Paces demo day- E112

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 everybody this is going to be a bit of a shorter episode and just me this time. Basically I want to take an update everybody on how things are but going with my startup called paces. Basic. Someone would let everybody know how things has been going when my startup paces and to kind of fill you in on how things are going to go with the podcast for the next few weeks we’re going to have a couple changes and then we’ll be back to normal starting in October. Um, first of all in terms of um. Paces so we’ve been going through what’s called wide combinator for the last couple of months and started beginning of June and in the next couple of days around the time you’re going to hear this podcast with something called demo day and so for those who aren’t aware. Combinator is this program. 1 of the first accelerators for startups and has you know a pretty great reputation for being the startup accelerator which airbnb and Dropbox and stripe and companies of that it came out of now. There’s not a ton of climate companies that have come through I see. Um, that seemed to have changed a couple years ago although the current batch doesn’t have that many at all. But I’d long wanted to get into Yc and it actually tried with 4 previous ideas to get into Yc and applied and was never even able to get an interview whereas this time we not only got an interview but we also got in.

And haven’t gone through Yc I think that there are certain things that people should know. Um, overall the experience has been amazing. I’m very very happy. We did it I would say though that it’s more valuable to people earlier in their career or people who have less experience starting. Or working at early stage startups. You know I’m 38 this week and so yeah, I’ve made a lot of mistakes I’ve been involved in a lot of failed efforts and a lot of the lessons that Yc gives on a very frequent basis are the kind of things that you learn after making a lot of mistakes. Ah. And so what they’re trying to do is have you as you know early stage founder not make those mistakes or make them faster so that you can learn from them and move on to the next thing. So for me if I had done my c in my twenty s I think it would have been even more profoundly positive. Then what it is now that yeah a lot of the kind of advice is something that I kind of figured out after making all the mistakes myself, um, now having said that I think that the number 1 thing that’s great about y c and I’ve said to everybody who’s asked me about it is the absolute obsession with getting to revenue interaction. You know there’s a lot of. Silicon Valley type startup perception where everybody just talks about their valuation or the number of employees that they have and those are not important things but those should just be proxies for is your company solving the problem enough to make reasonable revenue and ideally exploding revenue.

Where you’re just dramatically going up in terms of the amount of money you’re making and that is why c’s focus. They make you really think through what it means to have a company and a company solves a problem and makes money doing so and so we got you know everybody at yc has a um. Yeah, this kind of smaller group because there’s over a hundred companies in it I think it’s closer to 200 in our batch but there was closer to 400 in the previous match. So you’re slightly smaller than previous batches but still larger than maybe what wise he was five years ago and we’re in a with a group of about 10 companies and every week or every two weeks we have to. Talk about how we’ve done from mostly from revenue point of view and then explain how we’re going to hit specific targets in the knock next two weeks and the Wei Partners who you’re assigned to um, yeah, they never tell you what to do but they say hey could you be more ambitious or is it reasonable. You’ll get to that point. Um, why not go even further and those are ways of just adding a bit of competition and adding a bit of um, you know I guess friendly. You know, friendly pressure to you know really excel because the big thing do I see is it’s only three months and really it’s like can you get to a kind of regular ah can you get to a fast iterative cycle so that you’re building launching getting revenue or getting feedback to direct you towards revenue as quickly as possible. Um, so all that part has been great. Um.

We started off during covid there was no um in-person ycy whatsoever previously that Weisi had always been in San Francisco so people would fly there for a few months um this time it’s a bit of a hybrid so it started off somewhat in person with this retreat in San Francisco and then um, some major cities like New York or we’re based have regular meetups so it’s good to kind of chat to otherwise he partners or founders even that are in your space. 1 big thing I’ve noticed is that a lot of the startups in yc pivot quite a bit and so. Pivot is you are working on an idea and you can either do a hard pivot where you just start working on something completely different or you can do? What’s called a soft pivot where you know you’re basically working ah in the summer space or you’re taking a different approach to a similar problem. It’s very surprising to me the number of hard pivots I see um and so far. Because a lot of the people doing the hard pivot are honestly doing them fairly late into the program. It’s very hard to know whether they’ll be successful or not um, in our case, we definitely did not do any sort of hard or even much of a soft pivot. We did slightly change the direction of our product development though and by doing so we actually went from. Having lots of trials and nobody willing to become a paying customer to our first three pain customers and we did this by basically changing whether we were a map forward interface to something a little bit different and by going to a slightly different approach. Um, yeah, we the first 3 companies.

Ah, that trialed that new approach all closed as customers and now we’re working through trials with another half dozen and so it’s it’s been really, really exciting to kind of see after lot of building for a few months actual paying customers getting that real feedback from somebody who’s willing to give you hard earned money and we’re also not you know a. Super cheap $20 a month product product. You know we are a for figureer monk product and so having people willing to put over their you know hard earned money and their company money is incredibly validating. Um, and so yeah, so the other big thing for us is that we’re trying to show that our approach. Will not just support so developers when they’re trying to find the best places to build projects but will support any sort of green infrastructure developer whether that’s utility storage wind electric vehicle charging stations all the way through to things that are more climate. Neutral. But. Let’s say a renewable energy-based carbon neutral data center and so um, we have multiple verticals now trialing and the big thing for us is kind of working through those trials making sure the product is as good for those other verticals as it is for those initial solar customers and really showing that our approach makes sense. And may not right? You know one of the benefits of being small and nimble is that you’re learning from the market and so we have a hypothesis about what the market needs and we’ll see if it works and we should know pretty quickly because we’re very very fast. 1 big thing in terms of.

How fast we’ve been able to move is that throughout Yc the only 2 full time people are my cofounder Charles and I you’ll have heard charles on a previous episode a couple weeks ago a couple months ago and basically we are moving very fast and so um. We do our growth meeting on a Monday which I lead. It’s just the 2 of us and then we do a product meeting on a Tuesday morning which he leads and it’s just the 2 of us and in the growth meeting. We’re like okay you know we’re going to add this amount of revenue in the next week not months or quarter but like week. Um, and to do that we need this many demos. We need this many trial starts. We need this many trial closes and then on the product meeting the following day um we’re basically ideating and saying okay, what are the things that we would need to do from a product point of view to close existing trials or to attract more people trialing. And 1 really good example is there might be a feature that a customer will be willing to sign a contract if that feature is in the product and so 2 of our first 3 customers. We basically have contracts that structure and say hey if you sign today we commit that the product you need or the extra. You need will be in product within let’s say two weeks otherwise you get out of the contract and a lot of our product development is based around you know commitments that the customer has made to us from a revenue point of view and then commitments we make back to the customer in terms of shipping product that meets our need and so this has worked really well for us. Um.

We have hit the point where things are not super scalable. Um, we have some great interns helping paid interns of course startup shows paid interns helping with things around data collection as well as a little bit of sales research and then we also have a couple of ah contractors software engineers helping Charles with some aspects of. Ah, data integration. Well, we definitely hit the point where we are really struggling to keep up with interest which is two full-time people and so now we are heads down hiring. We’re hiring our first 2 ah full-time people. Um one is a data engineer and 1 is a software engineer um, those would both be founding engineers. With appropriate compensation from an equity and um salary point of view and so if anybody’s listening to this and knows anybody who are a software or data engineer who would love to be the founding on the founding team of a company really working hard on climate change like paces. Um, please reach out I’m going to include my email address on the show notes of this particular podcast would love to chat to people and we’re really really pushing to have those hires done in the next month or so and you know we have a very very high bar in terms of the the kind of level of talent and cultural fish. Um, but it’s also very very important to us that people bring you know they’re true and full selves to the office and so on because we have our own blind spots and we’re definitely trying to build a company that has um you know a huge amount of diversity throughout. It.

The thing I guess is ah I kind of touch upon a little bit but on the product side. Um, yeah, one of the things we really realized and we we knew this kind of going in and starting paces but the importance of data and so as part of the inflation reduction act. Um, there are concepts like things called energy communities where identifying. Places where energy communities exist as per the text of the bill has not become very very valuable to the types of customers that we talk to and so we are rapidly integrating that data probably it’ll be ready in the product by the time this podcast comes out and not just this but other datasets that are very very important things that are related to the grid like interconnection data. Ah, things that are related to zoning that we’ve been collecting for a few months but we need to do even greater job to have a world-class dataset in that front. So for us data collection being just the best source of data to identify the best place to build projects is absolutely their our real focus over the next few months um we continue to build out the software in the interface and improve on that. But basically if we have the best data we feel like we’ll have amazing service and product for the customers that we try to serve and that builds us also a competitive mode over time. Ah, the other thing I want to talk about is raising capital so we had raised as. People probably heard. We’d raised 7 figures of funding as part of our preceded in April of 2022 so you know four or five months ago and that’s the first time I’d ever raised money myself. Um I’ve written a pretty lengthy article on my own blog about that process.

Um, you know it’s a massive numbers to game talk to you reach out to hundreds and hundreds of people to get sixty seventy meetings and to close 10 or 12 investors and I would say we probably had a pretty easy time of it relative to a lot of folks who try for a very long time and certainly a ways your time than. I’d experience as part of other founding teams raising money even though I wasn’t the 1 directly doing the raising I’d probably been part of teams that had struggled to get anywhere as close to what we ended up doing and I put that down to a couple of factors. First of all I think you know we have a really really strong team on the technical side through my cofounder Charles. Um, you know former. Ah, Ai guy out of Facebook ah, but also I think we’ve really identified the problem and have a kind of a wedge into something that’s going to be a very very large industry in the next few years and I think that if I had 1 bit of advice and actually give this advice to a few friends and and even family members in my close circle. About what type of startup to build It’s try to find a market that is just starting to explode and just like try to grab a whole of that market. It’s so much easier than trying to summit a market out of nowhere or to you know, try to build something in a market that’s static or shrinking um like for us. You know, even if we had 100% market share. Um, we’d have a so solid size company. But what’s great is that the market share like the market’s going to double next year and double or the next over the next couple years and then double again and then double again. Um, and so that’s very very exciting because that allows us to just.

Do a great job and execute well but we know more customers are going to continue to flood in and you know have problems that we can potentially solve for them. Um, and so yeah, back to raising capital. Um, so coming up to the end of Ycombinator, there’s something called demo day and during demo day. You basically give a ah 1 minuteut pitch. About your company and there’s this whole interface where accredited investors and I think there’s usually a couple thousand of them can watch the pitch and hit the button that says they want to potentially invest and that means I’ll basically set up a meeting with the with the founding team. In this case, it would be with me. Um, one of the dirty secrets that a friend of mine who’d gone through y combinator last year told me was ideally you shouldn’t you should have all your money raised before demo day try to have your meetings in the couple weeks before on the lead up to demo day close those if you can at all and then demo day doesn’t re have of a ton of pressure on it. Um.

Luckily and I think there’s a couple of factors for this and we were able to close our entire round before demo day. So we’re about ten days from demo day right now we closed another round of funding just in the last week and there’s a couple of factors for why I think we were able to close so fast I mean first of all just to mention. We had about 90 investor meetings booked and all except 5 were inbound. Um I e I was getting an email from an investor introducing themselves saying hey like like what you guys are doing would like to talk. This is very different to our preet where I was doing a ton of outbound. Um, the main reason being that we’re in y combinator and there’s a y combinator directory that shows all the companies in the current batch and people can look that up and we’re on that of course, why were we getting that because I talked to other y combinator founders and they didn’t they got a lot of inbound interest but maybe not quite as much. Ah, generally think it’s just because there’s not that many climate companies in the current batch. Um, so there’s I believe there’s 6 or 7 out of you know a couple hundred companies as I said um and there’d been a way higher percentage in previous batches and so as more and more money goes towards climate tech. They’re looking for high quality startups that are solving problems in that space and so I think we’re just quite lucky to be right place right? time and not honestly have a lot of competition in terms of climate companies solving big problems in the climate space and so I think and that was honestly a lot of the inbound emails. We got refer to that directly. So I think if you are.

I’m interested in getting the y combinator. Um I’m not saying it’ll make it easier to get in. But if you are a climate company and y combinator. Um, our recent experience would indicate that raising capital as long as you know you do all the other things right? Um, might be slightly easier than other companies who are maybe not in the climate space. Um. And so yeah, so we um, we raised boat from a combination of existing investors increasing their investment as well as a couple 2 new investors coming in. Um, we actually closed around about three days after starting it which is very exciting and then we canceled most of those 90 meetings. We kept some of those meetings with like very very. High levelvel or or high tier vcs who might be interesting people to build relationships with for subsequent capital raises down the road. Um, but the big thing for us now is to kind of get through a lot of the meetings that have been booked and get back to work and for us get back to work again means getting new customers. Making the customers. We already have incredibly happy. Um, yeah, know making charging people money make generating revenue expanding the product to have a really really great moat and then between all that also obviously making hires building up the team. Um, so yeah, so over the next twelve months um we hope to hit our series a milestones. Um. Talked to a few investors now about what they think of as series a milestones and that ranges from a million dollars in recurring revenue per year. Um, all the way to no hard milestones but things like we want to see a replicable sales motion. We want to see the average contract size increasing. Yeah great team. Some people even.

Say that you should have good advisors so we take a note of all those things but we have our own internal idea of what we want to achieve um that would make us ready from our perspective to be series. Ah a investable um and our internal goals are probably much more ambitious than what an investor would want and that’s how we generally try to treat things we want to be better than what the market says. So that gives us a really really strong position when we do things like rate capital. So um, we’re not going to hire 30 people or anything like a lot of startups do who are well-capitalized like we are as say we’re going to hire probably 3 more full-time people by the end of this calendar year and then maybe another 5 or 6 ah, on the lead up into our series a ah most of those would be technical folks. We might have 1 marketing person I’m going to do all the company sales until we’re at least half a million dollars in annual revenue. It’s very very important I think for the founders to do most of the founder that sales or to do the founder that sales until you get to a decent amount of revenue. Because then you can basically develop a sales playbook and hand that off to you know salespeople that you hire in? Um, but I don’t think you should do that too early and that’s generally the advice. We’ve heard from bode Yc and elsewhere. Um, and yeah and in terms of the podcast. Um, you know we’re going into September when there’s a few different events happening. Ah, re plus which is this very very large renewable energy conference. Um, that will be ash as part of um behalf of paces so we’ll be at that I’m actually going to try to do a live interview while I’m there. We’ll see how that goes that’s be something a little bit different for the podcast. That’s the third week of September um I russset.

Actually also going to take a few weeks off um we’ve basically been on you know, weekly podcasts for 32 years outside of yeah, the occasional break around new year’s um, but what everything else that’s going on in startup. Um, basically we’re a little bit behind in terms of getting guest booked and so on so we’re going to take a bit of a break for a couple of weeks um and so probably the next podcast you’ll hear will be that live one at a plus and then after that we’ll get into a more regular cadence again with some amazing guests. So if you I guess my big ask is if you are somebody who is interested in. You know, working at a company like like pace’s you are a software data engineer. Or you know somebody. Um, we would love to hear from you and have a conversation and see if there might be a fish and yeah have a great end of your summer and looking forward to speaking to you again in a few weeks

Replacing Plastics with Algae – E111

Great to chat with Kim Pendergrass, Co-Founder of Algeon Materials, a biotech materials start-up on a mission to fight climate change and reduce plastic pollution by creating plastic alternatives for leading brands! We discussed the properties of algae,  the importance of researching customers in the early days of the start-up, product validation, balancing biodegradability against material longevity and more!

https://carbotnic.com/algeon

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 Kim Pendergrass co-founder at Algeon Materials welcome to the podcast Kim.

Kim Pendergrass

Hi James thanks for having me today I’m so excited to be here.

James McWalter

to start, Could you tell us a little bit about Algeon materials.

Kim Pendergrass

Yeah, happy to it’s one of my favorite subjects. So algoen materials is an advanced materials Biotech startup So we’re on a mission to fight climate change and reduce plastic pollution and we see ourselves doing this specifically by creating sustainable and biodegradable plastics.

James McWalter

The future.

Kim Pendergrass

Made from kelp.

James McWalter

Super cool and what drove the initial decision for Algeon.

Kim Pendergrass

Yeah, you know, like like most things over the last few years the pandemic was really a tipping point. So I’m the co-founder rose fine is my other co-founder. She’s honestly one of the smartest people I’ve ever met, but our story plate takes back when we were doing our Mba at. Ah, you see San Diego so we’re on zoome it’s terrible and we’re talking to each other about this and like everyone else we just have tons and tons of Amazon packages coming to our door because you don’t really want to go to the store right? and then on the flip side. You know you want to support those local restaurants I’m a big thai food person.

Kim Pendergrass

But I felt bad because every time I would you know get an order of panancurry. It comes with like £3 of plastic you know with all of a little containers and all all the plastic goods so we got to talking um and we’re like you know what there has to be a better way. Okay, so we have people working on single-use plastics. There’s a lot of legislation.

James McWalter

Right.

Kim Pendergrass

Trying to ah ban them or change them. But what about some of these limited life plastics and then on the flip side because we both lived in San Diego walking the beach is a great pastime I’m not personally a surfer but I do know a lot of surfers and seaweed is just always rolling up on the beaches or touching you. And so we started thinking about it. We’re like hey could this be a good material I grew up in the pacific northwest I’m originally from Portland Oregon and you know we take our recycling very serious up there and I grew up using things like cornforks I’m sure you’ve probably used one too. They’re not very delightful. They usually break.

James McWalter

Sure.

Kim Pendergrass

Break cuff in your mouth and so we got we got to thinking you we’re like hey you know what we make bioplastics out of other you know materials what about seaweed and so here’s the funny story. So here’s actually how we got her start imagine us pulling seaweed off the beaches of San Diego it’s just a disaster in the car. Um, and then getting it into a kitchen environment which is kind of like a lab if you think about it ruining some very good coffee grinders trying to grind it up and really seeing if we can make that first batch a plastic in the kitchen and we found out that we could and that was super exciting. Um, and so with that we started getting off to the races. And yeah, so that that that’s kind of the origin story long and short version of it.

James McWalter

Yeah, and so from the kind of moment you were having these conversations. Um, which your cofounder rose all the way through to like getting to you’re boiling up seaweed and and trying to process it in in a home kitchen. Ah how long was that and. You know when I guess did you say? Okay, we’re actually going to get our hands dirty on this.

Kim Pendergrass

You know I I know I know so many smart people who like have a lot of great ideas and they just don’t take any action. They spend all their time you know sitting around and strategizing and thinking of amazing solutions that never go into testing or execution. And I would say 1 thing that Rose and I really both have is a bias for action and so as soon as we started talking about it and we were like you know I I think I think there’s something here. We immediately jumped in and started trying and testing things out. Um I’m a big proponent that you know you learn a lot from failure and so a lot of. Little tiny pivots and failure early on were really important to us and for us, you know, just making sure it was technically possible and especially for somebody like me who doesn’t have a technical background in this. Um, that was really exciting and rewarding and it really gave us the confidence to move forward and can. Continue to pull in more subject matter experts in this field to help us grow.

James McWalter

And so we were kind of like you know, taking textbooks out of the library you know, googling around to try to figure out. Yeah because were there some existing Frameworks or recipes to to use to at least get you started.

Kim Pendergrass

Oh yeah, yeah of course and you know one thing that was really interesting as we started diving more into this started as a project now. It’s a full-fledged business um was starting to look to see what other people were doing and so I’d never heard it kelt plastic when I started.

Kim Pendergrass

Turns out with a few quick Google searches. There are some really cool people all over the world doing some interesting things so we have companies in the us I’m located in California so we have some California companies doing some really cool things. Some indonesian companies different european companies whether they’re in the U K or Spain. Um, truly people all over the world looking to make some unique solutions out of seaweed and kelp.

James McWalter

And so why seaweed and calupp like what are the elements of seaweed and Kp that make it a suitable potential raw material for this type of process.

Kim Pendergrass

Yeah, yeah, of course and I also just want to throw out a quick thing I’m going to use the words interchangeably? um, the best way to kind of think about it is is an overview is going to be algae you have macro a micro. We’re talking about Macro Algae here. Um, then seaweed would kind of be the next classification. It can classify a whole bunch of different sea plants and then we’re going to go down into Kelp then there’s obviously different species. So if I Um, if I use those words interchangeably um, please know that I am kind of talking about the same thing here. So Why is seaweed or kelp such a great material. First of all, it’s regenerative. Um, it grows super quickly and it’s good for the environment. Um, what a lot of people probably can can think about is it requires virtually zero inputs to grow so it doesn’t require fresh water. It doesn’t require arable land and it doesn’t require fertilizer which can be. Um, very harsh on our environment and so um, as ah as an aquaculture crop. You know it’s It’s growing quickly. Um, it’s creating jobs for people around the world who want to harvest this grow and harvest it and it’s putting nutrients back into the ocean for our planet. A lot of people talk about um the carbon sequestion. Um element to it as Well. Which is really important.

James McWalter

So And so has all these properties and yeah, then we kind of think through. Okay, so there’s a specific use case for plastic and you mentioned you know there are some other companies kind of exploring ah Kelp and seaweed I’ll also use them interchangeably um, seaweed for varying kind of use cases. Um, but you zeroed zeroed in on a specific you know, plastic replacement. Um, why did that appeal relative to some of the other potential options.

Kim Pendergrass

Oh yeah, um, it’s really in a whole bunch of different things. So it’s all the way from like additives and the food we eat if anybody enjoys ah nut milks I think almond milk if you use the pacific brand take a look in there. You might be surprised to find um some additives it’s in pharmaceuticals. It’s in a beauty product. So like makeup. It can be in biofuels. It can be in food I’m I’m a lover of sushi I think a lot of people are um, it can be an animal feed. It can be a fertilizer and it can also be a plastic. Plastics were really interesting to both of us and I think it probably just has something to do with um probably our age and where we grew up in the world and so we are both from corners of the us again pacific northwest for me roses from um, the northeast. And there’s a big push for environmentalism. You know I can remember growing up and hiking with my dad in the Columbia Gorge which is obviously a very beautiful place to be and thinking about wanting to make a positive impact on the world. You know we see plastics starting to pile up. Um, if you do walk the beaches and you see them kind of roll in with the the tides. It’s it’s really sad and it’s sad to think about you see it on the side of our roadways and you know we’re to the point now is you know we’re kind of maybe those stereotypical passionate millennials but we want to make a positive impact on the world.

Kim Pendergrass

Um, and we have identified this as the path that we’re going to take for right now.

James McWalter

And so let’s go back to that kind of you know that the first kind of breakthrough moment in the kitchen. So you’re like okay we’re actually able to make something and but the scale of the problem is so massive right? So every beach in the world has that plastic on the beach problem. Yeah. Up from the west coast of Ireland we have these beautiful beaches if much colder than San Diego and again you will still see you know with with the the vast mite of the the ocean plastic on beaches and so on and so what was the kind of next step to try to figure out. Okay. How do we? you know, think through what scaling this idea could look like yeah.

Kim Pendergrass

Yeah, so the next step was Omg I don’t know if we’re allowed to say ah curse words on this podcast. But oh say holy shit I think we have something here. Um.

James McWalter

So you can say you can say what you watch.

Kim Pendergrass

We ah, we immediately looked out to get some more technical people involved. So you know somebody with a biopolymers background material science. Um scale at manufacturing all of those things and then on the flip side. You know we’re in business school. We know step 1 is you you have to understand the problem. So we immediately went out and started doing customer discovery and people get a little turned off maybe on the word customers because they’re not buying from you in that exact moment. But what you’re really trying to understand is people who would be your customers. You know what are the problems that they’re truly up against not the problems. You think they’re up against um. You know what do? What do they need from a solution. What do they care about? What’s it nice to have what’s not and going through that process and so right away you know, maybe this is ah a good thing with the whole Zoom world. It was really easy to get a hold of people so we just started talking to people we would set up calls. 15 to 20 minutes honestly across the world which was really cool and just asked them to tell us about what they were doing. You know what they wanted to accomplish with reducing plastic what kind of mechanical properties it needed and so on and I would say in that you know we learned a ton. And we met a lot of really interesting people which was really neat.

James McWalter

I yeah I had a very similar experience. Um, also during covid um, when starting to kind of research different startup ideas myself also in the climate space and it was kind of this remarkable time you know 202021 where all of a sudden things like you know soil carbon. Just by spending a little bit of time you’re noticing people who didn’t know much about something a year previously becoming like foremost experts in the application of solar carbon in agultural use cases right? Obviously not the forefront expert from a science point of view but by talking to all of the kind of forfront experts technical folk. Scientists people who are doing research etc and then thinking through it a you know, startup in business lens starting to kind of say okay, this might be a path to market to solving this problem from boat to climate and a business point of view and so yeah I had a very recent experience. Met a ton of interesting people. I think there’s like this little group of people who are on things like my climate journey and air miners and it’s kind of various slack groups that were like a very very strong ecosystem to kind of encourage this and so at that time were you kind of part of any of those kind of ecosystems or are you kind of like figuring all this out on your own.

Kim Pendergrass

A little bit of both so neither Rose or I came from this industry. Originally my background is actually actually in financial technology enterprise software. So I’m pretty far out from that and then Rose was in aerospace and defense. 1 thing that. Deeply benefited us was at the time we were university students and so we had access not only to our university you see San Diego but also the broader uc network and I and maybe even like even one past that I guess all all universities in a way. So. Universities are really supportive of students. They have networks. It was great. You know getting involved with different professors in different organizations in San Diego we have the Scripps institution of oceanography and they were really great. They had a blue tech accelerator program that we joined. And they have definitely helped us better understand the industry that we’re stepping into making connections for us sharing research you know 1 thing James it sounded like maybe you had this experience too and and correct me if I’m wrong here. But 1 thing I love about this industry and I’m going to put climate tech. Um, as as a whole industry here is everybody wants to do better. You know it’s not about um, it’s not about like making the most money or anything like that. It’s about having ah a good solid impact a measurable impact to help others.

Kim Pendergrass

And so because of that you know we have just found people so open to talking and sharing and so really supporting and championing each other.

James McWalter

Yeah I found the exact same thing and it and it even becomes this interesting thing with competitors. You know one of the things I found remarkable particularly when I was working on this this soil carbon idea I ended up going a different direction as the audience knows im you know more in the renewable space now. But at the time I would like. You know, send an e-mail to somebody who is series a stage startup doing something you know adjacent or pretty similar to what I was kind of picturing and 9 times out of 10 they was like yeah, let’s just put a call. Let’s chat about it because I think the sense is that because startups have such a low success rate. Regardless you know. We’re all we need the you know the idea to actually succeed like you know if there’s 10 twenty thirty companies working on a similar idea statistically on a couple that’s going to make it and so you know Whistlecompe will still. You know do the the things we have to do to kind of grow our business quickly as possible. But. In terms of the actual sharing of knowledge. It’s really fascinating how open people are.

Kim Pendergrass

Yeah, and I I don’t know if this applies to Youtube but I grew up ah playing group sports competitive you know, competitive sports and there’s yeah oh rugby. Okay, so you’ll get this. There’s just something about having competitors too, especially good competitors that really you know make you strive to.

James McWalter

And rugby in my case and.

15:09.67

Kim Pendergrass

To do your best and be your best and never give up and so I you know I couldn’t imagine even doing startup world or startup land without having good competitors to go up against.

James McWalter

It? Yeah not um, it’s and it’s actually one of these kind of classic things where some folks who are kind of new to startup world will say yeah, especially when they’re like pitching investors and someone’s like oh we have no competitors.. There’s always some sort of competitor. Even if it’s a pen and paper right? Even if it’s a. You know something that people have figured out. Um, now maybe the solution that that one is proposing is way way better, but there’s always some way that people are trying to solve but given problem. Um and actually to kind of go back to you know this kind of user research customer research that you’re doing you know I can maybe agree I think you mentioned that. You know as you’re asking people exactly what they’re Experiencing. We don’t want to kind of presuppose the answers was there any kind of surprising things that came out of that research.

Kim Pendergrass

Yeah, there were a lot of surprising things I I think 1 thing 1 thing that I found really interesting is the vast vast vast majority of people I mean we’re talking like 99.9 percent know that there’s a problem. And they know that they know that they have to get started on fixing that and I’m talking about this from the corporate point of view and they are working with programs and you you just might be really surprised to learn about some of these companies and some of the initiatives that they’re undertaking in terms of like I would say like small initiatives like r and d. Or innovation challenges or things that they are trying to do because they know they have to make changes so I thought that felt really good. Um, and I was really pleased to learn this another thing that I found really fascinating I don’t you know it doesn’t really surprise me and I guess now that I think back on it but it did at the time. We spent quite a bit of time um talking to plastics manufacturers in the us so we spent time back in Erie Pennsylvania and we were part of an accelerator program there with the regional chamber of commerce and they’d introduced us and as we’re talking to these these plastic engineers. These plastic engineers are like yes we want a better material. You know we don’t want our product out there polluting the earth and I guess I was I was pleasantly surprised how open they were to the idea of innovation and wanting something better something new.

Kim Pendergrass

Um, for the environment which was really cooled here.

James McWalter

Also think a lot of corporates are starting to realize that there’s going to be a continued brain drain from organizations that don’t put these kind of concepts at the forefront like it used to be that. Yeah, all the some of the greatest ph d in the world would go work at shell or Exxon right. And like those companies cannot hire those people anymore like even if they dramatically overpay because folks coming out of university just don’t want to go to those places and so I think about any of these areas. You know one of the kind of big powerful things that a corporation can do is to not just screenwash but to actively you know, improve their. Environmental footprint nearly as like a talent acquisition and retention strategy.

Kim Pendergrass

Yeah I see it. You know all the time It’s really funny so you know just leaving at university and and watching my cohort members go out and you know friends go out and get jobs a vast majority of them are picking you know small. Innovative new players in industries who are disrupting things I don’t see people going to kind of the big established firms and I have a really good friend who teaches up at Oregon State University in the business school and she was telling me something really similar where. They um were their students are turning down offers at these you know like blue chip legacy companies because they just they don’t like their approach to Esg or Csr or something. Um, and I think it’s going to be a huge wake up call.

James McWalter

It it will and actually and will continue to be um and so yeah, so let’s ah, get back because we’re kind of you know, moving through through time. Um, and so you know you’re starting to kind of engage technical experts. You’re starting to have these customer conversations and so I guess from there you know how did. You know product validation product development go from there up to let’s say today.

Kim Pendergrass

Yeah, um, it’s It’s been a journey is the best word. Um, so you know initial experimentation and formulation. Um went really well in terms of proving that. Yes, it can be done but now it’s can it be done well and is it scalable. And so that’s where we’re working through right now in R and D. So we have gone through hundreds of formulations. Um on our primary product. Our formula Um, which is really great. So We’ve moved from a thermal set kind of formulation over over to a thermal plastic. What’s really important for us. Is that we are targeting injection molding for a final manufacturing method. The reason why is this will get us the most bang for our buck in terms of getting this biodegradable plastic out to the industry for packaging. So We’re excited about that. Um, and then working through the various manufacturing methods. Um, so we’ve you know we’ve talked about thermal set which is kind of like mold casting. Um, you know think about like I guess an Nice. You know if you do I Guess if you do chocolates maybe like a chocolate mold or I guess an ice cube. Maybe.

Kim Pendergrass

Um, you know, right now we’re working through our extrusion process and then next up would be the injection molding.

James McWalter

And that’s very exciting you know and I think people sometimes yeah will come across a video on Youtube or some random discovery channel these like large industrial presses and and molds. Um, and you know they’re kind of like magical how they kind of speak to each other to kind of produce like basically all the materials and all the. Different things in the kind of modern world and so yeah, so kind of scaling up from the kitchen. Yeah, the stove top all the way to that is this kind of like fascinating direction.

Kim Pendergrass

It is and it’s been really great. You know one of the great things about being located in San Diego is the biotech industry there so we have lots of access to some really great scientists as well as some really great lab space.

James McWalter

And yeah, and absolutely having that kind of localized talent is like makes massive absolutely massive and I guess when we think about um materials and we’ve had quite a few folks on the material side on the podcast over the last you know year or 2 and 1 or 2 folks. Ah in the kind of seaweed space. People in the kind of new types of concrete space and I’ve said on a previous podcast that I think materials is like the most interesting space for people who are like wanting to bring fresh eyes into climate tech. Yeah, we’re going to re a fashion pretty much all the materials of the built environment. And the consumed environment. So you know everybody you know opportunity for everybody um with something at that scale but 1 of the you know the kind of tradeoffs or 1 of the um I guess people have different kind of views on what a kind of go-to-market might look like and it generally splits into licensing or being a direct supplier. Like end supplier I know it’s quite early. You’re still kind of thinking through the product set of things. But how are you thinking about the kind of tradeoffs of different kind of business models.

Kim Pendergrass

Yeah, you know I I think there’s there’s 2 things maybe more. You know we’re always considering the one is is yeah how can we have the most impact and the second is is you know. How can we make sure that we are a viable business. Um, we don’t want to shoot ourselves in the foot. You know to say um because of the business Model. So What we’re thinking about right now is long-term you know we’d love to be a material feedstock provider for these large plastic manufacturers. Um, you know, working through material distributors who have contracts then with these large companies that we all know so you know we’re thinking like the P and gs of the world making those consumer packaging in the short term. We’re. Very aware of the fact that we need to prove out our our material and our product and make sure that we have the ability to scale and so we are focused in on making custom packaging solutions with smaller companies smaller companies who are willing to work with us as we go through the R and D phase. Um, and work with us as we scale up I think long term. There’s definitely a lot of value in Licensing. It’s ah it’s a very um I Guess a very valuable business model in that Sense. We haven’t done a lot in the exploration though of that at this time.

James McWalter

And that that makes sense and yeah you know it is yeah nature of any startup right? You’re trying to find those early adopters who will take a chance on on a company who’s figuring things out will potentially be a design partner because like the mutual learnings are massive right? so. Startup side. They obviously get this like amazingly direct feedback directly from an end user who will hopefully become ah like a paying customer and the company itself. Um actually gets listened to um it is funny I was talking to ah a customer from our company who we just closed and they moved to us from a competitor. And he was like the competitor wouldn’t take my phone calls anymore like you know they used to be a smaller company and and then they got very big and then you know like they just couldn’t supply the same amount of service or the same experience and and those kind of factors become very very important and so I think yeah, anyone who’s working on startups or trying to think through starting your own startup. Touch founders early team members and so on you know, definitely remember when you’re asking for design partnerships or early engagement from customers that you’re giving them something as well like it’s not just taking their ideas or taking their insights. It’s like you’re actually giving them attention and focus which is actually something that’s quite rare.

Kim Pendergrass

Yeah, exactly especially with ah the disaster of the last couple of years and in supply chain and it’s really I think ah highlighted the value of good strategic partners for everyone.

James McWalter

And actually just because you mentioned supply chain there so you know supply chain has become a massive issue. Um in Theory Kelp can be grown. You know pretty much any ocean or body of water in the world. Um, and so yeah, So how do you think about the advantages of. Yeah, using seaweed for use cases like this from a supply chain point of view.

Kim Pendergrass

Ah, it’s it’s it’s actually really complex so part of the part of the value prop and the promises is you know, not being worse than petroleum based plastics and so when we think of that about that we think about the lifecycle analysis and so it. Then so with that in mind we can’t just have seaweed from anywhere because you know getting seaweed from anywhere and getting it to you and where you’re manufacturing could actually be a lot worse or or very harmful for the environment and so things we’re thinking about are building out sustainable supply chains. Near us and near our processing. We’re located in North America Today that is very very very unlikely to change in any near future and so what we’re thinking about is you know can we get our sustainable supply chain out of Alaska um, Alaska and the us. Along with some places over in the northeast us do aquaculture farming so commercially grown kelp and thinking about working with the farm and the cooperatives up there with buying and securing that. And then bringing it down to our processing facilities.

James McWalter

So ah, the okay, where was my next question and so one of the aspects of you know, using seaweed is that it you know breaks down and so you’re not going to end up with these kind of you know horrific situations in landfill where the plastic’s around for you know, potentially hundreds or thousands of years um on the other hand it it degrades quite quickly right in things like so sunshine and so on potentially and so you know one of the things I think that people who are trying to develop products in the space and materials in general is that you know the advantage of being biodegradable sometimes comes up against the disadvantage of longevity. And so how do you think about balancing that equation.

