies as they exist today. So you mentioned you know basically electrify locomotives electrify trains and you have these overhead wires again much more common in Europe.

James McWalter

And and Asia then you see in the United States and then you know for the audience if you you know picture the old west you picture these steam locomotives with steam you know with with smoke coming out the top from the coal. Um, you know we’ve obviously moved on from that but we’re still using diesel which is very kind of dirty and polluting fuel I guess why? why. You know because my understanding is that the electrification is like you know that kind of next evolution of the diesel locomotive historically um, before you know the reasoning around hydrogen became kind of more compelling I guess why? not you know, try to push to you know to decarbonize locomotives into. Ah, electrification rather than through something like hydrogen. You know what are the other kind of pros and cons of hydrogen relative to electrification.

Rainer Küngas

That’s a really good question because um, many countries in Europe for example, are actually pushing electrification really hard this just means a really huge investments like capital investments. In in the rail tracks. So we’re talking about an average I think between 2 and $3000000 per per kiloometer of of track electrified. So you know if you want to do. Even in in a small country like Estonia. You know we have a thousand kilometers of of railways that needs to be electrified and it it all boils down to how how often do you use or how heavily these rail roads are being used if it’s used. Really intensively the electrification using overheadlines makes a lot of sense but you know even in countries like Germany then which you know we have really extensive railway networks and both you know. Also a lot of them electrified then the level of electrification is only 50% of the overall um you know overall track kilometers so you have these always. We’ll have these railroad track sections which are used less than the main lines. And it’s on those lines where where hydrogen is the most logical option because because you can kind of envision it as doing wireless electric electrification. You replace the the diesel engine on the locomotive. With ah with ah a fuel cell and then that will provide electricity that you use to run your your diesel locomotive traction engines. Okay.

James McWalter

And yeah I guess when I think about electrification of Rail One of the big you know blockers for it is basically local opposition to having the overhead wires and so you’re seeing.

James McWalter

You know and I’ve used the word nimbia in the past on the podcast but people ah you know ordinary people generally you know I’m I’m not not saying that these are bad people or anything but people who don’t want to see certain types of infrastructure in their backyard near near their homes. All those kind of things but things have to be built somewhere right? and so you you constantly have this kind of. Clash between um, building certain types of infrastructure versus local opposition and I guess one of the interesting things about going with hydrogen is the the tracks have already been built. You don’t have to change that rather you’re changing the vehicle on the tracks I think that is definitely compelling in a lot of cases. Um, I definitely would also like see us send up more than nimbyism and and then then push back on ah the the you know the kind of the push well pushback on the pushback of the objections to some of this kind of infrastructure build out. Um, but I definitely see that as an argument where you have particularly strong and trenched interests that will. Basically just not allow. Um you to build the electrification that might be needed in particular you know Geographic area.

Rainer Küngas

Yeah, so maybe it’s to comment on this then one of the applications of hydrogen locomotives that we see as like maybe the you know some one of the first applications is the use of um. Locomotives in railyards these are these um locomotives are typically referred to as shunting locomotives in Europe or switcher locomotives in in the us so these are the locomotives that kind of assemble and disassemble. Ah, the. Wagons or cargo or the you know the um the the large trains and then it’s another type of locomotive called mainliners. Then that that then transport these long trains over a long distance. But um, those switch are locomotives they’re typically you know. Oldest and most polluting ones that you have in your locomotive fleet because maybe you don’t can’t rely on them anymore to to operate on ah you know and on a um, long distance track? Um, but you want to have them in the railard where. Easier to maintain them or service them and and you know at the same time these rail yards are often located in urban areas where air pollution is you know a big problem so to replace those switcher locomotives. Is a really a low hanging fruit in terms of you know you you both get your benefits of cleaner air in urban areas and you also take some of them. You know the most oldest and the most unreliable locomotives off the rails.

James McWalter

That that makes a ton of sense and then I guess this other kind of use case the electrolysis itself. What is that kind of current process today and I guess what are the kind of innovations. You’re kind of working on bringing to market in that space. Yeah.

Rainer Küngas

Yes, um, so there are in general um 3 different kinds of electrolysis technologies. There’s the one called alkaline electrolysis. There’s the one called. Um, pem or polymer electrolyte membrane electrolysis and then there’s high temperature electrolysis. Um, we at stargate are focusing on the very first one. The one called alkaline and and if you zoom in through that type of electrolysis more then you’ll see that this. And again kind of has 2 different kinds of technologies in there 1 is based on precious metals. We’re talking about you know, not even silver or or gold but more like platinum iridium ruthenium really the rarest elements that you can find on earth. Um, the the kind of interesting thing is that this these elements give you unfortunately the the best activity and the you know the highest current densities and the the best performance but but sourcing. And availability is really an issue I I made this back of then will calculation that if you took the entire global production of iridium for 1 year and only used it for electronizers then you could install one Gigawatt ahualizers per year I mean this is a lot compared to how much we produce today but to put it in the in a perspective then the european union alone wants to install between. 40 and sixty Gigawatts of electizers by the year twenty thirty so even if we used all of the world’s iridium and only used that to make electronizers then there simply wouldn’t be enough of those rare metals available. So so we need an alternatives and there is an alternative and this is typically nickel based electronizers. You know you have much less of an issue with raw material availability. But unfortunately also these electizers have much lower performance. Lower current densities lower efficiencies and what we then want to do at stargate is to develop a third class of alkaline electroizers 1 ne’s based on ceramic active materials and um, ah it has been.

Rainer Küngas

Shown in the lab that that these ah electroizers are just as active as the precious metals ones. But at the same time you don’t have these raw material availability issues. So it kind of combines The best of both Worlds and this is the technology that we want to scale up and commercialize.

James McWalter

That makes sense and and just for the audience who I know we come in deeply talking about electricalizers but electroalizers are basically just a technology to separate water into the 2 component elements of water which is hydrogen and oxygen and so that’s why it’s you know so so important to the hydrogen industry and. Guess then in that kind of third that third piece so you know looking at your background. You know you’ve worked on different types of you know ceramics and have you know have a very strong kind of academic career as well as commercial career career working on these kind of technologies. Um I guess what? what is the you know. What is the state of play with that technology today. Um, you know? are you some the lab are there kind of initial pilots happening of the the technology around electrolysis. Yeah.

Rainer Küngas

Yeah, so um, so yeah as you rightly pointed out. Electrolysis is really like a key technology if you want to be able to kind of decouple the production of fuels like hydrogen and but also later on some synthetic fuels. From co 2 emissions. So if you use green electricity for producing hydrogen then and and you use electricity electrolysis for that then then then this is a way to produce fuels without co 2 emissions. So this is why we’re doing this and why why. Green hydrogen is so high on the agenda um with coming coming to your question then we are at the moment busy working in the lab developing the first materials and the first electrodes that we will that we will test and then. Gradually increased the the size of the systems so that we can get to commercially relevant sizes quickly. But at the same time. Um, so we don’t want to be be like ah you know a 2 academic of ah of a company. So if you. If a customer comes to us and wants to buy an allegizer already today then we offer that as well. It’s just that if you then at some point want to upgrade the existing electroizer stack with with the with the new one that we’re developing then then. That is certainly an option.

James McWalter

Understood and in in terms of like electro like electroalizers you have you have the underlying kind of chemistry that enables you know that that conversion right? like whatever that kind of internal catalyst is whether there’s rare or metals as you discussed. Um.

James McWalter

You know, Nickla or ah ceramic kind of approach. You’re taking but the other kind of major input is electricity itself so you need some energy to to cause that ah that reaction to occur and you know historically ah that energy has come from dirty sources and and you mentioned the importance of using green sources for this.

Rainer Küngas

Yes.

James McWalter

I Guess how much of a bottleneck is ubiquitous green energy to the scaling up of hydrone electrolysis for the types of use cases. We’re talking about you know where would we need to see you know? Ah, do we basically do we have enough solar and wind and and Hydra right now or a nuclear as well to actually? ah. You know meet the demand of potential Hydrogen applications or do we have to build ton more.

Rainer Küngas

Here again I would just want to start from a bit further and then get to your Aor E So like ah to put things in perspective then if you if you today if you take natural gas and convert that into hydrogen.

Rainer Küngas

Using the normal process of steam methane reforming and then you know you have some emissions actually about ten Kilos of co 2 per every kilo of of hydrogen that you produce so we’re talking about really sizable. AhCO 2 emissions if you then just you know either burn that hydrogen or if you use that hydrogen in ah in a fuel cell for example to power a fuel cell locomotive. Then if you kind of Zoom out and look at the overall emissions then you have produced actually more co 2 emissions in this process then if you just had burned this natural gas in the in a gas engine instead. Um, and so you know this is this kind of hydrogen produced from natural gas is called grey hydrogen. Then you have the ah hydrogen produced from electrolysis and if you use a really dirty electricity to power your electronizer then again you you may actually be much worse than if you just you know burn the fossil fuel. Be it. The. Oil or or coal or whatever in them in an engine somehow itself. So. It’s really only if you have green electricity available that that electrolysis starts to make sense and. Green hydrogen starts to make sense so it is it is like really really important that that there is enough of green electricity available and it’s certainly not trivial actually. Ah. In to fulfill these these goals that the the european union for example, has taken. It requires really massive installation of new renewable energy capacity. So you know gigawatts and gigawats of. Of of solar and wind. It’s it’s certainly an issue and I truly hope that the that the rate at which solar and wind get installed in really all across the world and like. Takes up in the in the in the next years

James McWalter

Absolutely as we all do have I think for the people who can listen to this podcast and then if if I think about like the other potentially use cases for hydrogen. Um, you know some of the ones that either we’ve talked to people in the past on the podcast or I’ve come across recently with my own company. So 1 is long duration storage right? So we one of these issues with the grid where the um, yeah, the renewables that we’re adding more and more of they’re intermittent. You know the sun does not shine and nice as is is very commonly so spoke about and the wind obviously doesn’t always blow.

James McWalter

And also certain times a year yeah the sun shines more right in Summer. So can you capture more of that energy at the moment and deploy it on the bridge when it’s more needed in the evenings and so on the big problem right now is that most of our storage technologies are either dirty or battery based which have a 4 to 8 hour max kind of timeframe for their use case. From a kind of economic point of view hydrogen is seen as this kind of more more akin to something like natural gas because you can basically you know produce it in the summer let’s say store it in tanks and then burn it off as a form of energy in the winter as an example, um, so that’s kind of 1 1 example, another example is around. Other types of vehicle locomotion not not locomotives but things like heavy heavy trucks. Even we’re starting to see some startups kind of explore things like aviation with hydrogen and then and shipping as well as another big one. Did you kind of think through these other use cases and I guess.

James McWalter

Why were locomotives and like I guess like the electrovisor itself is like more of a kind of enabling technology but in terms of like end use case Technologies I Guess why were locomotives more interesting relative is some of these other options.

Rainer Küngas

Ah, yeah, just to comment first on the the first part of your question. So um, hydrogen storage I think makes sense but you need to have some really like good conditions for it. So for example, storing hydrogen is just. In in high pressure tanks I think is unless there’s a real breakthrough in hydrogen storage technologies. It’s quite challenging I would rather like typically you would like you would do that like seasonal storage if you have some like. Geographic geologically favorable area where you can pump hydrogen and under the ground like in a salt cavern several hundred meters underneath the the ground ah where you can be sure that the hydrogen doesn’t get get out doesn’t leak. Um. And and and where you have these you know the volumes available where where long-term storage makes sense but to to store hydrogen on like in um, on the ground hydrogen tanks. That would be large enough for seasonal storage this I’m I’m not seeing at the moment these kind of projects materializing I think that the the cost of storing hydrogen is simply too high. Ah, on the other hand if you do something with hydrogen like green hydrogen is the first step in the production of you know all sorts of green chemicals. Be it methanol you know, synthetic natural gas also synthetic. You know. Liquid fuels like synthetic diesel and so on. So if you combine green hydrogen production with ah with some synthesis like that also ammonia forgot to mention so these kind of fuels are much much more easy to to store over. Long time and as a matter of fact, you can use the existing infrastructure right? You know synthetic natural gas you can pump it into an existing natural gas pipeline synthetic diesel you can blend that with ah with ah you know regular diesel. so that ah so that you yeah it might much more easier to store and at at lower pressures as well. Um, so this is this is where I see the world going I think that.

Rainer Küngas

If you need to store things over a long time or even transport hydrogen over a longer distance then you would convert it first to something hydrogen derivatives like they’re called um and then perhaps even convert it back to hydrogen when you need to use it. But.

James McWalter

So then I guess so I understand the kind of look the locomotive kind of case would then the production of Hydrogen be ah co-located with the the train yard in order to have remove some of that storage issue that you mentioned.

Rainer Küngas

Ah, yes, ideally you would have hydrogen production and and like ah hydrogen refueling station in the railway Hubs so that so that. The the locomotives and and Passenger trains can come there for for refueing and the like it. You don’t really need to have you know huge solar parks or or wind the farms. At these locations. So It’s ah it’s actually quite quite doable.

James McWalter

And and so and then those other kind of use cases. Um in the transportation. Space. So You know have a machinery aviation shipping and so on. Um I Guess how do they compare in the in the kind of framework that you kind of mentioned in terms of like. What when a good use cases and as I’m really kind of enjoying getting into the details of this because I think whenever we see Emergent Hot New Technologies right? Obviously Hydrogen production’s been around a very long time. But.

26:44.82

James McWalter

Um, you know it’s definitely something that ah is is top of mind for a lot of policymakers. A lot of industry people industry and across the sort of Landscape. It’s like okay maybe it’s a silver bullet bullet for every use case right? whereas we have to be I think you know, really clearly look at the technology and say okay, this really makes sense in certain use cases and and maybe less than others. And so yeah, So how do you think? and then when you apply that framework to these other forms of transportation. Why Hydrogen may be a good or less good choice for those and.