Kim Pendergrass

Yeah I the the way we think about it is is um, not not every not 1 single material is not good for every single use case and so um, I’ll give you an example. Um. Some plastics we want to to go away rather quickly. So the average useful life of a plastic bag is less than 15 minutes um there’s no reason why that needs to hang around for hundreds and hundreds years. Um, but on the flip side you know if I have pvc piping in my house. Um I want that to last. And so when we think about our material we as we target these single use and limited life products. You know we are looking for use cases where um, you know the end the end consumer doesn’t need it to last forever and so we’re thinking about things like Trapstick containers or deodorant. Um. Deodorant containers or even the handle on your lint roller I have a golden retriever and oh my god fur is everywhere at all times. Um, these are things people typically throw away. Um and they don’t recycle and I think another thing too that is kind of a misnomer at least in the Us. .

Kim Pendergrass

Is 90% of plastics aren’t recycled and that’s really a bummer, especially when you think about the time um that you might take to actually sort your bins If you’re one of those people and so when we are thinking about materials and the Lifespan. We want a material that has the mechanical properties that is needed to do the job. But when that job is Over. We Want it to go away.

James McWalter

No absolutely. And yeah I think everybody has a drawer at home where it’s like all these kind of used plastic bags and then it gets full and then eventually you just throw them out and it goes to landfill and and then repeat right? and so there’s all these kind of little patterns that result from.

Kim Pendergrass

Right here.

James McWalter

A mismashch between the as ah like the longevity versus the bio degradabilityability of individual plastics and you know I think figuring that out makes a ton of sense. You also mentioned a little bit earlier I think at the beginning but legislation around single use plastics. So that’s come in in I believe certain parts or maybe all of California It’s definitely about to come in in the next couple of years for all of Europe Ireland has their own I live in Mexico Mexico is introducing it. Um, how do you think about the legislative kind of space and how that impacts because sometimes legislation. You know can cause some problems sometimes it can be a massive kind of tailwind for a massive vanchture of a new industry and so yeah, how do you think about that balance.

Kim Pendergrass

I Have complicated feelings about it. Um, the reason why is I I do think things like this are well intentioned and I I think when they’re brought about the the hope or the belief is is that people will Um. Apply themselves to it in the way it was meant to be so when I think about things like um, we’ll just say like um, banning single use plastic bags. Great sounds great. Um, but now I’ve seen situations where um.

James McWalter

For her.

Kim Pendergrass

Plastic bags are being made thicker or with a little bit different material composition and so now they’re no longer single-use plastic bags. They’re just plastic bags you can reuse them 400 times or whatever the the claim there is um and I don’t think that was really the spirit of the the legislation. Or you know I am seeing things where maybe the composition has changed a little bit and so maybe the definition of plastic becomes a little bit more nebulous. Um again I don’t think that is the spirit of the legislation and so I I think you know when legislation like this comes out. I Would hope that people would and people in businesses would try to apply themselves to solutions. Um, that are in the spirit of it. So whatever. That means you know maybe it is truly learning how to use a nice good reusable bag. Maybe it’s learning how to carry things with your hands. I’m now one of those people who like see if I can juggle things out if I forget forget the reusable bags at the grocery store and then things with plastic Stras too I Mean that’s that’s truly complicated I think it’s it feels definitely a comfort to use a plastic straw especially with a nice cold drink or a milkshake. Um, and there are so you know some people in our communities who need straws for whatever reasons that may be but the vast majority of us. Do not use them and so some of that’s just kind of freetraining behavior as Well. I think there’s definitely a lot more. We could do I’m definitely ah a fan of the um.

Kim Pendergrass

Reduce first before we get into the reuse and the recycle.

James McWalter

I’ sorry we’re just slightly getting the the shovel there right at the very end again. Just so um, yeah, it’s so interesting you mentioned about like you carrying things and and the reduce. Um in Ireland and but it was 2002 we introduced a ten pence

Kim Pendergrass

Okay.

James McWalter

Um, plastic bags tax and that’s a time I was working in retail as a retail butcher of all things and the week that that came in was chaotic people. Ah yeah, people have quite quite a bit of pushback. Um, but what people ended up doing rather than pegue ten cent was like they were. Yeah, lump a load of things into their arms and then and then bring it out and then people did start to adapt and you get to a point and it was actually quite strange for me when I eventually you know moved on to to the Uk then later other countries where you kind of it took me a while to get back into actually taking the plastic bag. Default would just be not to have it or always carry my own bag with me. Um, and so having some sort of like price signal I think was was actually this like very powerful thing rather than just like outright banning which as I said or as you said yeah, there are ways around certain you know, depending on how the legislation is written to get around those things. Um. So yeah, so you have this kind of play of both carrot and stick that I think makes yeah that we’ll have to basically balance in order to get to the right path.

Kim Pendergrass

I’m I’m curious when you ah first experienced um the the bag feed did you feel like that changed your behavior early on um or was it or were you just like and whatever ¢10 I can deal with it.

James McWalter

I was a teenager so 10 centers a lot so at at the at the time I was like but and honestly like people people definitely did change behavior people definitely were um, more resistant to getting bags it it definitely absolutely did.

Kim Pendergrass

Ah, okay.

James McWalter

I think it has started to go a little bit towards the mean again in Ireland so does actually talk about raising the price again. Um, but yeah.

Kim Pendergrass

Interesting. Yeah.

James McWalter

Yeah, it’s it’s interesting. All these little laboratories of of experimentation. Um, and so yeah, so you mentioned the beginning so you were kind of in university you were working on your Mba and I’ve heard like mixed things from folks who’ve done mbas and then go on to found startups some apps who were like. You know the structure and the the kind of frameworks from the Nba had some profound effect on how they approach a startup and just were like I kind of wish I just started something earlier. Um, how do you think about? you know the impact your Mba and studying of that type has on how you founded the company.

Kim Pendergrass

I think that’s interesting feedback. Yeah, you know everybody’s different and is on a different journey. So my journey was from undergrad I went and worked for a startup for 8 years I was employee 15 and we were going through some really early funding rounds all the way through us. Successful. Acquisition by a large public company and then did a year of public life. So I felt like I had already had kind of the learning startup learning experience as an early employee and what I really wanted to do when I got my Mba is I wanted more frameworks and more knowledge. In some areas that I didn’t that I didn’t specialize in so I wanted more information and learnings around operations and I wanted more around finance and accounting and I can’t believe I just said I wanted more around accounting but I did of course yeah.

James McWalter

Of course.

Kim Pendergrass

Ah, it’s definitely the the language of businesses as my accounting professor Eric liked to say and that’s why I went and did it and for me it was a really good. It was a really good opportunity but on the flip side I think also taking advantage of the university environment is huge so universities. Have all kinds of access to um, early funds start you know startup accelerators, competitions incubators networks and because you’re a university student people usually want to help you and they want to help you learn and and grow and they want to be a part of that journey I think. Most people not all but most people feel really fulfilled when they can give back and teach somebody something and so being in that kind of learning environment was huge huge for us and it definitely um I would say kind of protected us probably you know like ah like an incubator. Um, protected us and helped us grow as we worked through some of the early stages now at the same time you know having a bias for action I 100% agree with just go out and do it. Um, the way you think you’re going to do it in the beginning is not the way it’s going to be um.

Kim Pendergrass

You might as well just get started I would say you know, starting this business while I was doing my Mba made my Mba so much more rewarding because everything I was learning in a classroom or academic environment or setting I could then directly apply. Ah, to the business as we were growing.

James McWalter

So I love that and you know for those who are running Mba Programs you know may make everybody start a company right? It’s why you’re running your Mba because I mean yeah, you’re immediately kind of tying the theoretical and the practical and in this potentially like fascinating way.

Kim Pendergrass

Oh yeah, I mean in theory everything makes sense. We’re like oh I just do this that and that and you know boom the $100000000 in revenue you’re like okay great. Let’s go out and execute that and practice.

James McWalter

Yeah, yeah, it’s like okay, everyone just gets our first 10 customers and it’s like okay, how do we do that like just trivial shit like that. Um.

James McWalter

Cool, well um, really enjoyed Chatten Kim before we break off is there anything I should have asked you about but did not.

Kim Pendergrass

Yeah I would have loved um to know a little bit more about our team and where we’re headed so today yeah today algae materials has a very small nimble and passionate team people working with us.

James McWalter

Please.

Kim Pendergrass

We are really excited to grow our team and so we are specifically looking for people who are you know obviously passionate about climate about Materials. Um, but specifically looking for some of those more technical rules. So You know polymer scientists material scientists. And people with skill at manufacturing experience. Anybody in those realms Even some chemistry you know if you want to come work for a a nimble startup looking to to change the world and really shake up an industry and be a part of something that’s important. We’d love to hear from you.

James McWalter

So and will include any career page to the show notes. Thank you Kim.

Kim Pendergrass

Yeah, thank you so much James it’s been a pleasure talking to you today I love talking about this kind of stuff. Cheers.

James McWalter

It’s the best cheers.

Title: Replacing Plastics with Algae – E111

Great to chat with Kim Pendergrass, Co-Founder of Algeon Materials, a biotech materials start-up on a mission to fight climate change and reduce plastic pollution by creating plastic alternatives for leading brands! We discussed the properties of algae,  the importance of researching customers in the early days of the start-up, product validation, balancing biodegradability against material longevity and more!

https://carbotnic.com/algeon

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 Kim Pendergrass co-founder at Algeon Materials welcome to the podcast Kim.

Kim Pendergrass

Hi James thanks for having me today I’m so excited to be here.

James McWalter

to start, Could you tell us a little bit about Algeon materials.

Kim Pendergrass

Yeah, happy to it’s one of my favorite subjects. So algoen materials is an advanced materials Biotech startup So we’re on a mission to fight climate change and reduce plastic pollution and we see ourselves doing this specifically by creating sustainable and biodegradable plastics.

James McWalter

The future.

Kim Pendergrass

Made from kelp.

James McWalter

Super cool and what drove the initial decision for Algeon.

Kim Pendergrass

Yeah, you know, like like most things over the last few years the pandemic was really a tipping point. So I’m the co-founder rose fine is my other co-founder. She’s honestly one of the smartest people I’ve ever met, but our story plate takes back when we were doing our Mba at. Ah, you see San Diego so we’re on zoome it’s terrible and we’re talking to each other about this and like everyone else we just have tons and tons of Amazon packages coming to our door because you don’t really want to go to the store right? and then on the flip side. You know you want to support those local restaurants I’m a big thai food person.

Kim Pendergrass

But I felt bad because every time I would you know get an order of panancurry. It comes with like £3 of plastic you know with all of a little containers and all all the plastic goods so we got to talking um and we’re like you know what there has to be a better way. Okay, so we have people working on single-use plastics. There’s a lot of legislation.

James McWalter

Right.

Kim Pendergrass

Trying to ah ban them or change them. But what about some of these limited life plastics and then on the flip side because we both lived in San Diego walking the beach is a great pastime I’m not personally a surfer but I do know a lot of surfers and seaweed is just always rolling up on the beaches or touching you. And so we started thinking about it. We’re like hey could this be a good material I grew up in the pacific northwest I’m originally from Portland Oregon and you know we take our recycling very serious up there and I grew up using things like cornforks I’m sure you’ve probably used one too. They’re not very delightful. They usually break.

James McWalter

Sure.

Kim Pendergrass

Break cuff in your mouth and so we got we got to thinking you we’re like hey you know what we make bioplastics out of other you know materials what about seaweed and so here’s the funny story. So here’s actually how we got her start imagine us pulling seaweed off the beaches of San Diego it’s just a disaster in the car. Um, and then getting it into a kitchen environment which is kind of like a lab if you think about it ruining some very good coffee grinders trying to grind it up and really seeing if we can make that first batch a plastic in the kitchen and we found out that we could and that was super exciting. Um, and so with that we started getting off to the races. And yeah, so that that that’s kind of the origin story long and short version of it.

James McWalter

Yeah, and so from the kind of moment you were having these conversations. Um, which your cofounder rose all the way through to like getting to you’re boiling up seaweed and and trying to process it in in a home kitchen. Ah how long was that and. You know when I guess did you say? Okay, we’re actually going to get our hands dirty on this.

Kim Pendergrass

You know I I know I know so many smart people who like have a lot of great ideas and they just don’t take any action. They spend all their time you know sitting around and strategizing and thinking of amazing solutions that never go into testing or execution. And I would say 1 thing that Rose and I really both have is a bias for action and so as soon as we started talking about it and we were like you know I I think I think there’s something here. We immediately jumped in and started trying and testing things out. Um I’m a big proponent that you know you learn a lot from failure and so a lot of. Little tiny pivots and failure early on were really important to us and for us, you know, just making sure it was technically possible and especially for somebody like me who doesn’t have a technical background in this. Um, that was really exciting and rewarding and it really gave us the confidence to move forward and can. Continue to pull in more subject matter experts in this field to help us grow.

James McWalter

And so we were kind of like you know, taking textbooks out of the library you know, googling around to try to figure out. Yeah because were there some existing Frameworks or recipes to to use to at least get you started.

Kim Pendergrass

Oh yeah, yeah of course and you know one thing that was really interesting as we started diving more into this started as a project now. It’s a full-fledged business um was starting to look to see what other people were doing and so I’d never heard it kelt plastic when I started.

Kim Pendergrass

Turns out with a few quick Google searches. There are some really cool people all over the world doing some interesting things so we have companies in the us I’m located in California so we have some California companies doing some really cool things. Some indonesian companies different european companies whether they’re in the U K or Spain. Um, truly people all over the world looking to make some unique solutions out of seaweed and kelp.

James McWalter

And so why seaweed and calupp like what are the elements of seaweed and Kp that make it a suitable potential raw material for this type of process.

Kim Pendergrass

Yeah, yeah, of course and I also just want to throw out a quick thing I’m going to use the words interchangeably? um, the best way to kind of think about it is is an overview is going to be algae you have macro a micro. We’re talking about Macro Algae here. Um, then seaweed would kind of be the next classification. It can classify a whole bunch of different sea plants and then we’re going to go down into Kelp then there’s obviously different species. So if I Um, if I use those words interchangeably um, please know that I am kind of talking about the same thing here. So Why is seaweed or kelp such a great material. First of all, it’s regenerative. Um, it grows super quickly and it’s good for the environment. Um, what a lot of people probably can can think about is it requires virtually zero inputs to grow so it doesn’t require fresh water. It doesn’t require arable land and it doesn’t require fertilizer which can be. Um, very harsh on our environment and so um, as ah as an aquaculture crop. You know it’s It’s growing quickly. Um, it’s creating jobs for people around the world who want to harvest this grow and harvest it and it’s putting nutrients back into the ocean for our planet. A lot of people talk about um the carbon sequestion. Um element to it as Well. Which is really important.

James McWalter

So And so has all these properties and yeah, then we kind of think through. Okay, so there’s a specific use case for plastic and you mentioned you know there are some other companies kind of exploring ah Kelp and seaweed I’ll also use them interchangeably um, seaweed for varying kind of use cases. Um, but you zeroed zeroed in on a specific you know, plastic replacement. Um, why did that appeal relative to some of the other potential options.

Kim Pendergrass

Oh yeah, um, it’s really in a whole bunch of different things. So it’s all the way from like additives and the food we eat if anybody enjoys ah nut milks I think almond milk if you use the pacific brand take a look in there. You might be surprised to find um some additives it’s in pharmaceuticals. It’s in a beauty product. So like makeup. It can be in biofuels. It can be in food I’m I’m a lover of sushi I think a lot of people are um, it can be an animal feed. It can be a fertilizer and it can also be a plastic. Plastics were really interesting to both of us and I think it probably just has something to do with um probably our age and where we grew up in the world and so we are both from corners of the us again pacific northwest for me roses from um, the northeast. And there’s a big push for environmentalism. You know I can remember growing up and hiking with my dad in the Columbia Gorge which is obviously a very beautiful place to be and thinking about wanting to make a positive impact on the world. You know we see plastics starting to pile up. Um, if you do walk the beaches and you see them kind of roll in with the the tides. It’s it’s really sad and it’s sad to think about you see it on the side of our roadways and you know we’re to the point now is you know we’re kind of maybe those stereotypical passionate millennials but we want to make a positive impact on the world.

Kim Pendergrass

Um, and we have identified this as the path that we’re going to take for right now.

James McWalter

And so let’s go back to that kind of you know that the first kind of breakthrough moment in the kitchen. So you’re like okay we’re actually able to make something and but the scale of the problem is so massive right? So every beach in the world has that plastic on the beach problem. Yeah. Up from the west coast of Ireland we have these beautiful beaches if much colder than San Diego and again you will still see you know with with the the vast mite of the the ocean plastic on beaches and so on and so what was the kind of next step to try to figure out. Okay. How do we? you know, think through what scaling this idea could look like yeah.

Kim Pendergrass

Yeah, so the next step was Omg I don’t know if we’re allowed to say ah curse words on this podcast. But oh say holy shit I think we have something here. Um.

James McWalter

So you can say you can say what you watch.

Kim Pendergrass

We ah, we immediately looked out to get some more technical people involved. So you know somebody with a biopolymers background material science. Um scale at manufacturing all of those things and then on the flip side. You know we’re in business school. We know step 1 is you you have to understand the problem. So we immediately went out and started doing customer discovery and people get a little turned off maybe on the word customers because they’re not buying from you in that exact moment. But what you’re really trying to understand is people who would be your customers. You know what are the problems that they’re truly up against not the problems. You think they’re up against um. You know what do? What do they need from a solution. What do they care about? What’s it nice to have what’s not and going through that process and so right away you know, maybe this is ah a good thing with the whole Zoom world. It was really easy to get a hold of people so we just started talking to people we would set up calls. 15 to 20 minutes honestly across the world which was really cool and just asked them to tell us about what they were doing. You know what they wanted to accomplish with reducing plastic what kind of mechanical properties it needed and so on and I would say in that you know we learned a ton. And we met a lot of really interesting people which was really neat.

James McWalter

I yeah I had a very similar experience. Um, also during covid um, when starting to kind of research different startup ideas myself also in the climate space and it was kind of this remarkable time you know 202021 where all of a sudden things like you know soil carbon. Just by spending a little bit of time you’re noticing people who didn’t know much about something a year previously becoming like foremost experts in the application of solar carbon in agultural use cases right? Obviously not the forefront expert from a science point of view but by talking to all of the kind of forfront experts technical folk. Scientists people who are doing research etc and then thinking through it a you know, startup in business lens starting to kind of say okay, this might be a path to market to solving this problem from boat to climate and a business point of view and so yeah I had a very recent experience. Met a ton of interesting people. I think there’s like this little group of people who are on things like my climate journey and air miners and it’s kind of various slack groups that were like a very very strong ecosystem to kind of encourage this and so at that time were you kind of part of any of those kind of ecosystems or are you kind of like figuring all this out on your own.

Kim Pendergrass

A little bit of both so neither Rose or I came from this industry. Originally my background is actually actually in financial technology enterprise software. So I’m pretty far out from that and then Rose was in aerospace and defense. 1 thing that. Deeply benefited us was at the time we were university students and so we had access not only to our university you see San Diego but also the broader uc network and I and maybe even like even one past that I guess all all universities in a way. So. Universities are really supportive of students. They have networks. It was great. You know getting involved with different professors in different organizations in San Diego we have the Scripps institution of oceanography and they were really great. They had a blue tech accelerator program that we joined. And they have definitely helped us better understand the industry that we’re stepping into making connections for us sharing research you know 1 thing James it sounded like maybe you had this experience too and and correct me if I’m wrong here. But 1 thing I love about this industry and I’m going to put climate tech. Um, as as a whole industry here is everybody wants to do better. You know it’s not about um, it’s not about like making the most money or anything like that. It’s about having ah a good solid impact a measurable impact to help others.

Kim Pendergrass

And so because of that you know we have just found people so open to talking and sharing and so really supporting and championing each other.

James McWalter

Yeah I found the exact same thing and it and it even becomes this interesting thing with competitors. You know one of the things I found remarkable particularly when I was working on this this soil carbon idea I ended up going a different direction as the audience knows im you know more in the renewable space now. But at the time I would like. You know, send an e-mail to somebody who is series a stage startup doing something you know adjacent or pretty similar to what I was kind of picturing and 9 times out of 10 they was like yeah, let’s just put a call. Let’s chat about it because I think the sense is that because startups have such a low success rate. Regardless you know. We’re all we need the you know the idea to actually succeed like you know if there’s 10 twenty thirty companies working on a similar idea statistically on a couple that’s going to make it and so you know Whistlecompe will still. You know do the the things we have to do to kind of grow our business quickly as possible. But. In terms of the actual sharing of knowledge. It’s really fascinating how open people are.

Kim Pendergrass

Yeah, and I I don’t know if this applies to Youtube but I grew up ah playing group sports competitive you know, competitive sports and there’s yeah oh rugby. Okay, so you’ll get this. There’s just something about having competitors too, especially good competitors that really you know make you strive to.

James McWalter

And rugby in my case and.

15:09.67

Kim Pendergrass

To do your best and be your best and never give up and so I you know I couldn’t imagine even doing startup world or startup land without having good competitors to go up against.

James McWalter

It? Yeah not um, it’s and it’s actually one of these kind of classic things where some folks who are kind of new to startup world will say yeah, especially when they’re like pitching investors and someone’s like oh we have no competitors.. There’s always some sort of competitor. Even if it’s a pen and paper right? Even if it’s a. You know something that people have figured out. Um, now maybe the solution that that one is proposing is way way better, but there’s always some way that people are trying to solve but given problem. Um and actually to kind of go back to you know this kind of user research customer research that you’re doing you know I can maybe agree I think you mentioned that. You know as you’re asking people exactly what they’re Experiencing. We don’t want to kind of presuppose the answers was there any kind of surprising things that came out of that research.

Kim Pendergrass

Yeah, there were a lot of surprising things I I think 1 thing 1 thing that I found really interesting is the vast vast vast majority of people I mean we’re talking like 99.9 percent know that there’s a problem. And they know that they know that they have to get started on fixing that and I’m talking about this from the corporate point of view and they are working with programs and you you just might be really surprised to learn about some of these companies and some of the initiatives that they’re undertaking in terms of like I would say like small initiatives like r and d. Or innovation challenges or things that they are trying to do because they know they have to make changes so I thought that felt really good. Um, and I was really pleased to learn this another thing that I found really fascinating I don’t you know it doesn’t really surprise me and I guess now that I think back on it but it did at the time. We spent quite a bit of time um talking to plastics manufacturers in the us so we spent time back in Erie Pennsylvania and we were part of an accelerator program there with the regional chamber of commerce and they’d introduced us and as we’re talking to these these plastic engineers. These plastic engineers are like yes we want a better material. You know we don’t want our product out there polluting the earth and I guess I was I was pleasantly surprised how open they were to the idea of innovation and wanting something better something new.

Kim Pendergrass

Um, for the environment which was really cooled here.

James McWalter

Also think a lot of corporates are starting to realize that there’s going to be a continued brain drain from organizations that don’t put these kind of concepts at the forefront like it used to be that. Yeah, all the some of the greatest ph d in the world would go work at shell or Exxon right. And like those companies cannot hire those people anymore like even if they dramatically overpay because folks coming out of university just don’t want to go to those places and so I think about any of these areas. You know one of the kind of big powerful things that a corporation can do is to not just screenwash but to actively you know, improve their. Environmental footprint nearly as like a talent acquisition and retention strategy.

Kim Pendergrass

Yeah I see it. You know all the time It’s really funny so you know just leaving at university and and watching my cohort members go out and you know friends go out and get jobs a vast majority of them are picking you know small. Innovative new players in industries who are disrupting things I don’t see people going to kind of the big established firms and I have a really good friend who teaches up at Oregon State University in the business school and she was telling me something really similar where. They um were their students are turning down offers at these you know like blue chip legacy companies because they just they don’t like their approach to Esg or Csr or something. Um, and I think it’s going to be a huge wake up call.

James McWalter

It it will and actually and will continue to be um and so yeah, so let’s ah, get back because we’re kind of you know, moving through through time. Um, and so you know you’re starting to kind of engage technical experts. You’re starting to have these customer conversations and so I guess from there you know how did. You know product validation product development go from there up to let’s say today.

Kim Pendergrass

Yeah, um, it’s It’s been a journey is the best word. Um, so you know initial experimentation and formulation. Um went really well in terms of proving that. Yes, it can be done but now it’s can it be done well and is it scalable. And so that’s where we’re working through right now in R and D. So we have gone through hundreds of formulations. Um on our primary product. Our formula Um, which is really great. So We’ve moved from a thermal set kind of formulation over over to a thermal plastic. What’s really important for us. Is that we are targeting injection molding for a final manufacturing method. The reason why is this will get us the most bang for our buck in terms of getting this biodegradable plastic out to the industry for packaging. So We’re excited about that. Um, and then working through the various manufacturing methods. Um, so we’ve you know we’ve talked about thermal set which is kind of like mold casting. Um, you know think about like I guess an Nice. You know if you do I Guess if you do chocolates maybe like a chocolate mold or I guess an ice cube. Maybe.

Kim Pendergrass

Um, you know, right now we’re working through our extrusion process and then next up would be the injection molding.

James McWalter

And that’s very exciting you know and I think people sometimes yeah will come across a video on Youtube or some random discovery channel these like large industrial presses and and molds. Um, and you know they’re kind of like magical how they kind of speak to each other to kind of produce like basically all the materials and all the. Different things in the kind of modern world and so yeah, so kind of scaling up from the kitchen. Yeah, the stove top all the way to that is this kind of like fascinating direction.

Kim Pendergrass

It is and it’s been really great. You know one of the great things about being located in San Diego is the biotech industry there so we have lots of access to some really great scientists as well as some really great lab space.

James McWalter

And yeah, and absolutely having that kind of localized talent is like makes massive absolutely massive and I guess when we think about um materials and we’ve had quite a few folks on the material side on the podcast over the last you know year or 2 and 1 or 2 folks. Ah in the kind of seaweed space. People in the kind of new types of concrete space and I’ve said on a previous podcast that I think materials is like the most interesting space for people who are like wanting to bring fresh eyes into climate tech. Yeah, we’re going to re a fashion pretty much all the materials of the built environment. And the consumed environment. So you know everybody you know opportunity for everybody um with something at that scale but 1 of the you know the kind of tradeoffs or 1 of the um I guess people have different kind of views on what a kind of go-to-market might look like and it generally splits into licensing or being a direct supplier. Like end supplier I know it’s quite early. You’re still kind of thinking through the product set of things. But how are you thinking about the kind of tradeoffs of different kind of business models.

Kim Pendergrass

Yeah, you know I I think there’s there’s 2 things maybe more. You know we’re always considering the one is is yeah how can we have the most impact and the second is is you know. How can we make sure that we are a viable business. Um, we don’t want to shoot ourselves in the foot. You know to say um because of the business Model. So What we’re thinking about right now is long-term you know we’d love to be a material feedstock provider for these large plastic manufacturers. Um, you know, working through material distributors who have contracts then with these large companies that we all know so you know we’re thinking like the P and gs of the world making those consumer packaging in the short term. We’re. Very aware of the fact that we need to prove out our our material and our product and make sure that we have the ability to scale and so we are focused in on making custom packaging solutions with smaller companies smaller companies who are willing to work with us as we go through the R and D phase. Um, and work with us as we scale up I think long term. There’s definitely a lot of value in Licensing. It’s ah it’s a very um I Guess a very valuable business model in that Sense. We haven’t done a lot in the exploration though of that at this time.

James McWalter

And that that makes sense and yeah you know it is yeah nature of any startup right? You’re trying to find those early adopters who will take a chance on on a company who’s figuring things out will potentially be a design partner because like the mutual learnings are massive right? so. Startup side. They obviously get this like amazingly direct feedback directly from an end user who will hopefully become ah like a paying customer and the company itself. Um actually gets listened to um it is funny I was talking to ah a customer from our company who we just closed and they moved to us from a competitor. And he was like the competitor wouldn’t take my phone calls anymore like you know they used to be a smaller company and and then they got very big and then you know like they just couldn’t supply the same amount of service or the same experience and and those kind of factors become very very important and so I think yeah, anyone who’s working on startups or trying to think through starting your own startup. Touch founders early team members and so on you know, definitely remember when you’re asking for design partnerships or early engagement from customers that you’re giving them something as well like it’s not just taking their ideas or taking their insights. It’s like you’re actually giving them attention and focus which is actually something that’s quite rare.

Kim Pendergrass

Yeah, exactly especially with ah the disaster of the last couple of years and in supply chain and it’s really I think ah highlighted the value of good strategic partners for everyone.

James McWalter

And actually just because you mentioned supply chain there so you know supply chain has become a massive issue. Um in Theory Kelp can be grown. You know pretty much any ocean or body of water in the world. Um, and so yeah, So how do you think about the advantages of. Yeah, using seaweed for use cases like this from a supply chain point of view.

Kim Pendergrass

Ah, it’s it’s it’s actually really complex so part of the part of the value prop and the promises is you know, not being worse than petroleum based plastics and so when we think of that about that we think about the lifecycle analysis and so it. Then so with that in mind we can’t just have seaweed from anywhere because you know getting seaweed from anywhere and getting it to you and where you’re manufacturing could actually be a lot worse or or very harmful for the environment and so things we’re thinking about are building out sustainable supply chains. Near us and near our processing. We’re located in North America Today that is very very very unlikely to change in any near future and so what we’re thinking about is you know can we get our sustainable supply chain out of Alaska um, Alaska and the us. Along with some places over in the northeast us do aquaculture farming so commercially grown kelp and thinking about working with the farm and the cooperatives up there with buying and securing that. And then bringing it down to our processing facilities.

James McWalter

So ah, the okay, where was my next question and so one of the aspects of you know, using seaweed is that it you know breaks down and so you’re not going to end up with these kind of you know horrific situations in landfill where the plastic’s around for you know, potentially hundreds or thousands of years um on the other hand it it degrades quite quickly right in things like so sunshine and so on potentially and so you know one of the things I think that people who are trying to develop products in the space and materials in general is that you know the advantage of being biodegradable sometimes comes up against the disadvantage of longevity. And so how do you think about balancing that equation.

Kim Pendergrass

Yeah I the the way we think about it is is um, not not every not 1 single material is not good for every single use case and so um, I’ll give you an example. Um. Some plastics we want to to go away rather quickly. So the average useful life of a plastic bag is less than 15 minutes um there’s no reason why that needs to hang around for hundreds and hundreds years. Um, but on the flip side you know if I have pvc piping in my house. Um I want that to last. And so when we think about our material we as we target these single use and limited life products. You know we are looking for use cases where um, you know the end the end consumer doesn’t need it to last forever and so we’re thinking about things like Trapstick containers or deodorant. Um. Deodorant containers or even the handle on your lint roller I have a golden retriever and oh my god fur is everywhere at all times. Um, these are things people typically throw away. Um and they don’t recycle and I think another thing too that is kind of a misnomer at least in the Us. .

Kim Pendergrass

Is 90% of plastics aren’t recycled and that’s really a bummer, especially when you think about the time um that you might take to actually sort your bins If you’re one of those people and so when we are thinking about materials and the Lifespan. We want a material that has the mechanical properties that is needed to do the job. But when that job is Over. We Want it to go away.

James McWalter

No absolutely. And yeah I think everybody has a drawer at home where it’s like all these kind of used plastic bags and then it gets full and then eventually you just throw them out and it goes to landfill and and then repeat right? and so there’s all these kind of little patterns that result from.

Kim Pendergrass

Right here.

James McWalter

A mismashch between the as ah like the longevity versus the bio degradabilityability of individual plastics and you know I think figuring that out makes a ton of sense. You also mentioned a little bit earlier I think at the beginning but legislation around single use plastics. So that’s come in in I believe certain parts or maybe all of California It’s definitely about to come in in the next couple of years for all of Europe Ireland has their own I live in Mexico Mexico is introducing it. Um, how do you think about the legislative kind of space and how that impacts because sometimes legislation. You know can cause some problems sometimes it can be a massive kind of tailwind for a massive vanchture of a new industry and so yeah, how do you think about that balance.

Kim Pendergrass

I Have complicated feelings about it. Um, the reason why is I I do think things like this are well intentioned and I I think when they’re brought about the the hope or the belief is is that people will Um. Apply themselves to it in the way it was meant to be so when I think about things like um, we’ll just say like um, banning single use plastic bags. Great sounds great. Um, but now I’ve seen situations where um.

James McWalter

For her.

Kim Pendergrass

Plastic bags are being made thicker or with a little bit different material composition and so now they’re no longer single-use plastic bags. They’re just plastic bags you can reuse them 400 times or whatever the the claim there is um and I don’t think that was really the spirit of the the legislation. Or you know I am seeing things where maybe the composition has changed a little bit and so maybe the definition of plastic becomes a little bit more nebulous. Um again I don’t think that is the spirit of the legislation and so I I think you know when legislation like this comes out. I Would hope that people would and people in businesses would try to apply themselves to solutions. Um, that are in the spirit of it. So whatever. That means you know maybe it is truly learning how to use a nice good reusable bag. Maybe it’s learning how to carry things with your hands. I’m now one of those people who like see if I can juggle things out if I forget forget the reusable bags at the grocery store and then things with plastic Stras too I Mean that’s that’s truly complicated I think it’s it feels definitely a comfort to use a plastic straw especially with a nice cold drink or a milkshake. Um, and there are so you know some people in our communities who need straws for whatever reasons that may be but the vast majority of us. Do not use them and so some of that’s just kind of freetraining behavior as Well. I think there’s definitely a lot more. We could do I’m definitely ah a fan of the um.

Kim Pendergrass

Reduce first before we get into the reuse and the recycle.

James McWalter

I’ sorry we’re just slightly getting the the shovel there right at the very end again. Just so um, yeah, it’s so interesting you mentioned about like you carrying things and and the reduce. Um in Ireland and but it was 2002 we introduced a ten pence

Kim Pendergrass

Okay.

James McWalter

Um, plastic bags tax and that’s a time I was working in retail as a retail butcher of all things and the week that that came in was chaotic people. Ah yeah, people have quite quite a bit of pushback. Um, but what people ended up doing rather than pegue ten cent was like they were. Yeah, lump a load of things into their arms and then and then bring it out and then people did start to adapt and you get to a point and it was actually quite strange for me when I eventually you know moved on to to the Uk then later other countries where you kind of it took me a while to get back into actually taking the plastic bag. Default would just be not to have it or always carry my own bag with me. Um, and so having some sort of like price signal I think was was actually this like very powerful thing rather than just like outright banning which as I said or as you said yeah, there are ways around certain you know, depending on how the legislation is written to get around those things. Um. So yeah, so you have this kind of play of both carrot and stick that I think makes yeah that we’ll have to basically balance in order to get to the right path.

Kim Pendergrass

I’m I’m curious when you ah first experienced um the the bag feed did you feel like that changed your behavior early on um or was it or were you just like and whatever ¢10 I can deal with it.

James McWalter

I was a teenager so 10 centers a lot so at at the at the time I was like but and honestly like people people definitely did change behavior people definitely were um, more resistant to getting bags it it definitely absolutely did.

Kim Pendergrass

Ah, okay.

James McWalter

I think it has started to go a little bit towards the mean again in Ireland so does actually talk about raising the price again. Um, but yeah.

Kim Pendergrass

Interesting. Yeah.

James McWalter

Yeah, it’s it’s interesting. All these little laboratories of of experimentation. Um, and so yeah, so you mentioned the beginning so you were kind of in university you were working on your Mba and I’ve heard like mixed things from folks who’ve done mbas and then go on to found startups some apps who were like. You know the structure and the the kind of frameworks from the Nba had some profound effect on how they approach a startup and just were like I kind of wish I just started something earlier. Um, how do you think about? you know the impact your Mba and studying of that type has on how you founded the company.

Kim Pendergrass

I think that’s interesting feedback. Yeah, you know everybody’s different and is on a different journey. So my journey was from undergrad I went and worked for a startup for 8 years I was employee 15 and we were going through some really early funding rounds all the way through us. Successful. Acquisition by a large public company and then did a year of public life. So I felt like I had already had kind of the learning startup learning experience as an early employee and what I really wanted to do when I got my Mba is I wanted more frameworks and more knowledge. In some areas that I didn’t that I didn’t specialize in so I wanted more information and learnings around operations and I wanted more around finance and accounting and I can’t believe I just said I wanted more around accounting but I did of course yeah.

James McWalter

Of course.

Kim Pendergrass

Ah, it’s definitely the the language of businesses as my accounting professor Eric liked to say and that’s why I went and did it and for me it was a really good. It was a really good opportunity but on the flip side I think also taking advantage of the university environment is huge so universities. Have all kinds of access to um, early funds start you know startup accelerators, competitions incubators networks and because you’re a university student people usually want to help you and they want to help you learn and and grow and they want to be a part of that journey I think. Most people not all but most people feel really fulfilled when they can give back and teach somebody something and so being in that kind of learning environment was huge huge for us and it definitely um I would say kind of protected us probably you know like ah like an incubator. Um, protected us and helped us grow as we worked through some of the early stages now at the same time you know having a bias for action I 100% agree with just go out and do it. Um, the way you think you’re going to do it in the beginning is not the way it’s going to be um.

Kim Pendergrass

You might as well just get started I would say you know, starting this business while I was doing my Mba made my Mba so much more rewarding because everything I was learning in a classroom or academic environment or setting I could then directly apply. Ah, to the business as we were growing.

James McWalter

So I love that and you know for those who are running Mba Programs you know may make everybody start a company right? It’s why you’re running your Mba because I mean yeah, you’re immediately kind of tying the theoretical and the practical and in this potentially like fascinating way.

Kim Pendergrass

Oh yeah, I mean in theory everything makes sense. We’re like oh I just do this that and that and you know boom the $100000000 in revenue you’re like okay great. Let’s go out and execute that and practice.

James McWalter

Yeah, yeah, it’s like okay, everyone just gets our first 10 customers and it’s like okay, how do we do that like just trivial shit like that. Um.

James McWalter

Cool, well um, really enjoyed Chatten Kim before we break off is there anything I should have asked you about but did not.

Kim Pendergrass

Yeah I would have loved um to know a little bit more about our team and where we’re headed so today yeah today algae materials has a very small nimble and passionate team people working with us.

James McWalter

Please.

Kim Pendergrass

We are really excited to grow our team and so we are specifically looking for people who are you know obviously passionate about climate about Materials. Um, but specifically looking for some of those more technical rules. So You know polymer scientists material scientists. And people with skill at manufacturing experience. Anybody in those realms Even some chemistry you know if you want to come work for a a nimble startup looking to to change the world and really shake up an industry and be a part of something that’s important. We’d love to hear from you.

James McWalter

So and will include any career page to the show notes. Thank you Kim.

Kim Pendergrass

Yeah, thank you so much James it’s been a pleasure talking to you today I love talking about this kind of stuff. Cheers.

James McWalter

It’s the best cheers.

Carbon Business Council – E110

Great to chat with Ben Rubin Co-founder and Executive Director of the Carbon Business Council! The Carbon Business Council is comprised of leading carbon management growth companies working to reverse climate change! We discussed carbon management technologies, the climate bill framework, voluntary vs mandatory carbon markets and more! 

https://carbotnic.com/carbonbc

Oath to Restore the Earth 

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 Ben Rubin executive director and co-founder of the Carbon Business Council, welcome to podcast Ben.

Ben Rubin

Thanks! Thanks! so much for having me here. James thank you.

James McWalter

Great Um, to start could you tell us a little bit about the carbon business council.

Ben Rubin

So happy to yeah, the carbon business council is a nonprofit trade association with more than forty carbon management startups who are working to help restore the climate by removing CO2 utilizing cotwo and and just a range of other ways of how we can. Deal with this problem of all of the legacy emissions we have in the atmosphere and and rethinking how we approach co 2 We are a trade association of innovators. Ah there’s many early stage companies that are part of it because we believe that innovation and the approaches it terms bring to carbon management is going to be key for unlocking solutions for how we. Scalup to to gigatonn scale carbon management.

James McWalter

And you know trade association I think you might be the First Trade Association we’ve had on the podcast and so and they’re obviously like you know, very very strong levers for the spreading and the development of certain types of industry certain types of technology and so on. What drove the initial decision to start co two bc.

Ben Rubin

So yeah, yeah, well we see innovators in the space and early stage companies moving forward very impactful solutions but because policy is going to be so critical to getting to gigaten scale Removal. We We saw a need to bring these innovators to the policy table to make sure that the unique needs of startups were represented as as government policies are being developed to move carbon management forward and we did not want startups to be left out of the conversation so we had conversations with dozens of companies to understand would a trade association be helpful. What types of services would be most advantageous to early stage companies and across the board. There was a lot of excitement for for the types of services the approach we put together and and we’ve been pleased with with ah stakeholder support as well of just people recognizing that. Startups do have such an important role to play in how we had Gigaton Scal removal and and how there can be a benefit to coming together and having a stronger voice and.

James McWalter

And so when you’re having those early conversations you know, thinking about the none you know none None to twelve months as you’re developing the C O 2 Bc um what were the kind of main commonalities I guess between different startups because as I look at the list of your members. You know some are obviously very focused on. Yeah. A cultural based carbon sequestration. Some are more direct or capture. Yeah, a large variance in terms of the technological approaches and generally the business models as well. Um, so yeah so what what were those kind of commonalities you recognize early on.

Ben Rubin

Yeah, you’re picking up on a great point. There James one of the biggest common nowities actually across every single person we spoke with was the desire for there business council to be technology neutral I think across the board companies felt like it was too soon in the game to pick winners and losers and that. We have to see what is going to be most successful where will the technology cost curve been the most and so there was you know a desire from folks to to not have any None technology favor too soon in policymaking I think without also recognition that. As we look towards 2030 when we are hopefully removing gigatonns of co 2 from the atmosphere that it will ultimately very likely be a blending of different approaches that’s going to help get us there both removing utilizing the c o 2 storing it and so that was a commonally commonality across the board that that tech neutral approach. And then a lot of the services that that we developed having companies come together to be able to network having companies better track the conversations happening in Dc to understand policy. There was just there was recognition that. Because the the carbon management industry you know is so locked into policy that there’s a benefit to to feed that Intel the startups and and to bring them to the to the table to interface with lawmakers directly.

James McWalter

And thinking about you know as you have like a new industry you often have like a larger in essence a b two b series of companies emerge to support that industry and so when you think about what a company that makes sense for the C O 2 Bc looks like versus None that’s a little bit adjacent makes that sense. Um, do you have any kind of firm delineations over what’s a great candidate to be part of the trade association versus something that might be a supportive set of technologies but isn’t core to your mission.

Ben Rubin

Yeah, we are working to represent the the full value chain when it comes to carbon management. So as an example, if a company is removing cotwo from the atmosphere and that could be through direct air capture or another type of technology. What is going to happen with with that co 2 and that’s where those types of b to b connections between companies is it being stored underground. There are companies rising on that challenge thinking through geologic sequestration and how to make that happen. There are also companies thinking through if that co 2 is not being. Stored underground if it’s being utilized. Can we help take that co two and turn it into jet fuel or turn it into a consumer product and so really we see a value and and think that we can help expedite the growth of the industry by forming these types of connections. Ah across and for us. It’s also included marketplaces folks who are helping to be a point of connection.

Ben Rubin

To to someone who might be wanting to buy carbon removal to help hit their net 0 pledges and then the the companies themselves who are who are you know who have those those carbon removal credits and they can sell.

James McWalter

I want I guess what about I guess ah, kind of carbon accounting companies and software where they’re basically going into often very very large fortune None companies and trying to measure the underlying carbon and they will often have some sort of ah you know offsetting. Ah, functionality built into their software would those also be a good candidate.

Ben Rubin

So Yes I I think they certainly could be for us. Generally you know, ah a litmus test is does The is a company early stage and and help fall into this category of and an innovator in the space which which tends to be early stage and growth companies and do they have. Either a full or part of their company that has a focus and emphasis on carbon management. There are some carbon accounting firms that might be squarely focused On. We’re measuring Scope 3 emissions of company but but there are others you know who are specifically thinking through where accounting for carbon removal and management comes into the mix and so I Think. The answer is yes there and and for us. Yeah, another litmus test is we were pleased when we rolled out that we released the ethical of to restore the earth for Us. We’re committed to both growing the carbon management industry economically but also responsibly and so we are looking as as members come on to. Sign on to this ethical oath or sortath similar to an ethical oath that doctor sign or lawyer sign we we are pleased to have our members supporting the responsible growth of the industry which you know includes affirming that removal should work in tandem with mitigation that is not a replacement to it and and some other tenins laid out in that oath.

James McWalter

Yeah, and I actually just have the oath up on the website and what well include that link in the show notes. Um, yeah, and and yeah, it’s pretty short but pretty comprehensive. It’s not None or None statements affirming the varying aspects of you know the carbon management industry as as you mentioned. And I guess when you’re kind of thinking through when you’re you know writing this and and partnering a folks to kind of get you know this list of None or None statements. Um I guess you know were there any predicted pieces that were more kind of debate worthy versus others.

Ben Rubin

Yeah, yeah, that’s a great question and we were fortunately able to workshop this with a wide set of stakeholders including startups in different groups in the space to get feedback I think what was great about it is there was broad-based alignment that there is a benefit to have the industry coalesce around a certain set. Standards to guide how the industry grows again invoking what lawyers have and and what doctors have when it came to carbon management it having this affirmation that removal is not replacement for mitigation for the carbon business council. We follow the the science in the ipcc science says that we need. Giga None of co 2 removed from the atmosphere but it does not say that that removal is a replacement to mitigation and so I think you know with an example like that there was fortunately a lot of alignment where these statements were. Great to have entshrined great to have written down great to have startups signing onto and affirming but largely you know they they made sense for folks to to back and stand behind.

James McWalter

So yeah, and the um you know, sorry just just so like a quick pause sometimes you slightly cut off a bit early Ben I I know you’re pausing but ah, you can give yourself ah like I guess a None after you finish talking.

Ben Rubin

So okay, great. Thanks James I will keep an eye on that when I meet myself and.

James McWalter

Ah, yeah, nowheres at all. Um, great and so you mentioned earlier that yeah this kind of focus on early stage companies and I mean that’s that’s partly due to the type of industry right? because it is such an early stage you know industry the idea of. Like a norri or you know director capture type technologies being deployed at scale. You know, even None maybe three years ago um was was pretty like surprising I think to a lot of folks and so you know things have come on in leaps and bounds over the last couple of years but I think one of the things that as you think about the growth of companies. Lot of startups that that I could interact with they don’t rethink too much about you know trade council councils as you go along from my own startup more the renewable energy space. We actually did did just recently sign up to one of the large scale solar energy. Um, you know trade organizations. Um, and it’s definitely not designed for. Companies of our size I would say and that’s fine. We like we are we are definitely getting value. Um, they’ have some good conferences all that kind of thing. Um, and so as you were kind of looking at other you know trade councils that are out there. Um and trying to build one that’s particularly beneficial to early stage companies who are generally fairly technologically advanced. I guess what were kind of things that you looked at and said okay we want to definitely incorporate these elements of other trade councils and we want to avoid these other ones.

Ben Rubin

Yeah that’s a great question James I think for us None of the goals is is as early stage companies know I mean time is one of the most precious commodities. There are so many time constraints when you’re getting a pilot up and running working on raising ah a seed round and so I think for us None of our goals was to. Work to be time additive for companies I think an example of that is something like tracking the latest policy developments or legislation floating or what is happening you know and in conversations that are taking place on Capitol Hill if we’re tracking that you know for for 1 carbon management company. We should be sharing and tracking that for more and that’s the type of thing that is saving a company time if if they can read our new see our digest and they don’t have to dedicate staff time to do that themselves I think it’s an example of how we want to try and fundamentally add time back into the day of startups and early stage companies and. Depending on where in the growth spectrum that company might be that might be actionable intelligence for them to want to engage in a policy conversation and and and have more substantial conversations. It might be something that they. Ah, fold into a pitch deck as they think about their business plan and and how they’re going ah to scale and grow and and nest this policy into their long-term business plans and so you know we startups might internalize take different steps based on the actionable info we provide to them but for us just generally. Time back in the day of companies was was a guiding principle for us recognizing the the time constraint that a lot of companies brought against and.

James McWalter

And going into that policy piece I think that’s a pretty meaty part of what any kind of trade association or trade council engages in and because this is again top of mind for anybody and. Industry right? like all people are thinking about the questions around measurement and verification and which technologies are moving faster or slower and how you price carbon and all these kind of things are just like very very yeah wealth developed in terms of underlying conversation. Um, but you know you mentioned Capitol Hill there’s been a year of ups and downs trying to get a climate bill through I mean just this week we did get a positive sign from senator Manchin but we’ll we’ll see you know I’m I’m not going I’ve been hurt before right? as we all have so I’m not going to kind of believe it until we kind of get to that point? Um, but as you think about you know some of those kind of larger legislative kind of movements.

Ben Rubin

I Think if he has if.

James McWalter

Um, how does the C O 2 bc see themselves or how are you kind of operating within that kind of larger you know climate bill framework.

Ben Rubin

Yeah, another good question James we want to bring fundamentally one of our primary goals is to bring innovators and strategiesups to the policy table because we think they’re so essential for bending that technology pass grid and helping us scale up to reach giga times scalele carbon management. We we want to make sure that they. Can be a resource to lawmakers to share information that that can be technical resources as well as understanding and and starting to hash out what types of policies are going to be advantageous for this tech neutral approach that can help startups to thrive and and grow and we’re seeing some of that in that. In that legislation that is being floated right now where there is just a breakthrough on if that passes some of the amendments to 45 q as an example, a tax credit where some of those amendments help more increase the eligibility where an additional set of companies working in carbon management can can be eligible and so. It’s examples like that where we’re pleased to see that the carbon business council as as an additional example of how we might engage or or the types of things we’re looking at we provided an endorsement to the bipartisan crest act and that is where we’re excited to see that that’s bipartisan. Climate legislation it it shows that there can that carbon management can be a bipartisan climate solution and we’re also pleased that it proposes expanding federal funding for multiple forms of carbon renewable again taking that tech neutral approach that we think is going to be so critical to help startups really scale and grow.

James McWalter

Yeah, it’s yeah know it’s like 700 pages of the bill were dumped this week and we actually like internally did do some reading of it. A lot of control fing like we didn’t actually like read anything close but but you know solar carbon. Um, you know these kind of terms that kind of see.

Ben Rubin

Yeah, yeah I.

James McWalter

Ah, how those things interact and I think one of the I guess somewhat hot topics when amongst at least some part of the environmentalist community. Um, which yeah is kind of surprising to me how this has become a hot topic but you know the. Use of carbon sequestration as some way of like maintaining. Um, yeah Fossil Fuel Dependence Now this is not something that I personally have much stock in I think that we need all of the above and then 10 X that to have any chance of really hitting these kind of longer term climate goals. Um, But how do you think about? you know some of those arguments that occur. Around ah carbon Sequestration Cc Us and and similar types of technologies as being things that potentially extend the runway of Fossil fuels and some of these other non-sustainable methods of fueling the economy.

Ben Rubin

Yeah, good question James I think for us that’s None reason why we think the ethical oath to restore the oath is so important that oath affirms that removal is not a replacement for the important work of mitigation and that ultimately can work in tandem with it and we see the issue you know as just that at that. Following the science that the ipcc has reached this conclusion that we’ve delayed reducing emissions for so long that that work of deep decarbonization continues to be more critical than ever and so many of the provisions in the inflationment inflation reduction act that was passed helped help get us there with electric vehicle tax credits. Renewable energy. So many of the other things that that it’s proposing of how we reduce emissions. But as we’re doing that removal also becomes this essential option and essential to be focusing on scaling it up today so that we can get to gigaton scale by the time that the ipcc models are showing that we need to be there and so. Ultimately I I think that it is a a yes and that it’s a working in tandem that we can have both and through one policy that the current business council supports is is net twin targets where in a net zero plan. We’re seeing how much someone is hitting net zero or net negative. Commitments through mitigation and how much someone is hitting it through carbon removal and so ultimately again, it’s that’s None example of how we can see this working in Tandem which is ultimately I think both what we’ll need. To stay within the goals of the Paris agreement and and what what can help ussuage concerns that removal is not a replacement for that important work of mitigation. So.

James McWalter

And you know we talked a little bit about the policy side of things. But then also you know the supply right? like the companies in that you work with those 40 odd companies they are providing a carbon removal or carbon. You know, carbon sequestration service of some sort and that’s you know the core product they’re building. But then you have on the demandd side. You know at the moment we do seem to have way more demand dens supply in terms of carbon removals and a lot of that has been led by ah rfps coming from the stripes and shopifys and Microsofts of the world. Um, and that I think has been a really powerful lever to ah kickstart this is like ah a nascent industry. Um, but not that many companies have done that right? We’re probably talking about none to a dozen companies who are buying up all of the you know quote unquote high-quality carbon sequest rated offsets over the last couple of years how do you think about how that’s going to evolve on the demand side. Um, I mean is it going to be world of marketplaces will individual members of of your council potentially start to build their own you know sales of marketing teams and they’re actually selling to the demand side directly? Um, yeah, any thoughts on that.

Ben Rubin

Yeah I Think how we can strengthen the business case for carbon Removal Offtake. It’s a great question and it’s going to be something that’s obviously vital to the success of the industry I Do think that we’re seeing some of the carbon removal happening through Marketplaces we’re seeing some carbon removal. Purchases happen through direct buys and we’re seeing you know the possibility that as we think about hitting Net zero targets that that obviously is going to be contingent on mitigation and reducing emissions but recognizing that that for that you know that that final mile or those. Um, hard to abate sectors in in ah in a net zero ah Pledge. That’s where carbon renewal will come into play and and we’re seeing that on both government side and private sector side and so I think as more plans are coming together for how they hit Net zero Targets. We will be seeing this increasing. Amount of recognition about where carbon removal and carbon management can come into mix.

James McWalter

And yeah, on that. So yeah, one of the things when I started looking into. Yeah the carbon space when I was looking at different ideas for my next kind of startup and again ended up going in in the clean energy space but went pretty deep on carbon offsets and all the varying technologies. Um, for about None to None months and. 1 of the things I I was kind of quite surprised by was there was this like massive existing industry of what’s called renewable energy credits or Rex that are traded mostly in California Canada and in the Eu and it’s what’s called like regulatory market for carbon. But it is in that this particular case dependent on renewable energy and then they have what. What are called the voluntary carbon market which is when an individual or like an entity will say I’m going to offset my carbon in a particular way I’m not actually required by anyone to do that I just want to you know either give directly back in a positive way. Ah, you know like a company like Microsoft right? who is committed to completely removing all the carbon. It’s ever emitted in the history of the company. Um, that’s not done for business reasons I don’t think that’s tiredly done through you know the kind of ethical reasoning of the internal company itself. Um, but. What you’re also seeing is people using offsets as a way to grow market share or retain talent and all these kind of things. Um, but that voluntary market is still very very small How do you think about how the voluntary market could potentially become a regulated market because the regulated market for Rex is absolutely. Massive I think it’s hundreds or none of x what the voluntary market is today. Um, can we you know will waste to have a voluntary market for the next 5 to 10 years and or should we be trying to get a regulated government run or state run market in carbon. Sequested credits as quickly as possible.

Ben Rubin

Yeah, good question James and I do think as we’re thinking about how to create business models for carbon removable. You’re you’re certainly thinking of something important with voluntary carbon markets. The carbon business council currently has a working group on voluntary carbon markets will be publishing a white paper in September with recommendations for how. Voluntary carbon markets can be strengthened to include more carbon removal options within those markets and for both I think in those voluntary carbon markets. There are open questions that you’re touching on around a common set of definitions. How to ensure verification. Removals that are entering into voluntary carbon markets. How to also ensure that that verification process is is somewhat streamlined so recognizing that voluntary carbon markets will continue to be here for the foreseeable future. We. We do think it’s important to strengthen and optimize those markets. Has been. It is encouraging to see some of the cases in the us in California with the low carbon fuel standard and some of the work that California Air Resources Board is moving forward some of the work happening in the eu with regulated markets that there’s growing possibilities on both the regulated. Market and the voluntary carbon market side of thing to help carbon removal scal up and grow.

James McWalter

Yeah, it’s It’s kind of like you know, especially large organizations right? They want a number and then they can build processes around that number and the more regulated that number is the more they’re likely to build the internal processes and so on to actually meet that. So. But that all makes a ton of sense. Um, one of the things I was looking through your website and kind of trying to better get but better understanding as I came across the institute for carbon removal law and policy which I believe is out of American University Um, could you speak? Ah, a bit to how um. That institute kind of interacts with COTwo bc.

Ben Rubin

Yeah, the institute for carbon and law policy is there. They are house head of American University and they are a wealth of resources for things on carbon remov have a lot of great explainers and None pages and reports on their website I am a research fellow with the institute. So. There’s. You know the line is open with them to think through. Are there research gaps within the carbon removal ecosystem that we should be thinking through and so that is a so have have a line open with them in that capacity and and they’re a partner of the carbon visits to come to working with them and and would encourage folks if if anyone’s not familiar with them to check out their website to read up on. Some of these just great. You know, different explainers 1 ne-pars of the resources they’re providing on what is direct air capture what is ocean-based Cdr and just some of those great resources out there. You know in the public domain to to bulk up knowledge around these complex issues and.

James McWalter

And what are the artor research gaps like where where would you love to see smart people doing more research in the space.

Ben Rubin

Yeah, yeah, there are certainly many research gaps within the the carbon remable ecosystem and I think that. And and they’re important to solve they’re they’re important to answer and I think it speaks to where there’s an opportunity for startups in early stage companies to be a resource for some of the research as it takes place. But there’s both the open research questions around hard tech. How can we lower the cost of certain carbon Removal technologies and and make them more affordable. There’s research questions around. Governance so that we can ensure that carbon Removal does scale up responsibly and and what that looks like what what the most beneficial forms of community engagement will look like when projects are being cited and built out and then there are research questions around what is that best verification system for voluntary carbon markets that is both. Rigorous but streamlined and so there there’s a host of of research and open questions to answer I think across different disciplines and I think. 1 that continues to be important is the the ipcc has a firm time and time again in multiple reports now the importance of carbon removable but continuing to understand how much carbon removable we need when that is obviously you know an underlying part of it that that helps underpin. How much carbon removal Are we talking about where the startups need to be going and and there’s similar alignment between different models that are being run by the ipcc or the international energy agency. But just again these wealth of open research issues. We’re pleased to see that startups can move forward on R and D on scaling up for projects on bringing projects to Market. As these important research questions are answered and addressed.

James McWalter

And I guess some of that research also intersects with the capital side of things. So there’s been a pretty decent amount of venture capital in particular going into ah carbon focused startups over the last two years and I’m talking a few of those vcs I’ve also talked to a few. Yeah, those kind of carbon startups and one of the things that sometimes there’s a bit of a struggle with especially on the vcc side is they often don’t have the ability in-house to confirm the science and so you’ll sometimes have something that’s like it makes sense right? So ah like there is an intuitive grasp of of the concept. But then in other cases, it’s like okay does this even work right? And so I think about things like enhanced weathering which is this kind of absolutely fascinating type of carbon squistering technology. Um, but yeah, I’m personally never done the research into understanding how it might scale what it might take. Ah, how much it sequesters relative to other you know, use cases all those kind of things and so how do you think about how startups can better. You know communicate ah display research chops and so on to investors who often will only give maybe None to 3 hours before they make a None figure decision on on a. Given startups investment.

Ben Rubin

I yeah I do it’s a great question and I think this speaks to efforts that are taking place right now to reach commonality around measurement reporting and verification and mrv having a clear set of standards in place for what. What we’re talking about how can we measure the CO o two how can we verify that that co 2 is be removed having those types of methodologies will be so important but that is obviously an immense and complex question to answer recognizing that There’s so many forms. Of carbon removal out there from enhanced weathering like you’re talking about to direct air capture to ocean-based carbon removal and in many other forms of it. What does that and mrrv look like but but moving forward on that having having data available that’s showing what what carbon removal is working what lessons are being learned. That will ultimately help to strengthen the industry and ensure that we are continuing to March towards this gigaton scale removal by 2030.

James McWalter

I Yeah, the M Mrv question is absolutely fascinating to me because because there’s so little emva ah particularly across certain types of carbon Removal technologies and generally those carbon startups are the carbon removal startups are like the most. Up-to-date cutting edge companies to do the actual measurement as well. But then you kind of get into a world where are we vertically integrating the sequestration the measurement and the price setting. Yeah the market piece which a few companies have done I could be understand why those companies have done that and I think it’s been so far. Net Positive. Do think as we get larger. There’s going to be have to be this role for independent and Mrv or ideally startups companies. Um, who are you know they are actually making money on the basis of the accuracy of their estimates um versus having all these things necessarily vertically integrated all with in the same company.

Ben Rubin

Yeah, yeah, I think that what’s great is how many bright minds are actively thinking through these complex issues right now around Mrb and and thinking through the different business cases if it will be vertically integrated within companies if it will be outside and and I think it’s it’s great to see how. Just how this is evolving I think there’s increasing recognition across the board that the sooner we can have good and and clear and streamlined sets of agreement around what and Mrb is going to look like the the faster or not the faster but but the faster and stronger we’ll be able to help scale up. Carbon management and.

James McWalter

Absolutely and then I guess the other piece is ah because we were talked a little bit about the the kind of capital side. So there aspects so some um startups make sense for certain type of funding and like the classic you know, quotequote software startup Silicon Valley company um yeah has tends to have pretty high margins right? So 70% plus margins they tend to be very very software based so low capital costs. Um, most of the costs are in the people themselves and that venture model is also built around lots and lots of bets and only if few shoot to the moon and the rest generally fail. And 1 of the things I think that as I look at climate tech in general and I think carbon removal and carbon sequeration companies are definitely part of this. We definitely need lots and lots of bets but often the technology and the novel use of a technology is contained within a single company. And if that company for whatever reason then most startups fail does fail. How does that affect actually that technology being set back for that particular you know direction versus just that company not working out for all to none of reasons those startups don’t work out and so one of the things I’ve been thinking and talking to a few folks about is what are other. You know capital allocation or capital. Um, you know investment structures that might make more sense for companies in climate tech versus traditional Vc and you know you have project financing. You have various types of debt instruments and so on. How do you think about the current landscape you know is it fit for purpose for carbon removal companies carbon secoration companies or do we need to start getting a bit innovative over the financing model itself.

Ben Rubin

Yeah, it’s a great question and obviously financing is such an important nut to crack for how startups can have the resources that they need to help hit Gigaton Scale. It’s been encouraging to see private investment coming into space both through vcs and also some of the corporates you were mentioning who are. We’re buying carbon removal to help scale and grow the industry. What the frontier fund is doing essentially with a model of advanced Market commitments a similar model that was used for vaccines for Covid Nineteen is another great way to help grow the industry and in addition to these private sector Dollars. We are seeing support from the government to help. Support research of technologies that’s coming through the department of energy through Arpa E and so it is also great to see the government investing in research to help answer some of these complex questions about again. How can we expedite the pathway to get to durable and strong carbon removal by 2030.

James McWalter

And if I think you know back to the C O 2 bc um, what are your kind of aims over the next year or 2

Ben Rubin

Yeah, well we are. We are excited to grow as the industry grows and so we’ve we’ve had many companies reaching out to us about joining the team and so excited to be expanding and and bringing out new members in the weeks and months ahead 1 of our central goals is to be bringing startups to the policy table and so we will be doing just that over the next several months attempting to weigh in and inform policies that can help startups to to scale grow and thrive. And in the process we will also be working to ensure again that carbon removal not only grows economically but also responsibly and so that will mean continuing to elevate and lift up that ethical oath to restore the earth and thinking through what responsible growth of the carbon management industry will be looking like.

James McWalter

And and then if I think about the the space. You know you have your 40 or so members today but we need um like lots more right um you if if some kind of smart potential founder early team member of ah of ah, an early stage startup is listening to this. We’re areas of innovation that we just need a lot more people building um, are there specific areas that are underrepresentative within the carbon removal space.

Ben Rubin

Yeah that’s a great question I think what’s encouraging about carbon removal right now is this idea and and this isn’t trend I think in the energy department’s carbon negative shop where they’ve set a goal to help have carbon removal happen at $100 a ton or less. By a certain year and and that is taking this tech neutral approach that’s emblematic of the carbon business council as well recognizing that there are multiple pathways that we can get there one. Great resource that I would point out is that lower carbon vc firm in the space who invests in carbon removal startups. Just put out a blog post recently highlighting some emerging forms of carbon removal that they are interested in funding and supporting and some of these you know are are probably newer news for folks who if they’re even if they’re tracking carbon removal conversations I think it shows how many promising forms of removal. Investors are looking to fund that might be scaling up and and it’s for you know a reason like that that we’re pleased to be taking this tech neutral approach where we are excited to see in the next few years are there breakaway solutions but we think right now at this juncction 2022 it would be premature to say you know that that one solution is going to be more successful over another than.

James McWalter

Yeah I think there needs to be a lot more kind of cross-pollination of talent between I guess conventional or traditional. Um you know, software and hardware startups and people who are in the labs developing these technologies um actually run a climate meetup in in New York City and it’s been kind of remarkable meeting some amazing research scientists out of Columbia University in particular who are working on carbon sequestration technologies and they’re like can I start a startup and and like and then they’re like talking to people who are you know, putting together ah like a slack competitor you know Zoom and they’re like oh these guys don’t know anything they’re like building a startup. It’s like oh. Yeah, you are one of the foremost domain experts in the world about this type of carbon sequestration carbon removal um, you absolutely can be building a startup if if you so wish and I think having more folks who are in that kind of startup world about trying to. Build at scale are interacting with people who actually know the science in a really deep way means we’ll start to get the best about worlds.

Ben Rubin

I But totally agree with that I think creating those types of points of connection and synergy can really help to unlock and accelerate the growth and.

James McWalter

I and just before we finish up and you know you’ve been working on the C O Two bc for a little while now. Um, what’s been most surprising that you found since since joining the and setting up the C O Two bc

Ben Rubin

So yeah, That’s a great question I Think what’s been most surprising I think really just seeing the the dedication that innovators or founders and companies have that they’re bringing into the carbon management ecosystem has been.. It’s been delightful surprising and inspiring to see we have some successful serial entrepreneurs who have started multiple successful companies not necessary and in climate who are now coming to climate but just seeing the level of talent and dedication being focused on this issue. It’s it’s encouraging to see. And it’s it’s ah it’s a pleasant surprise that so many people are are following this ipcc science and working the ride to the occasion. It is a tough nut to crack about what it will take to get to Gigaton Scale Removal by 2030. We think that innovators are are the ones who are going to be positioned to lead the way and help get us there and and it’s it’s great. To see them rising to that challenge and rising to that occasion and.

James McWalter

Yeah I Always tell people who are like pessimistic about our climate future to say if you want to feel a bit more optimistic every day directly work on these problems. Um, yeah I was kind of like in a bit of a funk about all these things and then actually sort of working on it and you know so far haven’t actually had a. Yeah, the profound effect on the climate that we all hope to have but just by working through the problem trying to improve every day. It actually has a massive. You know, positive kind of internal effect as Well. And so I think yeah for anyone listening to this who does feel ah you know, maybe a bit of despair a bit of hopelessness. Like actually working on these things in any place right? It could be a startup. It could be on the policy side Activism Whatever it may be is actually I think the number way to start feeling more optimistic and feeling like you’re making some positive progress.

Ben Rubin

I fully agree with that James yeah I think it’s encouraging to see what strives to do and and exactly what you’re hitting on. It’s to solve climate change. It will take multiple folks working on multiple issues whether it is on that policy side or some of those other areas you’re talking about. so so yeah doubling down that.

James McWalter

Yeah Ben it’s absolutely great and chatting and really enjoyed the conversation before we finish off is there anything I should have asked you about but did not.

Ben Rubin

So yeah, good question James I would say if folks are interested in hearing more about the carbon business council just that they can go to http://carbonbusinessconunsel.org to learn more. We put out a biweekly newsletter with updates and Intel happening in the space so would invite folks to sign up for that. But also invite folks working in carbon management to take a close look at the ethical oath to restore the earth signatures are not limited to members only we think it’s important to have multiple folks sign on to this ethical oath and so I just invite folks listening who are. Also thinking about carbon management also thinking about what it means to grow responsibly to to take a look at that and consider signing can be a good fit for them and.

James McWalter

So I will include the link to the oath and those other links in the show notes. Thank you ben.

Ben Rubin

Thanks, excellent! Thanks so much James thank much.

CO2 By Spend – E109

Great to chat with Ted Power, Co-Founder at Bend! Bend tracks CO2 emissions by company spend! We discussed CO2 estimates, the growth of companies with climate commitments in the last few years, how to define net zero and more!

https://carbotnic.com/bend

Reach Ted: tedpower@bend.green

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 is speaking with Ted Power Power cofounder at Bend welcome to podcast dead. Cheers! I supposed to start what is bend.

Ted Power 

Um, hey James great to be here. Thanks for having me. Yeah, so Bend is a carbon spend-based tool. We have really two use cases. one is we help small businesses with one click measure. Their carbon footprint and the way that works is we pull in. All of their spend data and um are able to create ah a company profile based purely on that spend data with merchant specificity factors. Um, and then we help those companies in a very sort of lightweight way plot a path to net zero and then. Figuring out how to talk about it with their customers. Um, so that’s one piece and it’s quite a bit more you know automated and you know, frankly, cheaper than some of the um you know more advanced ah sort of more enterprise carbon accounting tools out there. Um, you know our our sort of thesis is that there are. 99% of companies that are doing essentially no um, you know, thinking about their carbon footprint. We want to make it really easy for them to get started so that’s one focus and then the second focus is we make all of that data available via Api so that fintech companies and um. You know companies that have this spend data can actually embed climate information directly into their products and part of the idea there is that you know not every company wants to have a separate carbon accounting tool off to the side of all of the other tools that they’re already using to run their business and so we make it possible for. You know fintech companies expense management companies. Um, you know vendor management companies to embed ah carbon accounting little sort of widgets in in their existing products. Um all available v api um, yeah, so that’s what we’re building.

James McWalter

Super cool and and we’d love to kind of dig into each of those in turn. Um, but I guess before we do that. What drove the initial decision to start bend.

Ted Power

Yeah, so my cofounder and I um Thomas prior to Ben were working at an expense management company that I co-founded in 2014 called Abacus and um at Abacus we you know we built this thing where companies could. Track their spend. You could get reimbursed for your you know Starbucks coffee or your you know Jetblue flight or your Aws bill. Um, and we built that company. We sold it in None to a company called emburse that is the None largest spend management company in the us after concur. And um, you know one of the things that we heard from our customers increasingly over the last couple years is that you know our customers and which included like you know the bill and Melinda Gates Foundation and bosh and Exxon and others or big companies. Um, they were saying like hey you’ve got all of our spend data. Ah, could you please help us understand our carbon footprint. Um, if you think about it. It sort of makes sense in this you know from the perspective of all of that spend you know the business travel the marketing spend the cloud spend for many companies is the primary source of emissions. Um. And um, you know, being able to offer kind of real-time insights into um you know all of the things that your your company is spending money on and where there might be opportunities to reduce your emissions and particularly your scope 3 goods and services emissions. Um. Seemed like a useful thing to just sort of embed in um, in spend management and so we set out with Ben to build essentially that translation layer of you know dollars or or currency to co 2.

James McWalter

That’s interesting and it’s always very helpful to have heard about the problem. Yeah, from multiple years from like you know large organizations like you mentioned and that really helps kind of validate. You know that that kind of early kind of customer validation Process. So. Yeah, once you got to I guess decided to move forward and and start a new company with this particular focus. What was your kind of None You know the first couple of months like.

Ted Power

Yeah, so um, Thomas and I started working on ben really at the beginning of this year so it’s only been six months or so um, you know the the um, the None thing we did was we started to? um, yeah, talk to a bunch of people. And then also um, start aggregating corporate emissions data which is kind of the foundation of the way you know the way it all works and so as you may know um, most. Large companies now publish annual sustainability reports with their full greenhouse gas inventory data and so this is something that you know even a couple years ago the number of companies that were participating here was.

Ted Power

Was pretty small and and you know maybe not to a sort of a critical mass where what we what we’re doing today would have actually been possible but now over 70% of fortune None companies publish um their greenhouse gas inventory data and you know that number is growing exponentially. Um, and so it really made it possible to start to have much more granular. Ah merchant specificific data still using the sort of the spend approach. You know it used to be sort of traditional carbon accounting is the data was so poor that every time you wanted to address it. You pretty much had to do sort of bottoms up analysis of like. You know we don’t really know much about you know jetblus emissions or whatever so we’re going to create a model for air travel or we’re going to create a model for you know cloud or whatever. Um, and do a you know bunch of very manual sort of calculations and we probably do about once a year and you know takes a lot of time. Um, and our approach at Bend is we take you know instead this um greenhouse gas inventory data and we use that to create emissions factors per merchant and so you know let’s say you know Starbucks for example, publishes their annual sustainability report. Um. We take their full greenhouse gas inventory data which is scope one through scope 3 all of their data. Um, and that’s the total emissions and then we you know the the denominator what we divide that by is their total revenue and so the formula is basically your you know $7 starbucks.