Rainer Küngas

Yes, um I think it’s It’s a like a good way to look at it. This would be perhaps to like try try to think of it like as ah as a spectrum of Applications. So we’re on 1 Ah, edge of the spectrum you have these really like low energy applications. Like for example, you know electric bikes Scooters Passenger cars. Um in in that kind of corner of the spectrum I think that battery technology is doing really well. And um I I Don’t think that we are going to see like ah hydrogen powered bicycles taking over the world in the future. But um.

James McWalter

Right.

Rainer Küngas

And then then then you have kind of this ah middle part of the spectrum where you have you know you have locomotives you have ah coaches that. Operate between cities. You know that essentially need to be driving all the time and you cannot afford to have it plugged in you know after you, you take the bus from New York to to Philly where I also lived and. And then they they plug in the the bus after after that trip for for several hours before you can make the return trip. So I mean this just simply doesn’t work so in these applications hydrogen has a clear edge over battery um technology. Um. And then in the far end of the spectrum you then have you know oil tankers real big cargo ships. Ah passenger long haul aircraft and so on where where even the energy density of hydrogen.

Rainer Küngas

Not enough and there you’re going to need green synthetic fuels like synthetic jet fuel synthetic diesel perhaps green ammonia for the shipping industry but but there also you have green highrogen is the first kind of step. In in making those those fields so this is at least how I see the world.

James McWalter

Sure, yeah, no absolutely that that all makes sense and I guess then kind of returning to kind ofs star gate. What are the kind of goals over the next. Let’s say 6 to twelve months some milestones that you’re hoping to reach. Yeah.

Rainer Küngas

So we are really busy designing our first locomotive prototype and so I would very much like to to present the you know the the first. Working prototype of our hydrogen locomotive in in that timef frameme on the um on the electricalizer and development. Um, we want to get to First. Ah. Lab scale results that that we can share with the world and also that we that we can start testing our our technology together with some partners. So. Really talking about proof of concept in in kind of both business lines at the moment but and maybe as a third point kind of that unifies those 2 things is which simply want to grow as a company. We. Moment were about twelve fifteen people I think that by the end of the year will will probably be around um double that or maybe even more than that.

James McWalter

And and I guess the in terms of like the the early team. Um, who who who’s kind of involved in that. Um, how did you meet those people like you know how do you kind of build out the relationships with the you know the early founders early team mates and and oh. How you kind of all got to know each other and decide like this is the thing that you want to work on together.

Rainer Küngas

Um, so Estonia is like this at least we consider ourselves like this the world of or like ah in in a way the Silicon Valley of Europe I know some.

Rainer Küngas

Like at least this is how we think of ourselves. There’s quite a lot of ah nice companies that have come out of Estonia to maybe to name a few then like an early success of Estonia was Skype. That’s maybe not so ah, you know relevant anymore. But at the moment.

Rainer Küngas

Um they’re also some really nice companies and and so it’s it’s this kind of startup scene that has also been active in in in helping to establish stargate. So one of our founders for example is. Is a real pioneer in the field of super capacitors and and another one of our initial investors is the main investor in a. And the largest renewable energy producer in Estonia so it it just was a really good combination kind of combining the knowledge from the renewable energy field and and this understanding of how to scale up new technology. So. Really kept slicing on on this.

James McWalter

Why is Estonia ah better at startups than a lot of Europe and you know I’ve mentioned the podcast before in Ireland we do not do a good job at startups you know and a lot of that is on cultural elements right? You know we we live a good time. We are very you know, friendly people. But we’re also. So more critical of the success of others I think it’s fair to say and so that definitely um, you know, basically the idea of bragging about like your startup and say I just started this something I mean there’s no quicker way to get made fun of in Ireland than than saying something like that. So I guess how do you think about? yeah, are there cultural elements or even you know policy elements that have made Estonia that kind of. Center of so much startup activity and.

Rainer Küngas

I think it’s maybe difficult to pinpoint like 1 specific thing but there has been really a lot of support from the government side on the on like Estonian ii sector. So. Have done some I think nice things there like for example, this initiative of e residency that you can be a resident of Estonia without you know, physically having to be here and kind of getting the perks of being an european union citizen and ah, um. And this I think kind of helps to spur the Estoian startup kind of scene but by now it has really moved into you know the scope is much broader than just I see so you know green tech also um. Like medicine and health technologies. But yeah, I’m not so easy to say exactly what is the reason.

James McWalter

And and you mentioned the and that that kind of innovation that’s happening in Sonia and not just in etonia but kind of around the world like where are the areass though that we’re not seeing enough innovation. You know if somebody was like oh I might want to start a company that’s tackling some big problem. Um, particularly in the climate space where are there areas that like. More smart people should be focused on in your opinion. Um that we just don’t have enough you know startups being formed ideas being you know, attempted to turn into business that kind of thing.

Rainer Küngas

Um, there are some areas which may sound boring and I mean so ah, for example.

James McWalter

No such thing in startup world. Ah.

Rainer Küngas

It’s like 1 really important topic for for renewable energy and also like green hydrogen in general is everything that relates to standards and guarantees of origin and you know things like that. How do you make sure that if you actually produce green hydrogen that you know. That you can also sell the green hydrogen that is considered as green hydrogen and that the same time that you cannot sell it somehow twice that you sell it to 1 person and then you also sell it to another person or under company and how do you make sure. For example that the that the. If you use and if you buy a green electricity that it is also actually green. Not just you know, ah that 1 at 1 moment in time somebody produced green electricity. But what you’re getting ah through the lines is actually electricity from coal. It’s um, to me at least it’s an incredibly incredibly boring topic but it but it and and and really ah you know heavy on on on the like legal aspects and ah.

James McWalter

Business.

Rainer Küngas

But it’s extremely necessary without this then actually there will be no massive scale adoption of of Green Hydrogen technologies.

James McWalter

Yeah there’s ah this guy saw griffiz you might have come across him. He wrote a book about kind of electrifying. Ah yeah, the economy in the Us. But you know he’s got this line that yeah even lawyers have a role in in the kind of green future right? like navigating these these kind of different waters. Um. We’re absolutely you know essential and a company kind of agree with that. You know I think wherever there is a yeah I guess I have a think about like how to like the kind of modern technology that started in the late 90 s you know was very much driven by software sliding in to ah. Kind of new use cases right? You know the emergence of things that had never existed before like social network and so on Google etc and over the last like decade we’ve really seen you know software just starting to eat more and more into very old industries like change how they work how they operate all those kind of things and. That is basically just started right? like I come across. Um, you know my own startup like everyday like industries that are using. Um, basically you know pre-exel models from like 1988 to run things like the electricity grid and so on and nobody.

James McWalter

Like literally at the company knows how to how to fix it if it breaks like it just doesn’t even exist anymore and and we just have these things all the way down the way and so I think like you know my message is always just start talking to people in these industries and they will just start describing the status quo and I think people who are coming from a technology mindset will be so much shocked in a positive way that like oh these are massive opportunities.

James McWalter

To try to improve on great. Um, so ranar it was. It was great chat and before we finish off is there anything I should have asked you about but did not.

Rainer Küngas

I Completely agree with this.

Rainer Küngas

Um, yeah, maybe when would the you know 1 be able to see a first stargate locomotive running. And yeah, the us. Yeah because ah.

James McWalter

So yes, yeah, I’m very excited. What’s the timeline for this? yeah.

Rainer Küngas

The the interesting thing with our prototype locomotive is that we’re actually converting an american origin locomotive like ah through some well kind of an interesting story then in a Stonia. We. Almost exclusively use american general electric locomotives. Um whereas all the countries around us are using either. You know european or or russian technology and but and this is kind of. Going to be our entry ticket into the and into the us market. So our idea is that once we have have built the prototype. Um, then we will also get it certified on the us market and and and bring it bring it there. So so because there’s actually you know hundreds. If not thousands of of similar locomotives in the us just waiting to be retrofitted with with our technology.

James McWalter

Yeah, it’s that’s super exciting and I’m looking forward to that to that news. Ah Reiner. Thank you so much.

Rainer Küngas

Thank you.

Monitoring Electrical Assets – E95

Great to chat with Priya Vijayakumar  Co-founder and CEO at WattIQ! WattIQ connects thousands of unconnected electrical assets, enabling better utilization and energy usage of any electrical device! We discussed silent energy consumption assets, the ups and downs when starting a company, how to build customer trust, the issues with manufactured obsolescence and more! 

If interested in speaking to WattIQ, please email info@wattiq.io

https://carbotnic.com/wattiq

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today speaking with Priya Vijayakumar cofounder and Ceo at WattIQ, welcome to the podcast Priya great to start. Could you tell us a little bit about what iqueue.

Priya Vijayakumar

Thank you James lovely to be here.

Priya Vijayakumar

Sure So You know we formed what Iq with this mission to enable enterprises to be to become more um asset efficient and energy Efficient. We live in a world that were very resource intensive. Many industries are very resource intensive. And we believe it’s sort of the lack of data into understanding how your existing assets are utilized. Their condition. Their energy Consumption. You know, sort of their overall management throughou throughout the entire life cycle those inefficiencies. Obviously combined with sort of an over-consumption model that’s driven many industries right? I think that’s created tremendous inefficiencies in businesses as well as just the burden on our resources right? and we think by closing those data gaps I think we can. Transition to a far more efficient industry.

James McWalter

And I guess when did you first kind of start encountering those data gaps and thinking that oh this might be something. That’s so a potential startup right.

Priya Vijayakumar

Yeah, well actually you know I started my career in traditional manufacturing like aerospace right? So which is you know there are so many data Silos or lack of data even in very traditional industries which is really was. Big driver behind this industrial internet of things right? that was supposed to be sort of this next industrial revolution that was really intended to happen fell a little bit short of expect far short of expectations in many cases. So I think I’ve always seen the inefficiencies that have existed in traditional industries.

James McWalter

Right.

Priya Vijayakumar

Um, but how do you kind of close that chasm that’s existed between Silicon Valley and the industrial world right? So overcoming some technology barriers and I think years ago when I was when I started out in this internet of things space. We did things like asset tracking. You know everyone needed to know.

Priya Vijayakumar

Where their assets were and there was a lot of value behind that. But really the bigger problem that Cisco themselves had valued at two point one trillion dollars of economic value was understanding asset utilization. We couldn’t solve it.

Priya Vijayakumar

And so it was always these elusive use case and I think a few years ago sort of you have this aha moments right? You come across a technology that’s being applied for a different purpose in this case, the technology was being applied for energy monitoring I mean you see smart plugs in the home people were just trying to power off shut up. Shut down equipment when they were not in use but you always have to find the balance between great technology solving a problem and delivering value right? You need that combat you know that perfect storm to happen in order for something to take off and so sorry, go ahead.

Priya Vijayakumar

No, and that’s sort of what brought this along is I think there was this use case at the back of my head that I had not been able to solve in my early days in Iot and it just sort of nagged at me all along and then I came across this technology that that’s what kind of spawned this whole thing. Um, and to take that original technology application and form a new business that could you know go solve these problems that had been elusive.

James McWalter

And so once you kind of were like okay this is a interesting technology to to focus on this particular problem set. What did that kind of first you know step look like was it starting to build an Mvp was it talking to users something else and.

Priya Vijayakumar

Yeah, you know I think I come from a product background right? So My pet peeve has always been building a product without understanding the problem you’re solving and understanding the end user so you can either go down this extreme path of not being able to make a product. Vision until you know every little thing about the end user but it’s usually a good balance right? You have to understand the problem you’re solving find an end early adopter who’s willing and we were fortunate to have one of the leading Pharma companies be an early adopter. They were planning to do a lot of things manually and we’re like.

James McWalter

Fifth. Wreck.

Priya Vijayakumar

I Don’t think you can do this manually I think we need a product for this. So that’s how we began our journey right? So um, and and the way we worked is I think we focus on delivering value to the customer. What is then you know what we people say minimum viable product. But.

James McWalter

Right.

Priya Vijayakumar

How much confidence can you have in solving that problem. You know you want to try and solve it at least 70% of the way because your product is evolving so it gives users the confidence. Yep, you’re 70 % of the way here to solve my problem and you’re going to keep building the rest of it right? because if you aim. I think um as our cto likes to say perfection is the enemy of good right? So if you aim for perfection on your and Mvp. You will never get to mature your product and our product matured tremendously because we’re able to get it to a point we could deliver value to the customer and.

Priya Vijayakumar

You know you don’t want to do a half -baked product either. That’s really important because you’ll frustrate the customer. But then we worked very rapidly to continue to evolve the product and even expand our solution offerings just within like the first eighteen months of want you and so that I think. Being obsessed with delivering value to the customer is what helped us evolve our product really quickly along with like an amazing team behind it that makes the magic happen.

James McWalter

Yeah, no absolutely and and in in that kind of iterative. You know as you were kind of iterating on the product were there any you know, kind of I guess pivots along the way as you’re kind of working through those different product iterations.

Priya Vijayakumar

Yeah I can tell you I mean we started the company by acquiring sort of the technology from a company called Ibis Networks right who were using this technology to monitor and shut off equipment. The first evolution was how do we do this remotely. And fortunately that happened just before the beginning of the pandemic because a lot of hardware solutions especially in the enterprise you end up having to go on site to do deployments is a complexity around that and we knew we knew we had to create a consumer like simplicity still meet all the enterprise.

Priya Vijayakumar

You know, security reliability requirements but still I mean the end user experience has to be very consumer like our first It’s not a pivot. The first evolution I would say is we had to go and make this incredibly simple for the end user. The second was we actually had to go build. Software to now build out all these algorithms because all we had was power data before I mean collecting data is a first important point so having a stable system that can collect the data to enable you to do machine learning. That’s a second piece right? The first piece was to make sure that we could collect the data. Um, with completeness. Yeah that’s how we began and then we rapidly expanded our solutions. You know we started out just trying to give insights into how equipment is used then we started expanding to additional sensors and now we could tell you the health of your freezer. You know this freezer looks like it’s going to fail. Um, so kind of starting to get into equipment condition monitoring and that came because we worked closely with customers. We tested concepts and they would tell us why are you guys not offering this in the marketplace even in a very crowded marketplace right? So I think that was really important you focus on delivering value to the customer.

.

Priya Vijayakumar

And keep up with evolving your product then it just kind of takes a natural path from there right? as opposed to building a product and throwing it over the wall and selling a widget.

James McWalter

Yeah, absolutely there’s there’s a framework that I can’t remember who came up with it. But basically if you describe the current method of solving a problem and have that user rank it. Yeah between 1 and 10 and they may say something like this is like a 3 out of 10 you don’t need a 10 out of 10 to actually solve that you. Basically you need to be 3 subjective units better and the classic one is you know getting a cab a taxicabb is like a 3 out of 10 experience and an uber is like a 6 or 7 out of 10. It’s not a perfect experience by any means but still that was enough to kind of have this kind of booming company.

Priya Vijayakumar

Yeah, oh who right? right.

James McWalter

And I think like that that’s a lesson that it sounds like you guys kind of ingrained as part of that process.

Priya Vijayakumar

It It is and you know the product development is a very imperfect process right? I think the mistake a lot of early stage startups do make is they get too far removed from the customer too early because they’re selling through a channel. For example. So They lose visibility to how the end user is actually using the product particularly when you have a hardware component and that can make or break how you grow your business right? Um, and so we find that to be really important for us to stay close to the customers. And make sure we understand how they’re using the product how we can continue I mean some of this is very intuitive when you live in a purely software world right? Everyone’s like oh I know how many times somebody has used a feature. It’s not so obvious in an Enterprise world where there’s also a hardware component involved. Ah because there are a whole set of new challenges.

James McWalter

Absolutely and you mentioned this like data collection piece and I think it’s something a lot of startups who focus on the enterprise struggle with is the data collection right? And in previous companies I’ve involved in you know you go the the company’s very excited like oh this is a great product and then it’s like we’ll spend six months trying to.

Priya Vijayakumar

Yeah.

James McWalter

Navigate the company’s yeah, internal you know rules to be able to get some sort of data that we can actually do something with um I Guess how how do you kind of have that approach you know and and any kind of insights along the way.

Priya Vijayakumar

What who who? yep. All right, you’re gonna let me share my secret source now. Okay, so so the first thing is like I said I’ll take a simple example, you know when people talk about predictive monitoring and you know I worked in aircraft engines where you could put.

James McWalter

Ah, ask nicely? yeah.

Priya Vijayakumar

Every sensor you can imagine on an aircraft engine right? and people collected tons of information. They missed the most basic point if you don’t build that engine straight and round it’s going to fail pretty quickly in the field right? So what is the data that you can get with minimal friction for the customers. So we started by making sure that we didn’t touch any proprietary data. We solved this problem by staying off customers wi-fi networks not touching proprietary data to enable us to deliver that first level of value once you do that. Then it gets easier to now say can I go have all your historical data on this right? because if I can’t demonstrate value until I’ve collected six months of data. That’s the fastest way to stop a sales cycle. So and when we started this we didn’t um, start out because we knew. Sea level and all these big enterprise companies who were just going to give us a free pass right? It didn’t happen. We had to do this purely on delivering value to the end customer. So. It’s a much bigger challenge when you don’t have somebody just opening a door for you. You know whether it’s a channel partner or whether it’s you know. Somebody higher up in the organization and that forces you to be innovative right? because you go how can I deliver value to the customer with minimal friction and once you do that then they get I mean customers now ask us to get propriety data from the equipment and so it’s a different conversation right? once once you’ve. Established value and built trust then you can expand into more complex solutions that classically would be much harder to sell as an initial solution.

James McWalter

Yeah I love that you know one of the things having had that experience if we’re trying to get data out of different enterprises. Um, yeah to very much focus on what are other sources get creative as you say there might be public sources. There might be ah you know various Apis that you can kind of plug into.

Priya Vijayakumar

Um, will.

James McWalter

And honestly, what a lot of problems. You know, especially large enterprises when people are reliant on you know 30 year old Erp systems and excel like ah the ability to just pull some stuff together often will solve a problem. Not again for the whole organization like eventually you need these very complicated deployments.

Priya Vijayakumar

Over.

James McWalter

But in the early days as you said you know you can actually find that little that little kind of wedge really solve it well and then and then you’re basically just building trust in the organization as you kind of kind of move through it. Um I guess like you look at. But.

Priya Vijayakumar

And we made it very I was gonna say make but made it very simple for customers to experience the technology we would use cellular Modems to send data to the cloud right? So we don’t even need to get on your network and that way customers got to experience their data and and I know it’s not always possible with.

Priya Vijayakumar

Every type of solution. But these are things that we did differently instead of saying and we would do it as a free pilot for some of our larger customers right? because we felt confident in the value that we were going to deliver and that also makes it easier for the businesses to justify making these deep. Investments in it security reviews and so on because you know that is an investment The company’s making and so it’s It’s a you know it’s a partnership right? anytime you are a startup working with large enterprises. It’s a partnership you have to be committed to. Delivering on what you say you’re going to deliver right? And you’re you’re building a long term Relationship. You’re not making a transactional sale.

James McWalter

And no absolutely um, and yeah, right and like any large relationship has to be built on trust right? and and and kind of go set that kind of core element I guess in terms of like where what iqueue is today. Let’s say I you know listen to this podcast I be like oh this is something that would be great for my for my organization.

James McWalter

What are the kind of steps to kind of get get somebody set up with your product.

14:01.67

Priya Vijayakumar

It’s actually very simple right? typically somebody would reach out to us and we would look at sort of the types of equipment. We focus on the use cases I should backtrack a little bit. We have multiple use cases that we support with the data everything from optimizing throughput. Ah, you know analytical labs to driving procurement decisions or service contract decisions and all the way to space planning right? when you have lots of electrical equipment. So we always start with what’s the use case. That’s most pressing for the customer our european customers space is a big deal. Energy is a big deal. Right? So the priorities can shift depending on who the customer is and we start with that then figure out the right assets that we should put on an initial pilot or an initial program for them to get the data because we might support 9 different use cases. But for that customer. There might be 2 on that list. That’s most. You know, critical today.

James McWalter

You know when would a you know customer start seeing that kind of early value get and get very kind of excited about. That kind of yeah the problem being solved in that particular way.

Priya Vijayakumar

I jokingly and affectionately tell our customers in thirty days if we can’t show you value. Dinner is on me I haven’t paid for dinner yet. So and that’s because I think here’s another important thing. Um, you know we do use machine learning. But.

James McWalter

Yeah, sure. Yeah.

Priya Vijayakumar

Um, without disclosing too much. We use machine learning models that let us give us insight within seeing equipment kind of being active within a couple of weeks right which is another important piece. We’re not telling customers wait six months before you can start seeing inside. So while nobody’s necessarily going to make a business. Vision based on thirty days of data they start seeing the trends of oh somebody’s actually not using this or I can see that this piece of equipment is demonstrating a lot of anomalies. You know that we thought there was something happening here and with every single customer within the. 30 irty days we have shown them something that goes I had no idea this was happening um and that is important right in technology adoption. There’s no consumer product today that we buy that we don’t have a reaction within the first fifteen minutes of using that product even less. But in enterprises, it’s sort of taken for granted like oh you just have to live with a crappy product for six months and just power through it and I think that and that can change I think we can have take philosophies from consumer product development and apply it to the enterprise world to create a whole different experience.

James McWalter

Yeah, absolutely that the kind of consumerization of ah of I t right? like that that phrase around our consumerization of the enterprise. It’s something. Yeah, younger listeners might think everything you you know, looks like slack or something similar, but these are all very new, very emergent and um, you know.

Priya Vijayakumar

Um, urges none.

Priya Vijayakumar

What.

James McWalter

Using some of these ah very old school windows 95 things at the beginning of my career those are still being used and many many companies like kind of across the world and you know as I kind of looked at at your website you know and there’s this mentioned of the you know the key element of the smart plug and how that kind of interacts as you know.

Priya Vijayakumar

Who.

James McWalter

Basically the the conduits to this information and and all those kind of things as you’re kind of deploying those and and starting to pull in that data and you’re seeing that thirty days data and then eventually the six months data. What are the I guess have it the customers been very surprised by some of the insights is there. You know, particular insights that. You know you don’t maybe find that as surprising right now but the customers typically do yeah.

Priya Vijayakumar

So obviously the first one is they might have theories about how frequently equipment is used and they tend to be sort of blown away when they realize it’s not even in the 10% range. You know there are weeks that something is not used. We’ve sometimes done deployments where that equipment that we’re monitoring is not even turned on during that entire period right? So that’s you know that’s from a utilization perspective I think people have been shocked from an energy perspective when you take things like minus eighty freezers right? which everyone heard about for storing vaccines.

James McWalter

Yeah.

Priya Vijayakumar

Some of these freezers consume more upwards of 30% of excess energy as they age because they’re not always maintained properly right? and they’re just sort of blown away by the energy consumption. You know a new freezer with certain equipment oems. There’s also a big difference between equipment. And oems that data was not always visible people. Sold you on a datasheet not actual field data right? Very few people sell you on field data and so what they would see is some equipment oems models were consuming two and a half x what the datasheet was claiming to do.

Priya Vijayakumar

In other cases you could have a minus eighty freezer that’s only consuming Eight Kilowatts Kilowatt hours per day and another one that’s consuming you know upwards of 20 even though comparable models. So. I think having that data you know because there are certain pieces of equipment. You can’t turn off like a freezer you can’t turn it off but knowing that you’re using those assets efficiently or maintaining it properly has huge energy implications right? and space utilization implications. So I think usually those and we always.

Priya Vijayakumar

You know when you put some of the aging freezeers. It always makes her an interesting story in terms of how recovery to set point temperatures are happening and so that’s sort of how the some of the initial astonishment comes because they’ve had a hunch about some of these things but they’re still amazed at how much opportunity there is to. Share equipment right? The kind of the shared asset economy and and and and know a lot of our customers are in in Pharma Life Sciences Biotech so they’re very data driven and so to be able to see the data behind this makes for a much easier conversation than What I would call like an emotional procurement decision I have budget I don’t want to lose it. But I really don’t understand the implications of buying a product that now has to be housed in an area with very demanding hvac requirements people are going to be coming on site to maintain that piece of equipment.

Priya Vijayakumar

Need reagents or consumables to maintain that equipment. So there’s a whole cascading carbon impact throughout its lifecycle that most people don’t even think about right? We as consumers. Don’t even think about it because we just we consume.

James McWalter

Right? Absolutely and even thinking of about the example of the piece of equipment that wasn’t turned on in thirty days and I’m sure some you know some facilities operations managers like do we need a second one you know and and that that could potentially be bought as as well.

Priya Vijayakumar

Please.

Priya Vijayakumar

Right? Oh the ability to go ahead now I’s in the ability to sell a lot of this equipment right? So you would never buy a car that you didn’t know the mileage on the car imagine trying to resell equipment saying well trust us this was used by a big pharma that doesn’t mean anything.

James McWalter

Ah I think it got good none of no.

Priya Vijayakumar

Right? So you can actually extend the life of a lot of these products by providing what I call like a lab fax inside right? This is how it was maintained. This is a mileage on it and that could really go a long way for somebody buying it as ah, um as an after market or you know.

2

James McWalter

Yeah, and absolutely and as you’re talking there i’ kind of thinking through like what does a company see today when they don’t have what likeq and basically the only signal I get is the energy bill or some related something where there’s no granularity and it’s like oh energy bill seems to be going up or.

Priya Vijayakumar

Product.

James McWalter

Energy bill is like fluctuating in a weird way but there is thousands potentially millions of inputs into energy bill. Especially if you large facility that that’s manufacturing you know vaccines or or various pharmaceuticals and so on and being able to actually get to the ground your level of like oh.

James McWalter

Most of the increase is accounted for by these 3 freezers in the corner. Um, because we just didn’t maintain them or whatever it may be um I think that is ah yeah I think a lot of the problems around inefficiency are often. You have a fairly opaque process. And transparreency is often brought in as a way to kind of just for sake of doing it but it nearly always just makes our dramatically increases efficiency because like oh actually we were just like kind of stumbling Along. We didn’t really know what we’re doing and then all of a sudden. It’s like okay now we have some very very clear action items that we have if we want to. You know hit the bottom line in a positive way.

Priya Vijayakumar

And and it’s sort of shocking right? because in the manufacturing world data has been so critical to improving processes in manufacturing right? It’s it’s just inherent in good manufacturing. It’s not the case outside of manufacturing right? We people do capital expenditures. They buy. How do you justify today. Let’s even take an office space somebody comes and says I need a new printer. How do you justify you? You don’t know it’s just you’re relying on the person saying yep we need it and we’re going to believe you that you need it now multiply that. By hundreds of millions to billions of dollars that these industries are spending and these industries are growing very rapidly so they also need new space. So yeah, if you if I mean our data shows us we could probably take 20 to 30% of equipment.

Priya Vijayakumar

Away and nobody is going to cry. You know this is not a scarcity mode. This is this is what cracks us up because we’re trained to have this scarcity mode if you take things away but there’s just so much waste in our system right? Whether it’s food whether it’s fast fashion. There’s just tremendous waste in the overall system.

Priya Vijayakumar

And so when you take a lot of this away. You don’t really as long as you have the data to get to what you need. There is no scarcity right? and I think some companies are better than others are doing it. But as you know when lots of money floods into a certain industry.. There is no consideration I think there’s a lot of emphasis. Now being placed because of the lots of conversations happening around climate change and definitely some of the companies are leading the space in not just buying their way out through carbon credits. You know, actually taking meaningful action. Um.

James McWalter

You you like you’re you’re still admitting guys. You actually have to do something.

Priya Vijayakumar

Yeah, and and so I I think the changes are starting to happen and but part of it is. We’re also fueling industries whose business models are built on overconsumption right? So I’m a big believer in a product as a service model. Our job is not to sell more plugs. Right? So if we want to increase value. We better figure out another big problem to solve for the customer if our model was just to sell more hardware. We would figure out how to obsolete the hardware that we’ve sold to you in eighteen months which is what happens in a lot of industries right? Whether it’s infusion pumps.

Priya Vijayakumar

It’s not like infusion pump technology in Hospitals has like gone through some dramatic you know curve like the chip industry but they’re replaced every year you know.