James McWalter

I Sure these days. Yeah.

Ted Power

Maybe you know $10 Starbucks with inflation these days. Ah you know, multiplied by um, Starbucks’s total emissions divided by their total revenue equals. Essentially your share of emissions or basically um, you know your your scope 3 emissions. Um. And so that’s the formula. Um, and we um so like we hand download all of these ah Pdf sustainability reports and they’re like you know None page reports and on page you know 99 there’s like a table and so we you know pull in all those values. Um. And of course not every company yet publishes this data and so in the cases where we don’t have good merchant Specificific Data we have category fallbacks and so companies are still able to get None coverage but just with various. Degrees of confidence based on whether or not we have good merchant specific data or just sort of you know category benchmarks. Um, and um, yeah, and so you know at the beginning of the year we started building out that whole process. Um. You know and then you know once we had that sort of engine working you know more recently the focus has been on making it really easy for companies to either embed this data or to connect their bank account and um and get a climate report in a matter of you know 30 seconds and so that’s sort of the focus now.

James McWalter

Yeah, and I guess in terms of that like that initial Mvp to be able to connect your bank account. Get a cla forden I can vouch that I actually did try this with with Ted and Ben about a month or so ago now where I set up our company credit card at my own startup. We use. Credit card called Brex? Um I think like the nature of any Mvp there was on my side. Actually it felt pretty smooth but it sounds like when we we discussed recently that there was kind of a lot of different kind of moving parts but I was able to kind of get in see our total spend and as. You probably expect what a kind of small startup that has done a fair amount of travel recently you know it very very heavily weighed towards you know our delta airlines last Airlines Jetblue Airlines kind of emissions and as that in terms of our spend is definitely the most and it actually yeah from a gut check point of view. It actually fit. Pretty much what I would have expected.

Ted Power

Yeah, no, totally. That’s um, that is um, what we see often with particularly with um you know software startups or professional services type companies where their emissions you know primarily are in. Um, 2 categories None one is airfare as you as you would imagine the other being cloud you know hosting and things like that and ad campaigns. Um, actually you know one of the sort of surprising and things is that that there’s a pretty significant. You know we all think about cloud ah you know sort of. Aws or Google cloud or whatever as being a big emitter which it is um but also Adwords and you know ad spend um also is actually a pretty big um source of emission. So so marketing spend. Um, yeah and I think you know one of the things that’s really important to us is that it. It’s actually. Ah, merchant-specific. So um, you know I think the top line sort of takeaway is that you know airfares is ah is a quite carbon-intensive. Um, you know, endeavor you know that’s probably where where most companies should start and you know we should be sort of thoughtful about. You know when it’s worth getting on airplanes and that sort of thing. Um, but also you know one of the things that’s cool about the merchant-based approach is that you can think about the relative emissions. Um for different merchants and so you know all things being equal. Um, you know if you’re going to take a flight and of course we all need to get on airplanes from time to time. Um, you know there are ways to reduce emissions even you know within within that sort of frame of like you know, certain airlines? um are taking climate more seriously. Um, and you know booking. Direct flights and and you know thinking about even the you know the make and model of the aircraft and things like that and so you know one of the things that we’re trying to sort of peel back the layers on it. Bend is helping companies sort of you know, think about that next level of like. You know for startups spend less money in and of itself is not really a viable strategy. You know like companies have to spend money. Um, and so one of the highest leverage things that companies can do is that when they do spend money they can think about ways to spend with.

James McWalter

Okay.

Ted Power

Lower carbon intensive vendors. You know, sort of like look at sort of alternative vendors. Um, and that’s one of the things that we’re really focused on trying to encourage have been.

James McWalter

So yeah, so so kind of building out nearly a recommendation engine that states. Okay, ah yeah, and and you know because it’s I guess it’s early just still a lot of data collection around kind of how users are using the product but you know eventually you could have something like yeah for us. You know we’ve Delta Alaskan Jetlue is our top 3 airlines and fors sakee argument and ah, pretty much all and all those flights for us are New York to sf and back like that’s pretty much the the route we do and so it’s like okay, consistently Alaska is better. Best and I have no idea which one is best but let’s have sake of argument. It is Alaska. Um.

Ted Power

Um, yeah, yes, well.

James McWalter

You know that at the margin. Ah, you know you could set up a recommendation engine and say hey, um, maybe you know not only look at Laska but that might be the best place to even do things like your air miles program for your company and just start to have those little nudges that. At to margin get people to take more kind of climate. Friendly decision.

Ted Power

Yeah, that’s it I mean that’s kind of it in a nutshell I think those like little nudges are powerful. Um as as a way to just sort of like iteratively make progress and so yeah, we’re all about the little nudges. Um, yeah and I think that’s um.

James McWalter

And so going back into the data for these kind of large companies who have made the kind of climate commitments and it’s funny. Yeah, as you’re talking I was thinking back to when I was None starting to look at century started climate company. This is a yeah summer of 2020 yeah

Ted Power

That’s a good way to think about it.

James McWalter

And deep in the early days of covid and at the time I remember like trying to figure out how many because I was mostly looking at the food space at the time I was like trying to figure out like how many of the large you know the fortune 500 companies have made climate commitments and at that point there was maybe a dozen food companies and literally when in four or five months

James McWalter

It was like 50 and and it was just kind of remarkable how fast the growth and it went from literally like it was just like these are the None companies and the dozen companies who have made a commitment to it being you know, basically ah, kind of table stakes for any sort of company and with recent kind of scc movements. It’s becoming more and more. It’s not quite mandatory and in the way we’d all like it. But it’s it’s kind of trending in that direction and so I guess as you kind of think about because it isn’t ah you know, structured in exactly the same way you have all these kind of varying reports. How do you I guess kind of compare apples to apples when you’re trying to assess these companies.

Ted Power

Yeah I mean that’s the that’s the like million dollar question um and something I think we’re all collectively you know trying to grapple with um, you know we so we do some things today and it’s something that we um, you know I’m sure will continue to evolve. Um. But you know none of all companies need to use the greenhouse gas protocol to report their emissions so we won’t include um any companies that don’t share full greenhouse gas protocol data. You know some companies are are you know, like historically companies would be fairly selective where they would report like scope one and scope 2 and then business travel but like ignore all the other categories of scope 3 and and for us. Um, you know it’s really important that it needs to include your sort of full at least your full kind of. Upstream emissions. Um, you know impact because without that it’s not really apples to apples and um and there’s so much emissions in that in that sort of scope 3 category. That’s really important. Um, so that’s the none thing is that you know we we only um, you know. Pull in data when when it’s reasonably complete. Um the other piece of it is compensation or or you know carbon credits or offsets and that whole sort of thing which which um, you know is certainly ah um, a big topic unto itself and you know and None of the things that we’re doing there because the. Quality of some carbon removal or you know Avoidance Offset claims are um, you know a little squishy at best um is we give first of all, we won’t um, we won’t pull in ah you know, very dubious ah carbon removal. Um, you know claims or offset information. We really prefer to have the actual like project Ids and all the information about the projects that companies are investing in and then we also give our customers the ah the option of choosing either the um compensated. Ah, emissions factors or the uncompensated emissions factors but which I mean like um, you know for example, take salesforce um, you know salesforce um is doing a ton of really great stuff and we’re huge fans of salesforce um, and they are actually they claim to be ah carbon. Neutral I think they would even describe it as.

Ted Power

Net zero the sort of definition is more a little squishy. Um, and um and that’s based off of you know purchasing you know a significant amount of ah carbon credits and so you know if if you’re you know, sort of you want to give salesforce credit for that fully compensated. Um. You know Aissions factor where basically every dollar spent with salesforce has a 0 and you know zero kilograms of cotwo because they’re ah a net 0 business then you can do that or if you want to take a little bit of a sort of a stricter stance and say you know I’m not so sure about these sort of. You know avoidance carbon credits in general. Um, then you can choose to only take the emissions side of the equation for salesforce and and not sort of you know, try to bake in the offset projects or or other things that they’re investing in.

James McWalter

What’s powerful about that is you know the development of different levers that pushes companies into better directions because I salesforce and Microsoft and a few other companies have done a really good job. You know in particular funding. Um. You know, various carbon credits initiatives, forestry etc and that’s great and and definitely needed but those companies also have the kind of longer term aim to be actually net None right from their actual operations and. Could be a combination of them producing renewable energy completely redoing their operations. None classic example, you know Microsoft and and salesforce I’m sure as well have large server farms. Um, yeah, moving those to renewable energy kind of changing how they’re constructed all those things that are way way more difficult than just you much us. But. Purchasing carbon credits of various types. Um, so I really like this kind of you know, dual approach to the you know adding leverage factors to get large companies to see. Okay, how are people kind of voting. How are they assessing? Um, yeah, how good any individual company is doing on these metrics. But.

Ted Power

Yeah, totally and and you know we’re we’re big fans of um I think it’s Lucas Jopa I’m not sure if I’m saying saying his name right? But the head of sustainability at Microsoft and he has a ah way of framing this as like we need to debug net 0 claims. Um, and obviously as engineers. We love the sort of debug metaphor and so we like we literally and it’s still you know early days on this but the way we imagine this working and we have a little sort of prototype of this on our if you go to http://ben.green and click on the Microsoft um, ah profile. For example.

Ted Power

We have a little like you know, ah we imagine it will look very much like a like a debug console like you know in the same way that if you um, commit some code you run it through a series of um checks and it will sort of spit out any sort of errors. Um, and in that same Sense. You know when companies publish their. Greenhouse Gas Inventory Data. We’d like we’d run it through a series of checks and sort of say well you know some of these carbon credits are a little questionable or sort of you know ranked fairly low quality or you know the way this company’s defining. Their boundary is suspicious or you know things like that um all sort of you know. You know, maybe sort of contributing to like a credibility score or something like that. Um, as a way to further kind of refine. Um, you know how how these sort of merchants or or companies are um, you know getting you know appropriately sort of rewarded for the you know the sort of investments that they’re making um. And like another example of that is um, one of our early customers this this task management ah company called dart which is another Yc company um is using um as using Band and one of the things that we’re working on with them is you know. If they go net zero um by and investing in you know, really high quality carbon removal which which frankly startups can afford to do because um you know that they’re their sort of their footprints tend to be so Modest. Um, then we can basically position them to your point earlier as a as a. Low carbon alternative to their competitors. So like you know and and we can sort of list them in a directory of of companies that you know are are you know, lower carbon intensity or even net zero. Um, and so I think that’s a way to sort of reward companies that are you know quote unquote doing it right? and then. Essentially creating ah a market for um, you know bigger companies that are searching for vendors um a way to actually you know fairly quickly filter for companies that are sort of taking climate. Seriously.

James McWalter

Yeah, it’s really Interesting. You know we we talked in the past in the podcast about how most of the incentives are for the largest companies in the world to actually decarbonize kind of strangely enough I think to the to the lay person relative to small companies because large companies have way larger. You know Larger Regulatoratory. Burdens Ah consumer. They’re more exposed or or they exposed them their kind of marketing to a larger kind of cohort or consumers who might be driven by some of these factors whereas you know a small supplier that’s sitting within the supply chain of a fortune revenue company often does not and so one of the things. Typically been seeing is this pressure from large companies to have smaller companies that affect their own scope three and scope 2 emissions to decarbonize and so what I think is really kind of clever about what you’re just saying there is you know that that pressure exists but you can also give the smart companies. You know, getting out ahead from a competitive point of view of their competitors as they try to be you know merchants and vendors to larger companies and and actually put it back into the power of smaller companies to make those decisions in ways that yeah historically is quite difficult to do.

Ted Power

Yeah that’s that’s the dream. Um, and we are like we could not be bigger cheerleaders for exactly that. Um, you know and big shout out to um Patrick Flynn and the salesforce team for I think you know being one of the early companies leading the way here. Where they’ve basically said that None of their suppliers need to measure emissions and um and set production targets and that is just ah is such a powerful sort of you know? um. You know point of leverage to really scale this stuff up. Walmart’s actually done a bunch of great stuff here. There’s a few companies that are really sort of moving us forward there? Um, and you know so if you know for any big companies. You know, maybe listening to this podcast. Um, you know, please make similar supplier pledges. Ah because. Frankly, it costs you nothing. It might even save you money and um, it’s incredibly powerful. Um, but yeah I mean we we are big fans of startups and small businesses and we think that they have um, a lot of ah, a lot of you know lot of leverage a lot to contribute in this space I think that you know historically. Um, as exactly as you said it’s been perceived. This is kind of like a enterprise company sort of public company game. You know they’ve got they’ve got the resources to you know, build out sustainability teams and you know maybe they’re in sort of natural monopolies or things like that plus they you know they’ve got they want to. Be listed in yeah esg funds or you know other sort of ah you know financial sort of public company type. You know, regulate regulations or incentives. Um, but our belief is actually that um you know small businesses have in some ways a leg up over the big companies. Um, you know it’s just been too expensive for them to get started. You know if it costs $100000 to build out a climate program then small businesses can’t do it but you know the advantages that small businesses have is they don’t have the you know the huge sunk cost of you know. Capital investment. You know, big offices, big facilities. You know, big outside sales teams that are flying all over the place. Um, you know startups tend to be pretty lean, pretty pretty nimble particularly post covid where you know I think there have been whole. You know. You know vintages of startups that are sort of remote none or hybrid and you know you know sort of working more on Zoom and and that sort of thing and um, you know so these companies are super well positioned to credibly um you know.

Ted Power

Reduce their emissions a heck of a lot and perhaps even go all the way to net zero which should be a competitive advantage against the sort of you know they’re they’re bigger incumbents who um will have a harder time I think decarbonizing.

James McWalter

Yeah, and you mentioned darsh is yc company. Obviously we met through y combinator for the audience both you know Ted and I are in the summer and but both of our companies I should say are in the Summer Twenty Two Y Combinator batch um with few none others. Maybe not as many climate companies as as I would have liked to kind of go into it or i’ have preferred but know I guess you know so touching on that. Um you know one of the kind of real the I’d say powerful parts of at least my experience of yc is how much focus they have on really understanding the customer and. You know, basically asking them to pay you. You know, getting really figuring out your funnel and you know moving a customer from you know oh that sounds interesting to actually being someone who’s a user a happy user and a paying user and so. I think having that kind of strategy around startups I mean is this classic kind of wicy thing if you can sell to Otherwisey companies when you’re in the match. That’s often a good kind of way to leverage early kind of customer interest and so yeah I guess how how have you found yc and um, you know how you’ve kind of taken that advice and applied it to bend.

Ted Power

Um, yeah I mean I think that’s the the power of Yc is really the the community. Um and and so um, so this is actually our none time through YCombinator we did y c. Back in None with um with this company called Abacus which is ah this expense management company I was talking about earlier and um and so abacus was ah also a sort of ah a businessto business expense management tool. You know we helped companies. Manage their spend and get reimbursed for spend um and and like our first I don’t know you know I’d say like 80% of our None customers were probablyyc customers. Um, and um, and so certainly that um, that. You know that network of founders who are you know in many cases willing to try each other’s products and and um and you know provide good feedback has been incredibly valuable to us and you know I think it’s um, certainly was then and it seems to be this time around as well.

James McWalter

I and as was speaking to dance. What are the kind of goals of the next few months I mean there’s demoday goals. You don’t have to share those those are you’re often. Ah very evolving and and closely held in our case as well. But yeah I guess like what? what? what are some targets. You’d love to get to you know over the next. Yeah few months.

Ted Power

I have.

Ted Power

Yeah I mean I think um, you know we’re we’re trying to build something that you know companies want so we we want. Um, we want more people using bend basically and um and you know giving us feedback and making sure that we’re um, onto something here. Um, and so. You know our goals are basically um, you know the the sort of None focus areas. We werere talking about earlier. Um one is if you work at a startup or a small company and you want to try out bend. Um, you know we’re where we would love for you to try out end and um. You know it’s a free trial a two week free trial so you can decide if it. Ah if it works for you and and um and beyond that it’s only a hundred bucks a month so quite a bit less than um, you know, many of the other pretty much all of the other carbon accounting like so you know enterprise carbon accounting tools on the market. Um, so that’d be the None thing and then um, you know the other focus is we’re having lots of conversations with um you know companies that issue corporate cards companies that um, you know like accounting companies spend management companies vendor management companies about. Ah, embedding um bend in their products and so that’s that’s sort of the other kind of more of a Api focused kind of um, you know thing that we’re we are focused on.

James McWalter

Yeah, like we didn’t really kind of touch on that in depth. So let’s get into that piece because that’s actually new to me as well from when I first started talking to Ted a couple couple months like a month or so ago and so yeah, so you know I guess this really kind of goes to that early insight when you were working on Abacus. Um, and so would a company like abacus be kind of an ideal client in that direction.

Ted Power

Yeah, abacus um, aca we be an amazing customer and and emburse that was the acquire of Abacus or you know or concur or um, you know, ah you know Brex or you know we’d even we’d even like plaid um which is a. Card data aggregator you know, eventually we we would love for this data to just be. You know, returned in the same way that they return you know a transaction with you know, an amount and a merchant and a date you know? Ultimately we think that? um ah you know cotwo should be returned on every transaction. Um. And you know I think that’s that’s the like big idea is that literally every transaction every receipt um has this sort of carbon layered on top. So that you can start to make more informed decisions and and just sort of take that into account. You know I think like. Sort of like econ one on one I remember you know from from ah freshman ah college was all about this notion of or you know, big big surf concept around negative externalities and you know the you know tragedy of the commons and things like that and um, you know one of the things that we’re just. We’re trying to do with bend is take those negative externalities and just sort of reflect them or price them in or you know represent them so that you can um you know start to you know, make better decisions.

James McWalter

And when I guess you know relatedly to this kind of idea of expense management. There is sometimes you’ll go on to a webpage. You’ll go on to you know Google flights and you’ll sometimes see the CO 2 equivalents and sometimes you’ll see that opportunity to click offset and so how do you think about.

Ted Power

Um, and.

James McWalter

You know the the bend carbon Api and how it kind of positions relative to that. Ah, you know that kind of already existing space.

Ted Power

Yeah, no, we love that I mean I think um we you know the more of that the better um I think um I yeah you know in the same way that yeah like a few merchants now will um, will include some cotwo data. Um we we want that to be almost expected you know and you know I think like you know, for example, stripe is ah is a company that is doing a ton of really awesome climate stuff. Um, and we’re you know we’re big fans of what they’re doing in the carbon removal world and so on. And they’ve got this great program which is um called stripe climate where vendors can say we’re going to donate 1% of our revenue to the climate. Um, and that’s cool and I think you know yeah, it’s it’s awesome when companies. Um do that? um. But um, you know, ultimately, you know we would like to at least you know in many cases let those same companies not just sort of offset a flat 1% but actually have visibility into like what are the actual um line items that are contributing the most to you know to our carbon footprint. And um, and you know perhaps in some cases. That’s you know, 2% and perhaps in some cases. It’s like half a percent of revenue or whatever but having it be more sort of emissions drivenve as opposed to you know flat one percentage of revenue driven seems like at least in many cases. A really important sort of signal. Um. And um, you know making it so that more and more transactions have that climate data embedded is is the goal.

James McWalter

Um, I mean we nearly want it to be. You know like the water that everyone like swims in right? It’s just like it’s it’s it’s part of the conversation. It’s part of the decision making at literally every node every layer of basically the the kind of global economy and so. I think one of the really interesting insights over the last couple of years is the you know like a product as is it as an Api right? like and having companies like stripe and very very large companies who have completely built hundred billion dollar companies based on being an api. Um, when so much of the world has gone to software. Ah yeah, the world of Apis is not going to get any smaller and so I think they’re getting that leverage point. So yeah, is it like ah yeah, it was literally 5 minutes before we jumped into the call I notice the kind of new direction I was like oh that’s that’s that’s actually pretty interesting because you know we’ve had patch on on the podcast in the past and a few other folks who’ve kind of gone in. So what’s some directions but you know not not never kind of focused on the revenue-based carbon piece and I think it can definitely be this kind of very high leverage piece of the kind of climate picture.

Ted Power

Yeah, no totally. And in fact, you know, um you mentioned patch. We’re actually ah we just rolled out an integration with patch. In fact, um, where. You know, sort of it and in hindsight it maybe was obvious but we we weren’t sort of focused on carbon and removal at all at at None we were just focused on sort of nailing the measurement piece and sort of you know, high credibility automated measurement but inevitably you know when when we started to onboard some companies. They’re like this is cool. You know thanks for the data. But um, it doesn’t feel very actionable because you know yeah we can you know figure out some places to cut some emissions but you know at the end of the day you know there are certain things that are going to be very difficult for us to decarbonize and um and so could you help us with um you know. Carbon removal and so in literally a week we built ah integration with patch. Um where you can and so you know speaking of Apis is kind of like you know Api Plus Api where we’re doing the calculation and they’re doing the you know the offsetting. Um, but. The net effect is that companies can off their you know their brex account or their bank account. Um, get their monthly. You know real-time c o two footprint and then if they want to, they can opt in for um, automatic offset purchasing and so like the billing is just like It’s like a saas product or something. It’s like every month you just pay your balance. Um, and um and one of the things that we’re testing and like you know if you’ve got feedback on this listeners. Please let us know um, is we’re we’re really trying to push for kind of moving the expectations around. Carbon removal cost and so our sort of pilot. We’re actually charging um a hundred dollars per metric ton of co 2 which is probably about 10 x frankly what like most companies pay for carbon credits. Um. And these are super high quality. It’s mostly charm industrial which is um, you know this? Ah I’m I’m not a I’m not a scientist but I’m you know bio oil putting oil back into the ground solution really smart um team and then some um you know some. US -based um, you know, really high quality. Um ah other offsets and um, you know and and that feels like if we can convince companies that that that’s um, you know feasible.

Ted Power

And that feels important to kind of move away from these like $5 even $2 you know per ton offsets which frankly, ah you know tend to not to be very credible. Um, so that’s that’s sort of the other piece of it is then like Auto Auto billing offsets to sort of you know you know. You know, get companies the rest of the way to to net zero if they want to or a percentage.

James McWalter

Yeah, the if the I guess the value of a carbon credit. It’s just kind of fascinating space. Um that that I’ll probably have a guest on to kind of go into the details ah of there a point. But absolutely think you know for the audience like if you think about. Basically a line going from the kind of low- qualityality credits that that Ted mentioned where it’s you know, basically forestry or land-based credits that people haven’t really done a lot of verification of all the way through to multiple hundred dollar credits which is literally sucking c o two out of the atmosphere and pumping it underground. And then you know, really strong companies like charm and you know fall within that kind of between those None kind of endpoints on the spectrum. So you have this kind of idea of like ah like and permanence is basically related to to to quality and then permanent sales related to price. So I actually ah agree. Ah you know, getting above this kind of 10 to $15 ton. Um often ceiling for a lot of carbon credit programs in companies I think is absolutely important and essential because those a couple of things. None of all, it’s a better carbon credit right? The the carbon actually has more permanence. It’s more verifiable. Um, but it also helps fund the r and d needed. For those companies to actually try to get their cost down right? because as they get more money to fund greater research as they start to sequester more carbon. Yeah, a direct or capture a company that’s literally charging 3 or $ 400 or more a ton today you know they’re still targeting getting down sub a hundred dollars a ton right? like that’s their own internal goal.

Ted Power

Um, right.

James McWalter

Um, and they need early customers and early yeah things like this to help and you you have companies that we’ve already talked about like stripe and Microsoft Shopify and salesforce who are helping actually be the None customers and and in ah in one sense. Yeah quote unquote overpay to kind of help develop that as an industry but I think if we can get. You know everything to be literally a click of a button um at the margin people starting to make more of a permanent space decision I think that will be you know positive for the carbon credit space. Overall.

Ted Power

Yeah, no totally agree and I think you know one of the things that stripe has been arguing I think they’ve got a point is that it’s actually more important to invest in the you know, super expensive ah engineered carbon removal. Um, then to try to sort of you know, meet your you know per ton. Um, you know footprint and so like their recommendation is figure out how much you would have paid for the um, you know the lower verifiable quality permanent. You know solutions. And then just take that you know same amount of money and put it towards the expensive stuff and like yeah you won’t get as many you know, sort of quote unquote none of carbon credits. But your dollars are better spent there because you’re helping bring those projects down the cost curve. Um, and um. You know, generally generally I’d agree I also you know the other benefit of a price on carbon is that it ah it creates real. Um, you know, sort of incentives around like. You know at at like $2 a ton you know probably doesn’t come into you know decision making much but at $100 a ton. You know that actually does start to um you know help companies sort of think about you know you know should we be purchasing these things or you know what are the what are the sort of opportunities to reduce our um. Our carbon intensity. Um, so so yeah we’ll see how it goes you know it’s it’s it’s an experiment but but we’re we’re excited about the I think the other thing that’s worth saying is that? Um, even at that super high price point. Um, most companies are surprised at how affordable. Um, you know super credible net zero can be at least the companies that we’re talking to which are you know tend to be sort of smaller startups. Um, you know? For example, um us at bend of course we use bend at bend and um. You know we’re a tiny startup we’re we’re 2 people. We don’t have an office we you know we buy a bunch of software. We. You know we occasionally um you know do a bit of travel. But you know I think last month our um, our co two ah footprint was like. I think it’s like fifteen kilograms or something like that. Um, which is ah or it do is like none but it’s like five bucks you know like even at $100 a ton. It’s it’s ah peanuts. So um, and of course that will that will certainly um grow but you know even still even.

James McWalter

Right.

Ted Power

Even larger like series a companies. It’s like you know, maybe a couple hundred bucks a month kind of thing and so in the scheme of things. It’s possible if you start early that it’s still actually quite affordable. Um, and I think that’s an important thing that um you know companies maybe don’t even want to look because they’re sort of worried what the yeah. The answers might be and you know you know one of the nice things about our free trial is you can sort of test it out and and get a feel for you know what? the actual cost might be for your company.

42:32.33

James McWalter

Yeah, absolutely and actually we should talk about. Ah yeah, Us pace my own startup being proper customer I actually did just quick bit of math based on your product and ah purchase credits from recool it. Ah, another friend of the show.

Ted Power

You’re cool. That’s awesome.

James McWalter

Who was hunted a couple a couple of months ago um and they’re they’re also very high quality credits. But now that you have to patch integration. So so yeah I won’t worked that for us about eighty ninety bucks a month ah to offset so and that’s for yeah, completely reasonable and.

Ted Power

Um, yeah.

James McWalter

I’ll see you know climate companies we should at a minimum be be doing that kind of thing. Um, cool well Ted this has been absolutely brilliant and really appreciated. Is there anything I should ask you about but did not.

Ted Power

We should do a We should totally do yeah.

Ted Power

No I mean I think we covered it. You know I think and I guess the last thing um you just say is that you know part of our job is that you know after companies measure their emissions and put a plan together then you know one of the things we try to do is help them. Um, you know. Tell that story. You know to investors to employees to um, you know to you know potential customers that are you know, increasingly asking about it so that sort of you know we also want to make sure that um that sort of that piece companies are getting supporTed Power with and um. Yeah I mean really appreciate you having me on. Um you know any any of your listeners that want to try out bend. Um, check it out at http://ben.green or or shoot me an email at at just Ted Power at Ben Dot Green we’d love to hear from you. Thank you.

James McWalter

And we’ll add all that to the show notes. Thank you Ted Power.

Creating Net Zero Buildings – E108

Great to chat with Peter Light, CEO and Co-founder of Lumen Energy, Lumen Energy enables commercial buildings to generate income from clean energy! We discussed decarbonizing buildings, shaping the direction of technology deployment, helping building owners to find cost-optimal clean energy solutions, financing cleantech and more!

https://carbotnic.com/lumen

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

Lumen is hiring: https://jobs.lever.co/lumenenergy 

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 of Peter Light Ceo and cofounder at Lumen Energy, welcome to podcast Peter.

Peter Light

Thank you James thrilled to be here.

James McWalter

Great. Ah, could you tell us a little bit about lumin energy.

Peter Light

Sure so Lumen Energy is a technology company. We are creating a platform that enables commercial building owners to profitably decarbonize all their buildings swiftly and so what we do is really automate. Clean energy deployment. Typically starts with solar but it often cascades into batteries and ev charging and we see a future where there are a variety of clean energy technologies which are declining in costs. They’re getting simpler to deploy. Um, they’re getting finanable all that is good. It also means it gets ah really complicated for building owners to figure out what makes sense for them and as we as we look out. We find that many commercial building owners could save a lot of money today. Um yet, they don’t do it and they don’t do it because it’s hard. It’s complicated to figure out so that’s where we step in and really make it simple. Go from concept to assessment to action through a marketplace that we’ve developed which we can talk more about and I’m happy to happy to share more about how we got here, but that’s the punchline.

James McWalter

Yeah, and I guess it’s absolutely you know I think I heard about lumen and we spoke a couple of years ago and you’ve kind of come a long way since then but going back to that initial decision to start lumen. You know what drove that.

Peter Light

Ah, it was the initial decision. It was ah I you know it’s funny I can I vividly remember sitting in a cold brick building sort of the texture the walls when I would I had um. I couldn’t get away from this sense that there were you know I’d spent the the None 2 decades of my career commercializing breakthrough energy generation Technologies things like fuel cells or um, flying wind turbines or you know floating solar Yeah Non-lithium Ion chemistry batteries and.

Peter Light

And I really just sort just like wait. There. There are now technologies that are cost effective financiable proven and they’re not widely deployed and you know why is that and just even starting with rooftop solar. Um this this work came out of. So work I do at Google x when I was leading mv programs there. We were set out to you know model the global power grid and particularly the distribution grid think of it like creating Google maps for the power grid this is ah it was a confidential project now it’s public. It’s called tapestry. You can read more about it on the website. Um, but in that initiative started to work with some utilities and just got all the data for an entire city and and regions that utilities served and started to see that there were a lot of commercial buildings that could save money and they weren’t doing it and so um, that. That was the sort of founding story was just being bugged by that question. Um, like why you know the goal is Mas decarization on a timetable that matters meaning you know 2030 you know, 8 years from now really making a major dent and our carbon footprint that that led me to say well. A lot of things you could do to decarbonize in our society but like let’s start with mass deploying things that are already profitable because that’s going to be the fastest way to mobilize capital at at you know at gigaton scale um, so that was the starting point.

James McWalter

Yeah, yeah, it’s it’s so interesting and actually it kind of mirrors. Ah some of kind of my approach to climate tech in interesting way. So when I was none looking at you what part of the economy to kind of tackle from my kind of climate point of view. Initially for the first year of exploring things I completely ignored energy and transport because I was like well we’ve kind of invented most of yeah we’re going to evs are going to win and we have solar and wind and we’re just deploy that and the word just obviously is doing an incredible amount of work there and I basically dramatically kind of understated in my own head like what deploying the.

James McWalter

You know Terrawatts of energy that need to be deployed look like and not just energy but all the other elements of the decarbonization of of those kind of parts of the carbon pie and what I think is really exciting. Is you know I was kind of like attracted to carbon markets and like all all the things that were hot like eighteen months ago I’m now seeing this kind of reversal where people are already starting to dig in and like oh you know deployments? Yeah, any any sort of kind of step change in deployment of a new kind of global technology like that’s where there’s massive opportunities.

Peter Light

Well I agree with that I will say from a um as a you know member of society I’m I’m I’m in the all above all the above camp and you just sort of do the basic carbon math and it is you know it’s staggering and it quickly leads to you know across all the sectors. Um. We we need to mausly decarboize all of them at once? Um, so there’s a great news and that for anyone who’s listening who wants to get into climate tech. There’s something here for you. Um, and there are many you know across many different skill sets not just sort of deep tech engineering. But there know business development sales marketing and so happy to talk more about that software development. Big thing. But I think to focus on the deployment piece that is really what I have gravitated towards young I’ve spent a lot you know much of my career was working on things that I started with a premise that you know early two thousand s you go back in time I came out of the rocky mountain institute and you know. Coal was about 50% of the Us power grid solar and wind were good ideas and were sort of marching down the path but still really expensive relative to the power grid and kind of conventional fossil technologies and I thought like you know, but they’re just I didn’t see those converging anytime soon that mattered and that was you know. Sort of you know joke on me what I’m you know fast forward of what I’m doing now. But at the time I thought there has to be some technology breakthrough that can solve for being both. Um you know, cost effective low or 0 carbon and reliable and um. You know that led me to a bunch of early stage generation technologies I mentioned talk more about um but in that experience. Um I started to see there’s just there’s so much technical risk and in bringing forth a new device. And it has been done and it will continue to be done and it’s a great thing but it really forces the question like hey if there’s stuff that already works and is cost effective. You know my orientation is like let’s get that to the economic frontier and and masss deploy it as quickly as possible and. When you start to look into those issues. There are a lot of really complicated issues and topics around um making it simple and I think this applies to what we’re doing but it also applies to you know, ev adoption you sort of see this in many different sectors. So happy to chat more about that.

James McWalter

Yeah, and so you know once you kind of had that directionally. It’s going to be about the deployment piece and and kind of you know the importance of that there’s a lot of different ways to kind of think through the deployment. Um, but you kind of end up focusing on buildings. Was that thought process and I guess we’re you kind of consider any pivots along the Way. So.

Peter Light

Um, yes, there was a there was a color you know as I joked to some of my colleagues. There’s you know b none and just a very early version where um, again, you had to come back to the frame of looking across an entire city. Um, let’s say like Los Angeles you know all these buildings. Um there today serve by the electric utility which is on. It’s sort of you know, kind of slow decarbonization pathway. Um, you know what I started to look at was like well. That those utilities have their own decarbonization goals. You know, either forced upon them or you know or well-intentioned cost driven. Um, and if you sort of left alone if you sort of let all of these devices proliferate on the grid meaning electric vehicles. Thermostats solar Panels batteries just way too much complexity much more than utilities have ever been set out to to deal with and that really was the sort of founding story behind what is now tapestry that the Google x program is really to sort of build a better real time map and model of the power grid.

Peter Light

But within that same sort of lens I thought you know well hey like wouldn’t these utilities like to have a hand in shaping the direction of the deployment of even a rooftop solar and and onsite batteries that are just that is already happening. And so I started to reach out actually to see utility some of the most kind of forwardleaning ones that were in in California and um, you know and some that had ah that I thought had the most incentive to consider hey might we partner where we lumen would provide the data science on. And and build would talk the individual user data that utilities had where they had the billing and consumption data for each network building and then we could help go ah shape the deployment of onsite energy assets that would then help the utility so this is sort of a converging these you know bring these systems together. Co-optiming them and did a math look like greatd on paper seems like it would help them them be utilities you know and had None or 3 meetings. It started to go really well and it like wow this this great. We’re on to something and then when cold and just.

Peter Light

Didn’t return emails didn’t return phone calls and um, you know if anyone has been on a startup journey. You know who’s listening and you know are you James? That’s um, is so all part of it. But it’s certainly hard to sort of you know to to stomach that but then also it’s like okay this is a data point. Um, if you know some of the most forwardleaning utilities that this notion is just that you have to deal with it. That’s not they’re not wanting what I am seeking to offer them. Um and so it took so it took me a while and I had the great fortune and time of being. David Cohen who’s now my co-founder. Um, he was had been um, had had been a consultant fane and then later a software development and a product leader at stripe for many years and then it coming all snap dos in the you know automating lot of pieces in the mortgage industry. And we started to say okay, there’s there’s a huge market here with commercial buildings. But there’s some barrier and so let’s go find out what that is and it and I’d say together. It took us a while but it really crystallized like it is the building owner who is the decision maker about whether any of this will happen at their building or not. And so let’s work back from how people who own buildings think about getting their energy and so we set out to talk to many building owners and um, we heard again and again and in a sort of range of kind of scale of companies and ownership patterns so they get yeah, it’s great idea like I love. Love saving money that sounds good. You know I love going green that sounds good too and like great why you done it and you know surely you’ve looked into all of this and surprisingly but consistently. We got the answer well you know, actually like I kind of like I just like I do my day job like I you know I work with tenants and I work on. Buying buildings and making sure you know the parking lot is clean and you know working with my bank financing and so like I either I haven’t looked into this but I should. It’s kind of deep on my task list or you know the alternative we got was no, we looked into this a lot like we spent a lot of time on this and. We just got bogged down in the complexity and we like quote had to turn our attention to other things and so you know as part of our customer discovery we. We compiled all these interviews and the consistent pattern was people. It’s interesting. No one used this word but the theme was kind of intimidation or just. Overwhelm um or just I you know I feel like I’m gonna get quote I feel like I’m gonna I have this is too much brain damage. So I don’t get screwed so I’m not going to get into it so that all led us to say well.

Peter Light

What if we could make kind of like a zeestament for clean energy for every building and instantly price it so you could cut through all the data complexity of just figuring out does this make sense for me and provide that in a way that is investment grade and precise and verifiable for the building or and speak in their language. And that is led to led to what we’re developing today.

James McWalter

And what are those kind of I guess Inputs to you know that that kind of estimate type model. But that that you’ve built that is so overwhelming to the building owner. Um you know I’m sure they’re very familiar with you know, managing different types of documents all this kind of thing. Um, but there’s. Yeah,, there’s this extra thing There’s all the kind of associated benefits and incentives and all these things associated to clean energy electrification and so on and so yeah, so what were what are the kind of compounding complexities that ah I guess turned off those building owners and they’re looking for a solution that kind of.

Peter Light

Um, yeah, well, it’s I call it just like a None paper cuts and what I mean by that it’s it’s a many different domains of data that you have to sort of get comfortable with if you if you want to take this on yourself. You you can either just you know said look I just want to. Do something on None building. It’s like then a proposal from someone they I could to get the best deal but to be fine. Just go forward. Um, but if you when you start to say wait. You know I’ve got a none buildings or None buildings or a thousand and I see this as the opportunity to go deploy. What is really a new asset class. Um. And and there’s a real opportunity to um to create a new cash flowing asset and some and this is like the language of a real estate owner who’s who’s thinking about oh I like I I know about deploying capital and getting return on it but I have to do that smartly. And then I need to think through all the inputs and outputs of a financial model. So if you go on that list for let’s just say the simpler ah technology of of a rooftop solar um, you quickly get into okay well, what’s what’s the energy used today at that building. Um. And then what is that composed of and in energy charges demand charges fixed costs from from utility which by the way vary for every utility and about None utilities tariffs across the us. Um, then you get into well okay, what? what How much roof space. Do I have. Um, how much what is the equipment cost What’s the fair price for it, then? what are the incentives do I have tax you know do I have the the correct sort of tax exposure to take advantage of those are there local incentives. Um, what’s the degradation of the equipment. What’s operations and maintenance. How much should I assume over the 105 years and you know that’s that’s I I’ve just given a a sub list I will not boardre the reader with the audience with sort of the additional list but there’s is a long list of disparate domains to get good at and you can sort of is you start to poke into this. You see well.

Peter Light

You know as a customer recently described it to me. It’s like I have found myself digging through all these rabbit holes and I just get lost in them and then I just I switch on other things and so that that like this is touching the climate problem right now is people want to do the right thing and they see a financial opportunity. But it’s too complicated to really get to a decisive moment for them.

James McWalter

And I guess what’s even kind of compounding it is you know you places like New York City who will add some sort of electrification incentive which is great but it’s just now 1 more thing to worry about right? and so when even you have policy that’s trying to incentivize like.

James McWalter

Yeah, mass electrification additional renewable energy deployment all those those kind of things if it’s just like None other thing to to think about and it isn’t like digested in this consumable hole. Um that it actually won’t have like the positive effects that policymakers want and so that makes absolutely you know complete sense to me. Kind of going as you were talking to to those building owners. You’re kind of getting a sense of like this scatter of just like incredible complexity and yeah with your background complexity I’m sure and data complexity is exciting right? because you have worked and used tools like data science and machine learning and so on. That enable you to kind of make sense of that in ways that you know twenty thirty years ago might not even been possible and so I guess you know going from that kind of visual insight to what it like an early mvp in early product deployment. What was that like yeah.

Peter Light Light

Um, yeah, so um, what we what we set out to do in ah in an Mvp where we said. Okay there’s there. You know there are all these different you know, think of it visually like the pieces of the puzzle on a table like how do we? How do we stitch them together into. A a coherent picture for a building owner and um, we we found that? Um, what we started to do is like let’s just pick a city and let’s see if we can um, remotely price each and every commercial building for its clean, energy potential. And and deliver that to the building matters and so we picked Hayward California which um happens to be a place if you ever take off in an airplane out of San Francisco airport and you look out the window and you’ll see lots of big empty rooftops and a number of big warehouses there and we just. Kind of arbitrarily picked it for that reason. Um, and we got really lucky because it turned out the city of Hayward had an open data set about all the buildings and and permit history online which is great. Um, and what we did is we started to assemble um all these dis pieces that I started to describe. Um, we you know in in past lives I had also worked with various us national labs and realized that there was all this building energy data science that had been pioneered on supercomputers. It had been worked conducted by ph ds and and does incredible modeling. But that had been kind of stuck. In in the labs and kind of technically available but in practice not really tapped beyond kind of the academic realm and so we we dug into that and said how can we apply some of this work to really get the best handle on. Profiling buildings and and assessing without actually getting any data from the building owner. How can we get close at assessing what is the energy use in this building all the way down to each and every hour of the year and then getting into the electricity tariffs that were likely for that building and essentially. Simulating the electricity bill for that customer and software. Um, using that as a baseline to then run. Um, you know again in software to run in simulation. Well what would be the optimal the cost optimal clean energy mix for this customer. Um, and we did all that then just to simply produce a number like hey this is that these are the dollars you can save as a building owner and then we deliver that through direct marketing to those building owners and that’s how we started and we found um, you know we were wildly off in some places but we started to. Ah.

Peter Light

And we we we found um some warehouses that had cement garden gnomes in them. But you know, no electricity use you know, but we also found some that were you know food processing facilities that had a lot of electricity use that were very interested and we really got our footing that way and and started to sort of build our engen and and verify the. Data in our cycle and then along the way I’ll just say we were contacted by commercial building owners. Who said you know I don’t have None building but I have a lot of buildings and we have a you know essentially now a board level commitment to deploy clean energy. You know, starting with solar um everywhere it makes sense. But the problem is we just don’t know where it makes sense. We don’t know how to do this systematically and so that’s where we have found actually that there’s been a greatest uptake of of what we provide today.

James McWalter

Yeah there’s a couple areas there. The kind of touch upon. So for some of the data side. Um I said this to folks all the time who are you know trying to build companies that have like a a data component if you can avoid getting having to need data from your customer to build something like re avoid it at all costs. Data that you can collect yourself is to me 10 to None x more valuable than that you can get from the customer at least in the early days because it just takes so long to get data from customers and experiences across a lot of different industries and a lot of different customers and go back to your earlier. You know initial conversations with utilities that was probably honestly like the thing that. Froze some of that you know in those kind of internal discussions and and why they may not have kind of gone back to is okay, we have to go through such a rigmarole to try to get data which often is you know, stored in weird ways and all this kind of thing out to a none party and we have to go through legal and all these kind of things that slow it down. So I love this kind of approach to. Collecting your own data and just dramatically reducing the friction for the business owner and often when you do it this way people are shocked that you can find out more about their own business than they know themselves and it actually has this like ah and you know this really valuable kind eyeopening moment when you’re kind of doing that demo and and and that kind of thing. Um, so I think that. All makes a ton of sense in terms of the ah I guess you know real estate investment trusts and like these large kind of aggregations of commercial buildings I’ve actually talked to a few of those folks myself as part of other projects and they’ve absolutely said the exact same thing to me. It’s like they have this kind of triage approach to decarbonization. You know it’s like we’re going to offload the dirtiest properties we have. We’re going to add solar and electrify. Yeah the 80% like of yeah the 80% of the portfolio that that makes sense and then we’ll do some greenfield development on the other 5 to 10 percent and so if you think about just the number of commercial buildings United States and how many of those are kind of. Aggregated in reits and other you know, similar kind of ah you know, commercial entities commercial real estate entities like that’s to me seems like the massive opportunity and the most exciting opportunity for lumen.

Peter Light

It is I think it is 1 of ah 1 of multiple sectors and it is. It’s it’s a great opportunity for for lumen. But it’s also a great opportunity for these building owners and I think you know just to sort of take an example I mean there’s some um. You know, larger ones who own? Let’s just say many warehouses. Um, you know there’s a there’s ah, a company for instance who owns on the order of about None warehouses nationally and they’re a leader in deploying solar and it’s interesting. You sir just go look at their math. Um, you know I won’t won’t name them by name but just sort give you the example. Um, they’re like yeah we’re doing this. You know we we’ve got a plan and they’re therere thought leaders in it. Um, they’re deploying you in the order of like 40 or 50 buildings a year and that’s both wildly ambitious and yet. Way behind the the sort of scale of what’s possible be profitable. So what I mean by that is okay, that’s a you know none? their buildings would be. You know would get solarized in in 15 years um so that’s where it’s um. Where we think there’s just ah, there’s a chance to go do this. It should be 30 years um and so that’s what we see is the chance to um, really get out of kind of spreadsheets and emails and just all the painful back and forth that happens to coordinate some of these projects and really just. Make it happen at a you know ten x hundred x scale.

James McWalter

Yeah, and as you were saying None oh that’s so exciting like you know you get them running up and running in the next eighteen months and yeah and and for them internally they’re like hitting you know, maybe their internal targets and and taking you know that amount of time. Yeah, what one of the I guess. Levers to speed this up is making sure that the you know if if the demand is there from the business building owners the supply of the underlying. Yeah panels tech of various types are there as well as I’m sure financing is a piece and you mentioned like the the kind of marketplace dynamics that ah you’re kind of. Have as part of loom and could you speak to that.

Peter Light

Sure? Well I’ll say in you know in in general there. There are many marketplaces which we all as sort of individuals and consumers have interacted with today. Um that I think the. Yeah I think one of the stunning things that’s revealed whether it be you know airbnb or uber I mean they’re they’re so familiar. But what’s startling is just the the revealing of supply that the latent supply that existed and we didn’t know it and I think that is something that um that I see here where the um.

Peter Light

You know the ability to go deploy ons site. Clean energy. You know again, starting with solar they’re they’re um, a few 0 contractors nationally and um, this has been one of the you know fastest growing segments of of job industry. Um, that are qualified to do this so. There’s there’s still not enough people that are qualified but the point is that there are many many people out there that can do this. But if you go talk to them. Um, they’ll say look I you know I am a clean energy installer but I have to not only do I have to manage a team and go do get the permits and all that. I have I’m burdened with kind of sales and marketing and customer development and and walking these building owners through all these choices and so I do all this engineering work I submit None proposals 8 of them. Go nowhere. And so for them that is a real cost and that effectively inflates the the sort of total delivered cost because that’s all just sort of overhead for these um Epc companies or engineering procurement construction companies and so what we’re seeking to do with women energy is make it really easy for them to get to. Um, a known vetted project and really provide them digitally with the pieces that they need um to be able to quickly go bid on and act on a project and so that has a benefit for the local installers. Um, who who tend to be local and tend to know all the local building codes and and kind of all these these attributes that are kind of hard to make happen nationally or to scale nationally and then for the building owners. We find this notion of a the efficiency of a marketplace is very appealing because. They realize that they’ve looked at the math themselves where um, you know a whole bit of it out. A great post on the New York Times about this recently you look at the the cost of solar deployment in Australia is just a fraction of what it is in the us today and it’s you know the great news is that the harbor costs have fallen dramatically. Um, but the soft costs meaning the everything else profit overhead construction costs are very high in the us they can be over 50% of the project costs and they vary widely from project to project. So if you sort of put yourself in a building. Owner’s shoes as. You know as we did on some of our early projects in California we we did all the math got very precise about how many panels could fit on the roof. What is the exact optimal amount of onsite, clean energy solar batteries for that given load profile tariff all of that and then we set it out to bid and we got bids that were all over the place.

Peter Light

And it was startling to see how inefficient that process was so that’s something that we are really seeking to streamline through a marketplace in the None of 3 stages of our our product platform that we call act.

James McWalter

And so and then and you know I’ve actually talked to quite a few. Ah yeah, hchfac installers in New York as part of other conversations and so on and they’ve they’ve spoken to this exact issue where because they’re trying to move into a so yeah, know the skill sets are.

28:49.46

James McWalter

Identical to what they’ve been doing you know solving Ac units for 30 years um but moving to installing heat pumps. The tech is nerdy identical but the model and the structure and the components are a bit different. The supply chains are a bit different how to actually converse with the ah you know the owner of the buildings a bit different. And so because there’s all all those little frictions and it goes back to the frictions that the the building owner themselves. Also you know, kind of have to manage. Um again, directing and and reducing those frictions is like so core I guess to your approach. But yeah I’d love to kind of touch upon the the kind of none part of the product which I guess is the financing side.

Peter Light

Um, ah, yes, so and so financing is a key piece of um I think of of really deploying any any clean energy technology is it is that I was talking something of the other day that that you know structured finance or project finance is this sort of like. Poorly understood part of that just like runs the world of infrastructure deployment and um in in the case of um, you know energy you know energy assets let’s take this wind or solar in particular where there’s zero fuel cost. Um, and you’re you’re. your your sense you’re buying equipment that will generate energy for twenty thirty forty years upfront and you’re you’re paying for all that capex upfront. So it is um, it’s it’s amazing, long term but it really needs to be financed. Um and and especially for um. You know in our case, putting yourself in the shoes of building owners people are used to paying the utility month by month and it’s you know that that’s the grand bargain with with the utilities having a monopoly utility who can serve an end customer and there’s really just kind of a mostly non-negotiable price. But you is a. You know as a building owner you have the freedom to just stop paying and leave at the end of the month and that’s it um, and then you’re faced with this alternative which is wow like I see that you know electric utility rates went up None nationally in the last twelve months which is just startling. Um, you know above the the very high cpi. So people get there’s this economic opportunity. But then you get into well I you know I don’t I don’t want to use my own cash or rarely do people want to use their own cash to go pay for something that feels like outside of their business. Um, so you you know most roads lead to financing clean energy assets. Um, so there you get into kind of a you know, multiple different options and and I think this is again where people get high centered where um, you know particularly people in real estate who are very familiar with financing and want to understand all of the options. Um, there are the typical options of of cash purchase or a loan or you know the the conventional ppa which we can talk more about there’s also on bill financing called pace financing in some places but these you know each of these has has wiggles and turns and um, you know. Special considerations for for qualifying for the investment tax credit and it just it calls upon a specialty. So what we seek to do as a company is provide building owners with the options and is and just clear as transparent as possible.

Peter Light

Along with an easy button to say hey I just want clean energy Cheaperth and grid and so we have None party financing partners that enable us to do that. But we don’t We don’t sort of we’re seeking to give building owners the choice in a transparent way. Um, with the kind of answer upfront and they can go dig all the way down to to bare metal so to speak in in the models if they want to understand all the pieces behind the scenes.

James McWalter

And I would absolutely encourage any you know building owners to check out the lumen website like the actual flow and the ability to kind of immediately. You know, get insight over what’s possible I think it’s very very slick and better than ah I’ve seen on you know, a lot of products that are trying to solve similar types problems. Um, and so yes, so I guess where is luoman today and what are the kind of target over the next 12 to None months.

Peter Light

Um, yeah, well where we are today is um, we are a technology team based in San Francisco though we’re remote first we had people um in in Brazil Uganda um, you know we have teams overseas in India so we’re. We’re really already just as a company. We’re already you know around the world. Um, and then in terms of where we are commercially we’re working with a number of commercial building owners now who um, really have a bold commitment to decarbonize and they want to do it profitably and. And I think they’re starting to see the potential um to to realize that and they so there it’s it’s really interesting I mean yeah, I’ll share a conversation that I had recently um, with a a large industrial reit. Um and they had advertised on their website. You know you know. Many real estate websites have like big bold numbers and they’re they’re kind of their their flex numbers and None of them was um that they had I think one point one billion dollars of of basically rent every year from their tenants and we looked at all our buildings just kind of in our software did the math and like you know what you have. Your tenants are buying on the order of about $1000000000 of electricity each year. So you know so for your marquee number of what you see as your revenue as a company that today is being spent by your tenants and going out the door not to you. So. Wouldn’t you like to consider that as as part of your p and l essentially one day and do that sensibly like it’s not going to work everywhere. You can’t just go deploy solar and clean energy like you will you will waste money if you do that you have to do it smartly. But if you do do it smartly. It really is a new asset class commensurate with the scale of your existing business. And so I think there are companies that are starting to see that. Um we are we are quite busy as a team. We’re growing. Um and we’re we’re having a lot of fun doing that and I would just say from a the last thing just from a company building perspective. We’re seeking to be very deliberate and. Bringing people aboard who really loved the problem. You know, fall in love with the problem and want the responsibility to sort of own a key piece of advancing our company and I think you know like that sort of freedom and opportunity that that come along with that.

James McWalter

Yeah, yeah, I Love this example that that you mentioned you know, being able to go into any sort of sales call sales demo conversation with a potential customer and have something so specific to their use case that it’s nearly being crazy for them not to move forward I like is it’s such a kind of.

Peter Light

No.

James McWalter

You know a powerful way to kind of think through through and you know as any startup starts to build capabilities across their core problem solution Set. You actually do start to develop these opportunities to bring that directly into sales calls marketing. All those kind of things. Um, you know one of my kind of favorite marketing tactics that a lot of cool startups do is users. You know their tech to identify some sort of metric or number and then start running that metric against potential customers and say hey customer Yeah you think you’re X but you’re actually y would you be interested in trying to get to x. And that could be everything from you know your employee engagement score to your? Ah, you know how green you actually are from a clean energy electrification deployment point of view and so I Actually yeah, loved that kind of take and bringing that directly into the go-to-market.

Peter Light

Um, well that’s that’s good to hear and I think that’s something that that we’ve seen that has been powerful is that that reveal. Ah I’ll say also um, you know there are number companies out that um, that are doing a great job I say at making carbon accounting dashboards. Um, and then. Those dashboards often leads to buying carbon offsets which um I think is is in one sense progress. Um though I think I just have a I arrive at that scenario and I say you know those those offsets and person person and particularly you know. Carbon reduction offsets which I think as a society again we should have like we should be pursuing carbon removal but the you know the long run goal is that those reach kind of like a hundred dollars a ton so you just sort of stare at that. Reality and say wow that’s the long run technology goal with a lot of investment still to come and a lot of derisking still to happen. Meanwhile there are things people could do today that are carbon reducing and profitable for those businesses. So like let’s do all of those things none and I think that’s where you know we as a company are setting out to say how do we How do we reveal that in a way that almost it’s like creating you know you know, ah this sort of ah you know a tractor or this sort of know gravity field that makes it easy for capital to flow into um these places where where it actually wants to go.

James McWalter

And it it goes back to very beginning of our conversation and and you mentioned you know having like ah all of the above portfolio like mindset in terms of solving these problems and I also think and I agree with that. But I also think about that it kind of goes to the timing piece. It’s like yeah one of the reasons deployment is so important right now of what we have already. Invented and and have commercialized is to buy time for some of those other you know more moonshot longer range things to get to commercialization and so you know I personally think we’re going to need a ton of direct air capture. But it’s not going to be ready for 12 years potentially maybe longer and so everything we do now buys us years or buys this time. On the backend for when these technologies hopefully get get to the deployment they need to get to. Um Peter Light it’s not so brilliant kind of talk to you before we finish off is there anything I should have asked you about but did not so.

Peter Light

Well I will say that. Um, first. Thank you James and I say you know secondly that we are um we are actively hiring limited energy so you can check out our website http://gotlumin.com or or limit that energy one and you’ll you can see the careers page of you know, software development sales marketing. Um, a whole number of areas. Um, and ah you know I think something that I’ll I’ll leave you with is you know buildings are persistent and you know most of the buildings that will exist in 2050 or by you know, anyone’s net zero time horizon most of those buildings are have already been built and so. And further most of those buildings as vehicles electrify those buildings will become hubs or part of the system that can power our transportation and so I think that’s tremendously exciting but it also puts a lot of pressure on saying how can you find ways to. Decarbonized buildings and if you can do it profitably. That’s that’s phenomenal because that is going to be catalytic to make it happen at speed.

James McWalter

I couldn’t agree more um and a great message to end and will include ah the careers page in the show notes. Thank you Peter!

Peter Light

Thank you James take care.

High-Density Hydrogen for Zero-Emission Transportation – E107

Great to chat with David Jaramillo, Co-founder & CTO at Verne! Verne is developing high-density and lightweight hydrogen storage systems for use in heavy vehicles! We discussed how their approach can increase hydrogen density and vehicle range, how to best develop a hydrogen ecosystem, the importance of testing centers and more! 

Verne is hiring!

Contact David on Twitter!

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

Fermenting Better Meat – E106

Great to chat with Paul Shapiro, CEO and Co-founder of The Better Meat Co! The Better Meat Co. harnesses the amazing power of fermentation to make delicious, versatile fully animal-free meats! We discussed how they scaled their product from the lab to commercialization, the importance of better meat from a climate perspective, the future of the meat industry, policy improvements and more!

https://carbotnic.com/bettermeat

Paul Shapiro is the author of the national bestseller Clean Meat: How Growing Meat Without Animals Will Revolutionize Dinner and the World, the CEO of The Better Meat Co., a four-time TEDx speaker, and the host of the Business for Good Podcast.

Buy Paul’s book here 

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 Paul Shapiro Ceo and co-founder of the Better Meat Co., welcome to podcast Paul, brilliant to start. Could you tell us a little bit about the Better Meat. Co.

Paul Shapiro

James great to be with you.

Paul Shapiro

Sure the betterment co. is an ingredients company based in Sacramento that really is formed for the purpose of helping to reduce humanity’s footprint on the planet. So if you think about you know the ways that we leave our footprint a huge part of it is in our food print. Principally in the amount of meat that we eat it just takes a lot of land and a lot of water to raise none and None of animals for food. It’s also produces enormous quantities of greenhouse gases more than the entire transportation sector combined of greenhouse gases coming from animal agriculture. So this is a really serious problem but the issue is that unfortunately despite the fact that it’s commonly known now that meat production is a weeding contributor to deforestation climate change wildlife extinction pandemic risk and more meat demand continues to go up not down. So meat demand is going up in the us it’s going up in China and India and Brazil and Mexico and all the places is going to matter the most in the future meat demand is going up and so the question is like if people really are feeling wedded to consuming the meat experience. Can we divorce the meat experience from animals. So we know that we can divorce energy from fossil fuels right? Like we can get energy from wind and solar and nuclear and geothermal etc. Well we can also produce the meat experience without animals and the ways that companies today are doing that. Is either through using plants like soybeans or peas or wheat or they’re using animal cells which is not on the market yet whether companies growing real animal cells into real actual meat and then there’s what we at the better meatco. Do. Which is we’re not in the plant kingdom we’re not in the animal kingdom we use a very special kind of microscopic fungi and we grow our fungi in less than a single day. So from the moment we inoculate our fermentor to the time we harvest our fermenter we are spending less than a single day to get delicious succulent. Mycelium the root like structure of of um of fungi and what we can do is essentially create a great meat experience for very little money and so we can actually have a meat replacement that’s cost effective very convincing to the average meat consumer and really nutritious. And so that’s what we at the better meco do we do fungi fermentation to create the meat experience without animals.

James McWalter

And so this completely you know, unique approach relative to the other alternatives that you mentioned um what was the genesis of getting to a position where okay we can use this way of fermenting fungus to create a you know like a true meat substitute.

Paul Shapiro

Well, there’s one company in the space right now that earns about 100% of what’s called mycoprote of that mycoprote market and that’s called corn q u or m and so corn for decades now has proven that you can do fungi fermentation to create foods that are high in protein now.

Paul Shapiro

You know few people who eat corn think it tastes like meat. They might think it tastes good and I’m one of them I think it tastes very good I Really like corn. Um, but I don’t eat it thinking. Oh I can’t tell the difference between this and meat. It’s just like a different category of food and I really like it and so.

Paul Shapiro

You know James being from Ireland do this corn is a british company you you probably are more familiar with it than your listeners are if your listeners are more in the United States but corn has some products in the United States too and I like eating them so corn has proven that you can industrialize fungi fermentation to create an actual product what we are doing. That’s different.

Paul Shapiro

Is using a totally different strain not just strain but species an entirely different genus of fungi altogether that creates a much more meat-like experience and so there’s other differences between corn and us. But the point is that there are None of fungi species out there and they all have different properties and what we’re doing is creating. A very meat like experience through a whole food that has grown through fermentation where the product has more protein than eggs and more iron than Beef. It’s really like a superfood and it’s amazing that we can produce it for so little money in such a short amount of time.

James McWalter

And so the production as it’s scaling up and it’s commercialized today in the early days when it was like in the lab. You know what was that kind of process like was this the always the you know, proposed use case for that original r and d. Or this kind of come out of some other idea that and was like oh this actually is a better direction for this research to go in.

Paul Shapiro

Yeah I mean with any startup we’ve had ah many twists and turns or a lot of plot twists to our story here but we have always had the North star of creating a way to satiate Humanity’s meat tooth without animals and so as an ingredients company.

Paul Shapiro

We are partnered with big meat companies like purdue farms where we sell them ingredients that they can cut down on the number of chickens they use. So for example, back in the beginning of our company. We were founded in 18 back then we formed an agreement with Purdue Farms that enables them to make hybrid products so these are products that have none plant based and none chicken and those still to this day they sell very well they’re in none of supermarkets. It’s called purdue chicken plus and those products do quite well, we really are proud of that partnership. So for us like you know we’ve been.

Paul Shapiro

Ah, selling ingredients for some time to meat companies to help them reduce the amount of animals they need now at the same time when we really got interested in mycelium was pretty much toward the beginning of the company but it wasn’t the plan from the very beginning what became very queer was that using plant protein isoits. It’s very difficult. To get down to cost parity with meat meat is very ah, cheap, relatively speaking to plant-based meat not because plants are more expensive than meat like you know you think peas are less expensive than beef. For example, why is a pea protein based burger so much more expensive than a beef burger. It’s because you’re not using the whole pe. You know you’re using a tiny fraction of a pea the pea protein so you know in a pea. There’s like only 20% protein and so you end up stripping out the fiber stripping out the fact concentrating that pea protein down and then you have to texturize it so there are all these processes that you’re engaged in to get a pee to finally look like something like ground beef. For us when you utilize mycelium and use ui fungi you use the whole biomass. It’s not just like the equivalent of using the pea. It’s like the equivalent of using the entire pea plant and so that’s how we’re able to get cost down is because we’re not purifying or extracting any None individual isoe.

Paul Shapiro

From an organism. We’re using the entire organism itself and so that became very queer to me early on that if we wanted to actually compete on price not just on taste but on price with animal meat. We probably are going to have to move away from plant protein iso. It’s.

James McWalter

So yeah, it’s pretty interesting I mean we’ve definitely talked to a few folks, you know, working on some of the other alternative approaches to meat replacement over you know the kind a None or so episodes of the podcast and one of the questions I was asked is about that price parody right? because you can definitely build a wedge around folks. Who are like okay I’ll eat this from a animal cruelty or climate ah point of view and you know they’re making assumption choices on the basis about those Frameworks but mass adoption is going to necessitate price parity at scale and so. Starting with that as the kind of core focus I think is really smart because it does allow you to say? Okay, Um, yeah, we’ve ticked that box Now. You have to tick the otherer box around taste texture flavor. All those kind of other elements and so yeah, when you. Going? Yeah and you mentioned the ups and downs and and ins and outs of kind of startup life as you were trying to kind of you know, move through this kind of process. Um, what were kind of the early versions of the product like you know were there any kind of you know, fall starts or pivots from what the product itself looked like.

Paul Shapiro

Yeah, that’s good I appreciate that James so you know Ben Horowitz from the Vc fund Andreessen Horowitz is a really funny line where he says that if you start your own company. You will sleep like a baby because you will wake up every 2 hours and cry.

James McWalter

The retinum.

Paul Shapiro

And you know that certainly has been comparable to my experience. There’s just you know there’s like a rule I call it like the law of of the better miko and I presume. It’s a universal law across all startups. But you know pretty much whatever you want to do. It seems like it’s going to take more money than you plan and take more time than you plan. And so we have I think made some good decisions in terms of our fundraising to raise more than we thought we would need because we wanted to plan for these type of contingencies where you need more than you think. And so yeah, there are false starts you buy equipment and it turns out that equipment doesn’t work in the way that you thought that it would or it doesn’t work as well as you thought it would and you know equipment is expensive. You’re talking like None figure expenses if not more and so then you know you you can see how like you know the margin for error is pretty tight. So if you buy let’s say a None figure piece of equipment. It turns out that it doesn’t really do what you thought it’s pretty difficult to recoup that cost and then you need to go out and buy other equipment. So. There’s lots of ways that you can have that and so we’ve had that when we we built, we’ve built the largest mycelium biomass fermentation facility in North America which we run here in Sacramento.

Paul Shapiro

But when we first built it. We completed the construction of it in June of 2021 and you know the None products that we were making I tell you James they did not look like the products that we made in the lab. The products we made in the lab were really really good. Really tasty.

James McWalter

Sure.

Paul Shapiro

And then the products that we’re making in a much larger pilot scale facility turns out not really the same and so it took months of experimenting with different processes and different equipment to be able to scale up what we had done at the lab just to the pilot scale. Now we want to scale up to the commercial scale where we can actually build a full scale commercial fermentation facility with fermentors that go into the sky and create a river of our microprote to flow through the food industry and prevent the need to raise none of animals for food and that’s going to be another. You know important scale up that we need to get right? And so. Um, you know if I were to show you videos of the very None product. Our pilot plant made I can tell you you know just between us James. It looked more like leather than like meat honestly. But yes, yeah, you would be racing to make a great wristwatch with it.

James McWalter

Sure right? You wouldn’t be. You wouldn’t be racing the throw your fork at it.

Paul Shapiro

Um, but ah, but today thankfully the product now is back to lab quality and it’s it’s truly stur and it makes fantastic bacon daily slices steaks, chicken breasts and more.

James McWalter

And so on the ah so I’d love to get a continue dive on the supply side and then I think there’s a lot of kind of interesting things on the demand side to talk about as well. But you know what are the inputs. Ah yeah.

James McWalter

To the process into the fermenter and how do you think about those inputs Also I guess within this kind of climate prism from a total emissions reduction point of view. So.

Paul Shapiro

Is. Yeah I love this question. So thanks for asking it James so you know we’re not creating food from thin air here like you know when you’re running a fermentation what that means is think about it almost like as if you’re raising animals. So the microbes are your animals and they are way more efficient than animals. So you know with the cow. You know you might need like twenty five calories in to get None calorie out. However, with fermentation you’re talking about way way better ratios like down to like None to None so basically this is going to be way way better than animal meat on a climate perspective. Um, but you’re still feeding so you know basically if you think about it like you’re feeding your microbes. They’re eating and they grow up and then you eat them. So it’s really kind of like animal agriculture except your so-called animals aren’t aren’t animals at all. They’re just microscopic fungi but they like to eat and they like to eat sugar. So you know there’s different ways to get sugar most people in the United States who are in this type of a business. They end up using corn-based sugars what we do at the better meko is we’ve actually pioneered ways to valorize agricultural byproducts and feed them to our microbes so that rather than relying on you know huge vest. Fields of agriculture for us. We can take the byproducts of the potato industry and the corn industry and the rice industry take those byproducts and feed them so that we’re actually upcycling nutrients that otherwise are not going to be valorized in the same type of way. And upcycle them into really delicious meat like products and so for us like yeah, we want to replace meat like that is the main climate benefit of what we’re doing but we want to do it with the lowest footprint and we know we’re way lower than meat as far as footprint is concerned but we want to do it with the lowest possible footprint at all and so by valorizing. Agricultural byproducts. We end up having a much lighter footprint on the planet than if we were just going out into the market and and just buying sugar like the way that is customary and in this field.

James McWalter

That yeah that that makes us sort of sense and I think a lot of the you know companies attackckling climate in some way you know think very very deeply about the the full supply chain and you know it’s very difficult today to have a truly circular economy around any particular supply chain. It’s just the nature of where we are. But. Having been thoughtful about that figuring out where are there aspects that are you know considered as waste and you know currently in in the case that of the better mio. But then also ah you know the outputs and kind of constantly thinking in that circular way I think is kind of quite powerful that echo.

Paul Shapiro

Bones.

Paul Shapiro

yeah and yeah I mean you know it’s tough it’s tough to say like what is waste right? So like a lot of the times in the food industry if there’s some byproduct or some sidestream. Um. It might ah might be going. Let’s say to fertilizer or might be going to cattle feed lots like is that waste. It’s not going to a landfill necessarily It’s being used for something. Um, but it’s not really being valorized like it’s going for you know pennies per pound and so. You can take those products and and upcycle them into something that’s way more valuable. Um, now. Sometimes there is like true waste that goes literally into a landfill. But the food system is pretty efficient. You know the the food system does tend to take you know they don’t like to throw away money so they do tend to take a lot of things that would then you know, just get. Turned into like cattle feed or something like that. But that can be utilized for other things and that’s like None of the magic cool things about fermentation is that you can convert low value products into high value products through the magic of fermentation.

James McWalter

And then thinking through on the demand side. So you mentioned some of the kind of initial use cases for your product is combining it with existing yeah meat right? and it’s an ingredient that’s going into an existing you know, ah will call us a yeah cowbased be or yeah, something along those lines.

Paul Shapiro

Um, is yeah.

James McWalter

And how do you think about on the demand side. How much is going to be a direct consumer demand for a greater increase for products like yours versus a balance that’s happening more at the level of the existing suppliers of of meat beef and lamb and and chicken and so On. We’re saying Okay, we also have to hit certain climate Goals. We need to incorporate these other solutions to hit our Eshi goals. So How do you think about that balance between you know the corporates who are thinking through their Eshi goals versus consumption and consumers thinking through I want to make this change for you know my own and I want a product that like matches.

Paul Shapiro

Yeah, so I have a kind of pessimistic point of view on this which is that consumers say that they care about climate and esg. But in practice they buy the things that are the cheapest really.

James McWalter

My own view about climate and sustainability and.

Paul Shapiro

Um, so I just think there’s a big difference between what we tell pollsters we’re interested in and what we actually do in the supermarket and so you know even if you take this kind of a bad example. But if you think about like ethanol you know, like right now you have like 10% to 15% of most gas tanks in the country are running on ethanol because that’s ah, a part of the.

Paul Shapiro

Renewable fuels policy of the federal government and nobody thinks about it like nobody contemplates when they put that in there. Nobody thought oh there’s demand from the individual consumer that they want to use less fossil fuels and more biomass. So they’re just going to you know use cornbase ethanol in their tank. Just happened because of government policy. Ah similarly, um, you know most people who are putting solar panels on their roofs are not sitting there thinking that they’re climate warriors. They’re knowing that solar panels or solar power is coming down in cost and it can save the money and so then those rebates that the state and federal government have offered. Make it more attractive as well. And so the moment that renewable energy becomes less expensive than coal and oil and so on is the moment that it stops being such a tiny infinitesimal part of our energy grid and actually becomes a big part of it. It becomes the mainstream dominant source and so I think that the things that drive food decisions are. Taste just King like people if it doesn’t taste good. There. Nothing else matters then price and and then convenience as well. So that’s like the holy trinity when it comes to what actually motivates not what people say but what they do is. It’s got to taste great. It’s got to be cost effective and it needs to be convenient for people. So if you get that right? I think most people are quite happy to switch to animal-free meat. You know most people don’t care like you know they’re not sitting around like you point it like this like you walk into a room you flip on a light switch. Nobody’s thinking. Oh like is this light coming from coal or oil or is it coming from wind or so or you know people don’t think about that they just want an illuminated room. They want the experience of a lit room. The same is so when people eat meat like they’re not sitting around thinking. Ah I’m so glad an animal was slaughtered for this like nobody cares like they just want the experience of eating meat.

Paul Shapiro

And frankly, if they did think about the animal they might prefer that the animal not have been sluttered for it and so once that comes down in price and it tastes the same if not better I think that you’re a long way towards solving this problem. And answer your question directly about these meat companies though. James I I do think like part of it might be about their esg goals. But I also think that part of it has to do with their desire to not lose out on the future. You know they look and they see what happened to Kodak you know we all know like Kodak and canon were vying for supremacy in the film market. In the 1990 s and they both knew about digital but Kodak thought it would cannibalize its core business whereas canyon yeah, yeah, right? exactly? So like you know Canon is one of this massive company today and Kodak mine bankrupt and the the meat companies don’t want to be like Kodak they realize like.

James McWalter

And they’re the biggest companies in the world today.

Paul Shapiro

You know thing like the experience is still the same. We’re still capturing our memories. We just do it in a way more efficient way today than we did before. In fact, amusingly I was actually just thinking about how I remember when I was in college and in around like 2000 when I started using 1 hour photo and like I couldn’t believe that there was such a thing like I truly believed I was like in a Jetson’s future where we could get our photos in only 1 hour and I just couldn’t believe I had lived to be in this era and now of course imagine if you had to wait 1 minute like imagine 1 minute waiting for your photo. You’d be outraged. People would be insane. Apple’s stock would plummet so you know things change very rapidly in terms of technology and but we still get the same experience. You get to capture your memory. Well the same is so with meat like.