James McWalter

And all the Nobel prize winning infusion cur you know awards we’re giving out right.

Priya Vijayakumar

Right? But yet they’re replaced every twelve months oh because of a software upgrade. What is such a travesty right? So this is where I think you know you need regulation to happen. But you also need industry leaders to change that behavior because yes it doesn’t mean that we don’t we stop. But we can consume more responsibly shift the value proposition from you know, vendors and I always come back to the aircraft engine model in the early days they would give away an aircraft engine and make all their money on off to market right? So they were happy to have.

Priya Vijayakumar

So a ferrari like engine that constantly needed repairs when ge came in with this model of power by the hour well guess what? you don’t want to build ah an engine that needs repairs all the time you want it to stay on wing as long as possible. So it changed design philosophies right. So I think that’s also an industry shift that has to happen but that happens by the end users changing their buying behavior as long as we keep buying whether it’s plastics or whether it’s electronics people keep selling because that’s. What the business model is they’re counting on us to upgrade our product every year

James McWalter

Yeah it’s so interesting. You know we have this manufactured obsolescence. Yeah model across across the board right? and you know people upgrade their phones every you know every couple of years Um, because you know I’ve definitely gone through periods where my phone is like 3 years old and it just yes, it just stops it just. Just can handle things in the same way and like I haven’t changed my use like I’m I’m just doing you know the same 10 boring things on on my phone as I did for last few years. Um, but it does eventually stop. You know we do we definitely on on the positive side are seeing more subscription models kind of coming in. But even just this is slightly different. But even ah, there’s some utilities in the United States who are working toward subscription pricing for their energy bills right? and figuring out through getting lots of data that like okay, let’s just charge somebody $50 a month or $100 a month or whatever it is and they will absorb. Yeah, the spikes and so on that that occur and as we’re seeing with you know. And dramatically ah variant energy bills today you know that model right now I think would be like something that that people would actually love right because it’s kind of like an inflation hedge and so I think as you said like as we are if we can shift business models. You actually start to have these kind of positive feedback loops around. The the wastefulness of the industries that were kind of switching around in the first place.

Priya Vijayakumar

And ultimately you’re going to deliver more value to your end customer right? because you have to understand how your end customers using your product. What’s the difference between a tesla and the early days of the car manufacturers right? remember when you get a. Ah, a warranty notice months after it was issued right? and they have no clue how people were actually using their cars. It was just there was this huge separation between the end user and the people who actually manufactured the cars Tesla knows far more than you want to about how you drive your car right. But you see but then they built a whole different business and industry because of it right? because of that Data. So I think we have it on the flip side. We have a responsibility for using data Correctly, right responsibly. But I think it helps you deliver more value to the customer when you do focus on delivering a. Service as opposed to selling a widget I think it’s a very it’s um, fundamentally a mind shift change within a lot of these big corporations that have historically sold a widget and I think you’ve you’ve probably heard for years right? Everyone’s trying to move up the value stacks. We Want to stop being a. Selling a screwdriver and we want to sell you a smart screwdriver to do what right? So it’s It’s just you have to change your mindset.. It’s not just you make something smart and all of the sudden you’re delivering a service. Um.

James McWalter

Yes.

James McWalter

it yeah, it yeah it has to go back to again being our conversation like you have to solve an actual an actual problem and I guess like in terms of where what iq is today you know where where things and what are the kind of you know next 1 or 2 year goals for for what iq.

Priya Vijayakumar

Problem.

Priya Vijayakumar

I think you know we’ve we started initially kind of heavily focused in research labs right? We are now expanding in Europe I think the insights that we can get obviously the first part is get your foundation right? right? No, he wants to build on top of a crummy foundation. So we.

Priya Vijayakumar

Hunkered down got a foundation right? and we’re now expanding the solution capabilities in the coming and we’ll be announcing some of that in the coming months but right now a lot of growth happening in Europe primarily driven by energy. But I think for the biggest thing for us really at the end of the day is for. Consumers within the enterprise or you know consumers at home to be better educated about what is the carbon lifecycle impact of a procurement choice I’m making so we’re hoping for more transparency from the industry on what the carbon footprint of products they’re making. And feed that into the whole life cycle right? and to really start seeing the needle move in a significant way and that’s really the big thing for us and we’re starting to see that we obviously want to see that at scale. But I and I think there’s lots of opportunity for collaboration in the industry. It’s a huge problem right? I don’t think we need to be the only ones. Working in this space to solve it. So I think it’s a huge problem and it’ll be great to see more emphasis on you know, optimizing our resources. We. We talk about a lot of futuristic things which are also important but we just cannot continue to. Be as wasteful as we’ve historically been It’s just not viable. It doesn’t matter if you have the greatest renewable technology down the road.

James McWalter

Yeah I think what’s one of the really fascinating aspects is how the portfolio of sustainability is shifting in the enterprise especially over the last couple of years right? It used to be the sustainability department was like this little kind of corner. The 3 people.

Priya Vijayakumar

6 walking line.

James McWalter

And when I first started of getting into this space a couple years ago I was talking to some sustainability people actually in the fashion industry and they’re also so lonely they’re just like sitting in corners and I was like there should be like ah kind of like an a group of sustainability fashion folks now. It’s amazing right now there’s like all these organizations and then there’s a lot of collaboration and community happening.

Priya Vijayakumar

Of when.

James McWalter

Um, but even just a couple short years ago. It was like oh just I’m the only 1 working you know, working working at the firm to try to improve things. But now we are definitely shifting into you know, basically right now I think it’s now on the side of the Cfo right? The Cfo now cares about these things in this kind of interesting way and.

Priya Vijayakumar

Name.

James McWalter

You know the Ceo does at larger enterprises in some degree because if Cfo cares the Ceo does to a certain degree but it’s still not like the primary like focus of the Ceo and I think that is the shift over the next decade we’re going to continue to see you know as both the risk and reward are risk and return elements of. These various kind of sustainability and climate impacts happen across these enterprises. It’s just become more and more central to how things are run.

Priya Vijayakumar

And then I I also think sustainability was always There’s always been this approach like oh we’re going to save the planet There’s really no benefit to the business right? And so I think it’s a combination of reframing what your responsibility as a business is. It’s not just to be profitable but also have a societal impact right? So I think that’s 1 thing and and the and the younger generation that’s important to them when they join a company right? that you will have something more meaningful and it’s not just the younger generation to be fair I think there’s a mind shift. Change. That’s happened through ah through multiple generations right? where it’s not purely profit driven as the only metric for a company but I don’t think they have to be mutually exclusive right? So we have great sustainability benefits from delivering our solution but even bigger benefits from an operational efficiency perspective right. So I think there is lots of solutions out there that is a win-win for the business and also meeting your sustainability goals.

James McWalter

Yeah, no absolutely and couldn’t agree more and I guess in in terms of you know for yourself. Um, you know building a company taking a technology that existed and and divert. Yeah moving it into this new direction over the last few years I guess anything that surprised you about you know trying you know, becoming a Ceo leading a company. Ah you know any discoveries you made along the way.

Priya Vijayakumar

Um, you’ll have lots of days where you what we’ll probably be the only the co-founders that the once really only once convinced because you know you’re taking technologies that have existed and to demonstrate that you can deliver value. Sometimes it feels pretty lonely right? until you start getting that momentum which we’re seeing um, but I I think it’s exciting because what makes me get up every day is solving a problem hearing like amazing feedback from customers right? that we’ve solved a problem for them.

James McWalter

Is it.

Priya Vijayakumar

Um, seeing us evolve as a company. We’re a pretty small company. You know, solving some really big problems and so that’s what makes me get up every day is just that conviction that we can do this and and I think as you know for most founders will tell you in the early days ah if unless you’re part of a main bandwagon right? You’re like on the crypto bandwagon. It’s going to be a pretty lonely journey until you start demonstrating that products market fit and traction and so I think that’s probably been the most exciting part for us is that we have the conviction that we could solve these problems and now that’s.

Priya Vijayakumar

Being validated by all some of the large customers adopting large customers who are typically very conservative with tech New Technologies adopting our solution right? and so that’s that’s the most exciting part.

James McWalter

Yeah there’s there’s a big mindset shift from me personally and I’ve heard it from a lot of other kind of entrepreneurs through the podcast about moving from a feeling a know as rejection to curiosity right? where it’s like okay you. Every day as a founder you just especially in the early days just like a no no after no no from customers. No from investors no from potential hires. Just no, no, no, no, no and exactly it’s like I’m just going to hear a lot of dose today and then you know in previous kind of things I’ve worked on I but like oh I’d feel like a little bit I’d put my bit defensive.

Priya Vijayakumar

Yeah, yeah.

Priya Vijayakumar

Ah, it’s like your middle name.

Priya Vijayakumar

Ah, yeah, with.

James McWalter

Have my backup a little bit and be like okay that no is a reflection on me or it’s sort you know and then now it’s much more like oh like I I Absolutely thought that this would be a perfect yeah product for this particular customer and they said no, it’s like why and it’s like it’s so exciting to find out and it’s like.

Priya Vijayakumar

Um, why exactly.

James McWalter

And sometimes it’s it’s ah it’s a really good reason. Sometimes it’s like we just we dont need you know byproducts in January right? that or whatever it may be. You know.

Priya Vijayakumar

Yeah, um I think I always take every no as an opportunity to evolve either your narrative right? or it’s your product and and it’s because at the end. Day when you when you begin this journey as a founder you are the one who believes in what you’re doing right and people mistake investor investment as validation that you have a viable idea that’s complete Crap. There’s lots of like garbage startups that I Wealthf funded like.

James McWalter

Yeah, it’s like youre you you raise a sort of money. It’s like now I have actually have to build a company I.

Priya Vijayakumar

Yeah, exactly So. No I mean I just said to somebody last time I said we wanted to build a viable business. Not just a venture backed business right? That’s different because you have to deliver value in order to build a viable business and have cost structures that can scale. It. Easy to create the illusion of one day I’ll figure out what this business model could be right? So um, and and so it it is a journey.. It’s not and it’s as everyone knows being a founder is a bit of a rollercoaster right? There are these amazing days and then there are Days. You’re like why am I doing this again, but. I Think overall for us. It’s just we have amazing customers. They have been I mean we’re very fortunate. They’re amazing collaborators. They they’re very encouraging. They let us experiment right? and expand our portfolio. So. And that’s very enriching right? because they don’t treat us like a vendor. It really is a collaboration and so I think that’s been a big part of culturally who we are as a business right? We obsess about delivering value to the customer and I think that just naturally comes out in our interactions with customers. And I think the customers have reciprocated even though they’re really big. They’ve been very supportive of us so and that for me is very fulfilling right? and I see the team growing in their capability and I would have moments I’d come back to the team and go I didn’t know we could do that. So ah.

James McWalter

You Yeah that that the pleasant surprise is I like that’s always that I saw you come in here like Wow like I was at home and this happened without me. You know.

Priya Vijayakumar

And they’re like you can’t sell it yet.

Priya Vijayakumar

It is pretty cool. We have an amazing team and I have an amazing co-founder I’m very blessed.

James McWalter

Absolutely well Priya this has been such a great conversation really enjoyed the chat before we finish up is there anything I should have asked you but but do not.

Priya Vijayakumar

I think you’ve been very good about covering sort of the broad spectrum. You know we’re probably excited maybe to highlight that we’re going to be. We’re growing significantly in Europe and so we’re definitely looking for some great channel partners to work with who who. Finally have share similar values in terms of solving the customer’s problems. That’s really important to us. So I think that’s kind of the next exciting phase of our journey and this has been a great conversation as well. So thank you.

James McWalter

Thank Priya and we’ll include some contact information in the show notes have a great yesterday.

Priya Vijayakumar

Thank you you 2

The Future of Energy Delivery – E94

Great to chat with Jason Huang, Founder and TS Conductor, TS Conductor has developed a conductor that outperforms all current transmission & distribution conductors on the market! We discussed improving a 100 years old technology, bottlenecks in the power grid, building a strong company culture and more!

If you would like to contact TS Conductor please email ​info@tsconductor.com

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Hello today we’re speaking with Jason Huang founder of TSconductor welcome to the podcast Jason! great to start. Could you tell us a little bit about TSconductor?

Jason Huang

James thank you very much for the opportunity.

Jason Huang

TSconductor I would argue it is the best conductor that has been developed in history. It reflects the ultimate combination of best materials that is available today. To be able to conductor in the technology we use the most conductive aluminum type and we also feature a carbon fiber composite that has all the attributes. The industry has been looking for extremely high strengths lowest way possible. And it does not have a so more expansion problem which creates sag when you are able to combine the 2 mature together. You basically have that ultimate combination. What material science offers on top of that. We have a design that is enabling I would call that a breakthrough design we leverage aluminum to protect the carbon composite and we leverage the carbon composite to provide all the strength technical characteristics that protection from the aluminum. That is unique to us that provides guarantee for safety reliability longevity that has been missing in the industry for the past century.

James McWalter

And why and this might be a basic question but why are and conductors so important and.

Jason Huang

Yes, when you think about you know electricity. It’s about electrons we generate electrons from Generation site nowadays. It’s ah um, it’s all about renewboard generation and these are normally in the remote places. Our consumption side which is called Load Center These are the cities you have to move the Electron and that is where you need the pipeline for the Electron that is the conductor that we have power grid the power grid. Ah basically. You have towers you have conductors that are supported by the towers or poles and it’s the Conductor. That’s the ah pipeline for Electrons. You know when you talk about other forms of energy oil and gas you have pipelines when you talk about. Transporting humans and goods you talk about automobiles roads and it’s the same thing you have to move it. That’s why conductor is important and it’s a critical piece of power Grid Power Grid is also the critical piece for our. Energy infrastructure and you could also argue Electricity is the blood or energy is the blood of our economy without that you cannot run.

James McWalter

I go farther I’d say civilization right? We don’t have a lot if without electricity and the way we’ve completely constructed. Um the economy and civilization and in general and I guess like thinking back to the beginning of of Ts conductor. You know what drove the initial decision.

Jason Huang

Um, yeah.

James McWalter

Ah, to kind of go on this path and start this company and.

Jason Huang

Yeah I left my prior employer in 2017 and I had the um I would say the opportunity to acquire this technology. This was invented by someone else who is not. Affiliated with the industry because the technology’s uniqueness actually calls for outsider to be the innovator. It kind of looks to be a little bit impractic or stiff. But when you actually do it. They’ve learned that you could actually make it even more amenable to. What the industry need. So I had the fortune to acquire the technology and I I would say part of the reason is due to my um, my understanding of the industry my understanding of the prior technology which I had the fortune to lead as the. Ceo of the other company and so I know what is missing and I know you know when you see a great solution. You just get excited about it that you jump on it with all your heart and soul and your resources.

James McWalter

Yeah, and absolutely and so was it. You were looking for something better and you kind of came across this this research and development that this other person worked on or did it just kind of.

Jason Huang

That’s what what I have done.

James McWalter

You know you came across their research and were like oh this is like an amazing application of their technology.

Jason Huang

Yeah, yeah, that’s a good question I was aware of it but I was not involved in it and when I had the opportunity to act I basically seized the moment and made a decision to commit myself rest of my. My career and put all of what what I have on the line to to help take that technology forward and with everybody’s help. We can make this technology mainstream and we can make a tremendous difference in climate change or just give you a simple example, the efficiency this technology brings We can potentially cut about half of the greenhouse Gas emission associated with.

James McWalter

Please.

Jason Huang

Composory generation. What is a compository generation. You might ask today based on doe numbers. There is about 8.3% of the electricity that is lost due to resistance heating we call that line loss.

Jason Huang

Because whenever you have a conductor you have resistance and you pass current through it. There is a simple high school physics I square times r which is a resistance heing and that is always there when you have a conductor that has lower resistance which is basically more efficient. You’re gonna be able to cut. On that loss so globally 8.3% of the electricity. That’s generated is lost to line loss and it is about two Thousand Terawatt hours of electricity wasted every year to make up for that loss. You do composatory generation basically means. You generate far more than you need just to make up for that compository generation using today’s ah the power generation mix 30% renewable 70% traditional. We are creating about 1000000000 Ton of greenhouse gas every year every year and if you can improve efficiency by half you are basically cutting out 500000000 ton of greenhouse gas every year

James McWalter

It Yeah,, that’s that’s phenomenal I mean I think there’s this ah phrase within the kind of climate tech community of the your products that have Gigaton impact something that actually can go to that level of scale and then have that level of ah you know effect. On the carbon emissions and so when you’re talking about that level of numbers and because electricity is ubiquitous around the world and we’re just building more right? like the world population is Larger. We’re electrifying more and more of the world and so that Compenseratory energy loss is actually just going to increase on Net unless we have technologies like this to.

Jason Huang

Yeah, and to other data points I think it is not well known out there in the community one is the renewables we have today a lot of these projects whether it’s solar or wind.

James McWalter

You know mitigators.

Jason Huang

90% of them in our country here are not able to be integrated to the power grid because we have bottlenecks in the power grid. The average weight is about 3.5 years and in some other countries. It’s actually even longer. So.

James McWalter

This is.

Jason Huang

If You are able to deep Autoneck The power grid for example with our technology using existing right away in existing structures like the towers and the poles we can bring the capacity to 20250 even 300% of the Baseline capacity. And that’s going to transform how the renewables can be Integrated. You know we’d love to have more support from the community in terms of you know, asking utilities and asking our regulators to give advanced technology like ours. You know a closer look. In terms of faster Adoption. We do work in the industry that is slow and this is why all the support from all the aspects of the society would be very beneficial. Um.

James McWalter

Yeah, no absolutely and I would love to kind of dive into some of those kind of elements of the bottleneck in a moment but I guess coming a little bit back to that. Ah, earlier part of the story. So You yeah you recognize this technology and you’re like okay this this is going to solve this massive problem of. You know energy loss that is occurring on the grid today. What was the process of going from there to basically making it something that is a product that could be actually be deployed and utilized and I guess what were the kind of steps and were there any pivots along the way that.

Jason Huang

Yeah I think there are quite a few one of them is manufacturing one um, manufacturing the industry slow for a reason they expect reliability at any cost we actually put safety in the reliability as.

James McWalter

And.

Jason Huang

1 of the 6 core principles at Ts and in our manufacturing process. We’ve developed x-ray machines that allows you to ensure integrity of the composite material inside the conductor you can argue that every single inch of our conductor get inspected. Ah, nondestructively and we also deploy smart manufacturing in our system you have lot of video monitoring smart monitoring technologies today. The cloud storage is very cheap. We we basically. Ah, create a environment like a restaurant you have open kitchen that people can see through the glass we can provide that to our customers to to give that level of certainty to our customer base. So the safety reliability longevity. Not only you have to design it in. Which is what we have done but also in the manufacturing phase making sure they’re made properly then you can provide that safety reliability longevity performance that is expected by our ah utility customer in the other part I think it’s equally important. It’s often ignored. We have new technology getting adopted that is the user experience. For example, if you have a new product in the field when they’re being put to use like it deployed you have lineman and these people they put their lives on the line. You know they work with your product. Um.

James McWalter

And.

Jason Huang

How readily can they work with your product does it require new tools. new equipment new trainings we purposefully design the product to be compatible with standard way of working for the past century by the way though. The the conductor that is dominating in today’s power grid was invented in 198 so people were in the industry who are used to do things the way it has been for the past entry and if you suddenly change their practice. Require new tools new equipment that’s going to make it little bit more challenging for them to consider and adopt your technology. So we also took care of that part and you don’t get it right? The first time so in the manufacturing process. Um, we being. Doing the manufacturing actually the mentor was evolved since 2016 so this is not like you’re building it from scratch the noctar technology has already been deployed in both distribution circuit as well as in transmission circuit.

Jason Huang

So it’s a proven technology ready to be deployed at all the voltage levels.

James McWalter

And when I hear things like ah you know the the existing conductors that are in the overhead wires that you know the audience walks by every day. Um, probably have a copper basis or something similar and they’ve been basically were invented in the early twentieth century and have not been. You know majorly improved for 100 years what were the main barriers to the innovation in this space because I can definitely see understand how some industries are pretty slow to move. You may have a generation you know a few decades even of ah, kind of stagnation in innovation. But when I hear something like something did not change for 100 years is that because we just didn’t have the material science. Ah you know innovation itself to make changes or was it mostly down to some of these barriers to adoption when you have a very kind of risk versus organization like a local utility. Okay.

Jason Huang

I would say already above and and plus some other factors. Let me see if I can summarize it in a way that your audience can’t understand one is related to the the overriding need for reliability safety.

Jason Huang

You need a product that can provide the assurance of reliability safety longevity and that has not come along I would argue until Ots is is is available and there’s also that element of mature science. Um. What we feature in the ts technology. We have the a Neo aluminum which has the best connectivity that was actually featured in in the 1970 s technology called acss it has the steel technology combined with a need aluminum and steel by the way it is. Ah, you know higher Grace Theore with greater strengths compared to what was used in the nineteen what was developing 198 and that’s a niche product. It is only used for high temperature use typically because they’re little more expensive and then the composite piece. Ah. That you could also argue. It’s becoming a mature technology carbon fiber composite has been around since the 1970 s so it’s also about 50 years so it did take mature science evolution to make what we use in terms of the foundation or technology available today. And a proven technology by the way. Um, and I think the third element had to do with regulations the environment. The utilities are operating for example in today’s regulation um, you know, utilities. We have many you know there’s the western only utilities there are munies and the co-ops. You know there are thousands of them. They’re all regulated either by especially the io the emestinol utility by Ferc or by the state energy commissioners. And there is no mechanism today to Motivate Grid Power grid to improve on efficiency for example and um, you know the utilities are encouraged to make investment.

Jason Huang

And then they’re allowed a coupon rate to basically collect the return on their investment. There is no mechanism to to motivate them to let’s say use a more advanced conductor more efficient cut the loss which will ultimately benefit the ratepayers benefit the environment as well.

Jason Huang

Because you are generating less waste and yet there’s no mechanism for them to retain some of that benefit. Um, and sometimes when you use the more advanced conductor. It’s going to cost you a little bit more in the in the first cost.

But we we actually are able to reduce the overall capex cost but some people don’t look at that way and if you look at the life cycle or cost benefit. It is a total absolute. No-brainer that you should look at a more advanced conductor because they’re more efficient.

Jason Huang

In addition to providing you far more capacity than that you need in today’s environment

James McWalter

Yeah, on the on that capex point I’ve talked to a few folks at yeah various utilities from connnadison pg ah Pg and e and and and so on and um and as part of conversations I was having with potential startups that I might start myself and you know talking about like. What what would it take to sell to utilities and like what are the various elements and 1 person was like no matter what you do try to focus on capex because there’s often not the money for the opex. You know if you want to go in and pitch some sort of nice cool software solution right? because that’s the kind of world I’m more coming from ah rather than the hardware side. It’s like can you make it a capex expenditure on the software in some way because otherwise you might often struggle to actually get funded um by these kind of customers and so I think it’s something that’s quite opaque to to people on the outside just how things like how they spend money how they kind of deal with vendors. Has such a kind of ah artificially constraining um aspect of you know the kind of environment of people trying to sell into these organizations the utilities and so on and so it’s it’s absolutely something that that needs to be revised and and worked on I guess one other element is the regulatory state and so. When we’re dealing with ah things that affect critical infrastructure like the the grid often you have various kind of regulations that govern what can be done in in that case is the regulatory state ready for innovations like what ts has um and how can we improve the speed of regulation when we do have these new step change technologies like. The ts conductors and.

Jason Huang

that’s ah that’s a great question. Um on the regulation side I think even Ferc and the state commissioners. They recognize the massive challenge we face in terms of climate change. Ah, in terms of the need to integrate to facilitate the integration of all the renewable generations in our power grid is how do I put it. It’s it’s old on average in the us the power grid is about transmission grid is about thirty years old you know it’s it’s. It’s into the second half of its design life um to to address that regulation can play I would say enabling role and 1 aspect For example I just talked about. Is the efficiency. You know you you think about automobile department energy has guidelines set in the place may not be mandatory in the beginning that that you you have a kind of ah improved target for fuel economy and that has I would say made a huge difference in terms of How efficient the motors are the cars are I think the same thing can be done related to grid efficiency. We spend far more time and effort to improve only efficiency in our refrigerators microwaves dishwashers and you get insamitized for it but yet. The power grid system itself. We don’t pay attention to the efficiency aspect. Um I would also ask that the utility themselves in the past has always been conservative risk averse you have employees who are really you know. Got a job for life. Um, they don’t necessarily get rewarded for being innovative step out in the box and if you if you do let’s say do things the old way nobody will challenge you or ask you right? And that’s that that.

Jason Huang

That creates an environment to to be risk of worse as well and granted you know power grid need to be reliable need to provide that electricity. You know whenever you need however much you need, but we’re in the twenty first century we need to use twenty first century solutions for our problems instead of relying on ah early twentieth century technology to solve our pressing problems today. So I would really urge our regulatory um agencies. And also I would say environmentalal activist can also play a role and bring awareness to them people by by nature wanting to do good. You know for the community for society for humanity for our environment. Ah, many of the. I think even the regulators and commissioners give them a lot of credit because they face a monumental challenge. Um I think with time they will see it. But it’s going to benefit by creating more awareness of technologies like Ts that is available to deploy. You don’t need breakthrough innovations to make a difference. We can make a difference a huge difference today by having a environment that allows utilities to be a little bit more bold in also to think outside the box in them.

Jason Huang

To kind of force a mechanism that advanced technology are also looked at at least as a option and I could argue that we can reduce capex we can certainly reduce operating expense. Ah let me just give you a specific number when you think about building a new transmission line. Sometimes in in this country. It takes about 8 to 10 years from the planning phase only five percent of the project is spent on conductors 25% is on the structures when you use the right technology like ours. We can hugely impact the structural cost like fewer towers shorter towers. The foundation will be a lot cheaper as well. You have less encroachment of the of the environment and that 5% expenditure in the entire project by the way dictates the throughput.

Jason Huang

Dictates the agency of the line and we should certainly do far more and you know when you talk about leverage that is where the leverage is. That’s where you can spend a little bit more money so that you are impacting the overall project expense and you also have 50 years of line loss saving benefit that is available to you so that’s the kind of thinking process. We should have we should encourage our regulators to consider should encourage our utility operators to consider as well.

James McWalter

Yeah I think there’s a lot of like really fascinating kind of thoughts in there I mean one way I think about risk and risk aversion I guess is that I think we’d want you know people who are running critical infrastructure to be risk averse. But it’s down to the timeline that they’re risk averse on right. If you are if we’re kind of barreling into a you know future of electrifying everything where the grid itself just needs to massively you know, increase in size like moving into a world of just regular brownouts and blackouts is something that we should be very risk averse about right? like and not enabling that. Versus I guess the risk aversion of an individual and an organization like utility or a regulator who might be risk averse about you know, doing everything doing anything new at all, right? and it’s like if you we can lengthen the timeline for that risk aversion where it’s like okay, let’s not have the grid collapse in 4 years or 8 years or 12 years I think then there’s more of an appetite to explore these new technologies because I think what’s definitely I think is now accepted is that the status quo will not work right? like that that I think has that message has been definitely delivered as we’ve seen things like what happened in Texas you know last year as we see you know, um, and and those events are going to. Occur more more often and so it’s like can we get out ahead of those things by um, you know, improving process like that’s number 1 right? improving like the nature of things you mentioned the the interconnection queue taking three and a half years right now. Um I think pgm which for the audience covers Pennsylvania and a few states kind of close to Pennsylvania. Ah, they just announced a change their queue but it’ll take 2 years to like make the change that will actually slightly speed it up and that means you basically just have all this clean energy which is basically funded like the moneys there just sitting on the sidelines just waiting to be deployed and that combination of factors means that we’re just moving way slower. And for once it’s not money. That’s the issue. It’s all these other structural elements that are in place.