Paul Shapiro

Most people don’t care whether meat comes from an animal or not I just think that they want the meat they want it to taste good and be safe and be cost effective and so the meat companies realize they can do deliver for that same experience to the customer but in a way more efficient way I think a lot of them want to be the cann and they don’t want to be the Kodak.

James McWalter

Yeah, it’s it’s pretty interesting I mean I guess I’ll I’ll put a bit of kind of context on on on my side. So um, yeah, and some of the listeners probably heard me talk about this in the past. But yeah I grew up on ah a sheep farm in West Coast of Ireland we convert to organic in 98 but we’re still sheep a sheep farm. And I was actually a a butcher in the local butcher shop from you know age 16 to 20 and that was like my part-time job and you know doing a very particular job. Um, but I’ve also we have not had meat in our in our home for probably about 4 years my wife and I although I will on occasion eat mes when I’m out in restaurants and so on and I think one of the aspects that. Ah I guess I think a lot about is my own kind of move from being as ingrained in a meat eating culture and and you know literary butchering right? like ah to someone who basically has no meat in the home and most of that you know even with. Things like that I intellectually understood around animal cruelty and you know climate and all these kind of elements. Really it was down to people around me my wife in particular just stopped eating as much meat and that was the element where I was like oh okay, like actually just you know. The default is not ah yeah, a meatant and two veg which is like the default irish meal right? So you have yeah a steak and then you have ah yeah potatoes and then carrots and that is the default irish meal. Um, for most folks. Um, and so yeah, so I guess like you know how do you think about.

Paul Shapiro

Um, yes.

James McWalter

Like ways that ah culturally, there will be these wedges where you know if people see other people you know taking change. Um, how that can compound on top of these other factors which are of course important around you know price. Ah you know, ah like like taste and um and quality in general.

Paul Shapiro

Um, that is.

Paul Shapiro

Well I mean the question is does the average consumer care like you have this unique experience right? You grew up on a sheep farm you were involved in butchering and so on and there will be changes in the economy from this just as there’s changes in the film economy to go back to that example, you know all the chemicals that were sold for the dark rooms. The dark rooms themselves like all that stuff kind of went away. You know, same thing like people who had jobs at Blockbuster video don’t have jobs anymore because now we stream our video Content. So I Do think that there will be some displacement in the economy and I think that people who are involved in the business of raising and sluering animals for food. Ah, will actually have displacement in this in in this type of a future similarly Tobacco Growers Got you know, displaced by the public Health campaigns of the last several decades. So I’m not I’m not necessarily comparing tobacco and meat I’m just saying functionally these all have similarities from videos to film to tobacco to Animal Slaughter and so on and so I do think though that these industries are not going to go Away. You know we still have print film I mean some people still use horseform carriages. Even. Um, so I don’t think that they’ll go away I Do think though that there will be major changes like we will be raising and slaughtering None of fewer animals and that does mean that the people who are involved in like trucking those animals to slaughter Plants. Reading those animals castrating those animals branding the animals. The antibiotics that are given to the animals like all of that does get impacted and so you know in the case of the tobacco growers they could switch to other crops right? So like and really interestingly in the Us a lot of the tobacco growers. Ah, ultimately switched to growing chickpeas because as but as demand for tobacco was waning demand for hummus was increasing I Nothing causally correlated but it is kind of entertaining to think about like so you know hummus is on the Rise Tobacco’s on the fall and so a lot of the tobacco growers started switching to um to chickpeas.

Paul Shapiro

So It’s easy to see how a tobacco grower becomes a chickpea grower. It’s much harder to see how it ends your family’s experience like how a sheep farmer becomes a microbiologist right? like it’s just the the skillset that is needed to produce food in the future is not the same as in the past. And so I really am a fervent believer that there should be programs in place by the government that will help transition to this future food in the same way I think that we need that for coal miners and people involved in oil extraction and so on you know we need. To be training. Let’s say coal miners and and oil rig employees into how to do geothermal and solar installation and so on similarly I think people who are involved in the raising and slaughtering of animals. It’s really imperative that we have government programs that help. To train them to be a part of the future food industry as well.

James McWalter

And just because you mentioned that on the government side there and you know anything that is consumed. There’s often a regulatory environment associated with it. Um, there have been historically many battles over. Yeah what? what is milk What is meat you know the the kind of terms you can use.

Paul Shapiro

Reason.

James McWalter

And so how do you think about? yeah where the regulatory environment is today for companies like yours and ways that it could improve.

Paul Shapiro

Ah, well,, there’s lots of ways that it could improve. But so the food and drug administration has these rules that relate to what’s called Grass which is generally recognized as safe and the process is stringent as it should be to get a new ingredient to be determined to be grass again generally recognized as safe. Where my beef pun intended comes with a process is that there does seem to be preferential treatment given for animal experimentation to prove the safety of an ingredient and animal experimentation is not really an effective way to figure out what is safe for a human to consume.

Paul Shapiro

Humans and animals. Especially the animals who they’re testing on oftentimes rats and rabbits and so on have very different responses to different to different compounds and so actually if you use your family as an example, arsenic is not really a problem for sheep. Feed arsenic to sheep and they do fine and then you think oh well this is safe for humans to eat. Well I don’t recommend finding out so you know there’s just so a lot of differences there and so I’m a believer that the Fda while it does not legally require animal testing. It is like a de facto.

Paul Shapiro

Expectation that there will be animal testing and so I think when the agency should make it clearer that yeah you have to do stringent safety testing to make sure that your ingredient is safe but I would if I were at the Fda and could wave a magic wand I would give more explicit guidance. On this animal test in question and make it clear that you need to prove safety but you don’t need to prove it by by killing animals. So that’s my you know my main recommendation on that point, but ah overall I do think that the ah. That the battery of safety tests that the government requires to prove safety of these ingredients is pretty appropriate. Um, and I’m glad that it exists as a consumer.

James McWalter

Yeah, the the Fda is it’s quite an interesting agency is you know we’ve obviously all collectively gone through covid over the last number of years those those who are based in the Us. Ah, you know have I think had these ups and downs of you know, frustration of. Probably people thinking that the agency is going too fast or too slow over things like vaccination approval and so on and you know I definitely personally would never want to be a regulator because you are trying to weigh up like a ton of different factors. Um, but we’ll generally default to the to be less risky. Um I think I think it’s fair to say and so.

James McWalter

You know my general kind of view is that ah you know as somebody more a friend the startup side of things is that um we could put collectively take more risks across the board but I completely understand why those? yeah this kind of grass framework is in place. Um, and so. What about elements where you’ve had. Ah yeah, lobbying around naming terminology. Um, and it sounds like you know the meat you know the kind of meat focus major kind of companies like they are like okay this is the future. We’re actually not going to attempt to block this in a way that maybe. Ah, you know there’s very very large lobbying campaigns to try to prevent oat milk from being able to use the word milk and and other efforts you like you can’t use. Ah you know things from cow milk cannot be called cheese or sorry things from cow milk are the only things that called cheese in France um, because they have these kind of various rules structured around them.

Paul Shapiro

Commit.

James McWalter

And so have you kind of how is that is there any kind of areas that we can need to improve on in that area as well.

Paul Shapiro

Yeah, this is like the the big fight right? and and if you go back to these other examples like you know, nobody thinks that the photos you take on your phone aren’t photographs right? Nobody calls them a fake photo nobody refers to either your cell phone as ah as a fake landline or a fake phone.

Paul Shapiro

Ah, we think of it as a telephone because that’s the service that it provides for us in the same way when people think about coconut milk. Nobody is really confused and thinking oh is it coconut milk is that coming from a cow. Yeah people know coconut milk is coming from coconuts. And the same way that nobody thinks peanut butter even though though it says butter in the name. Nobody’s thinking this is coming from cows. Ah very few people hear you know terms like hamburger and think hey why is there? no ham in that consumers are smart enough to figure this out and so what’s happened though is that the meat in the dairy industry is at least some players in them. Have tried to pass laws or regulations to crack down on terms like almond milk soy milk. You know plantmp-based burger and so on and by and large in the us they haven’t really succeeded. They the laws that passed oftentimes have been found to be unconstitutional, but there’s been more success in Europe on this for sure. But in the us there hasn’t been a lot of success cracking down too too bad with without it being ruled unconstitutional but it’s telling that this industry is so concerned. That they want to force these companies to say things like fake or artificial in their names when there’s nothing fake about it at all, you know again, it’s not any more fake than your phone is your cell phone is a fake landline. So I think that this just shows the desperation. You know if I were in the dairy industry and I see year on year. Fluid milk consumption continuing to decline while plant-based milk consumption continues to increase I would be thinking you know what can I do to try to stop this competition? Um, but hopefully I would be smart enough to say hey rather than fight them. Maybe I should join them and now that’s what a lot of the dairy companies are doing and they’re launching their own plant-based milk lines.

Paul Shapiro

Some of the biggest purveyors of plant-based milk today are dairy companies themselves and I think ultimately that’s what it’s going to take in order to get this industry to succeed is not just to have like small startups who are doing this trying to be like a David versus goliath. But rather having the big the big companies that are already producing meat and milk and eggs and so on be the ones to purvey these products and not the only ones but they have you know great marketing. Great distribution, great scale and so on so they can be poised to succeed rather than just be disrupted and become like the next blockbuster. Or codec.

James McWalter

It’s so interesting. We we keep kind of returning to this concept of of disruption and as as you’re talking there I thinking of I believe it’s Clayton Christensen who originally wrote a lot of the work on disruption theory.

Paul Shapiro

Nothing.

James McWalter

And you know people coming out of Harvard andbas. All of a sudden are reading about the codec example and are reading about the disruption brought on. Yeah how Microsoft Disrupted Ibm and how you have these kind of like specific frameworks to how you can disrupt a given industry and you know once people once I guess the cat is out of the bag is like okay.

Paul Shapiro

Um, you have.

James McWalter

We don’t want to be Kodak or we don’t want to be you know Ibm and again you know some of these companies are still around but are nowhere near what they once were in the dominant position and so you know as youak I was like yeah is that Clayton Christiansen one of like the great environmentalists because.

James McWalter

It’s enabling a lot lot of this kind of transition where these companies are like okay instead of fighting this to nale where they’re going to eventually win from a technology point of view or there is some orthogonal business model that’s going to completely disrupt us like we have to get on that train. Otherwise we’re just going to be completely left behind.

Paul Shapiro

Yeah, so I love Kuit and Christensen I wish that I had met this guy because I’ve read his books and I’m ah I’m a fan. Um, and I think he’s right and I think these big food companies are right to try to innovate. You know, like right now like the food industry spends nearly no money on r and d compared to what you see in the tech space. You know in like electronics and in computing you see companies having budgets of you know, like around you know 30% for r and d basically whereas in the food industry. It’s like single digit percent.

James McWalter

It hath.

Paul Shapiro

And that’s that’s ah, that’s fine for a static industry where you know you’re just thinking hey how can we you know make a chunki or tomato sauce or how can we make a spicier tomato sauce you know or you know somebody’s like hey I came up with a really interesting flavor of peanut butter. Um, but when you’re starting to talk about things like just fundamentally different ways of producing protein without animals. It requires a lot of r and d and so I think that there are some forward thinking companies in the space that are taking a page from the Christensen Playbook and are actually investing in innovation centers where they can find really great ways to satiate the meat experience as well without animals.

James McWalter

You and you know looking into your background I Believe you’re the ah author of a bestselling book called Clean meat. Um, we don’t often have folks who you have written books as as long as as well as us, founding companies and and building companies um was experience like and I guess you know why we. Why was like writing up that book I Guess so important to you and how do you think about that as like a leverage point for the company itself.

Paul Shapiro

At least? well you know, none of all, thanks for bringing up my book I appreciate that and um, it’s it’s very kind of you James so the book is called clean meat how growing meat without animals will revolutionize dinner in the world. And the basic premise behind it is that it chronicles the stories of the investors the entrepreneurs the scientists who are all racing to commercialize the world’s none slaughter free meat and I wrote the book really as an exploration of this thesis that it may be that food technology is going to do more to improve agricultural sustainability. Than passing laws and and raising awareness will do so I you know I am a big believeer in passage of laws and raising awareness I think that’s fantastic. Um, but if you look for example, just take animal welfare if you look at how animal welfare is advanced in the United States most of the time it’s new technology and innovation that ends up freeing animals. So you know if you look at the fact that we used to slaughter none of whales in order to white our homes. We didn’t stop whaling in the united states because people cared about. Whales we stopped because Kerosene was invented and we had a better way to light our homes and and the kerosene industry really liberated whales from harpoons. We didn’t stop whipping horses and forcing them to carry us and our goods all around because people cared about horses we stopped because cars were invented. We used to live pluck geese for their quills. A very tortuous thing to do.

Paul Shapiro

And that’s how we wrote letters and we didn’t stop live plucking Geese because people cared about geese we stopped because metal fountain pens were invented and all of a sudden live plucking Geese and and goose cool pins were totally obsolete and so the question is like you look at you know example after example, after example. Of exploitation of animals being rendered obsolete by technological innovation yet. How many categories of animal exploitation were ended because people were actually trying to be more humanitarian-minded and the answer is virtually none like it’s very hard to find examples of of industries that were eradicated. Simply because of some moral awakening that people had about animals maybe like The only thing I and think of is like veal where people really stopped eating veal because of concerns about the treatment of the cabs. Um, but that’s a pretty unique case right? It’s a luxury item very few people ate it. It’s very expensive.

Paul Shapiro

Um, and there still is a Ill industry today. So it. It hasn’t been eradicated and so you know the purpose of the book is to explore that idea that um you know, maybe rather than doing what seems obvious which is to try to persuade people of the ethical benefits of plant-based eating. Or of you know, trying to do better for climate and so on maybe the thing to do is just render the current system obsolete and so that’s what the book explores and when the book came out. It was you know I’d never published a book before and I got very fortunate. I didn’t realize how the book would perform it hit the washington post bestseller list and Npr and wall street journal did these nice reviews of it and it led to an outcome for me that was very unexpected and at the time when I finished the book tour I had the choice I had the opportunity to write another book. In the same vein which I thought would be a really cool thing to do but I started talking to my wife about this and I was thinking you know rather than continuing to write about the people who I thought were going to solve this problem. Maybe I should just become one of them myself. And I chose that latter path and started the better meet co and more than 4 years later the company still exists so it hasn’t gone off the rails yet.

James McWalter

Absolutely and you know a book takes a while right? So like you’re building a company and you maybe you write 1 to 2 books and that same for your period and of course it is great to to write to write the book. But ah, you know the you know the leverage and and the kind of impact in the world. Um, of course it does an impact in ideas from.

James McWalter

From the book. But also think you know getting your hands dirt is is this incredibly exciting thing. Um I Also believe you are the host of the business for good podcast. What have you learned from giving your own interviews to your guests right.

Paul Shapiro

Oh that’s really nice of you James so you learned correctly. Um I do host the business for good podcast which is a show that spotlights folks who are trying to make money by making the world. A better place. So um, you know we feature companies doing all types of really cool things. Both in the food space and elsewhere. So you know people who are um, making eggs without chickens people who are finding out really cool new ways that you can make a business around nuclear waste storage. It’s very safe excuse me people were making um you know. Petroleum-free plastics or biodegradable plastics like all these really interesting ideas for businesses that can help to save the world and I have really admired the entrepreneurs who come onto the show sometimes we have titans like we’ve had on the Ceo and and founder of whole foods and. That executives from some larger companies too. But most of the time it’s it’s it’s entrepreneurs who are trying to make a business work to create something from nothing and I really admire the resilience that it takes because these people come on and they share their stories about what it takes to actually accomplish this you know startups have a very high mortality rate. It’s like 90% failure and so you know you have to you know if you’re looking just to get really rich. You know your chances are low. Um, but if you’re looking to solve a problem and really making a big impact on the world. You have a good chance. You know your your chances are high of failure. But at least you have a chance of doing something really important for the world. And so I really appreciate talking with entrepreneurs who are doing that who have quit their jobs and focused on creating something that is far more risky far less certain and are trying to do it because they see some problem in the world that they are so passionate about that. They just can’t do anything else with their lives. And so I’ve really enjoyed hosting the business for good podcast because I find it as a source of real inspiration for myself as well.

James McWalter

I and I absolutely echo that and many of the same reasons that that I host this podcast on Paul it’s been absolutely brilliant chatting before you finish off is there anything I should have asked you about but did not.

Paul Shapiro

Ah, no I really appreciate it James I admire what you’re doing here and I appreciate a chance to be a part of it and so the only thing I would say is that if you’re interested in getting more involved with the better meat co. We welcome hearing from you. So our website is bettermeat Co again, that’s better meat Co would’d love to hear from you get involved. We are hiring. We are. We’re recording this in June of 2022 and we are going to be soon opening an investment round so we’re looking forward to that if you’re interested. We’d love to hear from you as well. Also if you’re interested in reading the book Clean meat. You can buy it anywhere. Books are sold including on Amazon or you can go to the book’s website which is just https://cleanmeat.com/ again, that’s http://cleanmeat.com and you can get in touch with me through either of those websites https://www.bettermeat.co/

James McWalter

So and we’ll all add all those links into the show notes. Thank you Paul.

Paul Shapiro

Awesome! Thanks James.

Software Powered Grids – E105

Great to chat with Brendan Banfield, Co-Founder & CEO at GRIDSIGHT, Gridsight is a cloud analytics platform that helps electrical utilities transition from “poles and wires” businesses to distributed system operators! We discussed how their software platform provides in-depth grid insights, how to maximise renewable growth, data safety and more! 

https://carbotnic.com/gridsight

Brenda’s Linkedin!

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 Brendan Manfield co-founder and Ceo at Gridsight welcome to podcast Brendan Brilliant to start? What drove the initial decision to start Gridsight.

Brendan Banfield

Thanks James thanks for having me.

Brendan Banfield

Yeah, great question. So Gridsight was founded around two years ago so I’ve started electrical engineering as my background and I’ve worked for um, an electrical utility here in Australia while I was studying my bachelors so that was yeah probably about I started there in 2012 so quite some time ago now. But. When I was there I kind of got exposure to I guess how these utilities operate and I really got a lot of exposure to some of the challenges that they were facing so here in Australia we saw some really large rapid uptake and are still seeing a lot of rapid uptake in renewables particularly small scale rooftop solip pv and this rapid uptake caught a lot of these. Utilities by surprise particularly how it relates to the constraints that are being seen on the grid as a result of these small-s scale renewables so I had that exposure early on and kind of realized how these utilities were operating and then once I finished my bachelor’s I came back to do a ph d so I was doing this ph d leading ah a team of students building a smart.

Brendan Banfield

Solar powered house here in Australia so we took that house to Dubai for a competition called the solar decathle in 2018. So this house had you know all the bells and whistles that had solar batteries smart air conditioner ev charger all these cool pieces of technology and once we brought the house back to Australia it was rebuilt at a micro-grid. Um, my university’s campus and that’s where I undertook a lot of my research so I was using a lot of data from the micro-grid to I guess model the network itself so more data-driven applications to modeling electrical networks as well as controlling some of those you know the solar and batteries in the grid as well to help I guess. Improve the network constraints and ensure the network remains safe and reliable. So as during this time I realized that you know all this technology already exists and with all the data that’s now available to these utilities. There’s a lot better way that they could be managing these small-s scale assets on the network. That’s not currently being done so that kind of got the wheels turning. But. You know the technology is there. It’s just the implementation that’s required so it was based out of that that I contacted one of my best friends Kurt who is now co-founder as well. Who’s got a background in the startup space and was kind of explaining what I was thinking around I guess grid site itself and yeah, basically that night. Decided to to give it a go and yeah create grid site.

James McWalter

Yeah, those those moments right are so exciting. You’re like we’re actually we’re going to do it and now we only have whatever decades ahead of us to to to do all the work and the execution and so on and so I guess from that kind of initial decision. Um. What do those next kind of 3 to 6 months look like and you know what were the I guess early versions of the product before you kind of got to the direction that you are today.

Brendan Banfield

Yeah, so the early version of the products. So I took a lot of what I was I guess doing related to my Phd and so I was doing my ph d at the University Of Wollongong as well and they have a division within the University Of Wollongong that I was doing my Phd under is the australian power quality and reliability center. And they have a lot of ties to industry. So once I decided that this was something I wanted to I guess pursue I spun up a really pretty janky Mvp so just ah, basically a web application surfacing some of the insights related to this bicogrid that I was doing my Phd and so. What the hosting capacity was so hosting capacities. How much renewables the micro-grid can safely host the performance in terms of any voltage constraints and that sort of thing. So once I built that I managed to sit down with a couple of I guess stakeholders from other utilities and just basically walk them through the product and see if that was. You know what we’re doing was of interest and that was enough to spark some interest to kind of get to that next step where you know we knew we had something and we had potential users out there who were interested in what we were doing so at that point after we built that minimum viable product. It was time to get someone who actually had some I guess web development and application. Development skills in are more on the data science side. So that’s when we got our cofounder Hugh who is yeah his background’s in yeah web development and I guess building applications for startups so that was ah about about three months in that we got he on as a cofounder and from there. Um, we managed to get a project up and running with Evo energy who was the utility I worked with when I was doing my bachelor’s degree so that was really good. It gave us I guess you know the ability to test our software and solutions in a you know real network environment or just kind of a micro-grid like ah it was at my university. Was really good to kind of get runs on the board early particularly considering the industry we’re in It’s often quite difficult to get in and get projects and pilots up and running with utilities. They’re very you know, slow-moving beasts so being able to do that so early on in our journey was yeah was excellent for us.

James McWalter

And that was definitely going to be my next question. You know when investors and a lot of kind of founders are thinking about what are the easiest 2 most difficult customers to you know, have for your product. You know governments are generally on the most difficult side and maybe utilities are like None minor notch to the left of that and so but the opportunities are absolutely massive right? because there’s so much money kind of pouring through these entities. They have such a kind of crucial aspect for the yeah, the infrastructure that the energy infrastructure all around us and so getting so quickly you know that’s amazing to hear but I guess with there any kind of particular. Repeatable like insights for how you got were able to get that so quickly or was it a bit kind of you know, fortunate and accidental.

Brendan Banfield

Yeah, it’s ah it’s a constant. It’s a constant learning curve. So we yeah we were told very early on in the piece. You know when we basically would mention to you know investors and advisors and the like that we’re building software to assist utilities and automatically brought up some red flags and they were you know saying it’s going to be very difficult.

Brendan Banfield

You guys? Um, but we believe you know and we’ve found so far that the key is just finding you know a team within these organizations. That’s really passionate about I guess this change that we’re seeing on the grid and if we can find that team and find that internal champion. That’s really passionate about progressing things forward within their organization. once you find that person and once you find that team it’s really easy from there so we we take a really really collaborative approach with our clients at the moment so we have meetings with them Weekly. We have them on our you know slack channel and all those sorts of things so which they really appreciate. So I think it’s you know. Taking a bit of a different look on how you um work with these utilities. It’s not just the fact that we’re selling them software. It’s that we’re you know, providing them software but also becoming part of their team and working with them collaboratively throughout that whole journey. So once we do that. It’s a lot easier to become sticky and we’re kind of collaboratively building solutions that you know. Ah, not only going to help them. But if it’s helping them It’s probably going to be helping you know the broader industry as a whole. So. That’s the I guess method we’ve taken so far. So once we find that team just working really closely with them and basically becoming part of their team as well.

James McWalter

Yeah I think that’s that’s really interesting. You know when you’re trying to like navigate these large none person entities right? Whether there’s large corporation and utility those kind of folks you often have just like a ton of you know, different parts of organization. Don’t know what other parts of the organization are doing and. For folks who haven’t kind of worked in large organizations like that it can kind of seem strange. It’s like oh you know we got refused by the organization but you haven’t really been refused by like this one small slice of it and nobody else knows about that slice or that slice is not really communicating and you know I worked. Previously in ah at a None person company. We went from a thousand to eighteen in that timef frame and it would happen to us people selling at us and then I was also selling into very very large financial institutions and also had a similar experience where you’d have a no but like there’s still None people to go after potentially and so you try to find that champion who can kind of you know. That you’re representative to the people you need to get in front of within the company itself and so I think yeah, they yeah there is this fear of kind of tackling utilities across the startup world. But as you’ve shown and as I think can be learned by a lot of startups. You just need to you know. Figure out the org charge and just start working your way through it until you eventually find that champion because there are a lot of people in those organizations frustrated by how slowly those organizations are moving in these directions and so those are the real opportunities and so I guess like once you kind of had identified that particular person you know. What and you you mentioned having this kind of conversation. Thiss very collaborative back and forth. You know, coveloping the product from the sounds of it and and all those kind of elements and so what? what does the product look like today and you know if I was utility and I was interested in implementing gridite or would that experience be like.

Brendan Banfield

Yeah, great question. So the products at the moment or our main product at the moment’s called grid analytics. So it’s a web application software platform that provides in-depth insights related to the low voltage network. So where you know houses are connected and that sort of thing so we combine. Multiple disparate data sources that’s available to these utilities. So I guess we’re very data agnostic in that sense. So we ingest you know Gis data like their network map and topology. We ingest any smart meter data they have if they have data coming in from solar and batteries on the grid. We ingest that as well. Any you know. Asset monitoring devices like transformer monitors and those sorts of things so that in um, in and of itself is one benefit basically having a 1 ne-stop shop where they can see all their data at the moment the workflows for these utilities. You know if they want to do any kind of work related across many different datasets. They’ve got to do a sql query here and ah. Ah, data download here and try and combine in the next excel which is obviously yeah, very very cumbersome but at the moment that platform is targeted basically to identifying end to end hosting capacity issues. So as I said before hosting capacities essentially the amount of renewable energy technologies.

James McWalter

Dos and csvs and and excel right.

Brendan Banfield

Grid can host safely and reliably so we surface a lot of insights related to the small scale renewables on the grid solar batteries electric vehicle charges and how they’re operating at the I guess individual customer level but then also modeling back up the network as well and showing how these. Systems are potentially affecting network safety and reliability and where this is happening. We provide solutions on how you can improve that network hosting capacity. So the primary goal of this platform is to assist these utilities in basically managing the fully decentralized and decarbonized grid that can host 100% renewables here in Australia at the moment we’re already seeing you know, utilities are having to put limits on solar installations and those sorts of things when we only have you know we have very high penetrations of solar around None in 3 houses here in Australia has solar pv which is pretty crazy but we want to get to a point where every house could have solar and at the moment just. The huge amounts of you know, none of None of systems out there and the huge quantities of data. They don’t have the capacity to manage that at the moment so that’s where we’re stepping in managing the constraints associated with none of small-s scale renewables to assist these utilities in making this transition to a hundred percent renewables

James McWalter

And once the utilities deployed grid site and it’s say okay this this is a particular region in our grid in our network you know a geographic region where we’re Going. We have right now some capacity concerns. Like what actions then does the grid take to kind of mitigate those concerns and.

Brendan Banfield

Yeah, so there’s I guess a host of solutions that can be undertaken and that’s one of the I guess benefits of the gridsite platform as well. We can explore those different solutions. So some of them are as simple as. Basically performing a tap change so tap change is where you can just reduce the voltage of the transformer. So if you can reduce the voltage at the transformer. Sometimes you can unlock some additional hosting capacity some other I guess solutions are things like phase rebalancing so here in Australia we have a lot of soap pv systems and. Eb charges and those sorts of things which are only installed on a single phase and quite often. You’ll find that you might have a portion of the electrical network and it so happens that you know you have 50 pv systems installed on phase a and only 10 on phase b and six on phase c so being able to just swap some of those phases is a. Ah, really I guess low-hagging fruit solution to being able to improve the capacity of the network. But then we’re also starting to dive into the more I guess advanced non-network solutions as well. So that’s things like um, there’s an idea of or a concept called a dynamic operating envelope. So that’s where you can actually dynamically. Shift the amount of import or export of these assets. So for example, you may have a ten Kilowatt solar system that’s allowed to export freely to ten Kilowatts all around the year but maybe there’s a few days with the network’s constrained where you might want to wind that generation down to None or seven Kilowatts just to ensure the network remains safely and reliable. Safe and reliable. So we’re starting to explore and hopefully implement some of those solutions as well with more the dynamic shifting of import and export of these assets because at the moment some of these utilities are just looking at putting static export limits in. So for example, South Australia they’re bringing in a mandate that no matter how big your. Solar pv system is you can only export at one point five kilowatts so even if you had a ten Kilowatt system you limit to that small export so we don’t really want to see that we want to see the maximum amount of renewable energy on the grid. So we’re starting to explore these more smarter solutions where you can actually leverage the existing infrastructure all these solar and batteries and those sorts of things. To improve the grid as opposed to just putting hard. You know heuristic base rules into the network.

James McWalter

That’s that’s really fascinating I think’s you know it’s kind of complex because most of our audience is based in the Us. Although we definitely have a Australian listeners. Yeah, originally from from Ireland Grew up mostly in Europe and so all these different systems you and the utilities will have a lot of. You know, overlapping concerns will operate in very similar ways. But sometimes the incentive models can be quite different in terms of you know who the rate pair is who cares about the tariffs and all those kind of things can you speak to how those kind of incentives affect how a utility approaches things like. Adjusting and and responding to capacity concerns.

Brendan Banfield

Yeah, so that’s that’s ah I guess the million dollar question at the moment so it still hasn’t been solved correctly. The the tariff incentives the way we’re seeing this unfolding at the moment is um, it could be implemented that all the way some utilities are looking at it is when people install these renewables. They’ll have either a a static export limit. So as I said before just a flat say 1.5 Kilowatts or they’ll be able to sign up for a dynamic limit that can change based on the network constraints so you might be able to export all the way up to None kilowatts in a few days of the year um it might wind down to you know, None say in terms of the tariffs though or that sort of um I guess dynamic export limiting does still allow for people like virtual power plan operators to play in that space. So the virtual power plan operators can come in and all the utility is saying is here’s the upper bound like he can play anywhere within that. Within that limit. So the ah the virtual power plan operators can come in and still play within the market participate in energy arbitrage and really provide you know, benefits and incentives for the end users in terms of the the incentives to the edge users from the utility though. Still not entirely sure on the best approach for that I think education. Is absolutely key and really engaging the customers a lot more in terms of educating them and why this is important and how this is going to benefit them in the long run as opposed to hinder them. Um be I think just um, whether it’s financial incentive or whatever it may be something along those lines. Along with the education piece should be enough to ensure that these consumers are you know, getting the most out of their investment and understand why you know managing these large-scale of renewables while you think it might be hindering you in the long run. It’s not only benefiting you but benefiting the entire grid.

Brendan Banfield

As well.

James McWalter

And you mentioned a couple times the yeah more kind of this residential solar which Australia is absolutely the kind of world leader and having such a large penetration of you know, residential solar being on as you said a none of homes. What about the kind of larger community as they call it in the us or utility scale ah project development. You know when a developer is potentially bringing hundreds of megawatts onto the grid at a particular point typically called an interconnection point. How I guess you know when a utility is dealing with an individual consumer right? They’re giving some sort of price signal right? It’s like we will. Allow your energy onto the the grid or not and that’s kind of where it ends when you’re dealing with these kind of much more larger developers and entities. There must be more of a back and forth to try to figure out because you know the developer doesn’t want to put in millions of dollars into developing somewhere where the utility just won’t let them kind of connect to the grid and so. Have you seen use cases for grid sites insights grid sites insights for those kind of use cases as well.

Brendan Banfield

Yeah, so we don’t deal as much with the I guess really large scale solar farms and that sort of thing that’s kind of a different beast entirely. But in terms of kind of the smaller developments For example, you know there might be a new suburb or development going in with. You know and that plan on having so for example with Evo and energy who we worked with they have some suburbs that had 100% mandated solar. That’s actually what our none project with them was related to looking at the constraints associated with these suburbs. So what we can do currently in the platform is we kind of look at the constraints all the way up. The. Network hierarchy so we look all the way down to the individual customer. But then we extrapolate that out to entire basically zone substations. So if we’re talking none of customers. So using this it can be very easy to identify with some of the visualizations we do where these constraints are. For example, if a development was going in and you saw it was going into this particular zone substation. You could look at the surrounding parts of the network and determine hey this part of the network is already constrained if you know a suburb goes in that’s going to have 100% mandated solar that’s going to lead to significantly more constraints so that’s where we can start looking at. I guess more larger scale network solutions so things potentially like community batteries or some more advanced control strategies across that zone to try and facilitate that new development going in. So it’s really about looking at the the data we have available and trying to isolate the pockets of networks where there are constraints. And being able to access that data really efficiently and quickly so you know a planning engineer can go in have a look at where the suburbs going. There’s no constraints here currently, we should probably be okay.

James McWalter

That’s fascinating and so nudy needs to have yeah quite a few stakeholders involved right? So the real estate developer is putting in. You know a hundred home suburb or thousand home suburb like they obviously are like okay None of the selling points to the the buyer of these homes is the fact that. They’ll have you know, cheap or free or even maybe make some money from the solar panels on the on the roof. Um, but if you said like the capacity is already kind of tapped out in that area. Ah the utility must have concern. So I guess is there like a planning process to to connect the suburban developer. To understand like the the capacity constraints so that that conversation is happening at the right time or you know as what often happens in the us which market I know a bit better There’s a lot of just reaction that’s occurring and and then you start to see bottlenecks and the development kind of just stretches out to 3 years and and things slow down to a crawl.

Brendan Banfield

Yeah, particularly at that level. It’s still very reactionary. So. There’s a lot of improvement that can be done at that level. Um, yeah, these utilities just you know as they operate. They’re very I guess Reactionary Entities. There’s certainly a lot that can be improved in that space and I think. The way the industry is heading at the moment. There is a lot of consideration going into how we can manage this growth in the next five to 10 years as opposed to being more you know reactionary in the Sense. So I think um, you know lots of projects are going up with community batteries and those sorts of things even large scale. Um, batteries in parts of the areas where there’s constraints. So yeah, it’s still a very challenging process particularly once you then not only do you have the customers but also developers and and those sorts of things brought into the mix as well. Yeah, it still hasn’t been solved on it think yet. But I Think. You know some of the work we’re doing and particularly using data to unlock parts of the network where you’re experiencing Constraints is really going to be key in assisting these transitions and making sure that you know all stakeholders have a really transparent view of how these systems will operate and then how it will not only Benefit. Or help affect the grid in the long run but also affect the end consumers too.

James McWalter

Yeah, kind of yeah the idea of deploying your own battery and basically starting to see more and more micro-grids being built right? And yeah, a lot of micro-grids historically and and and still today are being built with resiliency is the none kind of concern. We don’t use the grid I see australia has had you know it’s a fair share of issues with with Forest fires. Wildfires as as the western United States has had and then you you know have hurricane seasons and so on in Eastern United States and around the world. You know, similar kind of climate and increasingly bad climate effects on things like energy in the grid. So you know we’re we’re starting to have a lot more micro-grids a lot more resiliency built in. But then we’re also starting to see. You know the ability or the idea that as you start to deploy these you know battery storage and these kind of things you start to actually also produce the ability for the owner of the asset to potentially make some you know income from that and so rather than just solar panels back on to the ah under grid and you just sell your excess energy from your solar panels. If you have a battery whether it’s standone storage within the the home that you live in or eventually things like the battery in your electric vehicle. You know these are opportunities to do things like grid stabilization and sorry services and so on how are you thinking about that like bidirectional. Structure as you have just more ubiquitous batteries kind of occurring across the grid whether it’s ev to grid or just batteries within the home and how you know grid site can kind of incorporate that data as well.