Jason Huang

Yeah, um, James I wanted to add 2 points like ah it’s it’s like a myth one is new technology will add more risk. It’s actually the opposite when you look at a technology like ts. We actually help to improve resiliency while you are modernizing your power grid or just give you an example I was in Florida meeting with Fpo and nexttera and they have challenges with hurricane wind becoming more intense and their power grid. Ah, need to be prepared to handle that type of load at the same time you needed more capacity. It’s a paradigm you know you you need more capacity. You’re going to need bigger conductors, a bigger conductor with a stronger way is going to put your towers and infrastructure at greater risk with ts technology. We don’t have to go bigger in size to give you more capacity. We can use the same size conductor give you 2 x capacity and our conductor is compact that minimizes the wind load and our conductor is a low sag so that you can also reduce tension to the you know to the towers to the poles. Ah, when you when you when you install it so that you have less tension to the top so you can actually have have them all without having a compromise the other part I would argue is the myth about okay when you go green there is a green premium you know in some cases that’s true. Ah, with ts you could actually go green and get green. What do I mean by that when you are able to leverage the massive line loss saving benefit and make that available to the rate pairs. Because by and large the rapier are financing the um you know the the power grid expansions or modernizations because they optimally pay for the electricity if the line loss is included in the analysis. They are actually getting a. Better deal out of the investment or they could actually start with a lower capex if they use ts technology in far lower operating expense because you don’t have much of a loss to speak of so you can go green and get green as well. And but you do that with ts technology. You’re also helping the environment and so we you know these? ah myths they need to be demystified. You know for for the for the truth to be known for everyone.

James McWalter

No absolutely and and I think yeah, somewhat whatever what we’re trying to do on on the podcast. But I think in general the anything that touches the electrical grid has been so just the water we swim in as a society for so long that we just don’t really think about it. You know I click a switch the light turns on. You know I had a button my microwave works those things are just such a fundamental element that all the kind of elements that allow that to happen because they’re all being changed because of the nature of moving to intermittent supply and demand as we move to renewables as we electrify more and more of the common world. I think demystifying those elements I think brings about the kind of more rapid change. It brings about you know consumer change it brings around regulatory change brings about utility change and and also the companies that changed and adopt and kind of develop new innovative kind of approaches in order to kind of solve for those different problems. Um, and I guess. You know, thinking about you know Ts and and kind of next steps I was reading about. You know you recently had this kind of very very large rates of capital to start building out your first kind of manufacturing facility in the us but some big you know, quite famous investors like breakthrough energy and so on. Where where’s kind of that today you know what? what are the kind of process to kind of get that that first factory and up and running so.

Jason Huang

Yeah, thanks for actually asking that question. First off, we are very blessed with our investor group breakthrough is a visionary investor and um, they know the global challenges they have patience. They invest in hard tech like ours they have to build factory to make a difference and we really appreciate them for their leadership. We’re also very grateful for utilities like national grid nextera fpl. These are thought leaders. These are early adopters of technology in the industry. You know I do remember you made a comment about how you get new technologies adopted in ah in a conservative industry. Um, you know, even even in the conservative industry. You have some players that are. Progressive that our thought leaders early adopters you wanted to focus your energy with them. We’ve been very fortunate to have a national grid and also next era to invest in us and they also have shown us a tremendous interest. In taking our technology forward as well. Um, and I also think that they speak volumes on behalf of the rest of the industry and the others are just not used to do things the way they do national grid and next era. So what. National grid nextter is is working with us is going to help the entire industry as well. In terms of the facilities we have. We’re building our first facility in California and there’s a massive need for fire remediation effort and you mentioned about p and e I just needed to bring a point. We our technology have been selected by Pg and e in its open space challenge sometimes you look at a massive utility p and e you know they’re not very progressive but when you are faced with challenges. You know they being very creative. Ah, soliciting solutions worldwide. So we’ve been very fortunate. We do have ah enabling technology for them and we’re working with some of our partners in industry like prismian to bring technology solutions for them and um so you know these are. These are things that will help the overall industry. Um, we are we should be in production phase in our facility here by about midsummer um I would say before August we will be making products.

James McWalter

So very exciting.

32:41.20

Jason Huang

Out of our facility in California and that is very exciting. That’s a milestone event and our team has worked really hard by the way we have a great team culture in case I didn’t mention it. We have a great team. Um, our vision. For our company is probably a little bit different than most of the other companies we care about our employees and partners. We care about their happiness fulfillment in not just material sense but also spiritual aspect. We believe that is important.

Jason Huang

And we also believe that as a company. There’s an obligation to society to humanity especially in today’s environment you have this massive climate change and we’re committed to make a difference for the world and lastly we like to. Get our technology to the phase that we can be the choice to rewire the world with our technology and and when we do that we can improve capacity ah capacity throughput in our power grid to accommodate all the renewables and. To improve efficiency that has been ignored in the past century as well as providing that enabling self-monitoring capability which is not possible in today’s wire today’s wire are dumb wires. Um, these are things these are missions of ts. And we’re really excited about what we could do for the for the world.

James McWalter

Yeah, ah, but ah, it’s absolutely fantastic I Guess on the um on that kind of cultural Piece. You know one of the things that we’re seeing right now is a move of the you know the most highly skilled you know workers and in the economy moving to things that have more of an impact right. Um, it’s started. You know when the the great resignation. Although so supposedly looking at the research. The great resignation was not quite as great as large as as if kind of seen initially, but you’re definitely seeing. Ah yeah, people who might be working at ah companies that are large tech companies. Maybe they don’t like the direction of those. They’re looking at climate Tech they’re looking at other areas where they can have more of an impact in their kind of day-to-day. Yeah, and you mentioned that this kind of you know the spiritual flourishing element. How does that I guess ah you know appear within the kind of company culture in a direct way. Um, because I think that it’s something that a lot more teams are trying to cultivate and maybe are struggling to do So yeah.

Jason Huang

Yeah let me expand a little bit about the 6 principle values at ts we at the very top. It’s a pyramid. It’s customer first without customer there’s nothing there. We don’t have to explain that right below it. Have 2 values that are important one is teamwork that is within and also with partners with customers. You know you mentioned about the culture. Um the spiritual aspect teamwork should be simple because we trust each other. And the trust is not easy if you have egos in the middle when you are able to see through the egos and really understand who we are as a being um, you’d be able to have a much greater appreciation for humanity.

Jason Huang

We actually are one. You know that oneness um I was impressed I saw a picture which is comparing the human lawng with the tree. The tree takes in what we breathes out and we take in what the tree breathes out.

Jason Huang

You know that code dependency that harmonious one is. It’s really amazing and we need to think it that way and teamwork is also just like that as well and then we have safety reliability. It is not just thinking about what.

Jason Huang

We locally as a team you know in our in our company but also the extended team that includes alignment that includes the utility workers that they work with our product and and then right below that we have 3 values that are important one is continuous improvement. I’m of the view that even with our technology I would argue It is best in the world. There’s still room to improve and we have a smart conductor in the works that will change the world again in the conductor space. Um. You know with continuous improvement I’m going to share with you. My perspectives about putting the effort having passion by the way The the fifth value is you have to have passion and energy to you know to to come to Work. It’s like um, you got to love what you do and do what you love. And if you’re stuck in a place if you still needed to make a living at least learn to like your work because otherwise life is too short. Why why choose to be miserable. You can make a difference in that selection in the last wise commitment.

Jason Huang

So back to the continuous improvement. Um, it’s a compounding fact I urge my colleagues and and and you know people I’m I meet I observe I’m a mature scientist by training so you can see my passions about Ma material science.

James McWalter

Absolutely yeah.

Jason Huang

Why I am excited about ts technology if we aim for one hundred point one percent what does that mean every day we have about 1000 minutes that we manage you know rest of it. You sleep and you eat and you know just nonproductive hours necessary minutes by the way. If every day we squeeze the 1 extra minute that is the one hundred point one percent effort if you do the compounding because the effort you put in today. You know that effect is compounded by next day’s 101001 ndred one thousand one minute if you do it for a whole year six three hundred and sixty five days that extra minute every day is 1.4 x compared to someone who’s just doing 100 if you do it forty years on a continuous basis that is 2000000 times if you are not successful. Something is wrong. Okay, so you are putting in basically the 1 minute extra effort that’s creating a 2000000 times compounded impact. Why shouldn’t you be successful and then the other point that I wanted to make about the continuous improvement is the 100 % principle the way I look at the 100% is you do need to pursue perfection in products in manufacturing as well. Just imagine you know we make products you make a conductor.

Jason Huang

You start with carbon fiber resins and then you do protrusion and then you do encapsulations and so on so forth if we screw up especially toward the latter stage the manufacturing step. You’re not. You know you are only 99.5 percent there. You might be scrapping the entire lot. Just think about all the wasted material wasted labor and effort wasted resources. We have to pursue the 100% as well and if if nothing else if your audience can take in the one hundred point one percent principle the 100% pursue for perfection I think it’s going to do them well for their for their lives.

James McWalter

Yeah, and I think it also goes to the core of even the technology itself and we talked a little bit about this at the beginning of the conversation. Ah, where technology makes a massive change is where it is a new point of leverage and this word leverage when you’re trying to leverage that extra point one percent or that extra minute a day. But you’re trying to leverage. You know a new type of advanced material in this new way that affects like a very large existing problem that nobody else was solving and all the way down through all the different ways that we kind of interact with the world I think searching for leverage is like something that that. I think more people need to talk about and there’s a mentor of mind. He says you know most people say don’t work harder work smarter but he also has he’s like there’s actually a better one. Ah further which is work braver right work would more seek things that have more leverage. Um, because again, even if you’re working smarter. There’s always maybe some. Other form of leverage whether there’s risk whether it’s kind of identifying areas of even greater productivity and so on that you can kind of capitalize on. Um, but Jason this is this has been a great conversation I I love kind of finishing off on on those kind of elements of culture. It’s’s super exciting before you finish off is there anything I should have asked you about but did not okay.

Jason Huang

Yeah, um, you did ask and I probably didn’t have time to respond we are looking for employees and colleagues and partners in ts on the world stage. We look for agents distributors. Representative of our technology in the product because this technology is not just us technology. We wanted to benefit the grid of the world basically everywhere so we look for partners that way if anybody’s interested in that let us know we also look for. Employees partners with cts that that can help us ah in manufacturing technology development finance business development. We have needs across the board and we do have a precondition you have to. Respect and like the 6 principal values that I mentioned about customer first teamwork safety continuous improvement passion and commitment and we have the commitment for you. Ah, we also like you to have commitment for us that is. You come to work bring your heart and mind with you as well to work and in the process. The company will be able to provide that fulfillment of what you wanted in life in both material as well as spiritual aspect and includes your family as well. So. It would be a great journey if someone were to join ts we. We need more talent and we could use more support more partners in the world.

James McWalter

Thank thank you Jason and we’ll include all those links and contact details in the show notes. This is great. Thank you so much.

Jason Huang

Thank you very much and I really appreciate the opportunity to speak with you and be you know, let more people know about advanced technologies like Ts and the difference they could make for the for the world. So thank you for that.

James McWalter

Like thank you Jason.

High Power Storage for EV Fast Charging – E93

Great to chat with Quincy Edmund Lee, Founder & CEO at Electric Era, Electric Era engineers and manufactures AI-driven high-power storage systems for EV fast charging stations! We discussed the importance of feedback from customers, what is needed to build out EV infrastructure, the need to unblock power constraints and more!

To find out more about Electric Era, contact them here! https://www.electriceratechnologies.com/contact

https://carbotnic.com/electricera

Download Podcast Here: https://plinkhq.com/i/1518148418

Remember, If you want to support the podcast please rate and review 5 stars on  Apple, Thanks so much! 

James

The unedited podcast transcript is below

James McWalter

Today we’re speaking with Quincy Edmund Lee founder and CEO At Electric Era, welcome to Podcast Quincy. I suppose to start could you tell us a little bit about Electric Era.

Quincy Edmund Lee

Thanks James good to be here how you doing today.

Quincy Edmund Lee

Yeah, electric era is a company based out of Seattle Washington we’re about a mile from the space needle our company focuses on building AI driven high power storage solutions for the ev fast charging market. So electric area is it’s an startup in Seattle Washington founded by myself. My co-founder Elliott Owen we are. About a mile from the space needle we focus on building an ai driven high power storage solution for ev fast charging stations. So specifically we sell a behind the meter high power storage system that lowers the load required the load capacity and power capacity for an ev fast charging station. So you think of peaks. Peak shaving. But for e fast charging stations. So we’re really trying to position ourselves in the market to be the energy brain of an ev fast charging station handling all the power flows and energy flows at a fast charging station so that the customer can lower the grid capacity requirements the demand charge costs. And operate the station intelligently. So we’ve we’ve built out a software platform and a hardware component that allows us to go and do those things.

James McWalter

So very good and what drove the initial inspiration to start electric Era. Yeah.

Quincy Edmund Lee

Um, yeah, it was it was about 2018 and I was working at Spacex and I was launching launching or watching a rocket launch and it was a deep space orbital entry mission. Um, and as the kind of rocket took off and and started to go into deep space to deposit the satellite. There was this earth-facing camera and showed the earth and it showed the earth getting smaller and smaller and smaller at that moment you know looking at that beautiful blue and green. Orb I realized I was spending all my time and energy and talents building technologies that were sending things away from earth when the problems on earth. We’re actually growing in magnitude. So you know that was kind of my existential moment. My aha moment hey I need to institute drastic and urgent course corrections for the the climate problem here on earth and there’s no better way to do that than a participant in the private sector as an entrepreneur so really started to focus my attention on. Problems here at home at that point and noodle on ideas ah around how you know I could contribute to the climate crisis in ah in a positive way. You know and stem the issues that are plaguing our planet.

James McWalter

Yeah I think it’s very similar to I think a lot of climate entrepreneurs where there’s kind of this default. Yes I believe in climate change the fact of it all those kind of things but had never really been maybe internalized to degree that the responsibility feels focus on oneself and I think ah you know. Talked to many many entrepreneurs and and also speaking for myself when it comes. It’s like it’s like a train that hits you and you don’t really you know it’s It’s nearly impossible to resist. It’s like oh I actually do need to make dramatic Change. You know career change focus change all those kind of things.

Quincy Edmund Lee

Yeah, yeah I think I think that’s right and I think what’s pretty cool that I see is there’s a huge wealth of talent of really capable motivated people coming from other sectors into the sector I think a lot of people recognize hey there’s this you know existential threat that I need to address. Um, but I think a lot of other people and just generally everyone participating in the process realized that this is a huge shift of Capital markets. So. There’s like a massive undertaking of wealth creation happening so like arguably like a really good industry to go into because we’re reindexing. Um. You know, value creation around solving climate problems and the capital markets are moving accordingly. So You know so selfishly I think all entrepreneurs should have both those things in mind of hey this is a um, a really big problem but hey there’s a huge amount of opportunity here. So like let’s go solve these issues and and create value for humanity and value. Um, for our shareholders at the same time.

James McWalter

Yeah, absolutely I think the best climate companies are ones where they’re very conscious at the beginning that the business model has to be tied to the climate impact in a very like specific and and direct way and I guess like so once you had you know this this you know step change in your kind of outlook you know and the underlying kind of emotions of that the the sentiment of like I’m going to. Yeah, make this change in my career in my overall direction. What was the next step. So.

Quincy Edmund Lee

yeah so yeah I started putting pen to paper I started building business models in the early mornings and late at night and reading about um ultimately the duck curve and and the the issues associated with onboarding bulk amounts of renewable energy onto the grid. So company originally started off with the idea of hey let’s like build load shifting batteries that have like vanishingly small dollar per Kilowatt hour costs and bulk onboard them onto the grid so that we can fill them up during the day and discharge them at night when renewables aren’t around and we realized you know that was that was. Was a big problem. It still is but the business case for it is probably not venture backable. We also realized that you know our expertise is our expertise didn’t really lend itself to making fundamental changes in that technology space. You know that’s like more of a chemical level innovation than it is like a product or. Mechanical engineering level innovation. So we kept looking around. We realized hey um you know there’s renewable onboarding and then there’s also clean vehicle electrification onboarding that needs to happen and what do you know? ev fast charging the big you know. £800 gorilla in the room of the electrification. The vehicle electrification process is not being really looked at or absolved um and and the more we looked into it the more we realized it was a huge impediment for people to adopt evs and I’m ah I’m a Tesla driver and even on the tesla network I find that coverage is actually kind of lacking. You know it’s it’s it’s still kind of hard to fastharge. So there’s there’s a very strong psychological need to have more infrastructure in the ground. Um and when we when we started digging into that we realized wow these stations pulled neighborhoods worth of power on one city block. There’s a clear mismatch there like literally thousands of homes worth of power. On you know, yeah, a single city block. Um, so when you dig into it. There’s a huge amount of cost impediment and time impediment to go and activate fast charging stations. So that was the genesis of the idea. Let’s build a high power behind the meter energy storage system that peak shaves. Load at a fax charging station and this and the software system that operates. It.

James McWalter

And once you hit kind of had that direction What kind of validation like who are the potential users potential customers potential clients who could be to yeah, come down the road as you kind of think in the long term about monetization but in in the short term like how do you kind of think walk through that validation process.

Quincy Edmund Lee

Yeah I think any engineer listening or sorry any actually yeah, any engineer that’s becoming an entrepreneur listening should should definitely just pick up the phone and start talking to customers and you don’t need to go and try to sell them on anything you can simply schedule introduction calls and say hey I’m interested in learning about your industry and this problem. Etc, etc, etc. That’s exactly what we did we we read a few papers to start and we’re like oh yeah, this is like actually fairly wellresearched and there’s a lot of you know publications that have suggested that demand charges is an issue for this industry and that fast charging stations are power intensive. But the very next thing we did was really start calling a lot of people and connecting with them on Linkedin and scheduling intro calls and like validating directly from the customer voice that this was a problem. Um, and that was I mean that was immensely helpful. It validated the thesis that this was a big cost driver for the industry. Also validated the thesis that there was a need for high power storage systems and there was a validated the thesis. There was actually already purchasing behavior for batteries in general for fast charging stations. So we had a lot of good market indicators early on directly from the customer and that was I think the key first step that. In hindsight was the right thing to do.

James McWalter

And we’re running kind of surprising insights from those user research interviews that came out of that period. So.

Quincy Edmund Lee

Yeah, definitely? um I think I think a big one was that you know there’s multiple considerations that dictate the site economics at a fast charging station and power cost is just one of them. Um, we also got a lot of indications that. You know the current battery solutions are just too big and it takes up too much space and it makes problems for citing and that can add land lease cost so you can flip the entire economics on its head by adding a battery but you know given that you solve 1 problem but that you create another so we had a lot of. Strong market signals and customers telling us hey make sure this isn’t a huge big shipping container like it can’t be because we’re trying to put this in urban tightly dense areas and that drove a lot of product decisions around optimizing the footprint of our power node battery product. So the system that we built and designs about. You know four by four feet it’s pretty small and it’s got. It’s got 120 kilowatts of power in it. So you know it’s half the size of a parking stall and you know 120 homes worth of instantaneous are 30 minute power actually so we really want to you know condense the footprint.

James McWalter

So.

Quincy Edmund Lee

I Think the other thing that a lot of customers indicated was um, they were going to try to find other solutions to this problem other than storage and I think that’s actually really important for entrepreneurs to hear you need to not Over-index on your technology and think that it’s a panacea for the Market. Like you should not assume that that is True. You should try to find direct buying behavior from customers for your product and not try to force your solution into their problem because they’re they’re creative people. They’re creative buyers and they have a mandate to not spend money and increase I R for a station. So. Best way to do that is to find other creative solutions. Um, and that was something I think we should have paid a little bit more attention to at the beginning because it probably would have shaped our product earlier on in our approach but you know that was another surprising anecdote that we found.

James McWalter

Yeah, it’s its so interesting. You know the problem solution dynamic and ah you kind of mentioned the you know the and engineering soul of of your founding founding team and how building things is like very close to the the kind of overall ethos for engineers and and the like um whereas.

James McWalter

Think the best entrepreneurs who are engineers who move into becoming startup founders and and early employees. They become very very obsessed with that problem piece and they don’t to your point try to you know Square Peg round holele type solutions because you know what? what? If. Let’s say the solution was more of a um, just trying a random thing but like you know a chat bot didn’t. Tells people about the the closest free ah fast charter right? Like if you’re kind of coming to the space with like just kind of a completely open. You know like an open kind of map of where the possible solutions are I think you end up getting to a place that’s ah, better. But Also you’re also even within that you’re bringing to. Conversation your own context about Solutions. You’ve seen in the past and I think like that balance is where you get like really smart people coming from outside a specific industry coming in and disrupting it in in a kind of new way.

Quincy Edmund Lee

Yeah, yeah, that makes that makes a lot of sense I think um, any like any product solution or problem solution orientated person engineer or not coming into a space will look at a problem and say oh well here’s a solution for it. I came up with solutions but that might not be the right solution and it. Certainly might not be the solution. That’s moizable. So you know like your your singular data point and idea is is one of 1 of many in a constellation of ideas and you’re trying to find the one that’s monetizable. So like lesson learned for me is you know, think through product design in a way that’s within the framework of the customers.

Quincy Edmund Lee

Desired solution space and then push the product envelope all the way out out to the point of monetization. Um, and then ah yeah, validate validate validate get lots of feedback from customers.

James McWalter

And absolutely and and so then you you do start building. You have this validation like what was that first mv he looked like.

Quincy Edmund Lee

Yeah, so we given we developed a brand new product. You know brand new high power battery. We had to do a fair bit of you know r and d to build it and you know brand new engineering to build it. So um, the first and Mvp we had that we were charging cars off was like a lab demonstrator of our battery. Um, it was you know a small I guess like 60 Kilowatt Twenty Kilowatt hour battery it it didn’t even have an inverter attached to it. It was just something to get us operational and prove that prove the thesis that we could make high power batteries that wouldn’t burn up. When you discharge a huge amount of power. There’s a ton of amperage amperage creates heat heat destroys batteries. So we had to solve a lot of thermal fluidic engineering problems to solve it first. Um, and you know we just did an engineering development front runner as an Mvp um, but we slowly developed that and matrod it to what we have now which is. 120 unit. That’s operational and testing cars and charging cars in our lab. That’s our go-tomarket product. That’s our Mvp. We’re deploying that with customers later this year after certification and with another customer that we’re gonna announce soon that is. Buying a pre-certification unit for a demonstration. Um, so you know ultimately we we pushed the envelope. We got the the product operational and um, you know there at this point just thinking about finishing certification and scaling up.

James McWalter

So yeah, not super super exciting time and just on the certification point you know one of the in in the startup world. You know we like we like to move fast ideally not break too many things but you know there’s definitely like a mindset of try to. Ah, trying a lot of things seeing what works but whenever you’re touching atoms especially things that are you know charging multi-thousand pound vehicles down down roads and and and related and you’re using different types of chemistry. You start to have to adjust for the risk of those things and and kind of deal with certification bodies and so on. You found that process and um I guess you know are there ways that government can work better but especially kind of small emergence startups for figuring those kind of things out. So.

Quincy Edmund Lee

Yeah I think um I mean it’s It’s like any sort of adamtom engineering or adamm entrepreneurship versus the world of bits and software is just going to be extremely hard. Our our approach is a hybrid of both. We do a lot of ah engineering and product development in the world of atoms and. You know with our high power battery system and then also in the world of software as it pertains to developing those solutions. It’s just time you need to add to your roadmap as it pertains to certifying those solutions. It’s even more time you need to add to your roadmap I would recommend like any entrepreneur going through certification do like. Early calls with certification bodies and and developed like the framework and the scaffolding of all the specific milestones along the way to completion of certification as early in the process as you can. Um I think ah I honestly pretty I’m pretty like not optimistic I guess around. Possible improvements. It’s just a slow encumbersome process. It’s with you know, fairly bureaucratic companies that are not really incentivized to move fast. The government has done and I guess the certification bodies have done what they need to do at this point which is create standardization processes and standardized certification requirements. Um. Honestly I think you know there’s actually probably a. There’s probably a business play in expedite math process I’m sure you can make a lot of money I know I would have paid more money to to help us go through it faster. But yeah I think you know the certification bodies They basically had done what they need to do I Think now at this point we need to just.

James McWalter

Right.

Quincy Edmund Lee

Push more companies through the process quicker um governments can probably help more broadly with standardizing utility interconnection I think this is this is like important for all distributed energy resources which fast charging is actually a distributed and energy resource. Um. But any time you’re interconnecting with the utility. It’s really Slow. It’s not necessarily clearly laid out um and having like a standardized process for permitting and interconnection. That’s more expeditious is is going to be hugely valuable for the broader energy. Industry because basically that’s what sets our time constant of energy transfer. You know like we’re going from internal combustion type technologies to clean energy technologies the rate of change between those 2 things is dictated by this fundamental interconnection Piece. So It’s It’s super valuable for the broader industry to do that I think.

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James McWalter

Yeah, and I guess for the listener you it’s pretty much a hodgepodge of systems United States like at the state level at the multi-state. What’s called an iso level these are different types of what are called interconnection queues and and formats depending on how much energy you’re trying to put on or even sometimes take off the grid. And ah to give people one one idea like if you’re trying to build a large-scale project that generates a lot of electricity onto the grid in somewhere like Pennsylvania that’s taking offward of 3 years now to actually get get the process kind of through interconnection queues and so on. Um, so it’s absolutely like a massive problem and. And of a couple startups who are kind of working on like the information around the timing of these things but we absolutely do need you know some of the step in and at the kind of government and policy level and sometimes I do think it’s like you know can we have a whip around of a few million across a lot a cartel of startups and and other kind of companies to try to fund some of the speed and interconnection. But. Having looked into it a little bit. It’s actually less of a money and resource point. Well, it’s definitely a resource point of view but our issue but less of a money issue is just they’ve never had this such pressure to build so much as the last five years and you know has produced and that’s getting you know, increasing ever faster and just the hiring plans at these entities. Just are not ready for this. You know the massive increase in physical assets that are going to hit the grid.

Quincy Edmund Lee

Yeah, yeah, yeah, that’s that’s exactly right? I Think if anybody has a good idea for a interconnection as a service business model with high-gross Margins I would invest in that because honestly, if you’re able to like deeply integrate with utilities around the the nation and help them solve this problem. They’d be Happy. They might even pay you too. You know like there’s there’s definitely a problem there that needs a solution and there’s probably ah, a good clean solution that can make a lot of money doing it.

James McWalter

Ah, see the podcast about my own startup from last week which is such upon some of that for the listener. Um, cool and so in terms of the so you mentioned you were kind of signing contracts with a couple different customers. Um, who’s the kind of ideal customer is it the car manufacturer who’s looking for their own network. Is it. You know I guess these kind of more emergent ev infrastructure focus companies some of which have gone public via spac over the last couple of years is is it a different type of entity right.

Quincy Edmund Lee

Yeah that’s that’s a really interesting question. So um, as you know as we’ve seen it so far the automotive ilims haven’t really doubled down dael that much. They’ve kind of like half doubled down on adding infrastructure for the sale of their cars. Vw obviously being the leader there out of the obligation with the diesel gates scandal they funded electrify America I put like $2000000000 or something like that in that company. Um I think I think automotive oils that do not do that are going to be in a world of hurt and honestly I think tesla’s. Going to continue to kind of run the show until auto automotive williams take the charge the fast charging the public fast charging infrastructure component more seriously. Um, you know and and not to say they’re not thinking about it. But I think they just they need to think about it as part of their rdroadmap and product development roadmap. Um, because it is a clear leader for vehicle sales as tesla demonstrated basically. But now you know we haven’t we haven’t really made a whole lot of headway with automotive volumes. Our ideal customer is you know a grid constrained high value property. That’s trying to add fast charging as an a minute the augmentation so that can take a variety different fan that can be a seat a cpo like some of the charging companies that have sped that can be charging point operators sorry to use acronyms um, that can be a convenience store. That’s you know, trying to add. Charging grief fill to their property to keep driving foot track to buy their snacks um or it can be a utility. That’s you know, putting an infrastructure It can be a fleet that’s you know, charging their vehicles but then opening up the charging station at night. Um, for public usage ah or during the day for public usage for that matter so any of those you know customer archetypes actually are good fits for our technology. Um they they they use the technology to lower demand charge costs. They use it to defer or entirely avoid infrastructure upgrades and interconnection timelines. While at the same time adding premium a premium fast charging experience for their customer base.