Brendan Banfield

Yeah, yeah, that’s that’s a really good one so we’re we’re doing quite a bit of work at the moment like still early stages. But how we can increase I guess the benefits of renewable energy particularly in isolated micro-grids so here in Australia we have a large interconnected energy system. However, there are small pockets particularly Australia’s you know really large where we have some isolated micro-grids that are reliant on basically renewables and diesel generation. So we’re looking there at how we can apply some of the analytics to ensure that basically we’re maximizing the amount of renewables in these micro-grids while trying to minimize the amount of. Reliance on Diesel Generation so that’s going to ultimately benefit the customers who own those assets too. But yeah in terms of I guess system stability and ancillary services like frequency control at the moment. A lot of that is being I guess managed by you know the vpp operators in the derm systems or distributed. Energy Resource Management Systems we see ourselves at the moment sitting at the I guess layer above that basically orchestrating at what levels these assets can import and export to ensure that the network still remains I guess reliable and operating within its bounds. Um, so the way that can happen. Is you know we can use our network models and data to calculate and set those limits and then the virtual power plan operators and the distribute or the derm systems can play within those other ancillary markets like the frequency control ancillary service market and that sort of thing. So I think it’s going to be a very. I guess collaborative and multi-layered infrastructure that’s going to be I guess monitoring and managing these systems so you know you’re going to have for example, an entity like gridsite who’s managing the network constraints as it ah pertains to the poles and wires and then there’s also going to be. You know your teslas of the world and those sorts of things who. Um, you know have control over a host of battery systems that can respond to you know, events such as large generators dropping offline and they can step in to increase the frequency. So I think it’s going to be. Yeah, it’s going to be many systems and it’s just going to be a matter of all these different entities. You know, being really open in the way that we integrate with one another I think you know traditionally when you’re thinking you know enterprise software. They’ve been very siloed in the past one system sits here and it doesn’t work with anything else and the other system sits over here or as we really want to and we’re starting to do this now kind of open up.

Brendan Banfield

Our platform and our solutions So that other people can or other entities can use our services and conversely we can use theirs as well.

James McWalter

That that’s really interesting. You know there’s this kind of very common refrain from ah grid opera operators utilities in the United States about sharing too much capacity data that it’s there’s a security concern related to that. Um, do you hear. Similar for utilities in Australia um, because there there are definitely you know capacity maps in places like New York state that kind of put put a pressure on this idea that there’s a security concern because New York also has security concerns. But yeah I guess does that ever come up as ah as a concern in Australia.

Brendan Banfield

Absolutely and it still is a big concern so you know to be frank if we were doing gridsite four years ago we would have failed miserably just because we’re a you know cloud software platform and there is no way four years ago that these utilities would have been open to sending their data. You know to a.

James McWalter

None Ah.

Brendan Banfield

Ah, cloud software platform to to run analytics and that sort of thing we’re really starting to see that shift now just purely because for a few reasons I think you know the utilities have opened up to the fact that you know this change is happening really rapidly and they need to do something ah about it now before it gets too out of hand. And due to the really vast quantities of data that they’re starting to see you know the operational overheads and costs associated with you know, hosting things internally is becoming prohibitively expensive. So um, yeah, that’s where we’ve seen some of the benefits and it’s still you know it’s still um. Guess a complex part of the business we need to navigate. We’ve done it a few times now and you know it’s just the the steps that you need to take to ensure that their you know their data is remaining really safe and secure so we’ve you know we’ve engaged and hired some some really really I guess people who have. Significant knowledge in this space in terms of data security. So one of our advisors who’s working with us is you know he’s worked worked across finance and health where data security and privacy is extremely extremely important. So we’re putting some of those mechanisms in place and working really closely when we’re onboarding these utilities and talking with them letting them know that the infrastructure we have in place. And the data is extremely safe and reliable and will remain secure but moreover these utilities themselves some of them the more advanced ones here in Australia anyway, they themselves are starting to open up and implement some of their own cloud systems. So really seeing the benefits or starting to realize that there’s a lot of benefits in this technology. Which has made them a lot more open to startups like us who are obviously cloud-based and not really an on-premises software.

James McWalter

And then on on terms of the policy side of things so you know there are various kind of incentives programs that have been deployed to kind of encourage renewables. Um, you also have sometimes you know just federal money to help with things like build out a distribution and transmission lines for. Utilities to kind of take advantage of in terms of like the policy framework in Australia like are there things that could be improved. You know. Are there areas where yeah money is being directed in in ways that are maybe counterproductive and. Other could of opportunities for policymakers to say okay, you know in some cases. Maybe we want to get very very involved and give incentives in some places. Maybe we want to get out of the way that the market is doing quite well and so how do you think about that balance.

Brendan Banfield

Yeah, so I guess the biggest issue with policy related to um, the utilities here in Australia at the moment is essentially the access to smart meter data. So the primary data source that we use within our platform is from smart meters themselves. So the meters that are on people’s homes. Um, and it used to be that the utility did own these meters and then about five years ago some government regulations came in known as power of choice where essentially they wanted to spin off the metering component of basically an electrical network into a separate entity. Called metering coordinators and what that has led to is basically the the fact that utilities no longer have direct access to this data so they actually need to purchase this smart metering data off these entities called metering coordinators and it’s really difficult because you know essentially these. Metering coordinators. There’s 2 really major ones here in Australia and basically they’re monopolies and it’s really difficult for these utilities to kind of bargain with these metering coordinators because you know the metering coordinator now has all the power. They have all the meters they have all the data. The utility can’t go anywhere else unless they want to. You know, fork out millions and millions of dollars and put their own monitoring and equipment in the network. So I’m really hoping and it’s starting to change but really hoping to see some um improved reform reforms ah around that so giving these utilities better access to this data because the data has so much value and it’s only going to benefit. Consumers if the utilities get access to these vast quantities of data. So as opposed to spending you know these utilities spend significant amounts of times you know bargaining with these media and coordinators you know going back and forth purchasing some data but not others and it’s really, ah, a game of dollars and cents where if I think you know. If more government regulations came in that just gave access to the utilities for this data. It’s only going to really drive more innovation in this sector and really benefit the consumers in the long run as opposed to kind of this. Yeah really I guess regulated world by living into the moment that’s causing a lot of stifling of this.

James McWalter

Yeah, it’s It’s a real kind of tough thing I mean I’ve been kind of working on a project with a few folks about like trying to start to layer and stack. How all these incentives operate because it’s quite difficult to know right? So sometimes like ah this might be a really big opportunity and you start to see entrepreneurs Potentially starting to build something in that space.

Brendan Banfield

Innovation.

James McWalter

And then all of a sudden. It’s like well there’s actually all these countervailing forces. That mean, what looks like an incentive actually has all these other. Um yeah know things that are that are working against it and so ah and and you know these incentives and even the disincentives of other things tariffs etc like they’re nearly always done with the best like idea in mind right? like people are not. Deliberately to to mess things up, but ah, there’s a lot of these kind of unintended consequences and so yeah I mean it’s really kind of fascinating where gridside is up to um, you know what What’s your kind of goals over the next twelve months for the company.

Brendan Banfield

Yeah, so we’ve got a really strong team at the moment. So we’ve managed to build like an absolutely excellent team. You know, really really talented engineers. So the goal at the moment is to continue growing our I guess great analytics platform here throughout Australia. As I mentioned earlier, we’re starting to get into this space. So at the moment. The analytics are purely kind of data-d drivenven looking at historical data. But we’re starting to get into this space as I mentioned earlier related to actually controlling some of these assets on the grid. So basically providing an end-to-end hosting capacity solution. So. Utility identifies and our grid analytics platform this part of the network’s constrained. They can see. There’s a lot of solar and they engage grid site to basically put our constraint engine on that part of the network and start managing that solar to ensure that we’re getting the maximum amount of renewable energy on that part of the.

Brendan Banfield

Grid while we’re remaining safe and reliable so kind of that end to end close loop solution is where we’re heading. But I guess externally outside Australia we’re really interested in potentially looking at the us as well. Obviously Hawaii and California really significant amounts of solar in their grid as well. We’re not only looking at solar toobe. But. You know the really large amounts of electric vehicles that are coming on the grid. So 1 of our clients well networks they’re based out of New Zealand and don’t have as much of a solar problem but are starting to see a lot more electric vehicle charges coming in the home so looking more at how we can manage those constraints along with the the solar related constraints and then also potentially. Exploring parts of Europe as well. You know Germany has really significant amounts of solar as does italy and Spain norway has huge amounts of electric vehicles. So starting to you know target these parts of the the world where we’re starting to see huge uptake of renewables. Um, as kind of the world leaders and we feel if we can kind of solve the problems there in these really world-leading countries where we’re seeing huge amounts of small scale renewables then we’ll have the software infrastructure ready when you know the rest of the world starts to catch up so we can you know assist you know, not only Australia but the world in reaching that. 100% renewable target.

James McWalter

Yeah, it’s it’s really exciting and I think it is interesting to start Australia which is definitely the world leader and you know in the United States different states different yeah regions isos etc like look to California and California is None to 3 years ahead of New York and New York is a couple of years ahead of you know other parts of the country all the way down to. Ah, you know some random gray plain states that haven’t really started working towards any this in the none place and so but everyone will get there right? like this is like a technological force that that is just occurring um but it is like you know fascinating like also just the opportunity for you around pure population right.

James McWalter

You know the la metro area probably has a similar population size to the East Coast of of all of Australia. So you know just getting into California I’m sure has a huge amount of upside and you only have to deal with 3 maybe 4 utilities and I’m sure the sales cycles will be quite along. But. Like once you get in there like the opportunities are vast.

Brendan Banfield

Yeah, exactly and you know that’s the thing with the clients we work with here. They have you know so endeavor energy our largest client here in Australia has around a none kind of connections on their network whereas you know we’re talking with some some overtake overseas utilities before and they’re saying you know we’ve got. Ah, sorry they have a none connections. Um boy I’ve spoken with some overseas utilities. And yeah, they mentioned you know we’ve got None it’s just a vastly vastly bigger grid but that’s exciting for us like you know we want to be solving problems that you know have ah I guess benefit and impact across. Millions of people with you know across Gigawatts and Gigawatts of distributed energy resources.

James McWalter

No absolutely and and thinking about like as building like building a startup in Australia um, you know there’s a reason I’m building a company myself in the us because it’s just a lot easier and you know even expression that we don’t use as much but it’s a very similar concept to what life is like in in Ireland. Tall poppy syndrome like this idea that you know, um, like I was like joke the most successful people in Ireland are pretty well correlated to the people who are kind of mocked the most and and there’s like a certain type of kind of fondness and and sense of humor to that hypo cynicism but it definitely yeah goes against the idea of. Startup world where everyone’s trying to build billion dollar companies and you got to believe it even when it’s very very difficult so have you found you know, like ways that being based in Australia building the company Australia you know about helps and hinders. Yeah, the trajectory of a startup.

Brendan Banfield

Yeah, so from a help standpoint. It’s definitely kind of what we’re been talking about Australia is leading the charge in the uptake of small-s scale renewables at the moment in a lot of senses so being able to solve the challenges here. We’re starting to see these challenges crop up in other parts of the world but really being able to kind of solve. You know the idea of network hosting capacity here in Australia really I guess gives us a leg up on other parts of the world that might not be considering it as as much yet. Also the fact that it’s a very I guess tight knit. You know community here the energy sector as a whole you know we only have 13 electrical utilities in the country and they all work very closely together and talk with one another. So once we kind of get in and start doing really good work with None utility word gets out to another and we can begin conversations with them which is you know I guess a benefit in terms of growing a business here. In terms of expanding though. It is a challenge. We still haven’t taken a real deep dive at going into the us. But we have spoken with investors and stuff over that side of the world who are hesitant in you know, investing in or some are anyway hesitant investing in a company that’s not incorporated in the us and those sorts of things.

Brendan Banfield

Um, but we’re just going to take those challenges as it comes you know we’ll we’ll probably end up doing ah you know potentially a series a sometime next year and at that point we may you know incorporate us a Delaware C Corp and those sorts of things so there’s lots of I guess mechanisms we can put in place that can hopefully assist us in taking that more. Global expansion. So yeah, it is a challenge but I think from a technical standpoint where poised really well to be able to implement and solve some challenges related to distributed energy resources on the grid here in Australia and hopefully once we do kind of expand um into the more global landscape people will see. You know I guess from a technical standpoint what we’re able to do and how we’re able to solve it here in Australia where there’s so much renewable energy that if we can solve it here. We can solve it in other parts of the world too. Yeah.

James McWalter

So if you can make it there you can make it anywhere. Um, absolutely um, well you brenan have really enjoyed the conversation I Guess proof shop is there anything I should have asked you about but did not.

Brendan Banfield

Yeah, so the moment we’re kind of just rolling through ah a seed round so getting a bit a final bit of investment in at the moment. Yeah we’re also looking at you know as we’ve discussed today getting in talks with potentially you know, utilities and those sorts of things within Hawaii California. Um, even New York if it if it works just to start getting an idea on some of the challenges they’re facing and how they’re managing small scale renewables on the grid. So you know we’re always looking to learn and understand more about what’s happening on the global landscape. So yeah, that’s where we’re at at the moment.

James McWalter

Brilliant I will include some contact details in the show notes. Thank you Brendan.

Brendan Banfield

Thanks James. Cheers.

Building Energy Saving Software – E104

Great to chat with John Powers, Founder and CEO of Extensible Energy! Extensible Energy creates advanced demand management software to help commercial building owners to intelligently use electricity and reduce their demand and time-of-use charges! We discussed how a startup is a series of tested hypotheses, the four “C”s of good building energy management systems, predicting energy fluctuations and more! 

https://carbotnic.com/extensibleenergy

Contact John on Linkedin!

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 John Powers founder and Ceo at extensible energy welcome to podcast John great to start. Could you tell us a little bit about extensible energy.

John Powers

Thanks a lot James looking forward to it. Sure yeah, we make a lightweight building energy control solution for smalltom medium commercial customers that helps them ah control what we call the four c’s basically ah cost and control comfort and carbon. So. If you’re managing a building for energy benefit. You have to address all of those concerns and you know we work with whatever is already in the building and you know we’re a software first company. We do put some hardware in the building but we’re a software first company. Ah, in the energy control space.

James McWalter

And what drove the initial decision to starch extensible. Okay.

John Powers

Oh boy. Yeah, so I’ve been an energy nerd for all my life and I’ve been about none my career as a consultant and half as a software entrepreneur so company before this was software for. Um, utilities to deliver information to their customers and that included commercial and industrial customers showing them what their buildings were doing so it was an information service. Basically that company was called energy interactive. It had a big impact on. Demand response market and some other markets but basically the product was there to say your building made a mistake yesterday. Maybe you can do better next time and the new prop company is there to say your buildings going to make a mistake in 2 hours but don’t worry. We’ve already fixed it for you. So it’s much more about actual automated print. Addictive autonomous energy control of buildings than any of the work I’ve done in the past.

James McWalter

And so I guess taking that kind of previous experience saying. Okay, we want I want to you know, solve this problem in a in a different way in this kind of new way. Um, from that that initial kind of decision to move in that direction. What were the I guess None None to twelve months like in terms of like what. This product and early team should look like and.

John Powers

Yeah, so um, we were very fortunate in that we got ah some support from the Us department of energy through a small business innovation research Grant as B I R Grant and and so.

John Powers

Yeah, okay, and an Sbi R Grant is non-dilutive financing with guidance from some of the best experts in the field so we had had some ideas around this um prior to that.

John Powers

So when we applied for that grant. We had some ideas about how we would do this and they give it to you in 2 phases. The none phase is sort of a proof of concept that just is ah um, we did it all as a simulation model that showed what it would be like if you could control all the flexible loads in the building in a way that reacted to. Um, any flexible, any flexibility in batteries car chargers behind the meter and especially hvac given that that’s the largest flexible load in each building so we did that and they liked it and so then they give you more money to go and build a working prototype and get it working in the field in. Ah, real building and so my my co-founder Ari and I um were able to then go out and and start to put together a team to to commercialize the product and so that’s that’s really we all all praised the the. Taxpayers of this country for helping to get this off the ground the sbir program I can’t recommend it highly enough for for other entrepreneurs in this space.

James McWalter

Yeah, yeah, it’s interesting I’ve had a quick look at it for some of the projects I’ve also worked on and it’s definitely something I think is like an underutilized resource. You know I often talk to entrepreneurs and I actually think you might be the None person and you know about None folks who who’ve actually mentioned it and that’s. You know I guess that’s surprising when you know it’s such ah such a powerful source of financing for your company.

John Powers

Well, it’s hard tech right? It’s really something that um, traditional angels or vcs won’t touch until you’ve de-risked um the technology bit so having what amounted to 2 years of funding to um. Build out all the core technology under nondilutive financing from the department of energy made us a much more attractive investment for follow on from the ventured community. So um, you know again, a startup is just ah, a set of hypotheses in search of. You know? Ah, ah you try that one again I can’t remember where I heard this. But I think Steve Blank says a startup is just a set of hypotheses that you’re testing and we’re always looking to test a combination of what’s the.

John Powers

Um, what’s what’s the initial viable product. The minimum viable product. What technical problems are people willing to pay for you to solve in what ways so being able to do the None bit of that all through um, solving some really hard mathematical and technical. And control problems through the sbir project was really helpful because then yeah, we knew what we were doing by the time we were asking anybody else for money. Yeah.

James McWalter

And you mentioned this building right? This None building. Um, what was that building because I feel you know right now climate related and these forces you mentioned like these are top of top of mind for many building owners and and people running companies around the world. But yeah. Years ago when you were kind of first starting this. It. It probably was less top of mind especially around the kind of climate carbon piece and so Yeah’d I’d love to hear the details of ah of the building itself. So.

John Powers

Yeah, the none building was an office building in downtown Berkeley within 3 blocks of our little space we we were in a wework space at the time in downtown Berkeley and I wanted it to be something we could walk to and fix if we had done something bad, right? so. Um, it was the David Brower Center which is ah a building in downtown Berkeley that has multiple sort of climate um mission nonprofits in it. So it was great because they understood what we were trying to do and trying to prove. We got great. Um. Help from the ah upper management down to the facilities managers in that building. So it was a really good experience and we anticipated that office buildings would be a big target for us and it’s turned out that really other commercial buildings have been been more attracted to what we’re doing. So we can handle anything where there are a lot of um, flexible loads that are dominated by hvac so office retail church school conditioned warehouse municipal building but the um you know the folks in in retail and schools and I’d say you know. Houses of worship and event centers sort of these places that have event driven schedules have been much more interested in in our solution than a lot of the office buildings. We thought we’d be targeting. We’ve done a few but most of them have been outside the office sector.

James McWalter

And yeah, it’s so interesting I mean to go back to your point earlier about you know startup is just putting out hypotheses testing them and then you know trying to wind your path. Um, you know you had this hypothessis around the office building being that maybe core early. Yeah Beachhead client and customer and.

James McWalter

Yeah, as you said it’s still part of what you’re expanding into but it was not as core and so I guess what are the attributes of the the kinds of you know retail or how a worship and so on that are different to office buildings that I I guess were ah you know new information as you’re kind of working through that hypotheses building. Piece of the of the founding and.

John Powers

A number of decision makers that is the biggest impediment in a lot of office buildings because with multiple tenants all it with multiple control of their own zones underneath the landlord who has the. Ownership of the assets whereas the control of the assets falls to folks who manage the building and the occupants in all the different spaces. It’s much more straightforward with a school district that might own dozens of buildings. And have exactly None control point for who you have to convince. So um, definitely the non-residential small to medium non-residential space is always hard for every kind of product and service. But. Um, in our case, the fact that you can go to a single decision maker at a lot of owner occupied retail for example or we’ve done a bunch of car dealerships I’ll just say I didn’t know there were over 20000 new car dealerships in the United States but there are and so we’ve become you know a. Provider of load flexibility services to um, energy- consciouss car dealers that’s been great. Um school districts the same way. There’s a lot of them that have already gone solar. The product is designed from the beginning to work well with solar or without but with solar it gives even greater savings. So. There’s a lot of folks outside of the office building space that we’ve but had a lot of success with. We’re starting to get some traction with the um sort of asset managers in the office space and that I think is a is a good path for us. But we’ll see.

James McWalter

It yeah’s it’s so interesting I I think a lot of founders when they’re you know trying to approach particular problem. You know they’re like okay this is a clear problem but often kind of struggle to identify the end buyer right? and also kind of. Struggle to often kind of combine that with what is the sales cycle here because if you a product where your sales cycle is like nine months and it’s a $700 end and result like that’s a bad business. But if it’s nine nine minutes that’s a great business or if it’s nine months and it’s $7000000. That’s also great in business and so I think figuring out exactly. Ah you know.

John Powers

Yes.

James McWalter

Who the endbuer is who actually has the problem because often the person buying the product may not have the problem you’re trying to solve and kind of combine this and so I love this idea of where are their decision Makers who are aggregating a lot of buildings right? So the person who’s running the school district you know, even in the office space. You know I would imagine a cowork like we work with might be more interesting then.

John Powers

I That’s right.

James McWalter

And because even though they have lots of tenants tenants don’t really have probably a lot of choice in terms of electrification of the building and so you know identifying those aggregation points as part of your sales cycle sounds like it was very important to the trajectory of the company.

John Powers

It absolutely was and it affected some of the decisions we made in product design too. There’s a feedback loop there. So We we very quickly realized that especially in places like office or shared Retail. We needed to make the product. So simple. And um, low upfront cost that it would work for tenants as well as for landlords so we don’t need this to be a big um you know a change in equipment in the facility. Um, the most we ever end up. Changing is Thermostats basically go from Dumb Thermostats to Smart Thermostats and the tenants have the right to do that. So The payback time is so quick often under a year That um, even tenants with short to medium term leases find this super appealing. It’s just finding the person who’s responsible for the electricity bill we can help whoever that turns out to be in in pretty much any commercial facility that I was just listing off there.

James McWalter

So yeah, so let’s then go into yeah where the kind of product is today in inr detail so you kind of spoke a little bit there about the implementation and I guess once it’s implemented like what is the kind of experience like for all the various kind of stakeholders and.

John Powers

Sure so the the trick is to identify upfront what the flexible loads are and we have certainly controlled batteries. We’re getting our none car charging workplace car charging solutions going. Ah, but in every building we’re also controlling hvac because that’s the biggest flexible load in most of the buildings in the country and so you you need to get buy in around the idea that you control within a range now. Everybody’s controlling within a range already in most buildings. There’s either. You know most buildings under one hundred Thousand Square feet I think 87% of them have nothing but dumb thermostats as their control system. So the the comfort is dedicated or is determined by the last person who walked by the thermostat right? So that’s not a good energy management system. So um.

James McWalter

Right.

John Powers

In those facilities you can rip and replace dumb thermostats with smart thermostats with a one day installation and you can have ah energy. Um and demand savings by keeping the temperature within a range if you like at None we can keep it anywhere between 70 and 76 most of the time we run it right down the middle nobody even notices when they’re you’re getting close to your peak. We might pre-cool the building before the peak and then let the temperature go up a little bit. It turns out to be a huge amount of energy that can be moved from minute to minute and hour to hour and the experience with the customer is they notice nothing. As the fans keep running everybody’s still comfortable. You know if we’re doing our jobs right? Nobody knows we’re there. So the the improvement comes from the facility management side where somebody who owns a portfolio of these buildings. And is getting hotch and cold complaints or getting other kinds of complaints. They can manage all of those centrally they don’t have to send out a human in a van to go and check just to do the diagnostics as to why somebody is cold. Did they misuse the thermostat did they is there a malfunctioning unit. You can figure out all of that before you get out to the site. You can see it all in front of you on a dashboard and then the the only site visit is for actual repair so you know that’s where the benefit to the end customer comes in is in you know, improved comfort but then also in improved economics. Economics for maintenance and economics for your electricity bill. So so my none job out of college was actually in the rates department of an electric utility. So I I know how all of the tricks are done by utilities to get more out of commercial customers. So you you and I just pay for kilowatt hours on our bill at home right? So ah, certainly a commercial customer pays for kilowatt hours too but they pay up to the 70% 30% to 70% of their electricity bill is based on when they use energy not just how much they use.

James McWalter

Right.

John Powers

A lot of that is in a demand charge the highest 15 minutes of usage for the entire month can cost up to None your bill and some of it is in time of use charges where expensive times a day cost 3 or 4 times as much for the same Kilowatt hour as cheap times a day so we can shift energy.

John Powers

Without anybody noticing from expensive to cheap from dirty to clean times a day and save on cost and carbon that way too. Yeah.

James McWalter

And so you mentioned these four c’s earlier and you were kind of touching upon these are the the elements that customers find compelling if you have to stack rank them from the customer’s perspective. You know, which which which see is like number 1 number 2 number 3 number 4 Yeah interesting.

John Powers

Comfort top. You have to be able to handle. Um, all of the you know, ah occupants are worth much more than electricity right? So so comfort is number 1 control and especially in a facilities management environment where.

John Powers

I’ve never met a facility manager who was not undersourced right. Facility management is ah given a None priorities and they can only attend to their top 3 right? And so if you don’t make the if you don’t take work off their plate with a solution instead of putting it on.

John Powers

If I just built us a bit of software that sends you a None alarms a day to say all the things that are going wrong or is yeah, you’re welcome I so no, it’s like this is a way to reduce your list of things to do and manage it not increase them. It’s a way to keep the.

James McWalter

I right? it was like thank you so much? yes.

John Powers

Ah, comfort and convenience of your customers. Um, you know under better control while reducing your your cost. So I we usually say comfort control cost and carbon and that’s not you know that’s based on. Kind of a consensus experiment experience. Certainly some have a much higher priority on carbon. There’s folks who have yeah esg goals that um Trump any savings on their electricity bills pretty much um and ah. But but comfort is non-negotiable. You have to keep folks comfortable and control is the you know is the underappreciated part. It’s like if you really have a building that has dumb thermostats locked in looseite cases. We can help you.

James McWalter

So right.

John Powers

If that’s the way you’re trying to control the occupants right now. My favorites are the ones that we find where the looseite cases have unbent paper clips that people are using to jab inside to adjust the temperatures. Anyway, we definitely can provide a better energy management experience than that.

35:53.96

James McWalter

I Think it’s so interesting that stack rank because yeah, again as I think through and I’ve talked to a lot of folks who are tackling similar problems or even pretty, you know pretty much the same problem and I think generally there is such a focus on like selling on. We’re going to save you money.

John Powers

Yeah.

36:30.80

James McWalter

But it’s it’s such a well-made point that like they make money to tenants and the tenants like you know, getting 17 complaints right? and and you’re probably getting those anyways even with the perfect control because you know we all have our different temperatures. You know my my wife likes a way warmer home than I do right? like these are just the the natural kind of state of things.

John Powers

Of course.

James McWalter

And and you know you always have disagreements about certain things but like giving that as the the priority. Um it you know changes everything because like it also as more as other aspects of building electrification become cheaper and more ubiquitous. You already have the control system in place to take advantage of that. And so it’s basically building this beachhead on the basis of comfort and control while also enabling you know, but right now but also much more in the future this idea around the cost and most importantly, the carbon piece I Guess from the context of of this podcast.

John Powers

I’m so glad you brought up the dynamics of a building right? because a building is not a static entity and what’s coming in the next few years is bigger changes than have happened to most buildings in the last several decades when when we talk about. Um, replacing when we talk about decarbonizing we we work a lot in California but we work all over the country and states are making these claims that they’re going to decarbonize everything and to decarbonize energy use in buildings. You have to replace gas heat with electric heat gas water heat. With electric water heat. This is a huge change in infrastructure and in the economics of building operations and if you put in and I’ll just use heat pumps as an example, but if you put in heat pumps where packaging units are today that currently are using gas. You’re you’re going to have ah a massive increase in demand charges in the winter that no one knows where they came from unless you accompany it with better control now we we actually do a great job with electric heat. We’ve done some studies that show we can. Keep the demand charges as low as they were before with the even with electric heat because you can flatten that out over the course of the day but again uncontrolled electric heat just sets this huge spike none thing in the morning and nobody understands what that does to their electricity bills. So the changes in. Infrastructure and building car chargers behind the meter is another huge one so we deal with I mentioned earlier? Um, ah some car dealers. Um, they’re all being told they have to install the the oems are telling them. They have to install car chargers in order to be entitled to any. Um, allocation of electric vehicles to sell well they don’t know what that does to their demand charges. They don’t know which brand to get which how you control any of them you plug in and suddenly your load goes crazy. Um, you know the ability to integrate management of all flexible loads in a building is. You know is just becoming more valuable as buildings change as the electric equipment in them changes and grows.

James McWalter

Yeah I was actually talking to the head of analytics at a Massachusetts based utility. Um, kind of four or five months ago and he was like we’re full time you know I have a staff of 8 data folk and we’re full time trying to predict. You know the year. Basically the peak load in the northeast swaps from summer base to winter base because of the adoption massocra heat pumps basic are like if we get that wrong if we’re like a year off like you’re going to have similar more things to what happened in Texas like year and a half ago when obviously horrific things in terms of like some loss of life and so on.

John Powers

Yeah, yeah.

John Powers

No, my.

James McWalter

Also had these you know $28000 for None inutes of energy. Ah you know bills that were occurring and a lot of those were kind of systematic like issues that happened as well. But you know these are all the kind of canaries you know in the coal mine to a certain extent for how different things are coming and and as we have extreme weather events they’re showing us what. Like basically the default response is going to have to be in five to ten years

John Powers

There’s there’s no question that the grid needs the kinds of controls. We’re talking about the grid needs to be able to communicate buildings in the grid are one system not to and the the buildings have lots of built-in flexibility. Once you get a building under better control. You can respond to any signal whether it’s from the customer s own meter based on their own fixed tariff or whether it’s a price signal or load control signal from the grid so you can you can turn your building into a revenue generator. Once you have it under better control utilities will pay for load flexibility in None form or another exactly the way your your contact in Massachusetts was talking about the cheapest form of storage on the grid is smarter control of of building loads period hands down. And you know I’ve I’ve lived in that market before I know the demand response market very well. Um, you know built one of the first web-based demand response tools available and the the getting a product that works for the customer none getting it to work. For the building manager first that opens up all these opportunities to turn it into revenue when you negotiate with the utility.

James McWalter

You know that that makes sense and then just on that I guess because you see we talked about kind of predicting a little bit So what kind of information are you going and like into to predict are we talking you know the day ahead. Energy markets. Are you pulling in you know, lots of different disparate datasets to try to say okay.

John Powers

Yeah.

John Powers

Um, within.

James McWalter

You know we really should charge up this this battery storage or whatever it may be because if we did it an hour later it’s going to be way more expensive.

John Powers

Yeah, so um, we can take a price signal in most markets don’t have that operating um yet. But we’re doing pilot projects in California British Columbia um None in California 1 in British Columbia to to look at day ahead pricing from the. Wholesale markets. But mostly what we take in is a prediction of what the uncontrolled loads in your building will be doing so the stuff we’re not controlling lights and plugs and other other end-use technologies that we’re not controlling.

John Powers

And then a prediction of weather in terms of what the temperatures or exterior temperatures are going to be and if you have solar then a prediction of what your own solar Um Pv system is going to be generating and so we take those and put them into an optimizer and then. That tells us when to run the flexible loads in a way that keeps you comfortable and yet minimizes your spend on electricity or maximizes your gain if there’s a you know program from the utility in effect.

James McWalter

Yeah I think whenever there’s kind of recommenders or predictive modeling. That’s occurring. It’s always nice to be able to get you know somewhat immediate feedback right? And so in this model you are every single day. It’s like did we do a good job with combining weather data and understanding that look.

John Powers

Um, yes, yeah.

James McWalter

The lights get turned off a little bit later certain times of the year versus others and like pulling in all those factors and then it’s like okay you know our perfect predicted curve like fit the actual data you know was it 92% or was it 97% or 99.9 percent and then and then tomorrow you get to do the whole thing ever. You know over again and so.

John Powers

Um, if.

James McWalter

Every day I would imagine you’re you’re kind of improving and and you know trying to hit your own internal metrics around like how close are you hitting that predictive curve The actual fact. Yeah.

John Powers

Yeah, this this is the beauty of modern machine learning this really is something that while you know I have a background in economics and statistics I’ve done plenty of modeling myself. But I have to say the ability to have the system. Learn autonomously and get better over time is really exciting to watch because the buildings get dialed in better and better as um, you know, ah hardware starts degrading on day. None software gets better the longer it runs so we’re controlling our our buildings better. Every. Every day.

James McWalter

And then as we have these you know step change you know items added in right? The things we kind of touched upon like Ev charging and you know more battery storage and ubiquitous heat pumps and so on um, like there’s ever more data to to kind of sort through and so you know like. Like even in company I’m working on and and whenever I’m advising on startups. It’s like if you are in a world where you’re trying to build models based on data like the more data the better and the more complex the data the better because that’s where you’re kind of bringing to bear expertise like in a world where there was just a single variable like there wouldn’t really be a business for you right.

John Powers

We We have a slide in our pitch deck that says the more complicated the better because as you add things to the building. You just are making it harder for yourself to manage and building a more compelling case for software to do much much of the autonomous management. Because you you just can’t be everywhere at once you can’t be adjusting every thermostat watching who’s plugged into your card chargers looking to see what the state of charge on the battery is none of this stuff is well suited for humans. This is a case where artificial intelligence is. Replacing jobs that aren’t being done at all. So We all worry about Ai replacing jobs this is doing jobs that nobody is doing right now. So we’re making sure that it’s possible to have the.

James McWalter

Right.

John Powers

Learning We just talked about continue even as you add more complications to the system.

James McWalter

And so what are the kind of goals for the next you know 12 to 18 months for the company. So.

John Powers

So we are um in the process of getting ready to fundraise so we raised a seed round last may and we’ll be raising a series a later this year. We are um, staffing up both the. Product and the sales side of the house and you know we’ve been doing pilot projects for multi multi-building owners so that could be chain accounts or school districts or what have you. And the real goal is to pivot from sort of the pilot projects to now that we have proof that those succeeded more massive deployment through those chains. So now that there’s a school district and. California that we’ve been working with and we’ve demonstrated all the things I just said that the control keeps people comfortable that the savings grow over time through the course of the pilot at the schools that we were doing and now we’re going to be talking to them about rolling it out to you know, 5 or None times as many schools. So the the you know we’re at that inflection point towards scale rather than invention. So this is the most exciting time for me as an entrepreneur because you get to see it not just work which I knew it was going to work but see it work at scale. And so that’s this is our year to sort of roll things out to um more and more more and more buildings in more and more sectors. So we’ve we’ve done bunch in schools. We’ve done a bunch in car dealerships. We’ve done a bunch and ah other. Houses of worship and like all of those lead to None building leads to many more buildings. Not None building is just another fight to go get None more right? So yeah.

James McWalter

Yet having a go- to market that is additive like that where you know a single sale is not a silo that ah nobody else knows about but it like makes the next you know part of the next sale the next building additive and and more more easy like um is something that.

James McWalter

I Think in general series a investors like to see so that’s that’s a positive.

John Powers

Well right? and you have to right because we we certainly had to earn our way there. We certainly had to go hand to hand into a single church a single car deal or a single school before we earn the right to go say we’ve proven this works. Ah, you know drop. Drop a dollar in the top and ten bucks comes out the bottom you know? So ah now we’re to that stage the the proof is there. The case studies are there. The referenceable accounts are there the you know now now things start rolling. So.

James McWalter

And absolutely and kind of take like ah I guess ah a broader perspective. You know there’s been ah I call it a tapestry of different incentives and disincentives as you know, various kind of public entities. Whether it’s federal state governments or you know other entities who are trying to add. Different ways to nudge ah different parts of the economy into more climate-. Friendly yeah situations and so you know you even have things which was us on the climate side but things like lead certification previously which is still ah you know ubiquitous What is the kind of policy and regulatory environment like.

John Powers

You know.

John Powers

Sure.

James McWalter

You know where are would you like to see areas where you know we’re actually having too much regulation. That’s slowing things down versus these are areas that would be great to see more incentives to speed up some of the transition.

John Powers

So A lot of the incentives that I’ve seen are all around hardware and physical assets so you can get.. It’s much easier to get an incentive to replace an Hvac system than to make it work better and that seems upside down to me I’d like to see more incentives around. Measures that can be implemented without huge capital expenditure because the um you know the adoption is not just based on expense adoption is based on education and you know a little bit of endorsement and Momentum. So I’d like to see more incentive to. If you’re going to keep your old stuff at least run it properly or if you’re going to get new stuff at least run it properly. So I think I think that incentives are skewed at the moment towards capital heavy stuff whereas software is delightfully asset light and you can. Make a bigger step change faster by updating the control of what you already have than by scheduling some multi-year engineering project with massive capital costs to take out perfectly. Good equipment to replace it with slightly better Equipment. So I think the the. Yeah I’d I’d say you know software is conquering the whole rest of the world and it’s you know, clearly going to conquer this part of the world but a lot of the incentives seem to be aligned around around hardware replacement.

James McWalter

It Yeah’s it’s this tricky thing like I think a lot of that is due to the flexibility of software and I think it’s very hard to design programs that take that into account right? and so you would have to have it So in some way outcome-based So it’s like okay this is the status quo from a.