James McWalter

Yeah it’s so interesting we’ve we’ve had a few folks who are looking at the kind of ev um, infrastructure space over the last on the podcast over the last few months and I guess the introduction of different types of business models to interact with the charging is one of the kind of really interesting pieces. And you mentioned one of them which is the idea of yeah fast casual dining or restaurants or you know convenience stores where people you know can set the the car and forget it for the fifteen twenty minutes whatever it may may take um and so yeah, so I guess. Speaking to that. Let’s say I did you know you know when your product is kind of deployed in the field later this year and I drive up to it and let’s say it’s at a convenience store for the sake of argument. What’s the kind of experience for me versus the status quo from using your product.

Quincy Edmund Lee

Yeah, so the world that we envision is a world filled with ubiquitous, highly findable. Ah high quality fast charging. You know we we need to as an industry think of this as a critical piece of national infrastructure and we need to drastically increase the availability and the quality of the fast charging experience. And by quality I’m using that as a proxy word to really indicate uptime I come from the aerospace industry and while at Spacex I worked in the telecommunication industry on the space starlink constellation and both those industries have you know success criteria measured in the 99.99 percent levels um and if you think about gas stations I mean it’s fairly rare. You go to a gas station and they’re not operational and like we as an industry need to be pushing the uptime availability quality of fast charging accordingly. Um, so your customer experience would be you. You know, discover electricera enabled station. Um, that’s in your neighborhood or along your route and you go to it and you you plug in and you walk away and you come back 15 to 20 minutes later with you know, 70% state of charge and then you go on your merry way and while you’re there, you spent. Ah, good share of wallet on buying a latte from Starbucks or a Taco From Taco Bell or whatever it is. You know? Um, but yeah you, you know? Honestly, we don’t really aim to be like a in your face. Front in brand we think of ourselves as the stripe of power management services for the industry. We just want to be like underlining technology the energy brand for the industry. We don’t care about branding ourselves or being front and center. So and that’s that’s intentional and that’s like part and parcel of our business model and go-to-mark strategy. But um. So honestly to answer your your question. You wouldn’t even know you were charging in a fast charging station and enabled by electric era if I had my way you know like we you would just be showing up and charging in a great in a great location on a great with a great experience.

James McWalter

And I guess just moving from a world with ubiquitous Well not even ubiquitous, but a lot of slow chargers to ubiquitous. Everything’s a fast charger right is the the kind of said.

Quincy Edmund Lee

Yeah, yeah, you know I think um, it’s definitely going to be a hybrid world. You know I opportunistically charge when I can like of course and I think most people will um so that leaves a lot of room for level one and level 2 charging which are as you mentioned slow charging. For the listener. But yeah I just think we need a lot more fast charging even for the tesla network I’m like man I wish I could charge my tesla at like a lot more locations. It’s like hard to find the stations. They’re all over the place and you actually have to fill up quite a lot because there’s just not a whole lot of mileage and a battery like that’s just the fundamental truth of it even for a 300 Mile ranged car. Um, so yeah I think I think if we really want this industry to take off. We need a lot more fast charging.

25:31.26

James McWalter

No absolutely and and you mentioned a moment ago. This idea that ev infrastructure is if I’m now but becoming a critical piece of national infrastructure and we actually had a fairly large infrastructure bill passed last year through congress is one of the the bill that did pass not the other bill that that. Back badder that that failed um but it had a fairly so large amount of money earmarked for building on ebch charging network I guess what? what are your kind of thoughts on how that will impact you know the grow to evev infrastructure um is the money set up in a way that’s. Yeah, optimal. Um, whether there you know any changes you would want to make and how does it get does it affect electric era.

Quincy Edmund Lee

Yeah, um, well yeah, first off shout out to the joint office the department of energy and department of transportation. They actually I think did a really good job of structuring that bill I think that they were really intelligent to allocate the majority of that capital to the development of alternative fuel. Corridors to establish fast charging on you know, transit routes for on routee. Sorry for corridor charging the bill is yeah you know there’s 5000000000 going to to the development of those alternative fuel corridors the the way that they specified the requirements actually have a lot of really good things in it 1 is that. There. There’s a mandate for fast charging. It’s you know the average station that they propose is for one fifty Kw charging stations which is like a lot actually um, the other thing that they they did well was they actually put language in there that basically. Fires slash recommends that utilities and construction agencies develop standard processes for interconnecting fast charging. So if we can use that as a framework for fast charging. It’s probably applicable to other distributed energy resources which solves that interconnection problem. We talked about earlier. Um I think. You know if I had my way I would say hey 1 recommendation recommendation I would make is you know push for um, monitor monitoring monitorable and measurable metrics of success around station interconnection timelines and station uptime availability. That are pretty good and high and that that didn use that as an economic forcing function to award the revenue or the the funding in that bill to people that are meeting that like high bar of criteria um, those you know like life’s all about of incentives. And I think that is like a really important incentive that we put into the industry and we specifically fund companies that have like high quality stations.

James McWalter

Oh that that that makes a ton of sense and I think it’s I think the best kind of government policy is when you do have those experts that you mentioned from you know department of transport and so on department of energy etc. You know working hand in hand with lawmakers and policymakers right? because the nature of any. Yeah Multibillion Dollar bill is that there’s going to be a lot of opinions in there and if you can get something that’s 75% good like you’ve done an amazing job right? And like if it’s if it’s directionally correct and I agree like in this case they seem to have done a kind of a bang up job and. I think it’s ah it’s a good framework for again. Some of the other bills that are pretty stalled or stopped completely but might potentially get get through over the next few years um and I guess you know thinking about yeah electric era over the next couple of years like what’s the kind of Target. Kind of your two year three from now.

Quincy Edmund Lee

Yeah, two years out we want to be deploying around 10 to 30 in a battery enabled fast charging stations a month we’re really yeah, like we’re really thinking. Okay, how do we scale this up as quickly as we can. How do we design the asset to be mass manufacturable and low cost.

James McWalter

Amazing.

Quincy Edmund Lee

How do we design the interconnection process to be quote Unquote mass manufactureurable and low cost and then how do we attach ourselves to the vast majority of vv fastch charging stations that are being installed over the next 5 to 10 years. So It’s for us. It’s you know the the products. Products here. The product’s working. You know we’re charging cars. The software is working. Um, we’re we’re pushing through certification and then scaling up Quickly. You know like that’s our next mandate. Um, you know we we really feel strongly about but ahholding that customer promise like we need to unblock power constraints so that we can add fast charging. So that people can participate in the fast the energy transition The vehicle electrification Energy transition. Um, so that’s what we’re doing.. That’s what we’re focused on and we’d love to chat with you about your application. It’s It’s very likely we can drastically decrease for anybody listening your interconnection timelines and you know. Deployment timelines toward your fast charging station and lower the cost for you and provide a better experience even during high periods of demand and usage. So yeah, give give us a give us a ring.

James McWalter

Yeah, and absolutely and we’ll we’ll put some contact details in in the show notes as well and I guess then you know in terms of yourself. You know you as you mentioned you you left Spacex looking at your your bio I think Spacex was your you know main company you worked out coming out of university and then you kind of went from. Ah, company. That’s fairly large I think at this stage you know, even though it’s so quote unquote startup ah to to founding something yourself. Um, what I guess have you learned most about or surprised you as part of that transition from you know someone managing a team within Spacex to you know, being the person. Ah the you know the founder the Ceo who has to.

Quincy Edmund Lee

Oh man where to start? Yeah I mean I mean space Spacex really put put me through the ringer. That’s a great company like what a great place to work and and learn. But you know the skills I acquire were really just engineering skills and of course as the Ceo you’re doing a lot more than just engineering. It’s actually rare that I do engineering you know like I get like I get to like boss people around and say hey that products should do this or that or like what about this approach but I’m not really putting pin to paper that that much in preventing canops anymore. So.

Quincy Edmund Lee

You know, growing the Ceo skills understanding the investment cycle process how to acquire funding how to market your company how to develop like a really strong corporate strategy and business model how to market and sell to customers. All those things were like major growth variables for me like very painful growth variables that I had to learn very quickly. Um, but ah yeah I think you know also the the really challenging part about starting a company is you don’t have any sort of embedded like cultural infrastructure.

Quincy Edmund Lee

You have to and you have to build that yourself like if you if you show up and you work for Apple you’re working at a company that has like literally 4 decades or 3 decades worth of like cultural heritage or at Spacex these yeah the Apple way or Spacex. It’s like everybody’s like drinking the coolid and saying hey we’re going to Mars you know and.

James McWalter

And the Apple way.

Quincy Edmund Lee

And literally they will go to Mars that’s definitely going to happen so that cultural infrastructure is not there at at a startup as as you you yourself know James you got build it and as its Ceo you have to manage morale and culture and cultural alignment and like bring in really key hires that facilitate that um and that like kind of. World building process is very challenging and something that um taught me a lot over the last eighteen months since I left Spacex.

James McWalter

Yes, I actually Spen to 8 years at a company a fintech company back in the day before we call ourselves a fintech company. We’re financial services back then but um I think there’s a I think a lot of founders will either. You know have a reactive or you know i. I guess proactive kind of ah adoption of their previous company’s culture in some way now of course as you said like as you add people, you know everyone’s kind of the all that early team even the type of product you’re building these all affect kind of culture over the first you know year or 2 um, but it is absolutely a process which I think the more. Conscious we can be of what we’re building and how we’re building it the better because one of like a mentor of mine was like if you ah you know if you like are in the room and you a piece of paper drops on the ground and you don’t pick that up and somebody sees that like those little elements all build in a way that like kind of affects. You know the actual. Culture out the company because especially in the early days basically culture is often just a mirroring of what the founders and the you know the first 5 employees are doing and you know and I think people sometimes want to shy away from that a little bit because it’s like oh we didn’t write down our culture document I was like no, it’s like your actual actions coupled with that later process of going through a culture document and so on um, is what actually. Makes people do the things that they should do in the right way from the the point of view of culture down the road and.

Quincy Edmund Lee

Yeah, well well said that that makes a lot of sense That’s right on. Um, yeah, and and that’s that’s a big challenge and I think like pretty much no first time T would have experience doing so good luck. Anybody listening.

James McWalter

Yeah, no, Absolutely we and and when you make the mistakes along the way. Um, yeah, and you mentioned you had a few of these kind of growth trajectories that you’re kind of working on for yourself around sales. All those kind of things you need like particular you know heuristics or or structures for. Fast learning in areas that maybe you’re kind of have less background experience in.

Quincy Edmund Lee

Yeah I mean I think ah I’m I’m pretty biased here but I would say try to go down to the axiomatic truths of whatever you’re trying to learn and explain from the bottom up higher order behavior that is emergent and observable. Um. So like don’t try to explain and inform mental models around the higher order behavior start much lower than that and learn like the first principles or the axiomatic truths of whatever you’re trying to learn and then form and then think for yourself and try to actually like develop you know your own mental model with those in mind around. How the system or process or behavior should work. Um, that second party super key because that’s actually like when you put the that’s when you embed the and information in your neuroplasticity of your brain. Um, so it’s it’s really about like. Learning the lowest level things and then trying to use them on a daily basis and then they’re just imbued into you and then it’s like then you can kind of churn it from an active prefrontal cortex type activity to something that’s more passive and more natural.

James McWalter

I Yeah no I Love I Love that I think that’s like a really kind of fascinating way of like adopting new knowledge figuring it Out. Um I think one of the other like somewhat similar to certain extent but just taking a step out and like looking at yourself from the outside not in a kind of judgmental way but just kind of noticing things. You know I think there’s a lot of um. You know intentionality as productivity elements. But there’s definitely something there where it’s like oh if I notice that I’m doing something like that doesn’t mean necessarily will change it but at least like I’ll have a better ah understanding what I’m doing and then I can you know, maybe sometimes even back out the framework for what is what is kind of leading to that behavior. You know, positive or negative. And again, especially when you are trying to build a company and you know initially you know your co-founders early employees then later investors then you know later as you get bigger. The media all these kind of things. Um, you know you have to kind of craft these different ways of navigating how you’re expressing yourself and communicating because if you’re not. Kind of noticing that like definitely other people are and yeah sometimes I think we can get get caught up in I Guess the wrong things as part of that process.

Quincy Edmund Lee

Yeah I think I think a lot of people um would benefit with the realization that everybody has their own unique worldview and if you can understand how they see the world and speak to them through that ocular view in a. And a language you know and a framework and in ah with a world experiences that they understand then communicating ideas whether it’s to the media or a customer or an investor or an employee or a future employee become much easier so you know just acknowledging people want to you know, see things in their own specific way and trying to mirror that and. And give them the information. That’s most digestible to them in a way that’s most digestible is a really big win.

James McWalter

So hunt was I couldn’t agree more Quincy. It’s been great I’ve really enjoyed the conversation. Um, before we finish up is there anything I should have asked you about but did not so.

Quincy Edmund Lee

Um, yeah I think ah you know our companies scaling up at this point we’re were’re adding a lot of customers to our pipeline and we’d love to chat with you about your application and get you in our queue, we’re got a finite finite demand or finite supply of of ah batteries and. You know we’re we’re lining up our our partners for the next you know 6 to twelve months so now’s the now’s the time to to chat with us and and really see how we can um, best help you in your expansion efforts. You know we’re we’re also hiring. We’re always hiring an electric era where we have a super hard. High barrier of entry into the company. We really want excellent people. Um, and you know most likely the listeners out there fit that mold so come to chat with us and you know we love. We love. We’d love to chat with you.

James McWalter

Amazing and we’ll include on those careers page and and other links in the show notes I Thank you Quincy Edmund Lee.

Quincy Edmund Lee

Take care James nice to talk.