James McWalter

Yeah, energy efficiency or emissions point of view and then this is the improvement and and incentive based on that I I do think that. Um, how do I think about this so another are like sort programs. Um I’m familiar with to try to like fund innovation Actually probably it’s so somewhat similar to the you know the kind of.

John Powers

For sure.

James McWalter

Granted investment from ah the voe where depending on exactly how these things are set up if they’re too structured. Yeah, one of the things we just talked about with software is that it’s so flexible right? Like you know you you have these ability to kind of like explore these areas because it’s such a malleable piece of technology to solve problems with. I Think there’s always going to be this tension between ah policy and incentives when apply to software specifically. Because yeah, if you put too much of a structure on software then maybe like the the best software and unless as you say you do have an entirely outcome based criteria.

James McWalter

And then you could have like a None different shots of goal and lots of people trying different things to kind of hit that particular outcome.

John Powers

Sure and and you could do it more simply too. You could say if you’re going to install make it come with the hardware right? You could say if you’re going to get an incentive to install heat pumps instead of gas ah heaters. You have to you. You could just use the heavy hand approach and say you have to have some kind of intelligent control software that goes with it. You know and it doesn’t have to be ours of course but it could you know just like it doesn’t have to be None company’s heat pump either. But just saying we’re we’re. Um, we’re installing a None heat pumps and we don’t care what happens to the grid as a result I think is setting ourselves up for some trouble and the same with car chargers having you know there’s there’s. No end of folks who talk about smart charging but we rarely see it right? Chargers start charging as soon as somebody plugs in and that’s that’s their version of smart charging because that’s what they think the car drivers want and they’re probably right? But if that happens everywhere with no. Ah, thoughts of consequences to the grid or consequences to carbon or the rest of it. That’s a missed opportunity. You know evs all by themselves will either. Ah um, save or wreck the grid just in the next few years the numbers that I’ve seen. So yeah.

James McWalter

I yeah I’ve I’ve mentioned to a few folks working on yeah in the ev space on on the podcast about this. Ah this theoretical you know, None of July weekend where in ah in a dense city with 30% ev penetration where we’re just going to be out of chargers when everybody tries to charge up and.

James McWalter

Yeah, you’ll have something so more chaotic and and I guess the lack of kind of over our controls um is a real issue. Um, but then I yeah I guess like kind of thinking about you specifically and your your background you know in we touch upon it ah like lot of kind of different kind of approaches to solving various problems. You know we worked at a utility and then you you know you’re an entrepreneur you know in multiple kind of chapters if you work I suppose to kind of give a message to you know the next generation analog of yeah what you’ve done somebody is coming On. You know, maybe in their late teens early 20 s who you know want to kind of have a kind of similar impact on the world. Sort of pick our advice you give that person.

John Powers

Yeah, so I mean work on something worthwhile. It’s it’s kind of trite advice but find a find a hard problem that you want to see solved and then go solve it because um, you know there’s there’s plenty of stuff that I’ve i’ve. Worked on in my career. But really the thing I’m proudest of is that I’ve probably participated in giving between None and None folks their none jobs in energy. Um, you know if if your early career looking for guidance and energy hit me up because I have to say. Um I I can connect you with any of the entrepreneurs who aren’t me who are also trying to solve all these hard problems. Um, we need more and better iq points on the big problems of the world. You don’t have to go to Facebook and figure out how to make somebody. Stay on a cat video for four more seconds right you should be applying those skills to ah something that will make a real difference for yourself and for the world.

James McWalter

That Yeah, and thankfully we’re starting to see a bit of a shift like there’s been this probably from the beginning of the pandemic but this kind of flourishing of lots of lots of folks who are starting online communities and and that are all kind of you know climate. Ah you know, focus and trying to. Get people to divert. Ah from yeah, the the kind of big tech like role or or similar into something that has that impact.

John Powers

Yeah, yeah, we we um before the pandemic we were big participants in local um hackathons and the like to try and pull people from tech tech into clean tech because the skills are are. Um, you know, fantastic in tech tech but the project needs are um, just bottomless in in clean tech right now there’s there’s None new innovations that need to come along in the next decade that are going to make a real difference in the world. So. Of. There’s plenty of opportunity here. Yeah.

James McWalter

And and it’s this isnt my own start of it literally every day I like talk to folks. It’s like the data insights from the financial software that we were building ten years ago are like that are just you know old school nobody uses them anymore in the financial space are just like cutting edge for people working on.

James McWalter

And the energy space and so it is. There’s just massive opportunity and um, yeah, hopefully we’ll have more and more people kind of joining. Um, but John it’s been actually great chatting. Um, before we finish off is there anything I should have asked you about but did not.

0John Powers

Um, and just give me a second. Well.

01:18:54.32

James McWalter

So to go for and this is your opportunity to give a call to action. Yeah.

John Powers

Well I think we covered the landscape pretty well I would say that um, we’d like to have folks hit us up on our Linkedin page where we talk about load flexibility and the value both to buildings and the grid pretty often. So um, extensible energies Linkedin Page is good None my own Linkedin page I’m just John powers on linked john t powers I think on Linkedin you can find me easily there. But if you if you own a building and want to see what our software can do for you just hit our homepage. There’s ah ah, a place for you to enter some very basic data and see if our solution. We’ll make a difference for you and we’d be happy to run the numbers with you and see what we can do to make you more comfortable and save you some money.

James McWalter

So fantastic and we’ll include those links in the show notes and I will also send an email to ah the person who runs our building where my own offices and and see if we can get some some some kind of juice from that. Thank you John.

John Powers

Okay, thanks so much James.

Carbon Capturing Membranes – E103

Great to chat with Erica Nemser, CEO of Compact Membrane Systems, a company that creates membrane technology to capture and reduce greenhouse gas emissions, and transform industry into a long-term sustainable enterprise! We discussed the challenges of decarbonization, point source carbon capture, how a membrane works at low pressure, scaling up the technology and more!

They can be contacted at membranes@compactmembrane.com

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 Erica Nemser Ceo at Compact Membrane Systems welcome to the podcast. Erica Brilliant could you tell us a little bit about compact membrane systems or Cms.

Erica Nemser

Thank you for having me.

Erica Nemser

Sure as the name suggests makes Membrane systems in this case for point source carbon capture and a host of other decarbonization Solutions pool.

James McWalter

And what I guess drove that initial decision to join Cms and then start developing that product. 

Erica Nemser

So sure. Um, I joined cms about seven years ago and the company had a history before that of really developing cutting-edge technology. There was substantial investment in the technology and solutions. Um. And that’s a little bit different from some other companies I’m not the ah part of the original founding team. My background is one of coming from economics and management consulting. So I jumped into the team at a point where they had developed some existing technologies. And had really profound um bench-scale results on a decarbonization platform and so.

James McWalter

And and was that were they targeting decarbonization or was that bench research focused on something else and then this is a spin out application of that original research and.

Erica Nemser

I would say they had a portfolio of about None different technology technology applications some commercial some ready to be commercialized and some at bench scale. So one of the first things that I did when I came in was the portfolio rationalization process meaning like you can’t get None things successfully to market with a team of less than 30 so where are we going to focus. Um, and that’s where a little bit where the management consultancy came came into play. Which is you know that’s been a background of work that I’d done um and focus on the initial decarbonization application came out of that with carbon capture as the sort of follow on but remember seven years ago you couldn’t have a conversation about point source carving capture technology with anyone we thought it was important but the world would tell us it’s not coming until twenty thirty 20 40 None um and the world’s changed a lot.

James McWalter

and it’s something that’s tough of mind for you know, a lot of folks right now and and something that has huge amount of investment going into it. But I guess what when you were kind of thinking you know those seven years ago what were the attributes or aspects of the potential market that made you think ok you know. This is not a None product. This is a None or 2022 product.

Erica Nemser

But None is how do you take a portfolio given that we have a platform and even if it were to be a None product. What are the areas that we can apply that platform in advance if you think of some of the challenges of carbon capture. You know it takes a lot of coordination. A market has to evolve. It’s essentially ah, an emission a controlled emission in most cases, the co two isn’t that valuable unlike other areas where you’re producing a product. So what we did is say where can we use that same platform. And work on products that do have value now where we have a unique offering our platform is highly competitive and start in those markets and basically bring the technologies out to market as the markets evolve and so that’s what we’re doing and and we saw it that way as a huge de-risking for the. The portfolio to be able to address other decarbon is um, like decarbonization applications before point source carbon capture.

James McWalter

I’m also curious about those other 29 parts of the of the portfolio. Um, and so I’d imagine some of those as you said are at various stages of of development from research to full commercialization I’m sure there was patents flying around. Ah you know were there any kind of close calls in terms of.

James McWalter

Going Maybe one of the others versus what you ended up focusing on sure.

Erica Nemser

Well part of it is. We’ll never know right things that I canceled early. We won’t I would say um, we were pretty rigorous and I’m very structured so I just put a framework on it to say you know. How much of a contribution is this in terms of addressing a need. That’s not addressed now how unique is it? How big is the market and how many what I’ll call for the engineers the nested if statements it could be huge but None ifs have to occur out in in the world. You know that’s a lot of risk. And so if you’re waiting for a whole um process or a whole sector of the economy to change and then they’re going to adopt something and if they adopt that then they’re going to want to adopt ours. That’s really risky so we basically use that kind of filtering system to say you know what’s going to matter. We don’t you know. We’re swinging for the fences we don’t need to to bring a metoo technology that’s incrementally better for an application that’s not on the top 3 list of someone’s things they need to solve so we were really aiming at that and you know. As cool as it could be if some of these things could do a job that other technologies could do. It’s just not It’s not a swinging for the fences kind of game.

James McWalter

So and so that decision is made then you know over five years ago five so five seven years ago and it’s like okay we’re we’re going to develop this now into a commercialized product that has some sort of you know, profound effect on climate.

Erica Nemser

Um, I mean yeah..

James McWalter

I Guess could you get into details of what the product is and how it works. Yeah.

Erica Nemser

The initial application was for olafen Paraffin separation which is a workhors separation in the petrochemical space the file the the and that’s the partner to the carbon capture separation technology. So if you think about if we focus in on the carbon capture piece and I’m happy to come back to the olaens one. But if you focus into the carbon capture piece where we’re looking is at well starting at point source carbon capture recognizing we can expand from there to direct air capture adjacencies and things like that. The.

Erica Nemser

Focus of point source carbon capture is is basically many of the things that we want and need in in this world. Can’t easily be moved to electric sources of power. So everyone’s familiar with electric cars that if you buy an electric car. And then you source that electricity electricity from a renewable source like wind or solar. You’re no longer producing any co 2 that’s going into the atmosphere. You’ve completely taken that out of your equation but many of the things that we want to need like steel for buildings. Meant for roads for those electric cars heating systems large and small a small one would be like the None in our house if if you live in ah in a part of the world that requires heating in the winter. Um and a large heating system would be something that’s in a plant or a commercial commission building. Those don’t always have an easy pass to get into a purely electric nonco None generating system. But we all contemplate a future where we’re going to have continue to have steel and cement and buildings. So how do we address them as soon as possible. That we’re enabling a transition and not just saying okay when they adopt some futuristic technology in 30 years then they’re not going to be emitting but what can we do right now. So point source carbon capture is going after the emission stack of those processes for most people you can think of the emission stack like the flu gas. Comes out of your own home heating system if you have a boiler or furnace in your basement. So large processes are not that different. They have a low pressure large volume of emissions that are going up mostly nitrogen but a lot of co 2 and so what we aim to do is go grab those out of those processes. Um, because those are processes that either don’t have a way to become electrified and we’re stuck with them for a really long time or they’re not going to change over for twenty or thirty years as that very expensive capital gets to end of life and be replaced so how do we go and grab that co 2.

James McWalter

And so let’s let’s take a cement factory as as a kind of example that I think comes up quitet a lot with point source carbon capture. Ah you know for the listener you have these very large factories. You can kind of picture the big chimney with you know, producing all the that CO two and smoke and.

Erica Nemser

Right now.

Erica Nemser

Me me. Yep.

James McWalter

All these other kind of wonderful compounds that we’re all inhaling and so on and so extracting the carbon from that to reduce the greenhouse gas emissions is obviously very important So how does your technology get integrated with an existing system like that to kind of maximize that carbon capture and.

Erica Nemser

Sure so what we do is we bolt onto that emissions stream and pull the co 2 out and and I think that’s not the tremendous novelty of coming up with the idea that one could tap into the flu gas dream and extract the C O two the novelty and the real contribution of Cms. Is being the lowest cost way to do that because that co 2 is not particularly valuable so it really is how do you do it cheaply and people are talking about aiming at $20 a ton carbon capture now everyone knows what you can buy for $20 being able to produce anything for $20 a ton.

Erica Nemser

Is a really big challenge and the way that we do that is with a novel Membrane that doesn’t need a lot of the heat electricity pressure and things that other systems do you know to step back into the world of separations and put that in the context of the overall. Energy consumption in the world If you take it look at just the Us The industry uses about a None of the of the power that’s generated the energy drawdown in the Us about a and industry takes about a None of that about half of that is just doing separations. It’s not making the material we need or powering the things we want. It’s separating the things we want to a pure enough state to use them and the way we’ve always done that historically is to use a lot of heat or a lot of pressure to do that. Those are energy hogs. You can you know. For most people you know industries far away and that’s because the industrial revolution taught us that if you want to do these things efficiently. You got to do them at scale and then you got to throw all this energy in and to do it. You know if you know anything about distillation is separation for alcohol. That’s a good reference point you boil stuff and you separate it. We have a membrane that works at low pressure and low energy. So We don’t need to put a lot of that into the system so we can go grab that CO two out of the ah the emission stack of a cement plant or another plant without needing a whole new power plant.

James McWalter

Right? And so thoses some of the other proposals because ah yeah, very little ah point source carving capture is is at scale right today but a lot of the are kind of pilot programs and so on some might be using a membrane some might be using other technologies but they’re typically trying to put a a current through a.

Erica Nemser

To be able to do it.

James McWalter

Ah, substance or a membrane. Um, as you said there’s heat requirements often maybe needs to be in a high pressure environment which also uses a ton of electricity and so just to kind of I guess for my own. Yeah, imagining it so membrane you know any surface that allows some things to go through it and other things not to go through it right? And so.

James McWalter

Literally something like your technology would be literally across the you know a part of the car of the cement manufacturing and so it would be allowing I guess some gases through but not the greenhouse gas emissions themselves through is that the idea.

Erica Nemser

Correct so you can imagine pumping something into a membrane. Um, and you pump it through a membrane system. Um, which and here we’re talking about pumping not compressing to create a lot of fresh air just moving it across the membrane and you get None streams that come out right um. 1 stream is the co 2 concentrated stream and one in the case of flu gas is the nitrogen rich stream. That’s just nitrogen is right back into the air so you can take that concentrated co 2 stream and then either use it or sequester. It.

James McWalter

It’s super interesting and so so you are getting the concentrated CO 2 screen it’s not actually connecting to the membrane directly. It’s it’s actually becoming a raw material that could be kind of redirected.

Erica Nemser

Correct. It’s not being absorbed into the membrane. The membrane is just working to to create those 2 separate streams.

James McWalter

That’s that’s really cool because again a lot of the other point source capture technologies I’ve read up on. They will often degrade because they are actually binding to the CO 2 molecules over time and and and that’s one of the kind of main ways and so there’s a lot of scrubbing that has to occur in order to have a turnover of COTwo in those.

James McWalter

Yeah Flus and so on.

Erica Nemser

Correct or they’re absorbing and absorbing so you have a multi-step process whereas a membrane is just a continuous process. It just continuously separating those.

James McWalter

And and so I guess where where is the product in today in terms of you know moving towards kind of commercialization.

Erica Nemser

So the initial application which I mentioned was in petrochemical plant is now in a demonstration scale. It’s already been validated in the field at one refinery and it’s now in partnership with Bras Kem in a demonstration plant. There. We are right now looking for the demonstration partner who wants to work with us on some of these initial applications for carbon capture. The membranes themselves are produced at commercial scale already right? So the technology itself is scaled up and now it’s ready for the field.

James McWalter

That’s that’s super exciting and I guess there’s a couple things when I’ve seen pilot technologies being deployed particularly things that have you know, hardware or physical component. So one is just does it work at all right? and then the None well one is can you produce that scale which which you mentioned you’re already doing.

James McWalter

Second is does it work at all and then third does it work at the kind of economic like level that makes the unit economics you know, pencil out. Um at least initially I mean it’t not to be perfect right? because these are demonstration plans but eventually as it gets to scaled will those unit economics get to a level that you know make financial sense.

James McWalter

And so I guess with with that None demonstration plant that that you’ve already kind of out there. How has it hit those kind of 3 categories in terms of effectiveness right.

Erica Nemser

I love this question because it was one of the things that I pushed the team on even five years ago right which is there’s a big difference between having a proof of concept technology and having a product and having a profitable product so one of the. None things that we did is is address those 3 things right? which is you know does it work. Well you know and we’re talking about using different chemistries for separation. So which chemistries do we like and do they do the separation. What does it look like to scale up so let’s work on this scale up out of the gate. Right? Let’s not look at we can make something you know a None by None square and then double that and double that and double that again, right? like we need to jump to the um to the end result which is can we make square kilometers of it consistently? um and then the next thing. That we sorry you’re gonna have to edit that so me to go back? Yeah, so the None was manufacturing to say look it’s not efficient to sort of make these leaps of can we go from tiny to a square foot to five Square feet

James McWalter

So that’s fine. Yeah, you can just start the the previous like thought and and we’ll we’ll fix it. Yeah.

Erica Nemser

Because then you’re scaling up Forever. You need to answer the question is it manufacturable and so we took that on very very quickly and early in the process to say we need to be able to show that we can make sort of hundreds of meters squared and know that we’re we’re doing that efficiently and the third was the economics there needs to be a pathway. Where we’re delivering for the customer and for us profitably from the get go. So yes, these Membrane Modules Even at this initial scale um are profitable for us profitable for the customer and deliver deliver value and. And can be done and I think that’s something that not every technologist sees out of the gate that it’s not just um about the technology it and is not about a lot of the stories I see which are technology is Amazing. Dot Dot Dot Market dominance.

James McWalter

Sure profit. Yeah.

Erica Nemser

Okay,, there’s a lot in that nut exactly there’s a lot in http://that.dotdot and and and really knowing right Now. For example, the existing technology can do $70 a ton carbon capture. It has a clear pathway to $40 a ton and then $20 a ton there from there at larger applications. That means we’re out of the gate at a really nice spot and not coming out of the gate at you know we can do $600 a ton and it’s some mystery of how we’re going to get to the to the south of a None.

James McWalter

That right? That’s that’s very interesting and then I guess None thing then that comes to mind is how this is developed in terms of a you know for the customer is this like a capital expenditure primarily or is there. Ah, also op x where and I guess how involved are you. Are you involved with yeah being that that contact point to the customer forever or are they buying the material incorporating into their process and then you know whatever the time frameme for when because all materials all memb. The grades. You know it’s not not I’m sure a none material but you know at some point and needs to be replaced.

James McWalter

That you then step back in or how does that kind of process are you planning or thinking about that process. So.

Erica Nemser

It’s an interesting question. So I think there were 2 questions in there. The first is is there calf x and offs. Yes, there’s both you know, just because we don’t need a huge amount of compression. They’re still moving parts right? So you’re still using some power to to be able to just move that volume of air.

Erica Nemser

And then you sort of ask the business model question of how do we get involved and so we’re looking at this now as a developing market that we could play many different roles and we’re developing the strategic partnerships with the relevant organizations to be able to do that. We have commercial modules now. We sell those commercial modules out in the market. Some of those directly to customers and systems some of those to oems who use those as components and other products we can continue to do both of those right? These are much much larger systems. So obviously it means partnering with an an Epc firm. To be able to do the builds but there are many different models from there. We can sell the system to them and you know they’ve got it and it’s running. There are also models out in the market where they don’t right? They’re just leasing it or they’re having someone operate and we sit in on it. We’re open to all of those recognizing that for other analogous markets. You can look at biogas um, you can look at solar and say there are a host of different different Mark different models that customers find valuable. Some people want to own the solar panels on their roof. They’re totally fine with the capital expense. They love it. Others don’t want to to get involved in that. And what they’re they’re basically leasing out their roof right in return for a payment all of those models are are successful and we can envision for some customers who like process technologies they may want to buy it and own it and operate it. You can imagine anyone who’s comfortable with oil and gas processes. They would want to do that others less. So. Cement plants for example, landfills.

James McWalter

And we’re mostly talking about these very very large industrial posteses. But when you’re kind of talking about some of the other hard to decarbonize sectors economy you mentioned things like home boilers and so on is that Also in mind that that’s also a potential area I mean maybe not right now but down the road like once.

James McWalter

I Guess there’s a kind of particular focus on industrials. Also some of those kind of smaller scale applications.

Erica Nemser

Absolutely I would say one of the beautiful and amazing things about membranes is theyre they’re modular. They’re completely modular all the membrane people will roll their eyes when I say this so they can close their ears for a None but you can imagine it like a filter cartridge right? And so.

James McWalter

Culture.

Erica Nemser

It’s for a small application. You need 1 or 2 for a large Application. You may need one hundred So the the virtue of that is it scales down beautifully to some of these smaller applications without losing efficiency and so when we talk to folks in the field. Even folks who have competing technologies. They recognize that those technologies don’t scale down well and that’s where they are interested in partnering and with us and working with us recognizing that membranes are the way to go when you’re building something that’s cost less than $100000000 for a separation system right.

James McWalter

And and that that makes sense and then you know we we talked about having this ah output of the C O Two you know there are these kind of 2 options that you touched upon one c o two could be then go back into some other industrial process COTwo is a feedstock gas for a lot of different chemicals.

James McWalter

Um, but then also it could be ah pumped somewhere and and stored and so as you think about that. What do you think considered like the breakdown of that will be at scale because there’s some concerns about both paths like where do you store all the CO two and then also is there actually enough like applications in in in the world too.

Erica Nemser

So let’s starts and I.

James McWalter

Had to do absorb all the COTwo will be extracting from traditionally CO two emitting processes and so yeah, how how do you think about that balance and with how thing will pan out.

Erica Nemser

Oh that’s a great prognostication question. So we’re gonna have to listen to this in 10 years to see how right I was um so I think it’s gonna be a yes and I think that you’re going to have uses and uses as.

James McWalter

Sure exactly.

Erica Nemser

And storage right? where they’re mixed so you can think of the processes where people are embedding the co 2 in cement to create a superior product right? That’s both a use kind of and ah in ah, a storage that’s really appealing. Um, but I think you’re going to have both I think we’re going to end up having to use. Um. Underground sequestration because there simply aren’t enough uses that people can identify now. So it’s you know what? that pie chart looks like and what the mix is I don’t know but I think um, the most important thing in my mind is how do we get the impact. On the planet as quickly as possible by removing the CO o two that’s there and reducing the amount that’s going in. So if in the short term that’s storage with some usage and over time that becomes more usage storage applications and less underground storage great but let’s not. You know, let’s not lose sight of the big picture of what we’re trying to achieve.

James McWalter

Yeah, it’s it’s interesting. Yeah I would imagine like the large use case for point SourceCO capture for at least a decade if not twice that is retrofits to existing. Ah yeah, emit emitting emitting factories. But 1 of the I guess the the issues is a lot of those are not maybe located.

Erica Nemser

Was correct and then.

James McWalter

Ideally from a ah yeah, storage underground point of view or even co-located with the consumer consumers of c two I’m sure there are None of factories enough to get to be a big company. Um off the existing. Um you know stock of factories that need this conversion. But yeah, how how do you think about? and I think you mentioned earlier that yeah in the industrial revolution. We.

James McWalter

Developed industry and in certain areas in a particular way how having a more kind of circular ability to reabsorb the carbon is going to affect how industry is actually deployed from a location point of view.

Erica Nemser

Oh another great question I love this I mean the industrial revolution taught us to centralize to to gain efficiency but membranes are just None technology that’s becoming more modular. Mean there are thousands out there and everyone’s recognizing the more modular and efficiency you can get at small scale then you don’t have to solve this transportation other problem of like we’re going to move everything to 1 central location. We’re going to work on it and then we’re goingnna send it back out to everyone. So I think that cracks that open really widely. It’s not just us. Well. We’ll start to see that they’re smaller scale production. That’s as efficient as larger scale hopefully and not not solving this big transportation challenge because that’s another giant consumer of energy right? is transportation. But.

James McWalter

Right up and when I look at your ah your website look you have kind of different applications of you know cnss technology and 1 of them was renewable metric gas if you speak to that? Um, use case.

Erica Nemser

Sure so that’s also a C O 2 separation that’s cotwo and methane. So if you think about one of the the applications that we originally tested this technology in the field was actually in biogas so you know human beings produce. Um. CO 2 and methane as do animals and so everything that we we use ends up producing biogass and anything in in a landfill produces biogass farms produce biogass et cetera so there’s a big movement now to capture both of the products that come out of that the methane which is. Kind of negative impact on the environment in terms of of warming. It’s a more potent greenhouse gas in the short term than co 2 and then use that upgrade that methane to pipeline quality and sort of displace. Ah, methode that we’re using and similarly capture the c o two so that’s what fundamentally that application is and that’s where where we originally tested the technology to to say you know can it be valuable here.

James McWalter

That super cool and you know you are starting to add those kind of early potential clients and customers and so one of the things that I think has been interesting over the last couple of years is how different pressure points are driving. Need to decarbonize across different industries and those pressure points vary in terms of intensity across different industries. But they’re broadly something like regulatory in some way. Um activism in some way sometimes it’s consumer driven. Um, but a lot of what’s happening in.

James McWalter

Industry seems to be driven by things like the divestment letter from Black Rock a couple of years ago and yeah, every company looking at how theyy they are and seeing when are we going to get divestment. You know how are we placing on these esg indices and so on um, but there’s a huge amount of industrial customers who are.

James McWalter

Not public companies and are kind of this middle market space and so as you talk to potential users of your technology. What’s driving their decision-making and even wouldn’t the organization themselves who are the decision makers like is it still within you know the small. And of off to None side sustainability group or is it starting to have larger effects by other members of the executive team and.

Erica Nemser

Great question so and fascinating to me because I started my career doing work in economics and and getting a ph d in economics and it’s fascinating to me how much access to capital and capital markets are actually moving this one. Versus regulatory or something else. Um, we could have a whole podcast about that. But the um, it’s changed in the last five or six years so I would say five or six years ago when we talked about separation technologies with any customer. It was always what’s the value that you’re creating in dollar terms and then just say something about the impact on the environment right? And hopefully it’s a positive thing and the um. At that point it wasn’t even esg right? It was environmental and safety were sort of the we lump together because you couldn’t sell anything based on the environmental impact that was not a driver. The economics were and the return to the business or the drivers. That’s definitely shifted. And so now what you’re seeing is that decision making is not a side that’s being driven from the top of the house. Um, so in some sense. It’s created more focus but in another way, it’s created a little bit more chaos as organizations are trying to figure out. How they organize and how they think and how they make decisions in this new environment. So they’re much more open to the discussions and it’s definitely more of a strategic driver but to your question about being a decision maker I think they’re trying to figure out what their business many of them. What their business model looks like.

Erica Nemser

And how significant of a change is this and when do they have to adopt so they’re they’re on that pathway to to determining who the decision makers are.

James McWalter

Right? And and because it’s such a large amount of emissions and because even if these industrial processes are usually not super high margin but the actual dollars are just so massive. Um, again these yeah, these are the building blocks of you know every single thing that we.

Erica Nemser

Lift me and then.

James McWalter

Ah, you know eat. Ah you know, watch like plastics all these kind of things are derived from these processes. The um are starting to see these other potential ah solution sets coming in and you know saying Okay, why not try to.

James McWalter

Think about things in quite a different way and so one of them is is hydrogen. Um, and so saying let’s say move to a different process where the the actual you know, generation of heat and so on um, is if it’s green hydrogen. Um, you know, carbonutral and so on how do you think about how those other initiatives.

James McWalter

I Guess enhance or maybe competitive with cms.

Erica Nemser

There with all things. It’s both I would say the focus on hydrogen is is definitely creating near term value because and I think there’s true value in in hydrogen there’s existing hydrogen processes. That because there’s a focus on green hydrogen are facing pressure to convert to be blue hydrogen and for those of your listeners who don’t know blue hydrogen is when you you take an existing process. That’s that’s emitting cotwo and you modify it in a way to do some carbon capture. But it’s not inherently. Um, not engaged in the process of of combusting anything so the process that’s used for that is steam methane reforming. So there’s a lot of focus on how do we think about and convert the existing hydrogen production to be more towards that green spectrum and. And and capture the carbon so that creates a lot of demand and a lot of focus for us. Those are great applications in the long term hydrogen any new hydrogen plants that are going in and new stacks of hydrogen will most likely be green right? It’ll be using the the electroizer and other pathways. And you know I think that’s vitally important at the end of the day you know, let’s focus on the right things which is if we can be a part of making a pathway for reducing carbon emissions today. That’s great for cms. It’s great for industry to reduce those emissions. It’s great for the planet if I could have a button that would turn all that off. Um but cms couldn’t exist I would still push the button right? and say we’ll just stop emitting emitting c o two. Um, you know that’s the swing at the fences thing. So.

Erica Nemser

Recognize our role is in these transition processes and our role will be in other separations going in the future we have applications related to food and produce stability right? feeding the planets a big application biobased materials that need separations right. Our ambition here is to focus on the most important separations where we can add a lot of value in the near term that’s cotwo and a host of other ones what that looks like in 20 years will be be other ones and hopefully we can teach the world. What it what it looks like to do great. Scale up of innovative technologies.

James McWalter

And it’s interesting as as you’re tratting there I was like if you were in the Memran space. You’re like long complexity specialization and entropy right? because as the economy becomes more so you know more more complex. Ah more specialized. You just need ever greater separation of.

James McWalter

Different substances to produce new materials in various ways and so yeah I So I think it’s like kind of this fascinating piece and I guess one aspect that I think you know it’s a ton of smart people kind of trying to pour into working on climate in various ways and a lot of people are bringing a lot of different skill sets and. You know, looking at problems in new ways that that is incredibly exciting. But I’ve done huge amounts of ah research on on different climate ideas before I ended up starting my own startup um in something completely unrelated and honestly Membranes never came up and I looked at it a lot and so as you kind of look at the you know the climate landscape and. You the innovation landscape and how those 2 things are intersecting where are areas of it’s like okay, some smart people should be working more on these things. There’s actually a huge gap in the amount of innovation that could be occurring mainly just because they’re such kind of behind the scenes processes that people are not aware of them.

Erica Nemser

Oh Obviously I would say membranes. But um, you know there are new new chemical processes to make the things that we want right from different feedstocks I think that’s kind of the big breakthrough. Because right now as we all See. We’re really dependent in manufacturing everything that we want from the historical processes a lot of them very oil and gas Fossil Fuel dependent and so. A lot of energy is pouring in I don’t know if it needs more energy pouring in but you have great companies like lanza tech working on how do we create biological and other processes to do manufacturing right? That’s a piece that Biotech has owned for the focus on. Therapeutics right? The Biotech Pharma model of how do we capture the natural world of bugs that can produce things that are interesting for us. Not just chemical processes I would love to see that translated more aggressively to this environment and you’re starting to see some of that. But that’s like a real real unlock. And they’ll still need separations at the end of the day.

James McWalter

Absolutely well we we we could start growing concrete and and and all these kind of things right? Um, we and we we’ve had a few algae companies on on the podcast over last year and you know it’s It’s a could be exciting um like.

Erica Nemser

Exactly algae to the rescue I mean.

Erica Nemser

Yeah, exactly biology is a lot of amazing machines for us. We maybe we need to stop thinking about how we’re the most amazing machine creators and work with some of those.

James McWalter

Ah, yeah, classic replacements and all that kind of thing.

James McWalter

Yeah, we have a few hundred years of making machines. Biology has a little little longer. Um and and you know we we talked a little bit about how you’re you’re coming out of a management consulting and and your background in Phg in economics and so on and then moving into in you know, seven years ago talking to.

James McWalter

But sounds like just a very very hardcore R and D team and one of the fascinating things that a lot of companies struggle with but the the best companies do really well is figuring out how to translate those different. Ah faction might be too hard. But yeah, those different kind of perspectives on building things. You know.

James McWalter

Teams that are very very R and D focused versus coming from a you know more commercialization Monetization point of view have you thought about ah how ways you know people coming from either side could do a better job of you know, being that translation there communicating better so that you know the the summation of. Both of those creative ways of of tacking problems build something greater than some of its whole. Yeah.

Erica Nemser

Absolutely I would say I’m a big proponent of diversity in teams and by that I mean sort of all modes of diversity but experiences thought process as ways of working are some of the most critical. So. What you see in companies. That’s I’ll call the easy path is I’m 2 people that I want to be 4 people I want to be None people and I want people like me because then I can communicate easily with them and that’s very comfortable and easy when you start out, but it doesn’t create a robust organization because you’re just spiky in the same strengths. You’re not. Developing a broad set of strengths so it can create a little bit of tension with a communication because you’re speaking different languages and you got to learn those other languages but it does bring something to the team. You know my co for example, at Cms. Very different profile from mine almost perfectly the opposite but that’s perfect for what the organization needs right? He’s an operations guy. He’s been in oil and gas for 30 years he knows all about large scale systems and he’s a detail oriented operator where I’m a high level. Strategists thinking about how we’re going to navigate through the ecosystem. Those are 2 very powerful things and they need to come together. So I would say it’s worth the investment in figuring out how to communicate across that divide because it’s going to be crucial to execution in the in the long term.

James McWalter

Yeah, there’s this concept that ah like a previous mentor kind of talked to me which is as you start kind of managing people or building teams like the perfect world is you just are constantly exposes to pleasant surprises right? and a lot of managers are like I don’t want surprises like that’s that’s a terrible thing did that surprise me.

James McWalter

But ah, yeah, obviously the certain surprises are not ideal but the pleasant surprise where it’s like they figure you know a direct report or somebody in the team figures out a way of doing something that you basically would never have thought of right and it’s better than anything. You could have thought of and it literally would have been possible for you to figure it out in that way because they’re bringing all these different perspectives and and diversity of thought and so on to it.

Erica Nemser

Um, right? okay.

James McWalter

Um, it’s just one of those kind of wonderful and magical things and I think you know removing None ne’s own ego from ah how a team should should exactly look um you know and and an act in certain contexts I think is something that you know a lot of people in leadership positions are startup um, you know early founder. Positions like really struggle with and I think you know I guess I echo your your message that being able to kind of navigate that um and leave a little bit of the ego at the door and be like okay I’m looking for that diversity of thought and those pleasant surprises is really powerful. Yeah.

Erica Nemser

Absolutely look if cms is relying on Erica to be the best chemical engineer that we have we’re in real trouble right? That’s that’s exactly that’s I would say talent is really important at the end of the day. The organization is just the talent you have.

James McWalter

I right? It’s like where’s my lab coach.

Erica Nemser

You know and what they can do with the ip in generating more ip but like at the center of that is the is the people and so one of the things I’m also passionate about is how do we How do we think like large industrial players and if you look at our team. We’ve got folks that came from those large industrial organizations so we do. We understand our customers and we develop technologies and products that they’re going to want to use but we have the nimbleness and things of a startup and None of the elements of nimbleness that you brought up is decision making. I call at the bench I’m a big advocate of how do we enable people to do smart decision making at the bench. We want natural owners and problem solvers at every level. It shouldn’t be I collected this information now I’m going to shoot it up to the chat for the organization and they’re going to make decisions and tell me what to do next. Yes, there’s an element of that and we need to understand what’s going on but we unleash the power of the talent we have when they’re smart capable owners who make smart decisions in their day-to-day work and make those kind of discoveries and my job is to clear the path for them and get out of the way.

James McWalter

It right? I mean you can imagine like a large ship and everybody yeah working out in the ship and it’s like if if if if the people at the bridge are like fielding you know should I put salt on the food should I pull that Lever should I flush that toilet that’s that’s not ah, a very well run you know ship.

Erica Nemser

Great, No not and not a lot of trust there going on either.

James McWalter

Um, ah absolutely and and trust is everything Well Eica This has been absolute great. Really enjoyed the conversation. Is there anything I should have asked you about but did not.

Erica Nemser

I would say the 2 things that are on my mind the most right now as we move forward are one capital rays we’re in the middle of so if anyone found this interesting I’d love to chat. And the second is getting the demonstrations up and carbon capture. So if you have a carbon capture application and you love a co 2 system I’d love a chat on that as well.

James McWalter

So brilliant and we’ll include some contact details in the show notes. Thank you eica.

Erica Nemser

Thank you.